fc_suppl-71213.htm
PROSPECTUS
SUPPLEMENT
DATED
JANUARY 18, 2008
TO
PROSPECTUS DATED
DECEMBER
13, 2007
OF
FIRSTGOLD
CORP.
20,635,588
SHARES
COMMON
STOCK
________________
This
prospectus supplement includes information reported by Firstgold Corp.
(“Firstgold” or the “Company”) on reports on Form 8-K previously filed with the
Securities and Exchange Commission as well as certain other
information. This prospectus supplement, together with the prospectus
listed above, is to be used by certain holders of the above-referenced
securities or by their transferees, pledges, donees or their successors in
connection with the offer and sale of the above-referenced
securities. This prospectus supplement should be read in conjunction
with the prospectus dated December 13, 2007, as amended and supplemented (the
“Prospectus”), which has been previously delivered to each selling security
holder. All capitalized terms used but not defined in the prospectus
supplement shall have the meanings given them in the Prospectus.
The
following information is added to
or updates the Prospectus referred to above:
New
Director Appointed to
Firstgold Corp’s Board of Directors
Kevin
Bullock has been appointed to the
Firstgold Board of Directors joining Stephen Akerfeldt (Chairman), Terrance
Lynch, Donald Heimler and Fraser Berrill.
Kevin
Bullock was appointed to the Board of Directors on December 21,
2007. Mr. Bullock currently serves as President, CEO and a Director
of Goldcrest Resources Ltd. (a mining and mineral exploration company listed
on
the Toronto Venture Exchange). Prior to joining Goldcrest Resources
in August 2003 he was the Vice President, Corporate Development of Kirkland
Lake
Gold Inc. (formerly Foxpoint Resources Ltd.) from November 2001 to August
2003. Prior thereto, he was Managing Director, Mining Division of
Cook Engineering, Thunder Bay, Ontario, from January 2001 to November
2001. Mr. Bullock has served as a member of the advisory board of
Orezone Resources Inc. since June 1999. From June 1999 to September
1999, Mr. Bullock was a consultant to Orezone Resources Inc. Mr.
Bullock served as Vice President of Brandon Gold Corporation from June 1997
to
September 1999 and as Manager of Operations for IAMGOLD Corporation from January
1995 to June 1997. He is currently also a director of Young Shannon
Gold Mines Ltd., Rolling Rock Resources and Kingsmill Capital
Ventures. Mr. Bullock is a professional engineer and received his
B.Eng. Degree from Laurentian University in Sudbury, Ontario. He is a
member of the Canadian Institute of Mining and Metallurgy, the Professional
Engineers of Ontario and the Society of Mining Engineers.
Recent
Changes in Management
Positions
On
December 21, 2007, Firstgold’s Board
of Directors accepted the resignation of A. Scott Dockter as a
Director. Mr. Dockter also resigned as President and CEO effective on
Janaury 4, 2008; however, he will continue to serve as Chief Operating Officer
of Firstgold. As of January 4, 2008, Chairman Stephen Akerfeldt
assumed the additional position of CEO.
Legal
Proceedings
Update
As
previously disclosed at page 48 of the Prospectus, on February 8, 2007, the
lessors of the Crescent Valley and Red Caps mining properties (“Plaintiffs”)
filed a complaint against ASDi, Crescent Red Caps LLC, Firstgold, and Scott
Dockter (“Defendants”). The Plaintiffs in this lawsuit (the lessors
on the two leases) allege, essentially, that ASDi breached the terms of the
leases and acted fraudulently by attempting to wrongfully assign its lease
rights in the Crescent Valley and Red Caps mining properties to Crescent Red
Caps LLC (of which Firstgold is the Managing Member) without consent of the
lessors and on terms contrary to those previously represented to the lessors.
The complaint seeks the termination of the leasehold rights granted to ASDi,
quiet title, and compensatory and punitive damages. The complaint
also sought an order restricting Defendants from making any claims of ownership
or control of and any interest in the mining properties or the
leases. Defendants contend that they did not breach the terms of the
leases, that the leases were never assigned, that the lessors’ termination was
invalid because they did not first provide notice and an opportunity to cure
any
breach, and that any attempted or actual transfer of the leases or mining claims
contained therein was not wrongful, nor did it require the lessors’
consent.
On
May
11, 2007 the court granted Plaintiffs’ motion for preliminary injunction and
entered a preliminary injunction prohibiting Defendants from making any claims
of ownership or control of or any interest in the mining properties or the
leases. On June 7, 2007, the Plaintiffs filed a Motion to Show Cause claiming
that Defendants had violated the injunction based upon certain statements made
on Firstgold’s website and certain disclosures made in Firstgold’s annual report
on Form 10-KSB. A hearing on the Motion to Show Cause was held on
November 20, 2007 and on January 8, 2008 the court made its ruling denying
Plaintiff's motion.
Defendants
are vigorously defending this action. However, until this litigation is
resolved, ASDi, Crescent Red Caps LLC, and/or Firstgold do not plan to expend
any funds on exploration of the mining claims subject to the two
leases. Defendants have filed a motion to dissolve the preliminary
injunction. A jury trial in the case and the disposition of the
property leases is scheduled to commence on March 4, 2008.
FIRSTGOLD
CORP.
INDEX
TO UNAUDITED FINANCIAL STATEMENTS
| |
Page
|
| |
|
|
Condensed
Balance Sheet as of
October 31, 2007 (Unaudited)
and
for fiscal year ended January
31, 2007 (Audited)
|
4
|
| |
|
|
Condensed
Statements of
Operations for the three and nine months ended
October
31, 2007 and 2006
(Unaudited)
|
6
|
| |
|
|
Condensed
Statements of Cash
Flows for the three and nine months
ended
October 31, 2007 and 2006
(Unaudited)
|
7
|
| |
|
|
Notes
to Unaudited
Financial Statements
|
11
|
FIRSTGOLD
CORP.
(AN
EXPLORATION STAGE COMPANY)
BALANCE
SHEET
| |
|
October
31,
|
|
|
January
31,
|
|
| |
|
2007
|
|
|
2007
|
|
| |
|
(unaudited)
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash
|
|
$ |
4,780,674 |
|
|
$ |
150,647 |
|
|
Receivables
|
|
|
32,090 |
|
|
|
114,737 |
|
|
Deposits
|
|
|
570,740 |
|
|
|
7,368 |
|
|
Prepaid
expense
|
|
|
163,247 |
|
|
|
140,000 |
|
| |
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
5,546,751 |
|
|
|
412,752 |
|
| |
|
|
|
|
|
|
|
|
|
Property,
plant and
equipment, net of accumulated depreciation
of $131,239 and $20,850 at October 31, and January
31, 2007, respectively
|
|
|
2,836,953 |
|
|
|
928,029 |
|
| |
|
|
|
|
|
|
|
|
|
Other
Assets
|
|
|
|
|
|
|
|
|
|
Restricted
cash
|
|
|
714,150 |
|
|
|
250,981 |
|
|
Deferred
reclamation costs
|
|
|
680,326 |
|
|
|
641,026 |
|
| |
|
|
|
|
|
|
|
|
|
Total
other assets
|
|
|
1,394,476 |
|
|
|
892,007 |
|
| |
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
9,778,180 |
|
|
$ |
2,232,788 |
|
LIABILITIES
AND SHAREHOLDERS' DEFICIT
|
Current
liabilities
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
205,831 |
|
|
$ |
598,788 |
|
|
Accrued
expenses
|
|
|
1,058,347 |
|
|
|
1,198,174 |
|
|
Notes
payable
|
|
|
167,163 |
|
|
|
130,249 |
|
| |
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
1,431,341 |
|
|
|
1,927,211 |
|
| |
|
|
|
|
|
|
|
|
|
Long-term
liabilities
|
|
|
|
|
|
|
|
|
|
Convertible
debenture and related derivative liabilities
|
|
|
|
|
|
|
|
|
|
net
of unamortized discount of $0 and $402,135 and deferred
|
|
|
|
|
|
|
|
|
|
financing
costs of $159,389 and $1,382,642 at October 31, and
|
|
|
|
|
|
|
|
|
|
January
31, 2007, respectively
|
|
|
490,612 |
|
|
|
3,110,344 |
|
|
Accrued
reclamation costs
|
|
|
680,326 |
|
|
|
641,026 |
|
|
Deferred
revenue
|
|
|
800,000 |
|
|
|
800,000 |
|
| |
|
|
|
|
|
|
|
|
|
Total
long-term liabilities
|
|
|
1,970,938 |
|
|
|
4,551,370 |
|
| |
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
3,402,279 |
|
|
|
6,478,581 |
|
FIRSTGOLD
CORP.
(AN
EXPLORATION STAGE COMPANY)
BALANCE
SHEET
| |
|
October
31,
|
|
|
January
31,
|
|
| |
|
2007
|
|
|
2007
|
|
| |
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Shareholders'
surplus (deficit)
|
|
|
|
|
|
|
|
Common
stock, $0.001 par value
|
|
|
|
|
|
|
|
250,000,000
shares authorized at October 31, and January 31, 2007,
respectively
|
|
|
|
|
|
|
|
114,601,310
and 68,104,072 shares issued and outstanding at
|
|
|
|
|
|
|
|
October
31, and January 31, 2007, respectively
|
|
|
114,601 |
|
|
|
77,839 |
|
|
Additional
paid in capital
|
|
|
35,833,164 |
|
|
|
19,434,973 |
|
|
Deficit
accumulated during the exploration stage
|
|
|
(29,571,864 |
) |
|
|
(23,758,605 |
) |
| |
|
|
|
|
|
|
|
|
|
Total
shareholders' surplus (deficit)
|
|
|
6,375,901 |
|
|
|
(4,245,793 |
) |
| |
|
|
|
|
|
|
|
|
|
Total
liabilities and shareholders' deficit
|
|
$ |
9,778,180 |
|
|
$ |
2,232,788 |
|
FIRSTGOLD
CORP.
(AN
EXPLORATION STAGE COMPANY)
STATEMENTS
OF OPERATIONS
For
the Nine and Three Months Ended October 31, 2007 and 2006
and
for the Period from January 1, 1995 to October 31, 2007
| |
|
|
|
|
|
|
|
For
the Period
|
|
| |
|
For
the Nine Months Ended
|
|
|
For
the Three Months Ended
|
|
|
From
January 1,
|
|
| |
|
October
31,
|
|
|
October
31,
|
|
|
1995
to October
|
|
| |
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
31,
2007
|
|
|
Net
Sales
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
and maintenance costs
|
|
|
870,828 |
|
|
|
1,480,449 |
|
|
|
505,037 |
|
|
|
1,308,319 |
|
|
|
2,863,180 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
loss
|
|
|
(970,828 |
) |
|
|
(1,480,449 |
) |
|
|
(505,037 |
) |
|
|
(1,308,319 |
) |
|
|
(2,863,180 |
) |
|
Operating
expenses
|
|
|
(3,933,654 |
)
|
|
|
(1,034,990 |
)
|
|
|
(1,664,954 |
)
|
|
|
(491,897 |
)
|
|
|
(19,744,380 |
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(4,904,482 |
)
|
|
|
(2,515,439 |
)
|
|
|
(2,169,991 |
)
|
|
|
(1,800,216 |
)
|
|
|
(22,607,560 |
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
(expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
172,310 |
|
|
|
|
|
|
|
89,004 |
|
|
|
|
|
|
|
259,062 |
|
|
Dividend
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,188 |
|
|
Gain
on settlement of obligations
|
|
|
455,533 |
|
|
|
|
|
|
|
454,653 |
|
|
|
|
|
|
|
455,533 |
|
|
Other
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,565 |
|
|
Adjustments
to fair value of derivatives
|
|
|
(703,992 |
) |
|
|
(525,871 |
) |
|
|
- |
|
|
|
135,952 |
|
|
|
(1,357,903 |
) |
|
Interest
expense
|
|
|
(831,319 |
) |
|
|
(394,092 |
) |
|
|
(307,780 |
) |
|
|
(162,600 |
) |
|
|
(3,837,331 |
) |
|
Loss
from joint venture
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(859,522 |
) |
|
Litigation
settlement
|
|
|
|
|
|
|
(214,000 |
) |
|
|
|
|
|
|
(214,000 |
) |
|
|
(214,000 |
) |
|
Loss
on sale of marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(281,063 |
) |
|
Bad
debt expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(40,374 |
) |
|
Loss
on disposal of plant, property
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(334,927 |
) |
|
Loss
on disposal of bond
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,000 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other income (expense)
|
|
|
(907,468 |
)
|
|
|
(1,133,963 |
)
|
|
|
235,877 |
|
|
|
(240,648 |
)
|
|
|
(5,963,003 |
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(5,811,950 |
)
|
|
$ |
(3,649,402 |
)
|
|
$ |
(1,934,114 |
)
|
|
$ |
(2,040,864 |
)
|
|
$ |
(28,570,566 |
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per share
|
|
$ |
(0.06 |
)
|
|
$ |
(0.05 |
)
|
|
$ |
(0.02 |
)
|
|
$ |
(0.03 |
)
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
average
shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
outstanding
|
|
|
94,725,487 |
|
|
|
69,974,829 |
|
|
|
109,455,871 |
|
|
|
72,044,798 |
|
|
|
|
|
FIRSTGOLD
CORP.
(AN
EXPLORATION STAGE COMPANY)
STATEMENTS
OF CASH FLOWS
For
the Nine Months
Ended October 31, 2007 and 2006
and
for the Period from
January 1, 1995 to October 31, 2007
| |
|
|
|
|
|
|
|
For
the Period
From
January 1,
1995
to October
31,
2007
|
|
| |
|
|
|
|
|
|
| |
|
For
the Nine Months Ended October
31,
|
|
| |
|
2007
|
|
|
2006
|
|
| |
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(5,811,950 |
) |
|
$ |
(3,649,402 |
) |
|
$ |
(28,628,760 |
) |
|
Adjustments
to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
used
in operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion
of warrants issued as a debt discount
|
|
|
32,370 |
|
|
|
2,609 |
|
|
|
1,320,145 |
|
|
Accretion
of beneficial conversion
|
|
|
- |
|
|
|
- |
|
|
|
107,468 |
|
|
Accretion
of debt discount
|
|
|
279,437 |
|
|
|
104,707 |
|
|
|
531,109 |
|
|
Adjustments
to fair value of derivatives
|
|
|
703,992 |
|
|
|
525,871 |
|
|
|
1,357,904 |
|
|
Loss
from joint venture
|
|
|
- |
|
|
|
- |
|
|
|
859,522 |
|
|
Loss
on sale of marketable securities
|
|
|
- |
|
|
|
- |
|
|
|
281,063 |
|
|
Depreciation
and amortization
|
|
|
509,733 |
|
|
|
33,839 |
|
|
|
698,618 |
|
|
Loss
on disposal of property, plant and equipment
|
|
|
- |
|
|
|
- |
|
|
|
334,927 |
|
|
Impairment
in value of property, plant and equipment
|
|
|
- |
|
|
|
- |
|
|
|
807,266 |
|
|
Loss
on disposal of bond
|
|
|
- |
|
|
|
- |
|
|
|
21,000 |
|
|
Impairment
in value of Relief Canyon Mine
|
|
|
- |
|
|
|
- |
|
|
|
3,311,672 |
|
|
Impairment
in value of joint investments
|
|
|
- |
|
|
|
- |
|
|
|
490,000 |
|
|
Bad
debt
|
|
|
- |
|
|
|
- |
|
|
|
40,374 |
|
FIRSTGOLD
CORP.
(AN
EXPLORATION STAGE COMPANY)
STATEMENTS
OF CASH FLOWS
For
the Nine Months
Ended October 31, 2007 and 2006
and
for the Period from
January 1, 1995 to October 31, 2007
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Assigned
value of stock and warrants exchanged for services
|
|
|
358,062 |
|
|
|
68,020 |
|
|
|
2,298,083 |
|
|
Assigned
value of stock options issued for compensation
|
|
|
83,015 |
|
|
|
25,489 |
|
|
|
132,726 |
|
|
Gain
on write off of note payable
|
|
|
- |
|
|
|
- |
|
|
|
(7,000 |
) |
|
Judgment
loss accrued
|
|
|
- |
|
|
|
- |
|
|
|
250,000 |
|
|
(Increase)
decrease in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
cash
|
|
|
(463,169 |
) |
|
|
- |
|
|
|
(714,150 |
) |
|
Receivables
|
|
|
82,647 |
|
|
|
(4,392 |
) |
|
|
(28,090 |
) |
|
Deposits
|
|
|
(563,372 |
) |
|
|
(5,000 |
) |
|
|
(566,240 |
) |
|
Deferred
reclamation costs
|
|
|
- |
|
|
|
370,290 |
|
|
|
175,548 |
|
|
Prepaid
expenses
|
|
|
(35,997 |
) |
|
|
(24,000 |
) |
|
|
(178,897 |
) |
|
Reclamation
bonds
|
|
|
- |
|
|
|
- |
|
|
|
185,000 |
|
|
Other
assets
|
|
|
- |
|
|
|
- |
|
|
|
(1,600 |
) |
|
Increase
(decrease) in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
(392,957 |
) |
|
|
(91,639 |
) |
|
|
(75,129 |
) |
|
Accrued
expenses
|
|
|
(139,827 |
) |
|
|
(61,478 |
) |
|
|
1,614,003 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used by operating activities
|
|
|
(5,358,016 |
) |
|
|
(1,437,723 |
) |
|
|
(15,383,410 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from sale of marketable securities
|
|
|
- |
|
|
|
- |
|
|
|
34,124 |
|
|
Investment
in marketable securities
|
|
|
- |
|
|
|
- |
|
|
|
(315,188 |
) |
|
Advances
from shareholder
|
|
|
- |
|
|
|
- |
|
|
|
7,436 |
|
|
Contribution
from joint venture partner
|
|
|
- |
|
|
|
- |
|
|
|
775,000 |
|
FIRSTGOLD
CORP.
(AN
EXPLORATION STAGE COMPANY)
STATEMENTS
OF CASH FLOWS
For
the Nine Months
Ended October 31, 2007 and 2006
and
for the Period from
January 1, 1995 to October 31, 2007
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of joint venture partner interest
|
|
|
- |
|
|
|
- |
|
|
|
(900,000 |
) |
|
Capital
expenditures
|
|
|
(2,019,313 |
) |
|
|
(251,018 |
) |
|
|
(5,919,700 |
) |
|
Proceeds
from disposal of property, plant and equipment
|
|
|
|
|
|
|
- |
|
|
|
278,783 |
|
|
Investments
in joint ventures
|
|
|
- |
|
|
|
- |
|
|
|
(490,000 |
) |
|
Note
receivable
|
|
|
- |
|
|
|
- |
|
|
|
(268,333 |
) |
|
Repayment
of note receivable
|
|
|
- |
|
|
|
- |
|
|
|
268,333 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used by investing activities
|
|
|
(2,019,313 |
) |
|
|
(251,018 |
) |
|
|
(6,529,545 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from the issuance of common stock
|
|
|
11,010,441 |
|
|
|
100,000 |
|
|
|
19,220,982 |
|
|
Proceeds
from notes payable
|
|
|
1,010,000 |
|
|
|
1,831,500 |
|
|
|
9,406,048 |
|
|
Principal
repayments of notes payable
|
|
|
(13,085 |
) |
|
|
(24,845 |
) |
|
|
(2,508,425 |
) |
|
Repayment
of advances to affiliate
|
|
|
- |
|
|
|
- |
|
|
|
(231,663 |
) |
|
Deferred
revenue
|
|
|
- |
|
|
|
- |
|
|
|
800,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
12,007,356 |
|
|
|
1,906,655 |
|
|
|
26,686,942 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase in cash
|
|
|
4,630,027 |
|
|
|
217,914 |
|
|
|
4,773,987 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash,
beginning of year
|
|
|
150,647 |
|
|
|
700,224 |
|
|
|
6,687 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash,
end of period
|
|
$ |
4,780,674 |
|
|
$ |
918,138 |
|
|
$ |
4,780,674 |
|
FIRSTGOLD
CORP.
(AN
EXPLORATION STAGE COMPANY)
STATEMENTS
OF CASH FLOWS
For
the Nine Months
Ended October 31, 2007 and 2006
and
for the Period from
January 1, 1995 to October 31, 2007
| |
|
|
Supplemental
cash flow information for the nine months ended October 31, 2007 and
2006 and January 1, 1995
|
|
|
through
October 31, 2007 as follows:
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
For
the Period
|
|
| |
|
|
|
|
|
|
|
From
January 1,
|
|
| |
|
For
the Nine Months Ended
October 31,
|
|
|
1995
to October 31,
|
|
| |
|
2007
|
|
|
2006
|
|
|
2007
|
|
| |
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
161,107 |
|
|
Cash
paid for income taxes
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non
Cash Investing and Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
of related party note payable to common
stock,
including interest payable of $446,193
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
1,848,935 |
|
|
Conversion
of convertible debenture to common stock
Including
interest payable of $217,151
|
|
$ |
3,186,203 |
|
|
$ |
600,000 |
|
|
$ |
4,359,609 |
|
|
Issuance
of warrants as financing costs in connection
with
convertible debt
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
173,114 |
|
|
Issuance
of common stock as payment for settlement of liabilities
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
39,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
FIRSTGOLD
CORP.
(AN
EXPLORATION STAGE COMPANY)
NOTES
TO FINANCIAL STATEMENTS
For
the Three Months Ended October 31, 2007
NOTE
1 - ORGANIZATION AND LINE OF BUSINESS
Firstgold
Corp. has been in the business of acquiring, exploring, developing, and
producing gold properties. Firstgold had rights to mine properties in
Nevada and Montana. Its primary focus was on the Relief Canyon mine
located near Lovelock, Nevada, where it has performed development and
exploratory drilling and was in the process of obtaining permits to allow
operation of the Relief Canyon Mine. In December 1997, Firstgold
placed the Relief Canyon Mine on care and maintenance status. From
mid-2001 until the beginning of 2003 Firstgold was essentially inactive,
only
continuing with some of the care and maintenance at Relief Canyon, as provided
for by a non-affiliate company owned by the President of Firstgold.
Firstgoldhas
embarked on a business strategy
whereby it will invest in and/or manage the exploration of
gold and
other mineral
producing properties. Currently, Firstgold’s
principal assets include various
mineral leases associated with the Relief Canyonmine
located near Lovelock, Nevadaalong
with various items of mining
equipment located at that site. Firstgold’s
business will be to acquire, explore
and, if warranted, develop various mining properties located in the state
of
Nevada. Firstgoldplans
to carryout comprehensive
exploration and development programs on its properties. Firstgold plans
to conductthese activities itself,
although
some activities may
beoutsourced. Consequently,
Firstgold's
current plan will require the hiring
of significant amounts of mining employees to carry out its future
mining
and current exploration
activities.
NOTE
2 - GOING CONCERN
These
financial statements have been prepared on a going concern
basis. During the years ended January 31, 2007 and 2006 and the
period from January 1, 1995 to January 31, 2007, Firstgold incurred net losses
of approximately $4,728,070, $2,645,231, and $22,816,810,
respectively. In addition, Firstgold had a total shareholders’
deficit of $4,245,793 and has been in the exploration stage since inception
and
through January 31, 2007. Information for the nine months ended
October 31, 2007 include a net loss of $5,811,950; negative cash flows from
operations of $5,358,016 and an accumulated shareholders’ surplus of
$3,694,567. The Company's ability to continue as a going concern is
dependent upon its ability to generate profitable operations in the future
and/or to obtain the necessary financing to meet its obligations and repay
its
liabilities arising from normal business operations when they come
due. The outcome of these matters cannot be predicted with any
certainty at this time. Since inception, the Company has satisfied
its capital needs by issuing equity securities.
Management
plans to continue to provide for its capital needs during the year ending
January 31, 2008 by issuing equity securities or incurring additional debt
financing, with the proceeds to be used to re-establish mining operations
at
Relief Canyon as well as improve its working capital position. These
financial statements do not include any adjustments to the amounts and
classification of assets and liabilities that may be necessary should Firstgold
be unable to continue as a going concern.
NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of
Presentation
These
financial statements have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission
(“SEC”). Certain information and footnotes normally included in
financial statements prepared in accordance with generally accepted accounting
principles in the United States of America have been condensed or omitted
pursuant to these rules and regulations. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements and the notes thereto included in Firstgold’s Form 10-KSB, as filed
with the SEC for the year ended January 31, 2007.
Effective
January 1, 1995 (date of inception), the Company is considered a development
stage Company as defined in SFAS No. 7. The Company’s development
stage activities consist of the development of several mining properties
located
in Nevada. Sources of financing for these development stage activities have
been
primarily debt and equity financing. The Company has, at the present
time, not paid any dividends and any dividends that may be paid in the future
will depend upon the financial requirements of the Company and other relevant
factors.
Cash
and Cash
Equivalents
For
the
purpose of the statements of cash flows, Firstgold considers all highly liquid
investments purchased with original maturities of three months or less to
be
cash equivalents.
Restricted
Cash
Restricted
cash represents a certificate of deposit with Umpqua Bank to serve as collateral
for a reclamation bond with the Nevada Department of Environmental Protection
at
the Relief Canyon Mine.
Deferred
Reclamation
Costs
In
August
2001, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset
Retirement Obligations,” which established a uniform methodology for accounting
for estimated reclamation and abandonment costs. The statement was
adopted February 1, 2003. The reclamation costs will be allocated to
expense over the life of the related assets and will be adjusted for changes
resulting from the passage of time and revisions to either the timing or
amount
of the original present value estimate.
Prior
to
adoption of SFAS No. 143, estimated future reclamation costs were based
principally on legal and regulatory requirements. Such costs related
to active mines were accrued and charged over the expected operating lives
of
the mines using the UOP method based on proven and probable
reserves. Future remediation costs for inactive mines were accrued
based on management’s best estimate at the end of each period of the
undiscounted costs expected to be incurred at a site. Such cost
estimates included, where applicable, ongoing care, maintenance and monitoring
costs. Changes in estimates at inactive mines were reflected in
earnings in the period an estimate was revised.
Valuation
of Derivative
Instruments
FAS
No. 133 "Accounting for Derivative Instruments and Hedging Activities" requires bifurcation
of
embedded derivative instruments and measurement of their fair value for
accounting purposes. In determining the appropriate fair value, the Company
uses
the Black Scholes model as a valuation technique. Derivative
liabilities are adjusted to reflect fair value at each period end, with any
increase or decrease in the fair value being recorded in results of operations
as Adjustments to Fair Value of Derivatives. In addition, the fair values
of
freestanding derivative instruments such as warrants are valued using Black
Scholes models.
Revenue
Recognition
Revenues
will be recognized when deliveries of gold are made, title and risk of loss
passes to the buyer and collectibility is reasonably
assured. Deferred revenue represents non-refundable cash received in
exchange for royalties on net smelter returns on the Relief Canyon
Mine. Deferred revenue will be amortized to earnings based on
estimated production in accordance with the royalty agreement.
Risks
Associated with Gold
Mining
The
business of gold mining is subject to certain types of risks, including
environmental hazards, industrial accidents, and theft. Prior to
suspending operations, Firstgold carried insurance against certain property
damage loss (including business interruption) and comprehensive general
liability insurance. While Firstgold maintained insurance consistent
with industry practice, it is not possible to insure against all risks
associated with the mining business, or prudent to assume that insurance
will
continue to be available at a reasonable cost. Firstgold has not
obtained environmental liability insurance because such coverage is not
considered by management to be cost effective. Firstgold currently
carries no insurance on any of its properties due to the current status of
the
mine and Firstgold’s current financial condition.
Comprehensive
Income
Firstgold
utilizes SFAS No. 130, “Reporting Comprehensive Income.” This
statement establishes standards for reporting comprehensive income and its
components in a financial statement. Comprehensive income as defined
includes all changes in equity (net assets) during a period from non-owner
sources. Examples of items to be included in comprehensive income,
which are excluded from net income, include foreign currency translation
adjustments, minimum pension liability adjustments, and unrealized gains
and
losses on available-for-sale marketable securities. Comprehensive
income is presented in Firstgold's financial statements since Firstgold did
have
unrealized gain (loss) from changes in equity from available-for-sale marketable
securities.
Estimates
The
preparation of financial statements requires management to make estimates
and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those
estimates.
Loss
Per
Share
Firstgold
utilizes SFAS No. 128, “Earnings per Share.” Basic loss per share is
computed by dividing loss available to common shareholders by the
weighted-average number of common shares outstanding. Diluted loss
per share is computed similar to basic loss per share except that the
denominator is increased to include the number of additional common shares
that
would have been outstanding if the potential common shares had been issued
and
if the additional common shares were dilutive. Common equivalent
shares are excluded from the computation if their effect is
anti-dilutive.
The
following common stock equivalents were excluded from the calculation of
diluted
loss per share since their effect would have been anti-dilutive:
| |
|
2007
|
|
|
2006
|
|
| Warrants |
|
|
39,500,976 |
|
|
|
21,274,583 |
|
| Options |
|
|
3,750,000 |
|
|
|
1,350,000 |
|
Recent
Accounting
Pronouncements
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (SFAS 159). Under the
provisions of SFAS 159, Companies may choose to account for eligible financial
instruments, warranties and insurance contracts at fair value on a
contract-by-contract basis. Changes in fair value will be recognized in earnings
each reporting period. SFAS 159 is effective for financial statements issued
for
fiscal years beginning after November 15, 2007, and interim periods within
those
fiscal years. The Company is required to and plans to adopt the
provisions of SFAS 159 beginning in the first quarter of 2008. The Company
is
currently assessing the impact of the adoption of SFAS 159.
NOTE
4 - PROPERTY AND EQUIPMENT
Property
and equipment at October 31, 2007 was recorded at $2,968,192 and consisted
of
$2,028,650 of site and pad costs, processing plant and mining equipment at
the
Relief Canyon Mine, $414,009 in land and building cost in an office in Lovelock,
NV and $525,533 of other property and equipment.
NOTE
5 - NOTES PAYABLE
Notes
payable consist of the following at October 31, 2007:
| Mortgage
note
payable |
|
$ |
100,000 |
|
| The
note bears
interest at 10% per year and is due in January 2008. The loan
is secured by a 3,000 square foot improved office building located
in
Lovelock, NV. |
|
|
|
|
| |
|
|
|
|
| Equipment
notes
payable |
|
$ |
67,163 |
|
| The
note does not
bear any interest and is due in December 2007. The loan is
secured by a Caterpillar loader. |
|
|
|
|
| |
|
|
|
|
| Total
notes
payable |
|
$ |
171,492 |
|
Firstgold
recorded interest expense of $307,780 and $831,319 for the three months and
nine
months ended October 31, 2007 compared to interest expense of $162,600 and
$394,092 for the three months and nine months, respectively, ended October
31,
2006.
NOTE
6 – CONVERTIBLE DEBENTURES
September
26, 2006
Convertible Debenture
On
September 26, 2006, Firstgold entered into a Securities Purchase Agreement
(the
“Purchase Agreement”) and other agreements, as amended on November 1,
2006,
in connection with the private placement of convertible debentures, in the
aggregate principal amount of $3,000,000 and bearing interest at 8% per annum
(the “Debenture”). The Debentures were funded $1,000,000 on September
26, 2006, $1,000,000 upon the filing of a resale registration statement with
the
SEC on December 1, 2006 and $1,000,000 on March15, 2007. Of the
$1,000,000 funded on September 26, 2006, $120,000 was paid for various loan
fees
and closing costs; of the $1,000,000 funded December 1, 2006, $90,000 was
paid
for various loan fees and closing costs; and of the $1,000,000 funded March
19,
2007, $90,000 was paid for various loan fees and closing costs. The
Debentures are due and payable three years after the issue date unless it
is
converted into shares of common stock or is repaid prior to its expiration
date. The conversion rate is adjustable and at any conversion date,
will be the lower of $0.45 per share or 95% of the Market Conversion
Price. On July 13, 2007 $450,000 of the Debenture dated March 15,
2007 was converted into 1,000,000 shares of common stock. On September 13,
2007
the $1,000,000 Debenture dated September 26, 2006 was converted into 2,222,222
shares of common stock. On October 12, 2007 $450,000 of the Debenture dated
December 1, 2006 was converted into 1,000,000 shares of common stock. On
October
16, 2007 $450,000 of the Debenture dated December 1, 2006 was converted into
1,000,000 shares of common stock. On October 30, 2007 1,444,444 shares of
common
stock were issued in conversion of the remaining $650,000 in principal of
outstanding Secured Convertible Debentures. An additional 413,784
shares of common stock was issued in conversion of $186,203 of accrued interest
on the Secured Convertible Debentures.
In
conjunction with the Purchase Agreement, Firstgold entered into an Investor
Registration Rights Agreement (the “Registration Rights
Agreement”). The Registration Rights Agreement required Firstgold to
register at least 15,000,000 shares (and subsequently reduced to 7,004,553
upon
full conversion of the Debenture) of its Common Stock to cover the conversion
of
the Debenture (assuming conversion prices substantially below $0.45) and
3,500,000 shares of its Common Stock issuable upon conversion of warrants
(the
“Warrants” which are exercisable at a price of $0.45 per common
share) granted to the Debenture holder. Firstgold is required to keep
this Registration Statement effective until the Debenture has been fully
converted, repaid, or becomes due and the Warrants have been fully exercised
or
expire. While the Debenture has been converted in full, the Warrants
are currently exercisable. The Registration Statement was declared
effective December 14, 2007.
In
conjunction with the Purchase Agreement, Firstgold entered into a Security
Agreement (the “Security Agreement”). The Security Agreement creates
a secured interest in favor of the Debenture holder in Firstgold’s mining
interest and assets in the Relief Canyon Mine property. This security
interest was created by recordation of a Memorandum of Security Agreement
filed
in Pershing County, Nevada in November 2006. Upon full conversion of
the Debenture the Security Agreement was cancelled in November
2007.
October
10, 2006 Convertible
Debentures
On
October 10, 2006, Firstgold issued convertible debentures in the aggregate
principal amount of $650,000 and bearing interest of 8% per
annum. The Debentures and accrued interest are convertible into
shares of Firstgold common stock at a conversion rate of $0.45 per
share. The Debentures are due and payable three years from the date
of issue unless they are converted into shares of the Company’s common stock or
are repaid prior to their expiration date. Additionally, the
investors were issued warrants to purchase an aggregate of 746,843 shares
of
Firstgold common stock exercisable at $0.45 per The warrants were issued
as
financing costs and total deferred financing cost of $173,114 was recorded
in
relation to this debt.
NOTE
7 - COMMITMENTS AND CONTINGENCIES
Except
for the advance royalty and rent payments noted below, Firstgold is not
obligated under any capital leases or non-cancelable operating lease with
initial or remaining lease terms in excess of one year as of October 31,
2007. However, minimum annual royalty payments are required to retain
the lease rights to Firstgold’s properties.
Relief
Canyon
Mine
Our
mining property rights are represented by 146 unpatented mill site and mining
lode claims which were re-staked in October 2004 and June
2006. Unpatented mining claims are generally considered subject to
greater title risks than patented mining claims or real property interests
that
are owned in fee simple. To remain valid, such unpatented claims are
subject to annual maintenance fees. As of July 31, 2007, we were
current in the payment of such maintenance fees.
During
1996, Repadre Capital Corporation (“Repadre”) purchased for $500,000 a net
smelter return royalty (Repadre Royalty). Repadre was to receive a
1.5% royalty from production at each of the Relief Canyon Mine and Mission
Mines. In July 1997, an additional $300,000 was paid by Repadre for an
additional 1% royalty from the Relief Canyon Mine. In October, 1997,
when the Mission Mine lease was terminated, Repadre exercised its option
to
transfer the Repadre Royalty solely to the Relief Canyon Mine resulting in
a
total 4% royalty. The total amount received of $800,000 has been
recorded as deferred revenue in the accompanying financial
statements.
Crescent
Red Caps Joint
Venture
Firstgold
is the owner of a 22.22% joint venture interest and is the operator of the
Crescent Red Caps LLC (“Crescent Red Caps”). Crescent Red Caps was
formed with the intention to acquire various mining properties located in
Nevada. The remaining 77.78% interest is held by ASDi LLC, a
California limited liability company owned by A. Scott Dockter, Chairman
and CEO
of Firstgold. Additionally, Firstgold, by making expenditures over
the next three years aggregating $2,700,000, can acquire a 66.66% overall
interest in the LLC. Firstgold will then have the opportunity to
purchase the remaining LLC interest held by ASDi LLC based on the results
of the
exploration work contemplated by these additional expenditures.
The
Company acquired its 22.22% in the joint venture by issuing to ASDi LLC
2,500,000 shares of its restricted common stock and a warrant to purchase
2,500,000 shares of its common stock at a price of $0.40. The warrant
has a term of three years. The common stock was valued at $0.20 per
share for a total of $500,000. The fair market value of the warrants
was calculated to be $359,522 as determined by the methodology described
in Note
9. The Company recorded this investment as a loss from the joint
venture of $859,522 for the year ended January 31, 2006.
The
properties are subject to two leases which include approximately 135 unpatented
mining claims and cover approximately 2700 acres. All gold, silver and other
mineral production by Crescent Red Caps is subject to a 3% net smelter return
(“NSR”) royalty payable to the lessors except for barite which is subject to a
10% royalty on ore produced from claims covered by the
leases. However, neither Firstgold nor Crescent Red Caps holds any
interest in the two leases nor the properties related thereto due to litigation
regarding such leases.
Litigation
On
February 8, 2007, a complaint was filed against ASDi, LLC, Crescent Red Caps
LLC, Firstgold, and Scott Dockter by the Lessors of the Crescent Valley and
Red
Caps mining properties. The complaint was filed in the Sixth Judicial
District Court of Lander County, Nevada (Case No. 9661). In the complaint
the
plaintiffs allege that ASDi, LLC wrongfully assigned its lessee rights in
the
Crescent Valley and Red Caps mining properties to Crescent Red Caps LLC (of
which Firstgold is the Managing Member).
The
complaint seeks the termination of the leasehold rights granted to ASDi,
LLC and
quiet title and damages. The complaint also seeks an order against Firstgold
restricting public claims of ownership or control of the mining properties.
ASDi,
LLC
and Firstgold do not believe the leases were assigned or that any transfer
or
contribution of the mining claims that are the subject of the leases was
wrongful or required the Lessors’ consent. Consequently, ASDi, LLC and
Firstgold plan to vigorously defend this action. On April 3, 2007, a preliminary
hearing was held in which the defendants sought a Summary Judgment to have
the
leasehold termination notices declared void. The Court did not grant
the defendants’ motions thus requiring the matter to proceed to trial on the
merits. In addition, the Court has entered an injunction against public claims
of ownership of the mining property by Firstgold. Until this matter
is resolved, Crescent Red Caps LLC and/or Firstgold plans to expend limited
funds on exploration expenses on the leased properties. A hearing on the
Motion
to Show Cause was held on November 20, 2007. The Defendants are also
seeking to have the injunction overturned.
On
September 24, 2007, a complaint was served on Firstgold by Swartz Private
Equity, LLC. The complaint was filed in the District Court for the
Western District of New York (Case No. 07CV6447). In the complaint,
plaintiff alleges that pursuant to an Investment Agreement dated October
4,
2000, and entered into with Firstgold’s former management, it is entitled to the
exercise of certain warrants in the amount of 1,911,106 shares of Firstgold
common stock or the equivalent cash value of $0.69 per share and a termination
fee of $200,000. While Firstgold has not yet fully evaluated this
lawsuit, it expects to vigorously defend this action.
Firstgold
is involved in various other claims and legal actions arising in the ordinary
course of business. In the opinion of management, the ultimate
dispositions of these matters will not have a material adverse effect on
Firstgold’s financial position, results of operations or liquidity.
NOTE
8 - SHAREHOLDERS' SURPLUS
Common
Stock
In
March
2007 warrants to purchase 1,125,000 shares of common stock were exercised
at a
price of $0.20 per share.
In
April
2007 warrants to purchase 2,340,013 shares of common stock were exercised
by the
Chief Executive Officer at a price of $0.15 per share.
In
April
2007 Firstgold received net proceeds of $2,374,200 upon the issuance of Units
consisting of 5,673,110 shares of common stock and warrants to purchase
2,836,555 shares of common stock at an exercise price of $0.65 per
share. An additional 542,310 shares and warrants to purchase
271,156 shares were issued on October 16, 2007 because the original Units
were
not registered for resale by October 15, 2007.
In
May
2007 Firstgold received net proceeds of $337,500 upon the issuance of Units
consisting of 749,999 shares of common stock and warrants to purchase 375,002
shares of common stock at an exercise price of $0.65 per share. An
additional 74,998 shares and warrants to purchase 37,499 shares were issued
on
November 19, 2007 because the original Units were not registered for resale
by
November 18, 2007.
In
June
2007 Firstgold received net proceeds of $7,798,141 upon the issuance of Units
consisting of 18,843,421 shares of common stock and warrants to purchase
9,421,711 shares of common stock at an exercise price of $0.65 per share.
An
additional 1,884,342 shares and warrants to purchase 942,171 shares were
issued
on November 16, 2007 because the original Units were not registered for resale
by November 15, 2007.
In
September 2007 warrants to purchase 93,500 shares of common stock were exercised
at a price of $0.1875 per share.
Warrants
Firstgold
has issued common stock warrants to officers of Firstgold as part of certain
financing transactions. Firstgold has also issued warrants as part of
the issuance of a convertible debt transaction (see Note
6). Firstgold has also issued warrants as part of the issuance of
common stock (see this Note 8).
The
fair
market value of warrants issued during the nine months ended October 31,
2007 in
conjunction with the issuance of common stock was determined to be $2,776,944
and was calculated under the Black-Scholes option pricing model with the
following assumptions used:
| Expected
life |
1.5
years |
| Risk
free interest
rate |
4.12%
to
4.92% |
| Volatility |
45.14%
to
75.1% |
| Expected
dividend
yield |
None |
The
fair
value of these warrants has been recorded as both a debit and credit to
additional paid in capital.
The
following table presents warrant activity from January 31, 2007 through October
31, 2007:
| |
|
|
|
|
Weighted-
|
|
| |
|
|
|
|
Average
|
|
| |
|
Number
|
|
|
Exercise
|
|
| |
|
of
Shares
|
|
|
Price |
|
| |
|
|
|
|
|
|
| Outstanding,
January
31, 2007 |
|
|
26,592,866 |
|
|
$ |
0.32 |
|
| Exercised |
|
|
(3,670,963 |
) |
|
$ |
(0.17 |
) |
| Granted |
|
|
16,579,073 |
|
|
$ |
0.65 |
|
| Outstanding,
October
31, 2007 |
|
|
39,500,976 |
|
|
$ |
0.47 |
|
| Exercisable,
October
31, 2007 |
|
|
39,500,976 |
|
|
$ |
0.47 |
|
Stock
options
The
2006
Plan provides for the issuance of non-qualified or incentive stock options
to
employees, non-employee members of the board and consultants. The exercise
price
per share is not to be less than the fair market value per share of the
Company’s common stock on the date of grant. The Board of Directors has the
discretion to determine the vesting schedule. Options may be either immediately
exercisable or in installments, but generally vest over a three-year period
from
the date of grant. In the event the holder ceases to be employed by the Company,
all unvested options terminate and all vested installment options may be
exercised within an installment period following termination. In general,
options expire ten years from the date of grant. Stockholders voting at the
2007
Annual Stockholders meeting held on September 20, 2007 approved an increase
in
the shares issuable under the 2006 Plan to a total of 10,000,000.
Effective
February 1, 2006, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 123(R), Share-Based Payment (SFAS
123(R)), which requires the measurement and recognition of compensation expense
for all share-based payment awards made to employees and directors, including
stock options based on their fair values.
Firstgold
had not previously issued any stock options prior to adoption of the 2006
Plan. In March 2005, the SEC issued Staff Accounting Bulletin
No. 107 (SAB
107) to provide guidance on SFAS 123(R). The Company has applied SAB 107
in its
adoption of SFAS 123(R).
The
Company adopted SFAS 123(R) using the modified prospective transition method
as
of and for the six months ended July 31, 2007. In accordance with the modified
prospective transition method, the Company’s financial statements for prior
periods have not been restated to reflect, and do not include, the impact
of
SFAS 123(R). Share-based compensation expense recognized is based on the
value
of the portion of share-based payment awards that is ultimately expected
to
vest. Share-based compensation expense recognized in the Company’s Statement of
Operations during the nine months ended October 31, 2007 includes compensation
expense for share-based payment awards granted during the current fiscal
year.
In
conjunction with the adoption of SFAS 123(R), the Company elected to attribute
the value of share-based compensation to expense using the straight-line
method.
Share-based compensation expense related to stock options and restricted
stock
grants was $83,015 for the nine months ended October 31, 2007, and was recorded
in the financial statements as operating expense.
For
the
nine months ended October 31, 2007 the Company’s calculations were made using
the Black-Scholes option pricing model with the following weighted average
assumptions: expected life, 36 months following the grant date; stock
volatility, 49.2% to 75.0%; risk-free interest rates of 4.09%to 4.90%; and
no
dividends during the expected term. As stock-based compensation expense
recognized in the consolidated statement of operations pursuant to SFAS
No. 123(R) is based on awards ultimately expected to vest, expense for
grants beginning upon adoption of SFAS No. 123(R) on February 1, 2006
will be reduced for estimated forfeitures. SFAS No. 123(R) requires
forfeitures to be estimated at the time of grant and revised, if necessary,
in
subsequent periods if actual forfeitures differ from those estimates.
Forfeitures are estimated based on historical experience.
A
summary
of the Company’s stock option activity is as follows:
|
|
|
|
|
|
|
Weighted
Ave.
|
|
|
Aggregate
|
|
|
|
|
#
of Shares
|
|
|
Exercise
Price
|
|
|
Intrinsic
Value
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
as of January 31, 2007
|
|
|
2,350,000
|
|
|
$
|
0.46
|
|
|
$
|
0
|
|
|
Granted
|
|
|
1,500,000
|
|
|
$
|
0.65
|
|
|
$
|
0
|
|
|
Exercised
|
|
|
(100,000
|
) |
|
$
|
.16
|
|
|
|
|
|
|
Cancelled
|
|
|
0
|
|
|
$
|
0
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Outstanding
as of October 31, 2007
|
|
|
3,750,000
|
|
|
$
|
0.54
|
|
|
$
|
0
|
|
| |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
as of October 31, 2007
|
|
|
2,137,500
|
|
|
$
|
0.55
|
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
information regarding options outstanding as of October 31, 2007 is as
follows:
|
|
|
|
|
|
|
|
|
Options
outstanding
|
|
|
Options
exercisable
|
|
|
|
|
|
|
|
|
|
|
Weighted
average
|
|
Weighted
|
|
|
|
|
|
|
Weighted
|
|
|
|
Range
of
|
|
|
|
|
|
remaining
|
|
average
|
|
|
|
|
|
|
average
|
|
|
|
exercise
|
|
|
Number
|
|
contractual
|
|
exercise
|
|
|
Number
|
|
|
exercise
|
|
|
|
prices
|
|
|
outstanding
|
|
life
(years)
|
|
price
|
|
|
exercisable
|
|
|
price
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
0.16 — $ 0.35
|
|
|
|
350,000
|
|
9.10
|
|
$0.33
|
|
|
|
62,500
|
|
|
$0.35
|
|
|
|
$0.50
|
|
|
|
1,900,000
|
|
8.88
|
|
$0.50
|
|
|
|
1,075,000
|
|
|
$0.50
|
|
| |
$0.65
|
|
|
|
1,500,000
|
|
9.62
|
|
$0.65
|
|
|
|
750,000
|
|
|
$0.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,750,000
|
|
9.20
|
|
$0.54
|
|
|
|
1,962,500
|
|
|
$0.54
|
|
The
weighted-average grant-date fair value of options granted during the nine
months
ended October 31, 2007 was $0.65. At October 31, 2007 there was $200,247
of
total unrecognized compensation costs related to non-vested stock options
granted under the Plan, which will be recognized over a period not to exceed
three years. At October 31, 2007, 6,150,000 shares were available for future
grants under the Stock Option Plan.
NOTE
9 - RELATED PARTY TRANSACTIONS
Prepayment
of Airplane Time
from Officer
In
December 2006 Firstgold purchased 600 hours of airplane usage from the President
and Chief Executive Officer of Firstgold for $120,000 at a rate of $200 per
hour. The airplane is to be used by Firstgold for commuting to and
from Nevada to the various mine sites and the Lovelock, NV
office. Based on current market rental rates for similar planes
Firstgold believes that the current market hourly rate is substantially above
its contract rate of $200 per hour. During the quarter and nine
months ended October 31, 2007 $0 and $6,360, respectively of airplane time
was
used by Firstgold.
Advance
to
Officer
In
January 2007 Firstgold made a temporary travel advance of $100,000 to the
Chairman and Chief Executive Officer. This amount had been fully
repaid by April 30, 2007.
NOTE
10 – SUBSEQUENT EVENT
An
additional 1,884,342 shares and warrants to purchase 942,171 shares were
issued
on November 16, 2007 because the original Units were not registered for resale
by November 15, 2007.
An
additional 74,998 shares and warrants to purchase 37,499 shares were issued
on
November 19, 2007 because the original Units were not registered for resale
by
November 18, 2007.
|
ITEM
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
|
Caution
About Forward-Looking Statements
This
Form
10-QSB includes “forward-looking” statements about future financial results,
future business changes and other events that haven’t yet
occurred. For example, statements like Firstgold “expects,”
“anticipates” or “believes” are forward-looking statements. Investors
should be aware that actual results may differ materially from Firstgold's
expressed expectations because of risks and uncertainties about the
future. Firstgold does not undertake to update the information in
this Form 10-QSB if any forward-looking statement later turns out to be
inaccurate. Details about risks affecting various aspects of
Firstgold’s business are discussed throughout this Form 10-QSB and should be
considered carefully.
Overview
We
are an
exploration-stage company engaged in the acquisition, exploration and, if
warranted, development of various mining properties located in the State of
Nevada. We are currently conducting a comprehensive exploration and
development program on various mineral leases associated with our Relief Canyon
Mine property located near Lovelock, Nevada. During the current fiscal year
we
have completed drilling 58 reverse circulation drill holes totaling 13,095
feet
in the existing pit area. We have also drilled a total of 57 sonic
holes and 125 reverse circulation holes in the existing heap leach pads to
assess the economic potential of reprocessing the ore and extracting any
remaining gold. These drill results will be added to the historic
drill hole database to help develop a new mining plan for Relief Canyon Mine
property.
In
January 2006, we entered into a joint venture with ASDi LLC for the purpose
of
exploring and, if warranted, developing additional mining properties located
in
Nevada. To date, no properties have been explored by the joint
venture.
In
October 2006, we entered into a Mineral Lease Agreement to explore, and, if
warranted, develop up to 25,000 acres of property called Antelope Peak located
in Elko County, Nevada. The Lease allows us the exclusive right to
explore for, and, if warranted, develop gold, silver and barite minerals on
the
leased property. Exploration activity has commenced on this
property.
We
have
conducted preliminary sampling of approximately 4,200 acres of potentially
mineralized ground in the Horse Creek area located approximately 100 miles
northeast of Reno, Nevada. During the course of the property
evaluation, rock chip samples were collected showing the potential presence
of
intrusion-related mineral systems. During the third quarter we
commenced the extensive mapping of the area’s bedrock
geology. Additionally, we plan to conduct an airborne geophysical
survey to map the magnetic character of the rocks. Geochemical
exploration efforts continued with more rock chip sampling as well as an
in-depth soil sampling survey.
Plan
of Operations for the Next Twelve Months
Certain
key factors that have affected our financial and operating results in the past
will affect our future financial and operating results. These
include, but are not limited to the following:
-
Our
proposed exploration of properties now include 146 millsite and unpatented
mining claims contained in about 1,000 acres of the Relief Canyon Property
and
the 25,000 acre Antelope Peak property and approximately 4,200 acres of
potentially mineralized ground in the Horse Creek area of
Nevada.
-
Our
operating plan is to commence exploration work on the Relief Canyon mining
property during 2007. We expect this exploration program to
continue through the end of 2007. During calendar 2008, we plan to
resume heap leaching at the Relief Canyon mine and we anticipate realizing
production revenue from the Relief Canyon mine thereafter. Through
the sale of additional securities and/or the use of joint ventures or other
financing arrangements we intend to progressively enlarge the scope and
scale
of our exploration, mining and processing operations, thereby potentially
increasing our chances of locating commercially viable ore deposits which
could increase both our annual revenues and ultimately our net
profits. Our objective is to achieve annual growth rates in revenue
and net profits for the foreseeable future.
-
We
expect to make capital expenditures in calendar years 2007, 2008 and 2009
totaling between $15 million and $20 million, including costs related to
the
exploration, development and operation of the Relief Canyon mining
property. We will have to raise additional outside capital to pay
for these activities and the resumption of exploration activities and possible
future production at the Relief Canyon mine.
-
Additional
funding or the utilization of other venture partners will be required to
fund
exploration, research, development and operating expenses at the Antelope
Peak
and Horse Creek properties. In the past we have been dependent on
funding from the private placement of our securities as well as loans from
related and third parties as the sole sources of capital to fund
operations.
Results
of Operation
Our
current business strategy is to invest in, explore and if warranted, conduct
mining operations of our current mining properties and other mineral producing
properties. Firstgold is a public company that in the past has been
engaged in the exploration, acquisition and development of gold-bearing
properties in the continental United States. Currently, our principal
assets include various mineral leases associated with the Relief Canyon Mine
located near Lovelock, Nevada along with various items of mining equipment
and
improvements located at that site. We have also entered into (i) a
joint venture intended to allow exploration of additional mining properties
located in Lander County, Nevada (although neither Firstgold nor the joint
venture own any interest in such mining properties which are currently subject
to litigation); (ii) a mineral lease to explore approximately 25,000 acres
of
property located in Elko County, Nevada; and (iii) the staking of approximately
4200 acres of property located in Humboldt County, Nevada.
Operating
Results for the
Fiscal Quarters Ended October
31, 2007 and
2006
Although
we commenced efforts to re-establish our mining business early in fiscal year
2004, no mining operations have commenced and no revenues have been recognized
during the quarters ended October 31, 2007 and 2006, respectively. We
have granted a 4% net smelting return royalty to a third party related to the
Relief Canyon mining property which has been recorded as an $800,000 deferred
option income.
During
the quarter ended October 31, 2007 we spent $505,037 for exploration,
reclamation and maintenance expenses related to our mining
properties. Reclamation and maintenance expenses expended during the
same quarter ended October 31, 2006 were $159,414. These expenses
relate primarily to exploration, maintenance and retention costs required to
maintain our mining claims. The increase in costs was due to
extensive building and facility expansion at the Relief Canyon mine and the
resumption of exploration drilling. We incurred operating expenses of
$1,664,954 during the quarter ended October 31, 2007. Of this amount,
$34,671 reflects outside director compensation expense related to the stock
options issued, $265,198 reflects promotion expense, $93,500 reflects officer
compensation and related payroll taxes during the quarter and $480,785 reflect
fees for outside professional services. $303,728 of the outside
professional services reflects legal costs associated with the litigation
involving the Crescent Red Caps LLC as well as other legal
and
accounting work pertaining to our annual and quarterly SEC reporting obligations
occurring in fiscal year 2008 as well as our Forms SB-2 filed in August,
September and October 2007. During the quarter ended October 31, 2006
we incurred operating expenses of $491,897 of which $93,500 represented officer
compensation and related payroll taxes, $153,458 reflected outside director
compensation related to the stock options issued, and $86,524 reflected fees
for
outside professional services. It is anticipated that both mining
costs and operating expenses will increase significantly as we resume our
exploration program and prepare for mining operations.
We
incurred interest expense of $307,780 during the quarter ended October 31,
2007
which compares to interest expenses of $162,600 incurred during the same quarter
of 2006. The principal balance of loans outstanding during the third
quarter of fiscal year 2008 decreased by $1,265,626 compared to third quarter
of
fiscal year 2007, which was primarily the result of a decrease in convertible
debentures. The increase in additional interest expense during the
quarter ended October 31, 2007 was primarily due to the increase in the
principal balance of loans outstanding during the period as well as the
write-off of unamortized debt costs related to convertible debt which was
converted in full during the period.
Our
total
net loss for the quarter ended October 31, 2007 decreased to $1,934,114 compared
to a net loss of $2,040,864 incurred for the same quarter ended October 31,
2006. The slightly smaller net loss in the third quarter of fiscal
2008 reflects the decrease in exploration costs and the $455,533 gain recognized
from writing off liabilities that were over six years old of which is partially
offset by the higher interest expense as well as the increase in operating
expenses as we expand our activities at Relief Canyon and a continued lack
of
revenues recognized during the quarter.
Operation
Results for the Nine Months Ended October 31, 2007 and 2006
During
the nine months ended October 31, 2007, we spent $870,828 on exploration,
reclamation and building and facilities expansion expenses related to our mining
properties. These expenses
relate primarily to repairing and upgrading costs required to resume exploration
drilling of our Relief Canyon mining claims. During the nine months
ended October 31, 2006, we spent $298,963 on reclamation and maintenance
expenses related to the Relief Canyon mining property; $47,581 in costs related
to the Crescent Red Caps Joint Venture; and $1,133,905 in costs related to
our
Antelope Peak leasehold interest. We incurred operating expenses of
$3,933,654 during the nine months ended October 31,
2007.
Of
this
amount, $442,476 reflects outside director compensation expense related to
director fees and stock options issued, $567,848 reflects promotion expense,
$273,009 reflects officer compensation and related payroll taxes during the
period and $885,883 reflect fees for outside professional services of which
$425,640 reflects legal costs associated with the litigation involving the
Crescent Red Caps LLC litigation while another large portion of the outside
and
professional services reflects legal and accounting work pertaining to our
annual and quarterly reporting with the SEC and our recently filed
Form SB-2. During the nine months ended October 31, 2006, we incurred
operating expenses of $1,019,990, of which $280,500 represented officer
compensation and related payroll taxes, $221,478 reflects outside directors
compensation expense related to stock options issued and $247,385 reflected
fees
for outside professional services. It is anticipated that both mining
costs and operation costs will increase significantly during the remainder
of
the fiscal year as we resume our exploration program and initiate mining
operations.
We
incurred interest expense of $831,319 during the nine months ended October
31,
2007, which compares to interest expenses of $394,092 incurred during the same
nine months of 2006. The average principal balance of loans
outstanding during the first nine months of the fiscal year 2008 was
significantly higher compared to the same nine months for fiscal year 2007,
which was primarily the result of the increase in outstanding convertible
debentures. Accordingly, the increase in additional interest expense during
the
nine months ended October 31, 2007, was primarily due to the increase in
outstanding convertible debentures.
In
conjunction with the Convertible Debentures issued during September 2006,
December 2006 and March 2007, we allocated the proceeds received between
convertible debt and the detachable warrants based upon the relative fair market
values on the date the proceeds were received. Subsequent to the
initial recording, the change in the fair value of the detachable warrants,
determined under the Black-Scholes option pricing formula, and the change in
the
fair value of the embedded derivative in the conversion feature of the
convertible debentures are recorded as adjustments to the liabilities for the
quarters ended April 30, 2007 and July 31, 2007. This resulted in
$703,992 of expense relating to the change in the fair value of Firstgold’s
stock reflected in the change in the fair value of the warrants and derivatives
(noted above) and is included as other income (expense). A similar
calculation was not done for the nine month period ended October 31, 2007 due
to
the Convertible Debentures having been fully retired due to
conversion.
Our
total
net loss for the nine months ended October 31, 2007, increased to $5,811,950
compared to a net loss of $3,649,402 incurred for the same nine months ended
October 31, 2006. The higher net loss in the first nine months of
fiscal 2008 reflects the increase in exploration, maintenance, and operating
expenses as we expand our exploration and building activities and a continued
lack of revenues recognized during the first nine months of fiscal
2008.
Liquidity
and Capital Resources
We
have
incurred significant operating losses since inception and during the nine months
ended October 31, 2007 which has resulted in an accumulated deficit of
$29,571,864 as of October 31, 2007.
At
October 31, 2007, we had cash and other current assets of $5,546,751 compared
to
$412,752 at January 31, 2007 and net working capital of $4,115,410. Since the resumption
of our business in February 2003, we have been dependent on borrowed or invested
funds in order to finance our ongoing operations. As of October 31,
2007, we had outstanding debentures and notes payable in the gross principal
amount of $817,163 (net balance of $657,775 after $(159,389) of note payable
discount and deferred financing costs) which reflects a decrease in the gross
principal balance of $1,265,625 compared to notes payable in the gross principal
amount of $2,082,789, (net balance of $2,397,508 after $(1,310,260) of note
payable discount and deferred financing costs and $1,624,979 of derivative
liabilities) as of October 31, 2006.
On
March
28, 2007 we provided the United States Department of the Interior, Bureau of
Land Management with a letter of credit which is secured by a certificate of
deposit in the amount of $613,500. On April 12, 2007 the Nevada
Division of Environmental Protection (“NDEP”) returned $243,204 previously
deposited in a blocked account to cover future reclamation costs required by
the
NDEP for the Relief Canyon Mine.
On
April
12, 2007 we received net proceeds of $2,374,200 upon the issuance of Units
consisting of 5,673,110 shares of our common stock sold at $0.45 per Unit and
warrants to purchase 2,836,555 shares of common stock at an exercise price
of
$0.65 per share. The warrants have a term of eighteen (18)
months.
On
May
18, 2007, we received net proceeds of $337,500 upon the issuance of 749,999
units at a price of $0.45 per unit. Each unit consisted of one share
of Firstgold’s common stock and ½ warrant to purchase a share of Firstgold’s
common stock at an exercise price of $0.65 per share. The warrants to
purchase 375,002 shares have a term of eighteen (18) months.
On
June
22, 2007, we received net proceeds of $7,798,141 upon the issuance of 18,843,421
units at the price of $0.45 per unit. Each unit consisted of one
share of Firstgold’s common stock and ½ warrant to purchase a share of
Firstgold’s common stock at an exercise price of $0.65 per share. The
warrants to purchase 9,421,711 shares have a term of eighteen (18)
months.
By
attempting to resume mining operations, we will require approximately $5 million
to $10 million in additional working capital above the amounts already raised
to
bring the Relief Canyon Mine into full production and carry out our exploration
programs at our other properties. It is our intention to pursue
several possible funding opportunities including the sale of additional
securities, entering into joint venture arrangements, or incurring additional
debt.
Due
to
our continuing losses from business operations, the independent auditor’s report
dated May 16, 2007, includes a “going concern” explanation relating to the fact
that Firstgold’s continuation is dependent upon obtaining additional working
capital either through significantly increasing revenues or through outside
financing. As of October 31, 2007, Firstgold’s principal commitments
included its obligation to pay ongoing maintenance fees on the Relief Canyon
mining claims, the funding arrangement pursuant to the joint venture with ASDi,
LLC and the annual minimum rent due on the Antelope Peak mineral
lease.
Our
management believes that it will need to raise additional capital to continue
to
develop, promote and conduct our mineral exploration and production
activities. Consequently, we are dependent on continuous cash
infusions from our major stockholders or other outside sources in order to
fund
our current operations. If additional funds are not otherwise
available, through public or private financing as well as borrowing from other
sources, Firstgold would not be able to fully establish or sustain its mineral
exploration and production program.
Off-Balance
Sheet
Arrangements
During
the fiscal quarter ended October 31, 2007, Firstgold did not engage in any
off-balance sheet arrangements as defined in Item 303(c) of the SEC’s Regulation
S-B.
Factors
Affecting Future Operating Results
We
are a
development stage company and an investment in, or ownership position in our
common stock is inherently risky. Some of these risks pertain to our
business in general, and others are risks which would only affect our common
stock. The price of our common stock could decline and/or remain
adversely affected due to any of these risks and investors could lose all or
part of an investment in our company as a result of any of these risks coming
to
pass. Readers of this Report should, in addition to considering these risks
carefully, refer to the other information contained in this Report, including
disclosures in our financial statements and all related notes. If any
of the events described below were to occur, our business, prospects, financial
condition, or results of operations or cash flow could be materially adversely
affected. When we say that something could or will have a material
adverse effect on Firstgold, we mean that it could or will have one or more
of
these effects. We also refer readers to the information in this
Report, discussing the impact of Forward-Looking Statements on the descriptions
contained in this Report and included in the Factors discussed
below.
As
a
development stage company with an unproven business strategy, we may not be
able
to achieve positive cash flows and our limited history of operations makes
evaluation of our future business and prospects difficult. We have
been relatively inactive since April 2001. Consequently, we have only
recently reactivated our business operations and we have not generated any
revenues, other than interest and dividend income, since our
reactivation. As a result, we have only a limited operating history
upon which to evaluate our future potential performance. Our
prospects must be considered in light of the risks and difficulties encountered
by new companies which have not yet established their business
operations.
We
will
need additional funds to finance our future mining and exploration
activities. We currently have cash reserves and a working capital
surplus of $4,115,410 as of October 31, 2007. However, our ability to
fully implement our business plan and meet our long-term obligations in the
ordinary course of business is dependent upon our ability to raise additional
capital through public or private equity financings, establish cash flows from
operations, enter into joint ventures or other arrangements with capital
sources, or secure other sources of financing to fund operations. Our continuing
reliance on outside capital is a consequence of our negative cash flows from
operations. At any time, a serious deficiency in cash flows could
occur and it is not always possible or convenient to raise additional
capital.
A
problem
in raising capital could result in temporary or permanent insolvency and
consequently potential claims by unpaid creditors and perhaps closure of the
business.
Our
prior
and current independent certified public accountants have expanded their opinion
contained in our financial statements as of and for the years ended January
31,
1997, through January 31, 2007 to include an explanatory paragraph related
to
our ability to continue as a going concern, stating, in the audit report dated
May 16, 2007, that “the Company has incurred a net loss of $4,728,073 and had
negative cash flow from operations of $2,397,495. In addition, the
Company had an accumulated deficit of $23,758,605 and a shareholders’ deficit of
$4,245,793 at January 31, 2007.” These factors, among others, as
discussed in “Note 2- Going Concern” to the financial statements, raise
substantial doubt about the Company’s ability to continue as a going
concern. The auditors recognize that the cash flow uncertainty makes
their basic assumptions about value uncertain. When it seems
uncertain whether an asset will be used in a “going concern” or sold at auction,
the auditors assume that the business is a “going concern” for purposes of all
their work, and then they disclose that there is material uncertainty about
that
assumption. It is certain, in any case, that analysts and investors
view unfavorably any report of independent auditors expressing substantial
doubt
about a company's ability to continue as a going concern.
The
price
of gold has experienced an increase in value over the past five years, generally
reflecting among other things relatively low interest rates in the United
States; worldwide instability due to terrorism; and a slow recovery from prior
global economic slumps. Any significant drop in the price of gold may
have a materially adverse affect on the results of our operations unless we
are
able to offset such a price drop by substantially increased
production.
We
have
no proven or probable reserves and have no ability to currently measure or
prove
our reserves other then estimating such reserves relying on information produced
in the 1990’s and thus may be unable to actually recover the quantity of gold
anticipated. We have retained SRK Engineering to perform a resource
evaluation. We can only estimate a potential mineral resource which
is a subjective process which depends in part on the quality of available data
and the assumptions used and judgments made in interpreting such
data. There is significant uncertainty in any resource estimate such
that the actual deposits encountered or reserves validated and the economic
viability of mining the deposits may differ materially from our
expectations.
Gold
exploration is highly speculative in nature. Success in exploration
is dependent upon a number of factors including, but not limited to, quality
of
management, quality and availability of geological data and availability of
exploration capital. Due to these and other factors, the probability
of our exploration program identifying individual prospects having commercially
significant reserves cannot be predicted. It is likely that many of
the claims explored will not contain any commercially viable
reserves. Consequently, substantial funds will be spent on
exploration which may identify only a few, if any, claims having commercial
development potential. In addition, if commercially viable reserves
are identified, significant amounts of capital will be required to mine and
process such reserves.
Our
mining property rights consist of 146 mill site and unpatented mining claims
at
the Relief Canyon Mine, our leasehold interest in the Antelope Peak property,
and recently staked claims in the Horse Creek area of Nevada. The
validity of unpatented mining claims is often uncertain and is always subject
to
contest. Unpatented mining claims are generally considered subject to
greater title risk than patented mining claims, or real property interests
that
are owned in fee simple. In addition, the validity of the property
rights pertaining to the Crescent Red Caps LLC are currently being contested
by
the lessors such that the Crescent Red Caps LLC does not currently hold any
interest in such mining properties. If title to a particular property
is successfully challenged, we may not be able to carryout exploration programs
on such property or to retain our royalty interests on that property should
production take place, which could reduce our future revenues.
Mining
is
subject to extensive regulation by state and federal regulatory
authorities. State and federal statutes regulate environmental
quality, safety, exploration procedures, reclamation, employees’ health and
safety, use of explosives, air quality standards, pollution of stream and fresh
water sources, noxious odors, noise, dust, and other environmental protection
controls as well as the rights of adjoining property owners. We
believe that we are currently operating in substantial compliance with all
known
safety and environmental standards and regulations applicable to our Nevada
property. However, there can be no assurance that our compliance
could be challenged or that future changes in federal or Nevada laws,
regulations or interpretations thereof will not have a material adverse affect
on our ability to resume and sustain mining operations.
The
business of gold mining is subject to certain types of risks, including
environmental hazards, industrial accidents, and theft. While we
maintain insurance consistent with industry practice, it is not possible to
insure against all risks associated with the mining business, or prudent to
assume that insurance will continue to be available at a reasonable
cost. We have not obtained environmental liability insurance because
such coverage is not considered by management to be cost
effective. We currently carry insurance on our property, plant and
equipment as well as comprehensive general liability insurance.
As
of
October 31, 2007, Firstgold had approximately 112,601,370 shares of Common
Stock
outstanding and convertible debentures which are convertible into 1,444,444
shares of our Common Stock. Additionally, warrants to purchase a
total of 39,726,132 shares of our Common Stock were outstanding as of October
31, 2007. The possibility that substantial amounts of our outstanding
Common Stock may be sold by investors or the perception that such sales could
occur, often called "equity overhang," could adversely affect the market price
of our Common Stock and could impair our ability to raise additional capital
through the sale of equity securities in the future
29