| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2013
x QUARTERLY REPORT UNDER SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
¨ TRANSITION REPORT UNDER SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __ to __
Commission file number 000-24393
AURORA GOLD CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
13-3945947
(I.R.S. Employer Identification No.)
Coresco AG, Level 3, Gotthardstrasse 20, 6304 Zug, Switzerland
(Address of principal executive offices)
+41 41 711 0281
(Issuer’s telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Larger accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
¨ Yes x No
There were 249,144,706 shares of common stock outstanding on May 10, 2013.
Documents incorporated by reference: Refer to Exhibits
This quarterly report contains statements that plan for or anticipate the future and are not historical facts. In this Report these forward looking statements are generally identified by words such as “anticipate,” “plan,” “believe,” “expect,” “estimate,” and the like. Because forward-looking statements involve future risks and uncertainties, these are factors that could cause actual results to differ materially from the estimated results. These risks and uncertainties are detailed in this report. The Private Securities Litigation Reform Act of 1995, which provides a “safe harbor” for such statements, may not apply to this Report.
| 1 | AURORA GOLD CORPORATION |
AURORA GOLD CORPORATION
FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS)
QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013
INDEX
| PART I – FINANCIAL INFORMATION | 4 | |
| CONSOLIDATED BALANCE SHEETS | 4 | |
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | 5 | |
| CONSOLIDATED STATEMENTS OF CASH FLOWS | 6 | |
| CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY) | 7 | |
| NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS | 13 | |
| ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 26 | |
| ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 40 | |
| ITEM 4 – CONTROLS AND PROCEDURES | 40 | |
| PART II - OTHER INFORMATION | 41 | |
| ITEM 1 – LEGAL PROCEEDINGS | 41 | |
| ITEM 1A – RISK FACTORS | 41 | |
| ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 41 | |
| ITEM 3 – DEFAULTS UPON SENIOR SECURITIES | 41 | |
| ITEM 4 – MINING SAFETY DISCLOSURES | 41 | |
| ITEM 5 – OTHER INFORMATION | 41 | |
| ITEM 6 – EXHIBITS | 42 | |
| SIGNATURES | 45 | |
| 2 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
Uncertainties Relating To Forward-Looking Statements
The information in this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act (SEC) of 1934. These forward-looking statements involve risks and uncertainties, including statements regarding the Company’s capital needs, business strategy and expectations. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements.
In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, or “continue”, the negative of such terms or other comparable terminology. Actual events or results may differ materially. In evaluating these statements, you should consider various factors, including the risks outlined from time to time, in other reports the Company files with the Securities and Exchange Commission.
The information constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements in this form are subject to risks and uncertainties that could cause actual results to differ materially from the results expressed in or implied by the statements contained in this report. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives requires the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate.
All forward-looking statements are made as of the date of filing of this form and the Company disclaims any obligation to publicly update these statements, or disclose any difference between its actual results and those reflected in these statements. The Company may, from time to time, make oral forward-looking statements. The Company strongly advises that the above paragraphs and the risk factors described in this Report and in the Company’s other documents filed with the United States Securities and Exchange Commission should be read for a description of certain factors that could cause the actual results of the Company to materially differ from those in the oral forward-looking statements. The Company disclaims any intention or obligation to update or revise any oral or written forward-looking statements whether as a result of new information, future events or otherwise.
| 3 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
PART I – FINANCIAL INFORMATION
ITEM 1 – FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
| AURORA GOLD CORPORATION | As at | As at | ||||||
| Consolidated Balance Sheets | March 31 | December 31 | ||||||
| (An exploration stage enterprise) | 2013 (unaudited) | 2012 | ||||||
| (Expressed in U.S. Dollars) | $ | $ | ||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | 3,151,999 | 3,963,836 | ||||||
| Prepayments | 196,687 | 67,910 | ||||||
| Total current assets | 3,348,686 | 4,031,746 | ||||||
| Non current assets | ||||||||
| Vehicles and other equipment, net | 153,534 | 97,916 | ||||||
| Total non current assets | 153,534 | 97,916 | ||||||
| Total assets | 3,502,220 | 4,129,662 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY) | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | 265,872 | 119,123 | ||||||
| Accounts payable and accrued expenses - related party | 116,049 | 126,220 | ||||||
| Advances payable - related party | 32,000 | 32,000 | ||||||
| Total current liabilities | 413,921 | 277,343 | ||||||
| Stockholders’ Equity (Deficiency) | ||||||||
| Common stock with par value of $0.001 each | ||||||||
| Authorized: 300,000,000 (Dec 31, 2012: 300,000,000) | ||||||||
| Issued and outstanding: 249,144,706 (Dec 31, 2012: 249,144,706) | 249,146 | 249,146 | ||||||
| Additional paid-in capital | 27,211,349 | 27,211,349 | ||||||
| Accumulated deficit during the exploration stage | (24,360,311 | ) | (23,600,974 | ) | ||||
| Accumulated other comprehensive income (loss) | (11,886 | ) | (7,202 | ) | ||||
| Total stockholders’ equity (deficiency) | 3,088,299 | 3,852,319 | ||||||
| Total liabilities and stockholders’ equity (deficiency) | 3,502,220 | 4,129,662 | ||||||
The accompanying notes are an integral part of these interim consolidated financial statements.
| 4 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
| AURORA GOLD CORPORATION | October 19, 1995 | |||||||||||
| (inception) | Quarter Ended | Quarter Ended | ||||||||||
| (An exploration stage enterprise) | to March 31 | March 31 | March 31 | |||||||||
| Consolidated Statements of Comprehensive Income (Loss) | 2013 | 2013 | 2012 | |||||||||
| (Expressed in U.S. Dollars) | $ | $ | $ | |||||||||
| Operating expenses | ||||||||||||
| Independent directors fees | 9,000 | - | ||||||||||
| Professional fees - audit, legal, company secretary | 100,543 | 8,171 | ||||||||||
| Investor relations, listing and filing fees | 142,425 | - | ||||||||||
| Travel and accommodation | 86,245 | - | ||||||||||
| Salaries, management and consulting fees | 94,123 | 119,259 | ||||||||||
| Other general and administrative | 9,642 | 88,673 | ||||||||||
| Total general and administration | 9,011,465 | 441,977 | 216,103 | |||||||||
| Depreciation and amortization | 156,405 | 6,150 | - | |||||||||
| Interest and bank charges | 398,461 | 1,679 | (138 | ) | ||||||||
| Imputed interest on loan payable - related party | 1,560 | - | - | |||||||||
| Foreign exchange loss (gain) | (13,235 | ) | 521 | 1,563 | ||||||||
| Exploration expenses | 10,373,927 | 309,803 | 28,282 | |||||||||
| Property search and negotiation | 479,695 | - | - | |||||||||
| Write-off of mineral property costs | 240,338 | - | - | |||||||||
| 20,648,616 | 760,130 | 245,810 | ||||||||||
| Other income (expense) | ||||||||||||
| Gain (loss) on disposition of subsidiary | (2,541,037 | ) | - | - | ||||||||
| Interest income | 23,279 | 793 | - | |||||||||
| Gain on sale of rights to Matupa agreement, net | 80,237 | - | - | |||||||||
| Loss on investments | (37,971 | ) | - | - | ||||||||
| Loss on spun-off operations | (316,598 | ) | - | - | ||||||||
| Loss on extinguishment of liabilities | (919,605 | ) | - | - | ||||||||
| (3,711,695 | ) | 793 | - | |||||||||
| Net Loss | (24,360,311 | ) | (759,337 | ) | (245,810 | ) | ||||||
| Other comprehensive income (loss) | ||||||||||||
| Foreign currency translation adjustments | (4,684 | ) | (18,654 | ) | ||||||||
| Comprehensive income (loss) | (764,021 | ) | (264,464 | ) | ||||||||
| Net Loss Per Share – Basic and Diluted | (0.00 | ) | (0.00 | ) | ||||||||
| Weighted Average Shares Outstanding – Basic and Diluted | 249,144,706 | 110,284,515 | ||||||||||
The accompanying notes are an integral part of these interim consolidated financial statements.
| 5 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
CONSOLIDATED STATEMENTS OF CASH FLOWS
| AURORA GOLD CORPORATION | Cumulative | |||||||||||
| (An exploration stage enterprise) | October 19, 1995 | |||||||||||
| Consolidated Statements of Cash Flows | (inception) | Quarter Ended | Quarter Ended | |||||||||
| (Expressed in U.S. Dollars) | to March 31 | March 31 | March 31 | |||||||||
| 2013 | 2013 | 2012 | ||||||||||
| $ | $ | $ | ||||||||||
| Cash Flows From Operating Activities | ||||||||||||
| Net loss for the period | (24,360,311 | ) | (759,337 | ) | (245,810 | ) | ||||||
| Adjustments to reconcile net loss to cash used in operating activities | ||||||||||||
| Depreciation and amortization | 156,405 | 6,150 | - | |||||||||
| Stock compensation expense on stock option grants | 1,624,012 | - | 43,681 | |||||||||
| Expenses satisfied with issuance of common stock | 1,202,054 | - | - | |||||||||
| Expenses satisfied with transfer of marketable securities | 33,903 | - | - | |||||||||
| Imputed interest on loan payable - related parties | 1,560 | - | - | |||||||||
| Write-off of mineral property costs | 240,338 | - | - | |||||||||
| Adjustment for spin-off of Aurora Metals (BVI) Limited | 316,498 | - | - | |||||||||
| Loss on disposal of subsidiary | 2,757,511 | - | - | |||||||||
| Realized loss on investments | 37,971 | - | - | |||||||||
| Gain on sale of rights to Matupa agreement (net) | (80,237 | ) | - | - | ||||||||
| (Gain) loss on extinguishment of liabilities | 919,605 | - | - | |||||||||
| Foreign exchange (gain) loss related to notes payable | (24,534 | ) | - | - | ||||||||
| Change in operating assets and liabilities | - | |||||||||||
| Decrease (increase) in receivables and other assets | (206,978 | ) | - | |||||||||
| (Increase) decrease in prepaid expenses and other assets | (217,146 | ) | (128,777 | ) | - | |||||||
| Increase (decrease) in accounts payable and accrued expenses (including related party) | 1,249,642 | 136,578 | 30,159 | |||||||||
| Net Cash Used in Operating Activities | (16,349,706 | ) | (745,385 | ) | (171,970 | ) | ||||||
| Cash Flows From Investing Activities | ||||||||||||
| Purchase of equipment | (370,161 | ) | (61,768 | ) | - | |||||||
| Proceeds on disposal of equipment | 16,761 | - | - | |||||||||
| Payment for mineral property Reclamation Bonds | (245,221 | ) | - | - | ||||||||
| Proceeds from disposition of marketable securities | 32,850 | - | - | |||||||||
| Acquisition of mineral property costs and related equipment | (672,981 | ) | - | - | ||||||||
| Payment for incorporation cost | (11,511 | ) | - | - | ||||||||
| Net CashProvided by (used in) Investing Activities | (1,250,263 | ) | (61,768 | ) | - | |||||||
| Cash Flows From Financing Activities | ||||||||||||
| Proceeds from common stock less issuance costs | 19,140,912 | - | 17,513 | |||||||||
| Loan proceeds from related party | 289,000 | - | - | |||||||||
| Net proceeds from (payments on) convertible notes and loans | 969,252 | - | - | |||||||||
| Net proceeds from (payments on) advances payable | 45,000 | - | - | |||||||||
| Net proceeds from (payments on) advances payable -related parties | 92,000 | - | - | |||||||||
| Net Cash Provided by Financing Activities | 20,536,164 | - | 17,513 | |||||||||
| Effect of exchange rate changes on Cash and Cash Equivalents | 215,804 | (4,684 | ) | (1,141 | ) | |||||||
| (Decrease) Increase in Cash | 3,151,999 | (811,837 | ) | (155,598 | ) | |||||||
| Cash at Beginning of Period | - | 3,963,836 | 237,426 | |||||||||
| Cash at End of Period | 3,151,999 | 3,151,999 | 81,828 | |||||||||
The accompanying notes are an integral part of these interim consolidated financial statements.
| 6 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)
| AURORA GOLD CORPORATION | Accumulated | |||||||||||||||||||||||||||
| (An exploration stage enterprise) | Accumulated | Other | Total | |||||||||||||||||||||||||
| Consolidated Statements of Stockholders' Equity (Deficiency) | Common Stock | Additional paid-in | Advances for Stock | (deficit) during Exploration | Comprehensive Income | Stockholders' Equity | ||||||||||||||||||||||
| October 19, 1995 (inception) to March 31, 2013 | Shares | Amount | capital | Subscriptions | Stage | (Loss) | (Deficiency) | |||||||||||||||||||||
| (Expressed in U.S. Dollars) | # | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Balance, December 31, 1994 | - | - | - | - | - | - | - | |||||||||||||||||||||
| Issuance of common stock for - settlement of indebtedness | 11,461,153 | 11,461 | - | - | - | - | 11,461 | |||||||||||||||||||||
| Net (loss) for the period | - | - | - | - | - | |||||||||||||||||||||||
| Balance December 31, 1995 | 11,461,153 | 11,461 | - | - | - | - | 11,461 | |||||||||||||||||||||
| Adjustment for reverse stock split | (7,640,766 | ) | (7,641 | ) | - | - | - | - | (7,641 | ) | ||||||||||||||||||
| Issuance of common stock for - cash at $0.001 per share | 5,800,000 | 5,800 | 341,761 | - | - | - | 347,561 | |||||||||||||||||||||
| - resource property | 300,000 | 300 | 2,700 | - | - | - | 3,000 | |||||||||||||||||||||
| Net (loss) for the period | (361,208 | ) | - | (361,208 | ) | |||||||||||||||||||||||
| Balance December 31, 1996 | 9,920,387 | 9,920 | 344,461 | (361,208 | ) | - | (6,827 | ) | ||||||||||||||||||||
| Issuance of common stock for - cash in March 1997 at $1.00 per share (less issue costs of $4,842) | 750,000 | 750 | 744,408 | - | - | - | 745,158 | |||||||||||||||||||||
| Net (loss) for the period | - | (615,880 | ) | - | (615,880 | ) | ||||||||||||||||||||||
| Balance December 31, 1997 | 10,670,387 | 10,670 | 1,088,869 | - | (977,088 | ) | - | 122,451 | ||||||||||||||||||||
| Issuance of common stock for: | ||||||||||||||||||||||||||||
| - settlement of indebtedness | 96,105 | 96 | 68,601 | - | - | - | 68,697 | |||||||||||||||||||||
| - cash in May 1998 at $1.25 per share | 200,000 | 200 | 249,800 | - | - | - | 250,000 | |||||||||||||||||||||
| - cash in November 1998 at $0.75 per share | 71,667 | 72 | 53,678 | - | - | - | 53,750 | |||||||||||||||||||||
| - cash in December 1998 at $0.75 per share | 143,333 | 143 | 107,357 | - | - | - | 107,500 | |||||||||||||||||||||
| Grant of options to employees and directors | 518,900 | - | - | - | 518,900 | |||||||||||||||||||||||
| Grant of options to consultants | 172,100 | - | - | - | 172,100 | |||||||||||||||||||||||
| Net (loss) for the period | - | (1,151,604 | ) | - | (1,151,604 | ) | ||||||||||||||||||||||
| Balance December 31, 1998 | 11,181,492 | 11,181 | 2,259,304 | - | (2,128,692 | ) | - | 141,794 | ||||||||||||||||||||
| Issuance of common stock for: | ||||||||||||||||||||||||||||
| - settlement of indebtedness | 231,286 | 231 | 160,151 | - | - | - | 160,382 | |||||||||||||||||||||
| - cash in March 1999 at $0.656 per share | 22,871 | 23 | 14,977 | - | - | - | 15,000 | |||||||||||||||||||||
| - finder's fee in February 1999 at $0.81 per share | 25,000 | 25 | 20,287 | - | - | - | 20,312 | |||||||||||||||||||||
| Grant of options to consultants | 29,500 | - | - | - | 29,500 | |||||||||||||||||||||||
| Cash advanced on stock subscriptions | 425,000 | - | 425,000 | |||||||||||||||||||||||||
| Net (loss) for the period | - | (855,391 | ) | - | (855,391 | ) | ||||||||||||||||||||||
| Balance December 31, 1999 | 11,460,649 | 11,461 | 2,484,219 | 425,000 | (2,984,083 | ) | - | (63,403 | ) | |||||||||||||||||||
The accompanying notes are an integral part of these interim consolidated financial statements.
| 7 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
| AURORA GOLD CORPORATION | Accumulated | |||||||||||||||||||||||||||
| (An exploration stage enterprise) | Accumulated | Other | Total | |||||||||||||||||||||||||
| Consolidated Statements of Stockholders' Equity (Deficiency) | Common Stock | Additional paid-in | Advances for Stock | (deficit) during Exploration | Comprehensive Income | Stockholders' Equity | ||||||||||||||||||||||
| October 19, 1995 (inception) to March 31, 2013 | Shares | Amount | capital | Subscriptions | Stage | (Loss) | (Deficiency) | |||||||||||||||||||||
| (Expressed in U.S. Dollars) | # | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Balance December 31, 1999 | 11,460,649 | 11,461 | 2,484,219 | 425,000 | (2,984,083 | ) | - | (63,403 | ) | |||||||||||||||||||
| Issuance of common stock for: | ||||||||||||||||||||||||||||
| - settlement of indebtedness | 199,000 | 199 | 99,301 | - | - | - | 99,500 | |||||||||||||||||||||
| - cash in March 2000 at $0.50 per share | 350,000 | 350 | 174,650 | (175,000 | ) | - | - | - | ||||||||||||||||||||
| - cash in March 2000 at $0.455 per share | 550,000 | 550 | 249,450 | (250,000 | ) | - | - | - | ||||||||||||||||||||
| Cancellation of shares in April 2000 | (90,706 | ) | (91 | ) | (56,600 | ) | - | - | - | (56,691 | ) | |||||||||||||||||
| Exercise of options in June 2000 | 405,000 | 405 | 3,645 | - | - | - | 4,050 | |||||||||||||||||||||
| Spin-off of Aurora Metals (BVI) Limited | 316,498 | - | - | - | 316,498 | |||||||||||||||||||||||
| Net (loss) for the period | - | (677,705 | ) | - | (677,705 | ) | ||||||||||||||||||||||
| Balance December 31, 2000 | 12,873,943 | 12,874 | 3,271,163 | - | (3,661,788 | ) | - | (377,751 | ) | |||||||||||||||||||
| Components of comprehensive income (loss): | ||||||||||||||||||||||||||||
| - Net income for the period | - | 128,545 | - | 128,545 | ||||||||||||||||||||||||
| - Unrealized holding losses on available-for-sale securities | - | - | (141,928 | ) | (141,928 | ) | ||||||||||||||||||||||
| Balance December 31, 2001 | 12,873,943 | 12,874 | 3,271,163 | - | (3,533,243 | ) | (141,928 | ) | (391,134 | ) | ||||||||||||||||||
| Issuance of common stock for: | ||||||||||||||||||||||||||||
| - settlement of indebtedness | 3,708,038 | 3,708 | 351,492 | - | - | - | 355,200 | |||||||||||||||||||||
| Components of comprehensive income (loss): | - | - | - | - | ||||||||||||||||||||||||
| - Net income for the period | - | (137,329 | ) | - | (137,329 | ) | ||||||||||||||||||||||
| - Unrealized holding losses on available-for-sale securities | - | - | 141,928 | 141,928 | ||||||||||||||||||||||||
| Balance, December 31, 2002 | 16,581,981 | 16,582 | 3,622,655 | - | (3,670,572 | ) | - | (31,335 | ) | |||||||||||||||||||
| Issuance of common stock for: | ||||||||||||||||||||||||||||
| - settlement of indebtedness | 2,752,450 | 2,752 | 114,806 | - | - | - | 117,558 | |||||||||||||||||||||
| - cash in December 2003 at $0.25 per share | 100,000 | 100 | 24,900 | - | - | - | 25,000 | |||||||||||||||||||||
| Components of comprehensive income (loss): | ||||||||||||||||||||||||||||
| - Net income for the period | - | (96,404 | ) | - | (96,404 | ) | ||||||||||||||||||||||
| - Unrealized holding losses on available-for-sale securities | - | - | - | - | ||||||||||||||||||||||||
| Balance, December 31, 2003 | 19,434,431 | 19,434 | 3,762,361 | - | (3,766,976 | ) | - | 14,819 | ||||||||||||||||||||
The accompanying notes are an integral part of these interim consolidated financial statements.
| 8 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
| AURORA GOLD CORPORATION | Accumulated | |||||||||||||||||||||||||||
| (An exploration stage enterprise) | Accumulated | Other | Total | |||||||||||||||||||||||||
| Consolidated Statements of Stockholders' Equity (Deficiency) | Common Stock | Additional paid-in | Advances for Stock | (deficit) during Exploration | Comprehensive Income | Stockholders' Equity | ||||||||||||||||||||||
| October 19, 1995 (inception) to March 31, 2013 | Shares | Amount | capital | Subscriptions | Stage | (Loss) | (Deficiency) | |||||||||||||||||||||
| (Expressed in U.S. Dollars) | # | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Balance, December 31, 2003 | 19,434,431 | 19,434 | 3,762,361 | - | (3,766,976 | ) | - | 14,819 | ||||||||||||||||||||
| Issuance of common stock for: | ||||||||||||||||||||||||||||
| - cash in January 2004 at $0.25 per share, less issuance costs | 100,000 | 100 | 22,400 | - | - | - | 22,500 | |||||||||||||||||||||
| Imputed interest | 1,560 | - | - | - | 1,560 | |||||||||||||||||||||||
| Components of comprehensive income (loss): | ||||||||||||||||||||||||||||
| - Net income for the period | - | (223,763 | ) | - | (223,763 | ) | ||||||||||||||||||||||
| - Unrealized holding losses on available-for-sale securities | - | - | - | - | ||||||||||||||||||||||||
| Balance, December 31, 2004 | 19,534,431 | 19,534 | 3,786,321 | - | (3,990,739 | ) | - | (184,884 | ) | |||||||||||||||||||
| Issuance of common stock for: | ||||||||||||||||||||||||||||
| - cash in July 2005 at $0.05 per share | 13,000,000 | 13,000 | 637,000 | - | - | - | 650,000 | |||||||||||||||||||||
| - settlement of indebtedness | 3,684,091 | 3,684 | 158,816 | - | - | - | 162,500 | |||||||||||||||||||||
| Components of comprehensive income (loss): | ||||||||||||||||||||||||||||
| - Net (loss) for the period | - | (457,271 | ) | - | (457,271 | ) | ||||||||||||||||||||||
| - Unrealized holding losses on available-for-sale securities | - | - | (4,614 | ) | (4,614 | ) | ||||||||||||||||||||||
| Balance, December 31, 2005 | 36,218,522 | 36,218 | 4,582,137 | - | (4,448,010 | ) | (4,614 | ) | 165,731 | |||||||||||||||||||
| Issuance of common stock for - cash in February 2006 at $0.50 per share less issurance costs of $110,000: | 8,000,000 | 8,000 | 3,882,000 | - | - | - | 3,890,000 | |||||||||||||||||||||
| - non cash finder's fee in December 200 at $0.70 per share | 250,000 | 250 | 174,750 | - | - | - | 175,000 | |||||||||||||||||||||
| - cash in December 2006 at $0.50 per share | 1,000,000 | 1,000 | 499,000 | - | - | - | 500,000 | |||||||||||||||||||||
| Components of comprehensive income (loss): | ||||||||||||||||||||||||||||
| - Net (loss) for the period | - | (5,463,855 | ) | - | (5,463,855 | ) | ||||||||||||||||||||||
| - Foreign currency translation adjustments | - | - | (3,692 | ) | (3,692 | ) | ||||||||||||||||||||||
| - Reclassification adjustment for losses on available-for-sale securities included in net loss | - | - | 4,614 | 4,614 | ||||||||||||||||||||||||
| Balance, December 31, 2006 | 45,468,522 | 45,468 | 9,137,887 | - | (9,911,865 | ) | (3,692 | ) | (732,202 | ) | ||||||||||||||||||
The accompanying notes are an integral part of these interim consolidated financial statements.
| 9 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
| AURORA GOLD CORPORATION | Accumulated | |||||||||||||||||||||||||||
| (An exploration stage enterprise) | Accumulated | Other | Total | |||||||||||||||||||||||||
| Consolidated Statements of Stockholders' Equity (Deficiency) | Common Stock | Additional paid-in | Advances for Stock | (deficit) during Exploration | Comprehensive Income | Stockholders' Equity | ||||||||||||||||||||||
| October 19, 1995 (inception) to March 31, 2013 | Shares | Amount | capital | Subscriptions | Stage | (Loss) | (Deficiency) | |||||||||||||||||||||
| (Expressed in U.S. Dollars) | # | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Balance, December 31, 2006 | 45,468,522 | 45,468 | 9,137,887 | - | (9,911,865 | ) | (3,692 | ) | (732,202 | ) | ||||||||||||||||||
| Issuance of common stock for: | ||||||||||||||||||||||||||||
| - cash in March 2007 at $0.50 per share | 500,000 | 500 | 249,500 | - | - | - | 250,000 | |||||||||||||||||||||
| - cash in July 2007 at $0.25 per share | 5,000,000 | 5,000 | 1,245,000 | - | - | - | 1,250,000 | |||||||||||||||||||||
| - settlement of indebtedness in August 2007 at $0.20 per share | 250,000 | 250 | 49,750 | - | - | - | 50,000 | |||||||||||||||||||||
| - cash in September 2007 at $0.20 per share | 4,000,000 | 4,000 | 796,000 | - | - | - | 800,000 | |||||||||||||||||||||
| Stock option compensation expense | 454,295 | - | - | - | 454,295 | |||||||||||||||||||||||
| Components of comprehensive income (loss): | ||||||||||||||||||||||||||||
| - Net (loss) for the period | - | (3,259,732 | ) | - | (3,259,732 | ) | ||||||||||||||||||||||
| - Foreign currency translation adjustments | - | - | (65,255 | ) | (65,255 | ) | ||||||||||||||||||||||
| Balance, December 31, 2007 | 55,218,522 | 55,218 | 11,932,432 | - | (13,171,597 | ) | (68,947 | ) | (1,252,894 | ) | ||||||||||||||||||
| Issuance of common stock for - non cash finder's fee in July 2008 at $0.10 per share: | 250,000 | 250 | 24,750 | - | - | - | 25,000 | |||||||||||||||||||||
| - settlement of indebtedness in December2008 at $0.06 per share | 2,603,333 | 2,603 | 153,597 | - | - | - | 156,200 | |||||||||||||||||||||
| Components of comprehensive income (loss): | ||||||||||||||||||||||||||||
| - Net (loss) for the period | - | (520,105 | ) | - | (520,105 | ) | ||||||||||||||||||||||
| - Foreign currency translation adjustments | - | - | 36,259 | 36,259 | ||||||||||||||||||||||||
| Balance, December 31, 2008 | 58,071,855 | 58,071 | 12,110,779 | - | (13,691,702 | ) | (32,688 | ) | (1,555,540 | ) | ||||||||||||||||||
| Issuance of common stock for - settlement of indebtedness in September 2009 at $0.15 per share: | 5,000,000 | 5,000 | 1,748,616 | - | - | - | 1,753,616 | |||||||||||||||||||||
| - cash in September 2009 at $0.10 per share less finder's fee | 3,000,000 | 3,000 | 255,000 | - | - | - | 258,000 | |||||||||||||||||||||
| - non cash finder's fee September 2009 at $0.10 per share | 420,000 | 420 | 41,580 | - | - | - | 42,000 | |||||||||||||||||||||
| - settlement of indebtedness in November 2009 at $0.18 per share | 100,000 | 100 | 17,899 | - | - | - | 17,999 | |||||||||||||||||||||
| - settlement of indebtedness in November 2009 at $0.24 per share | 150,000 | 150 | 35,611 | - | - | - | 35,761 | |||||||||||||||||||||
| - cash in December 2009 at $0.30 per share | 1,666,667 | 1,667 | 498,333 | - | - | - | 500,000 | |||||||||||||||||||||
| Components of comprehensive income (loss): | ||||||||||||||||||||||||||||
| - Net (loss) for the period | - | (1,779,477 | ) | - | (1,779,477 | ) | ||||||||||||||||||||||
| - Foreign currency translation adjustments | - | - | (60,171 | ) | (60,171 | ) | ||||||||||||||||||||||
| Balance, December 31, 2009 | 68,408,522 | 68,408 | 14,707,818 | - | (15,471,179 | ) | (92,859 | ) | (787,812 | ) | ||||||||||||||||||
The accompanying notes are an integral part of these interim consolidated financial statements.
| 10 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
| AURORA GOLD CORPORATION | Accumulated | |||||||||||||||||||||||||||
| (An exploration stage enterprise) | Accumulated | Other | Total | |||||||||||||||||||||||||
| Consolidated Statements of Stockholders' Equity (Deficiency) | Common Stock | Additional paid-in | Advances for Stock | (deficit) during Exploration | Comprehensive Income | Stockholders' Equity | ||||||||||||||||||||||
| October 19, 1995 (inception) to March 31, 2013 | Shares | Amount | capital | Subscriptions | Stage | (Loss) | (Deficiency) | |||||||||||||||||||||
| (Expressed in U.S. Dollars) | # | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Balance, December 31, 2009 | 68,408,522 | 68,408 | 14,707,818 | - | (15,471,179 | ) | (92,859 | ) | (787,812 | ) | ||||||||||||||||||
| Issuance of common stock for cash in April 2010 at $0.30 per share less finder's fee (paid with 1,126,111 shares included herein): | 14,109,446 | 14,110 | 3,880,890 | - | - | - | 3,895,000 | |||||||||||||||||||||
| - non cash property acquisition in June 2010 at $0.40 per share | 5,000,000 | 5,000 | 1,995,000 | - | - | - | 2,000,000 | |||||||||||||||||||||
| - settlement of indebtedness in September 2010 at $0.30 per share | 160,500 | 161 | 47,989 | - | - | - | 48,150 | |||||||||||||||||||||
| - settlement of indebtedness in September 2010 at $0.30 per share | 325,400 | 325 | 97,295 | - | - | - | 97,620 | |||||||||||||||||||||
| - payment of expenses in September 2010 at $0.30 per share | 200,000 | 200 | 59,800 | - | - | - | 60,000 | |||||||||||||||||||||
| - non cash finder's fee in September 2010 related to the June 2010 property acquisition at $0.30 per share | 500,000 | 500 | 149,500 | - | - | - | 150,000 | |||||||||||||||||||||
| Components of comprehensive income (loss) | ||||||||||||||||||||||||||||
| - Net (loss) for the period | - | (2,302,083 | ) | - | (2,302,083 | ) | ||||||||||||||||||||||
| - Foreign currency translation adjustments | - | - | (198 | ) | (198 | ) | ||||||||||||||||||||||
| Balance, December 31, 2010 | 88,703,868 | 88,704 | 20,938,292 | - | (17,773,262 | ) | (93,057 | ) | 3,160,677 | |||||||||||||||||||
| Issuance of common stock for non cash finder's fee in May 2011 at $0.042 per share | 450,000 | 450 | 49 | - | - | - | 499 | |||||||||||||||||||||
| Issuance of common stock for cash in September 2011 at $0.10 per share | 1,671,000 | 1,671 | 165,429 | - | - | - | 167,100 | |||||||||||||||||||||
| Issuance of common stock for settlement of indebtedness in September 2011 at $0.16 per share | 150,000 | 150 | 23,850 | - | - | - | 24,000 | |||||||||||||||||||||
| Issuance of common stock for settlement of indebtedness in December 2011 at $0.02 per share | 10,937,721 | 10,938 | 207,817 | 218,755 | ||||||||||||||||||||||||
| Issuance of common stock for cash in December 2011 at $0.04 per share | 8,000,000 | 8,000 | 312,000 | 320,000 | ||||||||||||||||||||||||
| Issuance of common stock for cash in December 2011 at $0.04 per share - oversubscribed | 20,000 | 20,000 | ||||||||||||||||||||||||||
| Stock option compensation expense | 393,557 | 393,557 | ||||||||||||||||||||||||||
| Components of comprehensive income (loss) | ||||||||||||||||||||||||||||
| - Net (loss) for the period | - | (4,627,338 | ) | - | (4,627,338 | ) | ||||||||||||||||||||||
| - Foreign currency translation adjustments | - | - | 22,532 | 22,532 | ||||||||||||||||||||||||
| Balance, December 31, 2011 | 109,912,589 | 109,913 | 22,040,994 | 20,000 | (22,400,600 | ) | (70,525 | ) | (300,218 | ) | ||||||||||||||||||
The accompanying notes are an integral part of these interim consolidated financial statements.
| 11 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
| AURORA GOLD CORPORATION | Accumulated | |||||||||||||||||||||||||||
| (An exploration stage enterprise) | Accumulated | Other | Total | |||||||||||||||||||||||||
| Consolidated Statements of Stockholders' Equity (Deficiency) | Common Stock | Additional paid-in | Advances for Stock | (deficit) during Exploration | Comprehensive Income | Stockholders' Equity | ||||||||||||||||||||||
| October 19, 1995 (inception) to March 31, 2013 | Shares | Amount | capital | Subscriptions | Stage | (Loss) | (Deficiency) | |||||||||||||||||||||
| (Expressed in U.S. Dollars) | # | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Balance, December 31, 2011 | 109,912,589 | 109,913 | 22,040,994 | 20,000 | (22,400,600 | ) | (70,525 | ) | (300,218 | ) | ||||||||||||||||||
| Issuance of common stock for settlement of indebtedness in March 2012 at $0.06 per share | 1,990,900 | 1,991 | 117,463 | 119,454 | ||||||||||||||||||||||||
| Issuance of common stock for cash in March 2012 at $0.06 per share - shares not issued until April 2012 | 17,513 | 17,513 | ||||||||||||||||||||||||||
| Issuance of common stock for cash in April 2012 at $0.06 per share | 1,316,000 | 1,316 | 77,644.00 | 78,960 | ||||||||||||||||||||||||
| Issuance of common stock for settlement of indebtedness in April 2012 at $0.06 per share | 300,000 | 300 | 17,700 | 18,000 | ||||||||||||||||||||||||
| Issuance of common stock in April 2012 for Advances for Stock Subscriptions | 625,217 | 625 | 36,888 | (37,513 | ) | - | ||||||||||||||||||||||
| Stock option compensation expense | 55,660 | 55,660 | ||||||||||||||||||||||||||
| Issuance of common stock for cash on October 5, 2012 at $0.037 per share | 135,000,000 | 135,000 | 4,865,000 | 5,000,000 | ||||||||||||||||||||||||
| Net (loss) for the period | (1,200,374 | ) | (1,200,374 | ) | ||||||||||||||||||||||||
| Foreign currency translation adjustments | 63,323 | 63,324 | ||||||||||||||||||||||||||
| Balance, December 31, 2012 | 249,144,706 | 249,145 | 27,211,349 | - | (23,600,974 | ) | (7,202 | ) | 3,852,319 | |||||||||||||||||||
| Net (loss) for the period | (759,337 | ) | (759,337 | ) | ||||||||||||||||||||||||
| Foreign currency translation adjustments | (4,684 | ) | (4,684 | ) | ||||||||||||||||||||||||
| Balance, March 31, 2013 | 249,144,706 | 249,145 | 27,211,349 | - | (24,360,311 | ) | (11,886 | ) | 3,088,299 | |||||||||||||||||||
The accompanying notes are an integral part of these interim consolidated financial statements.
| 12 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
| 1. | Organization, Business Strategy and Going Concern |
Organisation
Aurora Gold Corporation ("the Company") was formed on October 10, 1995 under the laws of the State of Delaware and is in the business of location, acquisition, exploration and, if warranted, development of mineral properties. The Company’s focus is on the exploration and development of its exploration properties located in the Tapajos Gold Province, State of Pará, Brazil (refer Notes). The Company has not yet determined whether its properties contain mineral reserves that may be economically recoverable and has not generated any operating revenues to date.
The Company is a junior mineral exploration company and conducts principal and technical activities from Coresco AG, Level 3, Gotthardstrasse 20, 6304 Zug, Switzerland. The telephone number is (+41) 41 711 0281. These offices are provided to the Company on a month-to-month basis. The Company believes these offices are adequate for the business requirements during the next 12 months. The Company does not own any real property.
Business Strategy
The general business strategy is to acquire mineral properties either directly or through the acquisition of operating entities. The continued operations and the recoverability of minerals are dependent upon the existence of economically recoverable mineral reserves, confirmation of interest in the underlying properties and ability to obtain necessary financing to complete the development and future profitable production. Since 1996 the Company acquired and disposed of a number of properties. The Company has not been successful in any exploration efforts to establish reserves on any of the properties owned by or in which the Company holds an interest.
The Company currently has an interest in a strategic land package of six (6) properties none of which contain any reserves.
Going Concern
The Company has no revenues, and has sustained losses since inception. The Company will not generate revenues even if any of its exploration programs indicate that a mineral deposit may exist on the properties. Accordingly, the Company will be dependent on future financings in order to maintain operations and continue exploration activities.
These interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The general business strategy of the Company is to acquire mineral properties either directly or through the acquisition of operating entities. The Company has incurred recurring operating losses since inception, has not generated any operating revenues to date and during the quarter ended March 31, 2013, operating activities used cash of $745,385 (March 31, 2012: $171,970). The Company requires additional funds to meet its obligations and maintain its operations.
These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in this regard are to raise equity financing through private or public equity investment in order to support existing operations and expand its business. There is however no assurance that such additional funding will be available to the Company when required, or on terms acceptable to the Company. In the event that the Company cannot obtain additional funds, on a timely basis, or the operations do not generate sufficient cash flow, the Company may be forced to curtail development or cease activities. These interim consolidated financial statements do not include any adjustments that might result from this uncertainty.
The Company has no revenues, has sustained losses since inception, has been issued an opinion expressing substantial doubt about the ability to continue as a going concern by the auditors and relies upon the sale of securities to fund operations. The Company will not generate revenues even if any of exploration programs indicate that a mineral deposit may exist on the properties. Accordingly, the Company will be dependent on future financings in order to maintain operations and continue exploration activities.
| 13 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
The properties are in the exploration stage only and without a known body of mineral reserves. Development of the properties will follow only if satisfactory exploration results are obtained. Mineral exploration and development involves a high degree of risk and few properties that are explored are ultimately developed into producing mines. There is no assurance that the mineral exploration and development activities will result in any discoveries of commercially viable bodies of mineralization. The long-term profitability of the operations will be, in part, directly related to the cost and success of the exploration programs, which may be affected by a number of factors.
The Company has not been involved in any bankruptcy, receivership or similar proceedings.
| 14 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
| 2. | Summary of Significant Accounting Policies |
| (a) | Basis of Preparation |
The Company follows accounting standards set by the Financial Accounting Standards Board (FASB). The FASB sets accounting principles generally accepted (GAAP) in the United States that the Company follows to ensure they consistently report their financial condition, results of operations, and cash flows. References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codification (ASC) or also referred to as Codification.
These interim consolidated financial statements have been prepared in accordance with GAAP and include the accounts of the Company and its wholly owned subsidiaries, Aurora Gold Mineração Ltda ("Aurora Gold Mineração") and AGC Resources LLC (“AGC”) (through to date of disposition of AGC, June 14, 2011). Collectively, they are referred to herein as "the Company". Significant inter-company accounts and transactions have been eliminated.
Certain information and footnote disclosures normally included in interim consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such Securities and Exchange Commission (SEC) rules and regulations. The interim period consolidated financial statements should be read together with the audited consolidated financial statements and accompanying notes included in the Company’s audited consolidated financial statements for the year ended December 31, 2012. In the opinion of the management of the Company, the unaudited consolidated financial statements contained herein contain all adjustments (consisting of a normal recurring nature) necessary to present a fair statement of the results of the interim periods presented.
| (b) | Use of Estimates |
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions.
| (c) | Cash Equivalents |
Cash equivalents comprise certain highly liquid instruments with a maturity date of three months or less when purchased. The Company has cash and cash equivalents of $3,151,999 as at March 31, 2013 ($81,828 as at March 31, 2012). Amounts paid for income taxes during the three months ended March 31, 2013 and 2012 were nil; and for interest paid nil respectively.
| 15 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
| 2. | Summary of Significant Accounting Policies (Continued) |
| (d) | Vehicles and Equipment |
Vehicles and equipment are carried at cost (including development and preproduction costs, capitalized interest, other financing costs and all direct administrative support costs incurred during the construction period, net of cost recoveries and incidental revenues), less accumulated depletion and depreciation including write-downs. Following the construction period, interest, other financing costs and administrative costs are expensed as incurred. On the commencement of commercial production, depletion of each mining property is provided on the unit-of-production basis, using estimated proven and probable reserves as the depletion basis. Buildings and equipment utilized directly in commercial mining activities are depreciated, following the commencement of commercial production, over their expected economic lives using either the unit-of-production method or the straight-line method. Depreciation for non-mining equipment is provided over the following useful lives:
| - | Vehicles | 5 years | |
| - | Office equipment, furniture and fixtures | 2 to 10 years |
The Company reviews the carrying values of its buildings and equipment whenever events or changes in circumstances indicate that their carrying values may not be recoverable. Impairment is considered to exist if total estimated future cash flows, or probability-weighted cash flows on an undiscounted basis, are less than the carrying value of the assets. An impairment loss is measured and recorded based on discounted estimated future cash flows associated with values beyond proven and probable reserves and resources. In estimating future cash flows, assets are grouped at the lowest level for which there is identifiable future cash flows that are largely independent of cash flows from other asset groups. Generally, in estimating future cash flows, all assets are grouped at a particular property for which there are identifiable cash flows. Buildings and equipment utilized directly in commercial mining activities are depreciated, following the commencement of commercial production, over their expected economic lives using either the unit-of-production method or the straight-line method.
All vehicles and equipment are located in Brazil.
| (e) | Mineral Property Reclamation Bonds and Other Related Refundable Costs |
Costs paid for the purchase of reclamation bonds and other related costs that are refundable are capitalized. If amounts paid are not to be refunded then they will be expensed when it is determined they will not be refunded.
| (f) | Mineral Properties and Exploration Expenses |
The Company accounts for its mineral properties on a cost basis whereby all direct costs, net of pre-production revenue, relative to the acquisition of the properties are capitalized. All sales and option proceeds received are first credited against the costs of the related property, with any excess credited to earnings. Once commercial production has commenced, the net costs of the applicable property will be charged to operations using the unit-of-production method based on estimated proven and probable recoverable reserves. The net costs related to abandoned properties are charged to operations.
Exploration costs are charged to operations as incurred until such time that proven reserves are discovered. From that time forward, the Company will capitalize all costs to the extent that future cash flow from mineral reserves equals or exceeds the costs deferred. The deferred costs will be amortized over the recoverable reserves when a property reaches commercial production. As at March 31, 2013, the Company does not have proven reserves. Exploration activities conducted jointly with others are reflected at the Company's proportionate interest in such activities.
| 16 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
| 2. | Summary of Significant Accounting Policies (Continued) |
The Company reviews the carrying values of its mineral properties on a regular basis by reference to the project economics including the timing of the exploration or development work, the program of works and the exploration results experienced by the Company and others. The review of the carrying value of any producing property will be made by reference to the estimated future operating results and net cash flows. When the carrying value of a property exceeds its estimated net recoverable amount, provision is made for the decline in value.
The recoverability of the amounts recorded for mineral properties is dependent on the confirmation of economically recoverable reserves, confirmation of the Company’s interest in the underlying mineral claims, the ability of the Company to obtain the necessary financing to successfully complete their development and the attainment of future profitable operations or proceeds from disposal.
Estimated costs related to site restoration programs during the commercial development stage of the property are accrued over the life of the project.
| (g) | Stock-Based Compensation |
The Company accounts for share-based payments under the fair value method of accounting for stock-based compensation consistent with GAAP. Under the fair value method, stock-based compensation cost is measured at the grant date based on the fair value of the award using the Black-Scholes option pricing model and is recognized to expense on a straight-line basis over the requisite service period, which is generally the vesting period. Where upon grant the options vest immediately the stock-based costs are expensed immediately.
| (h) | Interest Expense |
Interest expense for the periods ended March 31, 2013 and 2012 were nil.
| (i) | Foreign Currency Translation and Transactions |
The Company's reporting currency is the United States Dollar (USD). Aurora Gold Mineração Ltda is a foreign operation and its functional currency is the Brazilian Real (Real). Certain contractual obligations in these interim consolidated financial statements are stated in Brazilian Real’s. At the period ended March 31, 2013 the Brazilian Real exchange rate to the USD was $0.49375 to 1 Real (March 31, 2012: USD $0.54780 to 1 Real).
The Company translates foreign assets and liabilities of its subsidiaries, other than those denominated in USD, at the rate of exchange at the balance sheet date. Income and expenses of these subsidiaries are translated at the average rate of exchange throughout the reporting period. Gains or losses from these translations are reported as a separate component of other comprehensive income (loss) until all or a part of the investment in the subsidiaries is sold or liquidated. The translation adjustments do not recognize the effect of income tax because the Company expects to reinvest the amounts indefinitely in operations. Accumulated other comprehensive income (loss) consists entirely of foreign currency translation adjustments at March 31, 2013 and December 31, 2012.
Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the local functional currency are included in foreign exchange (gain) loss in the consolidated statements of comprehensive income (loss).
| (j) | Concentration of Credit Risk |
Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company places its cash with high credit quality financial institutions in Brazil and Canada. The Company occasionally has cash deposits in excess of federally insured limits. The Company had funds deposited in banks beyond the insured limits as of March 31, 2013 and 2012 respectively. The Company has not experienced any losses related to these balances, and management believes the credit risk to be minimal.
| 17 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
| 2. | Summary of Significant Accounting Policies (Continued) |
| (k) | Fair Value of Financial Instruments and Risks |
Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair value.
Management is of the opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments. The Company operates outside of the United States of America (primarily in Brazil) and is exposed to foreign currency risk due to the fluctuation between the currency in which the Company operates in and the USD.
| (l) | Income Taxes |
The Company has adopted ASC 740, Accounting for Income Taxes, which requires the Company to recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns using the liability method. Under this method, deferred tax liabilities and assets are determined based on the differences between the financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. In July 2006, the FASB issued an interpretation, which clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with GAAP. This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Estimated interest and penalties related to recording uncertain tax positions when recorded are included as a component of income tax expense on the consolidated statement of operations. The Company has not recorded any liabilities for uncertain tax positions or any related interest and penalties. The Company’s tax returns are open to audit for the years ending December 31, 2008 to 2012.
| (m) | Basic and Diluted Net Income (Loss) Per Share |
Earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the reporting period including common stock issued effective the date committed. Common stock issuable is considered outstanding as of the original approval date for the purposes of earnings per share computations. Diluted earnings (loss) per common share is computed by dividing net earnings (loss) by the sum of (a) the basic weighted average number of shares of common stock outstanding during the year and (b) additional shares that would have been issued and potentially dilutive securities. During the periods ended March 31, 2013 and 2012 the diluted earnings (loss) per share was equivalent to the basic earnings (loss) per share because all potentially dilutive securities were anti-dilutive due to the net losses incurred. Potentially dilutive securities consist of stock options and warrants outstanding at the end of the reporting period. Stock options outstanding as at March 31, 2013 were 9,650,000 (March 31, 2012: 10,450,000). Warrants outstanding as at March 31, 2013 were 8,000,000 (March 31, 2012: 8,000,000).
| 18 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
| 2. | Summary of Significant Accounting Policies (Continued) |
| (n) | Interim Financial Statements |
In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period. The unaudited financial statements should be read in conjunction with the Company’s audited financial statements and notes for the year ended December 31, 2012, which are included in the Company’s Annual Report on Form 10-K.
| (o) | Recent Accounting Pronouncements |
At present, there are no other such pronouncements not yet effective that the Company expects will have a material impact on these interim consolidated financial statements.
| 19 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
| 3. | Mineral Properties and Exploration Expenses |
In Brazil, Aurora has six (6) properties with an approximate total of 16,590 ha within the Tapajos Gold Province. The Exploration licence areas are located in the vicinity of the Săo Domingos Township. The Company has conducted various degrees of exploration activities on the properties and ranked the mineralised occurrences in order of merit and may discontinue such activities and dispose of some of the rights to mineral exploration on parts of the property if further exploration work is not warranted. A summary of these properties approved by the Department of National Production Minerals (DNPM) is set out below.
| a) | DNPM Process 850.684/06 1,985.91 ha |
| b) | DNPM Process 850.782/05 6,656.20 ha |
| c) | DNPM Processes 850.012/06 and 850.013/06; 1128.08 ha and 750.55 ha respectively |
| d) | DNPM Process 850.119/06 1,068.72 ha |
| e) | DNPM Process 859.587/95 5,000.00 ha |
São Domingos Project in the Municipality of Itaituba, in the Tapajos gold province of the State of Para, Brazil.
| a) | DNPM Processes 850.684/06: 1,985.91 ha |
Aurora has good title over the mineral rights object of the DNPM Process No. 850.684/06, which is valid and in force, free and clear of any judicial and extrajudicial encumbrances and taxes. Aurora is the sole registered and beneficial holder of and owns and possesses good title to the referred mineral rights. On September 13, 2006 Aurora submitted to DNPM one Exploration Claim for gold covering an area of 4914.18 ha in the Municipality of Itaituba, State of Pará. According to the information obtained such claim was correctly prepared and the required documents are in place but the area will be reduced to 1,985.91 due to overlapping with third parties’ areas with priority rights. The Exploration Permit has not been granted yet. The above-mentioned area is not related to any payments or royalties to third parties since Aurora claimed them directly.
| b) | DNPM Processes 850.782/05: 6,656.20 ha |
Aurora has good title over the mineral rights object of the DNPM Process No. 850.782/05, which is valid and in force, free and clear of any judicial and extrajudicial encumbrances and taxes. On November 8, 2005 it was submitted to DNPM the Exploration Claim for gold in the Municipality of Itaituba, State of Pará. The Exploration Permit was granted on November 28, 2006 for a 3 (three) year period. The transfer to Aurora was approved on March 24, 2009 and on September 28, 2009 it was requested the renewal of the Exploration Permit. This area was reduced from 6,756 ha to 5,651.98 ha due to the overlapping with Garimpeira (alluvial) Mining properties held by Mr. Celio Paranhos. However the DNPM ́s general attorney in Brasilia agreed with Aurora’s legal thesis and nullified all applications filed by Mr. Paranhos (about to 1,900 applications). A new Exploration Permit rectifying the previous one was granted on August 20, 2010 for a 3 (three) year period, for an area of 6,656.20 hectares. The Annual Fees per Hectare (TAHs) for the 1st and 2nd years of the extension period have been properly paid. The annual fee for the third year was paid in January 2013. In order to have the Exploration Permit renewed an Exploration Report must be presented until June 20th 2013. No payments or royalties are due regarding the DNPM Process 850.782/05 since it was acquired through a permutation agreement with Altoro Mineração Ltda.
| c) | DNPM Processes 850.012/06 and 850.013/06: 1,128.08 ha and 750.55 ha respectively |
The exploration claims were submitted to DNPM on January 19, 2006, for gold covering an area of 1,128.08 ha and 750.55 ha respectively, in the Municipality of Itaituba, State of Pará. According to information obtained such claims were correctly prepared and the required documents are in place. The tenements 850.012/06 and 850.013/06 are held by Mr. Antonio Oliveira Ferreira and were submitted to DNPM on January 19, 2006. The tenements are located at Itaituba, State of Pará and are valid and in force, free and clear of any judicial and extrajudicial encumbrances and taxes, but the area was blocked since it is inside of a Garimpeira Reserve. The transfer to Aurora will be submitted after the Exploration Permits are granted. There are no payments or royalties related to the tenements according to the agreement entered into with the previous owner.
| 20 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
| d) | DNPM Process 850.119/06: 1,068.72 ha |
Direct access to the files of this Project at DNPM’s office were not sited, however analysis is based on the then current information provided on DNPM’s website. The exploration claim was submitted to DNPM on March 7, 2006, for gold covering an area of 1,068.72 ha, in the Municipality of Itaituba, State of Pará. Aurora has good title over the mineral rights object of the DNPM Process No. 850.119/06, which is valid and in force, free and clear of any judicial and extrajudicial encumbrances and taxes. Aurora is the sole registered and beneficial holder of and owns and possesses good title to the referred mineral rights. The Exploration Permit has not been granted yet. The above-mentioned area is not related to any payments or royalties to third parties since Aurora claimed them directly.
| e) | DNPM Process 859.587/95: 5,000 ha |
The tenement, was held by Vera Lucia Lopes, and is valid and in force, and is free and clear of any judicial and extrajudicial encumbrances and taxes. It is located at the Municipality of Itaituba, State of Pará. On November 27, 1995, it was submitted to DNPM the Exploration Claim for gold. The Exploration Permit was granted on September 15, 2006, for a three-year period covering an area of 5,000 hectares, and it was valid until September 15, 2009. On July 15, 2009, it was requested the renewal of the Exploration Permit which was granted and transferred to Aurora and published on June 29, 2012. There are no payments or royalties related to the tenements since all payments due under the terms of the agreement entered into with the previous owner have been already made.
The tenement 859.587/95 is held by Aurora and is valid and in force, free and clear of any judicial and extrajudicial encumbrances and taxes. It is located at the Municipality of Itaituba, State of Pará. On November 27, 1995 it was submitted to DNPM the Exploration Claim for gold. The Exploration Permit was granted on September 15, 2006 for a 3 (three) year period covering an area of 5000 ha, and it was valid until September 15, 2009. On July 15, 2009 it was requested the renewal of the Exploration Permit, which was granted on June 14, 2012. The transfer to Aurora was approved and published on July 6, 2012. The beginning of the activities for the renewal period was properly informed on September 5, 2012. The Annual Fee per Hectare (TAHs) for the 1st year of the extension period has been properly paid. There are no payments or royalties related to the tenements since all payments due under the terms of the agreement entered into with the previous owner have been already made.
| 4. | Advances Payable |
During March 2012, the Company entered into debt settlement agreements for $105,000 of advances received from a director of the Company and a company during fiscal 2011. As at March 31, 2013 advances payable were $32,000 (March 31, 2012: $32,000), which is non-interest bearing and due on demand.
| 5. | Common Stock |
There were no common stock transactions during the quarter March 31, 2013.
On October 5, 2012, the Company, completed the sale of 135,000,000 shares of the Company’s common stock for a purchase price of $5,000,000, to Alltech Capital Limited pursuant to the terms of a subscription agreement entered into between the Company and the Alltech Capital Limited dated September 21, 2012. As a result of the sale of 135,000,000 shares of the Company’s common stock of approximately 54%, a change in control of the Company has occurred. As a condition to the closing of the transaction, the Company agreed to increase the size of its board of directors to five (5) members and to appoint two board members selected by the Investor. The board of directors appointed each of Messrs. Vladimir Bernshtein and Andrey Ratsko to serve as directors of the Company. Additionally, Mr. Bernshtein has been named as the Company’s Chief Business Development Director.
In October 2011 the Company filed a Registration Statement on Form S-1 offering up to a maximum of 50,000,000 units of the Company's securities at an offering price of $0.10 per Unit in a direct public offering, without any involvement of underwriters or broker-dealers. Each Unit consists of one (1) share of common stock at a $0.001 par value per share and one (1) Stock Purchase Warrant. Each full Warrant entitles the holder to purchase one additional share of common stock at a price of $0.20 for a period of two years commencing November 1, 2011 through October 31, 2013. The Units will be sold by the Chief Executive Officer and Chief Financial Officer. A Notice of Effectiveness was issued April 25, 2012. The offer expired January 20, 2013. To date, no funds were obtained from this offering.
| 21 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
On April 16, 2012, the Company entered into subscription agreements for 1,316,000 shares of common stock at a purchase price of $0.06 per share for a gross aggregate price of $78,960. Pursuant to the subscription agreements, each of the Investors has represented that they are not a U.S. person; as such term is defined in Regulation S. In connection with the offering, the Company has agreed to pay a cash commission equal to 8% of all funds received or an aggregate of up $48,000 on the total maximum $600,000 subscription.
During April 2012, the Company entered into a debt settlement agreement for $18,000 in accounts payable which was settled for 300,000 shares of common stock at an issue price of $0.06 per share.
During March 2012, the Company entered into debt settlement agreements for advances received from a director of the Company and a company during fiscal 2011 as well as $14,454 of amounts in accounts payable and accrued expenses. $119,454 was settled for 1,990,900 shares of common stock at an issue price of $0.06 per share. As at March 31, 2012 advances on stock subscriptions were $37,513 and received during that quarter.
In March 2012, the Company entered into subscription agreements for 625,217 shares of common stock at a purchase price of $0.06 per share for a gross aggregate price of $37,513. Share certificates were not issued as at March 31, 2012 and they were treated as an Advance for Stock Subscriptions. The share certificates were issued in April 2012. Pursuant to the subscription agreements, each of the Investors has represented that they are not a U.S. person; as such term is defined in Regulation S. In connection with the offering, the Company has agreed to pay a cash commission equal to 8% of all funds received or an aggregate of up $48,000 on the total maximum $600,000 subscription that is being offered.
On December 20, 2011, the Company entered into subscription agreements for 8,000,000 shares of common stock at a purchase price of $0.04 per share for a gross aggregate price of $320,000. Attached to each unit of common stock is one (1) series A stock purchase warrant. Each full Series A warrant entitles the holder to purchase an additional share of the Company’s common stock at an exercise price of $0.08 per share for a period of eighteen months commencing on December 20, 2011 and expiring on June 20, 2013. Pursuant to the subscription agreements, each of the Investors has represented that they are not a U.S. person; as such term is defined in Regulation S. In connection with the offering, the Company has agreed to pay a cash commission equal to 8% of all funds received or an aggregate of up $25,600. The total amount of commission paid was $8,800.
On December 15, 2011, the Company entered into debt settlement agreements with creditors and related parties in consideration for the issue of the Company’s common stock at a per share price of $0.02 per share. $218,754 was settled for 10,937,721 shares of common stock.
| 22 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
| 5. | Common Stock (continued) |
In September 2011, 1,671,000 shares were issued to an individual for cash at $0.10 per share. In September 2011, 150,000 shares were issued to a company for services rendered at $0.16 per share.
In April 2011, as an incentive to assist with future private placements, the Company authorized the payment of a non-cash finder’s fee of 450,000 shares of common stock of the Company in connection with the private placement completed in April 2010. The shares were issued in May 2011. All shares issued were to individuals and companies who reside outside the United States of America. The issuance of the shares was exempt from the registration requirements of Securities Act by virtue of Section 4(2) thereof as well as the exemption from registration requirements afforded by Regulation S.
| 6. | Stock Options and Warrants |
In 2007, the Company's Board of Directors approved the 2007 Stock Option Plan (amended September 29, 2008) (“the Plan”) to offer an incentive to obtain services of key employees, directors and consultants of the Company. The Plan provides for the reservation for awards of an aggregate of 10% of the total shares of Common Stock outstanding from time to time. No Plan participant may receive stock options exercisable for more than 2,500,000 shares of Common Stock in any one calendar year. Under the Plan, the exercise price of an incentive stock option must be at least equal to 100% of the fair market value of the common stock on the date of grant (110% of fair market value in the case of options granted to employees who hold more than 10% of the Company's capital stock on the date of grant). The term of stock options granted under the Plan is not to exceed ten years and the stock options vest immediately upon granting.
The following is a summary of stock option activity and status at March 31, 2013:
| Options Outstanding and Exercisable By Quarter | Stock Options # | Weighted Average Exercise Price $ | Remaining Contractual Life (years) | Aggregate Intrinsic value | ||||||||||||
| As at December 31, 2011 | 9,050,000 | 0.110 | 4.28 | 36,500 | ||||||||||||
| Forfeited during quarter | (200,000) | 0.260 | - | - | ||||||||||||
| Granted during quarter | 1,600,000 | 0.050 | - | - | ||||||||||||
| As at March, 31, 2012 | 10,450,000 | 0.090 | 4.21 | 42,000 | ||||||||||||
| Granted during quarter | 200,000 | 0.065 | - | - | ||||||||||||
| As at June, 30, 2012 | 10,650,000 | 0.097 | 3.97 | 34,125 | ||||||||||||
| Forfeited during quarter | (1,000,000) | 0.260 | - | - | ||||||||||||
| Granted during quarter | - | - | - | - | ||||||||||||
| As at September 30, 2012 | 9,650,000 | 0.080 | 3.74 | 52,500 | ||||||||||||
| Forfeited during quarter | - | - | - | - | ||||||||||||
| Granted during quarter | - | - | - | - | ||||||||||||
| As at Dec 31, 2012 | 9,650,000 | 0.080 | 3.51 | Nil | ||||||||||||
| Forfeited during quarter | - | - | - | - | ||||||||||||
| Granted during quarter | - | - | - | - | ||||||||||||
| As at March 31, 2013 | 9,650,000 | 0.080 | 3.28 | Nil | ||||||||||||
| 23 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
| 6. | Stock Options (continued) |
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value for all “in-the-money” options (i.e. the difference between the Company’s closing stock price on the last trading day of the fiscal year and the exercise price, multiplied by the number of shares) that would have been received by the option holders had all option holders exercised their options as of each date presented.
The total fair value of options granted for the period ended March 31, 2013 was nil (March 31, 2012: $43,681) and expensed in full as options were vested in full on grant. The fair value of options are determined using the Black Scholes option pricing model that takes into account the exercise price, the expected life of the option, the share price at grant date (January 13, 2012) and expected price volatility of the underlying share, the expected dividend yield (nil assumed) and the risk free interest rate (4.50% used) for the term of the option. Management determined 2.50 years to be the average expected likely life of the options and utilized the simplified method due to the fact that the Company has not had significant options granted to develop historical data to provide a reasonable basis to estimate option lives. Volatility rates were calculated at the grant date of each option tranche and rates of 120.89% respectively were used.
The total fair value of options granted during the three months ended June 30, 2012 was $11,979 (June 30, 2011: nil) and expensed in full as options were vested in full on grant. The fair value of options are determined using the Black Scholes option pricing model that takes into account the exercise price, the expected life of the option, the share price at grant date (April 10, 2012) and expected price volatility of the underlying share, the expected dividend yield (nil assumed) and the risk free interest rate (4.50% used) for the term of the option. Management determined 2.50 years to be the average expected likely life of the options and utilized the simplified method due to the fact that the Company has not had significant options granted to develop historical data to provide a reasonable basis to estimate option lives. Volatility rates were calculated at the grant date of the option tranche and a rate of 161.04% was used.
During the quarter ended March 31, 2012, Cameron Richardson departed the Company, an exercise notice for the 200,000 options held was not lodged and consequently the options lapsed during the quarter.
Effective January 13, 2012, the Company’s board of directors granted 1,600,000 stock purchase options pursuant to the Company’s 2007 Stock Option Plan. Each of the Options has an issue date, effective date and vesting date of January 13, 2012, with an exercise price of $0.05 per share. The term of these Options are five years. The Options are exercisable at any time from the grant date up to and including January 12,2017.
As of March 31, 2013, there are outstanding Warrants to purchase 8,000,000 shares of common stock with an exercise price of $0.08 expiring June 20, 2013.
| 24 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
| 7. | Related Party Transactions |
Related party transactions not disclosed elsewhere in these interim consolidated financial statements include:
| a) | During the period ended March 31, 2013 consulting fees of $105,000 (March 31, 2012: $110,751) were incurred to directors and officers (or companies of the officers and directors) of the Company. The transactions were recorded at the exchange amount, being the value established and agreed to by the related parties. |
| b) | Coresco (a company that the CEO and CFO are affiliated with) also charged for geophysical consulting activities and other exploration management fees for a total of $31,500 during the quarter ended March 31, 2013 (March 31, 2012: $nil) |
| c) | Included in accounts payable and accrued expenses and advances payable (related parties) as at March 31, 2013 and December 31, 2012 were $148,049 and $158,220 respectively payable to officers and directors of the Company for consulting fees and various expenses incurred on behalf of the Company. | |
| 8. | Non-Cash Investing and Financing Activities |
There were no non-cash investing and financings payments during the quarter ended March 31, 2013 (March 31, 2012: nil).
| 9. | Subsequent events |
There were no subsequent events at the date of filing.
| 25 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the Financial Statements and Notes to the Financial Statements filed with this Report.
Uncertainties Relating To Forward-Looking Statements
This portion of the Quarterly Report provides management's discussion and analysis (MD&A) of the financial condition and results of operations to enable a reader to assess material changes in financial condition and results of operations as of and for the quarterly periods reported, in comparison to the corresponding prior-year period. This MD&A is intended to supplement and complement the unaudited interim consolidated financial statements and notes thereto, prepared in accordance with US GAAP, for the quarterly periods reported (collectively, the "Financial Statements"), which are included in this Quarterly Report. The reader is encouraged to review the Financial Statements in conjunction with your review of this MD&A. This MD&A should be read in conjunction with both the annual audited interim consolidated financial statements for the year ended and the related annual MD&A included in the Forms 10-K on file with the US Securities and Exchange Commission. Certain notes to the Financial Statements are specifically referred to in this MD&A and such notes are incorporated by reference herein. All dollar amounts in this MD&A are in US dollars, unless otherwise specified. For the purposes of preparing this MD&A, we consider the materiality of information. Information is considered material if: (i) such information results in, or would reasonably be expected to result in, a significant change in the market price or value of Aurora Gold Corporation's shares; or (ii) there is a substantial likelihood that a reasonable investor would consider it important in making an investment decision or if it would significantly alter the total mix of information available to investors. Materiality is evaluated by reference to all relevant circumstances, including potential market sensitivity. This document contains numerous forward-looking statements relating to our business. The United States Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements. Operating, exploration and financial data, and other statements in this document are based on information we believe reasonable, but involve significant uncertainties as to future gold and silver prices, costs, ore grades, estimation of gold and silver reserves, mining and processing conditions, changes that could result from our future acquisition of new mining properties or businesses, the risks and hazards inherent in the mining business (including environmental hazards, industrial accidents, weather or geologically related conditions), regulatory and permitting matters, and risks inherent in the ownership and operation of, or investment in, mining properties or businesses in foreign countries. Actual results and timetables could vary significantly from the estimates presented. Readers are cautioned not to put undue reliance on forward-looking statements. We disclaim any intent or obligation to update publicly these forward-looking statements, whether as a result of new information, future events or otherwise.
Organisation
Aurora Gold Corporation ("the Company") was formed on October 10, 1995 under the laws of the State of Delaware and is in the business of location, acquisition, exploration and, if warranted, development of mineral properties. The Company’s focus is on the exploration and development of its exploration properties located in the Tapajos Gold Province, State of Pará, Brazil (refer Notes). The Company has not yet determined whether its properties contain mineral reserves that may be economically recoverable and has not generated any operating revenues to date.
The Company is a junior mineral exploration company and conducts principal and technical activities from Coresco AG, Level 3, Gotthardstrasse 20, 6304 Zug, Switzerland. The telephone number is (+41) 41 711 0281. These offices are provided to the Company on a month-to-month basis. The Company believes these offices are adequate for the business requirements during the next 12 months. The Company does not own any real property.
| 26 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
Business Strategy
The general business strategy is to acquire mineral properties either directly or through the acquisition of operating entities. The continued operations and the recoverability of minerals are dependent upon the existence of economically recoverable mineral reserves, confirmation of interest in the underlying properties and ability to obtain necessary financing to complete the development and future profitable production. Since 1996 the Company acquired and disposed of a number of properties. The Company has not been successful in any exploration efforts to establish reserves on any of the properties owned by or in which the Company holds an interest.
The Company currently has an interest in a strategic land package of six (6) properties none of which contain any reserves. The Company has no revenues, has sustained losses since inception and has been issued an opinion by the auditors expressing substantial doubt about the ability to continue as a going concern. The Company will not generate revenues even if any of its exploration programs indicate that a mineral deposit may exist on the properties. Accordingly, the Company will be dependent on future financings in order to maintain operations and continue exploration activities.
Exploration and Development
Exploration Activities
The Company is a junior mineral exploration company and conducts principal and technical activities from Coresco AG, Level 3, Gotthardstrasse 20, 6304 Zug, Switzerland. The telephone number is +41 41 711 0281. These offices are provided to the Company on a month-to-month basis. The Company believes these offices are adequate for the business requirements during the next 12 months. The Company does not own any real property.
The strategic objectives of the Company are to concentrate efforts on existing operations where infrastructure already exists, properties presently being developed or in advanced stages of exploration that have potential for additional discoveries and grass-roots exploration opportunities. The Company is currently concentrating on property exploration activities in Brazil.
The properties are in the exploration stage only and without a known body of mineral reserves. Development of the properties will follow only if satisfactory exploration results are obtained. Mineral exploration and development involves a high degree of risk and few properties that are explored are ultimately developed into producing mines. There is no assurance that the mineral exploration and development activities will result in any discoveries of commercially viable bodies of mineralization. The long-term profitability of the operations will be, in part, directly related to the cost and success of the exploration programs, which may be affected by a number of factors.
The Company currently has an interest in a strategic land package of six (6) properties none of which contain any reserves.
Plan of Operation contains forward-looking statements that involve risks and uncertainties, as described below. The actual results could differ materially from those anticipated in these forward-looking statements. During the next 12 months the Company may raise additional funds through equity offerings and/or debt borrowing to meet the general and administrative operating expenses and to conduct work on exploration properties. There is, of course, no assurance that the Company will be able to do so and the Company does not have any agreements or arrangements with respect to any such financing. The exploration properties have not commenced commercial production and the Company has no history of earnings or cash flow from operations. While the Company may attempt to generate additional working capital through the operation, development, sale or possible joint venture development of properties, there is no assurance that any such activity will generate funds that will be available for operations.
The planned activity for 2013 year is as follows:
| § | Technical team arriving on site at the Sao Domingo property - The geotechnical team is mobilizing to site to carry out the planned exploration activities for the 2013 exploration season. A detailed budget has been approved by the board that includes diamond drilling on the Toucano gold occurrence to follow up previously reported high grade sampling, along with geochemical sampling of the potential Fofoca resource extensions. |
| § | Trial mining license application nearing conclusion – a trial mining license has been applied for with the Brazilian Mines department, DNPM, and is expected to be granted during the next few months. The trail mining license will enable the Company to test geochemical and physical attributes of the area around the Toucano gold occurrence, and carry out bulk sampling. |
| § | Detailed exploration plans approved by the board |
| 27 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
| § | Initial drilling of the recently discovered Toucan Gold occurrence |
| § | Trial mining license in application for bulk sampling of alluvial/elluvial areas |
| § | Geochemical sampling via Auger drilling of several previously defined targets |
| § | New camp construction plans completed |
| § | Migration to the Toronto Stock Exchange in advanced stages |
| § | NI43-101 updated and filed (awaiting comments) – as part of the listing process in the migration to Canada, Aurora engaged Geosure Ltd of Australia to complete the National Instrument 43-101 which has been lodged with the TSX and is awaiting comment. Aurora is now set to execute the multiple tasks of Exploration and resource expansion, bulk sampling via the trial mining license and completing the migration to the Toronto Stock exchange. |
| § | Aurora will also utilize Auger drilling as a follow up anomalous areas of previous stream sediment sampling carried out during the Q3 of 2012 covering an area of 50 km2, which focused on the western flank of the license area. This area included the Toucano gold occurrence and extensions of the Fofoca resource. |
The Company intends to concentrate exploration activities on the Brazilian Tapajos properties and examine data relating to the potential acquisition or joint venturing of additional mineral properties in either the exploration or development stage in other South American countries. Additional contractors and consultants may be hired on as and when the requirement occurs.
The exploration work program for the remainder of Fiscal 2013 will focus on the Brazilian properties. The Company intends to follow up results from previous work on the Sao Domingo property, including the previous drilling and mapping over the Fofoca resource area. Follow up evaluation of the geophysical anomaly west of Fofoca is required to test any strike continuity of potential economic mineralisation. The Toucano occurrence was a recent discovery, made during the 4th Quarter of 2011 located in the same vicinity as the Colibri gold occurrence and close to the Fofoca resource area and the Attacadau occurrence. Toucano was discovered as a result of reviewing remote sensing imagery acquired during the last quarter of 2011 and the occurrence of recent artisanal activity.
Aurora conducted detailed mapping over the Toucano occurrence during 2012 and completed channel sampling across the exposed strike of potentially mineralised lithologies. As a result of the significant channel sample results and the other high-grade rock chip results taken from exposures within the Toucano system. Aurora intends to focus exploration delineating the potential area of mineralised material. This work will entail surface mapping, sampling of soils on a grid basis to delineate geochemical anomalies, stream sediment sampling, geophysical surveying and drilling.
Aurora recently concluded a first pass project wide evaluation of tailings and alluvial/elluvial potential. Results showed that follow up test work is recommended and Aurora intends to apply for a trial mining license to carry out bulk sampling of potentially economic material. Concurrently a technical team has been assembled to continue the evaluation of both the alluvial/elluvial potential and the geometry of the hard rock mineralisation in preparation for subsurface test work.
Results of the follow up exploration during 2012 identified further primary and placer gold occurrences, which were subsequently sampled for gold and associated minerals; cartographic archival data was reviewed, and follow on exploration recommendations and budgets established. Included in the recommendations is a geophysical survey utilizing GPR (Georadar) profiling as a method for determining overburden depths and delineation of potential alluvial/elluvial ore zones in cross a section.
The Company has set up a field operations centre at the Săo Domingos property and intend to continue to focus exploration activities on anomalies associated with the Săo Domingos property. The Company selected the Săo Domingos property based on its proximity to the other properties, and the logistics currently in place. Access to the Săo Domingos property is by light aircraft to a well-maintained strip, by road along the government maintained Trans Garimpeiro highway, and by boat along the multitude of waterways in the Amazon Basin.
The company also intends to expand the infrastructure on Sao Domingo to include further staff accommodation, office space, workshops for heavy machinery and an onsite laboratory for assaying. Currently the Company has a budget for exploration and alluvial/elluvial mining, and will seek to acquire a trial mining license in the near future. The exploration phase during 2012, coupled with data from previous campaigns has shown the project has great potential to host significant economic alluvial/elluvial and hard rock mineralisation.
| 28 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
Mining and Exploration Properties
The Company was incorporated under the laws of the State of Delaware on October 10, 1995, under the name "Chefs Acquisition Corp." Initially formed for the purpose of engaging in the food preparation business, the Company redirected business efforts in late 1995 following a change of control, which occurred on October 30, 1995, to the acquisition, exploration and development of mineral resource properties. The Company name changed to “Aurora Gold Corporation” on August 20, 1996 to more fully reflect the resource exploration business activities.
The general business strategy is to acquire mineral properties either directly or through the acquisition of operating entities. The continued operations and the recoverability of minerals are dependent upon the existence of economically recoverable mineral reserves, confirmation of interest in the underlying properties and ability to obtain necessary financing to complete the development and future profitable production. Since 1996 the Company acquired and disposed of a number of properties. The Company has not been successful in any exploration efforts to establish reserves on any of the properties owned by or in which the Company holds an interest.
The Company currently has an interest in a strategic land package of six (6) properties none of which contain any reserves. The Company has no revenues, has sustained losses since inception and has been issued an opinion by the auditors expressing substantial doubt about the ability to continue as a going concern. The Company may not generate revenues even if any of its exploration programs indicate that a mineral deposit may exist on the properties. Accordingly, the Company may be dependent on future financings in order to maintain operations and continue exploration activities.
The Company has not been involved in any bankruptcy, receivership or similar proceedings.
The strategic objectives of the Company are to concentrate efforts on existing operations where infrastructure already exists, properties presently being developed or in advanced stages of exploration that have potential for additional discoveries and grass-roots exploration opportunities. The Company is currently concentrating on property exploration activities in Brazil.
The properties are in the exploration stage only and without a known body of mineral reserves. Development of the properties will follow only if satisfactory exploration results are obtained. Mineral exploration and development involves a high degree of risk and few properties that are explored are ultimately developed into producing mines. There is no assurance that the mineral exploration and development activities will result in any discoveries of commercially viable bodies of mineralization. The long-term profitability of the operations will be, in part, directly related to the cost and success of the exploration programs, which may be affected by a number of factors.
Mineral exploration and development involves a high degree of risk and few properties that are explored are ultimately developed into producing mines. There is no assurance that planned production will result in a commercial success, as production is gold price and politically sensitive. Once production has commenced the Company is able to gauge the onward commercial viability of the project. There is no assurance that planned mineral exploration and development activities will result in any further discoveries of commercially viable bodies of mineralization. The long-term profitability of operations will be, in part, directly related to the cost and success of exploration programs, which may be affected by a number of factors.
The Company has calculated a body of mineralized material to Guide 7 standards calculated in accordance with the Australasian Joint Ore Reserves Committee (the “JORC”) code for reporting of Mineral Resources and Ore Reserves (the “JORC Code”). The current JORC compliant inferred resource is estimated at 130,000 ounces at 2.0 g/t calculated on a 0.5 g/t cut off. This mineralized material is located on the Săo Domingos property discussed below. The rest of the Brazil properties are in the preliminary exploration stage and do not contain any known bodies of ore. The Company will also examine data relating to any potential acquisition opportunities of other exploration properties in Latin America and South America.
During 2012 and 2013 through May 10, 2013 the Company has been evaluating property holdings in order to determine whether to implement exploration programs on existing properties or to acquire interests in new properties.
The Company currently has an interest in six (6) properties located in Tapajos gold province in Para State, Brazil, collectively called the Sao Domingo project. The Company has conducted exploration activities on the properties and have ranked the properties in order of merit and may discontinue such activities and dispose of some of the rights to mineral exploration on the properties if further exploration work is not warranted.
| 29 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
The geology of the Săo Domingos property is predominantly composed of paleo-proterozoic Parauari Granites that play host to a number of gold deposits in the Tapajos Basin. Typical Granites of the younger Maloquinha Intrusive Suite have been noticed in the vicinity of the Fofoca resource area, and basic rocks considered to be part of the mesoproterozoic Cachoeira Seca Intrusive Suite occur around the Esmeril target area. The Săo Domingos property was a previous large alluvial operation, and the property area covers numerous areas of workings. The Săo Domingos property lies in the Tapajos Province of Para State, Brazil It is situated approximately 250 km SE of Itaituba, the regional centre. Small aircraft service Itaituba daily and on occasions flights can be sourced via Manaus. Access from Itaituba to site is by small aircraft or unsealed road of average to poor quality. The road is subject to seasonal closures and ‘wet’ season site access is granted via light aircraft utilizing the local airstrip.
Tenures from the Department of National Production Minerals (DNPM) are disclosed in the aforementioned notes to the financial statements.
| 30 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
Results of Operations
Three months ended March 31, 2013 versus three months ended March 31, 2012
Revenues and Net Loss
The Company has yet to generate any revenues or establish any history of profitable operations. The Company recorded a net loss of $759,337 (March 31, 2012: net loss $245,810) or $(0.00) [March 31, 2012: $(0.00)] per share.
Expenses
The increase in quarter on quarter costs reflects the increased activities to actively manage and engage in exploration activities.
Exploration expenditures
Exploration expenses are charged to operations as they are incurred. The Company recorded exploration expenses of $309,803 (March 31, 2012: $28,282).
Depreciation expense
Depreciation expenses charged to operations were $6,150 (March 31, 2012:nil).
Capital Resources and Liquidity
March 31, 2013 versus December 31, 2012
During 2012 the capital markets continued to be tight and many companies had restricted access to debt and equity financing. The Company's exploration properties are in the exploration stage and have not commenced commercial production. Consequently the Company has no history of earnings or cash flow from its operations. As a result, the Company is reviewing its 2013 exploration and capital spending requirements in light of the current and anticipated, global economic environment.
The Company currently finances its activities primarily by the private placement of securities. There is no assurance that equity funding will be accessible to the Company at the times and in the amounts required to fund the Company’s activities. There are many conditions beyond the Company’s control, which have a direct bearing on the level of investor interest in the purchase of Company securities. The Company may also attempt to generate additional working capital through the operation, development, sale or possible joint venture development of its properties; however, there is no assurance that any such activity will generate funds that will be available for operations. Debt financing has been used to fund the Company’s property acquisitions and exploration activities. The Company does not have “standby” credit facilities, or off-balance sheet arrangements and it does not use hedges or other financial derivatives. The Company has no agreements or understandings with any person as to additional financing.
The Company intends to continue finance activities by raising capital through the equity markets and special purpose placements.
At March 31, 2013 the Company had cash of $3,151,999 (December 31 2012: $3,963,836) and working capital of $2,934,765 (December 31, 2012: $3,754,403). Total liabilities as of March 31, 2013 were $413,921 (December 31, 2012: $277,343).
On October 5, 2012, the Company, completed the sale of 135,000,000 shares of the Company’s common stock for a purchase price of $5,000,000, to Alltech Capital Limited pursuant to the terms of a subscription agreement entered into between the Company and the Alltech Capital Limited dated September 21, 2012. As a result of the sale of 135,000,000 shares of the Company’s common stock of approximately 54%, a change in control of the Company has occurred. As a condition to the closing of the transaction, the Company agreed to increase the size of its board of directors to five (5) members and to appoint two board members selected by the Investor. The board of directors appointed each of Messrs. Vladimir Bernshtein and Andrey Ratsko to serve as directors of the Company. Additionally, Mr. Bernshtein has been named as the Company’s Chief Business Development Director.
| 31 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
In October 2011 the Company filed a Registration Statement on Form S-1 offering up to a maximum of 50,000,000 units of the Company's securities at an offering price of $0.10 per Unit in a direct public offering, without any involvement of underwriters or broker-dealers. Each Unit consists of one (1) share of common stock at a $0.001 par value per share and one (1) Stock Purchase Warrant. Each full Warrant entitles the holder to purchase one additional share of common stock at a price of $0.20 for a period of two years commencing November 1, 2011 through October 31, 2013. The Units will be sold by the Chief Executive Officer and Chief Financial Officer. A Notice of Effectiveness was issued April 25, 2012. The offer was deregistered on January 7, 2013 and none of the shares registered were sold under the Registration Statement.
On April 16, 2012, the Company entered into subscription agreements for 1,316,000 shares of common stock at a purchase price of $0.06 per share for a gross aggregate price of $78,960. Pursuant to the subscription agreements, each of the Investors has represented that they are not a U.S. person; as such term is defined in Regulation S. In connection with the offering, the Company has agreed to pay a cash commission equal to 8% of all funds received or an aggregate of up $48,000 on the total maximum $600,000 subscription.
During April 2012, the Company entered into a debt settlement agreement for $18,000 in accounts payable which was settled for 300,000 shares of common stock at an issue price of $0.06 per share.
During March 2012, the Company entered into debt settlement agreements for advances received from a director of the Company and a company during fiscal 2011 as well as $14,454 of amounts in accounts payable and accrued expenses. $119,454 was settled for 1,990,900 shares of common stock at an issue price of $0.06 per share.
In March 2012, the Company entered into subscription agreements for 625,217 shares of common stock at a purchase price of $0.06 per share for a gross aggregate price of $37,513. Share certificates were not issued as at March 31, 2012 and they were treated as an Advance for Stock Subscriptions. The share certificates were issued in April 2012. Pursuant to the subscription agreements, each of the Investors has represented that they are not a U.S. person; as such term is defined in Regulation S. In connection with the offering, the Company has agreed to pay a cash commission equal to 8% of all funds received or an aggregate of up $48,000 on the total maximum $600,000 subscription that is being offered.
The general business strategy is to acquire mineral projects either directly or through the acquisition of operating entities. The interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the USA and applicable to a going concern concept, which contemplates the realization of assets and the satisfaction of liabilities and commitments during the normal course of business. As discussed in note 1 to the interim consolidated financial statements, the Company has incurred recurring operating losses since inception, has not generated any operating revenues to date and during March 31, 2013 operating activities used cash of $745,385 (March 31, 2012: $171,970). The Company requires additional funds to meet the Company obligations and maintain the operations. The Company may not have sufficient working capital to (i) pay administrative and general operating expenses through December 31, 2013 and (ii) to conduct preliminary exploration programs. Without cash flow from operations, the Company may need to obtain additional funds (presumably through equity offerings and/or debt borrowing) in order, if warranted, to implement additional exploration programs on the properties. While the Company may attempt to generate additional working capital through the operation, development, sale or possible joint venture development of the properties, there is no assurance that any such activity will generate funds that will be available for operations. Failure to obtain such additional financing may result in a reduction of interest in certain properties or an actual foreclosure of interest. The Company has no agreements or understandings with any person as to such additional financing.
The exploration properties have not commenced commercial production and the Company has no history of earnings or cash flow from operations. While the Company may attempt to generate additional working capital through the operation, development, sale or possible joint venture development of property, there is no assurance that any such activity will generate funds that will be available for operations.
| 32 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
Cash Flow
Three months ended March 31, 2013 versus three months ended March 31, 2012:
Operating activities:
The Company used cash of $745,385 (March 31, 2012: $171,970). Changes in prepaid expenses and other assets resulted in an increase of $128,777 during the period (March 31, 2012: nil) and changes in accounts payable and accrued expenses (including related party) resulted in an increase in cash of $136,578 (March 31, 2012: increase in cash of $30,159).
Investing Activities:
During the quarter the Company invested $61,768 in the purchase of equipment for exploration activities (March 31, 2012:nil).
Financing Activities:
There were no financing activities during the quarter ended March 31, 2013.
On October 5, 2012, the Company, completed the sale of 135,000,000 shares of the Company’s common stock for a purchase price of $5,000,000, to Alltech Capital Limited pursuant to the terms of a subscription agreement entered into between the Company and the Alltech Capital Limited dated September 21, 2012. As a result of the sale of 135,000,000 shares of the Company’s common stock of approximately 54%, a change in control of the Company has occurred. As a condition to the closing of the transaction, the Company agreed to increase the size of its board of directors to five (5) members and to appoint two board members selected by the Investor. The board of directors appointed each of Messrs. Vladimir Bernshtein and Andrey Ratsko to serve as directors of the Company. Additionally, Mr. Bernshtein has been named as the Company’s Chief Business Development Director.
In October 2011 the Company filed a Registration Statement on Form S-1 offering up to a maximum of 50,000,000 units of the Company's securities at an offering price of $0.10 per Unit in a direct public offering, without any involvement of underwriters or broker-dealers. Each Unit consists of one (1) share of common stock at a $0.001 par value per share and one (1) Stock Purchase Warrant. Each full Warrant entitles the holder to purchase one additional share of common stock at a price of $0.20 for a period of two years commencing November 1, 2011 through October 31, 2013. The Units will be sold by the Chief Executive Officer and Chief Financial Officer. A Notice of Effectiveness was issued April 25, 2012. The offer will expire January 20, 2013. To date, no funds have been obtained from this offering.
On April 16, 2012, the Company entered into subscription agreements for 1,316,000 shares of common stock at a purchase price of $0.06 per share for a gross aggregate price of $78,960. Pursuant to the subscription agreements, each of the Investors has represented that they are not a U.S. person; as such term is defined in Regulation S. In connection with the offering, the Company has agreed to pay a cash commission equal to 8% of all funds received or an aggregate of up $48,000 on the total maximum $600,000 subscription.
During April 2012, the Company entered into a debt settlement agreement for $18,000 in accounts payable which was settled for 300,000 shares of common stock at an issue price of $0.06 per share.
During March 2012, the Company entered into debt settlement agreements for advances received from a director of the Company and a company during fiscal 2011 as well as $14,454 of amounts in accounts payable and accrued expenses. $119,454 was settled for 1,990,900 shares of common stock at an issue price of $0.06 per share.
In March 2012, the Company entered into subscription agreements for 625,217 shares of common stock at a purchase price of $0.06 per share for a gross aggregate price of $37,513. Share certificates were not issued as at March 31, 2012 and they were treated as an Advance for Stock Subscriptions. The share certificates were issued in April 2012. Pursuant to the subscription agreements, each of the Investors has represented that they are not a U.S. person; as such term is defined in Regulation S. In connection with the offering, the Company has agreed to pay a cash commission equal to 8% of all funds received or an aggregate of up $48,000 on the total maximum $600,000 subscription that is being offered.
| 33 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
Dividends
The Company has neither declared nor paid any dividends on its’ Common Stock. The Company intends to retain earnings to finance growth and expand operations and does not anticipate paying any dividends on common stock in the foreseeable future.
Asset-Backed Commercial Paper
The Company has no asset-backed commercial paper.
Fair Value of Financial Instruments and Risks
Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair value.
The carrying value of cash, accounts payable, accrued expenses and advances payable (including those amounts owing to related parties) approximate their fair value because of the short-term nature of these instruments.
Management is of the opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments.
The Company operates outside of the United States of America (primarily in Brazil) and is exposed to foreign currency risk due to the fluctuation between the currency in which the Company operates in and the U.S. dollar in which the operations are reported.
Share Capital
At May 10, 2013, the Company had:
| - | Authorized share capital of 300,000,000 (December 31, 2012: 300,000,000) common shares with par value of $0.001 each |
| - | 249,144,706 common shares were issued and outstanding as at May 10, 2013 (December 31, 2012: 249,144,706). |
| - | 9,650,000 (December 31, 2012: 9,650,000) stock options were outstanding under the incentive stock option plan. The stock options are exercisable at prices ranging from $0.05 to $0.12 per share, with expiry dates ranging from October 10, 2016 to April 9, 2017. If the holders were to acquire all 9,650,000 (December 31, 2012: 9,650,000) shares issuable upon the exercise of all incentive stock options outstanding, the Company would receive an additional $779,500 (December 31, 2012: $779,500). |
| - | Warrants outstanding were 8,000,000 (December 31, 2012: 8,000,000). |
On October 5, 2012, the Company, completed the sale of 135,000,000 shares of the Company’s common stock for a purchase price of $5,000,000, to Alltech Capital Limited pursuant to the terms of a subscription agreement entered into between the Company and the Alltech Capital Limited dated September 21, 2012. As a result of the sale of 135,000,000 shares of the Company’s common stock of approximately 54%, a change in control of the Company has occurred. As a condition to the closing of the transaction, the Company agreed to increase the size of its board of directors to five (5) members and to appoint two board members selected by the Investor. The board of directors appointed each of Messrs. Vladimir Bernshtein and Andrey Ratsko to serve as directors of the Company. Additionally, Mr. Bernshtein has been named as the Company’s Chief Business Development Director.
In October 2011 the Company filed a Registration Statement on Form S-1 offering up to a maximum of 50,000,000 units of the Company's securities at an offering price of $0.10 per Unit in a direct public offering, without any involvement of underwriters or broker-dealers. Each Unit consists of one (1) share of common stock at a $0.001 par value per share and one (1) Stock Purchase Warrant. Each full Warrant entitles the holder to purchase one additional share of common stock at a price of $0.20 for a period of two years commencing November 1, 2011 through October 31, 2013. The Units will be sold by the Chief Executive Officer and Chief Financial Officer. A Notice of Effectiveness was issued April 25, 2012. The offer was deregistered on January 7, 2013 and none of the shares registered were sold under the Registration Statement.
| 34 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
Market Risk Disclosures
The Company has not entered into derivative contracts either to hedge existing risks or for speculative purposes during the quarter ended March 31, 2013 and 2012 and the subsequent period to May 10, 2013.
Off-balance Sheet Arrangements and Contractual Obligations
The Company does not have any off-balance sheet arrangements or contractual obligations as at reporting date, that are likely to have or are reasonably likely to have a material current or future effect on the financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that have not been disclosed in interim consolidated financial statements.
Application of Critical Accounting Policies
The accounting policies and methods utilized in the preparation of the interim consolidated financial statements determine how the Company reports the financial condition and results of operations and may require management to make estimates or rely on assumptions about matters that are inherently uncertain. The accounting policies are described in Note 2 to the December 31, 2012 interim consolidated financial statements. The accounting policies relating to mineral property and exploration costs, depreciation and amortization of property, plant and equipment and stock-based compensation are critical accounting policies that are subject to estimates and assumptions regarding future activities.
In 2007, the Company's Board of Directors approved the 2007 Stock Option Plan (amended September 29, 2008) (“the Plan”) to offer an incentive to obtain services of key employees, directors and consultants of the Company. The Plan provides for the reservation for awards of an aggregate of 10% of the total shares of Common Stock outstanding from time to time. No Plan participant may receive stock options exercisable for more than 2,500,000 shares of Common Stock in any one calendar year. Under the Plan, the exercise price of an incentive stock option must be at least equal to 100% of the fair market value of the common stock on the date of grant (110% of fair market value in the case of options granted to employees who hold more than 10% of the Company's capital stock on the date of grant). The term of stock options granted under the Plan is not to exceed ten years and the stock options vest immediately upon granting. The total fair value of options granted for during the reporting period are expensed in full as options are vested in full on grant. The fair value of options are determined using the Black Scholes option pricing model that takes into account the exercise price, the expected life of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield (nil assumed) and the risk free interest rate for the term of the option. Due to the fact that the Company has not had significant options granted to develop historical data to provide a reasonable basis to estimate, for the year ended December 31, 2012 and 2011 Management utilizes the simplified method.
Buildings and equipment are carried at cost (including development and preproduction costs, capitalized interest, other financing costs and all direct administrative support costs incurred during the construction period, net of cost recoveries and incidental revenues), less accumulated depletion and depreciation including write-downs. Following the construction period, interest, other financing costs and administrative costs are expensed as incurred.
On the commencement of commercial production, depletion of each mining property is provided on the unit-of-production basis, using estimated proven and probable reserves as the depletion basis.
Buildings and equipment utilized directly in commercial mining activities are depreciated, following the commencement of commercial production, over their expected economic lives using either the unit-of-production method or the straight-line method.
Depreciation for non-mining equipment is provided over the following useful lives:
| - | Vehicles | 10 years |
| - | Office equipment, furniture and fixtures | 2 to 10 years |
The Company reviews the carrying values of its buildings and equipment whenever events or changes in circumstances indicate that their carrying values may not be recoverable. Impairment is considered to exist if total estimated future cash flows, or probability-weighted cash flows on an undiscounted basis, are less than the carrying value of the assets.
| 35 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
An impairment loss is measured and recorded based on discounted estimated future cash flows associated with values beyond proven and probable reserves and resources. In estimating future cash flows, assets are grouped at the lowest level for which there is identifiable future cash flows that are largely independent of cash flows from other asset groups. Generally, in estimating future cash flows, all assets are grouped at a particular property for which identifiable cash flows exist. Buildings and equipment utilized directly in commercial mining activities are depreciated, following the commencement of commercial production, over their expected economic lives using either the unit-of-production method or the straight-line method.
The Company accounts for its mineral properties on a cost basis whereby all direct costs, net of pre-production revenue, relative to the acquisition of the properties are capitalized. All sales and option proceeds received are first credited against the costs of the related property, with any excess credited to earnings. Once commercial production has commenced, the net costs of the applicable property will be charged to operations using the unit-of-production method based on estimated proven and probable recoverable reserves. The net costs related to abandoned properties are charged to operations.
Exploration costs are charged to operations as incurred until such time that proven reserves are delineated. From that time forward, the Company will capitalize all costs to the extent that future cash flow from mineral reserves equals or exceeds the costs deferred. The deferred costs will be amortized over the recoverable reserves when a property reaches commercial production. As at December 31, 2012 and 2011, the Company did not have proven reserves. Exploration activities conducted jointly with others are reflected at the Company's proportionate interest in such activities.
The Company reviews the carrying values of its mineral properties on a regular basis by reference to the project economics including the timing of the exploration and/or development work, the work programs and the exploration results experienced by the Company and others. The review of the carrying value of any producing property will be made by reference to the estimated future operating results and net cash flows. When the carrying value of a property exceeds its estimated net recoverable amount, provision is made for the decline in value.
The recoverability of the amounts recorded for mineral properties is dependent on the confirmation of economically recoverable reserves, confirmation of the Company’s interest in the underlying mineral claims, the ability of the Company to obtain the necessary financing to successfully complete their development and the attainment of future profitable operations or proceeds from disposition.
Estimated costs related to site restoration programs during the commercial development stage of the property are accrued over the life of the project.
US GAAP requires the Company to consider at the end of each accounting period whether or not there has been an impairment of the capitalized property, plant and equipment. This assessment is based on whether factors that may indicate the need for a write-down are present. If management determines there has been impairment then management is required to write-down the recorded value of the property, plant and equipment, which reduces earnings and net assets.
| 36 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
Related Party Transactions
The proposed business raises potential conflicts of interests between certain officers and directors of the Company. Certain directors are directors of other mineral resource companies and, to the extent that such other companies may participate in ventures in which the Company may participate, the directors may have a conflict of interest in negotiating and concluding terms regarding the extent of such participation. In the event that such a conflict of interest arises at a meeting of the directors, a director who has such a conflict will abstain from voting for or against the approval of such participation or such terms. In appropriate cases, the Company will establish a special committee of independent directors to review a matter in which several directors, or management, may have a conflict. From time to time, several companies may participate in the acquisition, exploration and development of natural resource properties thereby allowing for their participation in larger programs, involvement in a greater number of programs and reduction of the financial exposure with respect to any one program. It may also occur that a particular company will assign all or a portion of its interest in a particular program to another of these companies due to the financial position of the company making the assignment.
In determining whether the Company will participate in a particular program and the interest therein to be acquired by it, the directors will primarily consider the potential benefits to the Company, the degree of risk exposure and the financial position at that time. Other than as indicated, the Company has no other procedures or mechanisms to deal with conflicts of interest. The Company is unaware of the existence of any conflict of interest as described herein.
Other than as disclosed below, during the quarter ended March 31, 2013 and 2012, none of our current directors, officers or principal shareholders, nor any family member of the foregoing, nor, to the best of our information and belief, any former directors, senior officers or principal shareholders, nor any family member of such former directors, officers or principal shareholders, has or had any material interest, direct or indirect, in any transaction, or in any proposed transaction which has materially affected or will materially affect the Company.
There have been no transactions or proposed transactions with officers and directors during the last two years to which the Company is a party except as follows:
During quarter ended March 31, 2013, consulting fees of $105,000 (March 31, 2012: $110,751) were incurred to directors and officers of the Company and its subsidiary. The transactions were recorded at the exchange amount, being the value established and agreed to by the related parties. Coresco also charged for geophysical consulting activities and other exploration management fees for a total of $31,500 during the three months ended March 31, 2013 (March 31, 2012: Nil).
Included in accounts payable (related parties) at March 31, 2013 is $148,049 (March 31, 2012: $126,103) payable to officers and directors of the Company for consulting fees and various expenses incurred on behalf of the Company.
| 37 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
CURRENT OUTLOOK
General Economic Conditions
Current problems in credit markets and deteriorating global economic conditions have lead to a significant weakening of exchange traded commodity prices, including precious and base metal prices. Volatility in these markets is also high. It is difficult in these conditions to forecast metal prices and demand trends for products to be produced if mining operations were current. Credit market conditions have also increased the cost of obtaining capital and limited the availability of funds. Accordingly, management is reviewing the effects of the current conditions on our business.
It is anticipated that for the foreseeable future, the Company will rely on the equity markets and Option and Warrant holders to meet financing requirements and continue to enter into debt settlements to preserve the Company’s capital reserves. The Company will also consider entering into joint venture arrangements to advance its properties if a suitable opportunity presents.
Capital and Exploration Expenditures
The Company is reviewing capital and exploration spending in light of current market conditions. As a result of our review, the Company may curtail a portion of our capital and exploration expenditures during 2013.
The Company is currently concentrating our exploration activities in Brazil and examining data relating to the potential acquisition or joint venturing of additional mineral properties in either the exploration or development stage.
Plans for Next Twelve Months
The following Plan of Operation contains forward-looking statements that involve risks and uncertainties, as described below. The actual results could differ materially from those anticipated in these forward-looking statements. During the next 12 months the Company may raise additional funds through equity offerings and/or debt borrowing to meet the general and administrative operating expenses and to conduct work on exploration properties. There is, of course, no assurance that the Company will be able to do so and the Company does not have any agreements or arrangements with respect to any such financing. The exploration properties have not commenced commercial production and the Company has no history of earnings or cash flow from operations. While the Company may attempt to generate additional working capital through the operation, development, sale or possible joint venture development of properties, there is no assurance that any such activity will generate funds that will be available for operations.
The planned activity for 2013 year is as follows:
| § | Technical team arriving on site at the Sao Domingo property - The geotechnical team is mobilizing to site to carry out the planned exploration activities for the 2013 exploration season. A detailed budget has been approved by the board that includes diamond drilling on the Toucano gold occurrence to follow up previously reported high grade sampling, along with geochemical sampling of the potential Fofoca resource extensions. |
| § | Trial mining license application nearing conclusion – a trial mining license has been applied for with the Brazilian Mines department, DNPM, and is expected to be granted during the next few months. The trail mining license will enable the Company to test geochemical and physical attributes of the area around the Toucano gold occurrence, and carry out bulk sampling. |
| § | Detailed exploration plans approved by the board |
| § | Initial drilling of the recently discovered Toucan Gold occurrence |
| § | Trial mining license in application for bulk sampling of alluvial/elluvial areas |
| § | Geochemical sampling via Auger drilling of several previously defined targets |
| § | New camp construction plans completed |
| § | Migration to the Toronto Stock Exchange in advanced stages |
| § | NI43-101 updated and filed (awaiting comments) – as part of the listing process in the migration to Canada, Aurora engaged Geosure Ltd of Australia to complete the National Instrument 43-101 which has been lodged with the TSX and is awaiting comment. Aurora is now set to execute the multiple tasks of Exploration and resource expansion, bulk sampling via the trial mining license and completing the migration to the Toronto Stock exchange. |
| § | Aurora will also utilize Auger drilling as a follow up anomalous areas of previous stream sediment sampling carried out during the Q3 of 2012 covering an area of 50 km2, which focused on the western flank of the license area. This area included the Toucano gold occurrence and extensions of the Fofoca resource. |
| 38 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
The Company intends to concentrate exploration activities on the Brazilian Tapajos properties and examine data relating to the potential acquisition or joint venturing of additional mineral properties in either the exploration or development stage in other South American countries. Additional contractors and consultants may be hired on as and when the requirement occurs.
The exploration work program for the remainder of Fiscal 2013 will focus on the Brazilian properties. The Company intends to follow up results from previous work on the Sao Domingo property, including the previous drilling and mapping over the Fofoca resource area. Follow up evaluation of the geophysical anomaly west of Fofoca is required to test any strike continuity of potential economic mineralisation. The Toucano occurrence was a recent discovery, made during the 4th Quarter of 2011 located in the same vicinity as the Colibri gold occurrence and close to the Fofoca resource area and the Attacadau occurrence. Toucano was discovered as a result of reviewing remote sensing imagery acquired during the last quarter of 2011 and the occurrence of recent artisanal activity.
Aurora conducted detailed mapping over the Toucano occurrence during 2012 and completed channel sampling across the exposed strike of potentially mineralised lithologies. As a result of the significant channel sample results and the other high-grade rock chip results taken from exposures within the Toucano system. Aurora intends to focus exploration delineating the potential area of mineralised material. This work will entail surface mapping, sampling of soils on a grid basis to delineate geochemical anomalies, stream sediment sampling, geophysical surveying and drilling.
Aurora recently concluded a first pass project wide evaluation of tailings and alluvial/elluvial potential. Results showed that follow up test work is recommended and Aurora intends to apply for a trial mining license to carry out bulk sampling of potentially economic material. Concurrently a technical team has been assembled to continue the evaluation of both the alluvial/elluvial potential and the geometry of the hard rock mineralisation in preparation for subsurface test work.
Results of the follow up exploration during 2012 identified further primary and placer gold occurrences, which were subsequently sampled for gold and associated minerals; cartographic archival data was reviewed, and follow on exploration recommendations and budgets established. Included in the recommendations is a geophysical survey utilizing GPR (Georadar) profiling as a method for determining overburden depths and delineation of potential alluvial/elluvial ore zones in cross a section.
The Company has set up a field operations centre at the Săo Domingos property and intend to continue to focus exploration activities on anomalies associated with the Săo Domingos property. The Company selected the Săo Domingos property based on its proximity to the other properties, and the logistics currently in place. Access to the Săo Domingos property is by light aircraft to a well-maintained strip, by road along the government maintained Trans Garimpeiro highway, and by boat along the multitude of waterways in the Amazon Basin.
The company also intends to expand the infrastructure on Sao Domingo to include further staff accommodation, office space, workshops for heavy machinery and an onsite laboratory for assaying. Currently the Company has a budget for exploration and alluvial/elluvial mining, and will seek to acquire a trial mining license in the near future. The exploration phase during 2012, coupled with data from previous campaigns has shown the project has great potential to host significant economic alluvial/elluvial and hard rock mineralisation.
| 39 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Aurora is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.
ITEM 4 – CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of senior management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were not effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act. As previously reported under Item 9A in the Annual Report on Form 10-K for the year ended December 31, 2012 (the “Annual Report”), we had numerous deficiencies in our disclosures controls as of December 31, 2012. In the Annual Report we described the remediation efforts we have begun to undertake in order to correct such deficiencies. As of March 31, 2013, the deficiencies described in the Annual Report still existed since the remediation efforts had not yet been fully implemented as of such date.
Changes in Internal Controls over Financial Reporting
There have been no changes in our internal controls over financial reporting or in other factors during the fiscal quarter ended March 31, 2013 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting subsequent to the date we carried out our most recent evaluation. As previously reported in Item 9A of the Annual Report, we had numerous material weaknesses in our internal control over financial reporting as of December 31, 2012. In the Annual Report we described the remediation efforts we have begun to undertake in order to correct such material weaknesses. As of March 31, 2013, the material weaknesses described in the Annual Report still existed since the remediation efforts had not yet been fully implemented as of such date.
| 40 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
PART II - OTHER INFORMATION
ITEM 1 – LEGAL PROCEEDINGS
Aurora is not a party to any pending legal proceedings and, to the best of Aurora’s knowledge, none of Aurora’s assets are the subject of any pending legal proceedings.
ITEM 1A – RISK FACTORS
Aurora is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.
ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The Company did not make any repurchases of securities during the quarter nor the subsequent period through to May 10, 2013.
ITEM 3 – DEFAULTS UPON SENIOR SECURITIES
During the quarter, no material default has occurred with respect to any indebtedness of the Company. Also, during this quarter, no material arrearage in the payment of dividends has occurred.
ITEM 4 – MINING SAFETY DISCLOSURES
There are no current mining activities at the date of this report.
ITEM 5 – OTHER INFORMATION
None.
| 41 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
ITEM 6 – EXHIBITS
All Exhibits required to be filed with the Form 10-Q are included in this quarterly report or incorporated by reference to the Companies previous filings with the SEC which can be found in their entirety at the SEC website at www.sec.gov under SEC File Number 000-24393 98720970.
| Exhibit | Description | Status |
| 3.1.1 | Certificate of Incorporation incorporated by reference to the registration statement on Form 10SB | Filed |
| 3.1 | Certificate of Amendment to the Certificate of Incorporation incorporated by reference to the registration statement on Form 10SB | Filed |
| 3.1 | Certificate of Restoration and Renewal of Certificate of Incorporation incorporated by reference to the registration statement on Form 10SB | Filed |
| 3.1.2 | Certificate of Amendment to the Certificate of Incorporation incorporated by reference to the registration statement on Form 10SB | Filed |
| 3.1.3 | Certificate of Restoration and Renewal of Certificate of Incorporation incorporated by reference to the registration statement on Form 10SB | Filed |
| 3.2.1 | By-laws incorporated by reference to the registration statement on Form 10SB | Filed |
| 3.2.2 | Amended and Restated By-laws incorporated by reference to the registration statement on Form 10SB | Filed |
| 4.1 | Form of Subscription Agreement incorporated by reference to the Post-Effective amendments for registration statement on Form S-1 | Filed |
| 4.2 | Form of Series A Warrant incorporated by reference to the Post-Effective amendments for registration statement on Form S-1 filed | Filed |
| 4.3 | Debt Settlement Agreement with Samba Minerals Limited incorporated by reference to the registration statement on Form S-1 filed | Filed |
| 4.4 | Form of Debt Settlement Agreement with Axino AG, Heroe Investments Inc, Jolanda Investments Ltd, Gemeinhardt GmbH, Lars Pearl and WS Marketing GmbH. incorporated by reference to the registration statement on Form S-1 | Filed |
| 10.1 | Consulting Agreement between Hans W. Biener of SupplyConsult GbR and Aurora Gold Corporation incorporated by reference to the registration statement on Form SB | Filed |
| 10.1 | Services Agreement (the “LP Services Agreement”) with Lars Pearl, the Company’s Chief Executive Officer, pursuant to which Mr Pearl will serve as the Company’s Chief Executive Officer. | Filed |
| 10.1 | Services Agreement (the “AS Services Agreement”) with Agustin Gomez de Segura, the Company’s Chairman and sole independent director, pursuant to which Mr Segura will serve as the Company’s Chairman and independent director. | Filed |
| 10.2 | Confidentiality Agreement between Hans W. Biener of SupplyConsult GbR and Aurora Gold Corporation incorporated by reference to the registration statement on Form SB | Filed |
| 10.3 | Assignment of Novo Porto and Santa Clara Memorandum of Understanding to Aurora Gold Corporation incorporated by reference to the registration statement on Form SB | Filed |
| 10.4 | Novo Porto Memorandum of Understanding Corporation incorporated by reference to the registration statement on Form SB | Filed |
| 10.5 | Declaration of Translator for translation of Porto Novo Memorandum of Understanding from Portuguese to English Corporation incorporated by reference to the registration statement on Form SB | Filed |
| 10.6 | Novo Porto Option Agreement incorporated by reference to the Form 10-KSB | Filed |
| 10.7 | Declaration of Translator for translation of Novo Porto Option Agreement from Portuguese to English Corporation incorporated by reference to the Form 10-KSB | Filed |
| 10.8 | Santa Clara Memorandum of Understanding incorporated by reference to the registration statement on Form SB filed | Filed |
| 10.9 | Declaration of Translator for translation of Santa Clara Memorandum of Understanding from Portuguese to English Corporation incorporated by reference to the registration statement on Form SB filed | Filed |
| 10.10 | Assignment of Ouro Mil Memorandum of Understanding to Aurora Gold Corporation incorporated by reference to the registration statement on Form SB | Filed |
| 42 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
| Exhibit | Description | Status |
| 10.11 | Ouro Mil Memorandum of Understanding Corporation incorporated by reference to the registration statement on Form SB filed | Filed |
| 10.12 | Declaration of Translator for translation of Ouro Mil Memorandum of Understanding from Portuguese to English Corporation incorporated by reference to the registration statement on Form SB | Filed |
| 10.13 | Ouro Mil Option Agreement incorporated by reference to the Form 10-KSB | Filed |
| 10.14 | Declaration of Translator for translation of Ouro Mil Option Agreement from Portuguese to English incorporated by reference to the Form 10-KSB | Filed |
| 10.15 | Assignment of Sao Domingos Memorandum of Understanding to Aurora Gold Corporation incorporated by reference to the registration statement on Form SB | Filed |
| 10.16 | Sao Domingos Memorandum of Understanding Corporation incorporated by reference to the registration statement on Form SB | Filed |
| 10.17 | Declaration of Translator for translation of Sao Domingos Memorandum of Understanding from Portuguese to English incorporated by reference to the registration statement on Form SB | Filed |
| 10.18 | Săo Domingos Option Agreement incorporated by reference to the Form 10-KSB | Filed |
| 10.19 | Declaration of Translator for translation of Săo Domingos Option Agreement from Portuguese to English incorporated by reference to the Form 10-KSB | Filed |
| 10.20 | Santa Isabel Option Agreement incorporated by reference to the Form 10-KSB | Filed |
| 10.21 | Declaration of Translator for translation of Santa Isabel Option Agreement from Portuguese to English incorporated by reference to the Form 10-KSB | Filed |
| 10.22 | Săo Joăo Option Agreement incorporated by reference to the Form 10-KSB | Filed |
| 10.23 | Declaration of Translator for translation of Săo Joăo Option Agreement from Portuguese to English incorporated by reference to the Form 10-KSB | Filed |
| 10.24 | Piranhas Memorandum of Understanding incorporated by reference to the Form 10-KSB | Filed |
| 10.25 | Declaration of Translator for translation of Piranhas Memorandum of Understanding from Portuguese to English incorporated by reference to the Form 10-KSB | Filed |
| 10.26 | Branca de Neve Memorandum of Understanding incorporated by reference to the Form 10- QSB | Filed |
| 10.27 | Declaration of Translator for translation of Branca de Neve Memorandum of Understanding from Portuguese to English incorporated by reference to the Form 10-QSB | Filed |
| 10.28 | Bigode Memorandum of Understanding incorporated by reference to the Form 10-QSB | Filed |
| 10.29 | Declaration of Translator for translation of Bigode Memorandum of Understanding from Portuguese to English incorporated by reference to the Form 10-QSB filed | Filed |
| 10.30 | Santa Lucia Memorandum of Understanding incorporated by reference to the Form 10-QSB | Filed |
| 10.31 | Declaration of Translator for translation of Santa Lucia Memorandum of Understanding from Portuguese to English incorporated by reference to the Form 10-QSB | Filed |
| 10.34 | Settlement Agreement dated as of August 9, 2007 between the Company and Luis Mauricio incorporated by reference to the Form SB-2 | Filed |
| 10.35 | Form of Subscription Agreement between the Selling Stockholders and the Company incorporated by reference to the Form SB-2 | Filed |
| 10.36 | Comandante Araras Memorandum of Understanding incorporated by reference to the Form 10-KSB | Filed |
| 10.37 | 2007 Stock Option Plan incorporated by reference to the Form 10-KSB | Filed |
| 10.38 | Asset Purchase Agreement dated June 15, 20102010 incorporated by reference to the registration statement on Form S-1/A | Filed |
| 10.39 | Asset Purchase Agreement dated June 14, 2011 incorporated by reference to the 8-K | |
| 31.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | Included |
| 32.1 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | Included |
| 99.1 | Corporate Governance Principles incorporated by reference to the Form 10-KSB filed on March 25, 2004 (SEC File No. 000-24393- 04689262). | Filed |
| 43 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
| Exhibit | Description | Status |
| 101* | Financial statements from the quarterly report on Form 10-Q of Aurora Gold Corporation for the quarter ended March 31, 2013, formatted in XBRL: (ii) the Balance Sheets, (ii) the Statements of Operations; (iii) the Statements of Cash Flows, and (iv) the Statements of Stockholders’ Equity (Deficit).
* In accordance with Rule 406T of Regulation S-T, the XBRL (“eXtensible Business Reporting Language”) related information is furnished and not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections. |
Included |
| 101.INS | XBRL Instance Document | * |
| 101.SCH | XBRL Taxonomy Extension Schema | * |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase | * |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase | * |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase | * |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase | * |
———
* Filed Herewith
| 44 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, Aurora Gold Corporation has caused this report to be signed on its behalf by the undersigned duly authorized person.
AURORA GOLD CORPORATION
/s/ Lars Pearl
Name: Lars Pearl
Title: President and CEO
Principal Executive Officer
/s/ Ross Doyle
Name: Ross Doyle
Title: CFO
Principal Financial Officer
/s/ Agustin Gomez de Segura
Name: Agustin Gomez de Segura
Title: Director
Dated: May 10, 2013
| 45 | AURORA GOLD CORPORATION |
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION
I, Lars Pearl, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Aurora Gold Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
/s/ Lars Pearl
Lars Pearl
Chief Executive Officer
Dated: May 10, 2013
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION
I, Ross Doyle, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Aurora Gold Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
/s/ Ross Doyle
Ross Doyle
Chief Financial Officer
Dated: May 10, 2013
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Aurora Gold Incorporated (the “Company”) on Form 10-Q as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lars Pearl, President, Chief Executive Officer of the Company, certify, pursuant to s.906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material aspects, the financial condition and result of operations of the Company. |
/s/ Lars Pearl
Lars Pearl
Chief Executive Officer
Dated: May 10, 2013
| AURORA GOLD CORPORATION |
| FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) |
| QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31, 2013 |
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Aurora Gold Corporation (the “Company”) on Form 10-Q as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ross Doyle, Chief Financial Officer and Director of the Company, certify, pursuant to s.906 of the Sarbanes-Oxley Act of 2002, that:
| 1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2) | The information contained in the Report fairly presents, in all material aspects, the financial condition and result of operations of the Company. |
/s/ Ross Doyle
Ross Doyle
Chief Financial Officer
Dated: May 10, 2013
|
Stock Options and Warrants (Summary of Stock Option Activity) (Details) (USD $)
|
0 Months Ended | 3 Months Ended | 12 Months Ended | ||||
|---|---|---|---|---|---|---|---|
|
Jan. 13, 2012
|
Mar. 31, 2013
|
Dec. 31, 2012
|
Sep. 30, 2012
|
Jun. 30, 2012
|
Mar. 31, 2012
|
Dec. 31, 2011
|
|
| Stock Options | |||||||
| Outstanding and exercisable beginning balance | 9,650,000 | 9,650,000 | 10,650,000 | 10,450,000 | 9,050,000 | ||
| Forfeited | (1,000,000) | (200,000) | |||||
| Granted | 1,600,000 | 200,000 | 1,600,000 | ||||
| Outstanding and exercisable at ending balance | 9,650,000 | 9,650,000 | 9,650,000 | 10,650,000 | 10,450,000 | 9,050,000 | |
| Weighted Average Exercise Price | |||||||
| Outstanding and exercisable beginning balance | $ 0.080 | $ 0.080 | $ 0.097 | $ 0.090 | $ 0.110 | ||
| Forfeited | $ 0.260 | $ 0.260 | |||||
| Granted | $ 0.065 | $ 0.050 | |||||
| Outstanding and exercisable at ending balance | $ 0.080 | $ 0.080 | $ 0.080 | $ 0.097 | $ 0.090 | $ 0.110 | |
| Remaining Contractual Life (years) | |||||||
| Remaining Contractual Life (years) | 3 years 3 months 11 days | 3 years 6 months 4 days | 3 years 8 months 26 days | 3 years 11 months 19 days | 4 years 3 months 11 days | 4 years 3 months 11 days | |
| Aggregate Intrinsic value | |||||||
| Outstanding and exercisable beginning balance | $ 52,500 | $ 34,125 | $ 42,000 | $ 36,500 | |||
| Forfeited | |||||||
| Granted | |||||||
| Outstanding and exercisable ending balance | $ 52,500 | $ 34,125 | $ 42,000 | $ 36,500 | |||
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Summary of Significant Accounting Policies
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2013
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| Summary of Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies |
The Company follows accounting standards set by the Financial Accounting Standards Board (FASB). The FASB sets accounting principles generally accepted (GAAP) in the United States that the Company follows to ensure they consistently report their financial condition, results of operations, and cash flows. References to GAAP issued by the FASB in these footnotes are to the FASB Accounting Standards Codification (ASC) or also referred to as Codification.
These interim consolidated financial statements have been prepared in accordance with GAAP and include the accounts of the Company and its wholly owned subsidiaries, Aurora Gold Mineração Ltda ("Aurora Gold Mineração") and AGC Resources LLC ("AGC") (through to date of disposition of AGC, June 14, 2011). Collectively, they are referred to herein as "the Company". Significant inter-company accounts and transactions have been eliminated.
Certain information and footnote disclosures normally included in interim consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such Securities and Exchange Commission (SEC) rules and regulations. The interim period consolidated financial statements should be read together with the audited consolidated financial statements and accompanying notes included in the Company's audited consolidated financial statements for the year ended December 31, 2012. In the opinion of the management of the Company, the unaudited consolidated financial statements contained herein contain all adjustments (consisting of a normal recurring nature) necessary to present a fair statement of the results of the interim periods presented.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions.
Cash equivalents comprise certain highly liquid instruments with a maturity date of three months or less when purchased. The Company has cash and cash equivalents of $3,151,999 as at March 31, 2013 ($81,828 as at March 31, 2012). Amounts paid for income taxes during the three months ended March 31, 2013 and 2012 were nil; and for interest paid nil respectively.
Vehicles and equipment are carried at cost (including development and preproduction costs, capitalized interest, other financing costs and all direct administrative support costs incurred during the construction period, net of cost recoveries and incidental revenues), less accumulated depletion and depreciation including write-downs. Following the construction period, interest, other financing costs and administrative costs are expensed as incurred. On the commencement of commercial production, depletion of each mining property is provided on the unit-of-production basis, using estimated proven and probable reserves as the depletion basis. Buildings and equipment utilized directly in commercial mining activities are depreciated, following the commencement of commercial production, over their expected economic lives using either the unit-of-production method or the straight-line method. Depreciation for non-mining equipment is provided over the following useful lives:
The Company reviews the carrying values of its buildings and equipment whenever events or changes in circumstances indicate that their carrying values may not be recoverable. Impairment is considered to exist if total estimated future cash flows, or probability-weighted cash flows on an undiscounted basis, are less than the carrying value of the assets. An impairment loss is measured and recorded based on discounted estimated future cash flows associated with values beyond proven and probable reserves and resources. In estimating future cash flows, assets are grouped at the lowest level for which there is identifiable future cash flows that are largely independent of cash flows from other asset groups. Generally, in estimating future cash flows, all assets are grouped at a particular property for which there are identifiable cash flows. Buildings and equipment utilized directly in commercial mining activities are depreciated, following the commencement of commercial production, over their expected economic lives using either the unit-of-production method or the straight-line method.
All vehicles and equipment are located in Brazil.
Costs paid for the purchase of reclamation bonds and other related costs that are refundable are capitalized. If amounts paid are not to be refunded then they will be expensed when it is determined they will not be refunded.
The Company accounts for its mineral properties on a cost basis whereby all direct costs, net of pre-production revenue, relative to the acquisition of the properties are capitalized. All sales and option proceeds received are first credited against the costs of the related property, with any excess credited to earnings. Once commercial production has commenced, the net costs of the applicable property will be charged to operations using the unit-of-production method based on estimated proven and probable recoverable reserves. The net costs related to abandoned properties are charged to operations.
Exploration costs are charged to operations as incurred until such time that proven reserves are discovered. From that time forward, the Company will capitalize all costs to the extent that future cash flow from mineral reserves equals or exceeds the costs deferred. The deferred costs will be amortized over the recoverable reserves when a property reaches commercial production. As at March 31, 2013, the Company does not have proven reserves. Exploration activities conducted jointly with others are reflected at the Company's proportionate interest in such activities.
The Company reviews the carrying values of its mineral properties on a regular basis by reference to the project economics including the timing of the exploration or development work, the program of works and the exploration results experienced by the Company and others. The review of the carrying value of any producing property will be made by reference to the estimated future operating results and net cash flows. When the carrying value of a property exceeds its estimated net recoverable amount, provision is made for the decline in value.
The recoverability of the amounts recorded for mineral properties is dependent on the confirmation of economically recoverable reserves, confirmation of the Company's interest in the underlying mineral claims, the ability of the Company to obtain the necessary financing to successfully complete their development and the attainment of future profitable operations or proceeds from disposal.
Estimated costs related to site restoration programs during the commercial development stage of the property are accrued over the life of the project.
The Company accounts for share-based payments under the fair value method of accounting for stock-based compensation consistent with GAAP. Under the fair value method, stock-based compensation cost is measured at the grant date based on the fair value of the award using the Black-Scholes option pricing model and is recognized to expense on a straight-line basis over the requisite service period, which is generally the vesting period. Where upon grant the options vest immediately the stock-based costs are expensed immediately.
Interest expense for the periods ended March 31, 2013 and 2012 were nil.
The Company's reporting currency is the United States Dollar (USD). Aurora Gold Mineração Ltda is a foreign operation and its functional currency is the Brazilian Real (Real). Certain contractual obligations in these interim consolidated financial statements are stated in Brazilian Real's. At the period ended March 31, 2013 the Brazilian Real exchange rate to the USD was $0.49375 to 1 Real (March 31, 2012: USD $0.54780 to 1 Real).
The Company translates foreign assets and liabilities of its subsidiaries, other than those denominated in USD, at the rate of exchange at the balance sheet date. Income and expenses of these subsidiaries are translated at the average rate of exchange throughout the reporting period. Gains or losses from these translations are reported as a separate component of other comprehensive income (loss) until all or a part of the investment in the subsidiaries is sold or liquidated. The translation adjustments do not recognize the effect of income tax because the Company expects to reinvest the amounts indefinitely in operations. Accumulated other comprehensive income (loss) consists entirely of foreign currency translation adjustments at March 31, 2013 and December 31, 2012.
Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the local functional currency are included in foreign exchange (gain) loss in the consolidated statements of comprehensive income (loss).
Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company places its cash with high credit quality financial institutions in Brazil and Canada. The Company occasionally has cash deposits in excess of federally insured limits. The Company had funds deposited in banks beyond the insured limits as of March 31, 2013 and 2012 respectively. The Company has not experienced any losses related to these balances, and management believes the credit risk to be minimal.
Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair value.
Management is of the opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments. The Company operates outside of the United States of America (primarily in Brazil) and is exposed to foreign currency risk due to the fluctuation between the currency in which the Company operates in and the USD.
The Company has adopted ASC 740, Accounting for Income Taxes, which requires the Company to recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns using the liability method. Under this method, deferred tax liabilities and assets are determined based on the differences between the financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. In July 2006, the FASB issued an interpretation, which clarifies the accounting for uncertainty in income taxes recognized in a company's financial statements in accordance with GAAP. This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Estimated interest and penalties related to recording uncertain tax positions when recorded are included as a component of income tax expense on the consolidated statement of operations. The Company has not recorded any liabilities for uncertain tax positions or any related interest and penalties. The Company's tax returns are open to audit for the years ending December 31, 2008 to 2012.
Earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the reporting period including common stock issued effective the date committed. Common stock issuable is considered outstanding as of the original approval date for the purposes of earnings per share computations. Diluted earnings (loss) per common share is computed by dividing net earnings (loss) by the sum of (a) the basic weighted average number of shares of common stock outstanding during the year and (b) additional shares that would have been issued and potentially dilutive securities. During the periods ended March 31, 2013 and 2012 the diluted earnings (loss) per share was equivalent to the basic earnings (loss) per share because all potentially dilutive securities were anti-dilutive due to the net losses incurred. Potentially dilutive securities consist of stock options and warrants outstanding at the end of the reporting period. Stock options outstanding as at March 31, 2013 were 9,650,000 (March 31, 2012: 10,450,000). Warrants outstanding as at March 31, 2013 were 8,000,000 (March 31, 2012: 8,000,000).
In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments which include only normal recurring adjustments, necessary to present fairly the Company's financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period. The unaudited financial statements should be read in conjunction with the Company's audited financial statements and notes for the year ended December 31, 2012, which are included in the Company's Annual Report on Form 10-K.
At present, there are no other such pronouncements not yet effective that the Company expects will have a material impact on these interim consolidated financial statements. |