-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UC/gqaqciE1v+BGBVmwIP6qG7wbHrFJ+/y2uotwjKIdkcQNzyZav4n3UqD+jFFFZ rAUO9j6C4ZRpfbna0tAl3A== 0001161697-06-001143.txt : 20061130 0001161697-06-001143.hdr.sgml : 20061130 20061130170214 ACCESSION NUMBER: 0001161697-06-001143 CONFORMED SUBMISSION TYPE: SB-2 PUBLIC DOCUMENT COUNT: 35 FILED AS OF DATE: 20061130 FILER: COMPANY DATA: COMPANY CONFORMED NAME: XTRA-GOLD RESOURCES CORP CENTRAL INDEX KEY: 0001288770 IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: SB-2 SEC ACT: 1933 Act SEC FILE NUMBER: 333-139037 FILM NUMBER: 061248817 BUSINESS ADDRESS: STREET 1: 428 ASPEN FOREST DR CITY: OAKVILLE STATE: NY ZIP: 000000 MAIL ADDRESS: STREET 1: 428 ASPEN FOREST DR CITY: OAKVILLE STATE: NY ZIP: 000000 SB-2 1 sb-2.txt FORM SB-2 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 30, 2006 Registration No. 333-______ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ---------- FORM SB-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------- XTRA-GOLD RESOURCES CORP. (Name of Small Business Issuer in Its Charter) NEVADA 1000 91-1956240 - ------------------------------- ---------------------------- ------------------- (State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Incorporation or Organization) Classification Number) Identification No.) 6 Kersdale Avenue Toronto, Ontario M6M 1C8 Canada Telephone: (416) 653-5151 Facsimile: (416) 981-3055 (Address, Telephone and Fax Number of Principal Executive Offices) ---------- Nevada Corporate Services 1800 E. Sahara, Suite 107 Las Vegas NV 89104 Telephone: (702) 734-7557 (Name, Address and Telephone Number of Agent for Service) ---------- Copies of all communications to: Roxanne K. Beilly Schneider Weinberger & Beilly LLP 2200 Corporate Blvd., N.W., Suite 210 Boca Raton, FL 33431 Telephone: (561) 362-9595 Facsimile: (561) 362-9612 Approximate Date of Proposed Sale to the Public: As soon as practicable after the effective date of this Registration Statement. If this Form is filed to register additional securities for an offering [ ] pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(c) [ ] under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. If this Form is a post-effective amendment filed pursuant to Rule 462(d) [ ] under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. If delivery of the prospectus is expected to be made pursuant to Rule 434, [ ] please check the following box. - ii - CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED TITLE OF EACH MAXIMUM MAXIMUM AMOUNT OF CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION TO BE REGISTERED REGISTERED PER SECURITY (1) OFFERING PRICE (1) FEE (1) Common Stock, par value $.001 per share (2) ............... 8,238,672 1.20 $ 9,886,407 $ 1,060 Common Stock, par value $.0001 per share (3) .............. 300,000 1.20 $ 360,000 $ 39 Common Stock, par value $.001 per share, issuable upon the exercise of options (4) .. 1,296,000 1.20 $ 1,555,200 $ 166 Common Stock, par value $.001 per share, issuable upon the exercise of options (5) .. 400,000 1.20 $ 480,000 $ 51 Common Stock, par value $.001 per share, issuable upon the exercise of warrants (6) ...................... 996,056 1.20 $ 1,195,267 $ 127 Common stock issuable upon the conversion of convertible debentures and accrued interest (7) .......... 915,750 1.20 $ 1,098,900 $ 117 ---------- ----- ------------- -------- TOTAL REGISTRATION FEE ............ 12,146,478 $ 1,560 ========== ========
__________ (1) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457 under the Securities Act of 1933 based on the average of the high and low sale price of the common stock as reported on the Pink Sheets on November 24, 2006. (2) Includes shares of common stock presently outstanding. (3) Includes shares of common stock issuable upon the exercise of options with an exercise price of $0.55 per share expiring on June 20, 2015. (4) Includes shares of common stock issuable upon the exercise of options with an exercise price of $0.70 per share expiring between April 21, 2009 and May 1, 2009. (5) Includes shares of common stock issuable upon the exercise of options with an exercise price of $0.90 per share expiring on August 1, 2009. (6) Includes shares of common stock issuable upon the exercise of common stock purchase warrants with an exercise price of $1.50 per share expiring between June 16, 2007 and October 31, 2007. (7) Includes shares of common stock issuable upon the conversion of $900,000 principal amount of convertible debentures and up to a maximum of $15,750 in the event that the holders convert the then accrued interest which would be no more than for a three month period, based upon a conversion price of $1.00 per share until June 30, 2010. - 3 - To the extent permitted pursuant to Rule 416, this Registration Statement also covers such additional number of common shares as may be issuable as a result of reclassifications, stock splits, stock dividends or similar events of the common stock, options, common stock purchase warrants and convertible debentures listed above. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - 4 - Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This Prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state. Subject to Completion _______, 2006 PROSPECTUS XTRA-GOLD RESOURCES CORP. 12,146,478 SHARES OF COMMON STOCK This prospectus (the "PROSPECTUS") and the registration statement (the "REGISTRATION STATEMENT"), of which it is a part, are being filed with the Securities and Exchange Commission (the "COMMISSION") to satisfy our obligations to the recipients of certain shares of common stock, share purchase warrants (the "WARRANTS"), optionees who have been granted nonqualified stock options ("OPTIONS") and holders of convertible debentures ("CONVERTIBLE DEBENTURES") (collectively, the "SELLING SECURITY HOLDERS") of Xtra-Gold Resources Corp. This Prospectus and the Registration Statement cover the resale: o by certain Selling Security Holders and their transferees, donees or successors, of 8,238,672 shares of our issued and outstanding common stock; o by certain Selling Security Holders and their transferees, donees or successors, of 996,056 shares of common stock issuable upon exercise of the Warrants at an exercise price of $1.50 per share expiring on June 16, 2007, July 31, 2007 and October 31, 2007 respectively; o by certain Selling Security Holders and their transferees, donees or successors, of up to 1,996,000 shares of common stock issuable upon the exercise of the Options (i) at a price of $.55 per share expiring on June 20, 2015; (b) at a price of $.70 per share expiring on April 21, 2009 and May 1, 2009 respectively; and (c) at a price of $0.90 per share expiring on August 1, 2009; and o by certain Selling Security Holders and their transferees, donees or successors, of up to 900,000 shares of common stock issuable upon the conversion of convertible debentures and up to a maximum of 15,750 shares of common stock issuable in the event that the holders convert the then accrued interest which would be no more than for a three month period at a price of $1.00 per share expiring on June 30, 2010. - 5 - We will not receive any proceeds from sales of shares by the Selling Security Holders. Our common stock is quoted "Pink Sheets" quotation system ("PINK SHEETS") maintained by Pink Sheets LLC under the symbol "XTGR". The last reported sales price of our common stock on the Pink Sheets on November 24, 2006 was $1.20. For a description of the plan of distribution of the shares, please see page 91 of this Prospectus. THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 8 OF THIS PROSPECTUS TO READ ABOUT RISKS OF INVESTING IN OUR COMMON STOCK. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is , 2006. - 6 - PROSPECTUS SUMMARY THE COMPANY SUMMARY OF BUSINESS We primarily engage in the exploration, development and mining of gold properties exclusively in the Republic of Ghana ("GHANA"), West Africa. Our interests in our projects are held, by our Ghanaian subsidiaries, through prospecting licences and mining leases granted by the Government of Ghana for licensed or leased areas respectively located within and upon concessions. A concession is a grant of a tract of land made by a government or other controlling authority in exchange for an agreement that the land will be used for a specific purpose. To a much lesser extent, we also plan in the next year or two to engage in the exploration of oil and gas producing properties in Canada and Ghana through two of our wholly-owned subsidiaries, which subsidiaries currently conduct no activity except one subsidiary has filed an application for a petroleum agreement with the Ghana National Petroleum Corporation ("GNPC"). CORPORATE HISTORY Xtra-Gold Resources Corp. ("XTRA-GOLD") was incorporated under the laws of the State of Nevada on September 1, 1998 under the name Silverwing Systems Corporation with an authorized capital consisting of 25,000,000 shares of common stock at a par value of $.001 per share. On August 19, 1999, we changed our name to Advertain On-Line Inc. On June 18, 2001, we changed our name to RetinaPharma International, Inc. ("RETINAPHARMA"). On December 16, 2003, following the acquisition of our wholly-owned subsidiary, Xtra-Gold Resources, Inc., a Florida corporation ("XGRI") on October 31, 2003, we changed our name to Xtra-Gold Resources Corp. and increased the number of shares of common stock we are authorized to issue to 250,000,000 shares effective December 19, 2003. On October 20, 2005, we amended the name of XGRI to Xtra Energy Corp. ("XTRA ENERGY"). On October 20, 2005, we incorporated our wholly-owned subsidiary, Xtra Oil & Gas Ltd. ("XOG"), an Alberta, Canada corporation, and on March 2, 2006, we incorporated our wholly-owned subsidiary, Xtra Oil & Gas (Ghana) Limited ("XOG GHANA"), an Accra, Ghana corporation for the business purpose set forth hereunder. On April 7, 1998, our wholly-owned subsidiary Xtra-Gold Exploration Limited ("XGEL"), a Ghana corporation, was formed. On June 7, 1989, our 90% owned subsidiary, Xtra-Gold Mining Limited ("XG MINING"), a Ghana corporation, was formed. LOCATION Our head office is located at 6 Kersdale Avenue, Toronto, Ontario, Canada, M6M 1C8, and our telephone number there is (416) 653-5151. We maintain technical offices at P.O. Box CT5239, Cantonments, House No. 15, Ade-Coker Road, East Legon, Accra, Ghana and at 430 Westmount Avenue, Unit F, Sudbury, Ontario, P3A 5Z8. References in this Prospectus to "Xtra-Gold", "Company", "we", "us" and "our" are to Xtra-Gold Resources Corp., a Nevada corporation, and our wholly owned subsidiaries, Xtra Energy, a Florida corporation; XOG, an Alberta corporation; XGEL, a Ghana corporation, XOG Ghana, a Ghana corporation and our 90% owned subsidiary, XG Mining, a Ghana corporation. - 7 - OTHER PERTINENT INFORMATION All information in this Prospectus gives effect to a 5:1 forward split of our outstanding common stock on December 19, 2003. Our fiscal year end is December 31. THE OFFERING This Prospectus covers the resale of a total of 12,146,478 shares of our common stock by Selling Security Holders. Of those shares covered by this Prospectus, 8,238,672 shares have been issued and are currently outstanding. The remaining 3,907,806 shares are issuable upon the exercise of Warrants, Options and Convertible Debentures and up to a maximum of 15,750 shares of common stock issuable in the event that the holders convert the then accrued interest (the "ACCRUED INTEREST") which would be no more than for a three month period that may be converted by certain Selling Security Holders. Selling Security Holders may resell their shares from time to time, including through broker-dealers, at prevailing market prices. We will not receive any proceeds from the resale of our shares by the Selling Security Holders. We will pay all of the fees and expenses associated with the registration of the shares covered by this Prospectus. Common Stock: Outstanding Prior to this Offering . 28,088,157 shares Outstanding After this Offering ... 31,995,963 shares, including an aggregate of 3,907,806 shares covered by this Prospectus which are reserved for possible issuance upon the exercise of outstanding Warrants and Options and the conversion of Convertible Debentures and the Accrued Interest. Common Stock Reserved ............. 996,056 shares issuable upon exercise of outstanding Warrants, 1,996,000 shares issuable upon exercise of outstanding Options and up to 915,750 shares issuable on conversion of the outstanding principal owing under the Convertible Debentures and the Accrued Interest (the resale of which is covered by this Prospectus). The Warrants are exercisable at $1.50 per share, the Options are exercisable at $.55 per share, $.70 per share and $.90 respectively and the Convertible Debentures and the Accrued Interest are convertible into shares at $1.00 per share. SELECTED FINANCIAL DATA The selected financial data set forth hereunder has been derived from our audited consolidated financial statements for the years ended December 31, 2005 and 2004 and our unaudited consolidated financial statements for the nine months ended September 30, 2006 and should be read in conjunction with the consolidated financial statements included elsewhere in this Prospectus. - 8 - BALANCE SHEET DATA SEPTEMBER 30 DECEMBER 31 2006 2005 2004 - -------------------------------------------------------------------------------- Working capital equity ............. $ 3,426,518 $ 2,745,926 $ 981,740 Current assets ..................... $ 3,513,872 $ 3,138,250 $ 1,089,646 Total assets ....................... $ 12,352,310 $ 11,757,304 $ 9,613.617 Current liabilities ................ $ 87,354 $ 392,324 $ 107,906 Total liabilities .................. $ 1,034,494 $ 1,336,157 $ 147,771 Stockholders' equity ............... $ 11,317,816 $ 10,421,147 $ 9,465,846 STATEMENT OF OPERATIONS DATA NINE MONTHS ENDED SEPTEMBER 30 YEARS ENDED DECEMBER 31 2006 2005 2005 2004 --------------------------------------------------------- Revenues ............ $ - $ - $ - $ - Cost of revenues .... $ - $ - $ - $ - Operating expenses .. $ 678,195 $ 208,836 $ 416,639 $ 215,362 Net (loss) income ... $ (1,375,973) $ 197,803 $(272,572) $(398,533) Net (loss) per share $ (0.05) $ 0.00 $ (0.01) $ (0.01) RISK FACTORS AN INVESTMENT IN THE SECURITIES OFFERED HEREBY IS SPECULATIVE IN NATURE AND INVOLVES A HIGH DEGREE OF RISK. THE FOLLOWING FACTORS ARE BELIEVED BY MANAGEMENT OF OUR COMPANY ("MANAGEMENT") TO BE THE MATERIAL RISKS THAT SHOULD BE CAREFULLY CONSIDERED BY INVESTORS BEFORE PURCHASING OUR SHARES. SALES OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK INTO THE PUBLIC MARKET BY THE SELLING SECURITY HOLDERS MAY RESULT IN SIGNIFICANT DOWNWARD PRESSURE ON THE PRICE OF OUR COMMON STOCK AND COULD AFFECT THE ABILITY OF OUR STOCKHOLDERS TO REALIZE THE CURRENT TRADING PRICE OF OUR COMMON STOCK. Sales of a substantial number of shares of our common stock in the public market could cause a reduction in the market price of our common stock. We had 28,088,157 shares of our common stock issued and outstanding as at November 27, 2006. Upon this Registration Statement being declared effective, the Selling Security Holders will be able to resell up to 12,146,478 shares of our common stock. Further, to the extent any of the Selling Security Holders exercise any of the Warrants or Options or convert any portion of the principal owing under the Convertible Debentures into shares, and then resell the shares of common stock issued to them upon such exercise or conversion (subject to applicable securities law restrictions), the price of our common stock may decrease due to the additional shares of common stock in the market. - 9 - As of November 27, 2006, there were 15,083,598 outstanding shares of our common stock that are restricted securities as that term is defined in Rule 144 under the Securities Act of 1933, as amended (the "SECURITIES ACT"). Albeit the Securities Act and Rule 144 place certain prohibitions on the sale of restricted securities, restricted securities may be sold into the public market under certain conditions. As of November 27, 2006, there is an aggregate of (i) 996,056 shares of common stock issuable upon the exercise of Warrants; (ii) 1,996,000 shares of common stock issuable upon the exercise of Options; (iii) 900,000 shares issuable upon the conversion under the Convertible Debentures; and (iv) 15,750 shares issuable upon the conversion of the Accrued Interest. As a result of the foregoing, a substantial number of our shares of common stock may be issued and may be available for immediate resale, which could have an adverse effect on the price of our common stock. As a result of any decrease in price of our common stock, purchasers who acquire shares from the Selling Security Holders may lose some or all of their investment. Any significant downward pressure on the price of our common stock as the Selling Security Holders sell their shares of our common stock could encourage short sales by the Selling Security Holders or others. Any such short sales could place further downward pressure on the price of our common stock. OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM HAS RAISED DOUBT OVER OUR CONTINUED EXISTENCE AS A GOING CONCERN. We have incurred substantial operating and net losses, as well as negative operating cash flow, since our inception. As a result, we continued to have significant working capital and stockholders' deficits including a substantial accumulated deficit of $673,805 and $401,233, at December 31, 2005 and 2004, respectively, and $2,049,778 at September 30, 2006. In recognition of such, our independent registered public accounting firm has included an explanatory paragraph in their report on our consolidated financial statements for the fiscal years ended December 31, 2005 and 2004, which expresses substantial doubt regarding our ability to continue as a going concern. OUR PROFITABILITY DEPENDS PRIMARILY ON THE SUCCESS OF OUR GOLD PROJECTS IN GHANA. We are focused primarily on the development and production of our projects located at our Kwabeng concession (the "KWABENG PROJECT") and our Pameng concession (the "PAMENG PROJECT") and the exploration of our project located at our Banso and Muoso concessions (the "BANSO AND MUOSO PROJECT"), our project located at our Apapam concession (the "APAPAM PROJECT") and our project located at our Edum Banso concession (the "EDUM BANSO PROJECT") (collectively, our "PROJECTS"). Accordingly, our profitability will depend entirely upon the successful development and operation of our Projects. We are currently incurring losses and we expect to continue to incur losses until gold production begins at our Kwabeng and Pameng Projects. We cannot assure you that we will achieve production at any of Projects or that we will ever be profitable even if production is achieved. The failure to successfully develop any of our other Projects would have a material adverse effect on our financial condition, results of operations and cash flows. Even if we are successful in achieving production, an interruption in operations at any of our Projects that prevent us from extracting ore for any reason would have a material adverse impact on our business and financial condition. - 10 - WE WILL NEED SUBSTANTIAL ADDITIONAL FINANCING TO COMPLETE THE DEVELOPMENT AND TO COMMENCE PRODUCTION AT OUR KWABENG AND PAMENG PROJECTS. We estimate that the initial capital cost for the full development of our Kwabeng and Pameng Projects will be approximately a minimum of $3,000,000 and a maximum of $6,000,000. A maximum of $6,000,000 will be expended in the event we decide to purchase an earthmoving and ancillary equipment fleet or a minimum expenditure of approximately $3,000,000 will be spent to engage the services of a contract earthmoving company, in order to carry out the majority of the mining and earthmoving required. The capital cost includes working capital, land purchases and contingencies, but excludes reclamation bonding requirements, inflation, interest and other financing costs. Those estimates could change after the detailed engineering process has been completed. We are exploring various financing alternatives for the balance of the projected costs and expenses. We cannot assure you that we will be able to obtain the necessary financing for our Kwabeng and Pameng Projects on favorable terms or at all. Additionally, if the actual costs to complete the development of our Kwabeng and Pameng Projects are significantly higher than we expect, we may not have sufficient funds to cover these costs and we may not be able to obtain other sources of financing. The failure to obtain all necessary financing would prevent us from achieving production at our Kwabeng and Pameng Projects and impede our ability to become profitable. We will also need substantial additional financing to complete the exploration programs at our Banso and Muoso, Apapam and Edum Banso Projects. We plan to have the exploration programs for these Projects carried out by CME & Company ("CME"), an independent geological firm in Ghana, who we previously engaged to conduct exploration programs at our Banso and Muoso Project in 2004 and 2005, however, we may decide in the future to engage another geological firm. Our exploration costs and the exploration programs and the exploration contracts entered into or to be entered into in connection therewith for our Banso and Muoso, Apapam and Edum Banso Projects are within the control of our Company. We are entitled to terminate the exploration programs at any time without liability. Should we determine that the exploration costs may exceed the allowable budget for each exploration program, we can, among other things, reduce the number of samples to be taken to ensure there are no cost overruns. During each stage of exploration should we not encounter positive results, we can abandon the exploration program at any time if deemed to be in the best interest of our Company. We estimate that the costs for the 2006 Phase II exploration program at our Banso and Muoso Project are approximately $200,000, which includes additional reconnaissance soil sampling as well as more detailed soil sampling, trenching and pitting. We have entered into an exploration contract with CME for the 2006 Phase II exploration program which commenced in September 2006. We anticipate that this program will be completed in November 2006. We entered into a contract with CME to carry out a Phase I mineral exploration program at our Apapam Project consisting of stream sediment sampling, exploration grid establishment, soil sampling, geological prospecting and bedrock sampling. This program was completed in late September 2006 at an approximate cost of $100,000. We are currently awaiting results of this program. We estimate that the costs for the exploration program at our Edum Banso Project are approximately $155,000 which includes soil sampling, trenching, pitting and an Induced Polarization ("IP") (geophysical) survey. We have not yet negotiated a contract for the exploration program at our Edum Banso Project as our immediate priority is with the Banso and Muoso Project, however, we expect to negotiate and approve a contract with CME in the near future with exploration field work being conducted shortly thereafter. - 11 - MOST OF OUR MINERAL PROJECTS ARE IN THE EXPLORATION STAGE AND MAY NOT RESULT IN THE DISCOVERY OF COMMERCIAL BODIES OF MINERALIZATION. Except for our Kwabeng and Pameng Projects, all of our project interests are in the exploration stage only and have no ongoing mining operations. Mineral exploration involves a high degree of risk and few properties which are explored are developed into producing mines. The exploration efforts on our Banso and Muoso and Edum Banso Projects may not result in the discovery of commercial bodies of mineralization which would require us to seek other exploration projects or cease operations. While we consider our Apapam Project to be an exploration project, there are historical proven placer gold reserves of 58,000 ounces on this concession. AS WE HAVE AN ACCUMULATED DEFICIT AND WE HAVE NOT REPORTED REVENUES IN OUR LAST TWO FISCAL YEARS, OR FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006, THERE IS NO ASSURANCE THAT WE WILL BE ABLE TO GENERATE REVENUES OR ACHIEVE THE FINANCING NECESSARY TO ENABLE US TO PROCEED WITH OUR EXPLORATION, DEVELOPMENT AND MINING ACTIVITIES. We had a working capital equity of $2,745,926 as of December 31, 2005 and $3,426,518 as of September 30, 2006. We did not report revenues in our last two fiscal years ended December 31, 2005 and December 31, 2004 or from the beginning of our development stage on January 1, 2003 to September 30, 2006. Our plan of operations calls for substantial expenditures of approximately a maximum of $6,755,000 or a minimum of $3,755,000 to be incurred by us over the next 12 months in order to continue mining and development activities at our Kwabeng and Pameng Projects and to pursue exploration activities at our Banso and Muoso, Apapam and Edum Banso Projects. While we will apply future proceeds from anticipated gold sales to cover these expenditures, we anticipate that proceeds from gold sales over the next 12 months will not exceed our projected expenditures during this period with the result that we will require substantial financing in order for us to pursue our plan of operations. If we do not obtain the necessary financing, then we will not be able to proceed with our planned exploration, development and mining activities and our financial condition, business prospects and results of operations will be materially adversely affected. THE DEVELOPMENT OF OUR KWABENG AND PAMENG PROJECTS MAY BE DELAYED. We may experience delays in developing our Kwabeng and Pameng Projects. These delays may affect the timing of development of these projects, and could increase their development costs, affect their economic viability, or prevent us from completing their development. The timing of development of our Kwabeng and Pameng Projects depends on many factors, some of which are beyond our control, including the: o timely issuance of permits; and o acquisition of surface land and easement rights required to develop and operate the projects, particularly if we are required to acquire surface land through expropriation in connection with our mining concessions; Adverse political and environmental developments in Ghana could also delay or preclude the issuance of permits or the expropriation of land necessary to develop our Projects. In addition, factors such as fluctuations in the market price of gold and in foreign exchange or interest rates, as well as international political unrest, could adversely affect our ability to obtain adequate financing to fund the development of our Projects. - 12 - WE MAY NOT BE ABLE TO OBTAIN OR RENEW ALL OF THE PERMITS NECESSARY TO DEVELOP AND OPERATE OUR PROJECTS. Pursuant to Ghanaian law, we must obtain various approvals, licences or permits in connection with the operation and development of our Projects. While we have secured several key approvals, permits and licences including prospecting licences and mining leases, we must obtain a variety of approvals, licences or permits in connection with environmental protection and the use of water resources. In addition to requiring permits for the development of our mining concessions located at each of our Kwabeng and Pameng Projects, we may need to obtain other permits and approvals during the life of these projects. Obtaining and renewing the necessary governmental permits and approvals can be a complex and time-consuming process. Although it is understood that that the issuance of all of the permits and approvals will not be unreasonably withheld, we cannot be assured that all the permits will be granted to us and in a timely manner or whether we will be able to fulfill all the requirements imposed pursuant to these permits and licences. The failure to obtain the necessary permits or licences or meet their requirements could delay development, increase our costs or, in some cases, require us to discontinue mining operations. OUR BUSINESS MAY BE NEGATIVELY AFFECTED BY INACCURATE ESTIMATES OF OUR ORE RESERVES. The ore reserve figures for the Kwabeng and Pameng Projects are estimates, and we cannot assure you that we will recover the indicated levels of gold. Reserve estimates are imprecise and depend on geological analysis based partly on statistical inferences drawn from drilling and sample analysis, which may prove unreliable, and assumptions about operating costs and gold prices. Valid estimates may change significantly when new information becomes available. The reserve estimates for our Kwabeng and Pameng Projects are based as of March 2006 on, among other things, an assumed long-term gold price of $400 per ounce, a cut-off grade of 0.65 g/bcm and projected average cash operating costs of $271 per ounce of gold. These assumptions may not be accurate and increases in production costs, fluctuations in the market price of gold or changes in grade estimates may result in changes to our reserve estimates. As we have not yet commenced production at our Kwabeng and Pameng Projects, there is additional risk that we may need to reduce or adjust the reserves and the extent of mineralization (including grade estimates) based upon actual production experience. A material reduction in the estimates of our reserves, or in our ability to extract these reserves, could require material write downs in investment in our Kwabeng and Pameng Projects and increase amortization, reclamation and closure costs. THE GOVERNMENT OF GHANA HAS THE RIGHT TO PARTICIPATE IN THE OWNERSHIP AND CONTROL OF CERTAIN SUBSIDIARIES, AND THEREBY DILUTE THE INTERESTS OF OUR PUBLIC STOCKHOLDERS. The Government of Ghana currently has a 10% free carried interest in XG Mining, one of our Ghanaian subsidiaries that holds two mining leases covering our Kwabeng and Pameng concessions. The Government of Ghana also has: (a) the right to acquire up to an additional 20% equity interest in XG Mining for a price to be determined by agreement or arbitration; (b) the right to acquire a special share or golden share (see "Ghanaian Law - Ghanaian Ownership and Special Rights") in XG Mining at any time for no consideration or such consideration as the Government of Ghana and XG Mining might agree; and (c) a preemptive right to purchase all gold and other minerals produced by XG Mining. We cannot assure you that the Government of Ghana would not seek to exercise one or more of these rights, which would reduce our equity interest in XG Mining and, therefore, the value of our shares. However, we are aware of only one occasion where the Government of Ghana has ever exercised the right referred to in item (a) above. - 13 - UNEXPECTED AND ADVERSE CHANGES IN GHANA OR OTHER FOREIGN COUNTRIES COULD RESULT IN PROJECT DISRUPTIONS, INCREASED COSTS AND POTENTIAL LOSSES. Increased international political instability, evidenced by the threat or occurrence of terrorist attacks, such as the September 11, 2001 attacks in the United States and elsewhere, heightened national security measures, uncertainties relating to the ongoing military action in Iraq and Afghanistan, strained international relations with North Korea and other countries, and conflicts in the Middle East, Asia and elsewhere may halt or hinder our ability to develop our Projects and to conduct exploration activities on future mineral projects in which we may acquire an interest. This increased instability may, for example, negatively impact the reliability and cost of transportation, negatively affect the desire of our employees to travel, adversely affect our ability to obtain adequate insurance at reasonable rates or require us to take extra security precautions. In addition, this international political instability has had, and may continue to have, negative effects on financial markets, which could adversely affect our ability to finance the development of our Projects. ILLEGAL MINERS ON OUR KWABENG AND PAMENG PROJECTS, OR ANY OTHER FUTURE PROJECTS, COULD ADVERSELY AFFECT OUR TITLE TO OUR PROJECTS AND SUBJECT US TO LIABILITY CLAIMS WHICH COULD HURT OUR FINANCIAL CONDITION. We are not aware of illicit mining on our minable deposits at our Kwabeng and Pameng Projects, however we have implemented security measures to protect the integrity of these Projects as we could experience incidents of artisanal miners illegally working at our Kwabeng and Pameng Projects. While we are sympathetic to the economic needs of those engaged in this activity, illegal mining typically results in uncontrolled environmental damage and is often conducted in an unsafe manner. In addition, the work performed by any illegal miners could cause environmental or other damage to our Kwabeng and Pameng Projects, or personal injury or death to others for which we could potentially be held responsible. Extensive illegal mining could result in surface depletion of mineral deposits, potentially making the future mining of such deposits uneconomic. While we have sought to and been successful in discouraging this activity, both by dialogue and by establishing a security presence, we may be unable to prevent the future presence of illegal miners at our Kwabeng and Pameng Projects. MINING ACTIVITIES ARE INHERENTLY DANGEROUS AND SUBJECT TO CONDITIONS OR EVENTS BEYOND OUR CONTROL, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS. Mining activities involve various types of risks and hazards, including: o environmental hazards; o industrial accidents; o metallurgical and other processing problems; o flooding; o fires; o gold losses; and o periodic interruptions due to inclement or hazardous weather conditions. These risks could result in damage to, or destruction of, mineral properties, production facilities or other properties, personal injury, environmental damage, delays in mining, increased production costs, monetary losses and possible legal liability. We may not be able to obtain insurance to cover these risks at economically feasible premiums. Insurance against certain environmental risks, including potential liability for pollution or other hazards as a result of the disposal of waste products occurring from production, is not generally available to us or to other companies within the mining industry. We may - 14 - suffer a material adverse effect on our business if we incur losses related to any significant events that are not covered by our insurance policies. OUR PRIMARY OPERATIONS ARE SUBJECT TO THE RISKS OF DOING BUSINESS IN FOREIGN COUNTRIES. As our exploration and mine development activities are located in Ghana, we are subject to risks associated with conducting business in a foreign country. These risks include: o uncertain political and economic environments; o limits on repatriation of earnings; o war, terrorism and civil disturbances; o expropriation or nationalization; o high rates of inflation; o illegal mining activities; o submitting to the jurisdiction of a foreign court or panel or enforcing the judgment of a foreign court or arbitration panel against a sovereign nation within its own territory; and o forced modification of existing contracts and unenforceability of contractual rights. Changes in mining or investment policies or shifts in the prevailing political climate in any of the countries in which we conduct exploration and development activities, or changes in U.S. regulations relating to foreign trade, investment and taxation, could adversely affect our business. We believe that we are in substantial compliance with current laws and regulations in Ghana and elsewhere. However, these laws and regulations are subject to frequent change and reinterpretation. Due to the substantial increase in mining development in Ghana in recent years, the Government of Ghana has been reviewing the adequacy of reclamation bonds and guarantees throughout the country and in some cases has requested higher levels of bonding than previously had been required. In the event we are required to comply with the application process to commence mining operations, we may have insufficient capital for the required bond. Moreover, once the bond is in place, there also can be no assurance that our bond requirement would not increase. Amendments to current laws and regulations governing operations and activities of mining companies or more stringent implementation or interpretation of these laws and regulations could have a material adverse impact on us, cause a reduction in levels of production and delay or prevent the development or expansion of our Projects. Any of these actions would delay or hinder revenue production and, therefore, adversely affect our results of operations. OUR ACTIVITIES ARE SUBJECT TO ENVIRONMENTAL LAWS AND REGULATIONS THAT MAY INCREASE OUR COSTS OF DOING BUSINESS AND MAY RESTRICT OUR OPERATIONS. All of our exploration, development and production activities in Ghana are subject to regulation by governmental agencies under various environmental laws. To the extent we conduct exploration activities or undertake new mining activities in other foreign countries, we will also be subject to environmental laws and regulations in those jurisdictions. These laws address emissions into the air, discharges into water, management of waste, management of hazardous substances, protection of natural resources, antiquities and endangered species, and reclamation of lands disturbed by mining operations. Environmental legislation in many countries is evolving and the trend has been towards stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and increasing responsibility for companies and their officers, directors and employees. Compliance with environmental laws and regulations may require significant capital outlays and may cause material changes or delays in our intended activities. We cannot assure you that - 15 - future changes in environmental regulations will not adversely affect our business, and it is possible that future changes in these laws or regulations could have a significant adverse impact on some portion of our business, causing us to re-evaluate those activities at that time. OUR ACTIVITIES ARE SUBJECT TO COMPLEX LAWS, SIGNIFICANT GOVERNMENT REGULATIONS AND ACCOUNTING STANDARDS THAT MAY DELAY OR PREVENT OPERATIONS AT OUR PROJECTS AND CAN ADVERSELY AFFECT OUR OPERATING AND DEVELOPMENT COSTS, THE TIMING OF OUR OPERATIONS, OUR ABILITY TO OPERATE AND OUR FINANCIAL RESULTS. Our business, mining operations and exploration and development activities are subject to extensive Ghanaian, United States, Canadian and other foreign, federal, state, provincial, territorial and local laws and regulations governing various matters as set forth hereunder and also exploration, development, production, exports, taxes, labor standards, waste disposal, protection of the environment, reclamation, historic and cultural resource preservation, mine safety and occupational health, toxic substances, reporting and other matters, as well as accounting standards. Compliance with these laws, regulations and standards or the imposition of new such requirements could adversely affect our operating and development costs, the timing of our operations, our ability to operate and our financial results. o environmental protection; o management and use of toxic substances; o management of natural resources; o exploration, development of mines, production and post-closure reclamation; o export and import controls and restrictions; o price controls; o taxation; o labor standards and occupational health and safety, including mine safety; o historic and cultural preservation; and o general accepted accounting principles. The costs associated with compliance with these laws and regulations are substantial and possible future laws and regulations, or more stringent enforcement of current laws and regulations by governmental authorities, could cause additional expense, capital expenditures, restrictions on or suspensions of our operations and delays in the development of our Projects. These laws and regulations may allow governmental authorities and private parties to bring lawsuits based upon damages to property and injury to persons resulting from the environmental, health and safety impacts of our past and current operations, and could lead to the imposition of substantial fines, penalties or other civil or criminal sanctions. In addition, our failure to comply strictly with applicable laws, regulations and local practices relating to permitting applications or reporting requirements could result in loss, reduction or expropriation of entitlements, or the imposition of additional local or foreign parties as joint venture partners. Any such loss, reduction, expropriation or imposition of partners could have a materially adverse effect on our operations or business. OUR MINERAL TITLES AND RELATED LAND SURFACE RIGHTS MAY BE CHALLENGED. Our policy is to seek to confirm the validity of our rights to title, or contract rights with respect to, each mineral property in which we have a material interest. However, we cannot guarantee that title to our properties will not be challenged. Title insurance generally is not available, and our ability to ensure that we have obtained secure claim to individual mineral properties or mining concessions and related surface rights may be severely constrained. In addition, we may be unable to operate at our Projects as permitted or to enforce our rights with respect to our Projects. - 16 - THE MINING INDUSTRY IS AN INTENSELY COMPETITIVE INDUSTRY, AND IF WE ARE UNABLE TO EFFECTIVELY COMPETE WITH OTHER MINING COMPANIES WE MAY NOT BECOME PROFITABLE AND INVESTORS WILL LOSE THEIR INVESTMENT IN US. Mines have limited lives and, as a result, we must continually seek to replace and expand our reserves through the acquisition of new mineral projects. Significant competition exists for the acquisition of properties producing or capable of producing gold. We may be at a competitive disadvantage in acquiring additional mining properties because we must compete with other individuals and companies, many of which may have greater financial resources and larger technical staffs than we have. As a result of this competition, we may be unable to acquire attractive mining properties on acceptable terms. IF COSTS OF EXPLORATION AND OR DEVELOPMENT, AS APPLICABLE, OF OUR PROJECTS ARE HIGHER THAN ANTICIPATED, THEN OUR PROFITABILITY COULD BE ADVERSELY AFFECTED. We are proceeding with the development of our Kwabeng and Pameng Projects on the basis of estimated capital and operating costs. Should capital and operating costs be greater than anticipated, in particular, with respect to fuel, electricity, labor and transportation costs, then the profitability of production at our Kwabeng and Pameng Projects could be adversely affected. This reduced profitability will cause us to have less funds for other expenses, such as (i) administrative and overhead expenses for these Projects; and (ii) further development of our Kwabeng and Pameng Projects. We are currently conducting a 2006 Phase II exploration program at our Banso and Muoso Project on the basis of results from our prior programs and estimated exploration costs. We have recently completed a Phase I exploration program at our Apapam Project and may proceed with a further exploration program based on the results from this program which are currently unavailable. We have not yet approved the proposed exploration program for our Edum Banso Project. We currently estimate the aggregate exploration programs for these Projects will cost approximately $755,000. Further exploration programs at our Projects will depend on the results of prior programs. Exploration costs can be controlled by our Company. For example, budgets are submitted for consideration, approved, then established and followed. While cost overruns can occur, they are not usually significant. As our exploration programs are conducted in stages, exploration costs for subsequent stages can be reduced if warranted by our Company. However, should our exploration costs be greater than anticipated and we are unable to reduce exploration costs for subsequent stages in our exploration programs, then we will have less funds for other expenses. WE DEPEND ON THE CONTINUED SERVICES OF OUR VICE-PRESIDENT, EXPLORATION, SENIOR PROJECT MANAGER, EXPLORATION, MANAGER, LODE GOLD EXPLORATION AND PROJECT MANAGER, OPERATIONS WHOSE EXPERTISE IS CRITICAL TO OUR SUCCESS, AND WHO WE MAY BE UNABLE TO REPLACE. Our future success depends upon the continued services of our geological team, comprised of our Vice-President, Exploration, our Senior Project Manager, Exploration, our Manager, Lode Gold Exploration and our Project Manager, Operations. The mining engineering and exploration expertise of these individuals with respect to the geological knowledge and experience that is fundamental to our business operations is unique and if we were to lose their services, we may encounter difficulty in replacing them, which could have a material adverse effect on our business, financial condition and results of operations. - 17 - WE MAY EXPERIENCE DIFFICULTY IN ENGAGING THE SERVICES OF QUALIFIED PERSONNEL IN CONNECTION WITH OUR TECHNICAL OPERATIONS AT OUR KWABENG AND PAMENG PROJECTS. Although we have engaged the services of an experienced and qualified mining consultant as our Project Manager to plan and oversee our technical operations at our Kwabeng and Pameng Projects, the term of his contract will expire in February 2007 and we may not be successful in negotiating a renewal of his contract and will be required to find a suitable replacement. We will also need to engage additional sought-after professionals to operate our Kwabeng and Pameng Projects according to plan, including an environmental manager, a geological manager and a processing manager. Our inability to retain the services of qualified persons for these positions in a timely manner could impede the commencement of gold production at our Kwabeng and Pameng Projects which would have a material adverse effect on our ability to conduct our business. WE HAVE NOT VOLUNTARILY IMPLEMENTED VARIOUS CORPORATE GOVERNANCE MEASURES, IN THE ABSENCE OF WHICH, STOCKHOLDERS MAY HAVE REDUCED PROTECTIONS AGAINST INTERESTED DIRECTOR TRANSACTIONS, CONFLICTS OF INTEREST AND OTHER MATTERS. Recent Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE or The NASDAQ Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges and NASDAQ are those that address board of directors' independence, audit committee oversight, and the adoption of a code of ethics. Because our stock is not listed on an exchange or quoted on NASDAQ, we are not required to adopt these corporate governance standards. While our board of directors has adopted a Code of Ethics, our Board has not established Audit and Compensation Committees and we have not adopted all of the corporate governance measures which we might otherwise have been required to adopt if our securities were listed on a national securities exchange or NASDAQ. It is possible that if we were to adopt some or all of the corporate governance measures, stockholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. Prospective investors should bear in mind our current lack of corporate governance measures in formulating their investment decisions. IN THE EVENT THAT WE ISSUE ADDITIONAL SHARES UPON THE EXERCISE OF OPTIONS AND WARRANTS AND THE CONVERSION OF CONVERTIBLE DEBENTURES, INCLUDING SHARES ISSUABLE UPON EXERCISE OF OPTIONS AND WARRANTS AND THE CONVERSION OF CONVERTIBLE DEBENTURES COVERED BY THIS PROSPECTUS, THE MARKET PRICE FOR OUR SHARES MAY BE ADVERSELY AFFECTED. We have granted 1,996,000 Options and issued Warrants to purchase an aggregate of 996,056 shares of our common stock and issued Convertible Debentures which entitles the holders to convert the unpaid principal for the issuance of up to 900,000 shares and up to 15,750 shares for the Accrued Interest, all of which are covered by this Prospectus. An aggregate of 300,000 Options are exercisable at a price of $.55 per share, an aggregate of 1,296,000 Options are exercisable at a price of $.70 per share and an aggregate of 400,000 Options are exercisable at a price of $.90 per share, an aggregate of 996,056 Warrants are exercisable at $1.50 per share and the outstanding principal owing under the Convertible Debentures and the Accrued Interest can be converted at $1.00 per share. To the extent that Options and Warrants are exercised or the Convertible Debentures and the Accrued Interest are converted, the shares - 18 - that are issued may result in an oversupply of shares and an undersupply of purchasers. The existence of Options and Warrants that are exercisable and Convertible Debentures and Accrued Interest that can be converted at below market may have a depressive effect on the market price for our common stock. NO ASSURANCE OF LIQUIDITY. There is currently only a limited public market for our Common Stock and there can be no assurance that a trading market will develop further or be maintained in the future. Such limited public market may affect the stock price of our Common Stock and may lead to potential loss of an investor's interests. "PENNY STOCK" RULE LIMITATIONS. The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exemptions. Such exemptions include an equity security listed on a national securities exchange or quoted on NASDAQ and an equity security issued by an issuer that has net tangible assets of at least $2,000,000, if such issuer has been in continuous operation for more than three (3) years. Unless such an exemption is available, the regulations require the delivery of a disclosure document to the investor explaining the penny stock market and the risks associated therewith prior to any transaction involving a penny stock. In addition, as long as the common stock is not listed on a national securities exchange or quoted on NASDAQ or at any time that the company has less that $2,000,000 in net tangible assets, trading in the common stock is covered by Rule 15g-9 under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), for non-NASDAQ and non-exchange listed securities. Under that rule, broker-dealers who recommend such securities to persons other than established customers and accredited investors must make a special written suitability determination for the purchaser and receive the purchaser's written agreement to a transaction prior to sale. Securities are exempt from this rule if the market price is at least $5.00 per share. To the extent that our Company does not meet the exemptions under the Penny Stock Rule, there will be reduced liquidity in the market. OUR COMMON STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE, WHICH COULD CAUSE THE VALUE OF YOUR INVESTMENT TO DECLINE. The market price of our Common Stock may be highly volatile. Investors may not be able to resell their shares of our Common Stock following periods of volatility because of the market's adverse reaction to volatility. We cannot assure you that our Common Stock will trade at the same levels of stocks in our industry or that our industry stocks in general will sustain their current market prices. Factors that could cause such volatility may include, among other things: o actual or anticipated fluctuations in our quarterly operating results; o large purchases or sales of our Common Stock; o changes in financial estimates by securities analysts; o investor perception of our business prospects; o conditions or trends in the mining industry; o changes in the market valuations of other industry-related companies; and o worldwide economic and financial conditions. - 19 - THIS PROSPECTUS PERMITS SELLING SECURITY HOLDERS TO RESELL THEIR SHARES. IF THEY DO SO, THE MARKET PRICE FOR OUR SHARES MAY FALL AND PURCHASERS OF OUR SHARES MAY BE UNABLE TO RESELL THEM. This Prospectus includes 12,146,478 shares being offered by existing stockholders, including 3,907,806 shares issuable upon the exercise of (i) 996,056 Warrants; (ii) 1,996,000 Options; (iii) the conversion of the Convertible Debentures for up to 900,000 shares; and (iv) the conversion of the Accrued Interest for up to 15,750 shares. To the extent that these shares are sold into the market for our shares, there may be an oversupply of shares and an undersupply of purchasers. In the event of this occurrence, the market price for our shares may decline significantly and investors may be unable to sell their shares at a profit, or at all. The existence of Warrants and Options that are exercisable and Convertible Debentures and Accrued Interest which may be converted at below market may have a depressive effect on the market price for our shares. In the event that the Warrants and Options are exercised and the Convertible Debentures and the Accrued Interest are converted at a price per share that is below the market price for our shares, the issuance of shares upon exercise may be dilutive to existing stockholders. ADDITIONAL ISSUANCES OF EQUITY SECURITIES MAY RESULT IN DILUTION TO OUR EXISTING STOCKHOLDERS. Our Articles authorize the issuance of 250,000,000 shares of common stock. Our Board has the authority to issue additional shares of our capital stock to provide additional financing in the future and the issuance of any such shares may result in a reduction of the book value or market price of the outstanding shares of our common stock. If we do issue any such additional shares, such issuance will also cause a reduction in the proportionate ownership and voting power of all other stockholders. As a result of such dilution, if you acquire shares of our common stock from the Selling Security Holders, your proportionate ownership interest and voting power will be decreased accordingly. Further, any such issuance could result in a change of control. ALL OF OUR DIRECTORS AND OFFICERS RESIDE OUTSIDE THE UNITED STATES, WHICH MAY MAKE IT DIFFICULT FOR INVESTORS TO ENFORCE WITHIN THE UNITED STATES ANY JUDGMENTS OBTAINED AGAINST US OR ANY OF OUR DIRECTORS OR OFFICERS. All of our directors and officers are residents of countries other than the United States and all or a substantial portion of such persons' assets are located outside the United States. As a result, it may be difficult for investors to effect service of process on our directors or officers, or enforce within the United States any judgments obtained against us or our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. Consequently, you may be effectively prevented from pursuing remedies under U.S. federal securities laws against them. The foregoing risks also apply to those experts identified in this Prospectus that are not residents of the United States. NEVADA LAW AND OUR ARTICLES OF INCORPORATION MAY PROTECT OUR DIRECTORS FROM CERTAIN TYPES OF LAWSUITS. Nevada law provides that our officers and directors will not be liable to us or to our stockholders for monetary damages for all but certain types of conduct as officers and directors. Our By-laws permit us broad indemnification powers to all persons against all damages incurred in connection with our business to the fullest extent provided or allowed by law. The exculpation provisions may have the effect of preventing stockholders from recovering damages against our officers and directors caused by their negligence, poor judgment or other circumstances. The indemnification provisions may require us to use our limited assets to defend our officers and directors against claims, including claims arising out of their negligence, poor judgment, or other circumstances. - 20 - WE CANNOT PREDICT WHETHER WE WILL SUCCESSFULLY EFFECTUATE OUR CURRENT BUSINESS PLAN. EACH PROSPECTIVE PURCHASER IS ENCOURAGED TO CAREFULLY ANALYZE THE RISKS AND MERITS OF AN INVESTMENT IN THE SHARES AND SHOULD TAKE INTO CONSIDERATION WHEN MAKING SUCH ANALYSIS, AMONG OTHERS, THE RISK FACTORS DISCUSSED ABOVE. USE OF PROCEEDS We will not receive any proceeds upon the sale of shares of our common stock offered by the Selling Security Holders under this Prospectus. Currently covered by this Prospectus are 289,056 Warrants having an expiry date of June 16, 2007, 566,000 Warrants having an expiry date of July 31, 2007 and 141,000 Warrants having an expiry date of October 31, 2007 which, if exercised, the maximum we would receive are gross proceeds of approximately $1,494,084. There are also Options covered by this Prospectus which, if exercised, the maximum we would receive are gross proceeds of approximately $1,432,200. There are Convertible Debentures and Accrued Interest covered by this Prospectus which, if converted, would reduce our debt by approximately $915,750. The proceeds, if any, that we receive from the exercise of Warrants and Options will be used for working capital primarily in support of our growing business in the gold industry and secondly in support of our future business in the oil and gas industry. The actual allocation of proceeds realized from the exercise of these securities will depend upon the amount and timing of such exercises, our operating revenues and cash position at such time and our working capital requirements. There can be no assurances that any of the outstanding warrants will be exercised. MARKET FOR COMMON STOCK AND DIVIDEND POLICY QUOTATIONS Bid and ask prices for our common stock are quoted from broker dealers on the Pink Sheets operated by Pink Sheets LLC under the symbol "XTGR". The following table sets forth the high and low bid prices for our common stock on the Pink Sheets since commencement. The quotations reflect inter-dealer prices and do not include mark-ups or mark-downs or commissions and do not represent actual transactions. There is limited trading for our shares and the quotation of our shares on the Pink Sheets does not indicate that our shares can be bought or sold at the prices set forth. MARKET INFORMATION PERIOD HIGH BID LOW BID July 1 to September 30, 2006 ............................. $ 1.30 $ 0.90 April 1, 2006 through June 30, 2006 ...................... $ 1.28 $ 0.96 January 1, 2006 through March 31, 2006 ................... $ 1.25 $ 0.94 October 1, 2005 through December 31, 2005 ................ $ 0.96 $ 0.84 July 1, 2005 through September 30, 2005 .................. $ 0.84 $ 0.70 April 1, 2005 through June 30, 2005 ...................... $ 0.70 $ 0.65 January 1, 2005 through March 31, 2005 ................... $ 0.69 $ 0.60 October 1, 2004 through December 31, 2004 ................ $ 0.63 $ 0.58 July 1, 2004 through September 30, 2004 .................. $ 0.68 $ 0.55 April 1, 2004 through June 30, 2004 ...................... $ 0.69 $ 0.51 January 1, 2004 through March 31, 2004 ................... $ 0.60 $ 0.50 December 22, 2003 (commencement) through December 31, 2003 ................................ $ 1.50 $ 0.80 - 21 - Since no public information, including audited financial statements was available about our business, operating results or financial condition during the time the bid prices occurred, the bid prices reflected might not reflect the historical valuation of the Company on a per share basis, nor be an accurate indication of the prices at which shares may be traded in the future, had such information been available. Of the issued and outstanding shares, 24,110,894 shares of our common stock (2,294,000 shares of which are owned by our officers, directors, directly or indirectly, one of which directors who is also a principal stockholder and 2,064,526 shares which are owned by another principal stockholder, directly or indirectly), have been held for in excess of one year and will be available for public resale pursuant to Rule 144 promulgated under the Securities Act commencing 90 days following the date of this Prospectus. As of the date of this Prospectus, the 8,238,672 issued and outstanding shares being offered by Selling Stockholders can be publicly transferred. Unless covered by an effective registration statement, the resale of our shares of common stock owned by officers, directors and affiliates is subject to the volume limitations of Rule 144. In general, Rule 144 permits our stockholders who have beneficially owned restricted shares of common stock for at least one year to sell without registration, within a three month period, a number of shares not exceeding one percent of the then outstanding shares of common stock. Furthermore, if such shares are held for at least two years by a person not affiliated with us (in general, a person who is not one of our executive officers, directors or principal stockholders during the three month period prior to resale), such restricted shares can be sold without any volume limitation. Sales of our common stock under Rule 144 or pursuant to such registration statement may have a depressive effect on the market price for our common stock. DIVIDENDS We have never paid cash dividends on our common stock. We intend to retain future earnings, if any, to finance the expansion of our business, and we do not anticipate that any cash dividends will be paid in the foreseeable future. Our future payment of dividends will depend on our earnings, capital requirements, expansion plans, financial condition and other relevant factors. Our retained earnings deficit currently limits our ability to pay dividends. STOCKHOLDERS OF RECORD Our common stock was held by 260 stockholders of record as of November 27, 2006. SEC "PENNY STOCK" RULES The Securities and Exchange Commission has adopted regulations which generally define a "penny stock" to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. Depending on market fluctuations, our common stock could be considered to be a "penny stock". A penny stock is subject to rules that impose additional sales practice requirements on broker/dealers who sell these securities to persons other than established customers and accredited investors. For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of these securities. In addition he must receive the purchaser's written consent to the transaction prior to the purchase. He must also provide certain written disclosures to the purchaser. Consequently, the "penny stock" rules may restrict the ability of broker/dealers to sell our securities, and may negatively affect the ability of holders of shares of our common stock to resell them. - 22 - FORWARD-LOOKING STATEMENTS This Prospectus, including the Management's Discussion and Analysis or Plan of Operation, contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended, with respect to our financial condition, results of operations, business prospects, plans, objectives, goals, strategies, future events, capital expenditure, and exploration and development efforts. Words such as "anticipates", "expects", "intends", "plans", "forecasts", "projects", "budgets", "believes", "seeks", "estimates", "could", "might", "should", and similar expressions identify forward-looking statements. Although we believe that our plans, intentions and expectations reflected in these forward-looking statements are reasonable, we cannot be certain that these plans, intentions or expectations will be achieved. Actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements. These statements include comments regarding: the establishment and estimates of mineral reserves and mineral resources, production, production commencement dates, productions costs, cash operating costs per ounce, total cash costs per ounce, grade, processing capacity, potential mine life, feasibility studies, development costs, capital and operating expenditures, exploration, the closing of certain transactions including acquisitions and offerings. The following, in addition to the factors described elsewhere in this Prospectus under "Risk Factors", are among the factors that could cause actual results to differ materially from the forward-looking statements: o unexpected changes in business and economic conditions; o significant increases or decreases in gold or oil and gas prices; o changes in interest rates and currency exchange rates; o timing and amount of production; o unanticipated grade changes; o unanticipated recovery rates or production problems; o changes in mining, processing and overhead costs; o changes in metallurgy and processing technology; o access and availability of materials, equipment, supplies, labor and supervision, power and water; o determination of mineral reserves and mineral resources; o availability of drill rigs; changes in project parameters; o costs and timing of development of new mineral reserves; results of current and future exploration activities; o results of pending and future feasibility studies; joint venture relationships; o political or economic instability, either globally or in the countries in which we operate; o local and community impacts and issues; o timing of receipt of government approvals; accidents and labor disputes; environmental costs and risks; and o competitive factors, including competition for property acquisitions; and availability of capital at reasonable rates or at all. - 23 - With respect to any forward-looking statement that includes a statement of its underlying assumptions or bases, we believe such assumptions or bases to be reasonable and have formed them in good faith, assumed facts or bases almost always vary from actual results, and the differences between assumed facts or bases and actual results can be material depending on the circumstances. When, in any forward-looking statement, we express an expectation or belief as to future results, that expectation or belief is expressed in good faith and is believed to have a reasonable basis, but there can be no assurance that the stated expectation or belief will result or be achieved or accomplished. All subsequent written and oral forward-looking statements attributable to us, or anyone acting on our behalf, are expressly qualified in their entirety by the cautionary statements. We do not undertake any obligations to publicly release any revisions to any forward-looking statements to reflect events or circumstances after the date of this report or to reflect unanticipated events that may occur. Factors that may cause our actual results to differ materially from those described in forward-looking statements include the risks discussed elsewhere in this prospectus under the caption "Risk Factors". MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS The following discussion and analysis of our consolidated financial conditions and results of operations for the years ended December 31, 2005 and 2004 and the nine months ended September 30, 2006 should be read in conjunction with the consolidated financial statements and the related notes to our consolidated financial statements and other information presented elsewhere in this Prospectus. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this Prospectus, particularly in the section entitled "Risk Factors" beginning on page 9 of this Prospectus. Our consolidated audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles. PLAN OF OPERATIONS We are a gold exploration and production company engaged in the exploration, acquisition and development of gold properties in the Republic of Ghana, West Africa. Our mining portfolio currently consists of 246.84 square kilometers (also referred to herein as "SQ KM") comprised of 51.67 sq km for our Banso Project, 55.65 sq km for our Muoso Project, 33.65 sq km for our Apapam Project, 40.51 sq km for our Kwabeng Project and 44.76 sq km for our Pameng Project, or 60,969 acres, pursuant to the leased and licensed areas set forth in our respective mining leases, prospecting licences and/or option agreement. Our strategic plan with respect to our gold projects and our oil and gas interests is to acquire further interests in gold mineralized projects and oil and gas prospects that fall within the criteria of providing a geological basis for development of drilling initiatives that can provide near term revenue potential and fast drilling capital repatriation from production cash flows while expanding reserves. We anticipate that our ongoing efforts, subject to adequate funding being available, will continue to be focused on successfully concluding negotiations for the acquisition of gold producing domains and to develop reserves and to provide revenues. We plan to continue building and increasing a strategic base of proven reserves and production base within our Kwabeng and Pameng Projects. Our ability to continue to expand land acquisitions and drilling opportunities during the next 12 months is dependent on adequate capital resources being available. Assuming adequate funding is available to us, we intend to continue to develop the mining concession within our Kwabeng and Pameng Projects with a view to commencing production in 2007 and acquiring further interests in mineral projects by way of acquisition or joint venture participation. - 24 - We require additional funding to implement our plan of operations. We anticipate that these funds primarily will be raised through equity and debt financing or from other available sources of financing. If we raise additional funds through the issuance of equity or convertible debt securities, it may result in the dilution in the equity ownership of investors in our common stock. Further, such securities might have rights, preferences or privileges senior to our common stock. There can be no assurance that additional financing will be available upon acceptable terms, if at all. If adequate funds are not available or are not available on acceptable terms, we may be unable to take advantage of prospective new opportunities or acquisitions, which could significantly and materially restrict our operations. We do not expect to purchase significant ore processing and gold recovery equipment due to the availability of our floating placer gold ore washing and processing plant, manufactured by IHC in the Netherlands and kept on care and maintenance since 1994 at our Kwabeng concession. Once our full scale mine plan has been thoroughly reviewed, we plan to determine whether we will purchase or contract third parties with respect to the earthmoving and ancillary earthmoving equipment fleet in connection with our gold production at our Kwabeng and Pameng Projects during the next 12 months. As well, we plan to significantly increase the number of key mining personnel including technical consultants, contractors and skilled laborers during the next 12 months on account of our planned gold production in 2007 at our Kwabeng and Pameng Projects. Our current business strategy is that we plan to obtain technical resources under contract where possible as Management believes that this strategy, at its current level of development, provides the best services available in the circumstances, leads to lower overall costs, and provides the best flexibility for our business operations. RESULTS OF OPERATIONS YEAR ENDED DECEMBER 31, 2005 COMPARED TO THE YEAR ENDED DECEMBER 31, 2004 Our loss for the year ended December 31, 2005 was $272,572 as compared to a loss of $398,533 for the year ended December 31, 2004, a decrease of $125,961. During the years ended December 31, 2005 and 2004, we generated nil revenue. We incurred expenses of $821,040 in the year ended December 31, 2005 as compared to $488,903 in the year ended December 31, 2004, an increase of $332,137. The significant increase in expenses in the year ended December 31, 2005 can be primarily attributed to (i) exploration costs of $476,223 incurred mostly in connection with an exploration program at our Banso and Muoso Project and care and maintenance costs for our Kwabeng and Pameng Projects as compared to $312,029 expended on these projects in the year ended December 31, 2004; and (ii) general and administrative expenses of $416,639 as compared to $215,362 for the year ended December 31, 2004. Significant increases were for management and consulting fees (2005 - $145,594; 2004 - $10,000) and for stock-based compensation (2005 - $41,022; 2004 - $Nil). These increases were due to (i) consulting fees in the amount of $97,767 paid to two officers (one, a former officer and one, a current officer), as consultants and various geological, financial, administrative and accounting consultants, to perform various functions for our Company; and (ii) the granting of 720,000 options to a former officer and 300,000 stock options to our CEO during 2005. No stock options were granted in 2004. Despite the increase in expenditures, our loss for the year ended December 31, 2005 was less than our loss for the year ended December 31, 2004. This was due to a large increase in income from cash balances and trading securities. Trading securities were comprised mostly of investments in common shares and income trust units of resource companies. Realized gains on the sale of trading securities (2005 - $160,170; 2004 - $1,295) and unrealized gains on trading securities held (2005 - $323,624; 2004 - $66,286) increased significantly. As well, other income, comprised of interest income and dividend income from the income trust units, increased from $22,789 in 2004 to $104,763 in 2005. - 25 - Our basic and diluted loss per share for the year ended December 31, 2005 was 0.01 compared to $0.01 per share for the year ended December 31, 2004. The weighted average number of shares outstanding was 42,075,408 at December 31, 2005 compared to 65,660,173 for the year ended December 31, 2004. The decrease in the weighted average number of shares outstanding can be attributed to the cancellation of 47,000,000 shares during 2005 by one current and one former officer and director of our Company as a condition to our acquisition of XG Mining. NINE MONTHS ENDED SEPTEMBER 30, 2006 COMPARED TO SEPTEMBER 30, 2005 Our loss for the nine months ended September 30, 2006 was $1,375,973 as compared to income of $197,803 for the nine months ended September 30, 2005, an increase of $1,573,776. During the nine months ended September 30, 2006 and 2005, we generated nil revenue. We incurred expenses of $1,113,030 in the nine months ended September 30, 2006 as compared to $320,569 in the nine months ended September 30, 2005, an increase of $792,461. The significant increase in expenses in the nine months ended September 30, 2006 can be primarily attributed to (i) exploration costs of $536,633 incurred mostly in connection with our exploration programs at our Banso and Muoso Project, our Apapam Project and care and maintenance costs for our Kwabeng and Pameng Projects as compared to $186,227 for the nine months ended September 30, 2005; and (ii) general and administrative expenses of $678,195 as compared to $208,836 for the nine months ended September 30, 2005. Significant increases were for management and consulting fees (2006 - $318,882; 2005 - $67,909) and for stock-based compensation (2005 - $131,647; 2004 - $20,511). These increases were due to (i) an aggregate of $267,595 for consulting fees paid to former officers and to current officers, either directly or indirectly and an aggregate of $51,287 paid to various geological, financial, administrative and accounting consultants, to perform various functions for our Company, subsequent to September 30, 2005; and (ii) the vesting of 214,805 stock options during the nine months ended September 30, 2006. Other items totaled a loss of $262,943 for the nine months ended September 30, 2006 as compared to a gain of $518,372 for the nine months ended September 30, 2005. Realized gains on the sale of trading securities (2006 - $126,798; 2005 -$150,932) reflects comparable trading, unrealized losses on trading securities (2006 - $462,269; 2005 - gain of $327,680) reflects a general decline in the value of resource company investments after a significant increase during the year ended December 31, 2005, other income (2006 - $131,981; 2005 - $60,698) reflects the increase in dividend income from holding more income trust units for longer periods, and interest expense (2006 - $57,506; 2005 - $20,938) mostly reflects the interest on convertible debentures which were outstanding for only the final quarter of the period ended September 30, 2005 and for the entire period ended September 30, 2006. Our basic and diluted loss per share for the nine months ended September 30, 2006 was $0.05 compared to $0.00 per share for the nine months ended September 30, 2005. The weighted average number of shares outstanding was 26,320,756 for the nine months ended September 30, 2006 compared to 46,048,227 for the nine months ended September 30, 2005. The decrease in the weighted average number of shares outstanding can be attributed to the cancellation of 47,000,000 shares during the year ended December 31, 2005 by one current and one former officer and director of our Company as a condition to our acquisition of XG Mining. LIQUIDITY AND CAPITAL RESOURCES Our principal source of funds is our available resources of cash and cash equivalents and investments in trading securities, as well as debt and equity financings. - 26 - UNREALIZED GAIN ON MARKETABLE SECURITIES HELD FOR SALE, NET OF INCOME TAX Unrealized gain on marketable securities held for sale, net of income tax, represents the change in the fair value of these securities as of the end of the financial reporting period. For the nine months ended September 30, 2006, we recognized an unrealized loss of $462,269 on marketable securities held for sale, net of income tax, as compared to an unrealized gain of $327,680 for the nine months ended September 30, 2005. The change reflects a general decline in the value of resource company investments after a significant increase during the year ended December 31, 2005. LIQUIDITY DISCUSSION Net cash provided by financing activities was $2,090,995 for the nine months ended September 30, 2006 as compared to net cash provided by financing activities of $1,323,218 for the nine months ended September 30, 2005. This change is primarily attributable to $2,097,995 (2005 - $414,420) we received from the sale of trading securities during the nine months ended September 30, 2006. As of September 30, 2006, we had working capital equity of $3,426,518, comprised of current assets of $3,513,872 less current liabilities of $87,354. Our current assets were comprised mostly of $760,696 in cash and cash equivalents and $2,697,092 in trading securities, which is based on our analysis of the ready saleable nature of the securities including an existing market for the securities, the lack of any restrictions for resale of the securities and sufficient active volume of trading in the securities. Our trading securities are held in our investment portfolio with an established brokerage in Canada in which we primarily invest in the common shares and income trust fund units of publicly traded resource companies. We currently and historically have invested a majority of our cash in various trading equity securities in an effort to increase the rate of return on our cash. U.S. companies that have more than 100 shareholders or are publicly traded in the U.S. and (i) are, or hold themselves out as being, engaged primarily in the business of investing, reinvesting or trading in securities, or (ii) are engaged or proposes to engage in the business of investing, reinvesting, owning, holding, or trading in securities, and owns or proposes to acquire investment securities having a value exceeding 40 percentum of the value of such issuer's total assets (exclusive of Government securities and cash items) on an unconsolidated basis, are subject to regulation under the Investment Company Act of 1940. We do not believe we are an "investment company" within the scope of the Investment Company Act of 1940, since we do not hold ourselves out as being, engaged primarily in the business of investing, reinvesting or trading in securities and the amount of our investment in trading securities is less than 40 percentum of the value of our total assets (exclusive of Government securities and cash items). RECENT CAPITAL RAISING TRANSACTIONS In March 2006, we completed a private equity financing for net proceeds of $496,420 whereby we sold 792,029 common shares of our common stock. As well, we received $81,375 from the exercise of share purchase warrants. In April 2006, an aggregate of 177,200 previously issued share purchase warrants were exercised for which we received gross proceeds of $132,900. In June 2006, we completed a private equity financing for net proceeds of $468,300 whereby we sold 578,112 common shares of our common stock and 289,056 underlying warrants at an exercise price of $1.50 per share expiring on June 16, 2007. - 27 - In July 2006, we completed a private equity financing for net proceeds of $1,018,800 whereby we sold 1,132,000 common shares of our common stock and 566,000 underlying warrants at an exercise price of $1.50 per share expiring on October 31, 2007. In October 2006, we completed a private equity financing for net proceeds of $310,200 whereby we sold 282,000 common shares of our common stock and 141,000 underlying warrants at an exercise price of $1.50 per share expiring on October 31, 2007. As of December 31, 2005, we had working capital equity of $2,745,926 (2004 - $981,740), comprised of current assets of $3,138,250 (2004 - $1,089,646) less current liabilities of $392,324 (2004 - $107,906). Our current assets were comprised mostly of $458,376 (2004 - $231,480) in cash and cash equivalents and $2,647,207 (2004 - $849,791) in trading securities. During the year ended December 31, 2005, net cash flows from financing activities were $2,035,149 (2004 - $1,368,992). These funds were raised through the issuance of convertible debentures (2005 - $900,000; 2004 - $Nil) and the sale of common stock, net of financing costs (2005 - $1,181,351; 2004 - $1,368,992). In June 2005, we completed a private equity financing of $294,920 whereby we sold 536,218 equity units comprised of 536,218 shares of our common stock and 268,110 underlying warrants. In July 2005, we completed an aggregate debt financing of $900,000 which was secured by the issuance of convertible debentures (described elsewhere in this Prospectus). In August 2005, we completed a private equity financing of $165,000 whereby we sold 300,000 equity units comprised of 300,000 shares of our common stock and 150,000 underlying warrants. In November 2005, we completed a private equity financing of $852,145 whereby we sold 1,549,354 shares of our common stock. During fiscal year 2004, we completed two private equity financings for an aggregate of 4,129,400 units for net proceeds of $1,368,992. For every two shares held, we also issued one common stock purchase warrant to purchase a share of our common stock at an exercise price of $.75 per share for an aggregate of 2,064,700 warrants (the "2004 WARRANTS"). The 2004 Warrants were exercisable for a term of one year and were subsequently extended on approval by our Board to March 31, 2006. As of March 31, 2006, 108,500 of the 2004 Warrants were exercised and the remaining 1,956,200 2004 Warrants expired unexercised. Existing working capital, further advances and possible debt instruments, anticipated warrant exercises, further private placements and anticipated cash flow are expected to be adequate to fund our operations over the next year. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private equity financings and a debt financing. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) exploration, development and production of our gold projects; (ii) acquisitions of additional gold properties; and (iii) acquisitions of oil and gas operating properties. We intend to finance these expenses with further issuances of securities, debt securities or from investment income. Thereafter, we expect we will need to raise additional capital to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current stockholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of - 28 - prospective new business endeavors or opportunities or existing agreements which could significantly and materially restrict our business operations. The independent auditors' report accompanying our December 31, 2005 and December 31, 2004 consolidated financial statements contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The consolidated financial statements have been prepared "assuming that we will continue as a going concern", which contemplates that we will realize our assets and satisfy our liabilities and commitments in the ordinary course of business. MATERIAL COMMITMENTS MINERAL PROPERTY COMMITMENTS Save and except for fees payable from time to time to (i) the Minerals Commission for an extension of an expiry date of a prospecting licence or mining lease or annual operating permits; (ii) the Environmental Protection Agency ("EPA") in Ghana for the issuance of permits prior to the commencement of any work at a particular concession or the posting of a bond in connection with any mining operations undertaken by our Company; and (iii) a legal obligation associated with our mineral properties for clean up costs when work programs are completed, we are committed to expend an aggregate of less than $500 in connection with annual or ground rent and mining permits to enter upon and gain access to the following concessions and such other financial commitments arising out of any approved exploration programs in connection therewith: (a) the Kwabeng concession (Kwabeng Project); (b) the Pameng concession (Pameng Project); and (c) the Banso and Muoso concessions (Banso and Muoso Project); (d) the Apapam concession (Apapam Project); (e) the Edum-Banso concession (Edum Banso Project). With respect to the Kwabeng and Pameng Projects, upon and following the commencement of gold production, a royalty of 3% of the net smelter returns is payable the Government of Ghana. With respect to the Edum Banso Project: (i) $5,000 is payable to Adom Mining Limited ("ADOM") on the anniversary date of the Option Agreement in each year that we hold an interest in the agreement; (ii) $200,000 is payable to Adom when the production of gold is commenced (or $100,000 in the event that less than 2 million ounces of proven and probable reserves are discovered on our project at this concession; and (iii) an aggregate production royalty of 2% of the net smelter returns ("NSR") from all ores, minerals and other products mined and removed from the project, except if less than 2 million ounces of proven and probable reserved are discovered in or at the Project, then the royalty shall be 1% of the NSR. - 29 - OIL AND GAS COMMITMENTS We have made an application to the Ghana National Petroleum Corporation ("GNPC") for a petroleum agreement to acquire an oil interest in Ghana. The application is currently under review by GNPC and other relevant Ghanaian governmental authorities. As we have not yet been awarded any oil interest, we have not made any financial commitment with respect to expenditures as none can be determined at this time, except for an initial processing fee of $7,500 payable to the Minister of Energy. REPAYMENT OF CONVERTIBLE DEBENTURES AND ACCRUED INTEREST We are committed to repay our Convertible Debenture holders outstanding amounts of principal and interest calculated at 7% per annum on an aggregate face value of $900,000. Interest only payments are payable quarterly on the last days of September, December, March and June in each year of the term or until such time that the principal has been repaid in the full. The Convertible Debenture holders are entitled, at their option, to convert, at any time and from time to time, until payment in full of their respective Convertible Debentures, all or any part of the outstanding principal amount of the Convertible Debenture, plus the Accrued Interest, into shares (the "CONVERSION SHARES") of our common stock at the conversion price of $1.00 per share (the "CONVERSION PRICE"). Provided there is a registration statement then in effect covering the Conversion Shares, or the Conversion Shares may otherwise be resold pursuant to Rule 144, the outstanding principal amount of each Convertible Debenture, and all accrued but unpaid interest, shall automatically be converted into shares of our common stock, at the Conversion Price, in the event that our common stock trade for 20 consecutive trading days (a) with a closing bid price of at least $1.50 per share and (b) a cumulative trading volume during such twenty (20) trading day period of at least 1,000,000 shares. FURTHER MATERIAL COMMITMENTS Further material commitments are subject to new funding arrangements to be obtained or agreements not yet formalized. PURCHASE OF SIGNIFICANT EQUIPMENT We do not expect to purchase significant ore processing and gold recovery equipment due to the availability of our floating placer gold ore washing and processing plant, manufactured by IHC in the Netherlands and kept on care and maintenance since 1994 at our Kwabeng Project. Once our full scale mine plan has been thoroughly reviewed, we may determine to purchase or contract from third parties the earthmoving and ancillary earthmoving equipment fleet with respect to our gold production at our Kwabeng and Pameng Projects during the next 12 months. OFF BALANCE SHEET ARRANGEMENTS We have no off balance sheet arrangements. SIGNIFICANT ACCOUNTING POLICIES APPLICATION OF CRITICAL ACCOUNTING POLICIES We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements. - 30 - GENERALLY ACCEPTED ACCOUNTING PRINCIPLES Our consolidated financial statements have been prepared in conformity with generally accepted accounting principles of the United States of America ("U.S. GAAP"). PRINCIPLES OF CONSOLIDATION Our consolidated financial statements include the accounts of our Company and our wholly owned subsidiaries, Xtra Energy (from October 24, 2003), XG Exploration (from February 16, 2004), XOG (from October 20, 2005), XOG Ghana (from March 2, 2006) and our 90% owned subsidiary, XG Mining (from December 22, 2004). All significant intercompany accounts and transactions have been eliminated on consolidation. CASH AND CASH EQUIVALENTS Our Company considers highly liquid investments with original maturities of three months or less to be cash equivalents. At December 31, 2005 and 2004 and the nine months ended September 30, 2006, cash and cash equivalents consisted of cash held at financial institutions. GENERAL CORPORATE ACTIVITIES Costs associated with general corporate activities are expensed in the period incurred. TRADING SECURITIES Our trading securities are reported at fair value, with unrealized gains and losses included in earnings. MINERAL PROPERTIES AND EXPLORATION AND DEVELOPMENT COSTS The costs of acquiring mineral rights are capitalized and allocated between proven and probable reserves and mineralization not considered proven and probable reserves at the date of acquisition, based on relative fair values. If it is later established that some mineralization meets the definition of proven and probable reserves, then it will be reclassified as relating to reserves at that time. After acquisition, various factors can affect the recoverability of the capitalized costs. If, after review, our Management concludes that the carrying amount of a mineral property is impaired, it will be written down to estimated fair value. Exploration and development costs incurred on mineral properties classified as mineralization are expensed as incurred. Development costs incurred on proven and probable reserves will be capitalized. Upon commencement of production, capitalized costs will be amortized using the unit-of-production method over the estimated life of the ore body based on proven and probable reserves. OIL AND NATURAL GAS PROPERTIES Our Company follows the full cost method of accounting for oil and natural gas operations. Under this method, all costs associated with the acquisition of, exploration for and development of oil and gas reserves are capitalized in cost centers on a country-by-country basis. Such costs include property acquisition costs, geological and geophysical studies, carrying charges on non-producing properties, costs of drilling productive wells, and overhead expenses directly related to these activities. - 31 - Depletion is calculated for producing properties by using the unit-of-production method based on estimated proved reserves, before royalties, as determined by our Management or independent consultants. Sales or dispositions of oil and gas properties are credited to the respective cost centers and a gain or loss is recognized when all properties in a cost center have been disposed of, unless such sale or disposition significantly alters the relationship between capitalized costs and proved reserves of oil and gas attributable to the cost center. Costs of abandoned properties are accounted for as adjustments of capitalized costs and written off to expense. Undeveloped properties are excluded from the depletion calculation until the quantities of proved reserves can be determined. A ceiling test is applied to the proven properties for each cost center and for the aggregate of all cost centers by comparing the net capitalized costs to the estimated future net revenues from production of estimated proved reserves without discount, plus the costs of unproved properties net of impairment. Any excess capitalized costs are written off to expense. Further, the ceiling test for the aggregate of all cost centers is required to include the effects of future removal and site restoration costs, general and administrative expenses, financing costs and income taxes. The calculation of future net revenues is based upon prices, costs and regulations in effect at each year end. Unproved properties are assessed for impairment on an annual basis by applying factors that rely on historical experience. In general, our Company may write off any unproved property under one or more of the following conditions: (a) there are no firm plans for further drilling on the unproved property; (b) negative results were obtained from studies of the unproved properties; (c) negative results were obtained from studies conducted in the vicinity of the unproved property; or (d) the remaining term of the unproved property does not allow sufficient time for further studies or drilling. LONG-LIVED ASSETS We account for long-lived assets under the Statements of Financial Accounting Standards Nos. 142 and 144 "Accounting for Goodwill and Other Intangible Assets" and "Accounting for Impairment or Disposal of Long-Lived Assets" ("SFAS No. 142 and 144"). In accordance with SFAS No. 142 and 144, long-lived assets, goodwill and certain identifiable intangible assets held and used by our Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, goodwill and intangible assets, the recoverability test is performed using undiscounted net cash flows related to the long-lived assets. ASSET RETIREMENT OBLIGATIONS Our Company records the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development, and/or normal use of the long-lived assets. We also record a corresponding asset which is amortized over the life of the asset. Subsequent to the initial measurement of the asset retirement obligation, the obligation is adjusted at the end of each period to reflect the passage of time (accretion expense) and changes in the estimated future cash flows underlying the obligation (asset retirement cost). - 32 - EQUIPMENT Equipment is recorded at cost and is being amortized over its estimated useful lives using the declining balance method at the following annual rates: Office furniture and equipment ............. 20% Computer equipment ......................... 30% Vehicle .................................... 30% DEFERRED FINANCING COSTS Deferred financing costs consist of expenses incurred to obtain funds pursuant to the issuance of the Convertible Debentures and are being amortized straight-line over the term of the debentures. STOCK-BASED COMPENSATION Our Company calculates the fair value of all stock options granted and records these amounts as compensation expense over the vesting period of the options using the straight-line method. The Black-Scholes option pricing model is used to calculate fair value. FOREIGN EXCHANGE Our Company's functional currency is the U.S. dollar. Non-monetary assets and liabilities that are in a currency other than the U.S. dollar are translated at historical rates. Any monetary assets and liabilities that are in a currency other than the U.S. dollar are translated at the rate prevailing at year end. Revenue and expenses in a foreign currency are translated at rates that approximate those in effect at the time of translation. Gains and losses from translation of foreign currency transactions into U.S. dollars are included in current results of operations. FINANCIAL INSTRUMENTS Our financial instruments consist of cash and cash equivalents, trading securities, receivables, accounts payable and accrued liabilities and convertible debentures. It is our Management's opinion that our Company is not exposed to significant interest, currency or credit risks arising from our financial instruments. The fair values of these financial instruments approximate their carrying values due to their short term nature, unless otherwise noted. Our Company has our cash primarily in one commercial bank in Toronto, Ontario, Canada. RECENT ACCOUNTING PRONOUNCEMENTS In December 2004, Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 153, "Exchanges of Non monetary Assets - an amendment of APB Opinion No. 29" ("SFAS 153") which amends Accounting Principles Board Opinion No. 29, "Accounting for Non monetary Transactions" to eliminate the exception for non monetary exchanges of similar productive assets and replaces it with a general exception for exchanges of non monetary assets that do not have commercial substance. A non monetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS 153 is effective for non monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. - 33 - In December 2004, FASB issued Statement of Financial Accounting Standards No. 123R, "Share Based Payment" ("SFAS 123R"). SFAS 123R supersedes APB 25 and its related implementation guidance by requiring entities to recognize the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards (with limited exceptions) and revises SFAS 123 as follows: (i) Public entities are required to measure liabilities incurred to employees in share-based payment transactions at fair value and nonpublic entities may elect to measure their liabilities to employees incurred in share-based payment transactions at their intrinsic value whereas under SFAS 123, all share-based payment liabilities were measured at their intrinsic value. (ii) Non public entities are required to calculate fair value using an appropriate industry sector index for the expected volatility of its share price if it is not practicable to estimate the expected volatility of the entity's share price. (iii) Entities are required to estimate the number of instruments for which the requisite service is expected to be rendered as opposed to accounting for forfeitures as they occur. (iv) Incremental compensation cost for a modification of the terms or conditions of an award is measured by comparing the fair value of the modified award with the fair value of the award immediately before the modification whereas SFAS 123 required that the effects of a modification be measured as the difference between the fair value of the modified award at the date it is granted and the award's value immediately before the modification determined based on the shorter of (1) its remaining initially estimated expected life or (2) the expected life of the modified award. SFAS 123R also clarifies and expands guidance in several areas, including measuring fair value, classifying an award as equity or as a liability and attributing compensation cost to reporting periods. SFAS 123R does not change the accounting guidance for share-based payment transactions with parties other than employees provided in SFAS 123 as originally issued and Emerging Issues Task Force No. 96-18 "Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods and Services" ("EITF 96-18"). SFAS 123R also does not address the accounting for employee share ownership plans which are subject to Statement of Position 93-6, "Employers' Accounting for Employee Stock Ownership Plans". Public entities (other than those filing as small business issuers) will be required to apply SFAS 123R as of the first annual reporting period that begins after June 15, 2005. Public entities that file as small business issuers will be required to apply SFAS 123R in the first annual reporting period that begins after December 15, 2005. For nonpublic entities, SFAS 123R must be applied as of the beginning of the first annual reporting period beginning after December 15, 2005. In May 2005, FASB issued Statement of Financial Accounting Standards No. 154, "Accounting Changes and Error Corrections - A Replacement of APB Opinion No. 20 and FASB Statement No. 3" ("SFAS 154") which is effective for fiscal years ending after December 15, 2005. SFAS 154 requires that changes in accounting policy be accounted for on a retroactive basis. The adoption of these new pronouncements is not expected to have a material effect on our Company's consolidated financial position or results of operations. - 34 - BUSINESS OF OUR COMPANY BUSINESS DEVELOPMENT Our predecessors were inactive from inception until October 21, 2003, except for some non-mining business ventures, raising capital to fund such ventures and two stock consolidations. On October 31, 2003, we entered into a share exchange agreement (the "SHARE EXCHANGE AGREEMENT") with Xtra Energy (formerly XGRI) and its shareholders (the "XTRA ENERGY SHAREHOLDERS"). Pursuant to the terms of the Share Exchange Agreement: (i) we acquired 100% of the issued and outstanding shares of common stock of Xtra Energy from the Xtra Energy Shareholders; and (ii) in exchange, we issued 10,070,000 shares of our common stock to the Xtra Energy Shareholders in proportion to their respective holdings in Xtra Energy. As a result of this transaction, Xtra Energy became our wholly owned subsidiary. Since our acquisition of Xtra Energy in October 2003, we have been primarily engaged in the business of exploration for gold mineralization and the development and production from our projects. Since February 2004, we have been focused on exploration for gold mineralization and the development and production from our projects in Ghana, through our Ghanaian subsidiaries, Xtra-Gold Exploration Limited ("XGEL") and Xtra-Gold Mining Limited ("XG MINING"). At the time of our acquisition of Xtra Energy on October 28, 2003, Xtra Energy held an option to earn up to 90% of the 80% interest in an early stage mineral exploration property located in Switzerland (the "SWISS PROPERTY") held by CaribGold Minerals Inc. ("CARIBGOLD"). We would have earned this 90% interest in the Swiss Property by incurring exploration expenditures of a least CAD$200,000 (USD$176,242) on or before October 28, 2004. Our Board subsequently decided to let the option expire and to instead use our capital to focus on the acquisition of mineral properties in the Republic of Ghana ("GHANA"), West Africa. None of the CAD$200,000 (USD$152,532) was expended, except for approximately $1,200 which was paid for an annual exploration fee to the relevant government authorities and storage fees for core samples. Paul Zyla, our former President and Chief Executive Officer, was the President and a director of CaribGold at the time of this transaction. Mr. Zyla owned 647,500 (.550%) of the 11,758,232 issued and outstanding shares of CaribGold at the time of this transaction. Since October 2004 until October 2005, Xtra Energy had been an inactive subsidiary of our Company. In October 2005, the board of directors of Xtra Energy decided to commence preliminary activities towards its business model on the oil and gas industry. As a result of Xtra Energy being a new entrant into the oil and gas industry and currently having no activities thereto, there is no available information regarding production or revenue generation. In October 2005, we also became engaged in the business of oil and gas through two other wholly-owned subsidiaries; namely Xtra Energy (formerly XGRI) and XOG, by way of XOG acquiring a 5% participating interest in one oil and gas property located in southeastern Saskatchewan, Canada (the "SASKATCHEWAN PROJECT"). Since the incorporation of our wholly-owned subsidiary, XOG Ghana on March 2, 2006, its activities in the oil and gas industry have been limited to organizational efforts and pursuing a petroleum interest in Ghana. In April 2006, our subsidiary XOG Ghana made an application to GNPC to acquire a petroleum agreement for an oil interest in Ghana. Final approval of our application is pending. Once negotiations have been completed between GNPC and XOG Ghana (i) a purchase agreement will be - 35 - entered into and sent to the Ghana Cabinet for approval; (ii) upon receiving Cabinet approval, the purchase agreement is then sent to Parliament for ratification; and (iii) upon receiving ratification from Parliament, the purchase agreement will become effective and a work program can be commenced. We anticipate that this approval process will take approximately nine months from the time of submission of the foregoing application. Other than making this application, XOG Ghana has undertaken no activities and has not formulated a business plan as to its future plans if it receives approval of the application. As a result of XOG Ghana being a new entrant into the oil and gas industry and currently having no activities thereto, there is no available information regarding production or revenue generation at this time. In October 2006, we sold our 5% interest to an arm's length oil and gas company pursuant to the terms of a purchase and sale agreement for a consideration of CAD$350,000 (USD$314,258). OUR BUSINESS IN THE GOLD INDUSTRY We engage in the exploration, development and mining of gold properties exclusively in Ghana. Our interests in our Projects are held by our Ghanaian subsidiaries, through prospecting licences, an option agreement in connection with a prospecting licence and mining leases granted by the Government of Ghana for licensed or leased areas respectively located within and upon concessions. A concession is a grant of a tract of land made by a government or other controlling authority in exchange for an agreement that the land will be used for a specific purpose. The development of a placer or lode gold project includes detailed exploration, reserve definition, preparation of a feasibility study, an environmental impact study and a detailed mine plan, permitting and construction of a mine. The exploration of a gold project typically includes the review of existing data, grid establishment, geological mapping, geophysical surveying, trenching and pitting to test the areas of anomalous soil samples and RC and/or diamond drilling to test targets followed by infill drilling, if successful, to define reserves. We are in the process of initiating placer gold production at our Kwabeng and Pameng Projects, continuing a lode gold exploration program at our Banso and Muoso Project, awaiting results from a preliminary lode gold exploration program at our Apapam Project and preparing a preliminary lode gold exploration program at our Edum Banso Project. All of these Projects are located in Ghana. We have not yet produced any gold and we will require substantial additional capital in order to do so. THE GOLD INDUSTRY THE GOLD INDUSTRY IN GHANA The mining and minerals development industry in Ghana continues to be focused on gold. Ghana is the second largest gold producer in Africa and is also a major producer of bauxite, manganese and diamonds. GEOLOGICAL SETTING Ghana is situated mostly within the West African Craton, which stabilized during the early Proterozoic Period some two billion years ago. In a series of tectonic processes, large areas were folded, - 36 - faulted, metamorphosed, subjected to igneous activity, erosion and sedimentary processes, giving rise to a series of gold belts. Gold deposits can be categorized as Birimian gold and Tarkwaian gold. Birimian supracrustal rocks of West Africa, which extend from Ghana westward to Senegal and Mauritania and northward into Burkina Faso, are richly endowed with Proterozoic greenstone-type lode gold deposits. Deposits are variable and structurally complex, featuring gold that occurs in both quartz-filled shear zones and in altered rocks adjacent to shear zones. The metamorphosed volcanic belts in which they are found average between 15 kilometers and 40 kilometers in width and cover approximately one-sixth of Ghana's surface area. The bulk of Ghanaian gold is derived from Birimian rocks. The second category is Tarkwaian gold. Auriferous quartz-pebble conglomerate deposits occur within the Tarkwaian supercrustal rocks of Ghana. The matrix consists of fine-grained quartz and black sands (mainly hematite, and to a lesser extent, ilmenite, magnetite and rutile) and over 90% of the pebbles are vein-quartz and the balance, quartzite and phyllite (1). Ghana is covered by the Paleoprotoerozoic rocks of the Birimian Super group and the overlying clastic sedimentary Tarkwaian group. A result of a series of erosional events, significant portions of these rocks have been re-deposited as placer formations in a number of streams and channels. Placer gold deposits, which are also referred to as alluvial gold, are found in the majority of rivers draining Birimian rocks. Large deposits of placer gold also occur along the terraces, floodplains, channels and river beds of the Offin, Pra, Ankobra, Birim and Tano rivers where large Birimian and Tarkwaian gold deposits have experienced several episodes of erosion and subsequent deposition (1). __________ (1) A Contextual Review of the Ghanaian Small-scale Mining Industry", Gavin Hilson: Mining, Minerals and Sustainable Development Journal, No. 76, September 2001. ORGANIZATION OF MINING OPERATORS IN GHANA Operators of gold projects are awarded mining leases by the Government of Ghana to mine in a designated area for a period of time. Typically, a licensed operator employs between five and 20 groups of tributers consisting of five to 10 workers that each excavate ore and process gold. MINERAL RIGHTS The governing mining law of Ghana is the Minerals and Mining Act, 2006 (Act 703) (the "MINING ACT") which was enacted in March 2006 by the President and Parliament of Ghana. This law and associated legislation combines regulation of the mining industry with fiscal incentives for investors. Some of the more significant features of the legislation are as follows: 1. Every mineral in its natural state in, under or upon land in Ghana, rivers, streams, water-courses throughout the country, the exclusive economic zone and an area covered by the territorial sea or continental shelf is the property of the Republic and is vested in the President in trust for the people of Ghana. 2. The Mining Act established a new cadastral system of mineral title administration. It is a system under which the country (Ghana) is divided into geographical blocks of 21 hectares each. Applications for mineral rights may be made in multiples of blocks which should be contiguous. Fractions of blocks may not be applied for except for blocks intended for small scale mining and blocks part of which lie outside the country; in which case, such part-blocks are considered for purposes of the cadastral system as full blocks. Three main types of mineral rights in the form of - 37 - licences may be granted under the Mining Act, to coincide with the three key stages of the mining cycle, namely reconnaissance, prospecting and development.
TYPE OF LICENCE PURPOSE AREA LICENCE PERIOD Reconnaissance ....... to conduct reconnaissance maximum of 12 months operations in search for 5,000 contiguous renewable for specific minerals (not blocks of 21 including drilling or excavations) Prospecting License .. to intentionally explore or maximum of 2 years search for specific minerals 750 contiguous renewable with 50% and determining their extent blocks of 21 reduction of area and economic value hectares each upon renewal Mining Lease ......... to intentionally extract or maximum of 30 years win specific minerals 300 contiguous renewable blocks per lease
3. Negotiable matters are the deferment of royalty payments, work programs and the level of export earnings retention allowances and the detailed provisions of a stability agreement or development agreement provided for respectively under sections 48 and 49 of the Mining Act. 4. In accordance with section 14(1), "a mineral right shall not in whole or in part be transferred, assigned, mortgaged or otherwise encumbered or dealt in, in a manner without the prior approval in writing of the Minister (of Lands, Forestry and Mines), which approval shall not be unreasonably withheld or given subject to unreasonable conditions". 5. The legislation is to be applied equally to Ghanaians and foreigners, except for the provisions relating to artisanal mining and exploitation of construction minerals which is reserved for Ghanaians. 6. The Government of Ghana is entitled to a free carried equity interest of 10% in mining ventures. It also has the option of purchasing an additional 20% at a fair market price. See the section entitled "Ghanaian Law - Ghanaian Ownership and Special Rights" for more detailed disclosure. 7. Royalties vary form 3% to 6% of the gross value of minerals produced. The variation is related to the "operating margin" and is designed to prevent royalties becoming too onerous during times of low profitability. 8. Section 10 of the Mining Act provides as follows: "10. Unless otherwise provided in this Act, a mineral right shall not be granted to a person unless the person is a body incorporated under the Companies Code 1963 (Act 179), under the Incorporated Private Partnerships Act 1962 (Act 152) or under an enactment in force." - 38 - This provision prohibits the grant of mineral rights which are defined in the law to include reconnaissance licence, prospecting licence and mining lease to natural persons unless a specific provision to the contrary is made in the law. However, it should be noted that the exceptions in this regard relate mainly to the grant of licences in respect of (a) building and industrial minerals; and (b) small scale mining to non-corporate persons who are citizens of Ghana. The exceptions therefore do not apply to large scale mining. In addition to being a corporate legal entity, an applicant is also required to show financial and technical capability to carry out the proposed mineral operations in respect of which the licence is being applied for. Thus, section 11 of the Mining Act states that: "11. An application for a mineral right shall be submitted to the Minerals Commission in the prescribed form and shall be accompanied with a statement providing, (a) particulars of the financial and technical resources available to the applicant for the proposed mineral operations, (b) an estimate of the amount of money proposed to be spent on the operations, (c) particulars of the programme of proposed mineral operations, and (d) particulars of the applicant's proposals with respect to the employment and training in the mining industry of Ghanaians." KWABENG AND PAMENG, APAPAM, BANSO AND MUOSO AND EDUM BANSO PROJECTS ACQUISITION OF XGEL AND XG MINING On February 16, 2004, we entered into an offer to purchase (the "ACQUISITION AGREEMENT") with Akrokeri-Ashanti Gold Mines Inc. ("AKROKERI-ASHANTI"), an unaffiliated third party, the sole shareholder of XGEL (formerly Canadiana Gold Resources Limited), a Ghanaian corporation, to purchase 50,000 ordinary common shares, being all of the issued and outstanding shares of XGEL (the "XGEL SHARES") for (i) $25,000 cash; (ii) forgiveness of $175,000 in debt owed to XGEL by an affiliate of Akrokeri-Ashanti; (iii) and agreeing to make a tender offer to Akrokeri-Ashanti note holders and debenture holders (the "NOTE AND DEBENTURE HOLDERS") to extinguish their debts totaling approximately CAD$5,936,700 (USD$4,824,232). Akrokeri-Ashanti had pledged as security to its Note and Debenture Holders, 90% of the issued and outstanding shares (the "GOLDENRAE SHARES") of its subsidiary, XG Mining (formerly Goldenrae Mining Company Limited). The remaining 10% of the issued and outstanding shares of XG Mining was at the relevant time and continues to be held by the Government of Ghana in accordance with governing mining laws and regulations of Ghana. Under the Acquisition Agreement, if we abandoned our bid to the Note and Debenture Holders, or were unsuccessful in acquiring the XG Mining Shares by December 31, 2004, then we would be required to reconvey the XGEL shares back to Akrokeri-Ashanti. On December 22, 2004, we succeeded in our offer to the Note and Debenture Holders and exchanged one-half share of our common stock for every CAD$1.00 (USD$.90) principal amount of notes and debentures. We therefore issued a total of 2,698,350 shares of our common stock for the CAD$5,936,700 (USD$4,824,232) outstanding principal - 39 - amount of the notes and debentures. Following the completion of the foregoing transaction on December 22, 2004, XG Mining became our subsidiary as to a 90% interest. The Government of Ghana holds the remaining 10%. THE KWABENG AND PAMENG PROJECTS Three concessions; namely the Kwabeng and Pameng Projects and the Apapam Project totaling 118.92 sq km, are contiguous to our Banso and Muoso Project. We hold 30-year mining leases expiring on July 26, 2019 on two mining concessions; namely our Kwabeng Project (40.51 sq km) and our Pameng Project (44.76 sq km). To the south of our Kwabeng and Pameng Projects, we also hold a prospecting licence for our Apapam Project (33.65 sq km). These three Projects have historical proven reserves of approximately 216,000 ounces of placer gold, with significant potential to increase these reserves through exploration. The placer gold deposit currently located at our Kwabeng concession was mined by the former owner in the early 1990's for 15 months and produced approximately 16,800 ounces of gold before operations were ceased due to mining difficulties as noted hereunder. In addition to the two mining leases, XG Mining owns a floating placer gold ore washing and processing plant (the "PLANT") was designed, built and acquired from IHC Holland ("IHC") of the Netherlands, Holland, one of the leading manufacturers of dredging and mineral separation equipment and a functional living compound for mining employees (the "FIELD CAMP") which is also comprised of offices and facilities for stores, engineering and exploration activities. The Plant and the Field Camp are located on property included in our Kwabeng concession, close to the town of Kwabeng. These three Projects have had very little exploration for lode source gold deposits; however, there has been detailed exploration for placer gold deposits. The Kwabeng, Pameng and Apapam Projects contain historical proven reserves estimated at 216,800 ounces of gold in accordance with a feasibility study prepared in 1994 by Minproc Engineers Pty Ltd. The proven reserves of 216,800 ounces were confirmed in an evaluation prepared by John Rae, P. Geo. in March 2006. In addition to the historical stated proven reserves, there is potential to add to the placer gold proven reserves with further exploration. The placer gold is contained in a gravel deposit distributed across the floor of the river valleys west of the Atewa Range. The gravel layer generally averages two meters of non-gold bearing silt and clay overburden. The gravel and overburden are semi-consolidated and can easily be excavated with earth moving equipment without the need for blasting. In early 1990's, the former mining lessee invested approximately $24,000,000 to open a mine at the Kwabeng concession. Due to poor operational techniques and improper equipment, production targets were not met. The mining operation lasted for 15 months and 16,800 ounces of gold was produced before the mine was shut down. FLOATING GOLD ORE WASHING AND PROCESSING PLANT The Plant was custom manufactured for the placer gold ores located on the Kwabeng and Pameng concessions by IHC in the Netherlands and shipped to Ghana in disassembled modules in the early 1990's while the Kwabeng mining lease was held by the former owner, Goldenrae Mining Company Limited. The Plant is made up of two major functional components: (i) a series of modular pontoons which are - 40 - assembled on-site to make up the floating barge portion of the plant with an assembled dimension of 20 meters long by 12 meters wide by 1.7 meters deep; and (ii) the gold ore processing and recovery equipment, power generation equipment are installed, which is comprised of vibrating grizzly feeder, scrubber, vibrating screen, a three stage IHC radial jig gold recovery unit and provisions for the disposal of the barren processed gravels back into the mining pit. The rated production capacity of the Plant is approximately 150 cubic meters of ore gravels per hour and we anticipate that it will be operated continuously by the staff to be hired at the commencement of full scale production at our Kwabeng concession. The Plant is currently not being operated since we have not begun processing and recovery, or testing, however, it has been maintained on a care and maintenance basis by the existing staff subcontracted to XG Mining at our Kwabeng Project and is started up on a regular basis as part of the care and maintenance program to ensure that all of the components continue to be in working order. The Plant, and our Field Camp thereto, is currently operated by generators since the area of our concession is not yet connected to any electrical power generation facility. In light of the current government imposed power shedding (outages), our Company has decided to postpone connection of the Field Camp to the national power grid and will continue to rely on its own generator systems. Currently, the Plant requires very little work to be brought into production which includes the installation of a new vibrating screen deck and water supply pump, prior to commencement of a bulk test program (the "BULK TEST"), which we anticipate will be installed in November 2006. The commencement and operation of the Bulk Test is subject to approval from the relevant government authorities of Ghana; namely the Minerals Commission, which approval has been received, the Water Commission and the EPA. Prior to issuing an EPA permit, the EPA has requested, among other things, the submission of an environmental impact study which includes a mine plan and cost reclamation plan (the "EPA DOCUMENTS"). The EPA does not issue EPA permits for a bulk test alone and requires submission of the EPA Documents for a full scale mining operation, which in our case includes conducting of the Bulk Test. Simultaneously with the EPA's review of the EPA Documents, the EPA arranges for the holding of a public forum which is attended by representatives of XG Mining, Bio Consult Limited (environmental management consultants engaged by us to assist us in the facilitation of obtaining the EPA permit), the EPA, the Minerals Commission, local chieftains, farmers and residents of the area in which we intend to carry out our full scale mining operation. The purpose of this public forum is to inform the attendees of our intention to carry out a full scale mining operation and to discuss and respond to any issues or concerns that any of the attendees may which to address, including crop compensation and reclamation. Once all attendees are satisfied with the outcome of the public forum, we anticipate that the EPA will provide their final comments on our EPA Documents, following which we plan to finalize the documents. Following finalization and resubmission of the EPA Documents, we expect that the EPA will render an invoice to XG Mining for payment of processing and certificate fees. We anticipate that the EPA permit will be issued following such payment. We can then apply for and obtain a certificate from the Water Commission, as referred to elsewhere in this Prospectus. Following receipt of the EPA permit and/or certificates, our Bulk Test can then be commenced. Also, see "Permits Required Prior to Commencement of Gold Production" for further information relating to the procedural steps to be conducted in order to obtain an EPA permit. BULK TEST The Bulk Test referred to above is a large scale or bulk sampling operation we plan to carry out in order that we can gather additional data related to the detailed operation of the Plant and the mining of the reserve with a view to assisting our technical team in confirming the most effective extraction method for the reserve, the operational capacities of processing equipment on the Plant and the confirmation of the metallurgical mass and water balances of the process equipment while operational. Immediately adjacent to the current location of the Plant is a section of reserve that was prepared for mining with most of the clay overburden removed by the previous owner but never extracted before the closure of the mine in - 41 - 1994. The area is approximately 250 meters by 150 meters and contains approximately 80,000 cubic meters of gravel ore. We plan to rent earthmoving equipment on an hourly or daily basis to extract the gravel ore from this area and intend to haul it the short distance to the Plant where it will be loaded into the large ore hopper/bin and processed. We then plan to collect the barren gravels and sands from the tailings discharge end of the Plant and intend to use it to refill the excavated pit from which the gravels came. We the plan to collect, analyze and sell the gold recovered. We anticipate reclaiming and re-contouring the whole area using the barren gravels and sands collected from the discharge end of the Plant. MINING LEASES - KWABENG AND PAMENG PROJECTS Our subsidiary, XG Mining, which is owned by us as to a 90% interest, entered into two individual mining leases on July 26, 1989 with The Government of the Republic of Ghana (the "GOVERNMENT OF GHANA"), who holds a 10% interest in XG Mining, covering an area of 40.51 sq km with respect to the Kwabeng concession and 44.76 sq km with respect to the Pameng concession (collectively, the "LEASE AREA"), located in the East Akim District of the Eastern Region of the Republic of Ghana. These mining leases have a 30 year term expiring on July 25, 2019. We have been granted surface and mining rights by the Government of Ghana to work, develop and produce gold in the lease area (including processing, storing and transportation of ore and materials). With respect to each mining lease, we are: (i) required to pay applicable taxes and annual rental fees of Cedis 15,500 (based on Cedis 500 per sq km) (USD$1.75) to the Government of Ghana; and (ii) committed to pay a royalty in each quarter through the Commissioner of Internal Revenue based on the production for that quarter within 30 days from the quarter end as well as a royalty on all timber felled in accordance with existing legislation. Under the terms and conditions of each mining lease, we are required to furnish (i) a report in each quarter not later than 30 days after the quarter end to the Government Authorities in connection with quantities of gold won in that quarter, quantities sold, revenue received and royalties payable; (ii) a report half-yearly not later than 60 days after the financial year end to the Government Authorities summarizing the results of operations during the half year and records containing a description for the proposed operations for the following year with an estimate of the production and revenue to be obtained; (iii) a report not later than three months after the expiration or termination of the mining lease, to the Government Authorities, giving an account of the geology of the lease area including the stratigraphic and structural conditions and a geological map on scale prescribed in the Mining Regulations; (iv) a report to the Government Authorities of any proposed alteration to its regulations and a report of the particulars of any proposed transfer of any share of its capital stock representing 1% of more of the total number of issued and outstanding shares; (v) a report to the Government Authorities on the particulars of any fresh share issuance or borrowings in excess of an amount equal to the stated capital of XG Mining; and (vi) having regard to items (iv) and (v), these reports shall be submitted not less than 60 days in advance of the proposed alteration, transfer, issue or borrowing; (vii) a copy of each of its annual financial reports including a balance sheet, profit and loss account and notes thereto certified by a recognized accountant not later than 180 days after the financial year end; (viii) such other reports and information in connection with our operations to Government Authorities as be reasonably required. We are entitled to surrender all or any part of our interest in the lease area upon providing proper notice to the Government of Ghana. We have the right to terminate our interest in each mining lease if the subject mine can no longer be economically worked, by giving not less than nine months' notice to the Government Authorities, without prejudice to any obligation or liability incurred prior to such termination. The Government of Ghana has the right to terminate our interest in the mining lease if (i) we fail to make payments when due; (ii) contravene or fail to comply with terms and conditions of mining lease (however, we have three months to remedy from the notice of such event); (iii) become insolvent or commit an act of bankruptcy; or (iv) submit false statements to the Government Authorities. - 42 - The mining leases further provide that XG Mining shall report forthwith to the Minister, the Chief Inspector of Mines, the Director of Geological Survey and the Chief Executive of the Minerals Commission in the event it discovers any other minerals in the lease area, who in turn will provide XG Mining with the first option to prospect further and to work the said minerals subject to satisfactory arrangements between made between XG Mining and the relevant government authorities. MINING, PROCESSING AND RECLAMATION AT OUR KWABENG AND PAMENG PROJECTS INTRODUCTION TO PLACER GOLD MINING Placer gold mining is the mining and processing of gold deposits that are generally formed by the weathering of lode gold deposits and the transportation of the resulting weathered materials over relatively short geological time periods into a stream or river system where the gold is generally sorted by the action of water to the bottom of the gravel and sand beds of the river or stream system. During the course of this depositional and sorting process the gravel and sand beds may be re-worked continuously by the movement of the river or stream within its channel or valley. The gravel and sand beds may also be covered over by other non-gold bearing materials such as wind blown clays or silts and the action of floods causing further deposition of materials. Normally, and as is the case at the Kwabeng and Pameng Projects, the greatest concentration of gold particles are found in the gravels and sands at the very bottom of the floodplain of the river or stream which lie directly on top of the bed rock underlying the floodplain. An exploration program was carried out by the previous owners to identify the layers of gravels that contained gold particles by the systematic digging of pits though the layers of material in the floodplains of the various streams located on the concessions and processing the materials with simple gravity gold recovery devices to determine the gold content of the gravel layers and to estimate the volume of the gravels present on the properties (also see "Studies and Evaluations"). These gold bearing gravel and sand deposits have traditionally been mined through the centuries using hand digging and gold panning methods and lately by the use of heavy earthmoving machinery such as bulldozers, hydraulic excavators and haul trucks, where the materials that are barren of gold are removed and the gold bearing gravels and sands are extracted and processed to recover the gold particles. In some cases these deposits have also been mined and processed with the use of bucket ladder dredges which are self contained digging and processing barges that float on the rivers and scoop out the gravels and sands to be processed on board the dredge and recover the gold. The gold recovery process in each case is still the same, whereby having washed and scrubbed the gravels and sands free of any sticky lumps of clay and silt and having screened and sieved the gravels to a processable size fraction, the force of gravity is used in devices that exploit the difference in the specific gravity of the gold particles and the gravel and sand particles. No chemical substances are used in the recovery of the gold from the ore since the particles of gold in a normal placer deposit are of large enough size to be amenable to gravity recovery alone, which is not the case for many load or hard rock deposits. It is these gravel layers, which make up the historical proven reserves located within the floodplains of the various streams on the Kwabeng and Pameng concessions that our Company will mine and process to extract the gold for eventual sale and the generation of revenue and profit. - 43 - MINING PROGRAM INTRODUCTION Our Company's plan calls for the mining of the reserves at our Kwabeng and Pameng Projects by the shallow open pit method with the use of heavy earthmoving machinery which will include bulldozers, hydraulic excavators, wheel loaders, haul trucks and motor graders. We have not yet determined whether the mining fleet of equipment will be acquired, owned and operated by us or whether we will make use of one of the many mining contractors in Ghana to carry out the mining, ore hauling and reclamation activities required to extract the reserves on a profitable basis. In any case, the activities involved in the process will be the same and are herein described in chronological order. Crop Compensation The floodplains of the rivers and streams located on the Kwabeng and Pameng concessions and that have been designated as forming part of our Company's proven ore reserves, are used by some of the local populace to plant subsistence farms consisting of a variety of seasonal crops such as tomatoes, peppers, cassava and plantain. In some areas, more significant crops such as cocoa and oil palm are also grown, however the majority of the vegetation located on the floodplain is secondary and tertiary forest growth. Prior to the clearing of any of the flora on the ore reserve areas, our Company will engage the services of the Government's Crop Compensation Board to enumerate the various farms and crops and assess the compensation to be paid to the farmers. The Crop Compensation Board is a government agency tasked with the overseeing of the compensation to farmers who lose crops to any industrial enterprise. Once the enumeration of an initially large area of the Awusu Stream ore reserve has taken place and the compensation paid we anticipate moving our machinery onto the compensated "block" and begin the process of clearing the vegetation and topsoil. This enumeration process continues throughout the life of the project as further blocks of reserves are prepared for the mining phase. Vegetation and Topsoil Removal The vegetation is then removed from the ore reserve block using a bulldozer and hydraulic excavator and is pushed and piled to the side of the floodplain as space allows. The top 30 centimeter layer of topsoil is also removed with the bulldozer and pushed and piled to the side of the floodplain where it is stored for later re-use in the land reclamation process. Stream Diversion A new stream channel is then dug, using a hydraulic excavator, along the length of the cleared reserve block along one far side of the floodplain and effectively off the main channel of reserves. The new stream channel is then connected to the outgoing existing stream channel at the far downstream of the ore reserve block and then connected to the incoming existing stream channel at the far upstream end of the reserve block, effectively causing the diversion of the stream. This is necessary to be able to ensure that our operations have little to no effect on the flow of water in the stream channel. The newly cleared ore reserve block, which can be up to 2 kilometers long and as wide as the whole floodplain, is now ready for the mining process. - 44 - Overburden Removal, Ore Extraction and Haulage The upper layers of material including the dry clay/silt, sand and layers of gravels that are either barren of gold or have too low a gold content to be economic are termed as overburden. We plan to remove this material by the hydraulic excavator and bulldozer and loaded initially into the haul trucks for hauling away to a temporary overburden dump site close to the initial excavation. We plan for supervision of this process by our Company's geologists to ensure that the only overburden will be carried away and not any of the economic ore. Once the layer of economic ore has been reached, which we plan to be determined by our Company's geologists, we then plan to dig out the ore by the hydraulic excavator and then loading it into the haul trucks for transport to the Plant for storage in the ore stockpile and eventual processing by the Plant. Generally, at our Kwabeng and Pameng Projects these excavations are no more than 6 meters deep and can be as shallow as 4 meters. During this excavation process, there is usually water ingress into the mining pit. We plan to pump out the pit to a holding pond where we then plan to pump it to our Company's settling ponds or impoundments in order for the solids to settle out and the clean water recycled to the Plant water supply pond upon which it is floating. We expect to obtain a considerable portion of our Plant process water supply from this water source thereby reducing its dependency on the water in the streams. Once the ore has been removed from the pit within the immediate reach of the hydraulic excavator it moves over slightly and begins the process again. We then plan to extract the ore down to the bedrock layer which is very visibly apparent due to the large texture and color change and the bedrock layer will then be checked by the geologist to ensure that all of the gravel ore has been removed. As the mined out pit increases in area, due to the continued extraction of the ore and overburden, with larger areas of "clean" bedrock exposed, we anticipate that the excavator will then stop loading the upper overburden layers into the haul trucks and instead we plan that the excavator will begin to cast the overburden within its immediate reach, back into the mined out pit, thereby exposing further ore for extraction and saving the cost of hauling away and stockpiling the overburden. Once the haul trucks have dumped their loads of ore into the ore stockpile immediately adjacent to the Plant, we anticipate they are then loaded with the tailings discharged at the rear end of the Plant (see Ore Processing section below), which they then haul back to the pit. These gravel tailings are then dumped at strategic locations at the mined out pit and the haul trucks then continue on to be loaded with ore for the return trip back to the Plant ore stockpile. This continuous process continues to advance downstream away from the Plant. As the mining pit advances downstream away from the current plant location, a strip of the floodplain will not have been refilled with overburden and tailings from the Plant, and will be kept open as a trench. At strategic points the trench will be allowed to fill with water to a depth of 2.5 meters and the Plant we plan for the Plant to be floated down stream in the trench to bring it closer to the reserve blocks being mined thereby reducing the haul distance between the active mining pit and the Plant. The Plant is independently mobile and is equipped with winches that are used to propel it across the body of water in which it floats. Our Company intends to construct haul roads within the floodplain and the terraces that flank the floodplain with the use of a bulldozer and motor grader. We plan to cap the haul roads with dry fine tailings from the Plant to make them weather resistant and we then plan to use a quality sufficient for the haulage of ore to the Plant and tailings back to the mining pit. We plan to carry out the foregoing with respect to mining of all the streams and floodplains in our concession that make up any proven ore reserve. - 45 - Reclamation, Re-contouring and Re-planting As can be seen the mining method is one that incorporates a large portion of the reclamation process as an integral part of the ore extraction and haulage process, with almost all of the material extracted being re-emplaced in the floodplain. Once the mining pit has advanced downstream a suitable distance and the Plant has been floated in its trench closer to the active mining pit, the areas of the floodplain that have been essentially left behind and refilled with the overburden and tailing from the Plant, including the Plant trench, are then re-contoured using a bulldozer and motor grader. A new stream channel is re-emplaced in the mined out and re-contoured block and the stream re-introduced into it. The topsoil that was previously stockpiled is then spread back over the re-contoured area. Our Company then plans to assist the natural re-vegetation process, by replanting indigenous tree species seedlings that we anticipate will be grown in our Company's seedling nurseries. We intend that various nitrogen fixing species of plants and rapid growing grasses will also be planted to consolidate the newly spread topsoil. This process is our anticipated cost reclamation plan ("RECLAMATION PLAN"), which is currently the subject of an application and Environment Impact Assessment process we are engaged in with the EPA. It is usual for the EPA to require that a company monitor the reclamation process for a period of three years upon the conclusion of the reclamation. The cost estimate for reclamation of disturbed areas depends basically on one or more of the following factors: o nature of deposit and degree of disturbance; o handling of mined material; and o end use of reclaimed land. The proposed reclamation estimates will be arrived at after our consultation with the EPA. Negotiations are based on other projects, site visits to reclaimed lands and review of related literature. The estimated cost for reclamation is $1,365,440 for the various activities which include backfilling, leveling, contouring and re-vegetation take into consideration: o labour costs; o cost of seedlings; o equipment costs; and o fuel costs. We anticipate that we will finance the rehabilitation and closure of our mining operation at our Kwabeng Project from revenues from this Project as well as from cash flow. Our Company is required, for reclamation bonding, to provide an annual detailed cash flow analysis to the EPA. Following our receipt of the relevant EPA permit, the reclamation bond will be negotiated with EPA based on the above and we anticipate that it will be posted with an insurance company, bank or a bonding house once the amount has been determined at which time XG Mining will then arrange the bond. Together with the bond, the EPA requires our cash payment, based upon a negotiated percentage of the bond, as soon as the reclamation costs have been agreed to. Sixty days thereafter, posting of the bond must be in place. We intend that the reclamation of the settling impoundments will also take place as each of them become full of solids and past their useful life. The impoundments are constructed with earth dams on the terraces immediately adjacent to the floodplain, to form large ponds approximately 3 meters deep. Once full of solids these de-commission impoundments will be allowed to dry and we plan that each will be contoured over using a bulldozer and hydraulic excavator. We then plan to replant with tree seedlings, grasses and nitrogen fixing species of plants to assist the natural re-vegetation process. - 46 - ORE PROCESSING Scrubbing, Screening and Ore Preparation The gold bearing gravel or ore, having been hauled from the mine pit by the haul trucks will be loaded into the Plant using a rubber tired wheel loader from the ore stockpile located immediately adjacent to the Plant. The ore bin that is an integral part of the processing equipment on the Plant is fitted with high pressure water nozzles that spray onto the ore which washes onto the primary screen deck which is a sieving or screening device which sieves away the large boulders and stones (plus 200 millimeters) (screen oversize) which are rejected onto a conveyor carrying this screen oversize to the rear end of the Plant and ejected into a pile. The smaller particles of the ore (minus 200 millimeters) and the water (screen undersize) fall though the screen bars and enter into the rotating scrubber barrel as a mixture of water and ore. The rotating scrubber barrel rotates rapidly much like a large cement mixer which causes the gravels, sands, silts and clays in the ore to be fully washed and scrubbed clean and therefore virtually free from lumps of silt and clay which can trap the contained gold particles. This mixture of washed gravel and water then exits from the opposite end of the scrubber barrel and is spread over the secondary vibrating screen deck which as with the primary screen deck, separates the ore water mixture according to particle size. The gravel particles that are larger than 7 millimeters in diameter (screen oversize) stay on the surface of the screen and are washed clean with jets of water at which point they are then ejected onto a conveyor belt which ejects the screen oversize along with the screen oversize from the primary screen deck, from the rear end of the Plant to be collected for transportation back to the mining pit for refilling and reclamation. All of this ejected material, due to the vigorous scrubbing action of the scrubber barrel, is free of any alluvial gold particles and is at this point considered as waste or tailings. The gravel particles that are smaller than 7 millimeters in diameter (screen undersize) fall through the screen deck, along with the majority of the water and this resulting mixture of washed gravel, sand, silt, clay and water (ore slurry) is collected in a sump underneath the screen. The ore slurry is then pumped using a heavy duty centrifugal slurry pump and a rubber lined hose to hydrocyclone separation device which removes the very fine particles of silts and clays from the slurry, prior to its introduction the gold recovery section of the Plant. The hydrocyclone separation devices do not remove gold from the slurry and are used to reduce the amount of ore and water reaching the gold recovery plant and to improve its recovery characteristics. The resulting high density or thick slurry that is discharged from the hydrocyclone separation devices is fed directly in to the three stage IHC radial jig recovery section. The majority of the water that entered the hydrocylones along with the ultra-fine particles of silts and clays (minus 150 microns) are rejected by the hydrocylones to a pipe which discharges this dilute non-gold bearing slurry to be transported by ditch or pipeline to the fine tailings settling impoundments or ponds, where the solid portions of the slurry is allowed to settle to the bottom of the impoundments or ponds, the clear water is drawn off and pumped back to the pond in which the Plant is floating, for re-use. Gold Recovery Although there are many different devices to recover free gold particles from any given ore whether placer gold or hardrock such as sluice boxes, jigs centrifugal concentrators and most of these devices have been in use for many decades, the Plant is equipped with an IHC radial jig gold recovery section. The IHC radial jig gold recovery section is a three stage system of jigs which are mechanical devices that make a separation of solid particles by taking advantage of the large difference in specific gravity of the gold particles and the particles of gravels, sands and silts. Placer gold particles generally have a specific gravity of between 15 and 18 whereas the gravel sand and silt particles that is also - 47 - contained in the ore have a specific gravity of 2.5 to 5.0 depending on the minerals present. As the ore transitions through the three stages of the IHC radial jig section, the concentration of gold particles to ore particles is increased and at each step more of the ore particles are removed and sent to the tailings pile at the rear end of the Plant. This process is continuous and results in a gold concentrate which is discharged from the third stage of the IHC radial jig section which is stored in locked steel boxes and collected from the Plant under the supervision of management and transported to the gold refining room at our Field Camp. Gold Room Operations We plan that the gold concentrate collected from the Plant will be taken to the secure gold refining room at the Field Camp where it will be subjected to a further concentration and cleaning process. We anticipate that the gold concentrate will be cleaned of remaining ore particles using a centrifugal concentrator which produces a gold concentrate which is approximately 90% gold particles which can then be dried, weighed and recorded and stored in our Company's safe. We plan that after one week of gold production from the Plant, the clean gold particles that accumulate and are stored will be then mixed with a borax flux compound and fired in our Company's gold smelting furnace. We anticipate that the gold will be melted in the furnace and the remaining non-metal impurities will be removed by the flux compound and the liquid gold will be poured into moulds and allowed to cool to form dore gold bars with an anticipated gold content of approximately 93%. We anticipate that this process will be carried out under the supervision of a Ghana Customs Officer who will record the details of the gold bar and seal the bars in containers and provide the Customs documentation for the export of the gold bars to a specialized refinery. Gold Export and Sales We plan to enter into a refining and sales agreement (the "REFINING AND SALES AGREEMENT") with an internationally recognized gold refining company (the "REFINER") for the sale of our gold on a regular basis. The Refining and Sales Agreement will be subject to the approval of the Minerals Commission, the Minister of Lands, Forestry and Mines and the Bank of Ghana. In addition to our obligations under this agreement, proceeds from the sale of the gold produced (the "GOLD PROCEEDS") will be subject to a foreign exchange retention agreement (the "FOREX AGREEMENT") to be entered into with the Government of Ghana and a trustee bank. Pursuant to the Mining Act, all Gold Proceeds must be returned to Ghana, except where a retention level has been negotiated between XG Mining and the Government of Ghana as evidenced by the Forex Agreement. Under the Mining Act, a retention level refers to permission to be granted specifically by the Minister of Finance to XG Mining as a net foreign exchange earner to retain a specified percentage which shall not be less than 25% of its Gold Proceeds in an off-shore account (the "EXTERNAL ACCOUNT") to be opened with a trustee bank (the "ACCOUNT TRUSTEE"). The funds in the External Account are required to be used by XG Mining specifically for a) the acquisition of spare parts; raw materials, machinery and equipment b) debt servicing and dividend payment c) remittance in respect of quotas for expatriate personnel; and transfer of capital in the event of a sale or liquidation of the mining operations of XG Mining. Prior to entering into the Forex Agreement, based upon our mine plan, we must make a formal written submission to the Minerals Commission stating, among other things, (i) what we intend to mine over the course of one to two years; and (ii) our anticipated cash flow projections including (a) anticipated revenues from gold sales; (b) offshore financial commitments; (c) debt servicing costs (if applicable); (d) operational costs including payments to consultants; and (e) our financial obligations in Ghana including equipment purchase or lease costs and overhead costs including payments to employees and consultants. Based on the foregoing, the Minerals Commission will then make a recommendation to the Minister of Finance as to the retention level to be granted to XG Mining. Upon approval being - 48 - obtained from the Minister of Finance, XG Mining will enter into the Forex Agreement with the Government of Ghana, the Bank of Ghana and the Account Trustee who will act as trustee for the External Account to ensure proper distribution of the Gold Proceeds in accordance with the Forex Agreement. Pursuant to the Mining Act, the Government of Ghana and XG Mining may also enter into a stability agreement (the "STABILITY AGREEMENT") pursuant to which the Government of Ghana will grant and give XG Mining certain assurances and undertakings which will ensure that for a period up to 15 years from the date of the Agreement, XG Mining will not be adversely impacted by any change in the legal and fiscal regime relating to mining that existed at the time the Stability Agreement was entered into. Based on similar agreements previously made between the Government and other mining companies, the Forex Agreement or the Stability Agreement may also contain warranties and confirmations to XG Mining that, in accordance with the Mining Act: (a) it shall be entitled to establish and maintain the External Account and receive into it: (i) any equity or capital contribution in foreign exchange made at any time by the shareholders to XG Mining; (ii) all credits or loans in foreign currency that may be granted to XG Mining from time to time; provided that XG Mining shall give to the Bank of Ghana notice of and obtain approval for any loan or credit it intends to obtain for the purpose of the mining operation. In accordance with the Mining Act: (a) the Government of Ghana shall be entitled to a 10% interest in all the rights and obligations of XG Miming for which no financial consideration is payable by the Government of Ghana and which interest shall be maintained and assured to be always equal to 10% of the total rights and obligations of XG Mining throughout the life of the project; (b) the Government of Ghana reserves the right to acquire at any time, a further 20% interest in XG Mining without prejudice to such further participation by the Government of Ghana as may be agreed upon by XG Mining; (c) the 20% interest to be acquired by the Government of Ghana shall be paid for in US dollars or other currency to be specified by XG Mining at a price agreed upon by the parties or at the fair market value thereof at the time of the exercise of the option, or as may be determined by arbitration and in connection herewith the Government of Ghana shall give XG Mining reasonable notice of its intention to exercise its option to purchase any part or all of the said 20% interest; (d) the Government of Ghana may nominate any agency or body as its agent to hold all or any part of its interest in XG Mining; (e) the regulations and other documents of XG Mining shall be amended to reflect any interest acquired or purchased by the Government of Ghana in XG Mining. For so long as XG Mining follows the procedure for marketing gold or other minerals produced by XG Mining as may be approved from time to time by the Bank of Ghana acting on the advice of the Minerals Commission, the Government of Ghana may undertake in the Stability Agreement that it shall take no preemption action pursuant to its statutory pre-emption rights under the Mining Act. The Stability Agreement requires Parliamentary approval. The foregoing matters, including obtaining the requisite Parliamentary approval of the Stability Agreement, can take up to three months or longer. With respect to any revenues generated from the Bulk Test to be conducted at our Kwabeng concession and pending the negotiation of a Stability Agreement, Forex Agreement and a Gold Refining and Sale Agreement, we must obtain special permission to sell any gold processed to a licensed local buyer in Ghana. Sales of Gold From the Plant, we plan to send gold concentrate to the laboratory located at our Field Camp where it will then be melted and poured into dore bars. The bricks will then be sent under armed guard to the airport in Accra for transport to a refinery. During the 1990's prior to our acquiring the 90% controlling share position of XG Mining, XG Mining sold its production to Johnson Matthey Plc, one of - 49 - the market leaders in gold refining. We have not yet identified any purchasers for any gold that we intend to produce. ANCILLARY OPERATIONS KWABENG FIELD CAMP Our Company already possesses a fully operational and well maintained Field Camp comprised of office, administration accommodation and workshop facilities located on the Kwabeng concession and is accessible by paved road located approximately 2 hours drive from the capital city of Accra. Our Field Camp was built and maintained by the previous owner which we plan to form the base of operations for our Kwabeng and Pameng Projects. The Field Camp is currently operated by generators since the area of our concession is not yet connected to any electrical power generation facility. The Field Camp is within cell phone coverage and can be supplied with electricity from the national grid, which lines run along the road accessing the Field Camp. We anticipate that all of our senior staff will be accommodated in the Field Camp with the junior staff finding accommodation in the surrounding towns and villages. FUEL AND SPARE PARTS SUPPLY We plan to deliver fuel from Accra by tanker and plan to discharge the fuel into and store the fuel in the fuel tank facility located within the Field Camp. We plan to purchase spare parts for all of our equipment either locally or from suppliers overseas and store such parts in the secure spare parts warehouse located at the Field Camp. DEPARTMENTAL WORKSPACE We anticipate, for the most part, hiring our Company's engineering staff locally due to the abundance of highly skilled mining professionals in Ghana. There is adequate office space at the Field Camp for our anticipated mine planning and engineering, geology, surveying, environmental, processing, equipment maintenance and other departments. EQUIPMENT MAINTENANCE Depending upon whether we elect to own and operate our own earthmoving equipment fleet or not, then the maintenance of that fleet will be carried out in the workshops located within the Field Camp. At the time when we make our decision to own and operate an earth moving equipment fleet, we plan for some re-tooling and re-equipping of our workshops to suit the equipment that we anticipate being utilized for our mining operations. If our Company decides to make use of a mining contractor to carry out the earth moving at our Kwabeng and Pameng Projects, then we anticipate leasing the workshops to the contractor as part of the contract. PERMITS REQUIRED PRIOR TO COMMENCEMENT OF GOLD PRODUCTION In order to commence gold production at our Kwabeng and Pameng Projects, we must first obtain a permit (the "EPA PERMIT") from the EPA. We have engaged the services of Bio Consult Limited ("BIO CONSULT"), who are environmental management consultants, to assist us in the facilitation of obtaining the EPA Permit, initially for our Kwabeng Project. Bio Consult's consulting team includes an environmental specialist, a mining engineer, a sociologist; an environmental technician and a hydrogeologist. Obtaining an EPA Permit requires completion of the following steps: - 50 - 1. Conduct a baseline assessment to determine the baseline environmental conditions, including: a. reconnaissance visit at the mining concession; b. preliminary consultation with stakeholders, including the: i. Atewa District Assembly; ii. traditional authorities; iii. Environmental Protection Agency; iv. Mines Department; and v. Minerals Commission; c. conduct environmental quality monitoring and analysis of samples; 2. Conduct an environmental scoping study to determine the scope or extent of the environmental impact statement ("EIS"). In preparation of the EIS, Bio Consult will follow the outline contained in the Environmental Impact Assessment Procedures. Among other things, the EIS will contain (a) a description of the proposed project; (b) a description of the existing environmental conditions; (c) an assessment of environmental impacts, unavoidable adverse impacts and alternatives to the proposed project; 3. Note terms of reference which will indicate the essential issues to be addressed in the EIS; 4. Prepare a reclamation plan; 5. Conduct a final consultation with stakeholders; 6. Prepare the EIS and submit to the EPA; 7. Review of the EIS by the EPA, who will provide comments with respect to required revisions; 8. Participate in a public forum with representatives of the EPA, the Minerals Commission, local chiefs of the Kwabeng area, farmers and residents, Bio Consult and XG Mining; 9. Finalize the EIS for review and approval by the EPA; 10. Obtain EPA approval; 11. Pay applicable processing and certificate fees; and 12. Obtain an EPA certificate within 24 days of the commencement of mining operations. Generally in Ghana, the EPA permitting process takes five to six months from initial application to final receipt. We submitted an application for the Bulk Test in June 2006 and an application for the full scale mining operations in October 2006. According to the foregoing general guideline of steps in the process to be conducted, obtaining the EPA Permit is subject to completion of steps 1 through 10 above and the payment of the processing fee (step 11) listed above. To date, we have completed steps 1 through 6 and step 8. There is no guarantee that steps 7 and 10 will be completed in a timely fashion. Failure to do so could result in delays in receiving the EPA Permit. After the Final EIS is approved by the EPA (step 10) and the applicable processing and certificate fees have been paid (step 11), an EPA Permit will - 51 - be granted. We anticipate and have obtained advice from the EPA that the EPA Permit will be forthcoming sometime in December 2006 which permit will grant us permission to conduct both the Bulk Test and our full scale mining operation at our Kwabeng Project. XG Mining must then obtain an environmental certificate within 24 days of the commencement of mining operations (step 12) and submit an environmental management plan within 18 months thereafter. To maintain the EPA Permit in good standing, we must submit an annual environmental report in such form as the EPA directs 12 months from the date of the commencement of mining operations and every 12 months thereafter. We plan to follow the identical process with respect to obtaining an EPA Permit to conduct a full scale mining operation at our Pameng Project. Water Commission Permit We also require permission from the Water Commission to abstract water for our processing on our Plant. The water will be obtained from a separate stream. Any abstraction of water for mining, industrial, irrigation and hydropower requires a permit from the Water Commission. There is a threshold of water supply that cannot be exceeded as this water is used domestically and we cannot contaminate the water supply from our mining activities. The fee to obtain this permit is a minimum of 3 million cedis (US$331). The amount of water permitted and consumed for abstraction is paid for on a quarterly basis. We anticipate that we will abstract 200 cubic meters per hour at a cost of 10 cedis per cubic meter. Based upon a monthly usage of 600 hours times 2,000 cedis per hour, the monthly cost would be 1,200,000 cedis per month for a quarterly payment of approximately 3,600,000 (US$398). We will continue to have an adequate water supply as long as the rains occur in the Kwabeng area, however, there is another stream that is not used domestically and the local chiefs of the Kwabeng area have poured libations and the water from this stream has been redirected into the dam area. In the event that there is an adequate supply of water from the rain, then no water abstraction would be necessary for our mining operation. At the commencement of our mining operation, we only expect to be washing the placer gold 10 to 12 hours per day and may not have to abstract any water from the domestic stream for several months or until such time that we increase washing to 20 hours per day. We are advised by the Water Commission that the issuance of their permit occurs soon after our receipt of the EPA Permit, however as the dam is presently filling and the rains are still occurring at the Kwabeng area, our receipt of the Water Commission permit will not delay the commencement of our mining operations. Capital Expenditures To commence production at the Kwabeng and Pameng Projects, with a view to generating revenues, we anticipate capital requirements of approximately a maximum of $6,000,000 as set out below: Mining Equipment (1) ............. $ 3,025,000 Service Equipment ................ $ 900,000 Processing Plant ................. $ 900,000 Site Administration .............. $ 100,000 Environmental and Permitting ..... $ 75,000 Working Capital .................. $ 1,000,000 ----------- TOTAL CAPITAL EXPENDITURES ....... $ 6,000,000 =========== - 52 - (1) This capital cost contemplates the purchase of mining equipment, which includes bull dozers, excavators, dump trucks, a front end loader and motor grader, and will be reduced by $3,000,000 in the event that we decide to lease such equipment through third parties. The Kwabeng and Pameng Projects will continue to be in a care and maintenance mode, until such time that the required EPA Permits are obtained. In the meantime, XG Mining has commenced rehabilitating the camp located at our Kwabeng Project which includes installation of a communication system for Internet access, electronic mail, telephone and facsimile service and minor construction repairs. We anticipate that our full scale mining operation will commence at our Kwabeng Project prior to the end of 2006 and that we will be in a position to generate revenues during the first quarter period of 2007. Studies and Evaluations An extensive pit sampling program was undertaken in 1988-1989 which culminated in the original feasibility study for the Kwabeng Project by Minproc Engineers Pty. Ltd. ("MINPROC") in June 1989 entitled "Kibi Alluvial Gold Project". As part of this study, Minproc calculated a resource for the Kwabeng Project. This study was supplemented by another study undertaken by Minproc entitled "Review of Mining Operations and Alternatives for the Kwabeng Alluvial Gold Project" in September 1991. This study reviewed the overall operation and concluded that the mining and treatment concepts were sound but suggested a number of alternative technical solutions to deal with the operating problems encountered. Later, John Hayes ("HAYES"), an alluvial mining consultant, in association with Alluvial Dredging & Mining Services Ltd., performed an assessment of the potential for future development of the Goldenrae Project in January 1994. His report, "Goldenrae Mining Company Limited, Technical Review", concluded that the reserve estimates were accurate and that reviving the operation was justified. In May 1994, ITM Corporation Ltd. provided a more comprehensive review of the previous operations and proposals for redevelopment in a document entitled "Goldenrae Alluvial Gold Project Information Memorandum". In April 1996, Alluvial Dredging & Mining Services Ltd. presented a three-part proposal for mining the Kwabeng Project based on a new hybrid mining method. The reports were entitled: (a) "Study for Dry Mining the Kwabeng Reserves in Combination with a Floating Treatment Plant (An Alternative to the Past Wet Mining Operation)"; (b) "Study for Dry Mining the Kwabeng and Pameng Reserves in Combination with a Mobile Treatment Plant"; and (c) "Preliminary Study for Dry Mining the EQ Reserves in Combination with a Mobile Treatment Plant". - 53 - In March 2006, our Company engaged Rae International ("RAE"), an alluvial (placer gold) mining consultancy, to update the proven reserves. Rae presented its evaluation of the Kwabeng Project (the "RAE EVALUATION") based upon existing studies and data they gathered in the field. The Rae Evaluation incorporated current market, political, environmental and regulatory conditions in Ghana and was titled "Goldenrae Evaluation Report". Rae's evaluation program involved a review of old reports and data (including items (a) to (c) above) and a check pitting program of 12 pits to compare grades and gravel thicknesses at random locations on each of the main placer gold deposits on: 1. the Aswusu River (3 pits at the Kwabeng Project); 2. the Merepong River (6 pits at the Pameng Project); and 3. the Birim River (3 pits at the Apapam Project); (collectively, the "12 PITS"). The pits on the Awusu River were close to the 12 check pits sunk by the former operator (the "PRIOR PITS") in order to compare grades with the earlier work. Results of the Prior Pits were also reviewed by Rae and summarized in its report. The 12 Pits completed in the current work show a large variation with the Prior Pits from the same area. In general, the current results show higher grades but a few are lower. There also appears to be a larger variation in gravel thicknesses than would be expected with such closely spaced pits. The Rae Evaluation (i) suggests that there is little doubt that the grades are understated, however, the results from the current pitting (12 Pits) as well as the Prior Pits should not be extrapolated across the entire resource base; (ii) states that it is possible that many of the higher grade areas (mostly in central and upstream areas), may have grades 30% higher than the existing estimates; (iii) states that further downstream, the real grades may be only 10% higher than the earlier estimates as the proportion of coarse gold reduces along with the grade; (iv) states that the recent work conducted, especially at the Pameng Project, indicates the potential to add additional volumes to the resource base, which will increase the amount of contained gold, possibly as much as 10%. The Rae Evaluation further states that it would be reasonable to expect the additional placer gold resources to be of comparable size (200,000 to 300,000 ounces) to the historical proven reserves currently existing at the Kwabeng and Pameng concessions. 2006 EXPLORATION PROGRAMS We entered into a Phase I exploration contract with CME with respect to our Apapam Project whereby CME conducted silt sampling, grid establishment and soil geochemical surveying, prospecting and will create a geodatabase and make recommendations for future work at our Apapam Project. The work program for this Project was completed in September 2006 at a cost of approximately $100,000. The results of this program are not available at this time. THE BANSO AND MUOSO PROJECT Our Banso and Muoso Project consists of two concessions totaling 107.32 sq km. We hold one prospecting licence, as more particularly described hereunder, for the Banso and Muoso concessions which is situated approximately 80 kilometers north of Accra in the Eastern Region of Ghana. These concessions lie in the Kibi-Winneba Gold Belt on the western flanks of the prominent Atewa Range, which is underlain by Birimian greenstone, phyllites, meta-tuffs, epi-diorite, meta-greywacke and chert. The valleys, over which the concessions are located, are underlain by thick sequences of Birimian - 54 - metasediments. The north-western end of the Atewa Range is the type-locality for the Birimian metasediments and metavolcanics. This area is one of the oldest placer gold mining areas of Ghana, dating back many centuries. Historical exploration and mining has mainly focused on placer gold. Prior to our acquisition of the Banso and Muoso concessions, to the best of our knowledge and based on mining records in Ghana, there has never been a detailed documented bedrock exploration program conducted on these concessions. BANSO AND MUOSO PROSPECTING LICENCE Our wholly-owned subsidiary, XGEL entered into a prospecting licence with The Government of the Republic of Ghana (the "GOVERNMENT OF GHANA") on September 24, 2001 covering a licensed area of 107.32 sq km (the "LICENSED AREA") 80 kilometers north of Accra in the East Akim District of the Eastern Region of the Republic of Ghana. This prospecting licence has a current term expiring on March 1, 2007 at which time, in order to obtain a further renewal of the licence, we will be required to submit (i) a comprehensive terminal report including logs of pits and assay results; (ii) a detailed financial report; (iii) a site plan indicating the areas to be retained and those to be shed off; (iv) evidence of annual ground rent payments; and (v) an environmental permit from the EPA. We have been granted the right and licence by the Government of Ghana to conduct geological and geophysical investigations in the licensed area to determine adequate quantity of geologically proven and mineable reserve of gold and diamonds (directly or through agents, contractors or sub-contractors). The terms and conditions of the prospecting licence include, among other things, our requirement to (i) conduct a preliminary pitting program (Phase I); (ii) conduct a reserve definition program (Phase II); and (iii) prepare an engineering/feasibility report (Phase III); (iv) provide an annual report in prescribed form within 60 days after each calendar year to various mining regulatory bodies and government authorities (collectively, the "AUTHORITIES"). We have the right to (i) assign or mortgage our interest in the prospecting licence, subject to obtaining the consent of the Government of Ghana who may impose certain conditions in connection therewith; (ii) surrender our interest in the prospecting licence; and (iii) renew the term of the prospecting licence for a period of two years or such other renewal period may be granted in accordance with Minerals and Mining Law 1986, PNDCL 153. The Government of Ghana has the right to terminate the prospecting licence in the event we (i) fail to make payments when due; (ii) contravene or fail to comply with terms and conditions of prospecting licence; (iii) become insolvent or commit an act of bankruptcy; or (iv) submit false statements to the Government of Ghana. In any of the foregoing events, we have 21 days in which to remedy any of these occurrences. If upon expiration of prospecting licence, we have fulfilled our obligations and have established to the Government of Ghana that development of a mine from ore reserves established within the licensed area is economical and financially feasible, the Government of Ghana shall grant us with first option to (i) acquire a lease for purposes of mining in the licensed area of the Banso and Muoso Project; and (ii) participate in mining project in licensed area, subject to negotiation with the Government of Ghana of satisfactory terms for such licence and participation. REGIONAL EXPLORATION PROGRAM On July 4, 2004, we commenced the first exploration stage on these concessions with fieldwork ending on August 23, 2004. We contracted with CME to conduct the exploration program. Fieldwork included stream sediment sampling, line cutting, GPS surveying of the grid and soil sampling. Acquisition and interpretation of airborne geophysical data and satellite imagery was also undertaken. - 55 - RESULTS Results from the first phase of exploration were very encouraging with evidence of a bedrock gold source within both the Banso and Muoso concessions. Silt sampling indicated significant gold values, with soil sampling showing several significant anomalous zones. The anomalous zones appear to correlate with an interpreted contact between the Birimian volcanoclastics and metasediments. FURTHER EXPLORATION WORK On April 27, 2005, we further contracted with CME to conduct a second stage exploration program at our Banso and Muoso Project located at the Banso and Muoso concessions. The work program included detailed grid establishment and soil sampling, ground magnetometer surveying, updating the geodatabase and recommendations for future work. The purpose of this program was to determine areas of gold mineralization at the Banso and Muoso concessions that can be followed up with induced polarization surveys, trenching and diamond drilling. RESULTS Grid Establishment Grid placement was based on the results from the 2004 regional work program. Four grids were established in the areas of primary interest, one on the Muoso concession and three on the Banso concession. The grids on the latter concession are referred to as Area 1, Area 2 and Area 3. Soil Sampling Soil sampling was undertaken along all grid lines established during this work program. From the 6,961 established stations, 177 locations were not sampled due to possible contamination from villages, streams and/or swamps. A total of 6,516 samples were submitted for gold and 6,066 samples for arsenic analyses. A breakdown of the gold results per property area includes: o Muoso Grid ......................... 3,318 o Banso Area 1 Grid .................. 1,560 o Banso Area 2 Grid .................. 696 o Banso Area 3 Grid .................. 942 Results A total of 17 samples reported gold values over 1,000 ppb Au, ranging from 1,066 to 171,000 ppb Au, including 4 samples over 10,000 ppb Au. Muoso Concession At the southwest boundary of the concession several anomalies appear, the largest of which measures 350 meters in length and up to 300 meters in width. Values up to 17,740 ppb Au occur on L71+00E at station 139+50N. Immediately below this is an easterly trending anomaly having a length of about 300 meters and a width of about 75 meters with values up to 19,600 ppb Au on L71+00E at station - 56 - 136+75N. Further south are two smaller but significant anomalies with maximum gold-in-soil values of 1,400 and 154 ppb Au. Banso Concession The soil sampling program at Banso was successful in locating a number of gold-in-soil anomalies, the most significant of these is located about 400 meters NE of Abesim Township (i.e. Area 3). This anomalous zone has an average width of about 50 meters and a length of about 500 meters and follows the northeasterly regional geological trend. There are a few continuous gold-in-soil values outside this main anomalous zone including 414 ppb Au and 426 ppb Au between stations 113+00E and 113+25E on L16+00N. East of these values along the same line are two spot anomalies; 2,492 ppb Au (116+75E) and 354 ppb Au (117+50E). INTERPRETATION AND CONCLUSIONS Soil sample geochemistry has been completed over selected portions of the anomalous zones indicated by the 2004 regional sampling program. Work during the 2005 program suggests the presence of a bedrock source within both the Muoso and Banso concessions. At Muoso the most significant anomalies occur along the inferred location of the northeast-southwest trending dolerite dyke. Secondary anomalies occur to the east of this dyke and are oriented sub-parallel to the strike of the dyke. These may represent possible structural events (shears/faults) lying along geological contacts (planes of weakness). In the southwest portion of the grid, a possible north-south to northwest-southeast trending gold anomaly is coincident with inferred faulting in similar directions. In the southwestern area of the Muoso grid, two of the arsenic anomalies flank the sides of the north-south trending gold anomaly. At Banso, each of the three grids outlined two gold anomalies. The Area I anomalies trend northwest-southeast and occur at the junction of cross cutting structures. Within Area 2 and 3, linear gold anomalies trend northeast-southwest, parallel to the regional geological trend. The western most gold anomaly in Area 3 flanks the margins of a strong magnetic high (possible intrusive). Arsenic anomalies at Banso typically occur on hill/ridge tops with the gold anomalies flanking the sides of the arsenic anomalies. Within Area 3, gold anomalies also appear to flank the edges of a magnetic high anomaly, possibly an intrusive body. RECOMMENDATIONS The following stage exploration program is recommended and consists of: o An estimated 200 kilometers of grid to be cut at Muoso and Banso. This will include the extension of selected existing lines and the establishment of new ones. In addition, soil sampling, geochemical analysis, GPS and ground magnetometer surveys will be conducted. o A grid will be established within the eastern areas of the Muoso concession, and soil samples collected, to follow up on anomalous silt samples taken in the previous sample program. - 57 - o At Banso a grid will be cut within the northern portion to cover those areas that returned anomalous silt samples. Additional soil sampling is planned to confirm and further define the anomalous area. o Auger sampling to depths of 2.5 meters will be conducted on both concessions testing sites that returned greater than 100 ppb gold in soils. o Trenches are recommended at selected sites at both concessions to investigate gold-in-soil anomalies and the relationship the anomalies have to geology/structure. An estimated 300 meters of trenching, to 3.0 meter depth, is recommended. o Approximately 50 line kilometers of surface IP surveying may be carried out on priority areas as identified in previous sampling/work programs. We have entered into a Phase II exploration contract with CME incorporating some of the above recommendations. As the exploration program commenced in September 2006 and we do not expect completion until November, results are not available at this time. No ore reserves have been identified on the Banso and Muoso Project. THE APAPAM PROJECT Our Apapam Project concession lies within the Kibi-Winneba Gold Belt and is located in the immediate vicinity of the district capital of Kibi, approximately 75 km NNW of the nation's capital city of Accra. Access to the Kibi area is provided by the main Accra-Kumasi highway. Our Apapam Project covers approximately 33.65 sq km on the eastern flank of the Atewa Range along the headwaters of the Birim River. The Kibi-Winneba Gold Belt is characterized by a narrow sequence of Birimian metavolcanics underlying most of the Atewa Range, which is covered by an extensive laterite/bauxite capping, and surrounded by a thick package of Birimian metasediments dominating the flanks and the lower lying areas. Our Apapam Project covers the Birimian volcanic-sediment contact which represents a highly favorable environment for the hosting of lode gold deposits throughout Ghana. Although the Kibi Gold Camp (which is a general reference to the placer gold mining district) is best known for its extensive placer gold deposits, a number of isolated gold-bearing quartz veins in the district attracted limited development in the early 1900s. The Kibi Mine located at the northeastern extremity of our Apapam concession underwent underground development work from 1925 to 1927 and 1936 to 1938, to a depth of approximately 50 meters on a quartz vein referred to as the Clearing Reef, but it is unknown if any actual mining took place. Very little systematic exploration work for bedrock gold deposits has been conducted in the Kibi area since the 1930s. Recent exploration activity in the district appears to be limited to an airborne geophysical survey flown by Ashanti Goldfields and a regional lode-gold occurrence compilation undertaken by Sikaman Gold Resources - BHP Minerals in the mid-1990s. PROSPECTING LICENCE - APAPAM PROJECT. XG Mining entered into a prospecting licence with respect to our Apapam Project with The Government of Ghana on March 29, 2004 covering a licensed area of 33.65 sq km (the "LICENSED AREA") - 58 - 75 km NNW of Accra in the East Akim District of the Eastern Region of the Republic of Ghana. This prospecting licence has an initial two year term with renewal provisions. The current term has been renewed and expires on April 28, 2007 at which time we will be required to submit (i) a comprehensive terminal report including logs of pits and assay results; (ii) a detailed financial report; (iii) a site plan indicating the areas to be retained and those to be shed off; (iv) evidence of annual ground rent payments; and (v) an environmental permit from the EPA. We have been granted the right and licence by the Government of Ghana to conduct geological and geophysical investigations in the licensed area to determine adequate quantity of geologically proven and mineable reserve of gold and diamonds (directly or through agents, contractors or sub-contractors). The future planned work program at our Apapam Project will include, among other things, (i) conducting pitting/trenching programs; (ii) additional detailed soil sampling; (iii) bedrock mapping and sampling; (iv) possible IP surveys; (v) drilling to be contingent upon exploration results. We are required to provide an annual report in prescribed form within 60 days after each calendar year to various mining regulatory bodies and government authorities (collectively, the "AUTHORITIES"). We have the right to (i) assign or mortgage our interest in the prospecting licence, subject to obtaining the consent of the Government of Ghana who may impose certain conditions in connection therewith; (ii) surrender our interest in the prospecting licence; and (iii) renew the term of the prospecting licence for a period of two years or such other renewal period may be granted in accordance with Minerals and Mining Law 1986, PNDCL 153. The Government of Ghana has the right to terminate the prospecting licence in the event we (i) fail to make payments when due; (ii) contravene or fail to comply with terms and conditions of prospecting licence; (iii) become insolvent or commit an act of bankruptcy; or (iv) submit false statements to the Government of Ghana. In any of the foregoing events, we have 21 days in which to remedy any of these occurrences. If upon expiration of prospecting licence, we have fulfilled our obligations and have established to the Government of Ghana that development of a mine from ore reserves established within the licensed area is economical and financially feasible, the Government of Ghana shall grant us with first option to (i) acquire a lease for purposes of mining in the licensed area of our Apapam Project; and (ii) participate in mining project in licensed area, subject to negotiation with the Government of Ghana of satisfactory terms for such mining lease and participation. THE EDUM BANSO PROJECT Our Edum Banso Project consists of one concession totaling 20.60 sq km which is situated within the south Ashanti gold belt in the Western Region of Ghana approximately 235 kilometers west of Accra and 15 kilometers northwest of Takoradi, the regional capital. We hold our interest through an option agreement, as more particularly described hereunder in this section. Access to the Project is by asphalt from Accra to Takoradi and by gravel road from Takoradi to Edum Banso through Apowa. Internal access within the concession area is quite poor, however there are many foothpaths that interconnect the scattered settlements within the licensed area. Topography is gently undulating with moderate ridges scattered throughout the Project area. Range in relief is about 150 meters, with the highest elevation corresponding to the Birimian formation. The Hwine Butre River constitutes the dominant drainage in the area and some other second order streams flowing generally to the north and northwest. Being a tropical humid climate, the yearly temperature ranges from an average of 27(degree)C during May to November to an average of 34(degree)C from December to April with annual rainfall of about 1,250 millimeters. The major rainy season runs from May to July and the minor season from September to November while the dry season runs from December to April. - 59 - Agriculture within the district consists predominantly subsistence farming, oil palm and cocoa. Our wholly-owned subsidiary, XGEL entered into an option agreement dated October 17, 2005 (the "Adom Option Agreement") with Adom Mining Ltd. ("ADOM"), a 100% wholly registered Ghanaian company, who is the registered proprietor of a prospecting licence which Adom entered into with The Government of Ghana on May 8, 1991, covering a licensed area of 20.60 sq km located in the Western Region of Ghana (the "EDUM BANSO PROJECT") approximately 235 kilometers west of Accra and 15 kilometers northwest of Takoradi, the regional capital. This prospecting licence has a current term expiring on July 21, 2008. Previously, Newmont Ghana Limited ("NEWMONT") had entered into an option agreement with Adom in connection with the Edum Banso Project, however abandoned their interest. Under the terms and conditions of the prospecting licence, Adom has the right to prospect for and prove gold under or in the licensed area including the right to conduct such geological and geophysical investigations in the licensed area in order to determine an adequate quantity of geologically proven and mineable reserve of gold (directly or through agents, contractors or sub-contractors). Under the prospecting licence, the holder has the right to (i) assign or mortgage its interest in the prospecting licence, subject to obtaining the consent of the Government of Ghana who may impose certain conditions in connection therewith; (ii) surrender its interest in the prospecting licence; and (iii) renew the term of the prospecting licence for a period of two years or such other renewal period may be granted in accordance with Minerals and Mining Law 1986, PNDCL 153. The Government of Ghana has the right to terminate the prospecting licence in the event the holder of the prospecting licence (i) fails to make payments when due; (ii) contravenes or fails to comply with terms and conditions of prospecting licence; (iii) becomes insolvent or commits an act of bankruptcy; or (iv) submits false statements to the Government of Ghana. In any of the foregoing events, the holder will have 21 days in which to remedy any of these occurrences. If upon expiration of prospecting licence, the holder has fulfilled its obligations and has established to the Government of Ghana that development of a mine from ore and reserves established within the licensed area is economical and financially feasible, the Government of Ghana shall grant the holder with first option to (i) acquire a licence for purposes of mining gold in the licensed area of the Edum Banso concession; and (ii) participate in mining project in licensed area, subject to negotiation with the Government of Ghana of satisfactory terms for such licence and participation. At the time of execution of the Adom Option Agreement, we paid Adom $5,000 as consideration for entering into the agreement with us. We are required to pay Adom additional payments of $5,000 on the anniversary date of the Adom Option Agreement for each year that we hold an interest in such agreement. The term of the Adom Option Agreement is for five years. There are no other termination rights available to Adom. We are required to make an additional payment of $200,000 to Adom at the time of commencement of the production of gold in or on the Edum Banso Project; provided, however in the event less than two million ounces of proven and probable reserves are discovered in or on the Edum Banso Project, this payment shall be reduced to $100,000. Under the terms and conditions of the Adom Option Agreement, Adom has granted XGEL the sole and exclusive right and option to acquire all of its right, title and interest in the prospecting licence, which option may be exercised by XGEL at any time during the term. Adom has further granted XGEL the exclusive right of free and unrestricted access to the Edum Banso Project to explore, develop and, provided XGEL has exercised the option, to mine, - 60 - extract, remove and sell any and all ores, minerals, concentrates or other products from the Edum Banso Project. Upon XGEL's written election to exercise the option, Adom shall forthwith transfer the prospecting licence to XGEL, subject only to a reserved royalty of 2% of the net smelter returns ("NSR") from all ores, minerals or other products mined and removed from the Edum Banso Project and sold by XGEL. In the event less than two million ounces of proven and probable reserves are discovered in or on the Adom Project, the reserved royalty shall be 1% of the NSR. Adom has granted XGEL the exclusive right and option, exercisable by XGEL at any time to purchase the entirety of the reserved royalty for the sum of $2,000,000. No payment of the actual NSR shall be credited toward the reserved royalty purchase price. In the event less than two million ounces of proven and probable reserves are discovered in or on the Edum Banso Project, the reserved royalty purchase price shall be $1,000,000. Pursuant to the terms of an amending agreement entered into between the parties on October 19, 2006, XGEL has the right, without the prior consent of Adom, to assign or transfer its rights under the Option Agreement and the option to any affiliate or third party or to enter into a joint venture in connection therewith provided that any assignment, transfer or joint venture by XGEL shall be subject to agreement by the assignee, transferee or joint venture partner to be bound by the terms of this agreement. RESERVES There are no reserves reported on this Project. GEOLOGY The Edum Banso concession is underlain by basic to intermediate metavolcanic rocks, volcanoclastic rocks, greywackes and phyllites of the Upper Birimian Formation. These rocks are intruded by Dixcove suite granites in the north, mainly composed of hornblende granites, granodiorites, gabbros and diorites in the south. Similar intrusive granites in Ghana have been proven to host disseminated sulphide hosted gold mineralization. Two major thrust faults interpreted from aeromagnetic data run north by northeast through the project area. HISTORIC WORK The only gold production on the concession was from local miners working the auriferous gravels and quartz veins as reported by J.W. Lunn in the 1930s. Amercosa (formerly AngloAmerican) reportedly worked on the project in the late 1990's, however the results from this work are not published. St. Jude Resources, a Canadian public mining company, conducted geophysical surveys including magnetic and induced polarization surveys. The prospective structures identified in these surveys were followed up by geochemical surveys which included soil, trench and pit sampling. In 2003, Newmont conducted stream sediment surveying throughout the entire concession area. Results of the survey delineated one main anomalous gold zone that appears to coincide with a possible shear zone as inferred from the geophysics. In 2004, a soil sampling program was completed to follow up on the previously identified stream gold anomaly. 1,109 soil samples were collected along a north-south exploration grid. Several samples returned anomalous assays up to 600 ppb gold. - 61 - TARGETS Stream sediment sampling by Newmont defined a broad anomalous gold zone approximately 7 km long by 1.5 km wide, roughly conforming to the regional geological trend. Follow-up soil and rock sampling further constrained this broadly anomalous area into two distinctive anomalies, while geophysical interpretation suggests they are coincident with the surface expression of two major North-South oriented thrust faults. The entire structure remains prospective but these two anomalies represent immediate targets for follow-up exploration. RECOMMENDED WORK PROGRAM A minimum work program for this Project would include infill soil sampling. Control would be provided by an exploration grid cut at 200 m line spacing and 50 m station intervals. 50 line-km of grid would be cut in order to cover the targets. It is also recommended that additional detailed geological and regolith mapping plus prospecting and rock sampling be carried out. Contingent upon the results of the programs, a reverse-circulation drilling program (approximately 2,500 meters) may be required to test the best targets. The total cost for such a program would be approximately $155,000. To date, the Company has made no decision on whether it will proceed with this work. GHANAIAN LAW GENERAL Ghana is situated on the West Coast of Africa, approximately 600 kilometers north of the equator on the Gulf of Guinea. Accra, the capital city of Ghana, is located on the Prime Meridian. After a period as a British colony, Ghana achieved independence in 1957 and it is now a republic with a democratically elected government and a national constitution promulgated in 1992 (the "CONSTITUTION"). Ghana has a population of approximately 20 million people. English is the official and commercial language. The total land area of the country is approximately 238,000 sq km and the topography is relatively flat. Ghana has a tropical climate with two rainy seasons and two dry seasons each year. The legal and regulatory framework for mining in Ghana is set out in the Constitution and the Minerals and Mining Act, 2006 (Act 703) (the "MINING ACT"). Within this legal framework, the Ghanaian State is the owner of all minerals occurring in their natural state within Ghana's land and sea territory, including its exclusive economic zones. All minerals in Ghana are vested in the President, on behalf of and in trust for the people of Ghana. Thus, regardless of who owns the land upon or under which the mineral is situated, the exercise of any mineral right requires, by law, a licence to be granted by the Minister of Lands, Forestry and Mines (the "SECTOR MINISTER") who acts as an agent of the State for the exercise of powers relating to minerals. The Sector Minister is also authorized to exercise, within defined limits, powers relating to transfer, amendment, renewal, cancellation and surrender of mineral rights. The powers conferred upon the Sector Minister must be exercised contingent upon the advice of the Minerals Commission, which has the authority under the Constitution to regulate and manage the utilization of the mineral resources and co-ordinate policies in relation to minerals. The law specifies the forms of the mineral rights that the Sector Minister is empowered to grant, the duration of the grant, the size of the concession, and eligibility criteria for the grantee, as well as the procedure for the application for the mineral rights. The law also sets out in broad terms the rights and obligations of the holder of the mineral right and the terms and conditions upon which each mineral right grant should be made. A - 62 - mineral right grant is not transferable or tradable in any form except with the prior written consent of the Sector Minister. GHANAIAN OWNERSHIP AND SPECIAL RIGHTS Rights to explore and develop a mine are administered through the Minerals Commission, a governmental organization designed to promote and control the development of Ghana's mineral wealth. Generally, a body corporate may apply to the Minerals Commission on prescribed forms for a renewable exclusive reconnaissance licence for a specifice mineral for one year or an exploration licence granting exclusive rights to explore for a particular mineral in a selected area for a period of up to three years. To be eligible for the grant of a licence, the applicant must show that it has the requisite financial and technical capability to carry out the mineral operations in respect of which the licence is applied for in accordance with a costed work programme. The applicant must also show how the proposed mineral operations would contribute to the employment and training of Ghanaians in the mining industry. When exploration has successfully delineated a mineable mineral reserve, an application is made to the Minerals Commission for conversion to a mining lease, granting a company the right to produce a specific product from the concession area for a period of normally 30 years. Production must begin within two years of the date of granting a mining lease. Under the mining law, the Government of Ghana holds a mandatory 10% carried interest in all mining leases. The Government may also acquire such further interest in the mining operations as may be agreed with the holder of the mining lease. The Government of Ghana currently has a 10% carried interest in XG Mining and may acquire such interest as may be mutually agreed with the holder. The carried interest that the Government of Ghana holds in XG Mining entitles it to a pro rata share of future dividends (none have been declared to date), if any, from XG Mining once all capital is repaid, and the Government of Ghana has no obligation to contribute development or operating expenses in respect of the carried interest. If the Government of Ghana wishes to exercise its option to acquire an additional interest, it must first give reasonable notice and pay a mutually agreed price. If there is no agreement, the purchase price would be the fair market value of such interest at such time as may be determined by arbitration conducted in accordance with the Mining Act. The Government of Ghana could also acquire further interest in XG Mining on terms mutually acceptable to the Government and XG Mining. To date, the Government has indicated no intention to obtain additional ownership in any of our Projects. The Government of Ghana is entitled to acquire a special or golden share in any mining or exploration Company, including XG Mining or XGEL, at any time for no consideration or such consideration as the Government of Ghana and XG Mining or XGEL might agree. The special share would constitute a separate class of shares with such rights as the Government of Ghana and XG Mining or XGEL might agree. In the absence of such agreement, the special share would have the following rights: o the special share would carry no voting rights, but the holder would be entitled to receive notice of and attend and speak at any general meeting of the members or any separate meeting of the holders of any class of shares; o the special share could only be issued to, held by, or transferred to the Government or a person acting on behalf of the Government; - 63 - o the written consent of the holder of the special share would be required for all amendments to the organizational documents of the company, the voluntary winding-up or liquidation of the company or the disposal of any mining lease or the whole or any material part of the assets of the company; and o the holder of the special share would be entitled to the payment of a nominal sum of 1,000 Ghanaian Cedis in a winding-up or liquidation of the company in priority to any payment to other members and could require the company to redeem the special share at any time for a nominal sum of 1,000 Cedis. XG Mining and XGEL have not issued nor to date been requested to issue any such special share to the Government of Ghana. The Government of Ghana has a preemptive right to purchase all gold and other minerals produced by any mining company including XG Mining and XGEL. The purchase price would be such price as the Government of Ghana and the mining company might agree on, or the price established by any gold hedging arrangement between the mining company and any third party approved by the Government, or the publicly quoted market price prevailing for the minerals or products as delivered at the mine or plant where the right of preemption was exercised. The Government of Ghana may enter into agreement with XG Mining to take no preemptive action pursuant to its right to purchase such gold or other minerals so long as the mining company sells gold in accordance with certain procedures for selling gold approved by the Bank of Ghana and set out in a Foreign Exchange Retention Account Agreement (the "FOREX AGREEMENT"). GHANAIAN ROYALTY RIGHTS Under the laws of Ghana, a holder of a mining lease is required to pay quarterly a royalty of not less than 3% per annum and not more than 6% per annum of the total revenues earned from the lease area. The Government of Ghana determines the royalty percentage each year based on the ratio that the operating margin bears to the value of gold produced from a mining lease in that year. Based on the applicable Mineral Royalty Regulations of 1987 as amended by the Mining Act, the royalty is 3% when the operating ratio is 30% or less, and the royalty increases 0.225% for each 1% increase in operating ratio until the royalty reaches a maximum of 6%. GOVERNMENT REGULATION Except as referred to elsewhere in this Prospectus, there are no other U.S., Ghanaian, Canadian or other government regulations that are material to our Company. EMPLOYEES Our Company has no salaried employees. Our Chairman, Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), devotes approximately 90% of his time in consulting services to our Company. Our Vice-President, Exploration devotes approximately 50% of his time in consulting services to our Company. We further engage the consulting services of our Vice-President, Ghana Operations for our Ghanaian subsidiaries who devotes approximately 60% of his time to our Company. We also engage our Secretary and Treasurer with respect to corporate, accounting and administrative services. She devotes approximately 90% of her time in consulting services to our Company. - 64 - REAL PROPERTY AND FACILITIES We do not own any real property. All of our mining activities are currently conducted at project sites located in Ghana. Mining leases or prospecting licences to which we are a party, granting us the right to operate at our Kwabeng and Pameng, Apapam, Banso and Muoso and Edum Banso Projects, are described elsewhere in this Prospectus. Our administrative activities are currently conducted from our corporate head office, which we lease on a month to month basis, located at 6 Kersdale Avenue, Toronto, Ontario, Canada, MCM 1C8, which space is provided by our Treasurer and director. We pay rent of CAD$500 (US$443) per month. Our technical activities are currently conducted from our technical office located at House No. 15, Ade-Coker Road, East Legon, Accra, Ghana which we lease on an annual basis and pay rent of $1,000 per month. We also maintain a technical office located at 430 Westmount Avenue, Unit F, Sudbury, Ontario, Canada, P3A 5Z8, where our VPE and his staff conduct business and pay rent of CAD$500 (US$443) per month. LEGAL PROCEEDINGS We are not a party to any pending legal proceeding, nor are we aware of any legal proceedings being contemplated against us by any governmental authority. We are not aware of any legal proceeding in which any of our officers, directors, affiliates or security holders is a party adverse to us or in which any of them have a material interest adverse to us. A former consultant of our Ghanaian subsidiaries, XG Mining and XGEL, has brought an action for damages in the High Court of Ghana against our two subsidiaries with respect to an alleged wrongful termination of appointment. He is claiming for an amount of $172,000. We have been advised by our Ghanaian counsel that the court action is both frivolous and vexatious and has no merit. We are vigorously defending against the claims and have filed statements of defense on behalf of our two subsidiaries. The trial of this suit commenced on November 2, 2006. It is premature to comment on the outcome of the trial or whether we will be able to reach an amicable settlement with the plaintiff during the trial process. MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The following table includes the names, positions held and ages of our executive officers and directors. NAME AGE POSITION William Edward (Ted) McKechnie ... 59 Chairman, Chief Executive Officer, Chief Financial Officer and Director Rebecca Kiomi Mori ............... 56 Secretary and Treasurer and Director James Werth Longshore ............ 39 Director Yves Pierre Clement .............. 42 Vice-President, Exploration Alhaji Nantogma Abudulai ......... 63 Vice-President, Ghana Operations - 65 - WILLIAM EDWARD (TED) MCKECHNIE, B.A. Chairman, Chief Executive Officer, Chief Financial Officer and Director William Edward (Ted) McKechnie was appointed as Chairman and Chief Executive Officer of our Company in August 2005 following the resignation of Paul Zyla, the former Chief Executive Officer of our Company. Mr. McKechnie was also appointed as Chief Financial Officer of our Company in November 2005 and has served as a director since November 21, 2003. For the prior years, Mr. McKechnie has held senior management positions with a number of Canadian and multinational packaged foods companies including President and Chief Executive Officer of: Centralized Buying Group Inc. from 2002 to 2004, a buying group importing mass merchandising items into North America; President, Maple Leaf Grocery, a division of Maple Leaf Foods Inc., from 1991 to 1994; President, Chief Operating Officer and a director of Humpty Dumpty Snack Foods Ltd., a division of Small Fry Snack Foods Ltd., from 1994 to 1998; Executive Vice-President - Marketing of Hostess Frito Lay, a division of Kraft General Foods/Pepsi Co. from 1988 to 1991 and Vice-President - Sales and Marketing of Hostess, a division of General Foods from 1985 to 1988. Mr. McKechnie was formerly the President, Chief Operating Officer and a director of Wynne International Inc. (2001 to 2004), a North American distributor of fitness equipment; President and Chief Executive Officer of William Davies Consulting, Inc. (since 1998), a management consulting firm and was the former President and a director of Dover Petroleum Corporation (2001 to 2003). Mr. McKechnie devotes approximately 90% of his time in consulting services to our Company. He provides 10% of his time to unrelated companies. Mr. McKechnie has entered into a management consulting agreement through a corporation of which he is a director as well as a non-competition and non-disclosure agreement with our Company. REBECCA KIOMI MORI Secretary and Treasurer and Director Ms. Mori was appointed Secretary and Treasurer of our Company in September 2005 and was further appointed as a director of our Company in April 2006. Ms. Mori has approximately 25 years of legal experience. During the last 13 years, she has worked exclusively with both public and private mining companies and also at a Toronto, Ontario, Canada corporate securities law firm. Prior to joining our Company, Ms. Mori was the Corporate Securities Legal Assistant for Roxy Resources Inc., a private Canadian mining company from December 2003 to May 2005, Valucap Investments Inc. from July 1997 to June 2004 and Romarco Minerals Inc. from May 1997 to March 2003 where was responsible for the corporate operations of each company including the maintenance of corporate records and regulatory reporting requirements. Prior thereto, she was a corporate securities legal assistant and/or law clerk at numerous Toronto, Canada law firms. Ms. Mori has diverse legal experience with respect to securities, corporate, accounting, finance and litigation matters and is knowledgeable and experienced in Canadian and U.S. securities matters. Ms. Mori devotes approximately 90% of her time in consulting services to our Company. She provides 10% of her time to unrelated companies. She has entered into a management consulting agreement as well as a non-competition and non-disclosure agreement with our Company. JAMES WERTH LONGSHORE, BA, Economics Director Mr. Longshore is one of the founders of our Company and was appointed as a director in November 2006. Mr. Longshore has been an officer and director of our Ghanaian subsidiaries, XGEL - 66 - and XOG Ghana, since April 2006 and XG Mining, since June 2006. Mr. Longshore has approximately 16 years of business experience. Since February 2004 until February 2006, Mr. Longshore has provided financial advisory consulting services to our Company through his corporation, Brokton International Ltd., a Turks & Caicos Islands, British West Indies based private investment company focused on investing in natural resource companies of which he has been President since 1995. From 1990 to 1995, he was a salesman for UNUM Insurance Company selling in both the United States and Canada. In August 2002, Mr. Longshore, formerly known as James Pincock, entered into a settlement agreement and order with the Ontario Securities Commission (the "OSC"). Pursuant to a settlement agreement reached between the OSC and Mr. Longshore, he voluntarily agreed to abide by the order which included, among other things, that he cease trading in securities for five years from the date of the order (until August 27, 2007), with the exception that after three years he can trade in securities beneficially owned by him in his personal accounts in his name, and that he be prohibited from becoming or acting as an officer or director of any issuer in Ontario or an officer or director of any issuer which has an interest directly or indirectly in any registrant, for a period of five years. Mr. Longshore paid the OSC CAD$20,000 (US$17,740) for cost incurred by the OSC and its Staff with respect to the proceeding. Mr. Longshore disclosed this matter to the Company prior to his appointment as a director and advised that as he was a non-resident of Ontario at the relevant time, he had sought, relied and acted upon poor financial and legal advice of Ontario advisors and completed certain securities transactions which ultimately gave rise to the Order. YVES PIERRE CLEMENT, P. Geo. Vice-President, Exploration Mr. Clement was appointed Vice-President, Exploration of our Company in May 2006. Mr. Clement has over 19 years experience in the generation, evaluation and development of a wide variety of mineral resources hosted by a broad spectrum of geological environments in Canada and South America. Prior to joining our Company, Mr. Clement was senior project geologist for Lake Shore Gold Corp. in the Timmins lode gold camp from August 2005 to April 2006 and was formerly exploration manager for Aurora Platinum Corp.'s Sudbury operations from August 2000 to July 2005. Prior to joining Aurora, Mr. Clement was senior project geologist/exploration manager for Southwestern Resources Corp. where he was responsible for the generation of precious and base metal exploration opportunities in Peru and Chile. Mr. Clement's expertise will allow us to further maximize the value of our existing portfolio of projects, as well as allowing us to expand our strategy of growth through strategic acquisitions. Mr. Clement devotes approximately 50% of his time in consulting services to our Company. He provides 50% of his time to an unrelated company. He has entered into a management consulting agreement but has not entered into a non-competition and non-disclosure agreement with our Company. ALHAJI NANTOGMA ABUDULAI, BA Vice-President, Ghana Operations Mr. Abudulai was appointed as Vice-President, Ghana Operations of our Company in April 2005. He is also the Secretary and the President, Community Relations and a director of our Ghanaian subsidiaries. Mr. Abudulai has more than 12 years of business experience in the mining industry. Since 1994, he has been the managing director of CME (Ghana) Ltd. and a director of CME (Nigeria) Ltd. - 67 - where his responsibilities included protocol and coordination of government and local authority affairs in Ghana and overseeing logistical support. Mr. Abudulai is familiar and experienced with respect to obtaining mining permits, prospecting and reconnaissance licences and the government regulations relating thereto and is knowledgeable in connection with environmental and forestry issues, immigration and customs affairs. He is also the President of the Canadian Business Association in Ghana. Mr. Abudulai's primary responsibilities with our Company are the management of our Ghanaian subsidiaries and the continued improvement of community and government relations. His expertise and background will assist us with respect to acquiring approvals, prospecting licences, mining leases and related permits and renewals from the relevant government authorities in order to advance our operations in Ghana, acting as our primary government liaison in connection therewith and will be involved in the hiring of skilled mining personnel and laborers for our mining operations. Mr. Abudulai devotes approximately 60% of his time in consulting services to our Company. He provides 40% of his time to unrelated companies. He has entered into a management consulting agreement but has not entered into a non-competition and non-disclosure agreement with our Company. All of our executive officers were awarded nonqualified stock options as disclosed elsewhere in this Prospectus. SIGNIFICANT CONSULTANTS We engage the consulting services of all of our officers. We further engage the consulting services of our Manager, Lode Gode Exploration, Senior Project Manager, Exploration and Project Manager, Operations with respect to our Ghanaian subsidiaries and have entered into consulting agreements with each of them. We have engaged the consulting services of Stewart Winter, B.A.Sc., Mining Engineering, M.Sc. (App.), Geological Sciences, as our Manager, Lode Gold Exploration. He acts as a special advisor to our Board. Mr. Winter has 49 years' experience in the mining industry. He has been the President of Winterbourne Explorations Ltd., a private geological consulting company since 1981 to the present and provides consulting services with respect to gold, silver, uranium, diamonds and base metals for companies with properties in Canada, South America and China. Mr. Winter was the Exploration Manager of Southwestern Gold Corporation from 1996 to 1998. One of our business strategies is to outsource other services as required by our Company from time to time by engaging consultants on an as-needed basis or entering into special purpose contracts with a view to maintaining our overhead at a reasonable, affordable cost. There are no family relationships between any of our officers or directors. CORPORATE GOVERNANCE MATTERS AUDIT COMMITTEE Our Board has not yet established an audit committee. The functions of the audit committee are currently performed by the entire Board. We are not currently subject to any law, rule or regulation requiring that we establish or maintain an audit committee. We may establish an audit committee in the future if the Board determines it to be advisable or we are otherwise required to do so by applicable law, rule or regulation. - 68 - BOARD OF DIRECTORS INDEPENDENCE Our Board consists of three members. We are not currently subject to any law, rule or regulation requiring that all or any portion of our Board include "independent" directors. None of our directors are considered to be an "independent" director, within the meaning of Section 10A-3 of the Securities Exchange Act of 1934 and Nasdaq Marketplace Rule 4200. AUDIT COMMITTEE FINANCIAL EXPERT We have not yet established an audit committee and we do not have an "audit committee financial expert" within the meaning of Item 401(e) of Regulation S-B. In general, an "audit committee financial expert" is an individual member of the audit committee (board of directors) who (a) understands generally accepted accounting principles and financial statements, (b) is able to assess the general application of such principles in connection with accounting for estimates, accruals and reserves, (c) has experience preparing, auditing, analyzing or evaluating financial statements comparable to the breadth and complexity to the Company's financial statements, (d) understands internal controls over financial reporting (e) understands audit committee functions, and (f) is an independent director. CODE OF ETHICS We have adopted a Code of Ethics applicable to our Chief Executive Officer, principal financial and accounting officers and persons performing similar functions. A Code of Ethics is a written standard designed to deter wrongdoing and to promote (a) honest and ethical conduct, (b) full, fair, accurate, timely and understandable disclosure in regulatory filings and public statements, (c) compliance with applicable laws, rules and regulations, (d) the prompt reporting violation of the code and (e) accountability for adherence to the Code. A copy of our Code of Ethics is filed as an exhibit to the Registration Statement of which this Prospectus forms a part, and we will provide a copy, without charge, to any person desiring a copy of the Code of Ethics, by written request to us at our principal offices. NOMINATING COMMITTEE We have not yet established a nominating committee. Our Board, sitting as a board, performs the role of a nominating committee. We are not currently subject to any law, rule or regulation requiring that we establish a nominating committee. COMPENSATION COMMITTEE We have not yet established a compensation committee. Our Board, sitting as a board, performs the role of a compensation committee. We are not currently subject to any law, rule or regulation requiring that we establish a compensation committee. EXECUTIVE COMPENSATION CASH COMPENSATION TABLE The following table sets forth information relating to all compensation awarded to, earned by or paid by us during each of the three fiscal years ended December 31, 2005, 2004 and 2003 respectively, to: (a) our chief executive officer; and (b) each of our executive officers who was awarded, earned or we paid more than $100,000: - 69 -
- ----------------------------------------------------------------------------------------------------- NAME OTHER ALL AND FISCAL ANNUAL OPTIONS LTIP OTHER PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (#) PAYOUTS COMPENSATION - ----------------------------------------------------------------------------------------------------- William Edward 2005 $ 0 $ 0 $ 0 300,000 0 0 McKechnie 2004 $ 0 $ 0 $ 0 0 0 0 CEO, Chairman and CFO (1) ................. 2003 $ 0 $ 0 $ 0 0 0 0 - ----------------------------------------------------------------------------------------------------- Paul Zyla 2005 $ 0 $ 0 $ 0 0 0 0 President and 2004 $ 0 $ 0 $ 0 0 0 0 CEO (2) ................. 2003 $ 0 $ 0 $ 0 0 0 0 - ----------------------------------------------------------------------------------------------------- Robert Knight President and CEO (3) ................. 2003 $ 0 $ 0 $ 0 0 0 0 - -----------------------------------------------------------------------------------------------------
(1) Mr. McKechnie was appointed as our CEO on August 26, 2005. Our Company has entered into a management consulting agreement with Goldeye Consultants Ltd., a corporation of which Mr. McKechnie is a director. Mr. McKechnie has executed a non-disclosure and non-competition agreement. (2) Mr. Zyla was appointed as our CEO and a director on November 21, 2003 and resigned from office on August 10, 2005. During his tenure, he had not entered into an employment agreement or a management consulting agreement with our Company nor had he executed a non-disclosure and non-competition agreement. (3) Mr. Knight was our CEO and director from May 1, 2000 until his resignation on November 21, 2003. During his tenure, he had not entered into an employment agreement or a management consulting agreement with us nor had he executed a non-disclosure and non-competition agreement. OPTION/SAR GRANTS IN LAST FISCAL YEAR The following table sets forth information concerning our grant of options to purchase shares of our common stock during the fiscal year ended December 31, 2005 to each person named in the Summary Compensation table.
- ------------------------------------------------------------------------------------------------- NUMBER OF SECURITIES PERCENT OF TOTAL UNDERLYING OPTIONS/SARS GRANTED EXERCISE OR OPTIONS/SARS GRANTED TO EMPLOYEES BASE PRICE EXPIRATION NAME (#) IN FISCAL YEAR ($/SHARE) DATE - ------------------------------------------------------------------------------------------------- Ted McKechnie CEO, CFO and Chairman ......... 300,000 29.41% 0.55 June 20, 2015 - ------------------------------------------------------------------------------------------------- Paul Zyla Former CEO ....... 0 0% N/A N/A - ------------------------------------------------------------------------------------------------- Robert Knight Former CEO ....... N/A N/A N/A N/A - -------------------------------------------------------------------------------------------------
- 70 - The following table sets forth information concerning our grant of options to purchase shares of our common stock subsequent to the fiscal year ended December 31, 2005 to each person named in the Summary Compensation table.
- -------------------------------------------------------------------------------------------------- PERCENT OF TOTAL NUMBER OF SECURITIES OPTIONS/SARS UNDERLYING GRANTED TO EMPLOYEES EXERCISE OR OPTIONS/SARS GRANTED SUBSEQUENT TO BASE PRICE EXPIRATION NAME (#) FISCAL YEAR ($/SHARE) DATE - -------------------------------------------------------------------------------------------------- Ted McKechnie CEO, CFO and 216,000 10.82% $0.70 April 21, 2009 Chairman ......... 200,000 10.02% $0.90 August 1, 2009 - ------------------------------------------------------------------------------------------------- Paul Zyla Former CEO ....... N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------- Robert Knight Former CEO ....... N/A N/A N/A N/A - -------------------------------------------------------------------------------------------------
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES The following table contains information with respect to the exercise of Options to purchase shares of common stock during the fiscal year ended December 31, 2005 to each person named in the Summary Compensation Table.
- ------------------------------------------------------------------------------------------------------------- NUMBER OF SECURITIES SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED ACQUIRED ON VALUE OPTIONS/SARS AT FISCAL YEAR IN-THE-MONEY OPTIONS/SARS EXERCISE REALIZED END (#) AT FISCAL YEAR END ($) NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE - ------------------------------------------------------------------------------------------------------------- Ted McKechnie CEO, CFO and Chairman ... 0 N/A NIL N/A - ------------------------------------------------------------------------------------------------------------- Paul Zyla former President, CEO ... 0 N/A NIL N/A - ------------------------------------------------------------------------------------------------------------- Robert Knight former President, CEO ... 0 N/A NIL N/A - -------------------------------------------------------------------------------------------------------------
2005 EQUITY INCENTIVE COMPENSATION PLAN On June 21, 2005, our Board authorized and approved the 2005 Equity Incentive Compensation Plan (the "PLAN"). Under the Plan, a total of 3,000,000 shares of our common stock has been reserved for issuance upon exercise of nonqualified stock options ("NSO'S") (collectively, the "OPTIONS"), stock bonuses and rights to purchase awarded from time to time, to our officers, directors, employees and consultants. Since the Plan was not approved by the shareholders of the Company, we are not permitted to issue any incentive stock options under the Plan. The Plan is currently administered by our Board. Under the Plan, the Board determines which of our officers, directors, employees and consultants are to be granted awards (individually, an "OPTIONEE"), - 71 - as well as the material terms of each award. Subject to the provisions of the Plan, the Board determines who shall receive awards, the number of shares of common stock that may be purchased under the awards, the time and manner of exercise of Options and exercise prices. At its discretion, the Board also determines the form of consideration to be received upon exercise and may permit the exercise price of Options granted under the Plan to be paid in whole or in part with previously acquired shares and/or the surrender of options. The term of Options granted under the Plan may not exceed 10 years. The exercise price for NSO's may not be less than 100% of the fair market value of our common stock on the date of grant. Absent registration under the Securities Act of 1933, as amended, or the availability of an applicable exemption therefrom, shares of common stock issued upon the exercise of Options or as restricted stock awards will be subject to restrictions on sale or transfer. As of the date of this Prospectus, we have granted 1,996,000 NSO's to purchase 1,996,000 shares under the Plan. We may, in the future, authorize the grant of options and/or the issuance of warrants for the foregoing purposes and other valid corporate purposes. SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS The following table sets forth information relating to our outstanding equity compensation plans as of December 31, 2005:
- ------------------------------------------------------------------------------------------------------------- NUMBER OF SECURITIES REMAINING AVAILABLE FOR NUMBER OF SECURITIES TO WEIGHTED AVERAGE EXERCISE FUTURE ISSUANCE UNDER BE ISSUED UPON EXERCISE PRICE OF OUTSTANDING EQUITY COMPENSATION OF OUTSTANDING OPTIONS, OPTIONS, WARRANTS AND PLAN (EXCLUDING SECURITIES WARRANTS AND RIGHTS RIGHTS REFLECTED IN COLUMN A) - ------------------------------------------------------------------------------------------------------------- Equity Compensation Plans Approved by Security Holders ........... N/A N/A N/A - ------------------------------------------------------------------------------------------------------------- Equity Compensation Plans Not Approved by Security Holders ........... - ------------------------------------------------------------------------------------------------------------- 2005 Equity Incentive Compensation Plan .......... 1,020,000 $0.55 1,980,000 - ------------------------------------------------------------------------------------------------------------- TOTAL ...................... 1,020,000 $0.55 1,980,000 - -------------------------------------------------------------------------------------------------------------
MANAGEMENT CONSULTING AGREEMENTS We have entered into the following management consulting agreements with officers of our Company. MANAGEMENT CONSULTING AGREEMENT WITH CEO We entered into a management consulting agreement with our CEO on July 1, 2006 for a term of five years. Mr. McKechnie, our CEO is compensated CAD$5,000 (US$4,404) per month, through Goldeye Consultants Ltd. ("GOLDEYE"), a Turks & Caicos Islands, British West Indies private corporation - 72 - of which he is a director and is reimbursed for expenses incurred by him on behalf of our Company. We plan to increase the compensation payable to Goldeye to (i) CAD$10,000 (US$8,820) upon the earlier of the Bulk Test achieving profitability or being completed; and then we plan to increase the compensation payable to Goldeye to (ii) CAD$15,000 (US$13,231) upon the earlier of the full scale mining operation we anticipate conducting at our Kwabeng concession achieving profitability or having occurred for two months. In the event of termination of Goldeye, without cause, Goldeye shall be paid compensation equivalent to six months' fees, based on the rate of compensation being paid at the relevant time. In the event of a Change of Control (as defined herein), Goldeye shall be paid, at the time of termination, compensation equivalent to 18 months' fees, based on the rate of compensation being paid at the relevant time. For clarity purposes, a "CHANGE OF CONTROL" shall mean the occurrence of (a) any person, other than an Employee (as such term is used in Section 13(d) and 14(d) of the Exchange Act is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's outstanding securities then having the right to vote at elections of directors; or (b) the individuals who at the commencement date of the agreement entered into between the consultant and our Company (the "MC AGREEMENT"), constitute the Board, cease for any reason to constitute a majority thereof unless the election, or nomination for election, of each new director was approved by a vote of at least two-thirds of the directors then in office who were directors at the commencement of the MC Agreement; or (c) there is a failure to elect two or more candidates nominated by management of the Company to the Board; or (d) the business of the Company for which the consultant's services are principally performed is disposed of by the Company pursuant to a partial or complete liquidation of the Company, a sale of assets (including stock of a subsidiary of our Company) or otherwise. Goldeye shall provide certain services to our Company including, but not limited to, overseeing ongoing organization and development of the corporate infrastructure of our Company resulting in a value added support team, identifying, developing and directing the implementation of our business strategy, planning and directing our business activities to achieve stated/agreed targets and standards for financial and trading performance, quality, culture and compliance with regulatory matters and ensuring organization accountability, internal controls and responsibilities are being complied with by all support team members. MANAGEMENT CONSULTING AGREEMENT WITH VICE-PRESIDENT, EXPLORATION We entered into a management consulting agreement with our Vice-President, Exploration ("VPE") on May 1, 2006 for a term of 36 months. Our VPE is paid CAD$5,000 (US$4,404) per month and is reimbursed for expenses incurred by him on behalf of our Company. Our VPE shall be paid compensation equivalent to 18 months' fees, based on the rate of compensation being paid at the relevant time in the event of (i) termination without cause; or (ii) a Change of Control. Our VPE shall provide certain services to our company including, but not limited to, making project or property site attendances as may be required from time to time, preparing progress reports with respect to our mineral exploration projects, conducting due diligence as may be required from time to time in connection with potential mineral properties; reviewing geological data and liaising with principal owners of mineral properties in which our Company may wish to acquire an interest, meeting with government authorities and retaining technical experts, making recommendations to the Board and its relevant committees with respect to the acquisition and/or abandonment of mineral exploration properties and preparing and implementing, subject to Board approval, plans for the operation of Xtra-Gold including plans for exploration programs, costs of operations and other expenditures in connection with our mineral projects. - 73 - MANAGEMENT CONSULTING AGREEMENT WITH VICE-PRESIDENT, GHANA OPERATIONS We entered into a management consulting agreement with our Vice-President, Ghana Operations ("VPG") on November 1, 2006 for a term of one year. Our VPG is paid $1,000 per month and is reimbursed for expenses incurred by him on behalf of our Company. Our VPG shall provide certain services to our company including, but not limited to, managing and improving community and government relations as may be required from time to time including but not necessarily restricted to, relationships with the Minerals Commission, the Minister of Lands, Forestry and Mines, the Water Resource Commission, the EPA and the GNPC, by acting as Xtra-Gold's primary liaison and attending meetings with related officials, managing specific executions on an as needed basis including, but not limited to, facilitating the procurement of licences, leases, permits and other government approvals and handling any political or environmental issues that may arise from time to time, participating in property acquisitions and dispositions from time to time and reviewing all material contracts to be entered into by our Ghanaian subsidiaries. MANAGEMENT CONSULTING AGREEMENT WITH SECRETARY AND TREASURER We entered into a management consulting agreement with our Secretary and Treasurer (the "ST") on July 1, 2006 for a term of five years. Our ST is compensated CAD$8,500 (US$7,497) per month and is reimbursed for expenses incurred by her on behalf of our Company. We plan to increase the compensation payable to our ST to (i) CAD$10,000 (US$8,820) upon the earlier of the full scale mining operation we anticipate conducting at our Kwabeng concession achieving profitability or having occurred for two months. In the event of termination of our ST, without cause, the ST shall be paid compensation equivalent to six months' fees, based on the rate of compensation being paid at the relevant time. In the event of a Change of Control, the ST shall be paid, at the time of termination, compensation equivalent to 18 months' fees, based on the rate of compensation being paid at the relevant time. The ST shall provide certain services to our Company including, but not limited to, preparing and maintaining all corporate records and overseeing all corporate and regulatory filings, maintaining the financial records of our Company, assisting our CEO with the day-to-day management of our Company and liaising with our legal counsel, auditors, stock transfer agent and all other professional advisors. LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS As authorized by the Nevada Revised Statutes, our articles of incorporation ("ARTICLES") provide that none of our directors shall be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except liability for: o any breach of a director's duty of loyalty to our Company or its stockholders; o acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; o unlawful payments of dividends or unlawful stock redemptions or repurchases; and o any transaction from which the director derived an improper personal benefit. This provision limits our rights and the rights of our stockholders to recover monetary damages against a director for breach of the fiduciary duty of care except in the situations described above. This provision does not limit our rights or the rights of any stockholder to seek injunctive relief or rescission if a director breaches his duty of care. These provisions will not alter the liability of directors under federal - 74 - securities laws. Our by-laws require us to indemnify directors and officers against, to the fullest extent permitted by law, liabilities which they may incur under the circumstances described above. Our Articles further provide for the indemnification of any and all persons who serve as our directors, officers, employees or agents to the fullest extent permitted under Nevada law. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling our Company pursuant to the foregoing provisions, we have been informed that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is therefore unenforceable. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ACQUISITION OF SWISS PROPERTY On October 28, 2003, prior to our acquisition of all of the issued and outstanding capital stock of Xtra Energy, CaribGold Minerals, Inc. ("CARIBGOLD") entered into a memorandum of agreement with Xtra Energy (the "CARIBGOLD AGREEMENT"), under which Xtra Energy was granted the right and option to acquire 90% of CaribGold's interest in a mining property located in Switzerland provided that Xtra Energy expended CAD$200,000 (USD$152,532) in exploration work on the property by October 28, 2004, failing which the option would terminate and would be reconveyed to CaribGold. Paul Zyla, who was our President and Chief Executive Officer at the time of this transaction, was also the President and a director of CaribGold and owned 647,500 common shares (5.51%) in the capital of CaribGold at this time. As consideration for the option grant, Xtra Energy issued 20,000 non-refundable shares of its common stock to CaribGold. These shares were subsequently exchanged for 20,000 shares of our common stock upon our acquisition of all of the outstanding capital stock of Xtra Energy. In order to exercise the option, our subsidiary would have been required to enter into a joint venture agreement with CaribGold, operate the property and contribute our share of expenditures of the joint venture. Our subsidiary did not expend the required amount during the option exercise period. We permitted the option to expire unexercised in order to permit us to devote our financial resources to the acquisition of mineral properties in Ghana. PROMISSORY NOTE ISSUED TO A FORMER OFFICER AND DIRECTOR OF OUR COMPANY On January 12, 2006, the Board approved the issuance of an unsecured promissory note (the "NOTE") in the aggregate amount of $66,302 in connection with an account payable owing to a former officer and director of the Company (the "NOTE HOLDER") with respect to unpaid consulting fees, expenses incurred on behalf of our Company and a bonus. Under the terms of the Note, the Note Holder had the option to convert any portion owing under the Note from time to time into shares of our Company at the conversion price of $0.55 per share. On January 31, 2006, the Note Holder provided us with a notice of conversion to convert $50,000 of the outstanding Note into shares and was subsequently issued 90,909 shares on February 9, 2006. INVESTMENT IN A COMPANY OF WHICH A CURRENT OFFICER OF OUR COMPANY IS ALSO AN OFFICER AND DIRECTOR AND OF WHICH A FORMER OFFICER AND DIRECTOR OF OUR COMPANY IS ALSO AN OFFICER AND DIRECTOR We invested an aggregate of CAD$123,000 (US$108,258), through participation in two private placement transactions in August 2006 (CAD$18,000 - US$15,946) and October 2006 (CAD$105,000 - - 75 - US$92,312), in Ginguro Exploration Inc., a private Ontario mineral exploration company which is seeking to become a public company, of which a current officer of our Company is also a director and officer and of which a former officer and director of our Company is also a director and officer. CONSULTING AGREEMENT WITH PRINCIPAL SHAREHOLDER From February 1, 2004 through February 1, 2006, we were a party to a consulting agreement with Brokton International Ltd. ("BROKTON"), a company which owns 7.12% of our common stock and one of only two shareholders that owns more than 5% of our issued and outstanding shares of common stock. Under the terms of this agreement, we engaged Brokton as a consultant to advise our Management with respect to hiring additional qualified management, providing support with respect to operational matters and government compliance in Ghana, mergers and acquisitions and financial advisory. James Longshore, one of the directors of our Company, is the President of Brokton and exercises sole investment, voting and disposition powers over the shares of Brokton. Mr. Longshore is also a director of our wholly-owned subsidiaries, XGEL and XOG Ghana (since April 2006) and XG Mining (since June 2006). From February 2004 to February 2006, we paid Brokton an aggregate of $30,000 for its consulting services and reimbursed Brokton for expenses incurred by Brokton on behalf of our Company. A PRINCIPAL SHAREHOLDER MANAGES OUR INVESTMENT PORTFOLIO We currently, and since approximately four years ago, maintain our brokerage account with Haywood Securities Inc. ("HAYWOOD") in connection with our investment accounts. Haywood provides us with investment recommendations and custodial services. Haywood is a member of the Toronto Stock Exchange, the TSX Venture Exchange, the Montreal Exchange, the Canadian Trading and Quotation System, the Canadian Investor Protection Fund, and the Investment Dealers Association of Canada. In addition, Haywood Securities (USA) Inc., a wholly owned subsidiary is a broker-dealer registered to transact securities business in the United States and a member of the National Association of Securities Dealers. We pay Haywood ordinary brokerage commissions on trade transactions and our accounts with Haywood can be terminated at any time. Mark McGinnis, a shareholder who owns 7.35% of our common stock and one of only two shareholders that owns more than 5% of our issued and outstanding shares of common stock, is an investment advisor with Haywood and is the manager of our accounts with Haywood. DIRECTORS' SECURITIES CANCELLED In May 2005, an aggregate of 47,000,000 shares of our common stock owned by Paul Zyla, a former director of our Company and William Edward McKechnie, a current director of our Company, were returned to treasury and cancelled pursuant to respective stock cancellation agreements entered into between our Company and such directors. CONSULTING FEES TO OFFICERS AND COMPANIES CONTROLLED BY DIRECTORS AND OFFICERS We have entered into consulting agreements with our officers, or companies controlled by our officers, for the services of our officers as set out elsewhere in this Prospectus. As of December 31, 2005, we paid or accrued an aggregate of $92,810 (2004 - $Nil) and as of September 30, 2006, $273,595 (September 30, 2005 - $ 53,320), pursuant to these consulting agreements. - 76 - PRINCIPAL STOCKHOLDERS The following table sets forth information known to us as of November 27, 2006, relating to the beneficial ownership of shares of our common stock by: o each person who is known by us to be the beneficial owner of more than five percent of our outstanding common stock; o each director; o each executive officer named in the Summary Compensation Table; and o all executive officers and directors as a group. Unless otherwise indicated, the address of each beneficial owner in the table set forth below is care of Xtra-Gold Resources Corp., 6 Kersdale Avenue, Toronto, Ontario, Canada, M6M 1C8. We believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock shown as being owned by them. Under securities laws, a person is considered to be the beneficial owner of securities owned by him (or certain persons whose ownership is attributed to him) and that can be acquired by him within 60 days from the date of this Prospectus, including upon the exercise of options, warrants or convertible securities. We determine a beneficial owner's percentage ownership by assuming that options, warrants or convertible securities that are held by him, but not those held by any other person, and which are exercisable within 60 days of the date of this Prospectus, have been exercised or converted. The table is based on 28,088,157 shares currently outstanding. Except as otherwise required by SEC rules relating to beneficial ownership, the table does not give effect to the issuance of up to: o 996,056 shares in the event of exercise of outstanding Warrants; o 900,000 shares in the event of conversion of Convertible Debentures; or o 15,750 shares in the event of conversion of Accrued Interest. NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS William Edward McKechnie ........... 394,275 shares(1) 1.40% Rebecca Kiomi Mori ................. 27,000 shares(2) .10% Yves Pierre Clement ................ 72,000 shares(3) .26% Alhaji Nantogma Abudulai ........... 124,000 shares(4) .44% James Werth Longshore .............. 2,000,000 shares(5) 7.12% OFFICERS AND DIRECTORS AS A GROUP (5 PERSONS) ............ 2,617,275 shares(1) thru (5) 9.32% 5% STOCKHOLDERS: Brokton International Ltd. P.O. Box 150, Design House Providenciales, Turks and Caicos British West Indies ................ 2,000,000 shares(5) 7.12% - 77 - NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS Mark T. McGinnis 236 Alscot Crescent Oakville, Ontario, Canada L6J 4R4 . 2,064,526 shares (6) 7.37% (1) Consists of (a) 200,000 shares of common stock; (b) 158,665 shares which are issuable upon the exercise of options that have vested and are currently exercisable; and (c) 35,610 shares which shall become issuable upon options that shall vest and be exercisable within 60 days following the date of this Prospectus; namely November 21 and December 1 and 21, 2006 and January 1, 2007. Does not include 521,725 shares issuable upon the exercise of options that have not yet vested and will vest monthly as to 6,250, 6,000 and 5,555 respectively in each month. (2) Consists of 21,000 shares which are issuable upon the exercise of options that have vested and are currently exercisable; and (c) 6,000 shares which shall become issuable upon options that shall vest and be exercisable within 60 days following the date of this Prospectus; namely November 21 and December 21, 2006. Does not include 81,000 shares issuable upon the exercise of options that have not yet vested and will vest monthly as to 3,000 in each month. (3) Consists of 54,000 shares which are issuable upon the exercise of options that have vested and are currently exercisable; and (c) 18,000 shares which shall become issuable upon options that shall vest and be exercisable within 60 days following the date of this Prospectus; namely December 1, 2006 and January 1, 2007. Does not include 252,000 shares issuable upon the exercise of options that have not yet vested and will vest monthly as to 9,000 in each month. (4) Consists of (a) 100,000 shares of common stock; (b) 18,000 shares which are issuable upon the exercise of options that have vested and are currently exercisable; and (c) 6,000 shares which shall become issuable upon options that shall vest and be exercisable within 60 days following the date of this Prospectus; namely December 1, 2006 and January 1, 2007. Does not include 84,000 shares issuable upon the exercise of options that have not yet vested and will vest monthly as to 3,000 in each month. (5) Brokton International Ltd. is a British West Indies corporation, whose sole beneficial owner is James Longshore. Mr. Longshore exercises sole investment, voting and disposition powers over the shares included in the table. (6) Consists of (a) 1,911,681 shares of common stock held by Mark McGinnis; and (b) 152,845 shares of common stock held by his spouse. DESCRIPTION OF SECURITIES GENERAL The following description of our common stock and provisions of our Articles is a summary thereof and is qualified by reference to our Articles, copies of which may be obtained upon request. Our authorized capital consists of 250,000,000 shares of common stock, par value $0.001 per share. As of the date of this Prospectus, 28,088,157 shares of common stock were issued and outstanding. - 78 - COMMON STOCK Holders of shares of common stock are entitled to share, on a ratable basis, such dividends as may be declared by the Board out of funds, legally available therefor. Upon our liquidation, dissolution or winding up, after payment to creditors, our assets will be divided pro rata on a per share basis among the holders of our common stock. Each share of common stock entitles the holders thereof to one vote. Holders of common stock do not have cumulative voting rights which means that the holders of more than 50% of the shares voting for the election of directors can elect all of the directors if they choose to do so, and, in such event, the holders of the remaining shares will not be able to elect any directors. Our By-Laws require that only a majority of our issued and outstanding shares need be represented to constitute a quorum and to transact business at a stockholders' meeting. Our common stock has no preemptive, subscription or conversion rights and is not redeemable by us. COMMON STOCK PURCHASE WARRANTS There are currently outstanding Warrants to purchase an aggregate of 996,056 shares of our common stock. The Warrants were issued in connection with financing transactions. The Warrants are exercisable (i) at $1.50 per share and expire on June 16, 2007; (ii) at $1.50 per share and expire on July 31, 2007; and (iii) at $1.50 per share and expire on October 31, 2007. The exercise price of the warrants and the number of shares issuable upon the exercise of the warrants is subject to adjustment in the event of stock splits, stock dividends and reorganizations. CONVERTIBLE DEBENTURES We completed a convertible debenture transaction with three investors (the "DEBENTURE HOLDERS") in July 2005 for gross proceeds of US$900,000, the outstanding principal balance of which is repayable on or before June 30, 2010. Interest is calculated at the rate of 7% per annum on the outstanding principal and is payable on a quarterly basis on the last days of September, December, March and June in each year. The Debenture Holders have the option to convert any portion of the outstanding principal owing and the Accrued Interest into shares at a conversion price of $1.00 per share. The conversion price and the number of shares issuable upon the conversion of the Convertible Debentures and Accrued Interest is subject to adjustment in the event of stock splits, stock dividends and reorganizations. An aggregate of 915,750 shares has been reserved for issuance in connection with the debt conversion. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for our common stock is Liberty Transfer Co., 274B New York Avenue, Huntington, NY 11743. Our transfer agent may be reached by telephone at (631) 385-1616. SELLING SECURITY HOLDERS BACKGROUND OF THE TRANSACTIONS This Prospectus covers the resale of 12,146,478 shares of our common stock issued or issuable in connection with the following transactions: - 79 - o 53,500 shares issued upon conversion of warrants we issued in connection with a private placement transaction completed on March 31, 2004; o 55,000 shares issued upon conversion of warrants we issued in connection with a private placement transaction completed on May 31, 2004; o 2,698,350 shares we issued in an acquisition with certain note and debenture holders of Akrokeri-Ashanti Gold, in connection with the acquisition of XG Mining completed on December 22, 2004; o 536,218 shares we issued pursuant to a private placement transaction completed on June 30, 2005, and 177,200 shares issued upon conversion of warrants issued in the transaction; o 900,000 shares issuable upon conversion of an aggregate of $900,000 convertible debentures issued in a convertible debenture financing completed on July 7, 2005; o 15,750 shares issuable upon conversion of up to $15,750 Accrued Interest in connection with the convertible debenture financing completed on July 7, 2005; o 300,000 shares we issued pursuant to a private placement transaction completed on August 31, 2005; o 1,549,354 shares we issued pursuant to a private placement transaction completed on November 7, 2005; o 84,909 shares we issued pursuant to the conversion of a promissory note to a former officer and director completed on February 9, 2006; o 792,029 shares we issued pursuant to a private placement transaction completed on March 6, 2006; o 578,112 shares we issued and 289,056 shares issuable upon conversion of warrants we issued pursuant to a private placement transaction completed on June 16, 2006; o 1,132,000 shares we issued and 566,000 shares issuable upon exercise of warrants we issued pursuant to a private placement transaction completed on July 24, 2006; o 282,0000 shares we issued and 141,000 shares issuable upon exercise of warrants we issued pursuant to a private placement transaction completed on November 27, 2006; and o 1,996,000 shares issuable upon conversion of options issued under our Equity Compensation Plan on June 21, 2005 (300,000); on April 21, 2006 (324,000); May 1, 2006 (972,000) and August 1, 2006 (400,000). SELLING SECURITY HOLDERS The following table sets forth: - 80 - o the name of each Selling Security Holder; o the number or shares of common stock beneficially owned by each Selling Security Holder as of the date of this Prospectus, giving effect to the exercise of the Selling Security Holders' Warrants; o the number of shares being offered by each Selling Security Holder; and o the number of shares to be owned by each Selling Security Holder following completion of this Offering. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities and includes any securities which the person has the right to acquire within 60 days through the conversion or exercise of options, warrants, promissory notes and any other security or other right. The information as to the number of shares of our common stock owned by each Selling Security Holder is based upon our records and information provided by our transfer agent. We may amend or supplement this Prospectus from time to time to update the disclosure set forth in the table. As the Selling Security Holders identified in the table may sell some or all of the shares owned by them which are included in this Prospectus, and as there are currently no agreements, arrangements or understandings with respect to the sale of any of the shares, no estimate can be given as to the number of shares available for resale hereby that will be held by the Selling Security Holders upon termination of the offering made hereby. We have therefore assumed, for the purposes of the following table, that the Selling Security Holders will sell all of the shares owned by them that are being offered hereby, but will not sell any other shares of our common stock that they presently own. We do not believe that any of the Selling Security Holders are broker-dealers or affiliated with broker-dealers. The shares of common stock being offered have been registered to permit public sales and the Selling Security Holders may offer all or part of the shares for resale from time to time. All expenses of the registration of the common stock on behalf of the Selling Security Holders are being borne by us. We will receive none of the proceeds of this offering.
- --------------------------------------------------------------------------------------------------------------- SHARES AND PERCENTAGE OF CLASS SHARES SHARES OWNED AVAILABLE OWNED PERCENTAGE BENEFICIALLY PRIOR TO THIS PURSUANT TO AFTER OF CLASS SELLING SECURITY HOLDER OFFERING THIS PROSPECTUS OFFERING AFTER OFFERING - --------------------------------------------------------------------------------------------------------------- Bansco & Co. (1) ................... 3,000 (0.011%) 3,000 0 0% - --------------------------------------------------------------------------------------------------------------- Bansco & Co. (2) ................... 200,000 (0.712%) 200,000 0 0% - --------------------------------------------------------------------------------------------------------------- BMO Nesbitt Burns Inc. (3) ......... 4,500 (0.016%) 4,500 0 0% - --------------------------------------------------------------------------------------------------------------- Canaccord Capital Corp. (4) ........ 2,500 (0.009%) 2,500 0 0% - --------------------------------------------------------------------------------------------------------------- Canaccord Capital Corp. (5) ........ 2,450 (0.009%) 2,450 0 0% - --------------------------------------------------------------------------------------------------------------- Canaccord Capital Corp. (6) ........ 1 (0.000%) 1 0 0% - --------------------------------------------------------------------------------------------------------------- Canaccord Capital Corp. (7) ........ 5,987 (0.021%) 5,987 0 0% - --------------------------------------------------------------------------------------------------------------- Canaccord Capital Corp. (8) ........ 4,100 (0.015%) 4,100 0 0% - --------------------------------------------------------------------------------------------------------------- Canaccord Capital Corp. (9) ........ 3,650 (0.013%) 3,650 0 0% - --------------------------------------------------------------------------------------------------------------- Canaccord Capital Corp. (10) ....... 4,500 (0.016%) 4,500 0 0% - ---------------------------------------------------------------------------------------------------------------
- 81 -
- --------------------------------------------------------------------------------------------------------------- SHARES AND PERCENTAGE OF CLASS SHARES SHARES OWNED AVAILABLE OWNED PERCENTAGE BENEFICIALLY PRIOR TO THIS PURSUANT TO AFTER OF CLASS SELLING SECURITY HOLDER OFFERING THIS PROSPECTUS OFFERING AFTER OFFERING - --------------------------------------------------------------------------------------------------------------- Canaccord Capital Corp. (11) ....... 1,800 (0.006%) 1,800 0 0% - --------------------------------------------------------------------------------------------------------------- Canaccord Capital Corp. (12) ....... 5,000 (0.018%) 5,000 0 0% - --------------------------------------------------------------------------------------------------------------- Canaccord Capital Corp. (13) ...... 15,000 (0.053%) 15,000 0 0% - --------------------------------------------------------------------------------------------------------------- Canaccord Capital Corp. (14) ....... 5,000 (0.018%) 5,000 0 0% - --------------------------------------------------------------------------------------------------------------- Canaccord Capital Corp. (15) ....... 6,000 (0.021%) 6,000 0 0% - --------------------------------------------------------------------------------------------------------------- Canaccord Capital Corp. (16) ....... 55,000 (0.196%) 55,000 0 0% - --------------------------------------------------------------------------------------------------------------- Canaccord Capital Corp. (17) ....... 2,500 (0.009%) 2,500 0 0% - --------------------------------------------------------------------------------------------------------------- Canaccord Capital Corp. (18) ....... 10,000 (0.036%) 10,000 0 0% - --------------------------------------------------------------------------------------------------------------- Canaccord Capital Corp. (19) ....... 5,000 (0.018%) 5,000 0 0% - --------------------------------------------------------------------------------------------------------------- Canaccord Capital Corp. (20) ....... 5,000 (0.018%) 5,000 0 0% - --------------------------------------------------------------------------------------------------------------- Canaccord Capital Corp. (21) ...... 10,000 (0.036%) 10,000 0 0% - --------------------------------------------------------------------------------------------------------------- Canaccord Capital Corp. (22) ....... 2,500 (0.009%) 2,500 0 0% - --------------------------------------------------------------------------------------------------------------- Canaccord Capital Corp. (23) ....... 2,500 (0.009%) 2,500 0 0% - --------------------------------------------------------------------------------------------------------------- Canaccord Capital Corp. (24) ....... 2,500 (0.009%) 2,500 0 0% - --------------------------------------------------------------------------------------------------------------- Canaccord Capital Corp. (25) ....... 62,500 (0.223%) 62,500 0 0% - --------------------------------------------------------------------------------------------------------------- Canaccord Capital Corp. (26) ....... 5,000 (0.018%) 5,000 0 0% - --------------------------------------------------------------------------------------------------------------- Canaccord Capital Corp. (27) ....... 5,000 (0.018%) 5,000 0 0% - --------------------------------------------------------------------------------------------------------------- Desjardins Securities Inc. (28) .... 50,000 (0.178%) 50,000 0 0% - --------------------------------------------------------------------------------------------------------------- First Associates Investments (29) .. 1,300 (0.005%) 1,300 0 0% - --------------------------------------------------------------------------------------------------------------- First Associates Investments (30) .. 11,100 (0.040%) 11,100 0 0% - --------------------------------------------------------------------------------------------------------------- GMP Securities Ltd. (31) ........... 3,300 (0.012%) 3,300 0 0% - --------------------------------------------------------------------------------------------------------------- GMP Securities Ltd. (32) ........... 12,450 (0.044%) 12,450 0 0% - --------------------------------------------------------------------------------------------------------------- Gundyco CIBC World Markets (33) .... 500 (0.002%) 500 0 0% - --------------------------------------------------------------------------------------------------------------- Gundyco CIBC World Markets (34) .... 9,750 (0.035%) 9,750 0 0% - --------------------------------------------------------------------------------------------------------------- Gundyco CIBC World Markets (35) .... 3,950 (0.014%) 3,950 0 0% - --------------------------------------------------------------------------------------------------------------- Haywood Securities Inc. (36) ....... 910,400 (3.241%) 910,400 0 0% - --------------------------------------------------------------------------------------------------------------- Haywood Securities Inc. (37) ....... 201,942 (0.719%) 201,942 0 0% - --------------------------------------------------------------------------------------------------------------- Haywood Securities Inc. (38) ....... 200,000 (0.712%) 200,000 0 0% - --------------------------------------------------------------------------------------------------------------- Haywood Securities Inc. (39) ....... 60,000 (0.214%) 60,000 0 0% - --------------------------------------------------------------------------------------------------------------- Haywood Securities Inc. (40) ....... 100,000 (0.356%) 100,000 0 0% - ---------------------------------------------------------------------------------------------------------------
- 82 -
- --------------------------------------------------------------------------------------------------------------- SHARES AND PERCENTAGE OF CLASS SHARES SHARES OWNED AVAILABLE OWNED PERCENTAGE BENEFICIALLY PRIOR TO THIS PURSUANT TO AFTER OF CLASS SELLING SECURITY HOLDER OFFERING THIS PROSPECTUS OFFERING AFTER OFFERING - --------------------------------------------------------------------------------------------------------------- Haywood Securities Inc. (41) ....... 100,000 (0.356%) 100,000 0 0% - --------------------------------------------------------------------------------------------------------------- Haywood Securities Inc. (42) ....... 100,000 (0.356%) 100,000 0 0% - --------------------------------------------------------------------------------------------------------------- Haywood Securities Inc. (43) ....... 15,000 (0.053%) 15,000 0 0% - --------------------------------------------------------------------------------------------------------------- Haywood Securities Inc. (44) ....... 100,000 (0.356%) 100,000 0 0% - --------------------------------------------------------------------------------------------------------------- Investor Co. (45) .................. 23,956 (0.085%) 23,956 0 0% - --------------------------------------------------------------------------------------------------------------- Investor Co. (46) .................. 28,850 (0.103%) 28,850 0 0% - --------------------------------------------------------------------------------------------------------------- Mac & Co. (47) ..................... 12,500 (0.045%) 12,500 0 0% - --------------------------------------------------------------------------------------------------------------- Mac & Co. (48) ..................... 49,375 (0.176%) 49,375 0 0% - --------------------------------------------------------------------------------------------------------------- NBC Clearing Services Inc. (49) .... 10,721 (0.038%) 10,721 0 0% - --------------------------------------------------------------------------------------------------------------- NBC Clearing Services Inc. (50) .... 97,000 (0.345%) 97,000 0 0% - --------------------------------------------------------------------------------------------------------------- NBCN Clearing Inc. (51) ............ 74,375 (0.265%) 74,375 0 0% - --------------------------------------------------------------------------------------------------------------- NBCN Clearing Inc. (52) ............ 2,500 (0.009%) 2,500 0 0% - --------------------------------------------------------------------------------------------------------------- Nesbitt Burns (53) ................. 2,200 (0.008%) 2,200 0 0% - --------------------------------------------------------------------------------------------------------------- Penson Financial Services (54) ..... 1,700 (0.006%) 1,700 0 0% - --------------------------------------------------------------------------------------------------------------- Penson Financial Services (55) ..... 2,600 (0.009%) 2,600 0 0% - --------------------------------------------------------------------------------------------------------------- Raymond James Ltd. (56) ............ 31,000 (0.110%) 31,000 0 0% - --------------------------------------------------------------------------------------------------------------- Raymond James Ltd. (57) ............ 500 (0.002%) 500 0 0% - --------------------------------------------------------------------------------------------------------------- Raymond James Ltd. (58) ............ 450 (0.002%) 450 0 0% - --------------------------------------------------------------------------------------------------------------- Raymond James Ltd. (59) ............ 5,000 (0.018%) 5,000 0 0% - --------------------------------------------------------------------------------------------------------------- RBC Dominion Securities Inc. (60) .. 2,800 (0.010%) 2,800 0 0% - --------------------------------------------------------------------------------------------------------------- RBC Dominion Securities Inc. (61) .. 5,050 (0.018%) 5,050 0 0% - --------------------------------------------------------------------------------------------------------------- RBC Dominion Securities (62) ....... 11,500 (0.041%) 11,500 0 0% - --------------------------------------------------------------------------------------------------------------- Research Capital Corp. (63) ........ 20,000 (0.071%) 20,000 0 0% - --------------------------------------------------------------------------------------------------------------- Scotia Capital Inc. (64) ........... 2,000 (0.007%) 2,000 0 0% - --------------------------------------------------------------------------------------------------------------- Scotia Capital Inc. (65) ........... 1,900 (0.007%) 1,900 0 0% - --------------------------------------------------------------------------------------------------------------- Valeurs Mobiliers Desjardins (66) .. 13,000 (0.046%) 13,000 0 0% - --------------------------------------------------------------------------------------------------------------- 1127024 Ontario Limited (67) ....... 35,000 (0.125%) 35,000 0 0% - --------------------------------------------------------------------------------------------------------------- Alhaji Abudulai (68) ............... 108,000 (0.385%) 108,000 0 0% - --------------------------------------------------------------------------------------------------------------- Alpine Atlantic Asset Management SA (69) .............. 250,000 (0.089%) 250,000 0 0% - ---------------------------------------------------------------------------------------------------------------
- 83 -
- --------------------------------------------------------------------------------------------------------------- SHARES AND PERCENTAGE OF CLASS SHARES SHARES OWNED AVAILABLE OWNED PERCENTAGE BENEFICIALLY PRIOR TO THIS PURSUANT TO AFTER OF CLASS SELLING SECURITY HOLDER OFFERING THIS PROSPECTUS OFFERING AFTER OFFERING - --------------------------------------------------------------------------------------------------------------- Anacort Capital Inc. (70) .......... 70,000 (0.249%) 70,000 0 0% - --------------------------------------------------------------------------------------------------------------- Bank Julius Baer & Co. Ltd. (71) ... 25,000 (0.089%) 25,000 0 0% - --------------------------------------------------------------------------------------------------------------- Ernst Baur (72) .................... 45,000 (0.160%) 45,000 0 0% - --------------------------------------------------------------------------------------------------------------- Morton Berman ...................... 35,000 (0.126%) 35,000 0 0% - --------------------------------------------------------------------------------------------------------------- Markus Bertschin (73) .............. 45,000 (0.160%) 45,000 0 0% - --------------------------------------------------------------------------------------------------------------- Bradam Financial Holdings Ltd. (74) 777,500 (2.768%) 777,500 0 0% - --------------------------------------------------------------------------------------------------------------- Brulene Inc. (75) .................. 142,000 (0.506%) 142,000 0 0% - --------------------------------------------------------------------------------------------------------------- Albert Bultje ...................... 8,520 (0.030%) 8,520 0 0% - --------------------------------------------------------------------------------------------------------------- Dr. Michael Byron (76) ............. 540,000 1.923%) 540,000 0 0% - --------------------------------------------------------------------------------------------------------------- Canadian Christian Education (77) .. 171,500 (0.611%) 171,500 0 0% - --------------------------------------------------------------------------------------------------------------- John Cappon ........................ 17,135 (0.061%) 17,135 0 0% - --------------------------------------------------------------------------------------------------------------- Katherine Carson ................... 19,354 (0.069%) 19,354 0 0% - --------------------------------------------------------------------------------------------------------------- Rory Cattanach ..................... 300 (0.001%) 300 0 0% - --------------------------------------------------------------------------------------------------------------- Earl Charleton (78) ................ 15,000 (0.053%) 15,000 0 0% - --------------------------------------------------------------------------------------------------------------- John Richard Charlton .............. 200,000 (0.712%) 200,000 0 0% - --------------------------------------------------------------------------------------------------------------- Marlene Chase ...................... 50 (0.000%) 50 0 0% - --------------------------------------------------------------------------------------------------------------- Sharon Ann Christie (79) ........... 75,000 (0.267%) 75,000 0 0% - --------------------------------------------------------------------------------------------------------------- Yves Clement (80) .................. 324,000 (1.154%) 324,000 0 0% - --------------------------------------------------------------------------------------------------------------- Norman Clements (81) ............... 155,000 (0.552%) 155,000 0 0% - --------------------------------------------------------------------------------------------------------------- CMK Financial Holdings Ltd. (81) ... 240,000 (0.854%) 240,000 0 0% - --------------------------------------------------------------------------------------------------------------- Court Global SA (83) ............... 6,000 (0.021%) 6,000 0 0% - --------------------------------------------------------------------------------------------------------------- Coutts Bank Von Ernst (84) ......... 40,000 (0.142%) 40,000 0 0% - --------------------------------------------------------------------------------------------------------------- Anthony Cristani ................... 9,600 (0.034%) 9,600 0 0% - --------------------------------------------------------------------------------------------------------------- Cyhen Developments Ltd. (85) ....... 50,000 (0.178%) 50,000 0 0% - --------------------------------------------------------------------------------------------------------------- John De Boer ....................... 1,695 (0.006%) 1,695 0 0% - --------------------------------------------------------------------------------------------------------------- John and Nell De Boer .............. 7,615 (0.027%) 7,615 0 0% - --------------------------------------------------------------------------------------------------------------- Henk and Yvonne De Bruin ........... 21,600 (0.077%) 21,600 0 0% - --------------------------------------------------------------------------------------------------------------- Penny Dibley ....................... 250 (0.001%) 250 0 0% - --------------------------------------------------------------------------------------------------------------- Andrew Dielemen Sr. ................ 550 (0.002%) 550 0 0% - --------------------------------------------------------------------------------------------------------------- Daniel Earle (86) .................. 84,909 (0.302%) 84,909 0 0% - ---------------------------------------------------------------------------------------------------------------
- 84 -
- --------------------------------------------------------------------------------------------------------------- SHARES AND PERCENTAGE OF CLASS SHARES SHARES OWNED AVAILABLE OWNED PERCENTAGE BENEFICIALLY PRIOR TO THIS PURSUANT TO AFTER OF CLASS SELLING SECURITY HOLDER OFFERING THIS PROSPECTUS OFFERING AFTER OFFERING - --------------------------------------------------------------------------------------------------------------- Allen Emes ......................... 30,000 (0.107%) 30,000 0 0% - --------------------------------------------------------------------------------------------------------------- Grace Engelsman .................... 17,870 (0.064%) 17,870 0 0% - --------------------------------------------------------------------------------------------------------------- Fundamental Capital Corp. (87) ..... 9,600 (0.034%) 9,600 0 0% - --------------------------------------------------------------------------------------------------------------- John Griffin ....................... 2,500 (0.009%) 2,500 0 0% - --------------------------------------------------------------------------------------------------------------- Wilfred Griffioen .................. 74,950 (0.267%) 74,950 0 0% - --------------------------------------------------------------------------------------------------------------- Kurt Groebli (88) .................. 15,000 (0.053%) 15,000 0 0% - --------------------------------------------------------------------------------------------------------------- Doug Groombridge ................... 2,405 (0.009%) 2,405 0 0% - --------------------------------------------------------------------------------------------------------------- Haywood Securities Inc. (89) ....... 100,000 (0.356%) 100,000 0 0% - --------------------------------------------------------------------------------------------------------------- Haywood Securities Inc. (90) ....... 20,000 (0.071%) 20,000 0 0% - --------------------------------------------------------------------------------------------------------------- Arthur G. Hibbard .................. 90,000 (0.320%) 90,000 0 0% - --------------------------------------------------------------------------------------------------------------- Fred Honea/Carmen De Liniers ....... 350,000 (1.962%) 350,000 0 0% - --------------------------------------------------------------------------------------------------------------- Fred Honea (91) .................... 150,000 (0.534%) 150,000 0 0% - --------------------------------------------------------------------------------------------------------------- Interloan AG (92) .................. 28,500 (0.101%) 28,500 0 0% - --------------------------------------------------------------------------------------------------------------- Adrian Jaggi (93) .................. 30,000 (0.107%) 30,000 0 0% - --------------------------------------------------------------------------------------------------------------- Kander Financial Corp. (94) ........ 100,000 (0.356%) 100,000 0 0% - --------------------------------------------------------------------------------------------------------------- Kieran & Co. Inc. (95) ............. 4,809 (0.017%) 4,809 0 0% - --------------------------------------------------------------------------------------------------------------- Arie and Wilma Kleine .............. 18,300 (0.065%) 18,300 0 0% - --------------------------------------------------------------------------------------------------------------- Peter and Tina Koning .............. 22,430 (0.080%) 22,430 0 0% - --------------------------------------------------------------------------------------------------------------- Laurentian Trust of Canada (96) .... 5,000 (0.018%) 5,000 0 0% - --------------------------------------------------------------------------------------------------------------- Michael and Vicki Lawrence (97) .... 45,000 (0.160%) 45,000 0 0% - --------------------------------------------------------------------------------------------------------------- LOM Securities (Bermuda) (98) ...... 25,000 (0.089%) 25,000 0 0% - --------------------------------------------------------------------------------------------------------------- Jeannie Luimes ..................... 8,140 (0.029%) 8,140 0 0% - --------------------------------------------------------------------------------------------------------------- Byron Mackie ....................... 10,000 (0.036%) 10,000 0 0% - --------------------------------------------------------------------------------------------------------------- Ted McKechnie (99) ................. 716,000 (2.549%) 716,000 0 0% - --------------------------------------------------------------------------------------------------------------- Paul and Susan McFarlan ............ 9,600 (0.034%) 9,600 0 0% - --------------------------------------------------------------------------------------------------------------- Frankie Mead (100) ................. 24,000 (0.085%) 24,000 0 0% - --------------------------------------------------------------------------------------------------------------- Paul Mercer/Katherine Ashendenm .... 9,690 (0.034%) 9,690 0 0% - --------------------------------------------------------------------------------------------------------------- Merlin Asset Holdings SA (101) ..... 27,000 (0.096%) 27,000 0 0% - --------------------------------------------------------------------------------------------------------------- Art Miedema ........................ 3,470 (0.012%) 3,470 0 0% - --------------------------------------------------------------------------------------------------------------- John Douglas Mills (102) ........... 204,465 (0.728%) 204,465 0 0% - ---------------------------------------------------------------------------------------------------------------
- 85 -
- --------------------------------------------------------------------------------------------------------------- SHARES AND PERCENTAGE OF CLASS SHARES SHARES OWNED AVAILABLE OWNED PERCENTAGE BENEFICIALLY PRIOR TO THIS PURSUANT TO AFTER OF CLASS SELLING SECURITY HOLDER OFFERING THIS PROSPECTUS OFFERING AFTER OFFERING - --------------------------------------------------------------------------------------------------------------- Rebecca Kiomi Mori (103) ........... 108,000 (0.385%) 108,000 0 0% - --------------------------------------------------------------------------------------------------------------- Hans J. Morsches ................... 17,500 (0.062%) 17,500 0 0% - --------------------------------------------------------------------------------------------------------------- Doug Murray ........................ 20,000 (0.071%) 20,000 0 0% - --------------------------------------------------------------------------------------------------------------- Ron Nichol (104) ................... 15,000 (0.053%) 15,000 0 0% - --------------------------------------------------------------------------------------------------------------- Basil Nola (105) ................... 30,000 (0.107%) 30,000 0 0% - --------------------------------------------------------------------------------------------------------------- Christopher Nola (106) ............. 348,486 (1.240%) 348,486 0 0% - --------------------------------------------------------------------------------------------------------------- Nube Administration Inc. (107) ..... 9,000 (0.032%) 9,000 0 0% - --------------------------------------------------------------------------------------------------------------- Larry Parker ....................... 59,215 (0.211%) 59,215 0 0% - --------------------------------------------------------------------------------------------------------------- Pipeline Displays and Fixtures (108) 50,000 (0.211%) 50,000 0 0% - --------------------------------------------------------------------------------------------------------------- Piper Foundation (109) ............. 9,000 (0.032%) 9,000 0 0% - --------------------------------------------------------------------------------------------------------------- Yke Reitsma ........................ 4,310 (0.015%) 4,310 0 0% - --------------------------------------------------------------------------------------------------------------- Royal Trust Corp. of Canada (110) .. 1,665,000 (5.928%) 1,665,000 0 0% - --------------------------------------------------------------------------------------------------------------- Peter Schmid ....................... 20,000 (0.071%) 20,000 0 0% - --------------------------------------------------------------------------------------------------------------- Walter Schneider (111) ............. 175,000 (0.623%) 175,000 0 0% - --------------------------------------------------------------------------------------------------------------- Matthias Schole (112) .............. 48,000 (0.171%) 48,000 0 0% - --------------------------------------------------------------------------------------------------------------- Anita Shapolsky .................... 21,000 (0.075%) 21,000 0 0% - --------------------------------------------------------------------------------------------------------------- N. Sleeva .......................... 9,750 (0.035%) 9,750 0 0% - --------------------------------------------------------------------------------------------------------------- Richard Smith ...................... 40,000 (0.142%) 40,000 0 0% - --------------------------------------------------------------------------------------------------------------- Sorrel Global Investments (113) .... 3,000 (0.011%) 3,000 0 0% - --------------------------------------------------------------------------------------------------------------- Margaret Speckert .................. 100,000 (0.356%) 100,000 0 0% - --------------------------------------------------------------------------------------------------------------- Suzanne Speckert ................... 6,000 (0.021%) 6,000 0 0% - --------------------------------------------------------------------------------------------------------------- I. Spivack ......................... 2,400 (0.009%) 2,400 0 0% - --------------------------------------------------------------------------------------------------------------- Tom Stefopulos ..................... 6,000 (0.021%) 6,000 0 0% - --------------------------------------------------------------------------------------------------------------- Marianne Strub ..................... 3,750 (0.013%) 3,750 0 0% - --------------------------------------------------------------------------------------------------------------- Subaraschi Foundation (114) ........ 31,500 (0.112%) 31,500 0 0% - --------------------------------------------------------------------------------------------------------------- Sufran Investments Ltd. (115) ...... 50,000 (0.178%) 50,000 0 0% - --------------------------------------------------------------------------------------------------------------- Eric Robert Taylor (116) ........... 316,529 (1.127%) 316,529 0 0% - --------------------------------------------------------------------------------------------------------------- Susan Thomson ...................... 5,950 (0.021%) 5,950 0 0% - --------------------------------------------------------------------------------------------------------------- Thousand Hills Properties Inc. (117) 90,000 (0.320%) 90,000 0 0% - --------------------------------------------------------------------------------------------------------------- Trust La Laurentienne (118) ........ 350 (0.001%) 350 0 0% - ---------------------------------------------------------------------------------------------------------------
- 86 -
- --------------------------------------------------------------------------------------------------------------- SHARES AND PERCENTAGE OF CLASS SHARES SHARES OWNED AVAILABLE OWNED PERCENTAGE BENEFICIALLY PRIOR TO THIS PURSUANT TO AFTER OF CLASS SELLING SECURITY HOLDER OFFERING THIS PROSPECTUS OFFERING AFTER OFFERING - --------------------------------------------------------------------------------------------------------------- Edward Tudor ....................... 369 (0.001%) 369 0 0% - --------------------------------------------------------------------------------------------------------------- William Ubbens ..................... 2,515 0.009%) 2,515 0 0% - --------------------------------------------------------------------------------------------------------------- William and Wendy Ubbens ........... 415 (0.001%) 415 0 0% - --------------------------------------------------------------------------------------------------------------- Leon van der Merwe (119) ........... 250,000 (0.890%) 250,000 0 0% - --------------------------------------------------------------------------------------------------------------- Diane Van Dyk ...................... 18,130 (0.065%) 18,130 0 0% - --------------------------------------------------------------------------------------------------------------- Margaret Van Velzen ................ 1,000 (0.004%) 1,000 0 0% - --------------------------------------------------------------------------------------------------------------- Steve E. Vlach ..................... 36,000 (0.128%) 36,000 0 0% - --------------------------------------------------------------------------------------------------------------- George Vroom ....................... 10,720 (0.038%) 10.720 0 0% - --------------------------------------------------------------------------------------------------------------- Hilda Vroom ........................ 49,575 (0.177%) 49,575 0 0% - --------------------------------------------------------------------------------------------------------------- John Vroom ......................... 1,050 (0.004%) 1,050 0 0% - --------------------------------------------------------------------------------------------------------------- W.D. Latimer Co. Limited (120) ..... 38,050 (0.135%) 38,050 0 0% - --------------------------------------------------------------------------------------------------------------- B. Wilson .......................... 4,200 (0.015%) 4,200 0 0% - --------------------------------------------------------------------------------------------------------------- Peter Winnell (121) ................ 33,000 (0.117%) 33,000 0 0% - --------------------------------------------------------------------------------------------------------------- J.W.T. Witzel ...................... 70,000 (0.249%) 70,000 0 0% - ---------------------------------------------------------------------------------------------------------------
(1) These shares are held by Bansco & Co. in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (2) These shares are held by Bansco & Co. in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (3) These shares are held by BMO Nesbitt Burns Inc. in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (4) Bradlee Legg exercises voting and dispositive power over all of the shares beneficially owned by Canaccord Capital Corp. in trust for Bradlee Legg. (5) Coleman Sinclair exercises voting and dispositive power over all of the shares beneficially owned by Canaccord Capital Corp. in trust for Coleman Sinclair. (6) These shares are held by Canaccord Capital Corp. in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (7) Rob Wildeboer exercises voting and dispositive power over all of the shares beneficially owned by Canaccord Capital Corp. in trust for Rob Wildeboer. (8) 1066826 Ontario Inc. exercises voting and dispositive power over all of the shares beneficially owned by Canaccord Capital Corp. in trust for 1066826 Ontario Inc. (9) Douglas Davis exercises voting and dispositive power over all of the shares beneficially owned by Canaccord Capital Corp. in trust for Douglas Davis. - 87 - (10) John Arthur exercises voting and dispositive power over all of the shares beneficially owned by Canaccord Capital Corp. in trust for John Arthur. (11) Meredith Davis exercises voting and dispositive power over all of the shares beneficially owned by Canaccord Capital Corp. in trust for Meredith Davis. (12) Friedland Family Trust exercises voting and dispositive power over all of the shares beneficially owned by Canaccord Capital Corp. in trust for Friedland Family Trust. (13) Russell Hawarden exercises voting and dispositive power over all of the shares beneficially owned by Canaccord Capital Corp. in trust for Russell Hawarden. (14) Frederick Kent exercises voting and dispositive power over all of the shares beneficially owned by Canaccord Capital Corp. in trust for Frederick Kent. (15) Marvin Morton exercises voting and dispositive power over all of the shares beneficially owned by Canaccord Capital Corp. in trust for Marvin Morton. (16) Garnet Watchorn exercises voting and dispositive power over all of the shares beneficially owned by Canaccord Capital Corp. in trust for Garnet Watchorn. (17) Leslie Houle exercises voting and dispositive power over all of the shares beneficially owned by Canaccord Capital Corp. in trust for Leslie Houle. (18) Franklin Pulver exercises voting and dispositive power over all of the shares beneficially owned by Canaccord Capital Corp. in trust for Franklin Pulver. (19) Nancy Mae Sim exercises voting and dispositive power over all of the shares beneficially owned by Canaccord Capital Corp. in trust for Nancy Mae Sim. (20) Jeremy Posner exercises voting and dispositive power over all of the shares beneficially owned by Canaccord Capital Corp. in trust for Jeremy Posner. (21) Kathi Gray exercises voting and dispositive power over all of the shares beneficially owned by Canaccord Capital Corp. in trust for Kathi Gray. (22) Charles Raymond Fitz exercises voting and dispositive power over all of the shares beneficially owned by Canaccord Capital Corp. in trust for Charles Raymond Fitz. (23) Glen Horseman exercises voting and dispositive power over all of the shares beneficially owned by Canaccord Capital Corp. in trust for Glen Horseman. (24) Ravinder Singh Minhas exercises voting and dispositive power over all of the shares beneficially owned by Canaccord Capital Corp. in trust for Ravinder Singh Minhas. (25) Anthony Crisanti exercises voting and dispositive power over all of the shares beneficially owned by Canaccord Capital Corp. in trust for Anthony Crisanti. (26) Linda Horseman exercises voting and dispositive power over all of the shares beneficially owned by Canaccord Capital Corp. in trust for Linda Horseman. (27) Roger Abbiss exercises voting and dispositive power over all of the shares beneficially owned by Canaccord Capital Corp. in trust for Roger Abbiss. - 88 - (28) John McFarlane exercises voting and dispositive power over all of the shares beneficially owned by Desjardins Securities Inc. in trust for John McFarlane. (29) These shares are held by First Associates Investments in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (30) These shares are held by First Associates Investments in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (31) These shares are held by GMP Securities Ltd. in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (32) These shares are held by GMP Securities Ltd. in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (33) These shares are held by Gundyco CIBC World Markets in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (34) These shares are held by Gundyco CIBC World Markets in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (35) These shares are held by Gundyco CIBC World Markets in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (36) These shares are held by Haywood Securities Inc. in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (37) These shares are held by Haywood Securities Inc. in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (38) Joanne Dorval-Dronyk exercises voting and dispositive power over all of the shares beneficially owned by Haywood Securities Inc. in trust for Joanne Dorval-Dronyk. (39) Richard Coglan exercises voting and dispositive power over all of the shares beneficially owned by Haywood Securities Inc. in trust for Richard Coglan. (40) Asad Sheikh exercises voting and dispositive power over all of the shares beneficially owned by Haywood Securities Inc. in trust for Asad Sheikh. (41) Walter Dainard exercises voting and dispositive power over all of the shares beneficially owned by Haywood Securities Inc. in trust for Walter Dainard. (42) Slowjen Ltd. exercises voting and dispositive power over all of the shares beneficially owned by Haywood Securities Inc. in trust for Slowjen Ltd. (43) Zapfe Holdings Inc. exercises voting and dispositive power over all of the shares beneficially owned by Haywood Securities Inc. in trust for Zapfe Holdings Inc. (44) These shares are held by Investor Co. in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (45) These shares are held by Investor Co. in trust for the named individual, who exercises sole voting control and dispositive power over these securities. - 89 - (46) These shares are held by Mac & Co. in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (47) These shares are held by Mac & Co. in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (48) These shares are held by NBC Clearing Services Inc. in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (49) These shares are held by NBC Clearing Services Inc. in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (50) Rebecca McKinnen exercises voting and dispositive power over all of the shares beneficially owned by NBCN Clearing Inc. in trust for Rebecca McKinnen. (51) These shares are held by NBCN Clearing Inc. in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (52) Jeff Walker exercises voting and dispositive power over all of the shares beneficially owned by NBCN Clearing Inc. in trust for Jeff Walker. (53) These shares are held by Nesbitt Burns in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (54) These shares are held by Penson Financial Services Canada Inc. in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (55) These shares are held by Penson Financial Services Canada Inc. in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (56) These shares are held by Raymond James Ltd. in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (57) These shares are held by Raymond James Ltd. in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (58) These shares are held by Raymond James Ltd. in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (59) These shares are held by Raymond James Ltd. in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (60) These shares are held by RBC Dominion Securities Inc. in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (61) These shares are held by RBC Dominion Securities Inc. in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (62) These shares are held by RBC Dominion Securities Inc. in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (63) These shares are held by Research Capital Corp. in trust for the named individual, who exercises sole voting control and dispositive power over these securities. - 90 - (64) These shares are held by Scotia Capital Inc. in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (65) These shares are held by Scotia Capital Inc. in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (66) These shares are held by Valeurs Mobiliers Desjardins in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (67) 1127024 Ontario Limited is an Ontario, Canada private company based in Thornhill, Ontario. Gordon Dreger, President of 1127024 Ontario Limited, makes decisions as to the voting and disposition of the securities. (68) Consists of (a) 108,000 shares underlying options which will vest monthly as to 3,000 options over a three year period, of which 18,000 options have vested as of the date of this Prospectus but remain unexercised and of which a further 6,000 options will vest within 60 days hereafter. Alhaji Abudulai is the Vice-President, Ghana Operations of our Company. (69) Consists of 250,000 shares of common stock underlying a debenture, the outstanding principal of which is convertible into shares. Alpine Atlantic Asset Management SA is a private foreign investment company based in Zurich, Switzerland. The Managing Director of Alpine Atlantic Asset Management SA makes decisions as to the voting and disposition of the securities. (70) Anacort Capital Inc. is a private investment company based in Calgary, Alberta, Canada. John Halliwell, President of Anacort Capital Inc., makes decisions as to the voting and disposition of the securities. (71) Bank Julius Baer & Co. Ltd., is a private foreign investment company based in Zurich, Switzerland. U. Mettler, Vice President of Bank Julius Baer & Co. Ltd., makes decisions as to the voting and disposition of the securities. (72) Consists of 30,000 shares and 15,000 shares of common stock underlying warrants that are currently exercisable. (73) Consists of 30,000 shares and 15,000 shares of common stock underlying warrants that are currently exercisable. (74) Consists of 277,500 shares and 500,000 shares of common stock underlying a debenture, the outstanding principal of which is convertible into shares. Bradam Financial Holdings Ltd. is a private foreign investment company based in Castries, St. Lucia, Caribbean. Mikkel Lind, Managing Director of the Selling Security Holder, makes decisions as to the voting and disposition of the securities. (75) Brulene Inc. is an Ontario, Canada private company based in Kitchener, Ontario. Bruce Richmond, President of Brulene Inc., makes decisions as to the voting and disposition of the securities. (76) Consists of 540,000 shares underlying options, all of which have vested and will expire on January 30, 2007. Dr. Byron is a former Officer and Director of our Company. (77) Canadian Christian Education Foundation is an Ontario, Canada private company based in Burlington, Ontario. The President of Canadian Christian Education Foundation makes decisions as to the voting and disposition of the securities. (78) Consists of 10,000 shares and 5,000 shares of common stock underlying warrants that are currently exercisable. (79) Consists of 50,000 shares and 25,000 shares of common stock underlying warrants that are currently exercisable. - 91 - (80) Consists of 324,000 shares underlying options which will vest monthly as to 9,000 options over a three year period, of which 54,000 options have vested as of the date of this Prospectus but remain unexercised and of which a further 18,000 options will vest within 60 days hereafter. Yves Clement is the Vice-President, Exploration of our Company. (81) Consists of 120,000 shares and 35,000 shares of common stock underlying warrants that are currently exercisable. (82) Consists of 60,000 shares, 30,000 shares underlying warrants that are currently exercisable and 150,000 shares of common stock underlying a debenture, the outstanding principal of which is convertible into shares. CMK Financial Holdings Ltd. is a private foreign investment company based in Castries, St. Lucia, Caribbean. Mikkel Lind, Managing Director of the Selling Security Holder, makes decisions as to the voting and disposition of the securities. (83) Court Global SA is a private foreign company based in Tortola, British Virgin Islands. Marc Angst, Managing Director of the Selling Security Holder, makes decisions as to the voting and disposition of the securities. (84) These shares are held by Coutts Bank Von Ernst AG, Lerchenstrasse 18, CH-8045, Zurich, Switzerland, in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (85) Cyhen Developments Ltd. is an Ontario, Canada private company based in Woodbridge, Ontario. The President of Cyhen Developments Ltd. makes decisions as to the voting and disposition of the securities. (86) Daniel Earle is a former Officer and Director of our Company. (87) Fundamental Capital Corp. is an Ontario, Canada private company based in Toronto, Ontario. Stanley Mourin, President of Fundamental Capital Corp., makes decisions as to the voting and disposition of the securities. (88) Consists of 10,000 shares and 5,000 shares of common stock underlying warrants that are currently exercisable. (89) E.C. McFeely exercises voting and dispositive power over all of the shares beneficially owned by Haywood Securities Inc. in trust for E.C. McFeely. (90) These shares are held by Haywood Securities Inc. in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (91) Consists of 100,000 shares and 50,000 shares underlying warrants that are currently exercisable. (92) Interloan AG is a private foreign investment company based in Zurich, Switzerland. Ferdinand Meyer, Managing Director of the Selling Security Holder, makes decisions as to the voting and disposition of the securities. (93) Consists of 20,000 shares and 10,000 shares underlying warrants that are currently exercisable. (94) Kander Financial Corp. is a private Ontario, Canada investment company based in Toronto, Ontario. Derek Riley, President of the Selling Security Holder, makes decisions as to the voting and disposition of the securities. (95) Kieran & Co. is a private Ontario, Canada company based in Kitchener, Ontario. The President of the Selling Security Holder makes decisions as to the voting and disposition of the securities. - 92 - (96) Donald Deeves exercises voting and dispositive power over all of the shares beneficially owned by Laurentian Trust of Canada Inc. in trust for Donald Deeves. (97) Consists of 30,000 shares and 15,000 shares of common stock underlying warrants that are currently exercisable. (98) LOM Securities (Bermuda) Limited is a private foreign investment company based in Hamilton, Bermuda. Brian Lines, President of the Selling Security Holder, makes decisions as to the voting and disposition of the securities. (99) Consists of 300,000 shares underlying options which will vest monthly as to 6,250 options over a four year period and an aggregate of 416,000 shares underlying options which will vest monthly as to an aggregate of 11,555 over a three year period of which 164,915 options have vested as of the date of this Prospectus but remain unexercised and of which a further 35,610 options will vest within 60 days hereafter. William Edward McKechnie is the Chairman, Chief Executive Officer, Chief Financial Officer and a Director of our Company. (100) Consists of 16,000 shares and 8,000 shares of common stock underlying warrants that are currently exercisable. (101) Merlin Asset Holdings SA is a private foreign investment company based in Tortola, British Virgin Islands. Marc Angst, Managing Director of the Selling Security Holder, makes decisions as to the voting and disposition of the securities. (102) Consists of (a) 4,465 shares; and (b) 200,000 shares underlying options which will vest pursuant to the achievement of two milestones, none of which has occurred as of the date of this Prospectus. (103) Consists of 108,000 shares underlying options which will vest monthly as to 3,000 options over a three year period, of which 21,000 options have vested as of the date of this Prospectus but remain unexercised and of which a further 6,000 options will vest within 60 days hereafter. Rebecca Kiomi Mori is the Secretary and Treasurer and a Director of our Company. (104) Consists of 10,000 shares and 5,000 shares of common stock underlying warrants that are currently exercisable. (105) Consists of 20,000 shares and 10,000 shares of common stock underlying warrants that are currently exercisable. (106) Consists of 292,930 shares and 55,556 shares of common stock underlying warrants that are currently exercisable. (107) Nube Administration Inc. is a private foreign company based in Tortola, British Virgin Islands. Michele Sacco, Managing Director of the Selling Security Holder, makes decisions as to the voting and disposition of the securities. (108) Pipeline Displays and Fixtures Inc. is a private Ontario, Canada company based in Toronto, Ontario. Ian Wookey, President of the Selling Security Holder, makes decisions as to the voting and disposition of the securities. (109) Piper Foundation is a private foreign company based in Vaduz, Liechtenstein. Erwin Speckert, Managing Director of the Selling Security Holder, makes decisions as to the voting and disposition of the securities. (110) These shares are held by Royal Trust Corp. of Canada in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (111) Consists of 150,000 shares and 25,000 shares of common stock underlying warrants that are currently exercisable. - 93 - (112) Consists of 32,000 shares and 16,000 shares of common stock underlying warrants that are currently exercisable. (113) Sorrel Global Investments is a private foreign investment company based in Tortola, British Virgin Islands. Erwin Speckert, Managing Director of the Selling Security Holder, makes decisions as to the voting and disposition of the securities. (114) Subaraschi Foundation is a private foreign company based in Vaduz, Liechtenstein. Ferdinand Meyer, Managing Director of the Selling Security Holder, makes decisions as to the voting and disposition of the securities. (115) Sufran Investments Ltd. is a private foreign investment company based in Geneva, Switzerland. P.A. Gordon, President of the Selling Security Holder, makes decisions as to the voting and disposition of the securities. (116) Consists of 261,029 shares and 55,500 shares of common stock underlying warrants that are currently exercisable. (117) Consists of 204,000 shares and 30,000 shares of common stock underlying warrants that are currently exercisable. Thousand Hills Properties Inc. is a private company based in Massapeqa, New York. Vincent DeLetto, President of the Selling Security Holder, makes decisions as to the voting and disposition of the securities. (118) These shares are held by Trust La Laurentienne in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (119) Consists of 200,000 shares and 50,000 shares of common stock underlying warrants that are currently exercisable. (120) These shares are held by W.D. Latimer Co. Limited in trust for the named individual, who exercises sole voting control and dispositive power over these securities. (121) Consists of 22,000 shares and 11,000 shares of common stock underlying warrants that are currently exercisable. None of the above Selling Security Holders are affiliates of United States brokers-dealers, nor at the time of purchase did any of them have any agreements or understandings, directly or indirectly, with any persons to distribute the securities. PLAN OF DISTRIBUTION The Selling Security Holders and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The Selling Security Holders may use any one or more of the following methods when selling shares: o ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; o block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; o purchases by a broker-dealer as principal and resale by the broker-dealer for its account; o an exchange distribution in accordance with the rules of the applicable exchange; - 94 - o privately negotiated transactions; o settlement of short sales; o broker-dealers may agree with the Selling Security Holders to sell a specified number of such shares at a stipulated price per share; o a combination of any such methods of sale; and o any other method permitted pursuant to applicable law. The Selling Security Holders may also sell shares under Rule 144 under the Securities Act of 1933, if available, rather than under this Prospectus. Broker-dealers engaged by the Selling Security Holders may arrange for other broker-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Security Holders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The Selling Security Holders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved. Broker-dealers may agree to sell a specified number of such shares at a stipulated price per share, and, to the extent such broker-dealer is unable to do so acting as agent for us or a selling stockholder, to purchase as principal any unsold shares at the price required to fulfill the broker-dealer commitment. Broker-dealers who acquire shares as principal may thereafter resell such shares from time to time in transactions, which may involve block transactions and sales to and through other broker-dealers, including transactions of the nature described above, in the over-the-counter markets or otherwise at prices and on terms then prevailing at the time of sale, at prices then related to the then-current market price or in negotiated transactions. In connection with such resales, broker-dealers may pay to or receive from the purchasers of such shares, commissions as described above. In the event that shares are resold to any broker-dealer, as principal, who is acting as an underwriter, we will file a post-effective amendment to the registration statement of which this Prospectus forms a part, identifying the broker-dealer(s), providing required information relating to the plan of distribution and filing any agreement(s) with such broker-dealer(s) as an exhibit. The involvement of a broker-dealer as an underwriter in the offering will require prior clearance of the terms of underwriting compensation and arrangements from the Corporate Finance Department of the National Association of Securities Dealers, Inc. The Selling Security Holders may, from time to time, pledge or grant a security interest in some or all of the shares or common stock or warrants owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock, from time to time, under this Prospectus, or under an amendment to this Prospectus under Rule 424 (b)(3) or other applicable provision of the Securities Act of 1933 amending the list of Selling Security Holders to include the pledgee, transferee or other successors-in-interest as selling security holders under this Prospectus. The Selling Security Holders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors-in-interest will be the selling beneficial owners for purposes of this Prospectus. The Selling Security Holders and any broker-dealers or agents that are involved in selling the shares may be deemed to be "underwriters" within the meaning of the Securities Act of 1933 in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act of 1933. The Selling Security Holders have informed us that they do not have any agreement or understanding, directly or indirectly, with any person to distribute the common stock. - 95 - We are required to pay all fees and expenses incidental to the registration of the shares. We have agreed to indemnify the Selling Security Holders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act of 1933. SHARES ELIGIBLE FOR FUTURE SALE As of the date of this Prospectus, we had 28,088,157 shares of common stock issued and outstanding. Of the issued and outstanding shares, approximately 24,110,894 shares of our common stock (4,358,526 of which are owned by our officers, directors and principal stockholders) have been held for in excess of one year and are available for public resale pursuant to Rule 144 promulgated under the Securities Act. As of the date of this Prospectus, the 8,238,672 shares registered under a registration statement of which this Prospectus forms a part, and being offered by Selling Security Holders can be publicly transferred. Not included in the foregoing are (i) 1,996,000 shares issuable upon exercise of options that have been granted (of which an aggregate of 347,915 options have vested but have not been exercised); (ii) 996,056 shares issuable on exercise of outstanding warrants; (iii) 900,000 shares issuable upon conversion of convertible debentures; and (iv) 15,750 shares issuable upon conversion of the Accrued Interest. They may be resold by their holders as long as they are covered by a current registration statement or under an available exemption from registration. In general, Rule 144 permits a shareholder who has owned restricted shares for at least one year, to sell without registration, within a three-month period, up to one percent of our then outstanding common stock. We must be current in our reporting obligations in order for a stockholder to sell shares under Rule 144. In addition, stockholders other than our officers, directors or 10% or greater stockholders who have owned their shares for at least two years may sell them without volume limitation or the need for our reports to be current. We cannot predict the effect, if any, that market sales of common stock or the availability of these shares for sale will have on the market price of the shares from time to time. Nevertheless, the possibility that substantial amounts of common stock may be sold in the public market could adversely affect market prices for the common stock and could damage our ability to raise capital through the sale of our equity securities. LEGAL MATTERS The validity of the securities offered by this Prospectus is being reviewed upon for us by Schneider Weinberger & Beilly LLP, Boca Raton, Florida. EXPERTS The consolidated financial statements of Xtra-Gold Resources Corp. as of December 31, 2005 and 2004, respectively, and for each of the two years then ended appearing in this Prospectus have been audited by Davidson & Company LLP, Independent Registered Public Accounting Firm, as set forth in their report thereon appearing elsewhere in this Prospectus, and are included in reliance upon this report given on the authority of such firm as experts in auditing and accounting. - 96 - ADDITIONAL INFORMATION We have filed with the SEC the Registration Statement on Form SB-2 under the Securities Act for the common stock offered by the Selling Security Holders by this Prospectus. This Prospectus, which is a part of the Registration Statement, does not contain all of the information in the Registration Statement and the exhibits filed with it, portions of which have been omitted as permitted by SEC rules and regulations. For further information concerning us and the securities offered by the Selling Security Holders by this Prospectus, we refer to the Registration Statement and to the exhibits filed with it. Statements contained in this Prospectus as to the content of any contract or other document referred to are not necessarily complete. In each instance, we refer you to the copy of the contracts and/or other documents filed as exhibits to the Registration Statement, and these statements are qualified in their entirety by reference to the contract or document. The Registration Statement, including all exhibits, and other materials we file with the SEC, may be inspected without charge, and copies of these materials may also be obtained upon the payment of prescribed fees, at the SEC's Public Reference Room at: 100 F Street, N.E. Room 1580 Washington, D.C. 20549 You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The Registration Statement, including all exhibits and schedules and amendments, has been filed with the SEC through the Electronic Data Gathering, Analysis and Retrieval (EDGAR) system. We do not currently file periodic reports with the SEC; however, following the effective date of the registration statement relating to this Prospectus, we will become a reporting company and will file annual, quarterly and current reports, and other information with the SEC. Copies of all of our filings with the SEC may be viewed on the SEC's Internet web site at http://www.sec.gov. We maintain a website at www.xtragold.com. The information on our website does not form a part of this Prospectus. For so long as we are a reporting company, we will be required to file annual reports with the SEC, containing audited financial statements. However, unless we register our common stock under Section 12(g) of the Exchange Act, we will not be required to deliver an annual report containing audited financial statements to security holders. We currently have no plans to register our common stock under Section 12(g) of the Exchange Act. If we are not required to deliver an annual report to security holders, we do not intend to voluntarily deliver annual reports to security holders containing audited financial statements. - 97 - XTRA-GOLD RESOURCES CORP. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) (UNAUDITED) SEPTEMBER 30, 2006 F-1 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) CONSOLIDATED BALANCE SHEETS (Expressed in U.S. Dollars) (unaudited) =================================================================================================
September 30, 2006 December 31, 2005 - ------------------------------------------------------------------------------------------------- ASSETS CURRENT Cash and cash equivalents ........................... $ 760,696 $ 458,376 Investment in trading securities, at fair value (cost of $2,742,761) (Note 5) ..................... 2,697,092 2,647,207 Receivables and other ............................... 56,084 32,667 ------------- ------------- TOTAL CURRENT ASSETS ................................ 3,513,872 3,138,250 EQUIPMENT (Note 6) ..................................... 69,678 6,963 DEFERRED FINANCING COSTS (Note 7) ...................... 34,652 41,582 OIL AND GAS PROPERTY (Note 8) .......................... 210,137 46,538 MINERAL PROPERTIES (Note 9) ............................ 8,523,971 8,523,971 ------------- ------------- TOTAL ASSETS ........................................... $ 12,352,310 $ 11,757,304 ================================================================================================= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT Accounts payable and accrued liabilities ............ $ 87,354 $ 305,825 Due to related party ................................ - 86,499 ------------- ------------- TOTAL CURRENT LIABILITIES .............................. 87,354 392,324 CONVERTIBLE DEBENTURES (Note 10) ....................... 900,000 900,000 ASSET RETIREMENT OBLIGATION (Note 11) .................. 47,140 43,833 ------------- ------------- TOTAL LIABILITIES ................................... 1,034,494 1,336,157 ------------- ------------- STOCKHOLDERS' EQUITY Capital stock (Note 12) Authorized 250,000,000 common shares with a par value of $0.001 Issued and outstanding 27,806,157 common shares (December 31, 2005 - 24,937,407 common shares) ........................ 27,806 24,938 Additional paid in capital .......................... 14,767,552 12,497,778 Deficit ............................................. (1,427,764) (1,427,764) Deficit accumulated during the development stage .... (2,049,778) (673,805) ------------- ------------- TOTAL STOCKHOLDERS' EQUITY .......................... 11,317,816 10,421,147 ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............. $ 12,352,310 $ 11,757,304 ================================================================================================= HISTORY AND ORGANIZATION OF THE COMPANY (Note 1) CONTINGENCY AND COMMITMENTS (Note 17) SUBSEQUENT EVENTS (Note 18) The accompanying notes are an integral part of these consolidated financial statements. F-2
XTRA-GOLD RESOURCES CORP. (A Development Stage Company) CONSOLIDATED STATEMENTS OF OPERATIONS (Expressed in U.S. Dollars) (unaudited) =============================================================================================================================
Cumulative amounts from the beginning of the development stage Three Months Three Months Nine Months Nine Months on January 1, 2003 Ended Ended Ended Ended to September 30, September 30, September 30, September 30, September 30, 2006 2006 2005 2006 2005 - ----------------------------------------------------------------------------------------------------------------------------- EXPENSES Amortization ......................... $ 9,693 $ 2,924 $ 791 $ 8,639 $ 791 Exploration .......................... 1,323,797 206,716 94,050 536,633 186,227 General and administrative ........... 1,312,896 267,655 115,958 678,195 208,836 Foreign exchange (gain) loss ......... (247,801) (22,568) (108,504) (110,437) (75,285) Mineral interests (Note 4) ........ 26,000 - - - - ------------- ----------- ----------- ------------ ----------- LOSS BEFORE OTHER ITEMS ................. (2,424,585) (454,727) (102,295) (1,113,030) (320,569) ------------- ----------- ----------- ------------ ----------- OTHER ITEMS Interest expense ..................... (97,595) (19,156) (20,938) (57,506) (20,938) Realized gains (losses) on sales of trading securities ................. 288,263 672 78,575 126,798 150,932 Net unrealized gain(loss) on trading securities ......................... (72,359) (199,883) 334,811 (462,269) 327,680 Other income ......................... 259,533 52,296 33,258 131,981 60,698 Loss on disposal of equipment ........ (3,035) - - (1,947) - ------------- ----------- ----------- ------------ ----------- 374,807 (166,071) 425,706 (262,943) 518,372 ------------- ----------- ----------- ------------ ----------- INCOME (LOSS) FOR THE PERIOD ............ $ (2,049,778) $ (620,798) $ 323,411 $ (1,375,973) $ 197,803 ============================================================================================================================= BASIC INCOME (LOSS) PER COMMON SHARE .... $ (0.02) $ 0.01 $ (0.05) $ 0.00 ============================================================================================================================= DILUTED INCOME (LOSS) PER COMMON SHARE .. $ (0.02) $ 0.01 $ (0.05) $ 0.00 ============================================================================================================================= BASIC WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING ...................... 27,621,592 23,170,403 26,320,756 46,048,227 ============================================================================================================================= DILUTED WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING ............... 27,621,592 23,735,519 26,320,756 46,138,612 ============================================================================================================================= The accompanying notes are an integral part of these consolidated financial statements. F-3
XTRA-GOLD RESOURCES CORP. (A Development Stage Company) CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in U.S. Dollars) (unaudited) =========================================================================================================================
Cumulative amounts from the beginning of the development stage on January 1, 2003 to Nine Months Ended Nine Months Ended September 30, 2006 September 30, 2006 September 30, 2005 - ------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Income (loss) for the period ....................... $ (2,049,778) $ (1,375,973) $ 197,803 Items not affecting cash: Amortization .................................... 9,693 8,639 791 Amortization of deferred financing costs ........ 11,550 6,930 2,310 Accretion of asset retirement obligation ........ 7,275 3,307 2,976 Shares issued for services ...................... 5,500 - 5,500 Stock-based compensation ........................ 172,669 131,647 20,511 Unrealized foreign exchange (gain) loss ......... (273,331) (121,876) (74,523) Realized gains on sale of trading securities .... (288,263) (126,798) (150,932) Purchase of trading securities .................. (7,172,957) (2,382,187) (3,163,483) Proceeds on sale of trading securities .......... 4,965,100 2,118,707 2,163,613 Unrealized (gain) loss on trading securities .... 72,359 462,269 (327,680) Loss on disposal of equipment ................... 3,035 1,947 - Mineral property acquired on purchase of subsidiary ................................... 26,000 - - Expenses paid by stockholders ................... 2,700 - - Changes in non-cash working capital items: Increase in receivables and other ............... (47,709) (23,417) (3,901) Increase (decrease) in accounts payable and accrued liabilities .......................... 76,662 (171,933) (37,492) Increase (decrease) in due to related party ..... 50,000 (36,499) - ------------ ------------ ----------- Net cash used in operating activities .............. (4,429,495) (1,505,237) (1,364,507) ------------ ------------ ----------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of convertible debentures ...................................... 900,000 - 900,000 Deferred financing costs ........................... (46,202) - (46,202) Repurchase of capital stock ........................ (7,000) (7,000) - Subscriptions received in advance .................. - - 55,000 Issuance of capital stock, net of financing costs .. 4,648,338 2,097,995 414,420 ------------ ------------ ----------- Net cash provided by financing activities .......... 5,495,136 2,090,995 1,323,218 ------------ ------------ ----------- - continued - The accompanying notes are an integral part of these consolidated financial statements. F-4
XTRA-GOLD RESOURCES CORP. (A Development Stage Company) CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in U.S. Dollars) (unaudited) =========================================================================================================================
Cumulative amounts from the beginning of the development stage on January 1, 2003 to Nine Months Ended Nine Months Ended September 30, 2006 September 30, 2006 September 30, 2005 - ------------------------------------------------------------------------------------------------------------------------- Continued... CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of equipment .......................... (81,318) (73,301) (8,017) Oil and gas property expenditures ................. (210,137) (210,137) - Acquisition of cash on purchase of subsidiary ..... 11,510 - - Acquisition of subsidiary ......................... (25,000) - - --------- ---------- --------- Net cash used in investing activities ............. (304,945) (283,438) (8,017) --------- ---------- --------- CHANGE IN CASH AND CASH EQUIVALENTS DURING THE PERIOD .............................................. 760,696 302,320 (49,306) CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD .... - 458,376 231,480 --------- ---------- --------- CASH AND CASH EQUIVALENTS, END OF THE PERIOD .......... $ 760,696 $ 760,696 $ 182,174 ========================================================================================================================= SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS (Note 14) The accompanying notes are an integral part of these consolidated financial statements. F-5
XTRA-GOLD RESOURCES CORP. (A Development Stage Company) CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Expressed in U.S. Dollars) (unaudited) ==============================================================================================================================
Common Stock Deficit -------------------------- Accumulated During the Number Additional Development of Shares Amount Paid-in Capital Deficit Stage Total - ------------------------------------------------------------------------------------------------------------------------------ BALANCE, DECEMBER 31, 2003 ....... 62,714,085 $ 62,714 $ 1,367,750 $ (1,427,764) $ (2,700) $ - March, 2004 - private placement at $0.35 per share ............... 2,000,000 2,000 698,000 - - 700,000 May, 2004 - private placement at $0.35 per share .................. 2,129,400 2,129 743,161 - - 745,290 December, 2004 - acquisition of subsidiary via issuance of common stock ..................... 2,698,350 2,699 8,492,688 - - 8,495,387 Share issuance costs ............. - - (76,298) - - (76,298) Loss for the year ................ - - - - (398,533) (398,533) ----------- ------------ --------------- ------------ ------------ ------------ BALANCE, DECEMBER 31, 2004 ....... 69,541,835 69,542 11,225,301 (1,427,764) (401,233) 9,465,846 May, 2005 - cancellation of shares ........................... (47,000,000) (47,000) 47,000 - - - June, 2005 - for services ........ 10,000 10 5,490 - - 5,500 June, 2005 - private placement at $0.55 per share ............... 536,218 536 294,384 - - 294,920 August, 2005 - private placement at $0.55 per share ............... 300,000 300 164,700 - - 165,000 November, 2005 - private placement at $0.55 per share ..... 1,549,354 1,550 850,595 - - 852,145 Share issuance costs ............. - - (130,714) - - (130,714) Stock-based compensation ......... - - 41,022 - - 41,022 Loss for the year ................ - - - - (272,572) (272,572) ----------- ------------ --------------- ------------ ------------ ------------ BALANCE, DECEMBER 31, 2005 ....... 24,937,407 24,938 12,497,778 (1,427,764) (673,805) 10,421,147 - continued - The accompanying notes are an integral part of these consolidated financial statements. F-6
XTRA-GOLD RESOURCES CORP. (A Development Stage Company) CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Expressed in U.S. Dollars) (unaudited) ==============================================================================================================================
Common Stock Deficit -------------------------- Accumulated During the Number Additional Development of Shares Amount Paid-in Capital Deficit Stage Total - ------------------------------------------------------------------------------------------------------------------------------ continued ... BALANCE, DECEMBER 31, 2005 ....... 24,937,407 24,938 12,497,778 (1,427,764) (673,805) 10,421,147 February, 2006 - conversion of promissory note at $0.55 per share 90,909 91 49,909 - - 50,000 March, 2006 - exercise of warrants at $0.75 per share ...... 108,500 108 81,267 - - 81,375 March, 2006 - private placement at $0.70 per share ............... 792,029 792 553,628 - - 554,420 April, 2006 - exercise of warrants at $0.75 per share ...... 177,200 177 132,723 - - 132,900 June, 2006 - cancellation of shares ........................... (10,000) (10) (6,990) - - (7,000) June, 2006 - private placement at $0.90 per share .................. 578,112 578 519,722 - - 520,300 July, 2006 - private placement at $0.90 per share .................. 1,132,000 1,132 1,017,668 - - 1,018,800 Share issuance costs ............. - - (209,800) - - (209,800) Stock-based compensation ......... - - 131,647 - - 131,647 Loss for the period .............. - - - - (1,375,973) (1,375,973) ----------- ------------ --------------- ------------ ------------ ------------ BALANCE, SEPTEMBER 30, 2006 ...... 27,806,157 $ 27,806 $ 14,767,552 $ (1,427,764) $ (2,049,778) $ 11,317,816 ============================================================================================================================== The accompanying notes are an integral part of these consolidated financial statements. F-7
XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) (unaudited) SEPTEMBER 30, 2006 ================================================================================ 1. HISTORY AND ORGANIZATION OF THE COMPANY Silverwing Systems Corporation (the "Company"), a Nevada corporation, was incorporated on September 1, 1998. On June 23, 1999, the Company completed the acquisition of Advertain On-Line Canada Inc. ("Advertain Canada"), a Canadian company operating in Vancouver, British Columbia, Canada. The Company changed its name to Advertain On-Line Inc. ("Advertain") on August 19, 1999. Advertain Canada's business was the operation of a web site, "Advertain.com", whose primary purpose was to distribute entertainment advertising on the Internet. In May 2001, the Company, being unable to continue its funding of Advertain Canada's operations, decided to abandon its interest in Advertain Canada. On June 15, 2001, the Company sold its investment in Advertain Canada back to Advertain Canada's original shareholder. On June 18, 2001, the Company changed its name from Advertain to RetinaPharma International, Inc. ("RetinaPharma") and became inactive. In 2003, the Company became a resource exploration and development company. On October 31, 2003, the Company acquired 100% of the issued and outstanding common stock of Xtra-Gold Resources, Inc.("XGRI"). XGRI was incorporated in Florida on October 24, 2003. On December 19, 2003, the Company changed its name from RetinaPharma to Xtra-Gold Resources Corp. In 2004, the Company acquired 100% of the issued and outstanding capital stock of Canadiana Gold Resources Limited ("Canadiana") and 90% of the issued and outstanding capital stock of Goldenrae Mining Company Limited ("Goldenrae") (Note 4). Both companies are incorporated in Ghana and the remaining 10% of the issued and outstanding capital stock of Goldenrae is held by the Government of Ghana. On October 20, 2005, XGRI changed its name to Xtra Energy Corp. ("Xtra Energy"). On October 20, 2005, the Company incorporated Xtra Oil & Gas Ltd. ("XOG") in Alberta, Canada. On December 21, 2005, Canadiana changed its name to Xtra-Gold Exploration Limited ("XG Exploration"). On January 13, 2006, Goldenrae changed its name to Xtra-Gold Mining Limited ("XG Mining"). On March 2, 2006, the Company incorporated Xtra Oil & Gas (Ghana) Limited ("XOGG") in Ghana. 2. GOING CONCERN The Company is in the development stage with respect to its resource properties, incurred a loss of $1,375,973 for the nine months ended September 30, 2006 and has accumulated a deficit during the development stage of $2,049,778. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company's ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. F-8 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) (unaudited) SEPTEMBER 30, 2006 ================================================================================ 2. GOING CONCERN (cont'd...) Management of the Company ("Management") is of the opinion that sufficient financing will be obtained from external financing and further share issuances to meet the Company's obligations. At September 30, 2006, the Company has working capital of $3,426,518 and subsequent to September 30, 2006 raised an additional $310,200 pursuant to a private placement and $314,258 pursuant to the sale of its oil and gas property (Note 18). 3. SIGNIFICANT ACCOUNTING POLICIES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES These consolidated financial statements have been prepared in conformity with generally accepted accounting principles of the United States of America ("US GAAP"). PRINCIPLES OF CONSOLIDATION These consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, Xtra Energy (from October 24, 2003), XG Exploration (from February 16, 2004), XOG (from October 20, 2005) and XOGG (from March 2, 2006) and its 90% owned subsidiary, XG Mining (from December 22, 2004). All significant intercompany accounts and transactions have been eliminated on consolidation. USE OF ESTIMATES The preparation of consolidated financial statements in conformity with US 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. CASH AND CASH EQUIVALENTS The Company considers highly liquid investments with original maturities of three months or less to be cash equivalents. At September 30, 2006 and December 31, 2005, cash and cash equivalents consisted of cash held at financial institutions. RECEIVABLES No allowance for doubtful accounts has been provided. Management has evaluated all receivables and believes they are all collectible. TRADING SECURITIES The Company's trading securities are reported at fair value, with unrealized gains and losses included in earnings. F-9 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) (unaudited) SEPTEMBER 30, 2006 ================================================================================ 3. SIGNIFICANT ACCOUNTING POLICIES (cont'd...) EQUIPMENT Equipment is recorded at cost and is being amortized over its estimated useful lives using the declining balance method at the following annual rates: Office furniture and equipment 20% Computer equipment 30% Vehicle 30% DEFERRED FINANCING COSTS Deferred financing costs consist of expenses incurred to obtain funds pursuant to the issuance of the convertible debentures and are being amortized straight-line over the term of the debentures. OIL AND NATURAL GAS PROPERTIES The Company follows the full cost method of accounting for oil and natural gas operations. Under this method, all costs associated with the acquisition of, exploration for and development of oil and gas reserves are capitalized in cost centers on a country-by-country basis. Such costs include property acquisition costs, geological and geophysical studies, carrying charges on non-producing properties, costs of drilling productive wells, and overhead expenses directly related to these activities. Depletion is calculated for producing properties by using the unit-of-production method based on estimated proved reserves, before royalties, as determined by management of the Company or independent consultants. Sales or dispositions of oil and gas properties are credited to the respective cost centers and a gain or loss is recognized when all properties in a cost center have been disposed of, unless such sale or disposition significantly alters the relationship between capitalized costs and proved reserves of oil and gas attributable to the cost center. Costs of abandoned properties are accounted for as adjustments of capitalized costs and written off to expense. Undeveloped properties are excluded from the depletion calculation until the quantities of proved reserves can be determined. A ceiling test is applied to the proven properties for each cost center and for the aggregate of all cost centers by comparing the net capitalized costs to the estimated future net revenues from production of estimated proved reserves without discount, plus the costs of unproved properties net of impairment. Any excess capitalized costs are written off to expense. Further, the ceiling test for the aggregate of all cost centers is required to include the effects of future removal and site restoration costs, general and administrative expenses, financing costs and income taxes. The calculation of future net revenues is based upon prices, costs and regulations in effect at each year end. F-10 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) (unaudited) SEPTEMBER 30, 2006 ================================================================================ 3. SIGNIFICANT ACCOUNTING POLICIES (cont'd...) OIL AND NATURAL GAS PROPERTIES (cont'd...) Unproved properties are assessed for impairment on an annual basis by applying factors that rely on historical experience. In general, the Company may write off any unproved property under one or more of the following conditions: (a) there are no firm plans for further drilling on the unproved property; (b) negative results were obtained from studies of the unproved properties; (c) negative results were obtained from studies conducted in the vicinity of the unproved property; or (d) the remaining term of the unproved property does not allow sufficient time for further studies or drilling. MINERAL PROPERTIES AND EXPLORATION AND DEVELOPMENT COSTS The costs of acquiring mineral rights are capitalized and allocated between proven and probable reserves and mineralization not considered proven and probable reserves at the date of acquisition, based on relative fair values. If it is later established that some mineralization meets the definition of proven and probable reserves, then it will be reclassified as relating to reserves at that time. After acquisition, various factors can affect the recoverability of the capitalized costs. If, after review, management concludes that the carrying amount of a mineral property is impaired, it will be written down to estimated fair value. Exploration and development costs incurred on mineral properties classified as mineralization are expensed as incurred. Development costs incurred on proven and probable reserves will be capitalized. Upon commencement of production, capitalized costs will be amortized using the unit-of-production method over the estimated life of the ore body based on proven and probable reserves. LONG-LIVED ASSETS The Company accounts for long-lived assets under Statements of Financial Accounting Standards Nos. 142 and 144 "Accounting for Goodwill and Other Intangible Assets" and "Accounting for Impairment or Disposal of Long-Lived Assets" ("SFAS 142 and 144"). In accordance with SFAS 142 and 144, long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, the recoverability test is performed using undiscounted net cash flows related to the long-lived assets. ASSET RETIREMENT OBLIGATIONS The Company records the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development, and/or normal use of the long-lived assets. The Company also records a corresponding asset which is amortized over the life of the asset. Subsequent to the initial measurement of the asset retirement obligation, the obligation is adjusted at the end of each period to reflect the passage of time (accretion expense) and changes in the estimated future cash flows underlying the obligation (asset retirement cost). F-11 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) (unaudited) SEPTEMBER 30, 2006 ================================================================================ 3. SIGNIFICANT ACCOUNTING POLICIES (cont'd...) STOCK-BASED COMPENSATION The Company calculates the fair value of all stock options granted and records these amounts as compensation expense over the vesting period of the options using the straight-line method. The Black-Scholes option pricing model is used to calculate fair value. INCOME TAXES The Company accounts for income taxes under Statements of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). Under SFAS 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. LOSS PER SHARE Basic loss per common share is computed using the weighted average number of common shares outstanding during the year. To calculate diluted loss per share, the Company uses the treasury stock method as defined in Financial Accounting Standards No. 128, "Earnings Per Share." As of September 30, 2006, there were 855,056 warrants (September 30, 2005 - 2,482,810); 1,996,000 options (September 30, 2005 - 1,020,000) and convertible debentures exercisable into 900,000 common shares (September 30, 2005 - 900,000) outstanding. FOREIGN EXCHANGE The Company's functional currency is the U.S. dollar. The Company does not have non-monetary assets and liabilities that are in a currency other than the U.S. dollar. Any monetary assets and liabilities that are in a currency other than the U.S. dollar are translated at the rate prevailing at year end. Revenue and expenses in a foreign currency are translated at rates that approximate those in effect at the time of translation. Gains and losses from translation of foreign currency transactions into U.S. dollars are included in current results of operations. FINANCIAL INSTRUMENTS The Company's financial instruments consist of cash and cash equivalents, trading securities, receivables, accounts payable and accrued liabilities and convertible debentures. It is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from its financial instruments. The fair values of these financial instruments approximate their carrying values due to their short term nature, unless otherwise noted. The Company has its cash primarily in one commercial bank in Toronto, Ontario, Canada. F-12 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) (unaudited) SEPTEMBER 30, 2006 ================================================================================ 3. SIGNIFICANT ACCOUNTING POLICIES (cont'd...) CONCENTRATION OF CREDIT RISK The financial instrument which potentially subjects the Company to concentration of credit risk is cash. The Company maintains cash in bank accounts that, at times, may exceed federally insured limits. As of September 30, 2006, the Company has exceeded the federally insured limit. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks on its cash in bank accounts. RECENT ACCOUNTING PRONOUNCEMENTS In December 2004, Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 153, "Exchanges of Non monetary Assets - an amendment of APB Opinion No. 29" ("SFAS 153") which amends Accounting Principles Board Opinion No. 29, "Accounting for Non Monetary Transactions" to eliminate the exception for non monetary exchanges of similar productive assets and replaces it with a general exception for exchanges of non monetary assets that do not have commercial substance. A non monetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS 153 is effective for non monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. In December 2004, FASB issued Statements of Financial Accounting Standards No. 123R, "Share Based Payment" ("SFAS 123R"). SFAS 123R supersedes APB 25 and its related implementation guidance by requiring entities to recognize the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards (with limited exceptions) and revises SFAS 123 as follows: (i) Public entities are required to measure liabilities incurred to employees in share-based payment transactions at fair value and nonpublic entities may elect to measure their liabilities to employees incurred in share-based payment transactions at their intrinsic value whereas under SFAS 123, all share-based payment liabilities were measured at their intrinsic value. (ii) Nonpublic entities are required to calculate fair value using an appropriate industry sector index for the expected volatility of its share price if it is not practicable to estimate the expected volatility of the entity's share price. (iii) Entities are required to estimate the number of instruments for which the requisite service is expected to be rendered as opposed to accounting for forfeitures as they occur. (iv) Incremental compensation cost for a modification of the terms or conditions of an award is measured by comparing the fair value of the modified award with the fair value of the award immediately before the modification whereas SFAS 123 required that the effects of a modification be measured as the difference between the fair value of the modified award at the date it is granted and the award's value immediately before the modification determined based on the shorter of (1) its remaining initially estimated expected life or (2) the expected life of the modified award. F-13 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) (unaudited) SEPTEMBER 30, 2006 ================================================================================ 3. SIGNIFICANT ACCOUNTING POLICIES (cont'd...) RECENT ACCOUNTING PRONOUNCEMENTS (cont'd...) SFAS 123R also clarifies and expands guidance in several areas, including measuring fair value, classifying an award as equity or as a liability and attributing compensation cost to reporting periods. SFAS 123R does not change the accounting guidance for share-based payment transactions with parties other than employees provided in SFAS 123 as originally issued and Emerging Issues Task Force No. 96-18 "Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods and Services" ("EITF 96-18"). SFAS 123R also does not address the accounting for employee share ownership plans which are subject to Statement of Position 93-6, "Employers' Accounting for Employee Stock Ownership Plans". Public entities (other than those filing as small business issuers) will be required to apply SFAS 123R as of the first annual reporting period that begins after June 15, 2005. Public entities that file as small business issuers will be required to apply SFAS 123R in the first annual reporting period that begins after December 15, 2005. For nonpublic entities, SFAS 123R must be applied as of the beginning of the first annual reporting period beginning after December 15, 2005. In May 2005, FASB issued Statements of Financial Accounting Standards No. 154, "Accounting Changes and Error Corrections - A Replacement of APB Opinion No. 20 and FASB Statement No. 3" ("SFAS 154") which is effective for fiscal years ending after December 15, 2005. SFAS 154 requires that changes in accounting policy be accounted for on a retroactive basis. The adoption of these new pronouncements is not expected to have a material effect on the Company's consolidated financial position or results of operations. 4. ACQUISITIONS On February 16, 2004, the Company acquired 100% of the outstanding and issued capital stock of XG Exploration by paying $25,000 and assuming $1,000 of liabilities. XG Exploration holds rights to a mineral prospecting licence on the Banso and Muoso concessions (the "Banso and Muoso Projects") located in Ghana. The total purchase price of $26,000 was written off to operations because no value was established for these prospecting rights as the Company does not yet have permits from the Government of the Republic of Ghana ("Government of Ghana") to operate on these projects. On December 22, 2004, the Company acquired 90% of the outstanding and issued capital stock of XG Mining by issuing 2,698,350 of the Company's common shares. XG Mining holds mining leases on the Kwabeng and Pameng concessions (the "Kwabeng and Pameng Projects"), and a mineral prospecting licence on the Apapam concession (the "Apapam Project"), all located in Ghana. The cost of the acquisition was based on the fair value of the net assets acquired. F-14 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) (unaudited) SEPTEMBER 30, 2006 ================================================================================ 4. ACQUISITIONS (cont'd...) The total purchase price of $8,495,387 was allocated as follows: Cash ................................................ $ 11,510 Receivables ......................................... 8,375 Equipment ........................................... 1,088 Mineral property .................................... 8,484,106 Accounts payable and accrued liabilities ............ (9,692) ----------- $ 8,495,387 =========== The Government of Ghana owns the remaining 10% of XG Mining's issued and outstanding capital stock. Pursuant to Ghanaian mining laws and regulations, the Government of Ghana holds a 10% interest in all mining leases in Ghana. Both acquisitions were accounted for using the purchase method with the net assets of the acquired companies being recorded at fair market value at the date of acquisition. 5. INVESTMENTS At September 30, 2006, the Company held investments classified as trading securities, which consisted of various equity securities. All trading securities are carried at fair value. As of September 30, 2006, the fair value of trading securities was $2,697,092 (December 31, 2005 - $2,647,207). 6. EQUIPMENT
==================================================================================================== September 30, 2006 December 31, 2005 ----------------------------------------------------------------------- Accumulated Net Book Accumulated Net Book Cost Amortization Value Cost Amortization Value ----------------------------------------------------------------------- Furniture and equipment .. $ 20,624 $ 1,981 $ 18,643 $ 2,964 $ 296 $ 2,668 Computer equipment ....... 8,623 1,495 7,128 5,053 758 4,295 Vehicle .................. 49,472 5,565 43,907 - - - ----------------------------------------------------------------------- $ 78,719 $ 9,041 $ 69,678 $ 8,017 $ 1,054 $ 6,963 ====================================================================================================
F-15 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) (unaudited) SEPTEMBER 30, 2006 ================================================================================ 7. DEFERRED FINANCING COSTS ======================================================================= September 30, 2006 December 31, 2005 ----------------------------------------------------------------------- Balance, beginning of period .. $ 41,582 $ - Costs incurred ................ - 46,202 Amortization .................. 6,930 4,620 ----------------------------------------------------------------------- Balance, end of period ........ $ 34,652 $ 41,582 ======================================================================= During the year ended December 31, 2005, the Company paid a finder's fee of $45,000 and other expenses of $1,202 relating to a convertible debenture financing (Note 10). 8. OIL AND GAS PROPERTY During the year ended December 31, 2005, the Company entered into a participation agreement for a 5% participating interest in certain oil and gas leases in Saskatchewan, Canada ("Saskatchewan Project"). To earn its interest, the Company was required to pay Ranger Canyon Energy Inc. $13,925 and to pay its proportionate share of seismic and drilling expenditures incurred. The Company's share of a drilling program undertaken in 2005 was $32,613 and for the nine months ended September 30, 2006 it was $163,599. Subsequent to September 30, 2006, the Company sold its interest to an unrelated oil and gas company for $314,258. 9. MINERAL PROPERTIES ======================================================================= September 30, 2006 December 31, 2005 ----------------------------------------------------------------------- Acquisition costs (Note 4) .... $ 8,484,106 $ 8,484,106 Asset retirement obligation (Note 11) .................. 39,865 39,865 ----------------------------------------------------------------------- Total ......................... $ 8,523,971 $ 8,523,971 ======================================================================= KWABENG AND PAMENG PROJECTS The Company holds two mining leases in Ghana. These mining leases grant the Company surface and mining rights to produce gold in the leased areas until July 26, 2019. All gold production will be subject to a 3% production royalty of the net smelter returns ("NSR"). F-16 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) (unaudited) SEPTEMBER 30, 2006 ================================================================================ 9. MINERAL PROPERTIES (cont'd...) APAPAM, BANSO AND MUOSO PROJECTS The Company holds prospecting licences on its Apapam, Banso and Muoso Projects in Ghana. These licences grant the Company the right to conduct exploratory work to determine whether there are mineable reserves of gold or diamonds in the licenced areas, are for two years and are renewable. If mineable reserves of gold or diamonds are discovered, the Company will have the first option to acquire a mining lease. OPTION AGREEMENT ON EDUM BANSO PROJECT In October, 2005, XG Exploration entered into an option agreement (the "Option Agreement") with Adom Mining Limited ("Adom") to acquire 100% of Adom's right, title and interest in and to a prospecting licence on the Edum Banso concession (the "Edum Banso Project") located in Ghana. Adom further granted XG Exploration the right to explore, develop, mine and sell mineral products from this concession. The Option Agreement has a five year term. The consideration paid was $15,000 with additional payments of $5,000 to be paid on the anniversary date of the Option Agreement in each year during the term. Upon the commencement of gold production, an additional $200,000 is to be paid, unless proven and probable reserves are less than 2,000,000 ounces, in which case the payment shall be reduced to $100,000. Upon successful transfer of title from Adom to XG Exploration, a production royalty (the "Royalty") of 2% of the net smelter returns shall be paid to Adom; provided, however that in the event that less than 2,000,000 ounces of proven and probable reserves are discovered, then the Royalty shall be 1%. The Royalty can be purchased by XG Exploration for $2,000,000; which will be reduced to $1,000,000 if proven and probable reserves are less than 2,000,000 ounces. MINING LEASE AND PROSPECTING LICENCE COMMITMENTS The Company is committed to expend, save and except for fees payable from time to time to the Minerals Commission and the Environmental Protection Agency ("EPA") (of Ghana) for an extension of an expiry date of a prospecting licence or mining lease and, in the case of the EPA, processing and certificate fees with respect to EPA permits, an aggregate of less than $500 in connection with annual or ground rent and mining permits to enter upon and gain access to the areas covered by the Company's mining leases and prospecting licences. 10. CONVERTIBLE DEBENTURES During the year ended December 31, 2005, the Company completed a convertible debenture financing for gross proceeds of $900,000. The debentures bear interest at 7% per annum, payable quarterly, and the principal balance is repayable by June 30, 2010. Debenture holders have the option to convert any portion of the outstanding principal into common shares at the conversion rate of $1 per share. F-17 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) (unaudited) SEPTEMBER 30, 2006 ================================================================================ 11. ASSET RETIREMENT OBLIGATION ======================================================================= September 30, 2006 December 31, 2005 ----------------------------------------------------------------------- Balance, beginning of period ... $ 43,833 $ 39,865 Obligation incurred ............ - - Accretion expense .............. 3,307 3,968 ----------------------------------------------------------------------- Balance, end of period ......... $ 47,140 $ 43,833 ======================================================================= The Company has a legal obligation associated with its mineral properties for clean up costs when work programs are completed. The undiscounted amount of cash flows, required over the estimated reserve life of the underlying assets, to settle the obligation, adjusted for inflation, is estimated at $50,000 (December 31, 2005 - $50,000). The obligation was calculated using a credit-adjusted risk free discount rate of 10% and an inflation rate of 2%. It is expected that this obligation will be funded from general Company resources at the time the costs are incurred. 12. CAPITAL STOCK CANCELLATION OF SHARES In May 2005, 47,000,000 common shares owned by two directors were returned to treasury and cancelled. In June 2006, 10,000 common shares were returned to the Company in settlement of a dispute and cancelled. PRIVATE PLACEMENTS In July 2006, the Company issued 1,132,000 common shares at $0.90 per share for gross proceeds of $1,018,800. For each two shares subscribed for, the purchaser received one share purchase warrant which enables the holder to acquire an additional common share at a price of $1.50 to July 31, 2007. In June 2006, the Company issued 578,112 common shares at $0.90 per share for gross proceeds of $520,300. For each two shares subscribed for, the purchaser received one share purchase warrant which enables the holder to acquire an additional common share at a price of $1.50 to June 16, 2007. In March 2006, the Company issued 792,029 common shares at $0.70 per share for gross proceeds of $554,420. In November 2005, the Company issued 1,549,354 common shares at $0.55 per share for gross proceeds of $852,145. In August 2005, the Company issued 300,000 common shares at $0.55 per share for gross proceeds of $165,000. For each two shares subscribed for, the purchaser received one share purchase warrant which enables the holder to acquire an additional common share at a price of $0.75 to August 31, 2006. F-18 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) (unaudited) SEPTEMBER 30, 2006 ================================================================================ 12. CAPITAL STOCK (cont'd...) PRIVATE PLACEMENTS (cont'd...) In June 2005, the Company issued 536,218 common shares at $0.55 per share for gross proceeds of $294,920. For each two shares subscribed for, the purchaser received one share purchase warrant which enables the holder to acquire an additional common share at a price of $0.75 to April 30, 2006. ACQUISITION OF SUBSIDIARY Effective December 22, 2004, the Company acquired 90% of the outstanding shares of XG Mining in exchange for 2,698,350 shares of common stock (Note 4). In connection with this acquisition, 47,000,000 shares owned by two officers and directors of the Company were returned to treasury and cancelled. STOCK OPTIONS The number of shares reserved for issuance under the Company's equity compensation option plan is 3,000,000. The terms and conditions of any options granted, including the number and type of options, the exercise period, the exercise price and vesting provisions, are determined by the board of directors. At September 30, 2006, the following stock options were outstanding: ======================================================================= Number of Options Exercise Price Expiry Date ----------------------------------------------------------------------- 300,000 $0.55 June 20, 2015 324,000 $0.70 April 21, 2009 972,000 $0.70 May 1, 2009 400,000 $0.90 August 1, 2009 ======================================================================= Stock option transactions and the number of stock options outstanding are summarized as follows:
=============================================================================================== September 30, 2006 December 31, 2005 --------------------------- --------------------------- Weighted Weighted Number Average Number Average of Options Exercise Price of Options Exercise Price - ----------------------------------------------------------------------------------------------- Outstanding, beginning of period .. 1,020,000 $ 0.55 - $ - Granted ........................ 1,696,000 0.75 1,020,000 0.55 Cancelled/Expired .............. (720,000) 0.55 - - ---------- ---------- Outstanding, end of period ........ 1,996,000 $ 0.72 1,020,000 $ 0.55 =============================================================================================== Exercisable, end of period ........ 252,305 $ 0.65 127,500 $ 0.55 ===============================================================================================
F-19 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) (unaudited) SEPTEMBER 30, 2006 ================================================================================ 12. CAPITAL STOCK (cont'd...) STOCK-BASED COMPENSATION The fair value of stock options granted during the nine months ended September 30, 2006 totalled $816,990 (September 30, 2005 - $310,324). Of this, $131,647 (September 30, 2005 - $20,511) was expensed in the period and included in general and administrative expenses. The remaining $778,052 will be expensed in future periods. The following assumptions were used for the Black-Scholes valuation of stock options granted during the nine months ended September 30, 2006 and the year ended December 31, 2005: September 30, 2006 December 31, 2005 -------------------------------------- Risk-free interest rate .. 4.94% 4.06% Expected life ............ 3 years 10 years Annualized volatility .... 31.75% 10.42% Dividend rate ............ 0% 0% The weighted average fair value of options granted was $0.48 (December 31, 2005 - $0.30). WARRANTS At September 30, 2006, the following warrants were outstanding: ======================================================================= Number of Warrants Exercise Price Expiry Date ----------------------------------------------------------------------- 289,056 $1.50 June 16, 2007 566,000 $1.50 July 31, 2007 ======================================================================= Warrant transactions and the number of warrants outstanding are summarized as follows: ======================================================================= Nine Months ended September 30, 2006 December 31, 2005 ----------------------------------------------------------------------- Balance, beginning of period ... 2,482,810 2,064,700 Issued ...................... 855,056 418,110 Exercised ................... (285,700) - Expired ..................... (2,197,110) - ---------- --------- Balance, end of period ......... 855,056 2,482,810 ======================================================================= F-20 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) (unaudited) SEPTEMBER 30, 2006 ================================================================================ 12. CAPITAL STOCK (cont'd...) WARRANTS (cont'd...) Exercise of Warrants (a) The expiry date for the exercise of the warrants issued in connection with the private placements completed in March and May 2004 was extended to March 31, 2006. An aggregate of 108,500 of these warrants were exercised for total proceeds of $81,375. (b) The exercise of the warrants issued in connection with a private placement completed in June 2005 expired on April 30, 2006. An aggregate of 177,200 of these warrants were exercised for total proceeds of $132,900. 13. RELATED PARTY TRANSACTIONS During the nine months ended September 30, 2006, the Company entered into the following transactions with related parties: (a) Paid or accrued consulting fees of $53,320 (September 30, 2005 - $48,363) to officers of the Company or companies controlled by such officers. (b) On January 12, 2006, the Board approved the issuance of an unsecured promissory note ("Note") in the aggregate amount of US$66,302 in connection with an account payable owing to an officer and director of the Company ("Note Holder") with respect to unpaid consulting fees, expenses incurred on behalf of the Company and a bonus. Under the terms of the Note, the Note Holder had the option to convert any portion owing under the Note from time to time into shares of the Company at the conversion price of US$0.55 per share. On January 31, 2006, the Note Holder provided the Company with a notice of conversion to convert US$50,000 of the outstanding Note into shares and was subsequently issued 90,909 shares on February 9, 2006. Amounts due to a related party are non-interest bearing, unsecured and have no fixed terms of repayment. The amounts charged to the Company for the services provided have been determined by negotiation among the parties. These transactions were in the normal course of operations and were measured at the exchange value, which represented the amount of consideration established and agreed to by the related parties. F-21 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) (unaudited) SEPTEMBER 30, 2006 ================================================================================ 14. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
=========================================================================================================== Cumulative amounts from the beginning of the development stage on January 1, 2003 September 30, 2006 September 30, 2005 to September 30, 2006 - ----------------------------------------------------------------------------------------------------------- Cash paid during the period for: Interest ...................... $ 47,250 $ 15,750 $ 78,750 Income taxes .................. $ - $ - $ - ===========================================================================================================
The significant non-cash transaction during the nine months ended September 30, 2006 was the issuance of 90,909 common shares valued at $50,000 for conversion of a promissory note (Note 13). The significant non-cash transaction during the nine months ended September 30, 2005 was the issuance of 10,000 common shares valued at $5,500 for consulting services. 15. DEFERRED INCOME TAXES Income tax benefits attributable to losses from United States of America operations was $Nil for the nine months ended September 30, 2006 and the year ended December 31, 2005, and differed from the amounts computed by applying the United States of America federal income tax rate of 34% to pretax losses from operations as a result of the following: ======================================================================= September 30, 2006 September 30, 2005 ----------------------------------------------------------------------- Income (loss) for the period $(1,375,973) $ 197,803 ======================================================================= Computed "expected" tax (benefit) expense ......... (467,831) $ 67,253 Non deductible (taxable) items ..................... 176,856 (127,709) Lower effective income tax rate on loss of foreign subsidiaries .............. 16,292 7,890 Valuation allowance .......... 274,683 52,566 ----------- ----------- $ - $ - ======================================================================= The tax effects of temporary differences that give rise to significant deferred tax assets and deferred tax liabilities are presented below: F-22 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) (unaudited) SEPTEMBER 30, 2006 ================================================================================ 15. DEFERRED INCOME TAXES (cont'd...) ====================================================================== September 30, 2006 December 31, 2005 ---------------------------------------------------------------------- Deferred tax assets: Net operating loss carry forwards - US ........... $ 627,165 $ 558,752 Net operating loss carry forwards - Ghana ........ 146,082 70,053 Valuation allowance .......... (773,247) (628,805) ----------- ---------- Total deferred tax assets .... $ - $ - ====================================================================== The valuation allowance for deferred tax assets as of September 30, 2006 and December 31, 2005 was $773,247 and $628,805 respectively. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in assessing the realizability of deferred tax assets. In order to fully realize the deferred tax asset attributable to net operating loss carryforwards, the Company will need to generate future taxable income of approximately $2,366,000 prior to the expiration of the net operating loss carryforwards. Of the $2,366,322 of operating loss carryforwards, $1,844,602 is attributable to the US, and expires between 2019 and 2026, and the balance of $521,720 is attributable to Ghana and expires between 2007 and 2011. 16. SEGMENTED INFORMATION The Company has one reportable segment, being the exploration and development of resource properties. Geographic information is as follows: ====================================================================== September 30, 2006 December 31, 2005 ---------------------------------------------------------------------- Capital assets: Canada .................... $ 214,750 $ 53,501 Ghana ..................... 8,589,036 8,523,971 ----------- ---------- Total capital assets ......... $ 8,803,786 $8,577,472 ====================================================================== F-23 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) (unaudited) SEPTEMBER 30, 2006 ================================================================================ 17. CONTINGENCY AND COMMITMENTS a) During the period ended September 30, 2006, a former consultant to the Company's Ghanaian subsidiaries brought an action for damages in the High Court of Ghana. The former consultant is alleging wrongful termination and claiming $172,000 is owed. The Company believes the lawsuit is without merit and will defend against the lawsuit vigorously. At this time, the likelihood of the outcome is not determinable and no liability has been recorded in connection with the lawsuit. b) Effective July 1, 2006, the Company entered into a management consulting agreement with a company of which the Chief Executive Officer of the Company is a director whereby the Company will pay $4,404 (Cdn$5,000) per month for five years. Upon the earlier of the bulk test achieving profitability or being completed, the monthly fee will increase to $8,820 (Cdn$10,000) and upon the commencement of full scale mining operations, the monthly fee will increase to $13,231 (Cdn$15,000). In the event of termination, without cause, six months of fees will be payable. In the event of a change of control, 18 months of fees will be payable. c) Effective May 1, 2006, the Company entered into a management consulting agreement with the Vice President, Exploration whereby the Company will pay $4,404 (Cdn$5,000) per month for three years. In the event of termination, without cause, 18 months of fees will be payable. d) Effective July 1, 2006, the Company entered into a management consulting agreement with the Secretary and Treasurer whereby the Company will pay $7,497 (Cdn$8,500) per month for five years. Upon the commencement of full scale mining operations, the monthly fee will increase to $8,820 (Cdn$10,000). In the event of termination, without cause, six months of fees will be payable. In the event of a change of control, 18 months of fees will be payable. e) Effective November 1, 2006, the Company entered into a management consulting agreement with the Vice President, Ghana Operations whereby the Company will pay $1,000 per month for one year. 18. SUBSEQUENT EVENTS Subsequent to September 30, 2006: A. PRIVATE PLACEMENT In October 2006, the Company issued 282,000 common shares at $1.10 per share for gross proceeds of $310,200. For each two shares subscribed for, the purchaser received one share purchase warrant which enables the holder to acquire an additional common share at a price of $1.50 to October 31, 2007. B. SALE OF OIL AND GAS INTEREST In October 2006, the Company sold its 5% participating interest in the Saskatchewan Project to an unrelated oil and gas company for $314,258. C. STOCK OPTIONS Pursuant to the resignation of an officer, 540,000 options with an exercise price of $0.70 will expire on January 30, 2007, instead of May 1, 2009, if not exercised. F-24 XTRA-GOLD RESOURCES CORP. AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN U.S. DOLLARS) DECEMBER 31, 2005 F-25 DAVIDSON & COMPANY LLP Chartered Accountants A Partnership of Incorporated Professionals ________________________________________________________________________________ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Xtra-Gold Resources Corp. and Subsidiaries (A Development Stage Company) We have audited the accompanying consolidated balance sheets of Xtra-Gold Resources Corp. and Subsidiaries (A Development Stage Company) as at December 31, 2005 and 2004 and the related consolidated statements of operations, stockholders' equity and cash flows for the years then ended and for the period from the beginning of the development stage on January 1, 2003 to December 31, 2005. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as at December 31, 2005 and 2004 and the results of its operations and its cash flows for the years then ended and for the period from the beginning of the development stage on January 1, 2003 to December 31, 2005 in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company incurred losses of $272,572 and $398,533 for the years ended December 31, 2005 and 2004, respectively, and has an accumulated deficit during the development stage of $673,805, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. "DAVIDSON & COMPANY LLP" Vancouver, Canada Chartered Accountants March 16, 2006 A Member of SC INTERNATIONAL ============================ 1200 - 609 Granville Street, P.O. Box 10372, Pacific Centre, Vancouver, BC, Canada, V7Y 1G6 Telephone (604) 687-0947 Fax (604) 687-6172 F-26 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) CONSOLIDATED BALANCE SHEETS (Expressed in U.S. Dollars) AS AT DECEMBER 31 ============================================================================================
2005 2004 - -------------------------------------------------------------------------------------------- ASSETS CURRENT Cash and cash equivalents ................................. $ 458,376 $ 231,480 Investment in trading securities, at fair value (cost of $2,241,762) (Note 5) .......................... 2,647,207 849,791 Receivables ............................................... 32,667 8,375 ------------ ------------ TOTAL CURRENT ASSETS ...................................... 3,138,250 1,089,646 EQUIPMENT (Note 6) ............................................ 6,963 - DEFERRED FINANCING COSTS (Note 7) ............................. 41,582 - OIL AND GAS PROPERTY (Note 8) ................................. 46,538 - MINERAL PROPERTIES (Note 9) ................................... 8,523,971 8,523,971 ------------ ------------ TOTAL ASSETS .................................................. $ 11,757,304 $ 9,613,617 ============================================================================================ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT Accounts payable and accrued liabilities .................. $ 305,825 $ 107,906 Due to related party (Note 13) ............................ 86,499 - ------------ ------------ TOTAL CURRENT LIABILITIES ..................................... 392,324 107,906 CONVERTIBLE DEBENTURES (Note 10) .............................. 900,000 - ASSET RETIREMENT OBLIGATION (Note 11) ......................... 43,833 39,865 ------------ ------------ TOTAL LIABILITIES ......................................... 1,336,157 147,771 ------------ ------------ STOCKHOLDERS' EQUITY Capital stock (Note 12) Authorized 250,000,000 common shares with a par value of $0.001 Issued and outstanding 24,937,407 common shares (2004-69,541,835 common shares) .. 24,938 69,542 Additional paid in capital ................................ 12,497,778 11,225,301 Deficit ................................................... (1,427,764) (1,427,764) Deficit accumulated during the development stage .......... (673,805) (401,233) ------------ ------------ TOTAL STOCKHOLDERS' EQUITY ................................ 10,421,147 9,465,846 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................... $ 11,757,304 $ 9,613,617 ============================================================================================ HISTORY AND ORGANIZATION OF THE COMPANY (Note 1) SUBSEQUENT EVENTS (Note 17) The accompanying notes are an integral part of these consolidated financial statements. F-27
XTRA-GOLD RESOURCES CORP. (A Development Stage Company) CONSOLIDATED STATEMENTS OF OPERATIONS (Expressed in U.S. Dollars) ==============================================================================================================
Cumulative amounts from the beginning of the development stage on January 1, 2003 to Year Ended Year Ended December 31, 2005 December 31, 2005 December 31, 2004 - -------------------------------------------------------------------------------------------------------------- EXPENSES Amortization ................................ $ 1,054 $ 1,054 $ - Exploration ................................. 788,252 476,223 312,029 General and administrative .................. 634,701 416,639 215,362 Foreign exchange gain ....................... (137,364) (72,876) (64,488) Mineral interests (Note 4) .................. 26,000 - 26,000 ------------ ------------ ------------ LOSS BEFORE OTHER ITEMS ....................... (1,312,643) (821,040) (488,903) ------------ ------------ ------------ OTHER ITEMS Interest expense ............................ (40,089) (40,089) - Realized gains on sales of trading securities 161,465 160,170 1,295 Net unrealized gain on trading securities ... 389,910 323,624 66,286 Other income ................................ 127,552 104,763 22,789 ------------ ------------ ------------ 638,838 548,468 90,370 ------------ ------------ ------------ LOSS FOR THE PERIOD ........................... $ (673,805) $ (272,572) $ (398,533) ============================================================================================================== BASIC AND DILUTED LOSS PER COMMON SHARE ....... $ (0.01) $ (0.01) ============================================================================================================== BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING .................... 42,075,408 65,660,173 ============================================================================================================== The accompanying notes are an integral part of these consolidated financial statements. F-28
XTRA-GOLD RESOURCES CORP. (A Development Stage Company) CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in U.S. Dollars) ==============================================================================================================
Cumulative amounts from the beginning of the development stage on January 1, 2003 to Year Ended Year Ended December 31, 2005 December 31, 2005 December 31, 2004 - -------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Loss for the period ......................... $ (673,805) $ (272,572) $ (398,533) Items not affecting cash: Amortization .............................. 1,054 1,054 - Amortization of deferred financing costs .. 4,620 4,620 - Accretion of asset retirement obligation .. 3,968 3,968 - Shares issued for services ................ 5,500 5,500 - Stock-based compensation .................. 41,022 41,022 - Unrealized foreign exchange gain .......... (151,455) (93,339) (58,116) Realized gains on sale of trading securities ............................... (161,465) (160,170) (1,295) Purchase of trading securities ............ (4,790,770) (3,532,825) (1,257,945) Proceeds on sale of trading securities .... 2,846,393 2,312,542 533,851 Unrealized gain on trading securities ..... (389,910) (323,624) (66,286) Loss on disposal of equipment ............. 1,088 - 1,088 Mineral property acquired on purchase of subsidiary ................... 26,000 - 26,000 Expenses paid by stockholders ............. 2,700 - - Changes in non-cash working capital items: Increase in receivables ................... (24,292) (24,292) - Increase in accounts payable and accrued liabilities .................. 248,595 151,381 97,214 Increase in due to related party .......... 86,499 86,499 - ----------- ----------- ----------- Net cash used in operating activities ....... (2,924,258) (1,800,236) (1,124,022) ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of convertible debentures ..................... 900,000 900,000 - Deferred financing costs .................... (46,202) (46,202) - Issuance of capital stock, net of financing costs ............................ 2,550,343 1,181,351 1,368,992 ----------- ----------- ----------- Net cash provided by financing activities ... 3,404,141 2,035,149 1,368,992 ----------- ----------- ----------- - continued - The accompanying notes are an integral part of these consolidated financial statements. F-29
XTRA-GOLD RESOURCES CORP. (A Development Stage Company) CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in U.S. Dollars) ==============================================================================================================
Cumulative amounts from the beginning of the development stage on January 1, 2003 to Year Ended Year Ended December 31, 2005 December 31, 2005 December 31, 2004 - -------------------------------------------------------------------------------------------------------------- Continued... CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of equipment .................... (8,017) (8,017) - Acquisition of cash on purchase of subsidiary .............................. 11,510 - 11,510 Acquisition of subsidiary ................... (25,000) - (25,000) ----------- ----------- ----------- Net cash used in investing activities ....... (21,507) (8,017) (13,490) ----------- ----------- ----------- CHANGE IN CASH AND CASH EQUIVALENTS DURING THE PERIOD ............................. 458,376 226,896 231,480 CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD ....................... - 231,480 - ----------- ----------- ----------- CASH AND CASH EQUIVALENTS, END OF THE PERIOD .. $ 458,376 $ 458,376 $ 231,480 ============================================================================================================== SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS (Note 14) The accompanying notes are an integral part of these consolidated financial statements. F-30
XTRA-GOLD RESOURCES CORP. (A Development Stage Company) CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Expressed in U.S. Dollars) ========================================================================================================================
Deficit Common Stock Accumulated ----------------------- Additional During the Number Paid-in Development of Shares Amount Capital Deficit Stage Total - ------------------------------------------------------------------------------------------------------------------------ BALANCE, DECEMBER 31, 2003 ..... 62,714,085 $ 62,714 $ 1,367,750 $(1,427,764) $ (2,700) $ - March, 2004 - private placement at $0.35 per share ........... 2,000,000 2,000 698,000 - - 700,000 May, 2004 - private placement at $0.35 per share .............. 2,129,400 2,129 743,161 - - 745,290 December, 2004 - acquisition of subsidiary via issuance of common stock ................. 2,698,350 2,699 8,492,688 - - 8,495,387 Share issuance costs ........... - - (76,298) - - (76,298) Loss for the year .............. - - - - (398,533) (398,533) ----------- -------- ------------ ----------- ---------- ----------- BALANCE, DECEMBER 31, 2004 ..... 69,541,835 69,542 11,225,301 (1,427,764) (401,233) 9,465,846 May, 2005 - cancellation of shares ....................... (47,000,000) (47,000) 47,000 - - - June, 2005 - for services ...... 10,000 10 5,490 - - 5,500 June, 2005 - private placement at $0.55 per share ........... 536,218 536 294,384 - - 294,920 August, 2005 - private placement at $0.55 per share ............. 300,000 300 164,700 - - 165,000 November, 2005 - private placement at $0.55 per share . 1,549,354 1,550 850,595 - - 852,145 Share issuance costs ........... - - (130,714) - - (130,714) Stock-based compensation ....... - - 41,022 - - 41,022 Loss for the year .............. - - - - (272,572) (272,572) ----------- -------- ------------ ----------- ---------- ----------- BALANCE, DECEMBER 31, 2005 ..... 24,937,407 $ 24,938 $ 12,497,778 $(1,427,764) $ (673,805) $10,421,147 ======================================================================================================================== The accompanying notes are an integral part of these consolidated financial statements. F-31
XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) DECEMBER 31, 2005 ================================================================================ 1. HISTORY AND ORGANIZATION OF THE COMPANY Silverwing Systems Corporation (the "Company"), a Nevada corporation, was incorporated on September 1, 1998. On June 23, 1999, the Company completed the acquisition of Advertain On-Line Canada Inc. ("Advertain Canada"), a Canadian company operating in Vancouver, British Columbia, Canada. The Company changed its name to Advertain On-Line Inc. ("Advertain") on August 19, 1999. Advertain Canada's business was the operation of a web site, "Advertain.com", whose primary purpose was to distribute entertainment advertising on the Internet. In May 2001, the Company, being unable to continue its funding of Advertain Canada's operations, decided to abandon its interest in Advertain Canada. On June 15, 2001, the Company sold its investment in Advertain Canada back to Advertain Canada's original shareholder. On June 18, 2001, the Company changed its name from Advertain to RetinaPharma International, Inc. ("RetinaPharma") and became inactive. In 2003, the Company became a resource exploration and development company. On October 31, 2003, the Company acquired 100% of the issued and outstanding common stock of Xtra-Gold Resources, Inc.("XGRI"). XGRI was incorporated in Florida on October 24, 2003. On December 19, 2003, the Company changed its name from RetinaPharma to Xtra-Gold Resources Corp. In 2004, the Company acquired 100% of the issued and outstanding capital stock of Canadiana Gold Resources Limited ("Canadiana") and 90% of the issued and outstanding capital stock of Goldenrae Mining Company Limited ("Goldenrae") (Note 4). Both companies are incorporated in Ghana and the remaining 10% of the issued and outstanding capital stock of Goldenrae is held by the Government of Ghana. On October 20, 2005, XGRI changed its name to Xtra Energy Corp. ("Xtra Energy"). On October 20, 2005, the Company incorporated Xtra Oil & Gas Ltd. ("XOG") in Alberta, Canada. On December 21, 2005, Canadiana changed its name to Xtra-Gold Exploration Limited ("XG Exploration"). On January 13, 2006, Goldenrae changed its name to Xtra-Gold Mining Limited ("XG Mining"). On March 2, 2006, the Company incorporated Xtra Oil & Gas (Ghana) Limited ("XOGG") in Ghana. 2. GOING CONCERN The Company is in the development stage with respect to its resource properties, incurred losses of $272,572 and $398,533 during the years ended December 31, 2005 and 2004, respectively, and has accumulated a deficit during the development stage of $673,805. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company's ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. F-32 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) DECEMBER 31, 2005 ================================================================================ 2. GOING CONCERN (cont'd...) Management of the Company ("Management") is of the opinion that sufficient financing will be obtained from external financing and further share issuances to meet the Company's obligations. At December 31, 2005, the Company has working capital of $2,745,926 and subsequent to year end has raised an additional $573,170 pursuant to a private placement and the exercise of warrants (Note 17). 3. SIGNIFICANT ACCOUNTING POLICIES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES These consolidated financial statements have been prepared in conformity with generally accepted accounting principles of the United States of America ("US GAAP"). PRINCIPLES OF CONSOLIDATION These consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, Xtra Energy (from October 24, 2003), XG Exploration (from February 16, 2004) and XOG (from October 20, 2005), and its 90% owned subsidiary, XG Mining (from December 22, 2004). All significant intercompany accounts and transactions have been eliminated on consolidation. USE OF ESTIMATES The preparation of consolidated financial statements in conformity with US 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. CASH AND CASH EQUIVALENTS The Company considers highly liquid investments with original maturities of three months or less to be cash equivalents. At December 31, 2005 and 2004, cash and cash equivalents consisted of cash held at financial institutions. RECEIVABLES No allowance for doubtful accounts has been provided. Management has evaluated all receivables and believes they are all collectible. TRADING SECURITIES The Company's trading securities are reported at fair value, with unrealized gains and losses included in earnings. F-33 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) DECEMBER 31, 2005 ================================================================================ 3. SIGNIFICANT ACCOUNTING POLICIES (cont'd...) EQUIPMENT Equipment is recorded at cost and is being amortized over its estimated useful lives using the declining balance method at the following annual rates: Office furniture and equipment 20% Computer equipment 30% DEFERRED FINANCING COSTS Deferred financing costs consist of expenses incurred to obtain funds pursuant to the issuance of the convertible debentures and are being amortized straight-line over the term of the debentures. OIL AND NATURAL GAS PROPERTIES The Company follows the full cost method of accounting for oil and natural gas operations. Under this method, all costs associated with the acquisition of, exploration for and development of oil and gas reserves are capitalized in cost centers on a country-by-country basis. Such costs include property acquisition costs, geological and geophysical studies, carrying charges on non-producing properties, costs of drilling productive wells, and overhead expenses directly related to these activities. Depletion is calculated for producing properties by using the unit-of-production method based on estimated proved reserves, before royalties, as determined by management of the Company or independent consultants. Sales or dispositions of oil and gas properties are credited to the respective cost centers and a gain or loss is recognized when all properties in a cost center have been disposed of, unless such sale or disposition significantly alters the relationship between capitalized costs and proved reserves of oil and gas attributable to the cost center. Costs of abandoned properties are accounted for as adjustments of capitalized costs and written off to expense. Undeveloped properties are excluded from the depletion calculation until the quantities of proved reserves can be determined. A ceiling test is applied to the proven properties for each cost center and for the aggregate of all cost centers by comparing the net capitalized costs to the estimated future net revenues from production of estimated proved reserves without discount, plus the costs of unproved properties net of impairment. Any excess capitalized costs are written off to expense. Further, the ceiling test for the aggregate of all cost centers is required to include the effects of future removal and site restoration costs, general and administrative expenses, financing costs and income taxes. The calculation of future net revenues is based upon prices, costs and regulations in effect at each year end. Unproved properties are assessed for impairment on an annual basis by applying factors that rely on historical experience. In general, the Company may write off any unproved property under one or more of the following conditions: F-34 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) DECEMBER 31, 2005 ================================================================================ 3. SIGNIFICANT ACCOUNTING POLICIES (cont'd...) OIL AND NATURAL GAS PROPERTIES (cont'd...) (a) there are no firm plans for further drilling on the unproved property; (b) negative results were obtained from studies of the unproved properties; (c) negative results were obtained from studies conducted in the vicinity of the unproved property; or (d) the remaining term of the unproved property does not allow sufficient time for further studies or drilling. MINERAL PROPERTIES AND EXPLORATION AND DEVELOPMENT COSTS The costs of acquiring mineral rights are capitalized and allocated between proven and probable reserves and mineralization not considered proven and probable reserves at the date of acquisition, based on relative fair values. If it is later established that some mineralization meets the definition of proven and probable reserves, then it will be reclassified as relating to reserves at that time. After acquisition, various factors can affect the recoverability of the capitalized costs. If, after review, management concludes that the carrying amount of a mineral property is impaired, it will be written down to estimated fair value. Exploration and development costs incurred on mineral properties classified as mineralization are expensed as incurred. Development costs incurred on proven and probable reserves will be capitalized. Upon commencement of production, capitalized costs will be amortized using the unit-of-production method over the estimated life of the ore body based on proven and probable reserves. LONG-LIVED ASSETS The Company accounts for long-lived assets under Statements of Financial Accounting Standards Nos. 142 and 144 "Accounting for Goodwill and Other Intangible Assets" and "Accounting for Impairment or Disposal of Long-Lived Assets" ("SFAS 142 and 144"). In accordance with SFAS 142 and 144, long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, the recoverability test is performed using undiscounted net cash flows related to the long-lived assets. ASSET RETIREMENT OBLIGATIONS The Company records the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development, and/or normal use of the long-lived assets. The Company also records a corresponding asset which is amortized over the life of the asset. Subsequent to the initial measurement of the asset retirement obligation, the obligation is adjusted at the end of each period to reflect the passage of time (accretion expense) and changes in the estimated future cash flows underlying the obligation (asset retirement cost). STOCK-BASED COMPENSATION The Company calculates the fair value of all stock options granted and records these amounts as compensation expense over the vesting period of the options using the straight-line method. The Black-Scholes option pricing model is used to calculate fair value. F-35 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) DECEMBER 31, 2005 ================================================================================ 3. SIGNIFICANT ACCOUNTING POLICIES (cont'd...) INCOME TAXES The Company accounts for income taxes under Statements of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). Under SFAS 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. LOSS PER SHARE Basic loss per common share is computed using the weighted average number of common shares outstanding during the year. To calculate diluted loss per share, the Company uses the treasury stock method as defined in Financial Accounting Standards No. 128, "Earnings Per Share." As of December 31, 2005, there were 2,482,810 warrants (2004 - 2,064,700), 1,020,000 options (2004 - Nil) and convertible debentures exercisable into 900,000 common shares (2004 - Nil) which have not been included in the weighted average number of common shares outstanding as these were anti-dilutive. FOREIGN EXCHANGE The Company's functional currency is the U.S. dollar. The Company does not have non-monetary assets and liabilities that are in a currency other than the U.S. dollar. Any monetary assets and liabilities that are in a currency other than the U.S. dollar are translated at the rate prevailing at year end. Revenue and expenses in a foreign currency are translated at rates that approximate those in effect at the time of translation. Gains and losses from translation of foreign currency transactions into U.S. dollars are included in current results of operations. FINANCIAL INSTRUMENTS The Company's financial instruments consist of cash and cash equivalents, trading securities, receivables, accounts payable and accrued liabilities, amounts due to a related party and convertible debentures. It is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from its financial instruments. The fair values of these financial instruments approximate their carrying values due to their short term nature, unless otherwise noted. The Company has its cash primarily in one commercial bank in Toronto, Ontario, Canada. CONCENTRATION OF CREDIT RISK The financial instrument which potentially subjects the Company to concentration of credit risk is cash. The Company maintains cash in bank accounts that, at times, may exceed federally insured limits. As of December 31, 2005, the Company has exceeded the federally insured limit. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks on its cash in bank accounts. F-36 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) DECEMBER 31, 2005 ================================================================================ 3. SIGNIFICANT ACCOUNTING POLICIES (cont'd...) RECENT ACCOUNTING PRONOUNCEMENTS In December 2004, Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 153, "Exchanges of Non monetary Assets - an amendment of APB Opinion No. 29" ("SFAS 153") which amends Accounting Principles Board Opinion No. 29, "Accounting for Non Monetary Transactions" to eliminate the exception for non monetary exchanges of similar productive assets and replaces it with a general exception for exchanges of non monetary assets that do not have commercial substance. A non monetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS 153 is effective for non monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. In December 2004, FASB issued Statements of Financial Accounting Standards No. 123R, "Share Based Payment" ("SFAS 123R"). SFAS 123R supersedes APB 25 and its related implementation guidance by requiring entities to recognize the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards (with limited exceptions) and revises SFAS 123 as follows: (i) Public entities are required to measure liabilities incurred to employees in share-based payment transactions at fair value and nonpublic entities may elect to measure their liabilities to employees incurred in share-based payment transactions at their intrinsic value whereas under SFAS 123, all share-based payment liabilities were measured at their intrinsic value. (ii) Nonpublic entities are required to calculate fair value using an appropriate industry sector index for the expected volatility of its share price if it is not practicable to estimate the expected volatility of the entity's share price. (iii) Entities are required to estimate the number of instruments for which the requisite service is expected to be rendered as opposed to accounting for forfeitures as they occur. (iv) Incremental compensation cost for a modification of the terms or conditions of an award is measured by comparing the fair value of the modified award with the fair value of the award immediately before the modification whereas SFAS 123 required that the effects of a modification be measured as the difference between the fair value of the modified award at the date it is granted and the award's value immediately before the modification determined based on the shorter of (1) its remaining initially estimated expected life or (2) the expected life of the modified award. SFAS 123R also clarifies and expands guidance in several areas, including measuring fair value, classifying an award as equity or as a liability and attributing compensation cost to reporting periods. SFAS 123R does not change the accounting guidance for share-based payment transactions with parties other than employees provided in SFAS 123 as originally issued and Emerging Issues Task Force No. 96-18 "Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods and Services" ("EITF 96-18"). SFAS 123R also does not address the accounting for employee share ownership plans which are subject to Statement of Position 93-6, "Employers' Accounting for Employee Stock Ownership Plans". Public entities (other than those filing as small business issuers) will be required to apply SFAS 123R as of the first annual reporting period that begins after June 15, 2005. Public entities that file as small business issuers will be required to apply SFAS 123R in the first annual reporting period that begins after December 15, 2005. For nonpublic entities, SFAS 123R must be applied as of the beginning of the first annual reporting period beginning after December 15, 2005. F-37 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) DECEMBER 31, 2005 ================================================================================ 3. SIGNIFICANT ACCOUNTING POLICIES (cont'd...) RECENT ACCOUNTING PRONOUNCEMENTS (cont'd...) In May 2005, FASB issued Statements of Financial Accounting Standards No. 154, "Accounting Changes and Error Corrections - A Replacement of APB Opinion No. 20 and FASB Statement No. 3" ("SFAS 154") which is effective for fiscal years ending after December 15, 2005. SFAS 154 requires that changes in accounting policy be accounted for on a retroactive basis. The adoption of these new pronouncements is not expected to have a material effect on the Company's consolidated financial position or results of operations. 4. ACQUISITIONS On February 16, 2004, the Company acquired 100% of the outstanding and issued capital stock of XG Exploration by paying $25,000 and assuming $1,000 of liabilities. XG Exploration holds rights to a mineral prospecting licence on the Banso and Muoso concessions (the "Banso and Muoso Projects") located in Ghana. The total purchase price of $26,000 was written off to operations because no value was established for these prospecting rights as the Company does not yet have mining leases from the Government of the Republic of Ghana ("Government of Ghana") to conduct mining operations on these projects. On December 22, 2004, the Company acquired 90% of the outstanding and issued capital stock of XG Mining by issuing 2,698,350 of the Company's common shares. XG Mining holds mining leases on the Kwabeng and Pameng concessions (the "Kwabeng and Pameng Projects"), and a mineral prospecting licence on the Apapam concession (the "Apapam Project"), all located in Ghana. The cost of the acquisition was based on the fair value of the net assets acquired. The total purchase price of $8,495,387 was allocated as follows: Cash ..................................... $ 11,510 Receivables .............................. 8,375 Equipment ................................ 1,088 Mineral property ......................... 8,484,106 Accounts payable and accrued liabilities . (9,692) ----------- $ 8,495,387 =========== The Government of Ghana owns the remaining 10% of XG Mining's issued and outstanding capital stock. Pursuant to Ghanaian mining laws and regulations, the Government of Ghana holds a 10% interest in all mining leases in Ghana. Both acquisitions were accounted for using the purchase method with the net assets of the acquired companies being recorded at fair market value at the date of acquisition. F-38 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) DECEMBER 31, 2005 ================================================================================ 5. INVESTMENTS At December 31, 2005, the Company held investments classified as trading securities, which consisted of various equity securities. All trading securities are carried at fair value. As of December 31, 2005, the fair value of trading securities was $2,647,207 (2004 - $849,791). 6. EQUIPMENT
=============================================================================================== 2005 2004 ------------------------------------------------------------------- Accumulated Net Book Accumulated Net Book Cost Amortization Value Cost Amortization Value ------------------------------------------------------------------- Furniture and equipment .. $2,964 $ 296 $2,668 $ - $ - $ - Computer equipment ....... 5,053 758 4,295 - - - ------------------------------------------------------------------- $8,017 $1,054 $6,963 $ - $ - $ - ===============================================================================================
7. DEFERRED FINANCING COSTS ============================================================== 2005 2004 -------------------------------------------------------------- Balance, beginning of year ........ $ - $ - Costs incurred .................... 46,202 - Amortization ...................... 4,620 - -------------------------------------------------------------- Balance, end of year .............. $ 41,582 $ - ============================================================== During the year ended December 31, 2005, the Company paid a finder's fee of $45,000 and other expenses of $1,202 relating to a convertible debenture financing (Note 10). 8. OIL AND GAS PROPERTY During the year ended December 31, 2005, the Company entered into a participation agreement for a 5% participating interest in certain oil and gas leases in Saskatchewan, Canada ("Saskatchewan Project"). To earn its interest, the Company was required to pay Ranger Canyon Energy Inc. $13,925 and to pay its proportionate share of seismic and drilling expenditures incurred. The Company's share of a drilling program undertaken in 2005 was $32,613. F-39 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) DECEMBER 31, 2005 ================================================================================ 9. MINERAL PROPERTIES ================================================================= 2005 2004 ----------------------------------------------------------------- Acquisition costs (Note 4) .......... $8,484,106 $8,484,106 Asset retirement obligation (Note 11) 39,865 39,865 ----------------------------------------------------------------- Total ............................... $8,523,971 $8,523,971 ================================================================= KWABENG AND PAMENG PROJECTS The Company holds two mining leases in Ghana. These mining leases grant the Company surface and mining rights to produce gold in the leased areas until July 26, 2019. All gold production will be subject to a 3% production royalty of the net smelter returns ("NSR"). APAPAM, BANSO AND MUOSO PROJECTS The Company holds prospecting licences on its Apapam, Banso and Muoso Projects in Ghana. These licences grant the Company the right to conduct exploratory work to determine whether there are mineable reserves of gold or diamonds in the licenced areas, are for two years and are renewable. If mineable reserves of gold or diamonds are discovered, the Company will have the first option to acquire a mining lease. OPTION AGREEMENT ON EDUM BANSO PROJECT In October, 2005, XG Exploration entered into an option agreement (the "Option Agreement") with Adom Mining Limited ("Adom") to acquire 100% of Adom's right, title and interest in and to a prospecting licence on the Edum Banso concession (the "Edum Banso Project") located in Ghana. Adom further granted XG Exploration the right to explore, develop, mine and sell mineral products from this concession. The Option Agreement has a five year term. The consideration paid was $15,000 with additional payments of $5,000 to be paid on the anniversary date of the Option Agreement in each year during the term. Upon the commencement of gold production, an additional $200,000 is to be paid, unless proven and probable reserves are less than 2,000,000 ounces, in which case the payment shall be reduced to $100,000. Upon successful transfer of title from Adom to XG Exploration, a production royalty (the "Royalty") of 2% of the net smelter returns shall be paid to Adom; provided, however that in the event that less than 2,000,000 ounces of proven and probable reserves are discovered, then the Royalty shall be 1%. The Royalty can be purchased by XG Exploration for $2,000,000; which will be reduced to $1,000,000 if proven and probable reserves are less than 2,000,000 ounces. MINING LEASE AND PROSPECTING LICENCE COMMITMENTS The Company is committed to expend, save and except for fees payable from time to time to the Minerals Commission and the Environmental Protection Agency ("EPA") (of Ghana) for an extension of an expiry date of a prospecting licence or mining lease and, in the case of the EPA, processing and certificate fees with respect to EPA permits, an aggregate of less than $500 in connection with annual or ground rent and mining permits to enter upon and gain access to the areas covered by the Company's mining leases and prospecting licences. F-40 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) DECEMBER 31, 2005 ================================================================================ 10. CONVERTIBLE DEBENTURES During the year ended December 31, 2005, the Company completed a convertible debenture financing for gross proceeds of $900,000. The debentures bear interest at 7% per annum, payable quarterly, and the principal balance is repayable by June 30, 2010. Debenture holders have the option to convert any portion of the outstanding principal into common shares at the conversion rate of $1 per share. 11. ASSET RETIREMENT OBLIGATION ============================================================== 2005 2004 -------------------------------------------------------------- Balance, beginning of year ......... $39,865 $ - Obligation incurred ................ - 39,865 Accretion expense .................. 3,968 - -------------------------------------------------------------- Balance, end of year ............... $43,833 $39,865 ============================================================== The Company has a legal obligation associated with its mineral properties for clean up costs when work programs are completed. The undiscounted amount of cash flows, required over the estimated reserve life of the underlying assets, to settle the obligation, adjusted for inflation, is estimated at $50,000 (2004 - $50,000). The obligation was calculated using a credit-adjusted risk free discount rate of 10% and an inflation rate of 2%. It is expected that this obligation will be funded from general Company resources at the time the costs are incurred. 12. CAPITAL STOCK CANCELLATION OF SHARES In May 2005, 47,000,000 common shares owned by two directors were returned to treasury and cancelled. PRIVATE PLACEMENTS In November 2005, the Company issued 1,549,354 common shares at $0.55 per share for gross proceeds of $852,145. In August 2005, the Company issued 300,000 common shares at $0.55 per share for gross proceeds of $165,000. For each two shares subscribed for, the purchaser received one share purchase warrant which enables the holder to acquire an additional common share at a price of $0.75 to August 31, 2006. In June 2005, the Company issued 536,218 common shares at $0.55 per share for gross proceeds of $294,920. For each two shares subscribed for, the purchaser received one share purchase warrant which enables the holder to acquire an additional common share at a price of $0.75 to April 30, 2006. F-41 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) DECEMBER 31, 2005 ================================================================================ 12. CAPITAL STOCK (cont'd...) PRIVATE PLACEMENTS (cont'd...) In May 2004, the Company issued 2,129,400 common shares at $0.35 per share for gross proceeds of $745,290. For each two shares subscribed for, the purchaser received one share purchase warrant which enables the holder to acquire an additional common share at a price of $0.75 for one year. The Company subsequently extended the exercise period to February 28, 2006. In March 2004, the Company issued 2,000,000 common shares at $0.35 per share for gross proceeds of $700,000. For each two shares subscribed for, the purchaser received one share purchase warrant which enables the holder to acquire an additional common share at a price of $0.75 for one year. The Company subsequently extended the exercise period to February 28, 2006. ACQUISITION OF SUBSIDIARY Effective December 22, 2004, the Company acquired 90% of the outstanding shares of XG Mining in exchange for 2,698,350 shares of common stock (Note 4). In connection with this acquisition, 47,000,000 shares owned by two officers and directors of the Company were returned to treasury and cancelled. STOCK OPTIONS The number of shares reserved for issuance under the Company's equity compensation option plan is 3,000,000. The terms and conditions of any options granted, including the number and type of options, the exercise period, the exercise price and vesting provisions, are determined by the board of directors. At December 31, 2005, the following stock options were outstanding: =========================================================== Number of Options Exercise Price Expiry Date ----------------------------------------------------------- 1,020,000 $0.55 June 20, 2015 =========================================================== Stock option transactions and the number of stock options outstanding are summarized as follows:
============================================================================================= 2005 2004 --------------------------- --------------------------- Weighted Weighted Number Average Number Average of Options Exercise Price of Options Exercise Price - --------------------------------------------------------------------------------------------- Outstanding, beginning of year ... - $ - - $ - Granted ...................... 1,020,000 0.55 - - Cancelled/Expired ............ - - - - --------- ---- Outstanding, end of year ......... 1,020,000 $ 0.55 - $ - ============================================================================================= Exercisable, end of year ......... 127,500 $ 0.55 - $ - =============================================================================================
F-42 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) DECEMBER 31, 2005 ================================================================================ 12. CAPITAL STOCK (cont'd...) STOCK-BASED COMPENSATION The fair value of stock options granted during the year ended December 31, 2005 totalled $310,324 (2004 - $Nil). Of this, $41,022 (2004 - $Nil) was expensed in the year and included in general and administrative expenses. The remaining $269,302 will be expensed in future periods. The following assumptions were used for the Black-Scholes valuation of stock options granted during the years ended December 31, 2005 and 2004: December December 31, 2005 31, 2004 --------------------- Risk-free interest rate ............. 4.06% - Expected life ....................... 10 years - Annualized volatility ............... 10.42% - Dividend rate ....................... 0% - The weighted average fair value of options granted was $0.30 (2004 - $Nil). WARRANTS At December 31, 2005, the following warrants were outstanding: ==================================================================== Number of Warrants Exercise Price Expiry Date -------------------------------------------------------------------- 2,064,700 $ 0.75 February 28, 2006 (Note 17) 268,110 0.75 April 30, 2006 150,000 0.75 August 31, 2006 ==================================================================== Warrant transactions and the number of warrants outstanding are summarized as follows: ============================================================== 2005 2004 -------------------------------------------------------------- Balance, beginning of year ..... 2,064,700 - Issued ..................... 418,110 2,064,700 Exercised .................. - - Expired .................... - - --------- --------- Balance, end of year ........... 2,482,810 2,064,700 ============================================================== F-43 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) DECEMBER 31, 2005 ================================================================================ 13. RELATED PARTY TRANSACTIONS During the year, the Company entered into the following transactions with related parties: (a) Paid or accrued consulting fees of $97,767 (2004 - $Nil) to officers of the Company. Amounts due to a related party are non-interest bearing, unsecured and have no fixed terms of repayment. The amounts charged to the Company for the services provided have been determined by negotiation among the parties. These transactions were in the normal course of operations and were measured at the exchange value, which represented the amount of consideration established and agreed to by the related parties. 14. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS ================================================================================ Cumulative amounts from the beginning of the development stage on January 1, 2003 2005 2004 to December 31, 2005 - -------------------------------------------------------------------------------- Cash paid during the period for: Interest ................... $ 31,500 $ - $ 31,500 Income taxes ............... $ - $ - $ - ================================================================================ The significant non-cash transaction during the year ended December 31, 2005 was the issuance of 10,000 common shares valued at $5,500 for consulting services. The significant non-cash transaction during the year ended December 31, 2004 was the issuance of 2,698,350 shares of common stock of the Company for the acquisition of XG Mining (Note 4). 15. DEFERRED INCOME TAXES Income tax benefits attributable to losses from United States of America operations was $Nil for the years ended December 31, 2005 and 2004, and differed from the amounts computed by applying the United States of America federal income tax rate of 34% to pretax losses from operations as a result of the following: F-44 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) DECEMBER 31, 2005 ================================================================================ 15. DEFERRED INCOME TAXES (cont'd...) ============================================================== 2005 2004 -------------------------------------------------------------- Loss for the year .................... $(272,572) $(398,533) ============================================================== Computed "expected" tax benefit ...... $ (92,674) $(135,501) Non deductible (deductible) items .... (54,487) 4,234 Lower effective income tax rate on loss of foreign subsidiaries ....... 673 10,886 Valuation allowance .................. 146,488 120,381 --------- --------- $ - $ - ============================================================== The tax effects of temporary differences that give rise to significant deferred tax assets and deferred tax liabilities are as follows: =================================================================== 2005 2004 ------------------------------------------------------------------- Deferred tax assets: Net operating loss carry forwards - US .. $ 558,752 $ 510,015 Net operating loss carry forwards - Ghana 70,053 66,911 Valuation allowance ....................... (628,805) (576,926) --------- --------- Total deferred tax assets ................. $ - $ - =================================================================== The valuation allowance for deferred tax assets as of December 31, 2005 and 2004 was $628,805 and $576,926, respectively. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in assessing the realizability of deferred tax assets. In order to fully realize the deferred tax asset attributable to net operating loss carryforwards, the Company will need to generate future taxable income of approximately $1,920,000 prior to the expiration of the net operating loss carryforwards. Of the $1,920,807 of operating loss carryforwards, $1,670,617 is attributable to the US, and expires between 2019 and 2025, and the balance of $250,190 is attributable to Ghana and expires between 2007 and 2010. F-45 XTRA-GOLD RESOURCES CORP. (A Development Stage Company) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) DECEMBER 31, 2005 ================================================================================ 16. SEGMENTED INFORMATION The Company has one reportable segment, being the exploration and development of resource properties. Geographic information is as follows: ============================================================== 2005 2004 -------------------------------------------------------------- Capital assets: Canada .................... $ 53,501 $ - Ghana ..................... 8,523,971 8,523,971 ---------- ---------- Total capital assets ......... $8,577,472 $8,523,971 ============================================================== 17. SUBSEQUENT EVENTS Subsequent to December 31, 2005: A. PRIVATE PLACEMENT The Company issued 792,029 common shares at $0.70 per share for gross proceeds of $554,420. B. EXERCISE OF WARRANTS (i) The expiry date for the exercise of the warrants issued in connection with the private placements completed in March and May 2004 (Note 12) was extended to March 31, 2006. (ii) In February 2006, 25,000 warrants were exercised for total proceeds of $18,750. C. PROMISSORY NOTE AND SUBSEQUENT CONVERSION INTO SHARES On January 12, 2006, the Board approved the issuance of an unsecured promissory note ("Note") in the aggregate amount of US$66,302 in connection with an account payable owing to an officer and director of the Company ("Note Holder") with respect to unpaid consulting fees, expenses incurred on behalf of the Company and a bonus. Under the terms of the Note, the Note Holder had the option to convert any portion owing under the Note from time to time into shares of the Company at the conversion price of US$0.55 per share. On January 31, 2006, the Note Holder provided the Company with a notice of conversion to convert US$50,000 of the outstanding Note into shares and was subsequently issued 90,909 shares on February 9, 2006. F-46 NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF ANY OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE INFORMATION SET FORTH HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. TABLE OF CONTENTS Page ---- Prospectus Summary .................................................... 7 Risk Factors .......................................................... 9 Use of Proceeds ....................................................... 21 Market for Common Stock and Dividend Policy ........................... 21 Forward-Looking Statements ............................................ 23 Management's Discussion and Analysis or Plan of Operation ............. 24 Business .............................................................. 35 Management ............................................................ 65 Executive Compensation ................................................ 69 Certain Relationships and Related Transactions ........................ 75 Principal Stockholders ................................................ 77 Description of Securities ............................................. 78 Selling Security Holders .............................................. 79 Plan of Distribution .................................................. 94 Shares Eligible for Future Sale ....................................... 96 Legal Matters ......................................................... 96 Experts ............................................................... 96 Additional Information ................................................ 97 Financial Statements .................................................. F-1 12,146,478 SHARES XTRA-GOLD RESOURCES CORP. PROSPECTUS ________________, 2006 PART TWO INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS As authorized by the Nevada Revised Statutes, our articles of incorporation provide that none of our directors shall be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except liability for: o any breach of a director's duty of loyalty to our company or our stockholders; o acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; o unlawful payments of dividends or unlawful stock redemptions or repurchases; and o any transaction from which a director derived an improper personal benefit. This provision limits our rights and the rights of our stockholders to recover monetary damages against a director for breach of the fiduciary duty of care except in the situations described above. This provision does not limit our rights or the rights of any stockholder to seek injunctive relief or rescission if a director breaches his duty of care. These provisions will not alter the liability of our directors under federal securities laws. Our by-laws require us to indemnify our directors and officers against, to the fullest extent permitted by law, liabilities which they may incur under the circumstances described above. Our articles of incorporation further provide for the indemnification of any and all persons who serve as our directors, officers, employees or agents to the fullest extent permitted under Nevada law. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers or persons controlling our Company pursuant to the foregoing provisions, we have been informed that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the act and is therefore unenforceable. ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The estimated expenses in connection with the distribution of the securities being registered, all of which are payable by our Company, are as follows: SEC Registration and Filing Fee ............................... $ 1,560 Legal Fees and Expenses* ...................................... $ 20,000 Accounting Fees and Expenses* ................................. $ 15,000 Financial Printing* ........................................... $ 5,000 Transfer Agent Fees* .......................................... $ 1,000 Blue Sky Fees and Expenses* ................................... $ 0 Miscellaneous* ................................................ $ 500 ------------- TOTAL EXPENSES ................................................ $ 43,060 ============= * Estimated None of the foregoing expenses are being paid by the Selling Security Holders. II-1 ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES On October 28, 2003, as consideration for the option grant from CaribGold Minerals, Inc., Xtra Energy issued 20,000 shares of its common stock to CaribGold. These shares were subsequently exchanged for 20,000 shares of our common stock upon our acquisition of all of the outstanding capital stock of Xtra Energy (the "XTRA ENERGY ACQUISITION"). CaribGold was provided access to business and financial information about our Company and had such knowledge and experience in business and financial matters that it was able to evaluate the risks and merits of an investment in our Company. Accordingly, CaribGold was a "sophisticated" investor within the meaning of federal securities laws. The certificate evidencing the shares issued in the transaction included a legend stating that the securities were not registered under the Securities Act and may not be resold absent registration or the availability of an applicable exemption therefrom. No general solicitation or advertising was used in connection with the transaction. The Xtra Energy Acquisition was exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereunder as a transaction by an issuer not involving any public offering. On October 31, 2003, our Company issued 10,050,000 shares of our common stock to acquire the balance of the issued and outstanding shares of Xtra Energy pursuant to a share exchange (the "SHARE EXCHANGE") with the following shareholders of Xtra Energy: - ------------------------------------------------------------------------------- NAME NUMBER OF SHARES - ------------------------------------------------------------------------------- William Edward (Ted) McKechnie ............................. 5,000,000 - ------------------------------------------------------------------------------- Paul Zyla .................................................. 5,000,000 - ------------------------------------------------------------------------------- Brokton International Inc. ................................. 50,000 - ------------------------------------------------------------------------------- TOTAL SECURITIES ISSUED .................................... 10,050,000 - ------------------------------------------------------------------------------- The Xtra Energy shareholders were provided access to business and financial information about our Company and had such knowledge and experience in business and financial matters that they were able to evaluate the risks and merits of conducting the Share Exchange with our Company. Accordingly, the Xtra Energy shareholders were "sophisticated" investors within the meaning of federal securities laws. The certificates evidencing the shares issued in the transaction included a legend stating that the securities were not registered under the Securities Act and may not be resold absent registration or the availability of an applicable exemption therefrom. No general solicitation or advertising was used in connection with the transaction. The Share Exchange was exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereunder as a transaction by an issuer not involving any public offering. On December 19, 2003, our Company conducted a stock consolidation whereby every shareholder of record, as set out in the following table, was issued five shares for each one share held.
- ----------------------------------------------------------------------------------------------- NUMBER OF SHARES TOTAL SHARES HELD NUMBER OF SHARES ISSUED HELD NAME OF SHAREHOLDER PRE-CONSOLIDATION ON CONSOLIDATION POST CONSOLIDATION - ----------------------------------------------------------------------------------------------- Cede & Co. .................... 46,705 186,820 233,525 - ----------------------------------------------------------------------------------------------- Trevor Allen .................. 5 20 25 - ----------------------------------------------------------------------------------------------- Pauline Amoy and Keith Lay .... 10 40 50 - ----------------------------------------------------------------------------------------------- Bamby Investments Ltd. ........ 2,800 11,200 14,000 - -----------------------------------------------------------------------------------------------
II-2
- ----------------------------------------------------------------------------------------------- NUMBER OF SHARES TOTAL SHARES HELD NUMBER OF SHARES ISSUED HELD NAME OF SHAREHOLDER PRE-CONSOLIDATION ON CONSOLIDATION POST CONSOLIDATION - ----------------------------------------------------------------------------------------------- Brokton International Ltd. .... 50,000 200,000 250,000 - ----------------------------------------------------------------------------------------------- Noreen Brown .................. 10 40 50 - ----------------------------------------------------------------------------------------------- Jayne Burgoyne ................ 5 20 25 - ----------------------------------------------------------------------------------------------- CaribGold Minerals Inc. ....... 20,000 80,000 100,000 - ----------------------------------------------------------------------------------------------- Ian Daniel .................... 53 212 265 - ----------------------------------------------------------------------------------------------- Judy Davey .................... 10 40 50 - ----------------------------------------------------------------------------------------------- Harwinderj Dhillon ............ 10 40 50 - ----------------------------------------------------------------------------------------------- Dynastar Investments Ltd. ..... 1,000 4,000 5,000 - ----------------------------------------------------------------------------------------------- Jason Ellis ................... 5 20 25 - ----------------------------------------------------------------------------------------------- Janice Eng/Charles Macachor ... 10 40 50 - ----------------------------------------------------------------------------------------------- Nancy Etchart ................. 10 40 50 - ----------------------------------------------------------------------------------------------- G.M. Capital Partners ......... 1,200,000 4,800,000 6,000,000 - ----------------------------------------------------------------------------------------------- Ursula Handschin .............. 4,000 16,000 20,000 - ----------------------------------------------------------------------------------------------- High Quality Corp. ............ 1,000 4,000 5,000 - ----------------------------------------------------------------------------------------------- Huda Ltd. ..................... 4,000 16,000 20,000 - ----------------------------------------------------------------------------------------------- Wan Jung ...................... 10 40 50 - ----------------------------------------------------------------------------------------------- Sukhibir Kallu ................ 10 40 50 - ----------------------------------------------------------------------------------------------- Knight Financial Ltd. ......... 1,200,000 4,800,000 6,000,000 - ----------------------------------------------------------------------------------------------- Michelle Koch ................. 10 40 50 - ----------------------------------------------------------------------------------------------- Glenn Lachowiez ............... 10 40 50 - ----------------------------------------------------------------------------------------------- Edward and Edith Lay .......... 40 160 200 - ----------------------------------------------------------------------------------------------- Barry Lee ..................... 10 40 50 - ----------------------------------------------------------------------------------------------- Franklin Macachor Jr. ......... 20 80 100 - ----------------------------------------------------------------------------------------------- Barry Maedel .................. 60 240 300 - ----------------------------------------------------------------------------------------------- N.H. Maedel ................... 170 680 850 - ----------------------------------------------------------------------------------------------- Bernard Magale ................ 5 20 25 - ----------------------------------------------------------------------------------------------- Nicolas Mathys ................ 4,000 16,000 20,000 - ----------------------------------------------------------------------------------------------- Jollean Matsen ................ 230 920 1,150 - ----------------------------------------------------------------------------------------------- Karby Matsen .................. 50 200 250 - ----------------------------------------------------------------------------------------------- Ted McKechnie ................. 5,000,000 20,000,000 25,000,000 - ----------------------------------------------------------------------------------------------- New Creations Consulting ...... 200 800 1,000 - ----------------------------------------------------------------------------------------------- New Creations Consulting ...... 128 512 640 - -----------------------------------------------------------------------------------------------
II-3
- ----------------------------------------------------------------------------------------------- NUMBER OF SHARES TOTAL SHARES HELD NUMBER OF SHARES ISSUED HELD NAME OF SHAREHOLDER PRE-CONSOLIDATION ON CONSOLIDATION POST CONSOLIDATION - ----------------------------------------------------------------------------------------------- Merv Peters ................... 10 40 50 - ----------------------------------------------------------------------------------------------- Brent Peters .................. 10 40 50 - ----------------------------------------------------------------------------------------------- Michael Reynoch ............... 10 40 50 - ----------------------------------------------------------------------------------------------- Ian Shanks .................... 10 40 50 - ----------------------------------------------------------------------------------------------- Alison Sharpe ................. 10 40 50 - ----------------------------------------------------------------------------------------------- Anne Sharpe ................... 10 40 50 - ----------------------------------------------------------------------------------------------- Betsy Sharpe .................. 10 40 50 - ----------------------------------------------------------------------------------------------- Don Sharpe .................... 10 40 50 - ----------------------------------------------------------------------------------------------- Lynn Sharpe ................... 10 40 50 - ----------------------------------------------------------------------------------------------- Thomas and Mary Sheppard ...... 30 120 150 - ----------------------------------------------------------------------------------------------- Christian Snelgrove ........... 10 40 50 - ----------------------------------------------------------------------------------------------- Shawn Spronken ................ 15 60 75 - ----------------------------------------------------------------------------------------------- Kenneth Szuszkiewicz .......... 5 20 25 - ----------------------------------------------------------------------------------------------- Tannis Szuszkiewicz ........... 5 20 25 - ----------------------------------------------------------------------------------------------- Ken Thomas .................... 10 40 50 - ----------------------------------------------------------------------------------------------- Tiger-Eye Investments Cayman .. 4,000 16,000 20,000 - ----------------------------------------------------------------------------------------------- TTI Market Explorers Inc. ..... 56 224 280 - ----------------------------------------------------------------------------------------------- Randy West .................... 10 40 50 - ----------------------------------------------------------------------------------------------- Paul Zyla ..................... 5,000,000 20,000,000 25,000,000 - ----------------------------------------------------------------------------------------------- TOTAL SECURITIES ISSUED ....... 50,171,268 - -----------------------------------------------------------------------------------------------
The Share Exchange was exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereunder as a transaction by an issuer not involving any public offering. On March 31, 2004, we completed a private financing for an aggregate purchase price of $700,000 and, in connection therewith, we issued a total of 2,000,000 shares of our common stock and warrants to purchase an additional 1,000,000 shares to the following 22 accredited [or sophisticated] investors: - -------------------------------------------------------------------------------- NAME NUMBER OF SHARES NUMBER OF WARRANTS - -------------------------------------------------------------------------------- Avonlea Homes Investments Ltd. ......... 150,000 75,000 - -------------------------------------------------------------------------------- Anne McGinnis .......................... 100,000 50,000 - -------------------------------------------------------------------------------- Asad Sheikh ............................ 140,000 70,000 - -------------------------------------------------------------------------------- Gordon Winter .......................... 60,000 30,000 - -------------------------------------------------------------------------------- Sal Bossio ............................. 100,000 50,000 - -------------------------------------------------------------------------------- II-4 - -------------------------------------------------------------------------------- NAME NUMBER OF SHARES NUMBER OF WARRANTS - -------------------------------------------------------------------------------- Rene Petitjean ......................... 30,000 15,000 - -------------------------------------------------------------------------------- Mazhar Sheikh .......................... 140,000 70,000 - -------------------------------------------------------------------------------- Paul Zyla .............................. 84,000 42,000 - -------------------------------------------------------------------------------- Bridgitte Longshore, Trustee ........... 100,000 50,000 - -------------------------------------------------------------------------------- Jim Schweitzer ......................... 100,000 50,000 - -------------------------------------------------------------------------------- Wamada Inc. ............................ 140,000 70,000 - -------------------------------------------------------------------------------- Ivano De Cotiis ........................ 30,000 15,000 - -------------------------------------------------------------------------------- Steven Adelstein ....................... 72,000 36,000 - -------------------------------------------------------------------------------- Michael J. Hausman ..................... 30,000 15,000 - -------------------------------------------------------------------------------- Joseph Parisi .......................... 30,000 15,000 - -------------------------------------------------------------------------------- Steve E. Vlach ......................... 72,000 36,000 - -------------------------------------------------------------------------------- Ashley Investors Corp. ................. 100,000 50,000 - -------------------------------------------------------------------------------- Michael Herman ......................... 150,000 75,000 - -------------------------------------------------------------------------------- Leonard Sculler ........................ 50,000 25,000 - -------------------------------------------------------------------------------- B. S. Jr. Inc. ......................... 143,000 71,500 - -------------------------------------------------------------------------------- Hans J. Morsches ....................... 35,000 17,500 - -------------------------------------------------------------------------------- Thousand Hills Properties Inc. ......... 144,000 72,000 - -------------------------------------------------------------------------------- TOTAL SECURITIES ISSUED ................ 2,000,000 1,000,000 - -------------------------------------------------------------------------------- The warrants were initially exercisable until March 31, 2005. Pursuant to Board approval, the expiry date for the exercise of warrants was extended to March 31, 2006, at an exercise price of $.75 per share, subject to adjustment. As of March 31, 2006, 78,500 of the 1,000,000 Warrants were exercised for 78,500 Shares. The remaining 921,500 Warrants were cancelled following their expiration on March 31, 2006. Each of the investors was provided access to business and financial information about our Company and had such knowledge and experience in business and financial matters that they were able to evaluate the risks and merits of an investment in our Company. Accordingly, the investors were "sophisticated" within the meaning of federal securities laws. Each certificate evidencing securities issued in the transaction included a legend stating that the securities were not registered under the Securities Act and may not be resold absent registration or the availability of an applicable exemption therefrom. No general solicitation or advertising was used in connection with the transaction. No commissions or finder's fees were paid. The transaction was exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereunder as a transaction by an issuer not involving any public offering, and under Rule 506 of Regulation D. On May 31, 2004, we completed a private financing for an aggregate purchase price of $745,290 and, in connection therewith, we issued a total of 2,129,400 shares of our common stock and warrants to purchase an additional 1,064,700 shares to the following 24 accredited [or sophisticated] investors: II-5 - -------------------------------------------------------------------------------- NAME NUMBER OF SHARES NUMBER OF WARRANTS - -------------------------------------------------------------------------------- Anacort Capital Inc. ................... 60,000 30,000 - -------------------------------------------------------------------------------- Nancy Blasiak .......................... 30,000 15,000 - -------------------------------------------------------------------------------- Dale Burstall .......................... 46,000 23,000 - -------------------------------------------------------------------------------- Cathy Butler ........................... 15,000 7,500 - -------------------------------------------------------------------------------- J. C. Cassina .......................... 50,000 25,000 - -------------------------------------------------------------------------------- Michael Cooper ......................... 30,000 15,000 - -------------------------------------------------------------------------------- John DeBoer ............................ 40,000 20,000 - -------------------------------------------------------------------------------- Joanne Dorval-Dronyk ................... 50,000 25,000 - -------------------------------------------------------------------------------- Allen Emes ............................. 60,000 30,000 - -------------------------------------------------------------------------------- Shelly Green ........................... 50,000 25,000 - -------------------------------------------------------------------------------- Sandra Hall ............................ 50,000 25,000 - -------------------------------------------------------------------------------- Arthur G. Hibbard ...................... 60,000 30,000 - -------------------------------------------------------------------------------- Robert Ritzer .......................... 30,000 15,000 - -------------------------------------------------------------------------------- Wendy E. Shaw .......................... 14,000 7,000 - -------------------------------------------------------------------------------- Sheridan Platinum Group Ltd. ........... 71,400 35,700 - -------------------------------------------------------------------------------- Richard Smith .......................... 30,000 15,000 - -------------------------------------------------------------------------------- Jeff Walker ............................ 30,000 15,000 - -------------------------------------------------------------------------------- Paul Weisberg .......................... 30,000 15,000 - -------------------------------------------------------------------------------- Paul Zyla .............................. 16,000 8,000 - -------------------------------------------------------------------------------- Avonlea Homes Investments Ltd. ......... 595,000 297,500 - -------------------------------------------------------------------------------- Finneran Investments Ltd. .............. 150,000 75,000 - -------------------------------------------------------------------------------- Stephen J. Maass ....................... 72,000 36,000 - -------------------------------------------------------------------------------- Anthony V. and Karen R. Laterza ........ 500,000 250,000 - -------------------------------------------------------------------------------- LOM Securities (Bermuda) Limited ....... 50,000 25,000 - -------------------------------------------------------------------------------- TOTAL SECURITIES ISSUED ................ 2,129,400 1,064,700 - -------------------------------------------------------------------------------- The warrants were initially exercisable until May 31, 2005. Pursuant to Board approval, the expiry date for the exercise of warrants was extended to March 31, 2006, at an exercise price of $.75 per share, subject to adjustment. As of March 31, 2006, 30,000 of the 1,064,700 Warrants were exercised for 30,000 Shares. The remaining 1,034,700 Warrants were cancelled following their expiration on March 31, 2006. Each of the investors was provided access to business and financial information about our Company and had such knowledge and experience in business and financial matters that they were able to evaluate the risks and merits of an investment in our Company. Accordingly, the investors were "sophisticated" within the meaning of federal securities laws. Each certificate evidencing securities issued in the transaction included a legend stating that the securities were not registered under the Securities Act and may not be resold absent registration or the availability of an applicable exemption therefrom. No general solicitation or advertising was used in connection with the transaction. Haywood Securities Inc. and Norstar Securities International, registered broker-dealers received an aggregate commission in the amount of US$21,123.20 for assisting our Company with the sale of the securities II-6 issued in connection with this transaction. We also paid two individuals an aggregate finder's fee of $1,347.50 for introducing our Company to certain investors in connection with this transaction. The transaction was exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereunder as a transaction by an issuer not involving any public offering, and under Regulation S. On December 22, 2004, we executed a share purchase agreement with the trustees representing the note and debenture holders of Akrokeri-Ashanti Gold Limited to extinguish their debts totaling approximately CAD$5,936,700 (USD$5,320,100). Akrokeri-Ashanti had pledged as security to the note and debenture Holders, 90% of the issued and outstanding shares of its subsidiary, XG Mining (formerly Goldenrae Mining Company Limited). We exchanged one-half share of our common stock for every CAD$1.00 (USD$.90) principal amount of notes and debentures and issued a total of 2,698,350 shares of our common stock for the CAD$5,396,700 (USD$5,320,100) outstanding principal amount of the notes and debentures. - -------------------------------------------------------------------------------- NAME OF NOTE OR DEBENTURE HOLDER NUMBER OF SHARES - -------------------------------------------------------------------------------- Canadian Christian Education Foundation ...................... 171,500 - -------------------------------------------------------------------------------- Rory Cattanach ............................................... 300 - -------------------------------------------------------------------------------- CDS & Co. .................................................... 1,743,100 - -------------------------------------------------------------------------------- Marlene Chase ................................................ 50 - -------------------------------------------------------------------------------- Cyhen Developments Ltd. ...................................... 50,000 - -------------------------------------------------------------------------------- Penny Dibley ................................................. 250 - -------------------------------------------------------------------------------- Andrew Dielemen Sr. .......................................... 550 - -------------------------------------------------------------------------------- John Griffin ................................................. 2,500 - -------------------------------------------------------------------------------- Wilfred Griffioen ............................................ 74,950 - -------------------------------------------------------------------------------- Gundyco CIBC World Markets ................................... 500 - -------------------------------------------------------------------------------- Laurentian Trust of Canada Inc., in trust for Donald Deeves .. 5,000 - -------------------------------------------------------------------------------- Trust La Laurentienne ........................................ 350 - -------------------------------------------------------------------------------- Jeannie Luimes ............................................... 5,000 - -------------------------------------------------------------------------------- Margaret Van Velzen .......................................... 1,000 - -------------------------------------------------------------------------------- Hilda Vroom .................................................. 5,250 - -------------------------------------------------------------------------------- W.D. Latimer Co. Ltd. ........................................ 38,050 - -------------------------------------------------------------------------------- Albert Bultje ................................................ 8,520 - -------------------------------------------------------------------------------- John Cappon .................................................. 17,135 - -------------------------------------------------------------------------------- CDS & Co. .................................................... 286,235 - -------------------------------------------------------------------------------- Anthony Cristani ............................................. 9,600 - -------------------------------------------------------------------------------- John De Boer ................................................. 1,695 - -------------------------------------------------------------------------------- John and Nell De Boer ........................................ 7,615 - -------------------------------------------------------------------------------- Henk and Yvonne De Bruin ..................................... 21,600 - -------------------------------------------------------------------------------- Diane Van Dyk ................................................ 18,130 - -------------------------------------------------------------------------------- Grace Engelsman .............................................. 17,870 - -------------------------------------------------------------------------------- II-7 - -------------------------------------------------------------------------------- NAME OF NOTE OR DEBENTURE HOLDER NUMBER OF SHARES - -------------------------------------------------------------------------------- Fundamental Capital Corp. .................................... 9,600 - -------------------------------------------------------------------------------- Doug Groombrdige ............................................. 2,405 - -------------------------------------------------------------------------------- Arie and Wilma Kleine ........................................ 18,300 - -------------------------------------------------------------------------------- Peter and Tina Koning ........................................ 22,430 - -------------------------------------------------------------------------------- Jeannie Luimes ............................................... 3,140 - -------------------------------------------------------------------------------- Paul and Susan McFarlan ...................................... 9,600 - -------------------------------------------------------------------------------- Paul Mercer and Katherine Ashendenm .......................... 9,690 - -------------------------------------------------------------------------------- Art Miedema .................................................. 3,470 - -------------------------------------------------------------------------------- J. Douglas Mills ............................................. 4,465 - -------------------------------------------------------------------------------- Larry Parker ................................................. 59,215 - -------------------------------------------------------------------------------- Yke Reitsma .................................................. 4,310 - -------------------------------------------------------------------------------- Susan Thomson ................................................ 5,950 - -------------------------------------------------------------------------------- William Ubbens ............................................... 2,515 - -------------------------------------------------------------------------------- William and Wendy Ubbens ..................................... 415 - -------------------------------------------------------------------------------- George Vroom ................................................. 10,720 - -------------------------------------------------------------------------------- Hilda Vroom .................................................. 44,325 - -------------------------------------------------------------------------------- John Vroom ................................................... 1,050 - -------------------------------------------------------------------------------- TOTAL SECURITIES ISSUED ...................................... 2,698,350 - -------------------------------------------------------------------------------- The transaction was exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereunder as a transaction by an issuer not involving any public offering. On June 21, 2005, our Board approved the granting of an aggregate of 1,020,000 nonqualified stock options to certain officers, directors or consultants of our Company vesting in equal amounts over a four year term at an exercise price of $0.55 per share. The transaction was exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereunder as a transaction by an issuer not involving any public offering. - -------------------------------------------------------------------------------- NUMBER OF SHARES TO BE GRANTED NAME OF OPTIONEE ON EXERCISE OF OPTIONS - -------------------------------------------------------------------------------- William Edward (Ted) McKechnie ............... 300,000 - -------------------------------------------------------------------------------- Daniel Earle ................................. 720,000 - -------------------------------------------------------------------------------- TOTAL SECURITIES ISSUED ...................... 1,020,000 - -------------------------------------------------------------------------------- On June 30, 2005, we completed a private financing for an aggregate purchase price of $294,920 and, in connection therewith, we issued a total of 536,218 shares of our common stock and warrants to purchase an additional 268,110 shares to the following 16 accredited [or sophisticated] investors: II-8 - -------------------------------------------------------------------------------- NAME NUMBER OF SHARES NUMBER OF WARRANTS - -------------------------------------------------------------------------------- Bradam Financial Holdings Ltd. ......... 185,000 92,500 - -------------------------------------------------------------------------------- CMK Financial Holdings Ltd. ............ 60,000 30,000 - -------------------------------------------------------------------------------- Court Global SA ........................ 4,000 2,000 - -------------------------------------------------------------------------------- Interloan AG ........................... 19,000 9,500 - -------------------------------------------------------------------------------- Merlin Asset Holdings SA ............... 18,000 9,000 - -------------------------------------------------------------------------------- Christopher Nola ....................... 181,818 90,910 - -------------------------------------------------------------------------------- Nube Administration Inc. ............... 6,000 3,000 - -------------------------------------------------------------------------------- Piper Foundation ....................... 6,000 3,000 - -------------------------------------------------------------------------------- Anita Shapolsky ........................ 14,000 7,000 - -------------------------------------------------------------------------------- N. Sleeva .............................. 6,500 3,250 - -------------------------------------------------------------------------------- Suzanne Speckert ....................... 4,000 2,000 - -------------------------------------------------------------------------------- I. Spivack ............................. 1,600 800 - -------------------------------------------------------------------------------- Tom Stefopulos ......................... 4,000 2,000 - -------------------------------------------------------------------------------- Marianne Strub ......................... 2,500 1,250 - -------------------------------------------------------------------------------- Subaraschi Foundation .................. 21,000 10,500 - -------------------------------------------------------------------------------- B. Wilson .............................. 2,800 1,400 - -------------------------------------------------------------------------------- TOTAL SECURITIES ISSUED ................ 536,218 268,110 - -------------------------------------------------------------------------------- The warrants were exercisable until April 30, 2006, at an exercise price of $.75 per share, subject to adjustment. As of April 30, 2006, 177,200 of the 268,110 Warrants were exercised for 177,200 Shares. The remaining 90,910 Warrants were cancelled following their expiration on April 30, 2006. Each of the investors was provided access to business and financial information about our Company and had such knowledge and experience in business and financial matters that they were able to evaluate the risks and merits of an investment in our Company. Accordingly, the investors were "sophisticated" within the meaning of federal securities laws. Each certificate evidencing securities issued in the transaction included a legend stating that the securities were not registered under the Securities Act and may not be resold absent registration or the availability of an applicable exemption therefrom. No general solicitation or advertising was used in connection with the transaction. We paid a private foreign investment company a finder's fee of $29,000 for introducing our Company to certain investors in connection with this transaction. The transaction was exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereunder as a transaction by an issuer not involving any public offering, and under Rule 506 of Regulation D and under Regulation S. On July 7, 2005, we completed a private debt financing for which we received aggregate loan proceeds of $900,000. We issued three convertible debentures as security therefor whereby the holders of the convertible debentures are entitled to convert the principal balance owing from time to time thereunder into an aggregate of up to 900,000 shares of our common stock and Accrued Interest for an aggregate of 15,750 shares of our common stock to the following three accredited [or sophisticated] investors: II-9
- ----------------------------------------------------------------------------------------------- NUMBER OF SHARES ISSUABLE NUMBER OF SHARES ISSUABLE ON CONVERSION OF ON CONVERSION OF NAME CONVERTIBLE DEBENTURES ACCRUED INTEREST - ----------------------------------------------------------------------------------------------- Alpine Atlantic Asset Management AG ... 250,000 4,375 - ----------------------------------------------------------------------------------------------- Bradam Financial Holdings Ltd. ........ 500,000 8,750 - ----------------------------------------------------------------------------------------------- CMK Financial Holdings Ltd. ........... 150,000 2,625 - ----------------------------------------------------------------------------------------------- TOTAL SECURITIES ISSUED ............... 900,000 15,750 - -----------------------------------------------------------------------------------------------
Each of the above-noted investors was provided access to business and financial information about our Company and had such knowledge and experience in business and financial matters that they were able to evaluate the risks and merits of an investment in our Company. Accordingly, the investors were "sophisticated" within the meaning of federal securities laws. Each convertible debenture and the securities into which they are convertible (collectively, the "SECURITIES") include a legend stating that the securities were not registered under the Securities Act and may not be resold absent registration or the availability of an applicable exemption therefrom. No general solicitation or advertising was used in connection with these transactions. We paid a private foreign investment company a finder's fee of $56,000 for introducing our Company to certain investors in connection with this transaction. The transaction was exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereunder as a transaction by an issuer not involving any public offering and under Regulation S. This transaction was an "offshore" transaction with non-U.S. persons. On August 31, 2005, we completed a private financing for an aggregate purchase price of $165,000 and, in connection therewith, we issued a total of 300,000 shares of our common stock and warrants to purchase an additional 150,000 shares to the following three accredited [or sophisticated] investors: - -------------------------------------------------------------------------------- NAME NUMBER OF SHARES NUMBER OF WARRANTS - -------------------------------------------------------------------------------- Brian Lines ........................... 200,000 100,000 - -------------------------------------------------------------------------------- Fred Honea and Carmen de Liniers ...... 100,000 50,000 - -------------------------------------------------------------------------------- TOTAL SECURITIES ISSUED ............... 300,000 150,000 - -------------------------------------------------------------------------------- The warrants are exercisable until August 31, 2006, at an exercise price of $.75 per share, subject to adjustment. As of August 31, 2006, none of the warrants had been exercised. Each of the investors was provided access to business and financial information about our Company and had such knowledge and experience in business and financial matters that they were able to evaluate the risks and merits of an investment in our Company. Accordingly, the investors were "sophisticated" within the meaning of federal securities laws. Each certificate evidencing securities issued in the transaction included a legend stating that the securities were not registered under the Securities Act and may not be resold absent registration or the availability of an applicable exemption therefrom. No general solicitation or advertising was used in connection with the transaction. Haywood Securities Inc., a registered broker-dealer received a commission in the amount of US$5,500 for assisting our Company with the sale of the securities issued in connection with this transaction. The transaction was exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereunder as a transaction by an issuer not involving any public offering and under Regulation S. This transaction was an "offshore" transaction to non-U.S. persons. II-10 On November 7, 2005, we completed a private financing for an aggregate purchase price of $852,145 and, in connection therewith, we issued a total of 1,549,354 shares of our common stock to the following 22 accredited [or sophisticated] investors: - -------------------------------------------------------------------------------- NAME NUMBER OF SHARES - -------------------------------------------------------------------------------- Sufran Investments Ltd. ................................ 50,000 - -------------------------------------------------------------------------------- Walter Schneider ....................................... 100,000 - -------------------------------------------------------------------------------- Peter Schmid ........................................... 20,000 - -------------------------------------------------------------------------------- Leon van der Merwe ..................................... 100,000 - -------------------------------------------------------------------------------- Margaret Speckert ...................................... 100,000 - -------------------------------------------------------------------------------- Pipeline Displays and Fixtures Inc. .................... 50,000 - -------------------------------------------------------------------------------- 1127024 Ontario Limited ................................ 35,000 - -------------------------------------------------------------------------------- Allen Emes ............................................. 30,000 - -------------------------------------------------------------------------------- H. Richard Smith ....................................... 40,000 - -------------------------------------------------------------------------------- Arthur G. Hibbard ...................................... 90,000 - -------------------------------------------------------------------------------- Anacort Capital Inc. ................................... 40,000 - -------------------------------------------------------------------------------- John Richard Charlton .................................. 200,000 - -------------------------------------------------------------------------------- Katherine Carson ....................................... 19,354 - -------------------------------------------------------------------------------- Joanne Dorval-Dronyk ................................... 60,000 - -------------------------------------------------------------------------------- Richard Coglan ......................................... 100,000 - -------------------------------------------------------------------------------- Asad Sheikh ............................................ 100,000 - -------------------------------------------------------------------------------- Walter Dainard ......................................... 100,000 - -------------------------------------------------------------------------------- Slowjen Ltd. ........................................... 15,000 - -------------------------------------------------------------------------------- Zapfe Holdings Inc. .................................... 100,000 - -------------------------------------------------------------------------------- John McFarlane ......................................... 50,000 - -------------------------------------------------------------------------------- Norman Clements ........................................ 50,000 - -------------------------------------------------------------------------------- Kander Financial Corp. ................................. 100,000 - -------------------------------------------------------------------------------- TOTAL SECURITIES ISSUED ................................ 1,549,354 - -------------------------------------------------------------------------------- Each of the above-noted investors was provided access to business and financial information about our Company and had such knowledge and experience in business and financial matters that they were able to evaluate the risks and merits of an investment in our Company. Accordingly, the investors were "sophisticated" within the meaning of federal securities laws. Each certificate evidencing securities issued in the transaction included a legend stating that the securities were not registered under the Securities Act and may not be resold absent registration or the availability of an applicable exemption therefrom. No general solicitation or advertising was used in connection with the transaction. Haywood Securities Inc., a registered broker-dealer received a commission in the amount of US$2,200 for assisting our Company with the sale of the securities issued in connection with this transaction. We also paid a private foreign investment company a finder's fee of $48,089 and an individual a finder's fee of $8,800 for introducing our Company to certain investors in connection with this transaction. The transaction was exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereunder and Regulation S. This transaction was an "offshore" transaction to non-U.S. persons. II-11 We established our 2005 Equity Compensation Plan (the "PLAN") effective June 21, 2005, which provides for the issuance of nonqualified options to officers, directors and key employees, consultants, advisors and other service providers. As of November 28, 2006, we have issued and outstanding options to purchase 1,996,000 shares of common stock under the Plan at an exercise price of (i) $0.55 per share for 300,000 options expiring on June 20, 2015; (ii) $0.70 per share for 324,000 options expiring on April 21, 2009; (iii) $0.70 per share for 972,000 options of which 432,000 options expire on May 1, 2009 and 540,000 options which expire on January 30, 2007; and (iv) $0.90 per share for 400,000 options expiring on August 1, 2009. The options were issued to six consultants of our Company, four of whom are also current officers and/or directors of our Company. The security issuances were exempt from registration by Section 4(2) of the Securities Act. The option holders had access to information about us and had the opportunity to ask questions about us. The options issued contain a legend restricting their transferability absent registration or an available exemption. On January 12, 2006, we issued a $66,302 convertible promissory note (the "NOTE") to a former officer and director of our Company, for accrued expenses incurred on behalf of our Company, unpaid consulting fees and a bonus. This issuance was exempt from registration under the Securities Act in reliance on Section 4(2). The certificate evidencing the Note that was issued contained a legend restricting its transferability absent registration under the Securities Act or the availability of an applicable exemption therefrom. On March 6, 2006, we completed a private financing for an aggregate purchase price of $554,420 and, in connection therewith, we issued a total of 792,029 shares of our common stock to the following eight accredited [or sophisticated] investors: - -------------------------------------------------------------------------------- NAME NUMBER OF SHARES - -------------------------------------------------------------------------------- Fred Honea and Carmen de Liniers ....................... 250,000 - -------------------------------------------------------------------------------- Morton Berman .......................................... 35,000 - -------------------------------------------------------------------------------- Brulene Inc. ........................................... 142,000 - -------------------------------------------------------------------------------- J.W.T. Witzel .......................................... 70,000 - -------------------------------------------------------------------------------- Eric Robert Taylor ..................................... 150,029 - -------------------------------------------------------------------------------- E.C. McFeely ........................................... 100,000 - -------------------------------------------------------------------------------- Fred Kozak ............................................. 20,000 - -------------------------------------------------------------------------------- Bank Julius Baer & Co. Ltd. ............................ 25,000 - -------------------------------------------------------------------------------- TOTAL SECURITIES ISSUED ................................ 792,029 - -------------------------------------------------------------------------------- Each of the above-noted investors was provided access to business and financial information about our Company and had such knowledge and experience in business and financial matters that they were able to evaluate the risks and merits of an investment in our Company. Accordingly, the investors were "sophisticated" within the meaning of federal securities laws. Each certificate evidencing securities issued in the transaction included a legend stating that the securities were not registered under the Securities Act and may not be resold absent registration or the availability of an applicable exemption therefrom. No general solicitation or advertising was used in connection with the transaction. We also paid two private foreign investment companies an aggregate finder's fee of $58,000 for introducing our Company to certain investors in connection with this transaction. The transaction was exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereunder and under Rule 506 of Regulation D and Regulation S. II-12 On April 21, 2006, our Board approved the granting of an aggregate of 324,000 nonqualified stock options to certain officers, directors or consultants of our Company vesting in equal amounts over a three year term at an exercise price of $0.70 per share. The transaction was exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereunder as a transaction by an issuer not involving any public offering. - -------------------------------------------------------------------------------- NUMBER OF SHARES TO BE GRANTED NAME OF OPTIONEE ON EXERCISE OF OPTIONS - -------------------------------------------------------------------------------- William Edward (Ted) McKechnie ............. 216,000 - -------------------------------------------------------------------------------- Rebecca Kiomi Mori ......................... 108,000 - -------------------------------------------------------------------------------- TOTAL SECURITIES ISSUED .................... 324,000 - -------------------------------------------------------------------------------- On May 1, 2006, our Board approved the granting of an aggregate of 972,000 nonqualified stock options to certain officers, directors or consultants of our Company vesting in equal amounts over a three year term at an exercise price of $0.70 per share. The transaction was exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereunder as a transaction by an issuer not involving any public offering. - -------------------------------------------------------------------------------- NUMBER OF SHARES TO BE GRANTED NAME OF OPTIONEE ON EXERCISE OF OPTIONS - -------------------------------------------------------------------------------- Dr. Michael Byron .......................... 540,000 (1) - -------------------------------------------------------------------------------- Yves Clement ............................... 324,000 - -------------------------------------------------------------------------------- Alhaji Abudulai ............................ 108,000 - -------------------------------------------------------------------------------- TOTAL SECURITIES ISSUED .................... 972,000 - -------------------------------------------------------------------------------- (1) Following the resignation of the optionee on October 30, 2006, all of these options became vested and will expire on January 30, 2007. On June 16, 2006, we completed a private financing for an aggregate purchase price of $520,300 and, in connection therewith, we issued a total of 578,112 shares of our common stock and warrants to purchase an additional 289,056 shares to the following ten accredited [or sophisticated] investors: - -------------------------------------------------------------------------------- NAME NUMBER OF SHARES NUMBER OF WARRANTS - -------------------------------------------------------------------------------- Norman Clements .............. 70,000 35,000 - -------------------------------------------------------------------------------- Ron Nichol ................... 10,000 5,000 - -------------------------------------------------------------------------------- Sharon Christie .............. 50,000 25,000 - -------------------------------------------------------------------------------- Thousand Hills Properties .... 60,000 30,000 - -------------------------------------------------------------------------------- Michael and Vicki Lawrence ... 30,000 15,000 - -------------------------------------------------------------------------------- Frankie Mead ................. 16,000 8,000 - -------------------------------------------------------------------------------- Christopher Nola ............. 111,112 55,556 - -------------------------------------------------------------------------------- Basil F. Nola ................ 20,000 10,000 - -------------------------------------------------------------------------------- II-13 - -------------------------------------------------------------------------------- NAME NUMBER OF SHARES NUMBER OF WARRANTS - -------------------------------------------------------------------------------- Eric Taylor .................. 111,000 55,500 - -------------------------------------------------------------------------------- Fred Honea ................... 100,000 50,000 - -------------------------------------------------------------------------------- TOTAL SECURITIES ISSUED ...... 578,112 289,056 - -------------------------------------------------------------------------------- The warrants are exercisable until June 16, 2007, at an exercise price of $1.50 per share, subject to adjustment. Each of the above-noted investors was provided access to business and financial information about our Company and had such knowledge and experience in business and financial matters that they were able to evaluate the risks and merits of an investment in our Company. Accordingly, the investors were "sophisticated" within the meaning of federal securities laws. Each certificate evidencing securities issued in the transaction included a legend stating that the securities were not registered under the Securities Act and may not be resold absent registration or the availability of an applicable exemption therefrom. No general solicitation or advertising was used in connection with the transaction. We also paid two private foreign investment companies an aggregate finder's fee of $52,000 for introducing our Company to certain investors in connection with this transaction. The transaction was exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereunder and under Rule 506 of Regulation D and Regulation S. On July 24, 2006, we completed a private financing for an aggregate purchase price of $1,018,800 and, in connection therewith, we issued a total of 1,132,000 shares of our common stock and warrants to purchase an additional 566,000 shares to the following two accredited [or sophisticated] investors: - -------------------------------------------------------------------------------- NAME NUMBER OF SHARES NUMBER OF WARRANTS - -------------------------------------------------------------------------------- Sprott Securities Inc. ....... 1,110,000 555,000 - -------------------------------------------------------------------------------- Peter L. Winnell ............. 22,000 11,000 - -------------------------------------------------------------------------------- TOTAL SECURITIES ISSUED ...... 1,132,000 566,000 - -------------------------------------------------------------------------------- The warrants are exercisable until July 31, 2007, at an exercise price of $1.50 per share, subject to adjustment. Each of the above-noted investors was provided access to business and financial information about our Company and had such knowledge and experience in business and financial matters that they were able to evaluate the risks and merits of an investment in our Company. Accordingly, the investors were "sophisticated" within the meaning of federal securities laws. Each certificate evidencing securities issued in the transaction included a legend stating that the securities were not registered under the Securities Act and may not be resold absent registration or the availability of an applicable exemption therefrom. No general solicitation or advertising was used in connection with the transaction. We also paid a private foreign investment company a finder's fee of $50,000 and an individual a finder's fee of $50,000 for introducing our Company to certain investors in connection with this transaction. The transaction was exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereunder and under Regulation S. This transaction was an "offshore" transaction to non-U.S. persons. On August 1, 2006, our Board approved the granting of an aggregate of 400,000 nonqualified stock options ("NSO'S") to certain officers, directors or consultants of our Company. The NSO's granted to our officer and director will vest in equal amounts over a three year term and the NSO's granted to a consultant will vest upon the achievement of certain milestones as to 100,000 per achievement. The NSO's have an exercise price of $0.90 per share. The transaction was exempt from the registration II-14 requirements of the Securities Act by reason of Section 4(2) thereunder as a transaction by an issuer not involving any public offering. - -------------------------------------------------------------------------------- NUMBER OF SHARES TO BE GRANTED NAME OF OPTIONEE ON EXERCISE OF OPTIONS - -------------------------------------------------------------------------------- William Edward (Ted) McKechnie ............. 200,000 - -------------------------------------------------------------------------------- John Douglas Mills ......................... 200,000 - -------------------------------------------------------------------------------- TOTAL SECURITIES ISSUED .................... 400,000 - -------------------------------------------------------------------------------- On November 27, 2006, we completed a private financing for an aggregate purchase price of $310,200 and, in connection therewith, we issued a total of 282,000 shares of our common stock and warrants to purchase an additional 141,000 shares to the following eight accredited [or sophisticated] investors: - -------------------------------------------------------------------------------- NAME NUMBER OF SHARES NUMBER OF WARRANTS - -------------------------------------------------------------------------------- Walter Schneider ............. 50,000 25,000 - -------------------------------------------------------------------------------- Adrian Jaggi ................. 20,000 10,000 - -------------------------------------------------------------------------------- Markus Bertschin ............. 30,000 15,000 - -------------------------------------------------------------------------------- Ernst Baur ................... 30,000 15,000 - -------------------------------------------------------------------------------- Matthias Schole .............. 32,000 16,000 - -------------------------------------------------------------------------------- Earl Charleton ............... 10,000 5,000 - -------------------------------------------------------------------------------- Leon Van Der Merwe ........... 100,000 50,000 - -------------------------------------------------------------------------------- Kurt Groebli ................. 10,000 5,000 - -------------------------------------------------------------------------------- TOTAL SECURITIES ISSUED ...... 282,000 141,000 - -------------------------------------------------------------------------------- The warrants are exercisable until October 31, 2007, at an exercise price of $1.50 per share, subject to adjustment. Each of the above-noted investors was provided access to business and financial information about our Company and had such knowledge and experience in business and financial matters that they were able to evaluate the risks and merits of an investment in our Company. Accordingly, the investors were "sophisticated" within the meaning of federal securities laws. Each certificate evidencing securities issued in the transaction included a legend stating that the securities were not registered under the Securities Act and may not be resold absent registration or the availability of an applicable exemption therefrom. No general solicitation or advertising was used in connection with the transaction. We paid an individual a finder's fee of $24,816 for introducing our Company to certain investors in connection with this transaction. The transaction was exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereunder and under Regulation S. This transaction was an "offshore" transaction to non-U.S. persons. II-15 ITEM 27. EXHIBITS EXHIBIT NO. DESCRIPTION OF DOCUMENT 2.1 Stock Exchange Agreement dated October 31, 2003, by and between Xtra-Gold Resources Corp. and the former shareholders of Xtra Energy Corp. (formerly Xtra-Gold Resources, Inc.) 3.1 Articles of Incorporation of Silverwing Systems Corporation filed on September 1, 1998 3.2 Articles of Amendment filed on August 19, 1999 to change our name to Advertain On-Line Inc. 3.3 Articles of Amendment filed June 18, 2001 to change our name to RetinaPharma International, Inc. 3.4 Articles of Amendment filed on October 8, 2001 to increase our capital stock from 25,000,000 to 100,000,000 shares 3.5 Articles of Amendment filed December 16, 2003 to change our name to Xtra-Gold Resources Corp. and to increase our capital stock from 100,000,000 to 250,000,000 shares 3.6 By-laws 4.1 Form of common stock purchase warrant 4.2 Form of convertible debenture 5 Legal Opinion of Schneider Weinberger & Beilly LLP * 10.1 2005 Equity Compensation Plan 10.2 Memorandum of Agreement dated October 28, 2003, by and between Xtra Energy Corp. (formerly Xtra-Gold Resources, Inc.) and Ranger Canyon Energy Inc. (formerly CaribGold Minerals, Inc.) * 10.3 Agreement dated February 16, 2004 by and between Xtra-Gold Resources Corp. and Akrokeri-Ashanti Gold Mines Inc. 10.4 Share Purchase Agreement dated December 22, 2004 between Xtra-Gold Resources Corp. and 2058168 Ontario Inc., the trustee for the former note holders of Akrokeri-Ashanti Gold Mines Inc. 10.5 Share Purchase Agreement dated December 22, 2004 among Xtra-Gold Resources Corp., 2058168 Ontario Inc., the trustee for the former debenture holders of Akrokeri-Ashanti Gold Mines Inc. and 2060768 Ontario Corp. 10.6 Stock Cancellation Agreement dated December 22, 2004 by and between Paul Zyla and Xtra-Gold Resources Corp. with respect to the cancellation of 24,000,000 shares 10.7 Stock Cancellation Agreement dated December 22, 2004 by and between William Edward McKechnie and Xtra-Gold Resources Corp. with respect to the cancellation of 23,000,000 shares 10.09 Stock option agreement dated September 5, 2005 with William Edward McKechnie, as optionee 10.10 Stock option agreement dated April 21, 2006 with William Edward McKechnie, as optionee 10.11 Stock option agreement dated April 21, 2006 with Kiomi Mori, as optionee 10.12 Stock option agreement dated May 1, 2006 with Michael Byron, as optionee II-16 10.13 Stock option agreement dated May 1, 2006 with Yves Clement, as optionee 10.14 Stock option agreement dated May 1, 2006 with Alhaji Abudulai, as optionee 10.15 Stock option agreement dated August 1, 2006 with William Edward McKechnie, as optionee 10.16 Stock option agreement dated August 1, 2006 with John Douglas Mills, as optionee 10.17 Management consulting agreement dated May 1, 2006 with Yves Clement 10.18 Management consulting agreement dated July 1, 2006 with Goldeye Consultants Ltd. 10.19 Management consulting agreement dated July 1, 2006 with Rebecca Kiomi Mori 10.20 Consulting agreement dated August 1, 2006 with JD Mining Ltd. * 10.21 Management consulting agreement dated November 1, 2006 with Alhaji Nantogma Abudulai 10.22 Mining lease with respect to the Kwabeng concession * 10.23 Mining lease with respect to the Pameng concession * 10.24 Prospecting licence with respect to the Banso and Muoso concessions 10.25 Prospecting licence with respect to the Apapam concession 10.26 Prospecting licence with respect to the Edum Banso concession 10.27 Option Agreement dated October 17, 2005 between Xtra-Gold Exploration Limited and Adom Mining Limited * 10.28 Consulting agreement dated January 17, 2006 between Xtra-Gold Mining Limited and Bio Consult Limited 10.29 Amending Agreement dated October 19, 2006 between Xtra-Gold Exploration and Adom Mining Limited 10.30 Purchase and Sale Agreement dated September 1, 2006 between Xtra Oil & Gas Ltd. and TriStar Oil & Gas Ltd. * 14 Code of Ethics 23.1 Consent of Schneider Weinberger & Beilly LLP (filed with Exhibit 5) * 23.2 Consent of Davidson & Company LLP __________ * to be filed ITEM 28. UNDERTAKINGS The undersigned small business issuer will: (1) File, during any period in which it offers or sells securities, a post-effective amendment to this Registration Statement to: (i) Include any prospectus required by Section 10(a)(3) of the Securities Act; II-17 (ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement; and notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospects filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in the volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) Include any additional or changed material information on the plan of distribution. (2) For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering. (3) File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering. (4) For determining liability of the undersigned small business issuer under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned small business issuer undertakes that in a primary offering of securities of the undersigned small business issuer pursuant to this Registration Statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned small business issuer will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: i. Any preliminary prospectus or prospectus of the undersigned small business issuer relating to the offering required to be filed pursuant to Rule 424; ii. Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned small business issuer or used or referred to by the undersigned small business issuer; iii. The portion of any other free writing prospectus relating to the offering containing material information about the undersigned small business issuer or its securities provided by or on behalf of the undersigned small business issuer; and iv. Any other communication that is an offer in the offering made by the undersigned small business issuer to the purchaser. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the small business issuer of expenses incurred or paid by a director, officer or controlling person of the small business issuer in the successful defense of any action, suit or preceding) is asserted by such director, officer or controlling person in connection with the securities being registered, the small business issuer will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-18 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and authorized this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Toronto, Canada on November 30, 2006. XTRA-GOLD RESOURCES CORP. By: /s/ WILLIAM EDWARD MCKECHNIE ---------------------------- WILLIAM EDWARD MCKECHNIE Chief (Principal) Executive and Financial Officer Pursuant to the requirements of the Securities Act of 1933, this Form SB-2 Registration Statement has been signed by the following persons in the capacities and on the dates indicated. SIGNATURE TITLE DATE /s/ WILLIAM EDWARD MCKECHNIE Chief (Principal) Financial November 30, 2006 - ---------------------------- Officer, Chairman, Chief WILLIAM EDWARD MCKECHNIE (Principal) Executive Officer and Director /s/ REBECCA KIOMI MORI Secretary and Treasurer November 30, 2006 - ---------------------------- and Director REBECCA KIOMI MORI /s/ JAMES WERTH LONGSHORE Director November 30, 2006 - ---------------------------- JAMES WERTH LONGSHORE EX-2 2 ex_2-1.txt SHARE EXCHANGE AGREEMENT DATED OCTOBER 31, 2003 EXHIBIT 2.1 STOCK EXCHANGE AGREEMENT THIS STOCK EXCHANGE AGREEMENT (the "Agreement") is made and entered on the 31st day of October 2003, by and among RETINAPHARMA INTERNATIONAL INC., a Nevada corporation ("RPHI"), XTRA-GOLD RESOURCES, INC., a Florida corporation ("XG); and the PERSONS IDENTIFIED ON SCHEDULE A HERETO, representing the holders of all of the issued and outstanding capital stock of XG (each, "Shareholder" and collectively the "Shareholders"). RECITALS: --------- A. The Shareholders own all of the issued and outstanding capital stock of XG, consisting of 10,070,000 shares of common stock, $.001 par value per share (the "XG Shares"). B. RPHI desires to acquire the XG Shares from the Shareholders in exchange for a like number of shares of common stock, $.001 par value per share, of RPHI (the "RPHI Shares") to be issued to the Shareholders pro-rata to their ownership of XG. C. The Shareholders desire to exchange their XG Shares for the RPHI Shares upon the terms and conditions set forth herein. D. It is the intention of the parties hereto that: (i) RPHI shall acquire the XG Shares solely for the consideration set forth below (the "Exchange"); (ii) the Exchange shall qualify as a transaction in securities exempt from registration or qualification under the Securities Act of 1933, as amended (the "Securities Act"), and under the applicable securities laws of each jurisdiction where any of the Shareholders reside; and (iii) the Exchange shall qualify as a "tax- free" transaction within the meaning of Section 368 of the Internal Revenue Code of 1986. NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations and warranties contained in this Agreement, the parties hereto agree as follows: SECTION 1. EXCHANGE OF SHARES 1.1 EXCHANGE OF SHARES. On the Closing Date (as hereinafter defined) the Shareholders shall tender the XG Shares to RPHI and RPHI shall issue the RPHI Shares to the Shareholders in exchange therefor. 1.2 Delivery of XG Shares. On the Closing Date, the Shareholders will deliver to RPHI the certificates representing the XG Shares, duly endorsed for transfer (or with executed stock powers) so as to convey good and marketable title to the XG Shares to RPHI, and, simultaneously therewith, RPHI will deliver certificates evidencing the RPHI Shares to the Shareholders, registered to the Shareholders in the denominations set forth on Schedule A. - 1 - SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS Each Shareholder, severally and not jointly, represents and warrants to RPHI as follows: 2.1 INFORMATION ON SHAREHOLDER. Shareholder is an "accredited investor," as such term is defined in Regulation D promulgated by the Act, is experienced in investments and business matters, has made investments of a speculative nature and, with its representatives, has such knowledge and experience in financial, tax and other business matters as to enable him to utilize the information made available by RPHI to evaluate the merits and risks of and to make an informed investment decision with respect to this Agreement, which represents a speculative investment. Shareholder is able to bear the risk of such investment for an indefinite period and to afford a complete loss thereof. 2.2 INVESTMENT INTENT. Shareholder understands that the RPHI Shares have not been registered under the Act, and may not be sold, assigned, pledged, transferred or otherwise disposed of unless the RPHI Shares are registered under the Securities Act or an exemption from registration is available. Shareholder represents and warrants that it is acquiring the RPHI Shares for its own account, for investment, and not with a view to the sale or distribution of the RPHI Shares except in compliance with the Act. Each certificate representing the RPHI Shares will have the following or substantially similar legend thereon: "The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Act") or any state securities laws. The shares have been acquired for investment and may not be sold or transferred in the absence of an effective Registration Statement for the shares under the Act unless, in the opinion of counsel satisfactory to the Company, registration is not required under the Act or any applicable state securities laws." 2.3 OWNERSHIP OF XG SHARES AND AUTHORIZATION OF AGREEMENT. Shareholder is the sole record and beneficial owner of the XG Shares attributed to Shareholder on Schedule A, all of which shares are owned free and clear of all rights, claims, liens and encumbrances, and have not been sold, pledged, assigned or otherwise transferred except pursuant to this Agreement. There are no outstanding subscriptions, rights, options, warrants or other agreements obligating Shareholder to sell or transfer to any third person any of the XG Shares owned by Shareholder, or any interest therein. Shareholder has the power to enter into this Agreement and to carry out its obligations hereunder. This Agreement has been duly executed by Shareholder and constitutes the valid and binding obligation of Shareholder, enforceable against Shareholder in accordance with its terms. SECTION 3. REPRESENTATIONS OF XG XG hereby represents and warrants to RPHI as follows: - 2 - 3.1 ORGANIZATION AND GOOD STANDING. XG is a newly-formed corporation, duly organized, validly existing and in good standing under the laws of the State of Florida, and is entitled to own or lease its properties and to carry on its business as and in the places where such properties are now owned, leased or operated and such business is now conducted. XG is qualified to do business as a foreign corporation in each jurisdiction, if any, in which its property or business requires such qualification. XG does not have any subsidiaries. 3.2 AUTHORIZATION; ENFORCEABILITY; NO BREACH. XG has all necessary corporate power and authority to execute this Agreement and perform its obligations hereunder. This Agreement constitutes the valid and binding obligation of XG enforceable against XG in accordance with its terms, except as may be limited by bankruptcy, moratorium, insolvency or other similar laws generally affecting the enforcement of creditors' rights. The execution, delivery and performance of this Agreement by XG and the consummation of the transactions contemplated hereby will not: (a) violate any provision of the Charter or By-laws of XG; (b) violate, conflict with or result in the breach of any of the terms of, result in a material modification of, otherwise give any other contracting party the right to terminate, or constitute (or with notice or lapse of time or both constitute) a default under, any contract or other agreement to which XG is a party or by or to which it or any of its assets or properties may be bound or subject; (c) violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon, XG, or upon the properties or business of XG; or (d) violate any statute, law or regulation of any jurisdiction applicable to the transactions contemplated herein which could have a material adverse effect on the business or operations of XG. 3.3 COMPLIANCE WITH LAWS. XG has complied with all federal, state, county and local laws, ordinances, regulations, inspections, orders, judgments, injunctions, awards or decrees applicable to it or its business which, if not complied with, would materially and adversely affect the business or financial condition of XG. 3.4 LITIGATION. There is no action, suit or proceeding pending or threatened, or any investigation, at law or in equity, before any arbitrator, court or other governmental authority, pending or threatened, nor any judgment, decree, injunction, award or order outstanding, against or in any manner involving XG or any of XG's properties or rights which (a) could reasonably be expected to have a material adverse effect on XG taken as a whole, or (b) could reasonably be expected to materially and adversely affect consummation of any of the transactions contemplated by this Agreement. - 3 - 3.5 BROKERS OR FINDERS. No broker's or finder's fee will be payable by XG in connection with the transaction contemplated by this Agreement, nor will any such fee be , incurred as a result of any actions by XG or the Shareholders. 3.6 REAL ESTATE. XG neither owns real property nor is a party to any leasehold agreement. 3.7 ASSETS. XG owns all rights, title and interest in and to its assets, free and clear of all liens, pledges, mortgages, security interests, conditional sales contracts or any other encumbrances. XG has no assets other than an option to acquire certain real property located in Switzerland, the terms and conditions of which have previously been provided to PHPI. 3.8 LIABILITIES. XG has not suffered or incurred any material direct or indirect indebtedness, liability, claim, loss, damage, deficiency, obligation or responsibility, including without limitation, liabilities on account of taxes, other governmental charges or legal proceedings ("Liabilities") other than previously discharged Liabilities. 3.9 CAPITALIZATION. The authorized capital stock of XG consists of 100,000,000 shares of common stock of which 10,070,000 shares are presently issued and outstanding. Such shares are owned of record and beneficially by the Shareholders and in the amounts reflected in Schedule A. XG has not granted, issued or agreed to grant, issue or make available any warrants, options, subscription rights or any other commitments of any character relating to the unissued shares of capital stock of XG. All of the XG Shares are duly authorized and validly issued, fully paid and non-assessable. 3.10 TAXES. All required tax returns or federal, state, county, municipal, local, foreign and other taxes and assessments have been properly prepared and filed by XG for all years for which such returns are due unless an extension for filing any such return has been properly prepared and filed. Any and all federal, state, county, municipal, local, foreign and other taxes, assessments, including any and all interest, penalties and additions imposed with respect to such amounts have been paid or provided for. 3.11 FULL DISCLOSURE. No representation or warranty by XG in this Agreement or in any document or schedule to be delivered by them pursuant hereto, and no written statement, certificate or instrument furnished or to be furnished to RPHI pursuant hereto or in connection with the negotiation, execution or performance of this Agreement contains, or will contain, any untrue statement of a material fact or omits, or will omit, to state any fact necessary to make any statement herein or therein not materially misleading or necessary to a complete and correct presentation of all material aspects of the businesses of XG. SECTION 4. REPRESENTATIONS OF RPHI RPHI hereby represents and warrants to XG and the Shareholders as follows: 4.1 ORGANIZATION AND GOOD STANDING. RPHI is a corporation duly organized, validly existing and in good standing under the laws of Nevada, and is entitled to own or lease its properties and to carry on its business as and - 4 - in the places where such properties are now owned, leased or operated and such business is now conducted. RPHI is qualified to do business as a foreign corporation in each jurisdiction, if any, in which its property or business requires such qualification. RPHI does not have any subsidiaries. 4.2 AUTHORIZATION; ENFORCEABILITY; NO BREACH. RPHI has all necessary corporate power and authority to execute this Agreement and perform its obligations hereunder. This Agreement constitutes the valid and binding obligation of RPHI enforceable against RPHI in accordance with its terms, except as may be limited by bankruptcy, moratorium, insolvency or other similar laws generally affecting the enforcement of creditors' rights. The execution, delivery and performance of this Agreement by RPHI and the consummation of the transactions contemplated hereby will not: (a) violate any provision of the Charter or By-Laws of RPHI; (b) violate, conflict with or result in the breach of any of the terms of, result in a material modification of, otherwise give any other contracting party the right to terminate, or constitute ( or with notice or lapse of time or both constitute) a default under, any contract or other agreement to which RPHI is a party or by or to which it or any of its assets or properties may be bound or subject; (c) violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body against, or binding upon, RPHI, or upon the properties or business of RPHI; or (d) violate any statute, law or regulation of any jurisdiction applicable to the transactions contemplated herein which could have a material adverse effect on the business or operations of RPHI. 4.3 THE RPHI SHARES. The RPHI Shares to be issued to the Shareholders have been, or on or prior to the Closing will have been, duly authorized by all necessary corporate and shareholder actions and, when so issued in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable and will not be issued in violation of the pre- emptive or similar rights of any person. 4.4 FINANCIAL STATEMENTS. RPHI has delivered or will deliver to XG (a) the unaudited balance sheets of RPHI as at December 31, 2002 and 2001, and the related statements of operations, stockholders' equity and cash flows for each the two fiscal years then ended, including the notes thereto, and (b) the unaudited balance sheet of RPHI as at September 31, 2003 and the related statement of operations for the nine months then ended (collectively, the "RPHI Financial Statements"). The RPHI Financial Statements have been prepared by management in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (y) as may be otherwise indicated in such financial statements or the notes thereto, or (z) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of RPHI as of the dates thereof and the - 5 - results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). RPHI has no reason to believe that its financial statements cannot be audited in accordance with generally accepted accounting principles and the rules and regulations of the United States Securities and Exchange Commission. 4.5 NO MATERIAL ADVERSE CHANGES. Since the date of the RPHI financial Statements, there has been no material adverse change in the assets, operations, financial condition or prospects of RPHI, taken as a whole. 4.6 BOOKS AND RECORDS. The financial records of RPHI and its subsidiaries accurately reflect in all material respects the information relating to the business of RPHI and the subsidiaries, the location and collection of their assets, and the nature of all transactions giving rise to the obligations or accounts receivable of RPHI. 4.7 COMPLIANCE WITH LAWS. RPHI has complied with all federal, state, county and local laws, ordinances, regulations, inspections, orders, judgments, injunctions, awards or decrees applicable to it or its business which, if not complied with, would materially and adversely affect the business or financial condition of RPHI. 4.8 LITIGATION. There is no action, suit or proceeding pending or threatened, or any investigation, at law or in equity, before any arbitrator, court or other governmental authority, pending or threatened, nor any judgment, decree, injunction, award or order outstanding, against or in any manner involving RPHI or any of RPHI's properties or rights which (a) could reasonably be expected to have a material adverse effect on RPHI taken as a whole, or (b) could reasonably be expected to materially and adversely affect consummation of any of the transactions contemplated by this Agreement. 4.9 BROKERS OR FINDERS. No broker's or finder's fee will be payable by RPHI in connection with the transaction contemplated by this Agreement, nor will any such fee be incurred as a result of any actions by RPHI. 4.10 ASSETS; OPERATIONS. RPHI has no assets. RPHI is inactive and currently engages in no business operations. 4.11 LIABILITIES. RPHI has not suffered or incurred any material direct or indirect indebtedness, liability, claim, loss, damage, deficiency, obligation or responsibility, including without limitation, liabilities on account of taxes, other governmental charges or legal proceedings ("Liabilities") other than previously discharged Liabilities. 4.12 CAPITALIZATION. The authorized capital stock of RPHI consists of 25,000,000 shares of common stock of which 2,472,817 shares are presently issued and outstanding. RPHI has not granted, issued or agreed to grant, issue or make available any warrants, options, subscription rights or any other commitments of any character relating to the unissued shares of capital stock of RPHI. All of the issued and outstanding capital stock of RPHI has been duly authorized and validly issued, fully paid and non-assessable, and was issued in compliance with applicable securities laws. - 6 - 3.12 TAXES. All required tax returns or federal, state, county, municipal, local, foreign and other taxes and assessments have been properly prepared and filed by RPHI for all years for which such returns are due unless an extension for filing any such return has been properly prepared and filed. Any and all federal, state, county, municipal, local, foreign and other taxes, assessments, including any and all interest, penalties and additions imposed with respect to such amounts have been paid or provided for. 4.13 FULL DISCLOSURE. No representation or warranty by RPHI in this Agreement or in any document or schedule to be delivered by them pursuant hereto, and no written statement, certificate or instrument furnished or to be furnished to XG pursuant hereto or in connection with the negotiation, execution or performance of this Agreement contains, or will contain, any untrue statement of a material fact or omits, or will omit, to state any fact necessary to make any statement herein or therein not materially misleading or necessary to a complete and correct presentation of all material aspects of the businesses of RPHI. 5.1 EXAMINATIONS AND INVESTIGATIONS. Prior to the Closing Date, the parties acknowledge that they have been entitled, through their employees and representatives, to make such investigation and verification of the assets, properties, business and operations, books, records and financial condition of the other, including communications with suppliers, vendors and customers, as they each may reasonably require. No investigation by a party hereto shall, however, diminish or waiver in any way any of the representations, warranties, covenants or agreements of the other party under this Agreement. Consummation of this Agreement shall be subject to the fulfillment of due diligence procedures to the reasonable satisfaction of each of the parties hereto and their respective counsel. 5.2 EXPENSES. Each party hereto agrees to pay its own costs and expenses incurred in negotiating this Agreement and consummating the transactions described herein. 5.3 FURTHER ASSURANCES. The parties shall execute such documents and other papers and take such further action as may be reasonably required or desirable to carry out the provisions hereof and the transactions contemplated hereby. Each such party shall use its best efforts to fulfill or obtain in the fulfillment of the conditions to the Closing, including, without limitation, the execution and delivery of any documents or other papers, the execution and delivery of which are necessary or appropriate to the Closing. 5.4 CONFIDENTIALITY. In the event the transactions contemplated by this Agreement are not consummated, each of the parties hereto agree to keep confidential any information disclosed to each other in connection therewith; provided, however, such obligation shall not apply to information which: (a) at the time of disclosure was public knowledge; - 7 - (b) after the time of disclosure becomes public knowledge (except due to the action of the receiving party); or (c) the receiving party had within its possession at the time of disclosure. 5.5 STOCK CERTIFICATES AND CONSIDERATION. At the Closing, the Shareholders shall have delivered the certificates representing the XG Shares duly endorsed (or with executed stock powers) so as to make RPHI the sole owner thereof. At such Closing, RPHI shall issue to the Shareholders, the RPHI Shares as provided herein. 5.6 MANAGEMENT OF XG AND RPHI. On the Closing Date, the directors and officers of RPHI shall resign and the designees of XG shall, from and after the Closing Date, be the directors and officers of RPHI. 5.7 NO CHANGE TO CAPITALIZATION. From the date hereof and continuing to the Closing Date, neither XG nor RPHI shall issue any shares of capital stock or any securities convertible into capital stock, or enter into any agreement to do so. SECTION 6. THE CLOSING The Closing shall take at a time and place mutually agreed upon by RPHI, XG and the Shareholders following satisfaction or waiver of all conditions precedent to Closing. At the Closing, the parties shall provide each other with such documents as may be necessary or appropriate and customary in transactions of this sort in order to consummate the transactions contemplated hereby, including evidence of due authorization of the Agreement and the transactions contemplated hereby. SECTION 7. CONDITIONS PRECEDENT TO CLOSING 7.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF RPHI TO ISSUE THE RPHI SHARES. The obligation of RPHI to issue the RPHI Shares to the Shareholders and to otherwise consummate the transactions contemplated hereby is subject to the satisfaction, at or before the Closing, of each of the conditions set forth below. These conditions are for the Company's sole benefit and may be waived by the Company at any time in its sole discretion. (a) Accuracy of XG's and the Shareholder's Representations and Warranties. The representations and warranties of XG and the Shareholders will be true and correct in all material respects as of the date when made and as of the Closing Date, as though made at that time. (b) Performance by XG and the Shareholders. XG and the Shareholders shall have performed all agreements and satisfied all conditions required to be performed or satisfied by them at or prior to the Closing. (c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement. - 8 - (d) No Material Adverse Changes. There shall have been no adverse effect on the business, operations, properties, prospects or financial condition of XG that is material and adverse to XG, taken as a whole. (e) Miscellaneous. XG and the Shareholders shall have delivered to RPHI such other documents relating to the transactions contemplated by this Agreement as RPHI may reasonably request. 7.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE SHAREHOLDERS TO EXCHANGE THEIR XG SHARES. The obligation of the Shareholders to exchange their XG Share s for the RPHI Shares and to otherwise consummate the transactions contemplated hereby is subject to the satisfaction, at or before the Closing, of each of the conditions set forth below. These conditions are for the Company's sole benefit and may be waived by the Company at any time in its sole discretion. (a) Accuracy of RPHI's Representations and Warranties. The representations and warranties of RPHI will be true and correct in all material respects as of the date when made and as of the Closing Date, as though made at that time. (b) Performance by RPHI. RPHI shall have performed all agreements and satisfied all conditions required to be performed or satisfied by it at or prior to the Closing. (c) No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement. (d) No Material Adverse Changes. There shall have been no adverse effect on the business, operations, properties, prospects or financial condition of RPHI that is material and adverse to RPHI, taken as a whole. (e) Miscellaneous. RPHI shall have delivered to the Shareholders such other documents relating to the transactions contemplated by this Agreement as the Shareholders may reasonably request. SECTION 8. SURVIVAL AND WARRANTIES OF RPHI Notwithstanding any right of XG and the Shareholders fully to investigate the affairs of RPHI, XG and the Shareholders shall have the right to rely fully upon the representations, warranties, covenants and agreements of RPHI contained in this Agreement or in any document delivered by RPHI or any of its representatives, in connection with the transactions contemplated by this Agreement. All such representations, warranties, covenants and agreements shall survive the execution and delivery hereof and the Closing Date hereunder for 12 months following the Closing. - 9 - SECTION 9. SURVIVAL AND WARRANTIES OF REPRESENTATIONS OF THESHAREHOLDERS Notwithstanding any right of RPHI fully to investigate the affairs of XG, RPHI has the right to rely fully upon the representations, warranties, covenants and agreements of XG and the Shareholders contained in this Agreement or in any document delivered to RPHI by the latter or any of its representatives, in connection with the transactions contemplated by this Agreement. All such representations, warranties, covenants and agreements shall survive the execution and delivery hereof and the Closing Date hereunder for 12 months following the Closing. 10.1 Obligation of RPHI to Indemnify. Subject to the limitations on the survival of representations and warranties contained in Section 8, RPHI hereby agrees to indemnify, defend and hold harmless the Shareholders from and against any losses, liabilities, damages, deficiencies, costs or expenses (including interest, penalties and reasonable attorneys' fees and disbursements) (a "Loss") based upon, arising out of, or otherwise due to any inaccuracy in or any breach of any representation, warranty, covenant or agreement of RPHI contained in this Agreement or in any document or other writing delivered pursuant to this Agreement. 10.2 Obligation of the Shareholders to Indemnify. Subject to the limitations on the survival of representations and warranties contained in Section 9, the Shareholders agree to indemnify, defend and hold harmless RPHI to the extent provided for herein from and against any Loss based upon, arising out of, or otherwise due to any inaccuracy in or any breach of any representation, warranty, covenant or agreement made by any of them and contained in this Agreement or in any document or other writing delivered pursuant to this Agreement. 11.1 Waivers. The waiver of a breach of this Agreement or the failure of any party hereto to exercise any right under this agreement shall in no event constitute waiver as to any future breach whether similar or dissimilar in nature or as to the exercise of any further right under this Agreement. 11.2 Amendment. This Agreement ma be amended or modified only by an instrument of equal formality signed by the parties or the duly authorized representatives of the respective parties. 11.3 ASSIGNMENT. This Agreement is not assignable except by operation of law. 11.4 NOTICES. Until otherwise specified in writing, the mailing addresses of both parties of this Agreement shall be as follows: The Shareholders: To their addresses set forth on Schedule A. RPHI: Retinapharma International, Inc. 114 W. Magnolia Street, #446 Bellingham, WA 98225 - 10 - Any notice or statement given under this Agreement shall be deemed to have been given if sent by registered mail addressed to the other party at the address indicated above or at such other address as may be furnished in writing to the addressor. 11.5 GOVERNING LAW; VENUE. This Agreement shall be governed and construed in accordance with the laws of the State of Florida, without regard to the conflicts of law provisions thereof. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the County of Broward or Palm Beach, State of Florida, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. If any provision of this agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this agreement in that jurisdiction or the validity or enforceability of any provision of this agreement in any other jurisdiction. EACH PARTY HERETO IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY. 11.6 PUBLICITY. No publicity release or announcement concerning this Agreement or the transactions contemplated hereby shall be issued by either party hereto at any time from the signing hereof without advance approval in writing of the form and substance thereof by the other party. 11.7 ENTIRE AGREEMENT. This Agreement (including the Exhibits and Schedules hereto) and the collateral agreements executed in connection with the consummation of the transactions contemplated herein contain the entire agreement among the parties with respect to the purchase and issuance of the XG Shares and the RPHI Shares and related transactions, and supersede all prior agreements, written or oral, with respect thereto. 11.8 HEADINGS. The headings in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. 11.9 SEVERABILITV OF PROVISIONS. The invalidity or unenforceability of any term, phrase, clause, paragraph, restriction, covenant, agreement or other provision of this Agreement shall in no way affect the validity or enforcement of any other provision or any part thereof. 11.10 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which, when so executed, shall constitute an original copy hereof, but all of which together shall consider but one and the same document. - 11 - IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written. RETINAPHARMA INTERNATIONAL, INC. By: /s/ Robert Knight Robert Knight, President XTRA-GOLD RESOURCES, INC. By: /s/ Paul Zyla Paul Zyla, President SHAREHOLDERS: /s/ Paul Zyla Paul Zyla /s/ Ted McKechnie Ted McKechnie Brokton International Ltd. By: /s/ James Pincock James Pincock, President CaribGold Minerals Inc. By: /s/ Paul Zyla Paul Zyla, President - 12 - SCHEDULE A SHAREHOLDERS OF XG NAME AND ADDRESS OF NUMBER OF XG SHARES NUMBER OF RPHI SHARES Paul Zyla .......................... 5,000,000 5,000,000 428 Aspen Forest Drive Oakville ON L6J 6H5 Ted McKechnie ...................... 5,000,000 5,000,000 446 Drake Circle Waterloo ON N2T 1L1 Brokton International Ltd. ......... 50,000 50,000 P.O. Box 150, Design House ......... 50,000 50,000 Providenciales, Turks & Caicos British West Indies CaribGold Minerals Inc. ............ 20,000 20,000 Suite 2100 67 Yonge Street Toronto ON M5E 1J8 TOTALS ............................. 10,070,000 10,070,000 - 13 - EX-3.(I) 3 ex_3-1.txt ARTICLES OF INCORPORATION FILED SEPTEMBER 1, 1998 EXHIBIT 3.1 FILED IN THE OFFICE OF THE SECRETARY OF STATE OF THE STATE OF NEVADA Sep 01 1988 No. C 20716-98 /s/ Dean Heller Dean Heller, Secretary of State ARTICLES OF INCORPORATION OF SILVERWING SYSTEMS CORPORATION Know all men by these presents; That we the undersigned, have this day voluntarily associated ourselves together for the purpose of forming a corporation under and pursuant to the provisions of the Nevada Revised Statutes 78.010 To Nevada Revised Statutes 78.090 inclusive, as amended and certify that; ARTICLE I The name of this corporation is Silverwing Systems Corporation. The name and post office address of the incorporator signing the Articles of Incorporation is: Richard D. Fritzler, 1800 E. Sahara Avenue, Suite 107, Las Vegas, Nevada 89104. The name and address of the initial member of the first Board of Directors is: Richard D. Fritzler, 1800 E. Sahara Avenue, Suite 107, Las Vegas, Nevada 89104. ARTICLE II The Resident Agent of this corporation in Nevada shall be Nevada Corporate Services located at 1800 E. Sahara Avenue, Suite 107, Las Vegas, Clark Country, Nevada 89104. Offices for the transaction of any business of the Corporation, and where meetings of the Board of Directors and of Stockholders may be held, may be established and maintained in any other part of the State of Nevada, or in any other state, territory or possession of the United States of America, or in any foreign country as the Board of Directors may, from time to time determine. 1 ARTICLE III The nature of the business and the objects and purpose proposed to be transacted, promoted or carried on by the Corporation is to conduct any lawful activity in accordance with the Laws of the State of Nevada and the United States of America, including but not limited to the following; 1) Shall have the rights privileges and powers as may be conferred upon a corporation by any existing law. 2) May at any time exercise such rights, privileges and powers, when not inconsistent with the purposes and objects for which this corporation is organized. 3) This corporation shall have perpetual existence. 4) To sue or be sued in any Court of Law. 5) To make contracts. 6) To hold, purchase and convey real and personal estate and to mortgage or lease any such real and personal estate with its franchises. The power to hold real and personal estate shall include the power to take the same by device or bequest in this state, or in any other state, territory or country. 7) To appoint such officers and agents as the affairs of Corporation shall require, and to allow them suitable compensation. 8) To make By-Laws not inconsistent with the Constitution or Laws of the United States, or of the State of Nevada, for the management, regulation and government of its affairs and property, the transfer of its stock, the transaction of its business, and the calling and holding of meetings of its Stockholders. 2 9) To wind up and dissolve itself, or be wound up and dissolved, according to existing law. 10) To adopt or use a common seal or stamp, and alter the same at pleasure. The use of a seal or stamp by the Corporation on any corporate document is not necessary. The Corporation may use a seal or stamp if it desires, but such use or nonuse shall not in any way affect the legality of the document. 11) To borrow money and contract debts when necessary for the transaction of its business, or for the exercise of its .corporate rights, privileges or franchises, or for any other lawful purpose of its incorporation; to issue bonds, promissory notes, bills of exchange, debentures, and other obligations and evidences of indebtedness, payable at a specific time or times, or payable upon the happening of a specified event or events, whether secured by mortgage, pledge or other security, or unsecured, for money borrowed, or in payment for property purchased, or acquired, or for any other lawful object. 12) To guarantee, purchase, hold, take, obtain, receive, subscribe for, own, use, dispose of, sell, exchange, lease, lend, assign, mortgage, pledge, or otherwise acquire, transfer or deal ill or with bonds or obligations of, or shares, securities or interests in or issued by, any person, government, governmental agency or political subdivision of government, and to exercise all the rights, powers and privileges of ownership of such an interest, including the right to vote, if any. 3 13) To purchase, hold, sell and transfer shares of its own capital stock, and use therefor its capital, capital surplus, surplus, or other property or funds. 14) To conduct business, have one or more offices, and hold, purchase, mortgage and convey real and personal property in this state, and in any of the several states, territories, possessions and dependencies of the United States, the District of Columbia, and any foreign countries. 15) To do everything necessary and proper for the accomplishment of objects enumerated in its Articles of Incorporation, or in any amendment thereof or necessary or incidental to the protection and benefit of the Corporation, and, in general, to carry on any lawful business necessary or incidental to the attainment of the objects of the Corporation, whether or not the business is similar in nature to the objects set forth in the Articles of Incorporation, or in any amendment thereof. 16) To make donations for public welfare or for charitable, scientific or educational purposes. 17) To enter into partnerships, general or limited, or joint ventures, in connection with any lawful activities. ARTICLE IV The capital stock of this corporation shall consist of twenty-five million shares of common stock (25,000,000), with a par value of $0.001 per share all of which stock shall be entitled to voting power. The Corporation may issue the shares of stock for such consideration as may be fixed by the Board of Directors. 4 ARTICLE V The members of the governing board of this corporation shall be styled directors. The Board of Directors shall consist of one (1) person. The number of directors of this corporation may, from time to time, be increased or decreased by an amendment to the By-Laws in that regard and without the necessity of amending the Articles of Incorporation. A majority of the Directors in office, present at any meeting of the Board of Directors, duly called, whether regular or special, shall always constitute a quorum for the transaction of business, unless the By-Laws otherwise provide. ARTICLE VI This corporation shall have a president, a secretary, a treasurer, and a resident agent, to be chosen by the Board of Directors, any person may hold two or more offices. ARTICLE VII The capital stock of the Corporation, after the fixed consideration thereof has been paid or performed, shall not be subject to assessment, and the individual Stockholders of this corporation shall not be individually liable for the debts and liabilities of the Corporation, and the Articles of Incorporation shall never be amended as to the aforesaid provisions. ARTICLE VIII The Board of Directors is expressly authorized: (subject to the By-Laws, if any, adopted by the Stockholders) 1) To make, alter or amend the By-Laws of the Corporation. 5 2) To fix the amount in cash or otherwise, to be reserved as working capital. 3) To authorize and cause to be executed mortgages and liens property and franchises of the Corporation. 4) To by resolution or resolutions passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the Directors of the Corporation, which, to the extent provided in the resolution or resolutions or in the By-Laws of the Corporation, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation, and may have power to authorize the seal of Corporation to be affixed to all papers on which the Corporation desires to place a seal. Such committee or committees shall have such name or names as may be stated in the By-Laws of the Corporation or as may be determined from time to time by resolution adopted by the Board of Directors. 5} To sell, lease or exchange all of its property and assets, including its goodwill and its corporate franchises, upon such terms and conditions as the board deems expedient and for the best interests of the Corporation, when and as authorized by the affirmative vote of the Stockholders holding stock in the Corporation entitling them to exercise at least a majority of the voting power given at a Stockholders meeting called for that purpose. ARTICLE IX The Directors of this corporation need not be Stockholders. 6 ARTICLE X In the absence of fraud, no contract or other transaction of the Corporation shall be affected by the fact that any of the Directors are in any way interested in, or connected with, any other party to such contract or transaction, or are themselves, parties to such contract or transaction provided that this interest in any such contract or transaction of any such director shall at any time be fully disclosed or otherwise known to the Board of Directors, and each and every person who may become a director of the Corporation is hereby relieved of any liability that might otherwise exist from contracting with the Corporation for the benefit of himself or any firm, association or corporation in which he may be in any way interested. ARTICLE XI No director or officer of the Corporation shall be personally liable to the Corporation or any of its Stockholders for damages for breach of fiduciary duty as a director or officer involving any act or omission of any such director or officer provided, however, that the foregoing provision shall not eliminate or limit the liability of a director or officer for acts or omissions which involve intentional misconduct, fraud or a knowing violation of law, or the payment of dividends in violation of Section 78.300 of the Nevada Revised Statutes. Any repeal or modification of this Article by the Stockholders of the Corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director or officer of the Corporation for acts or omissions prior to such repeal or modification. 7 ARTICLE XII Except to the extent limited or denied by Nevada Revised Statutes 78.265 Shareholders shall have no preemptive right to acquire unissued shares, treasury shares or securities convertible into such shares, of this corporation. I, the undersigned, being the incorporator hereinbefore named for the purpose of forming a corporation pursuant to the general corporation law of the State of Nevada, do make and file these Articles of Incorporation, hereby declared and certifying that the facts herein stated are true, and accordingly have hereunto set my hand. /s/ Robert Fritzler State of Nevada ) ) ss Clark County ) On August 25, 1998 personally appeared before me, the undersigned, a Notary Public, Richard Fritzler, known to me the person whose name is subscribed in the foregoing document and acknowledged to me that he executed the same. /s/ Kristi Richardson Notary Public Notary Public-State of Nevada THE GREAT SEAL County of Clark OF THE Kristi Richardson STATE OF NEVADA My Appointment Expires February 25, 2002 No. 98-1632-1 8 FILED IN THE OFFICE OF THE SECRETARY OF STATE OF THE STATE OF NEVADA Sep 01 1988 No. C 20716-98 /s/ Dean Heller Dean Heller, Secretary of State CERTIFICATE OF ACCEPTANCE OF APPOINTMENT BY RESIDENT AGENT In the matter of Silverwing Systems Corporation, Nevada Corporate Services, with address at: 1800 East Sahara Avenue, Suite 107, City of Las Vegas, County of Clark, State of Nevada, 89104, hereby accept appointment as Resident Agent of the above-entitled corporation in accordance with NRS 78.090. FURTHERMORE, that the principal office in this State is located at 1800 East Sahara Avenue, Suite 107, City of Las Vegas, County of Clark, State of Nevada, 89104. IN WITNESS WHEREOF, I have hereunto set my hand August 25, 1998. /s/ Richard Fritzler for Nevada Corporate Services RESIDENT AGENT State of Nevada ) ) ss Clark County ) On August 25, 1998 personally appeared before me, the undersigned Notary Public, Richard Fritzler, know to me the person whose name is subscribed in the foregoing document and acknowledged to me that he executed the same. /s/ Kristi Richardson Notary Public Notary Public-State of Nevada THE GREAT SEAL County of Clark OF THE Kristi Richardson STATE OF NEVADA My Appointment Expires February 25, 2002 No. 98-1632-1 ================================================================================ NRS 78.090 Except during any period of vacancy described in NRS 78.097, every corporation shall have a resident agent, who may be either a natural person or a corporation, resident or located in this state, in charge of its principal office. The resident agent may be any bank or banking corporation, or other corporation, located and doing business in this state. The certificate of acceptance must e filed at the time of the initial filing of the corporate papers. 9 EX-3.(I) 4 ex_3-2.txt ARTICLES OF AMENDMENT FILED ON AUGUST 19, 1999 EXHIBIT 3.2 FILED IN THE OFFICE OF THE SECRETARY OF STATE OF THE STATE OF NEVADA Aug 19 1999 No. C 20716-98 /s/ Dean Heller, Secretary of State CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION (After issuance of Stock) SILVERWING SYSTEMS CORPORATION Name of Corporation We the undersigned Robert Knight, President and Robert Knight, Secretary of Silverwing Ssytems Corporation do hereby certify: That the Board of Directors of said corporation at a meeting duly convened, held July 14, 1999 adopted a resolution to amend the original Articles of Incorporation. Article 1: Corporation name change from Silverwing Systems Corporation to Advertain On-Line Inc. The number of shares outstanding and entitled to vote on an amendment of the Articles of Incorporation is 6,985,000; that the said change(s) and amendment have been consented to and approved by a majority of stockholders holding at least a majority of each class of stock outstanding and entitled to vote thereon. /s/ Robert Knight President /s/ Robert Knight Secretary ACKNOWLEDGMENT: STATE OF COUNTY OF On Aug 18, 1999 personally appeared before me, a Notary Public, acknowledged he executed the above instrument on behalf of said Corporation. /s/ Kerry Deane-Cloutier Notary Public Barrister and Solicitor MacLeod Thorson Darychuk #310 - 2755 Lougheed Hwy. Port Coquitlam BC V3B 5Y9 EX-3.(I) 5 ex_3-3.txt ARTICLES OF AMENDMENT FILED JUNE 18, 2001 EXHIBIT 3.3 CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION (After issuance of Stock) ADVERTAIN ON-LINE, INC. Name of Corporation We the undersigned Robert Knight, President and Robert Knight, Secretary of Advertain On-Line, Inc. do hereby certify: That the Board of Directors of said corporation at a meeting duly convened, held June 6, 2001 adopted a resolution to amend the original Articles of Incorporation. Article 1: Change name of corporation from Advertain On-Line, Inc. to RetinaPharma International, Inc. The number of shares outstanding and entitled to vote on an amendment of the Articles of Incorporation is 8,181,720; that the said change(s) and amendment have been consented to and approved by a majority of stockholders holding at least a majority of each class of stock outstanding and entitled to vote thereon. /s/ Robert Knight President /s/ Robert Knight Secretary ACKNOWLEDGMENT: PROVINCE OF BRITISH COLUMBIA COUNTY OF NEW WESTMINSTER On June 6, 2001 Robert Knight personally appeared before me, a Notary Public, acknowledged he executed the above instrument on behalf of said Corporation. /s/ Kerry Deane-Cloutier Notary Public Barrister and Solicitor MacLeod Thorson Darychuk #310 - 2755 Lougheed Hwy. Port Coquitlam BC V3B 5Y9 EX-3.(I) 6 ex_3-4.txt ARTICLES OF AMENDMENT FILED ON OCTOBER 9, 2001 EXHIBIT 3.4 FILED # C 20716-98 Oct 09 2001 IN THE OFFICE OF THE SECRETARY OF STATE OF THE STATE OF NEVADA /s/ Dean Heller, Secretary of State CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION (After issuance of Stock) RETINAPHARMA INTERNATIONAL, INC. Name of Corporation We the undersigned Robert Knight, President and Robert Knight, Secretary of Advertain On-Line, Inc.do hereby certify: That the Board of Directors of said corporation at a meeting duly convened, held October 4, 2001 adopted a resolution to amend the original Articles of Incorporation. Article IV: The capital stock of this corporation shall be increased to one hundred million shares of common stock (100,000,000) with a par value of $0.001 per share from twenty-five million shares of common stock (25,000,000) with a par value of $0.001 per share. The number of shares outstanding and entitled to vote on an amendment of the Articles of Incorporation is 364,090; that the said change(s) and amendment have been consented to and approved by a majority of stockholders holding at least a majority of each class of stock outstanding and entitled to vote thereon. /s/ Robert Knight President /s/ Robert Knight Secretary ACKNOWLEDGMENT: STATE OF COUNTY OF On October 5, 2001 personally appeared before me, a Notary Public, acknowledged he executed the above instrument on behalf of said Corporation. /s/ Kerry Deane-Cloutier Notary Public Barrister and Solicitor MacLeod Thorson Darychuk #310 - 2755 Lougheed Hwy. Port Coquitlam BC V3B 5Y9 EX-3.(I) 7 ex_3-5.txt ARTICLES OF AMENDMENT FILED DECEMBER 16, 2003 EXHIBIT 3.5 FILED # C20716-98 Dec 16 2003 IN THE OFFICE OF THE SECRETARY OF STATE OF THE STATE OF NEVADA /s/ Dean Heller, Secretary of State CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION For Nevada Profit Corporations (Pursuant to NRS 78.385 and 78.390 - After Issuance of Stock) 1. Name of corporation: RETINAPHARMA INTERNATIONAL, INC. 2. The articles have been amended as follows (provide article numbers, if available): ARTICLE I. The name of the corporation is changed from RetinaPharma International, Inc. to Xtra-Gold Resources Corp. ARTICLE IV. The number of shares of capital stock that the corporation is authorized to issue shall be increased from 100,000,000 shares of common stock, par value $.001 per share, to 250,000,000 shares of common stock, par value $.001 per share. 3. The vote by which the stockholders holding shares in the corporation entitling them to exercise at least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the provisions of the articles of incorporation have voted in favor of the amendment is: a majority. 4. Effective date of filing (optional): 12/19/03 5. Officer Signature (required): /s/ Paul Zyla If any proposed amendment would alter or change any preference or any relative or other right given to any class or series of outstanding shares, then the amendment must be approved by the vote, in addition to the affirmative vote otherwise required, of the holders of shares representing a majority of he voting power of each class or series affected by the amendment regardless of limitations or restrictions on the voting power thereof. IMPORTANT: Failure to include any of the above information and submit the proper fees may cause this filing to be rejected. EX-3.(II) 8 ex_3-6.txt BY-LAWS EXHIBIT 3.X BY LAWS OF SILVERWING SYSTEMS CORPORATION A NEVADA CORPORATION ARTICLE I STOCKHOLDER'S MEETINGS A) ANNUAL MEETINGS shall be held on or before the anniversary of the corporation each year, or at such other time as may be determined by the board of directors or the president, for the purposes of electing directors, and transacting such other business as may properly come before the meeting. B) SPECIAL MEETINGS may be called at any time by the Board of Directors or by the President, and shall be called by the President or the Secretary at the written request of the holders of a majority of the shares then outstanding and entitled to vote. C) WRITTEN NOTICE stating the time and place of the meeting, signed by the President or the Secretary, shall be served either personally or by mail, not less than ten (10) nor more than sixty (60) days before the meeting upon each Stockholder entitled to vote. Said notice shall state the purpose for which the meeting is called, no other business may be transacted at said meeting, unless by unanimous consent of all Stockholders present, either in person or by proxy. D) PLACE of all meetings shall be at the principal office of the Corporation, or at such other place as the Board of Directors or the President may designate. E) A QUORUM necessary for the transaction of business at a Stockholder's meeting shall be a majority of the stock issued and outstanding, either in person or by proxy. If a quorum is not present, the Stockholders present may adjourn to a future time, and notice of the future time must be served as provided in Article I, C), if a quorum is present they may adjourn from day to day, without notice. F) VOTING: Each stockholder shall have one vote for each share of stock registered in his name on the books of the Corporation, a majority vote shall authorize any Corporate action, except the election of the Directors, who shall be elected by a plurality of the votes cast. G) PROXY: At any meeting of the stockholders any stockholder may be represented and vote by a proxy, appointed in writing and signed. No proxy shall be valid after the expiration of six (6) months from date of its execution, unless the person executing it specifies the length of time it is to continue in force, which in no case shall exceed seven (7) years from its execution. H) CONSENT: Any action, except election of Directors, which may be taken by a vote of stockholders at a meeting, may be taken without a meeting if authorized by a written consent of shareholders holding at least a majority of the voting power. 1 ARTICLE II BOARD OF DIRECTORS A) OFFICE: At least one person chosen annually by the stockholders shall constitute the Board of Directors. Additional Directors may be appointed by the Board of Directors. The Director's term shall be for one year, and Directors may be re-elected for successive annual terms. B) DUTIES: The Board of Directors shall be responsible for the control and management of the affairs, property and interests of the Corporation and may exercise all powers of the Corporation, except as are in the Articles of Incorporation or by statute expressly conferred upon or reserved to the stockholders. C) MEETINGS: Regular meetings of the Board of Directors shall be held immediately following the annual meeting of the stockholders, at the place of the annual meeting of the stockholders, or at such other time and place as the Board of Directors shall by resolution establish. Notice of any regular meeting shall not be required, unless the Board of Directors shall change the time or place of the regular meeting, notice must be given to each Director who was not present at the meeting at which change was made. Special meetings may be called by the President or by one of the Directors at such time and place specified in the notice or waiver of notice thereof. The notice of special meeting shall be mailed to each Director at least five (5) days before the meeting day, or if the notice is delivered personally, by telegram or telephone then the notice must be delivered the day before the meeting. Special meetings may be called without notice, provided a written waiver of notice is executed by a majority of the Board of Directors. D) CHAIRMAN: At all meetings of the Board of Directors, the Chairman shall preside. If there is no Chairman one shall be chose by the Directors. E) QUORUM: A majority of the Board of Directors shall constitute a quorum. F) VACANCIES: Any vacancy in the Board of Directors, unless the vacancy was caused by stockholder removal of a Director, shall be filled for the unexpired term by a majority vote of the remaining Directors, though less than a quorum at any regular or special meeting of the Board of Directors called for that purpose. G) A RESOLUTION in writing signed by a majority of the Board of Directors, shall constitute action by the Board, with the same force and effect as though such resolution had been passed at a duly convened meeting. The Secretary shall record each resolution in the minute book. H) COMMITTEES may be appointed by a majority of the Board of Directors from its number, by resolution, with such powers and authority to manage the business as granted by the resolution. I) SALARIES of the Corporate Officers shall be determined by the Board of Directors. 2 ARTICLE III OFFICERS A) TITLE: This Corporation shall have a present, secretary, treasurer, and such other officers as may be necessary. Any two or more offices may be held by the same person. The officers shall be appointed by the Board of Directors at the regular annual meeting of the Board. B) DUTIES: THE PRESIDENT SHALL: 1) Be the chief executive officer of the Corporation. 2) President at all meetings of the Directors and the Stockholders. 3) Sign or countersign all certificates, contracts and other instruments of the Corporation as authorized by the Board of Directors and shall perform all such other incidental duties. THE SECRETARY SHALL: 1) have charge of the corporate books, responsible to make the necessary reports to the Stockholders and the Board of Directors. 2) prepare and disseminate notices, waivers, consents, proxies and other material necessary for all meetings. 3) file the sixty (60) day list of officers, directors, name of the resident agent and the filings fee to the Secretary of State. 4) file the designation of resident agent in the office of the County Clerk in which the principal office of the Corporation in Nevada is located. 5) file the annual list of officers, directors and designation of resident agent along with the filing fee. 6) be the custodian of the certified articles of incorporation, bylaws and amendments thereto. 7) supply to the Resident Agent or Principal Corporate Nevada Office the name of the custodian of the stock ledger or duplicate stock ledger, along with the complete Post Office address of the custodian, where such stock ledger or duplicate stock ledger is kept. THE TREASURER SHALL: 1) Have the custody of all monies and securities of the Corporation and shall keep regular books of account. 2) Perform all duties incidental to his office as directed of him by the Board of Directors and the President. 3 ARTICLE IV STOCK A) The certificates representing shares of the Corporation's stock shall be in such form as shall be adopted by the Board of Directors, numbered and registered in the order issued. The certificates shall bear the following; the holders name, the number of shares of stock, the signature either of the Chairman of the Board of Directors or the President, and either the Secretary or Treasurer. B) No certificate shall be issued until the full amount of the consideration has been paid, except as otherwise provided by law. C) Each share of stock shall entitle the holder to one vote. ARTICLE V DIVIDENDS DIVIDENDS may be declared and paid out of any funds available therefore, as often, in such amounts as the Board of Directors may determine, except as limited by law. ARTICLE VII FISCAL YEAR THE FISCAL YEAR of the Corporation shall be determined by the Board of Directors. ARTICLE VIII INDEMNIFICATION PURSUANT TO NRS 78.751 any person who is a Director, Officer, Employee, or Agent of this Corporation, who becomes a party to an action is entitled to indemnification against expenses including attorney fees, judgments, fines and amounts paid in settlement, if he acted in good faith and he reasoned his conduct or action to be in the best interest of the Corporation. ARTICLE VIII AMENDMENTS A) STOCKHOLDERS shall have the authority to amend or repeal all the bylaws of the Corporation and enact new bylaws, by affirmative vote of the majority of the outstanding shares of stock entitled to vote. B) THE BOARD OF DIRECTORS shall have the authority to amend, repeal, or adopt new bylaws of the Corporation, but shall not alter or repeal any bylaws adopted by the stockholders of the Corporation. 4 EX-4 9 ex_4-1.txt FORM OF COMMON STOCK PURCHASE WARRANT EXHIBIT 4.1 NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. Warrant No. ___ COMMON STOCK PURCHASE WARRANT To Purchase Shares of Common Stock of XTRA-GOLD RESOURCES CORP. THIS COMMON STOCK PURCHASE WARRANT CERTIFIES that, for value received, _______________________ (the "HOLDER"), of _________________________, is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after (the "INITIAL EXERCISE DATE") and on or prior to the close of business on (the "TERMINATION DATE") but not thereafter, to subscribe for and purchase from XTRA-GOLD RESOURCES CORP., a corporation incorporated in the State of Nevada (the "Company"), up to the number of full shares indicated above (the "WARRANT SHARES") of common stock of the Company (the "COMMON STOCK"). The purchase price of each share of Common Stock (the "EXERCISE PRICE") under this Warrant shall be US$1.50, subject to adjustment hereunder. The Exercise Price and the number of Warrant Shares for which the Warrant is exercisable shall be subject to adjustment as provided herein. CAPITALIZED TERMS USED AND NOT OTHERWISE DEFINED HEREIN SHALL HAVE THE MEANINGS SET FORTH IN THAT CERTAIN SUBSCRIPTION AGREEMENT BETWEEN THE COMPANY AND THE HOLDER. 1. TITLE TO WARRANT. Prior to the Termination Date and subject to compliance with applicable laws and Section 7 of this Warrant, this Warrant and all rights hereunder are transferable, in whole or in part, at the office or agency of the Company by the Holder in person or by duly authorized attorney, upon surrender of this Warrant together with the Assignment Form annexed hereto properly endorsed. The transferee shall sign an investment letter in form and substance reasonably satisfactory to the Company. 2. AUTHORIZATION OF SHARES. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and non-assessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue). 3. EXERCISE OF WARRANT. (a) Exercise of the purchase rights represented by this Warrant may be made at any time or times on or after the Initial Exercise Date and on or before the Termination Date by the surrender of this Warrant and the Notice of Exercise Form annexed hereto duly executed, at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company) and upon payment of the Exercise Price of the shares thereby purchased by wire transfer or cashier's check drawn on a United States bank, the Holder shall be entitled to receive a certificate for the number of Warrant Shares so purchased. Certificates for shares purchased hereunder shall be delivered to the Holder within three (3) Trading Days after the date on which this Warrant shall have been exercised as aforesaid. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 5 prior to the issuance of such shares, have been paid. (b) If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant. 4. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price. 5. CHARGES, TAXES AND EXPENSES. Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. 6. CLOSING OF BOOKS. The Company will not close its stockholder books or records in any manner that prevents the timely exercise of this Warrant, pursuant to the terms hereof. - 2 - 7. TRANSFER, DIVISION AND COMBINATION. (a) Subject to compliance with any applicable securities laws and the conditions set forth in Sections 1 and 7(e) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued. (b) This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 7(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. (c) The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Warrant or Warrants under this Section 7. (d) The Company agrees to maintain, at its aforesaid office, books for the registration and the registration of transfer of the Warrants. (e) If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such transfer (i) that the Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such transfer may be made without registration under the Securities Act and under applicable state securities or blue sky laws, (ii) that the holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company and (iii) that the transferee be an "accredited investor" as defined in Rule 501(a) promulgated under the Securities Act or such other securities laws as may be applicable in the event that the Holder is not a "U.S. Person" as defined in the Securities Act. - 3 - 8. NO RIGHTS AS SHAREHOLDER UNTIL EXERCISE. This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate Exercise Price (or by means of a cashless exercise), the Warrant Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the later of the date of such surrender or payment. 9. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate. 10. SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday. 11. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. (a) STOCK SPLITS, ETC. The number and kind of securities purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the following. In case the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to holders of its outstanding Common Stock; (ii) subdivide its outstanding shares of Common Stock into a greater number of shares; (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock; or (iv) issue any shares of its capital stock in a reclassification of the Common Stock, then the number of Warrant Shares purchasable upon exercise of this Warrant shall be increased or decreased in the same proportion as the number of shares outstanding immediately prior to the event described in subparagraphs (i), (ii), (iii) or (iv) bears to the number of shares outstanding immediately following such event. Upon each such adjustment of the kind and number of Warrant Shares or other securities of the Company which are purchasable hereunder, the Holder shall thereafter be entitled to purchase the number of Warrant Shares or other securities resulting from such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to such adjustment and dividing by the number of Warrant Shares or other securities of the Company resulting from such adjustment. An adjustment made pursuant to this paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. - 4 - 12. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR DISPOSITION OF ASSETS. In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is a change in or distribution with respect to the Common Stock of the Company), or sell, transfer or otherwise dispose of all or substantially all its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation ("OTHER PROPERTY"), are to be received by or distributed to the holders of Common Stock of the Company, then the Holder shall have the right thereafter to receive, upon exercise of this Warrant, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined in good faith by resolution of the Board of Directors of the Company) in order to provide for adjustments of Warrant Shares for which this Warrant is exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 12. For purposes of this Section 12, "common stock of the successor or acquiring corporation" shall include stock of such corporation of any class which is not preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 12 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets. 13. VOLUNTARY ADJUSTMENT BY THE COMPANY. The Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company. 14. NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares or number or kind of securities or other property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Company shall give notice thereof to the Holder, which notice shall state the number of Warrant Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Warrant Shares (and other securities or property) after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. - 5 - 15. NOTICE OF CORPORATE ACTION. If at any time: (a) the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right; or (b) there shall be any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger of the Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of the Company to, another corporation; or (c) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; then, in any one or more of such cases, the Company shall give to Holder (i) at least 10 days' prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, liquidation or winding up; and (ii) in the case of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least 10 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof; and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their Warrant Shares for securities or other property deliverable upon such disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 18(c). 16. AUTHORIZED SHARES. (a) The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as - 6 - may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Principal Market upon which the Common Stock may be listed. (b) Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value; (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant; and (c) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant. (c) Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof. 17. REGISTRATION. The Holder acknowledges that (i) neither this Warrant not the Warrant Shares acquired upon the exercise of this Warrant have been registered under the Securities Act and may not be sold, assigned, pledged, transferred or otherwise disposed of absent registration under the Securities Act or an applicable exemption from the registration requirements of the Securities Act; (ii) except to the limited extent set forth in Section 9 of the Subscription Agreement, the Company has not undertaken to register this Warrant or the Warrant Shares; and (iii) a legend will be placed on all certificates evidencing the Warrant Shares referring to the restrictions described in this paragraph. 18. MISCELLANEOUS. (a) JURISDICTION. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Nevada without giving effect to any choice or conflict of law provision or rule (whether of the State of Nevada or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Nevada. - 7 - (b) NON-WAIVER AND EXPENSES. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder's rights, powers or remedies, notwithstanding all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys' fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder. (c) NOTICES. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement; provided upon any permitted assignment of this Warrant, the assignee shall promptly provide the Company with its contact information. (d) LIMITATION OF LIABILITY. No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant or purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. (e) REMEDIES. Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. (f) SUCCESSORS AND ASSIGNS. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares. (g) AMENDMENT. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder. (h) SEVERABILITY. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or - 8 - invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant. (i) HEADINGS. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant. IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized. DATED this ________________ day of ______________ , 2006. XTRA-GOLD RESOURCES CORP. By: ______________________________________ Kiomi Mori Secretary and Treasurer - 9 - NOTICE OF EXERCISE TO: XTRA-GOLD RESOURCES CORP. (1) The undersigned hereby elects to purchase Warrant Shares of Xtra-Gold Resources Corp. pursuant to the terms of the attached Warrant (ONLY IF EXERCISED IN FULL), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any. (2) Payment of the exercise price in lawful money of the United States accompanies this Notice of Exercise. (3) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below: The Warrant Shares shall be delivered to the following: (4) ACCREDITED INVESTOR. The undersigned is an "accredited investor" as defined in Regulation D promulgated under the Securities Act of 1933, as amended, or in the event that the Holder is not a "U.S. Person" as defined in the Securities Act, then in accordance with such other securities laws as may be applicable. ____________________________________________________ Signature of Purchaser or Authorized Signing Officer of Purchaser (where the Purchaser is a corporation) ____________________________________________________ (Print Name of Purchaser) WHERE THE PURCHASER IS A CORPORATION: By: ________________________________________________ (Print Name of Authorized Signing Officer) ________________________________________________ (Print Title of Authorized Signing Officer) ________________________________________________ (Date of Execution) - 10 - ASSIGNMENT FORM (To assign the foregoing Warrant, execute this form and supply required information. DO NOT USE THIS FORM TO EXERCISE THE WARRANT.) FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to: ____________________________________________________________ whose address is _______________________________________________________________________________ ______________________________________________________________________________. DATED: _________________________________, __________________. __________________________________________________ (Holder's Signature) __________________________________________________ (Holder's Address) SIGNATURE GUARANTEED: ___________________________________________ NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant. EX-4 10 ex_4-2.txt FORM OF CONVERTIBLE DEBENTURE EXHIBIT 4.2 THIS SECURED DEBENTURE, AND THE SECURITIES INTO WHICH IT IS CONVERTIBLE (COLLECTIVELY, THE "SECURITIES"), HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THE SECURITIES ARE BEING OFFERED PURSUANT TO ONE OR MORE EXEMPTIONS FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SECURITIES ARE "RESTRICTED" AND MAY NOT BE OFFERED OR SOLD UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT OR PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND THE COMPANY RECEIVES AN OPINION OF COUNSEL OR OTHER SUCH INFORMATION AS IT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH EXEMPTIONS ARE AVAILABLE. FURTHER, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE MADE EXCEPT IN COMPLIANCE WITH THE ACT. XTRA-GOLD RESOURCES CORP. 7% CONVERTIBLE DEBENTURE DUE: JUNE 30, 2010 No. _____________________ US$ _______________ This Convertible Debenture (the "DEBENTURE") is issued on July 6, 2005 (the "CLOSING DATE") by XTRA-GOLD RESOURCES CORP., a Nevada corporation (the "COMPANY"), to (together with its permitted successors and assigns, the "HOLDER") pursuant to exemptions from registration under the Act. ARTICLE I SECTION 1.01 PRINCIPAL AND INTEREST. For value received, the Company hereby promises to pay to the order of the Holder, at its address set forth below or to such other address as is specified in accordance with Section 6.01 below, on June 30, 2010 ("MATURITY DATE"), in lawful money of the United States of America and in immediately available funds, the principal sum of UNITED STATES DOLLARS (U.S.$ ). Interest shall be paid on the outstanding principal amount of this Debenture at the rate of seven percent (7%) per annum, payable quarterly, in arrears, on the last day of September, December, March and June of each year, until paid in full. The entire principal amount and all accrued interest shall be paid to the Holder on the Maturity Date. - 2 - SECTION 1.02 OPTIONAL CONVERSION. The Holder is entitled, at its option, to convert, at any time and from time to time, until payment in full of this Debenture, all or any part of the outstanding principal amount of the Debenture, plus accrued interest, into shares (the "CONVERSION SHARES") of the Company's common stock, having a par value of $0.01 per share ("COMMON STOCK"), at the price per share equal to $1.00 (the "CONVERSION PRICE"). No fraction of shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. To convert this Debenture, the Holder hereof shall deliver a duly completed and executed conversion notice (the "CONVERSION NOTICE"), substantially in the form of Exhibit A annexed to this Debenture, to the Company at its address as set forth herein. The date upon which the conversion shall be effective (the "CONVERSION DATE") shall be deemed to be the date set forth in the Conversion Notice, which shall not be earlier than the business day following the date on which the Conversion Notice is received by the Company. The Conversion Shares shall be issued to the Holder within five (5) business days following the Conversion Date. SECTION 1.03 RESERVATION OF COMMON STOCK. The Company shall reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of this Debenture, such number of shares of Common Stock as shall from time to time be sufficient to effect such conversion, based upon the Conversion Price. If at any time the Company does not have a sufficient number of Conversion Shares authorized and available, then the Company shall call and hold a special meeting of its stockholders as soon as is reasonably practicable for the sole purpose of increasing the number of authorized shares of Common Stock. SECTION 1.04 AUTOMATIC CONVERSION. Provided there is a registration statement then in effect covering the Conversion Shares, or the Conversion Shares may otherwise be resold pursuant to Rule 144, the outstanding principal amount of this Debenture, and all accrued but unpaid interest, shall automatically be converted into shares of the Company's Common Stock, at the Conversion Price, in the event that the Common Stock trades for twenty (20) consecutive trading days (a) with a closing bid price of at least $1.50 per share and (b) a cumulative trading volume during such twenty (20) trading day period of at least 1,000,000 shares. SECTION 1.05 REGISTRATION RIGHTS. The Company shall include the Conversion Shares in the next registration statement filed by it under the Act, for the purpose of raising capital for the account of the Company or any of its security holders. The foregoing shall not apply to a registration statement on Form S-4, S-8 or any successor forms. The Company shall pay all of the costs and expenses of preparing and filing the registration statement contemplated by this Section; provided, however, that the undersigned shall pay all commissions attributable to the registration and sale of the Conversion Shares to be registered on behalf of the Holder, and the Holder shall be - 3 - responsible for the payment of all fees and expenses of any professional advisors engaged by the Holder in connection with the registration and resale of the Conversion Shares. The registration obligations contained in this Section shall apply only to the extent that the undersigned provides all information reasonably requested by the Company in order to comply with its obligations under the Act and other applicable laws, rules and regulations, including to enable the Company to provide customary disclosure for purposes of a resale registration statement under the Act. The registration obligations contained in this Section shall terminate as to any Conversion Shares at such time as such Conversion Shares may be resold under the provisions of Rule 144 under the Act. ARTICLE II SECTION 2.01 PREPAYMENTS. This Debenture may be prepaid, without penalty, on not less than seven (7) days prior written notice to the Holder. The Holder may convert this Debenture until 5:00 p.m., Eastern time, on the day prior to the date fixed for prepayment. ARTICLE III SECTION 3.01 EVENTS OF DEFAULT. An Event of Default is defined as follows: (a) failure by the Company to pay amounts due hereunder on the Maturity Date; (b) failure by the Company to make any quarterly interest payment hereunder within five (5) days of the prescribed due date; (c) failure by the Company to honor any conversion notice within five (5) business days; (d) the making by the Company of an assignment for the benefit of creditors; and (e) the filing by or against the Company of a petition under Federal or State bankruptcy laws, which, if not a voluntary proceeding, is not dismissed within ninety (90) days. SECTION 3.02 EFFECT OF EVENT OF DEFAULT. Upon the occurrence and continuation of an Event of Default, the Holder may, in its sole discretion, following written notice to the Company, declare all amounts due hereunder to be immediately due and payable. Notwithstanding the foregoing, upon the occurrence and during the pendency of a continuing Event of Default, the Holder shall have the right (but not the obligation) to convert this Debenture into Common Stock in the manner hereinabove provided. ARTICLE IV SECTION 4.01 RIGHTS AND TERMS OF CONVERSION. This Debenture may be converted, in whole or in part, at any time following the date hereof, into shares of Common Stock at a price equal to the Conversion Price as described in Section 1.02 above. - 4 - SECTION 4.02 RE-ISSUANCE OF DEBENTURE. When the Holder elects to convert a portion of the Debenture, then the Company shall reissue a new Debenture in the same form as this Debenture to reflect the new principal amount. ARTICLE V SECTION 5.01 ADJUSTMENT OF CONVERSION PRICE AND NUMBER OF CONVERSION SHARES UPON SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company at any time after the date of issuance of this Debenture subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, any Conversion Price in effect immediately prior to such subdivision will be proportionately reduced, and the number of Conversion Shares will be proportionately increased. If the Company at any time after the date of issuance of this Debenture combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, any Conversion Price in effect immediately prior to such combination will be proportionately increased and the number of Conversion Shares will be proportionately reduced. Any adjustment under this Section 5.01(a) shall become effective at the close of business on the date the subdivision or combination becomes effective. SECTION 5.02 MERGER EVENTS. In the event of any merger, consolidation share exchange or similar business combination in which the Company is not the surviving corporation (a "MERGER EVENT") (a) the Company shall make appropriate provision or cause appropriate provision to be made so that the Holder shall have the right thereafter to convert this Debenture into the kind of shares of stock and other securities and property receivable in connection with such Merger Event by persons who were holders of Common Stock immediately prior to consummation of such Merger Event and on a basis which preserves the economic benefits of the conversion rights of the Holder on a basis as nearly as practical as such rights existed prior to consummation of such Merger Event or, if the Company is unable to make provision as aforesaid; (b) the outstanding principal amount of this Debenture and accrued but unpaid interest shall be paid to the Holder on or prior to the effective date of the Merger Event. SECTION 5.03 NOTICES. Immediately upon any adjustment required by this Article, the Company will give written notice thereof to the holder of this Debenture, setting forth in reasonable detail, and certifying, the calculation of such adjustments. ARTICLE VI SECTION 6.01 NOTICE. Notices regarding this Debenture shall be sent to the Company and the Holder, via personal delivery, overnight courier or facsimile transmission, at the following addresses, unless a party notifies the other parties, in like manner, of a change of address or other contact co-ordinate as noted hereunder: - 5 - If to the Company, to: Xtra-Gold Resources Corp. Suite 207 251 Davenport Road Toronto, Ontario, Canada - M5R 1J9 Attention: Daniel Earle, Chief Operating Officer Telephone: (416) 925-9890 Facsimile: (416) 981-3055 With a copy to: Steven I. Weinberger, Esq. Schneider, Weinberger & Beilly LLP 2200 Corporate Blvd., NW, Suite 210 Boca Raton, Florida, U.S.A. 33431-7307 Telephone: (561) 362-9595 Facsimile: (561) 362-9612 If to the Holder, to: ____________________________________________ ____________________________________________ ____________________________________________ Attention: ________________________________ SECTION 6.02 GOVERNING LAW. This Debenture shall be deemed to be made under and shall be construed in accordance with the laws of the State of Florida without giving effect to the principals of conflict of laws thereof. SECTION 6.03 SEVERABILITY. The invalidity of any of the provisions of this Debenture shall not invalidate or otherwise affect any of the other provisions of this Debenture, which shall remain in full force and effect. - 6 - SECTION 6.04 COMMITMENT FEE. Upon delivery of this Debenture and payment of the purchase price by the Holder, the Company shall pay the Holder a commitment fee equal to five percent (5%) of the principal amount hereof. SECTION 6.05 ENTIRE AGREEMENT AND AMENDMENTS. This Debenture represents the entire agreement between the parties hereto with respect to the subject matter hereof and there are no representations, warranties or commitments, except as set forth herein and in the Subscription Agreement being delivered in connection herewith. This Debenture may be amended only by an instrument in writing executed by the Holder and the Company. SECTION 6.06 COUNTERPARTS. This Debenture may be executed in multiple counterparts, each of which shall be an original, but all of which shall be deemed to constitute on instrument. IN WITNESS WHEREOF, with the intent to be legally bound hereby, the Company has executed this Debenture as of the date first written above. XTRA GOLD RESOURCES CORP. By: ___________________________________________ Daniel Earle Chief Operating Officer - 7 - EXHIBIT A NOTICE OF CONVERSION (TO BE EXECUTED BY THE HOLDER IN ORDER TO CONVERT THE DEBENTURE) TO: _____________________________________________ The undersigned hereby irrevocably elects to convert $_____________________________________________ of the principal amount of the above Debenture into Shares of Common Stock of Xtra-Gold Resources Corp., according to the conditions stated therein, as of the Conversion Date written below. CONVERSION DATE: _____________________________________________ APPLICABLE CONVERSION PRICE: _____________________________________________ SIGNATURE: _____________________________________________ NAME: _____________________________________________ ADDRESS: _____________________________________________ AMOUNT TO BE CONVERTED: _____________________________________________ AMOUNT OF DEBENTURE UNCONVERTED: $____________________________________________ CONVERSION PRICE PER SHARE: $____________________________________________ NUMBER OF SHARES OF COMMON STOCK TO BE ISSUED: _____________________________________________ PLEASE ISSUE THE SHARES OF COMMON STOCK IN THE FOLLOWING NAME AND TO THE FOLLOWING ADDRESS: _____________________________________________ ISSUE TO: _____________________________________________ AUTHORIZED SIGNATURE: _____________________________________________ NAME: _____________________________________________ TITLE: _____________________________________________ ADDRESS: _____________________________________________ TELEPHONE NUMBER: _____________________________________________ EX-10 11 ex_10-1.txt 2005 EQUITY COMPENSATION PLAN EXHIBIT 10.1 XTRA-GOLD RESOURCES CORP. 2005 EQUITY COMPENSATION PLAN 1. PURPOSE; DEFINITIONS. 1.1 Purpose. The purpose of the Xtra-Gold Resources Corp. 2005 Equity Compensation Plan is to enable the Company to offer to its employees, officers, directors and consultants whose past, present and/or potential contributions to the Company and its Subsidiaries have been, are or will be important to the success of the Company, an opportunity to acquire a proprietary interest in the Company. The various types of long-term incentive awards that may be provided under the Plan will enable the Company to respond to changes in compensation practices, tax laws, accounting regulations and the size and diversity of its businesses. 1.2 Definitions. For purposes of the Plan, the following terms shall be defined as set forth below: (a) "Agreement" means the agreement between the Company and the Holder setting forth the terms and conditions of an award under the Plan. (b) "Board" means the Board of Directors of the Company. (c) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (d) "Committee" means the Stock Option Committee of the Board or any other committee of the Board that the Board may designate to administer the Plan or any portion thereof. If no Committee is so designated, then all references in this Plan to "Committee" shall mean the Board. (e) "Common Stock" means the Common Stock of the Company, $.001 par value per share. (f) "Company" means Xtra-Gold Resources Corp., a corporation organized under the laws of the State of Nevada. (g) "Deferred Stock" means Common Stock to be received, under an award made pursuant to Section 8, below, at the end of a specified deferral period. (h) "Disability" means physical or mental impairment as determined under procedures established by the Committee for purposes of the Plan. (i) "Effective Date" means the date set forth in Section 12.1, below. (j) "Fair Market Value", unless otherwise required by any applicable provision of the Code or any regulations issued thereunder, means, as of any given date: (i) if the Common Stock is listed on a national securities exchange or quoted on the Nasdaq National Market or Nasdaq SmallCap Market, the last sale price of the Common Stock in the principal trading market for the Common Stock on such date, as reported by the exchange or Nasdaq, as the case may be; (ii) if the Common Stock is not listed on a national securities exchange or quoted on the Nasdaq National Market or Nasdaq SmallCap Market, but is traded in the over-the-counter market, the closing bid price for the Common Stock on such date, as reported by the OTC Bulletin Board or the National Quotation Bureau, Incorporated or similar publisher of such quotations; and (iii) if the fair market value of the Common Stock cannot be determined pursuant to clause (i) or (ii) above, such price as the Committee shall determine, in good faith. 1 (k) "Holder" means a person who has received an award under the Plan. (l) "Incentive Stock Option" means any Stock Option intended to be and designated as an "incentive stock option" within the meaning of Section 422 of the Code. (m) "Nonqualified Stock Option" means any Stock Option that is not an Incentive Stock Option. (n) "Normal Retirement" means retirement from active employment with the Company or any Subsidiary on or after age 65. (o) "Other Stock-Based Award" means an award under Section 9, below, that is valued in whole or in part by reference to, or is otherwise based upon, Common Stock. (p) "Parent" means any present or future "parent corporation" of the Company, as such term is defined in Section 424(e) of the Code. (q) "Plan" means the Xtra-Gold Resources Corp. 2005 Equity Compensation Plan, as hereinafter amended from time to time. (r) "Repurchase Value" shall mean the Fair Market Value in the event the award to be repurchased under Section 10.2 is comprised of shares of Common Stock and the difference between Fair Market Value and the Exercise Price (if lower than Fair Market Value) in the event the award is a Stock Option or Stock Appreciation Right; in each case, multiplied by the number of shares subject to the award. (s) "Restricted Stock" means Common Stock, received under an award made pursuant to Section 7, below, that is subject to restrictions under said Section 7. (t) "SAR Value" means the excess of the Fair Market Value (on the exercise date) over the exercise price that the participant would have otherwise had to pay to exercise the related Stock Option, multiplied by the number of shares for which the Stock Appreciation Right is exercised. (u) "Stock Appreciation Right" means the right to receive from the Company, on surrender of all or part of the related Stock Option, without a cash payment to the Company, a number of shares of Common Stock equal to the SAR Value divided by the Fair Market Value (on the exercise date). (v) "Stock Option" or "Option" means any option to purchase shares of Common Stock which is granted pursuant to the Plan. (w) "Stock Reload Option" means any option granted under Section 5.3 of the Plan. (x) "Subsidiary" means any present or future "subsidiary corporation" of the Company, as such term is defined in Section 424(f) of the Code. 2. ADMINISTRATION. 2.1 Committee Membership. The Plan shall be administered by the Board or a Committee. Committee members shall serve for such term as the Board may in each case determine, and shall be subject to removal at any time by the Board. The Committee members, to the extent deemed to be appropriate by the Board, shall be "non-employee directors" as defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act"), and "outside directors" within the meaning of Section 162(m) of the Code. 2 2.2 Powers of Committee. The Committee shall have full authority to award, pursuant to the terms of the Plan: (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, (iv) Deferred Stock, (v) Stock Reload Options and/or (vi) Other Stock-Based Awards. For purposes of illustration and not of limitation, the Committee shall have the authority (subject to the express provisions of this Plan): (a) to select the officers, employees, directors and consultants of the Company or any Subsidiary to whom Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock, Reload Stock Options and/or Other Stock-Based Awards may from time to time be awarded hereunder. (b) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder [including, but not limited to, number of shares, share exercise price or types of consideration paid upon exercise of such options and the purchase price of Common Stock awarded under the Plan (including without limitation by a Holder's conversion of deferred salary or other indebtedness of the Company to the Holder), such as other securities of the Company or other property, any restrictions or limitations, and any vesting, exchange, surrender, cancellation, acceleration, termination, exercise or forfeiture provisions, as the Committee shall determine]; (c) to determine any specified performance goals or such other factors or criteria which need to be attained for the vesting of an award granted hereunder; (d) to determine the terms and conditions under which awards granted hereunder are to operate on a tandem basis and/or in conjunction with or apart from other equity awarded under this Plan and cash awards made by the Company or any Subsidiary outside of this Plan; (e) to permit a Holder to elect to defer a payment under the Plan under such rules and procedures as the Committee may establish, including the crediting of interest on deferred amounts denominated in cash and of dividend equivalents on deferred amounts denominated in Common Stock; (f) to determine the extent and circumstances under which Common Stock and other amounts payable with respect to an award hereunder shall be deferred that may be either automatic or at the election of the Holder; and (g) to substitute (i) new Stock Options for previously granted Stock Options, which previously granted Stock Options have higher option exercise prices and/or contain other less favorable terms, and (ii) new awards of any other type for previously granted awards of the same type, which previously granted awards are upon less favorable terms. 2.3 Interpretation of Plan. (a) Committee Authority. Subject to Section 11, below, the Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable, to interpret the terms and provisions of the Plan and any award issued under the Plan (and to determine the form and substance of all Agreements relating thereto), and to otherwise supervise the administration of the Plan. Subject to Section 11, below, all decisions made by the Committee pursuant to the provisions of the Plan shall be made in the Committee's sole discretion and shall be final and binding upon all persons, including the Company, its Subsidiaries and Holders. (b) Incentive Stock Options. Anything in the Plan to the contrary notwithstanding, no term or provision of the Plan relating to Incentive Stock Options (including but limited to Stock Reload Options or Stock 3 Appreciation rights granted in conjunction with an Incentive Stock Option) or any Agreement providing for Incentive Stock Options shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be so exercised, so as to disqualify the Plan under Section 422 of the Code, or, without the consent of the Holder(s) affected, to disqualify any Incentive Stock Option under such Section 422. 3. STOCK SUBJECT TO PLAN. 3.1 Number of Shares. The total number of shares of Common Stock reserved and available for issuance under the Plan shall be 3,000,000 shares. Shares of Common Stock under the Plan may consist, in whole or in part, of authorized and unissued shares or treasury shares. If any shares of Common Stock that have been granted pursuant to a Stock Option cease to be subject to a Stock Option, or if any shares of Common Stock that are subject to any Stock Appreciation Right, Restricted Stock, Deferred Stock award, Reload Stock Option or Other Stock-Based Award granted hereunder are forfeited or any such award otherwise terminates without a payment being made to the Holder in the form of Common Stock, such shares shall again be available for distribution in connection with future grants and awards under the Plan. 3.2 Adjustment Upon Changes in Capitalization, Etc. In the event of any dividend (other than a cash dividend) payable on shares of Common Stock, stock split, reverse stock split, combination or exchange of shares, or other similar event (not addressed in Section 3.3, below) occurring after the grant of an Award, which results in a change in the shares of Common Stock of the Company as a whole, the number of shares issuable in connection with any such Award and the purchase price thereof, if any, shall be proportionately adjusted to reflect the occurrence of any such event. Any adjustment required by this Section 3.2 shall be made by the Committee, in good faith, whose determination will be final, binding and conclusive. Certain Mergers and Similar Transactions. In the event of (a) a dissolution or liquidation of the Company, (b) a merger or consolidation in which the Company is not the surviving corporation (other than a merger or consolidation with a wholly-owned subsidiary, a reincorporation of the Company in a different jurisdiction, or other transaction in which there is no substantial change in the stockholders of the Company or their relative stock holdings and the Awards granted under this Plan are assumed, converted or replaced by the successor corporation, which assumption will be binding on all Awardees), (c) a merger in which the Company is the surviving corporation but after which the stockholders of the Company immediately prior to such merger (other than any stockholder that merges, or which owns or controls another corporation that merges, with the Company in such merger) cease to own their shares or other equity interest in the Company, (d) the sale of substantially all of the assets of the Company, or (e) the acquisition, sale, or transfer of more than 50% of the outstanding shares of the Company by tender offer or similar transaction, any or all outstanding Awards may be assumed, converted or replaced by the successor corporation (if any), which assumption, conversion or replacement will be binding on all Awardees. In the alternative, the successor corporation may substitute equivalent Awards or provide substantially similar consideration to Awardees as was provided to stockholders (after taking into account the existing provisions of the Awards). The successor corporation may also issue, in place of outstanding Shares of the Company held by the Holder, substantially similar shares or other property subject to repurchase restrictions no less favorable to the Holder. In the event such successor corporation (if any) refuses or otherwise declines to assume or substitute Awards, as provided above, (i) the vesting of any or all Awards granted pursuant to this Plan will accelerate immediately prior to the effective date of a transaction described in this Section 3.3 and (ii) any or all Options granted pursuant to this Plan will become exercisable in full prior to the consummation of such event at such time and on such conditions as the Committee determines. If such Options are not exercised prior to the consummation of the corporate 4 transaction, they shall terminate at such time as determined by the Committee. Subject to any greater rights granted to Awardees under the foregoing provisions of this Section 3.3, in the event of the occurrence of any transaction described in this Section 3.3, any outstanding Awards will be treated as provided in the applicable agreement or plan of merger, consolidation, dissolution, liquidation, or sale of assets. 4. ELIGIBILITY. Awards may be made or granted to employees, officers, directors and consultants who are deemed to have rendered or to be able to render significant services to the Company or its Subsidiaries and who are deemed to have contributed or to have the potential to contribute to the success of the Company. No Incentive Stock Option shall be granted to any person who is not an employee of the Company or a Subsidiary at the time of grant. Notwithstanding anything to the contrary contained in the Plan, awards covered or to be covered under a registration statement on Form S-8 may be made under the Plan only if (a) they are made to natural persons, (b) who provide bona fide services to the Company or its Subsidiaries, and (c) the services are not in connection with the offer and sale of securities in a capital-raising transaction, and do not directly or indirectly promote or maintain a market for the Company's securities. 5. STOCK OPTIONS. 5.1 Grant and Exercise. Stock Options granted under the Plan may be of two types: (i) Incentive Stock Options; and(ii) Nonqualified Stock Options. Any Stock Option granted under the Plan shall contain such terms, not inconsistent with this Plan, or with respect to Incentive Stock Options, not inconsistent with the Plan and the Code, as the Committee may from time to time approve. The Committee shall have the authority to grant Incentive Stock Options or Nonqualified Stock Options or both types of Stock Options which may be granted alone or in addition to other awards granted under the Plan. To the extent that any Stock Option intended to qualify as an Incentive Stock Option does not so qualify, it shall constitute a separate Nonqualified Stock Option. 5.2 Terms and Conditions. Stock Options granted under the Plan shall be subject to the following terms and conditions: (a) Option Term. The term of each Stock Option shall be fixed by the Committee; provided, however, that an Incentive Stock Option may be granted only within the ten-year period commencing from the Effective Date and may only be exercised within ten years of the date of grant (or five years in the case of an Incentive Stock Option granted to an optionee who, at the time of grant, owns Common Stock possessing more than 10% of the total combined voting power of all classes of stock of the Company ("10% Stockholder"). (b) Exercise Price. The exercise price per share of Common Stock purchasable under a Stock Option shall be determined by the Committee at the time of grant and (i) in the case of Incentive Stock Options, may not be less than 100% of the Fair Market Value on the day of grant; provided, however, that the exercise price of an Incentive Stock Option granted to a 10% Stockholder shall not be less than 110% of the Fair Market Value on the date of grant; and (ii) in the case of Nonqualified Stock Options, the exercise price may be below Fair Market Value on the day of grant. (c) Exercisability. Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee and as set forth in Section 10, below. If the Committee provides, in its discretion, that any Stock Option is exercisable only in installments, i.e., that it vests over time, the Committee may waive such installment exercise provisions at any time at or after the time of grant in whole or in part, based upon such factors as the Committee shall determine. 5 (d) Method of Exercise. Subject to whatever installment, exercise and waiting period provisions are applicable in a particular case, Stock Options may be exercised in whole or in part at any time during the term of the Option, by giving written notice of exercise to the Company specifying the number of shares of Common Stock to be purchased. Such notice shall be accompanied by payment in full of the purchase price, which shall be in cash or, if provided in the Agreement, either in shares of Common Stock (including Restricted Stock and other contingent awards under this Plan) or partly in cash and partly in such Common Stock, or such other means which the Committee determines are consistent with the Plan's purpose and applicable law. Cash payments shall be made by wire transfer, certified or bank check or personal check, in each case payable to the order of the Company; provided, however, that the Company shall not be required to deliver certificates for shares of Common Stock with respect to which an Option is exercised until the Company has confirmed the receipt of good and available funds in payment of the purchase price thereof. Payments in the form of Common Stock shall be valued at the Fair Market Value on the date prior to the date of exercise. Such payments shall be made by delivery of stock certificates in negotiable form that are effective to transfer good and valid title thereto to the Company, free of any liens or encumbrances. Subject to the terms of the Agreement, the Committee may, in its sole discretion, at the request of the Holder, deliver upon the exercise of a Nonqualified Stock Option a combination of shares of Deferred Stock and Common Stock; provided that, notwithstanding the provisions of Section 8 of the Plan, such Deferred Stock shall be fully vested and not subject to forfeiture. A Holder shall have none of the rights of a Stockholder with respect to the shares subject to the Option until such shares shall be transferred to the Holder upon the exercise of the Option. Subject to the provisions of applicable law, including restrictions on the extension of credit to officers and directors of the Company, the Committee shall be empowered to determine the types of consideration to be paid upon exercise of awards Plan (including without limitation by a Holder's conversion of deferred salary or other indebtedness of the Company to the Holder), such as services, property or other securities of the Company. (e) Transferability. Except as may be set forth in the Agreement, no Stock Option shall be transferable by the Holder other than by will or by the laws of descent and distribution, and all Stock Options shall be exercisable, during the Holder's lifetime, only by the Holder (or, to the extent of legal incapacity or incompetency, the Holder's guardian or legal representative). (f) Termination by Reason of Death. If a Holder's employment by the Company or a Subsidiary terminates by reason of death, any Stock Option held by such Holder, unless otherwise determined by the Committee at the time of grant and set forth in the Agreement, shall thereupon automatically terminate, except that the portion of such Stock Option that has vested on the date of death may thereafter be exercised by the legal representative of the estate or by the legatee of the Holder under the will of the Holder, for a period of one year (or such other greater or lesser period as the Committee may specify at grant) from the date of such death or until the expiration of the stated term of such Stock Option, whichever period is the shorter. (g) Termination by Reason of Disability. If a Holder's employment by the Company or any Subsidiary terminates by reason of Disability, any Stock Option held by such Holder, unless otherwise determined by the Committee at the time of grant and set forth in the Agreement, shall thereupon automatically terminate, except that the portion of such Stock Option that has vested on the date of termination may thereafter be exercised by the Holder for a period of one year (or such other greater or lesser period as the Committee may specify at the time of grant) from the date of such termination of employment or until the expiration of the stated term of such Stock Option, whichever period is the shorter. 6 (h) Other Termination. Subject to the provisions of Section 13.3, below, and unless otherwise determined by the Committee at the time of grant and set forth in the Agreement, if a Holder is an employee of the Company or a Subsidiary at the time of grant and if such Holder's employment by the Company or any Subsidiary terminates for any reason other than death or Disability, the Stock Option shall thereupon automatically terminate, except that if the Holder's employment is terminated by the Company or a Subsidiary without cause or due to Normal Retirement, then the portion of such Stock Option that has vested on the date of termination of employment may be exercised for the lesser of three months after termination of employment or the balance of such Stock Option's term. (i) Additional Incentive Stock Option Limitation. In the case of an Incentive Stock Option, the aggregate Fair Market Value (on the date of grant of the Option) with respect to which Incentive Stock Options become exercisable for the first time by a Holder during any calendar year (under all such plans of the Company and its Parent and Subsidiary) shall not exceed $100,000. (j) Buyout and Settlement Provisions. The Committee may at any time, in its sole discretion, offer to repurchase a Stock Option previously granted, based upon such terms and conditions as the Committee shall establish and communicate to the Holder at the time that such offer is made. 5.3 Stock Reload Option. If a Holder tenders shares of Common Stock to pay the exercise price of a Stock Option ("Underlying Option"), and/or arranges to have a portion of the shares otherwise issuable upon exercise withheld to pay the applicable withholding taxes, the Holder may receive, at the discretion of the Committee, a new Stock Reload Option to purchase that number of shares of Common Stock equal to the number of shares tendered to pay the exercise price and the withholding taxes ( but only if such shares were held by the Holder for at least six months). Stock Reload Options may be any type of option permitted under the Code and will be granted subject to such terms, conditions, restrictions and limitations as may be determined by the Committee, from time to time. Such Stock Reload Option shall have an exercise price equal to the Fair Market Value as of the date of exercise of the Underlying Option. Unless the Committee determines otherwise, a Stock Reload Option may be exercised commencing one year after it is granted and shall expire on the date of expiration of the Underlying Option to which the Reload Option is related. 6. STOCK APPRECIATION RIGHTS. 6.1 Grant and Exercise. The Committee may grant Stock Appreciation Rights to participants who have been, or are being granted, Stock Options under the Plan as a means of allowing such participants to exercise their Stock Options without the need to pay the exercise price in cash. In the case of a Nonqualified Stock Option, a Stock Appreciation Right may be granted either at or after the time of the grant of such Nonqualified Stock Option. In the case of an Incentive Stock Option, a Stock Appreciation Right may be granted only at the time of the grant of such Incentive Stock Option. 6.2 Terms and Conditions. Stock Appreciation Rights shall be subject to the following terms and conditions: (a) Exercisability. Stock Appreciation Rights shall be exercisable as shall be determined by the Committee and set forth in the Agreement, subject to the limitations, if any, imposed by the Code, with respect to related Incentive Stock Options. (b) Termination. A Stock Appreciation Right shall terminate and shall no longer be exercisable upon the termination or exercise of the related Stock Option. 7 (c) Method of Exercise. Stock Appreciation Rights shall be exercisable upon such terms and conditions as shall be determined by the Committee and set forth in the Agreement and by surrendering the applicable portion of the related Stock Option. Upon such exercise and surrender, the Holder shall be entitled to receive a number of shares of Common Stock equal to the SAR Value divided by the Fair Market Value on the date the Stock Appreciation Right is exercised. (d) Shares Affected Upon Plan. The granting of a Stock Appreciation Right shall not affect the number of shares of Common Stock available under for awards under the Plan. The number of shares available for awards under the Plan will, however, be reduced by the number of shares of Common Stock acquirable upon exercise of the Stock Option to which such Stock Appreciation Right relates. 7. RESTRICTED STOCK. 7.1 Grant. Shares of Restricted Stock may be awarded either alone or in addition to other awards granted under the Plan. The Committee shall determine the eligible persons to whom, and the time or times at which, grants of Restricted Stock will be awarded, the number of shares to be awarded, the price (if any) to be paid by the Holder, the time or times within which such awards may be subject to forfeiture ("Restriction Period"), the vesting schedule and rights to acceleration thereof, and all other terms and conditions of the awards. 7.2 Terms and Conditions. Each Restricted Stock award shall be subject to the following terms and conditions: (a) Certificates. Restricted Stock, when issued, will be represented by a stock certificate or certificates registered in the name of the Holder to whom such Restricted Stock shall have been awarded. During the Restriction Period, certificates representing the Restricted Stock and any securities constituting Retained Distributions (as defined below) shall bear a legend to the effect that ownership of the Restricted Stock (and such Retained Distributions), and the enjoyment of all rights appurtenant thereto, are subject to the restrictions, terms and conditions provided in the Plan and the Agreement. Such certificates shall be deposited by the Holder with the Company, together with stock powers or other instruments of assignment, each endorsed in blank, which will permit transfer to the Company of all or any portion of the Restricted Stock and any securities constituting Retained Distributions that shall be forfeited or that shall not become vested in accordance with the Plan and the Agreement. (b) Rights of Holder. Restricted Stock shall constitute issued and outstanding shares of Common Stock for all corporate purposes. The Holder will have the right to vote such Restricted Stock, to receive and retain all regular cash dividends and other cash equivalent distributions as the Board may in its sole discretion designate, pay or distribute on such Restricted Stock and to exercise all other rights, powers and privileges of a holder of Common Stock with respect to such Restricted Stock, with the exceptions that (i) the Holder will not be entitled to delivery of the stock certificate or certificates representing such Restricted Stock until the Restriction Period shall have expired and unless all other vesting requirements with respect thereto shall have been fulfilled; (ii) the Company will retain custody of the stock certificate or certificates representing the Restricted Stock during the Restriction Period; (iii) other than regular cash dividends and other cash equivalent distributions as the Board may in its sole discretion designate, pay or distribute, the Company will retain custody of all distributions ("Retained Distributions") made or declared with respect to the Restricted Stock (and such Retained Distributions will be subject to the same restrictions, terms and conditions as are applicable to the Restricted Stock) until such time, if ever, as the Restricted Stock with respect to which such Retained Distributions shall 8 have been made, paid or declared shall have become vested and with respect to which the Restriction Period shall have expired; (iv) a breach of any of the restrictions, terms or conditions contained in this Plan or the Agreement or otherwise established by the Committee with respect to any Restricted Stock or Retained Distributions will cause a forfeiture of such Restricted Stock and any Retained Distributions with respect thereto. (c) Vesting; Forfeiture. Upon the expiration of the Restriction Period with respect to each award of Restricted Stock and the satisfaction of any other applicable restrictions, terms and conditions (i) all or part of such Restricted Stock shall become vested in accordance with the terms of the Agreement, subject to Section 10, below, and (ii) any Retained Distributions with respect to such Restricted Stock shall become vested to the extent that the Restricted Stock related thereto shall have become vested, subject to Section 10, below. Any such Restricted Stock and Retained Distributions that do not vest shall be forfeited to the Company and the Holder shall not thereafter have any rights with respect to such Restricted Stock and Retained Distributions that shall have been so forfeited. 8. DEFERRED STOCK. 8.1 Grant. Shares of Deferred Stock may be awarded either alone or in addition to other awards granted under the Plan. The Committee shall determine the eligible persons to whom and the time or times at which grants of Deferred Stock will be awarded, the number of shares of Deferred Stock to be awarded to any person, the duration of the period ("Deferral Period") during which, and the conditions under which, receipt of the shares will be deferred, and all the other terms and conditions of the awards. 8.2 Terms and Conditions. Each Deferred Stock award shall be subject to the following terms and conditions: (a) Certificates. At the expiration of the Deferral Period (or the Additional Deferral Period referred to in Section 8.2 (d) below, where applicable), share certificates shall be issued and delivered to the Holder, or his legal representative, representing the number equal to the shares covered by the Deferred Stock award. (b) Rights of Holder. A person entitled to receive Deferred Stock shall not have any rights of a Stockholder by virtue of such award until the expiration of the applicable Deferral Period and the issuance and delivery of the certificates representing such Common Stock. The shares of Common Stock issuable upon expiration of the Deferral Period shall not be deemed outstanding by the Company until the expiration of such Deferral Period and the issuance and delivery of such Common Stock to the Holder. (c) Vesting; Forfeiture. Upon the expiration of the Deferral Period with respect to each award of Deferred Stock and the satisfaction of any other applicable restrictions, terms and conditions all or part of such Deferred Stock shall become vested in accordance with the terms of the Agreement, subject to Section 10, below. Any such Deferred Stock that does not vest shall be forfeited to the Company and the Holder shall not thereafter have any rights with respect to such Deferred Stock. (d) Additional Deferral Period. A Holder may request to, and the Committee may at any time, defer the receipt of an award (or an installment of an award) for an additional specified period or until a specified event ("Additional Deferral Period"). Subject to any exceptions adopted by the Committee, such request must generally be made at least one year prior to expiration of the Deferral Period for such Deferred Stock award (or such installment). 9 9. OTHER STOCK-BASED AWARDS. Other Stock-Based Awards may be awarded, subject to limitations under applicable law, that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of Common Stock, as deemed by the Committee to be consistent with the purposes of the Plan, including, without limitation, purchase rights, shares of Common Stock awarded which are not subject to any restrictions or conditions, convertible or exchangeable debentures, or other rights convertible into shares of Common Stock and awards valued by reference to the value of securities of or the performance of specified Subsidiaries. Other Stock-Based Awards may be awarded either alone or in addition to or in tandem with any other awards under this Plan or any other plan of the Company. Each other Stock-Based Award shall be subject to such terms and conditions as may be determined by the Committee. 10. ACCELERATED VESTING AND EXERCISABILITY. 10.1 Non-Approved Transactions. If any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act of 1934, as amended ("Exchange Act")), is or becomes the "beneficial owner" (as referred in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 10% or more of the combined voting power of the Company's then outstanding securities in one or more transactions, and the Board does not authorize or otherwise approve such acquisition, then the vesting periods of any and all Stock Options and other awards granted and outstanding under the Plan shall be accelerated and all such Stock Options and awards will immediately and entirely vest, and the respective holders thereof will have the immediate right to purchase and/or receive any and all Common Stock subject to such Stock Options and awards on the terms set forth in this Plan and the respective agreements respecting such Stock Options and awards. 10.2 Approved Transactions. The Committee may, in the event of an acquisition of substantially all of the Company's assets or at least 50% of the combined voting power of the Company's then outstanding securities in one or more transactions (including by way of merger or reorganization) which has been approved by the Company's Board of Directors, (i) accelerate the vesting of any and all Stock Options and other awards granted and outstanding under the Plan, and (ii) require a Holder of any award granted under this Plan to relinquish such award to the Company upon the tender by the Company to Holder of cash in an amount equal to the Repurchase Value of such award. 11. AMENDMENT AND TERMINATION. The Board may at any time, and from time to time, amend alter, suspend or discontinue any of the provisions of the Plan, but no amendment, alteration, suspension or discontinuance shall be made that would impair the rights of a Holder under any Agreement theretofore entered into hereunder, without the Holder's consent. 12. TERM OF PLAN. 12.1 Effective Date. The Plan shall become effective at such time as the Plan is approved and adopted by the Company's Board of Directors (the "Effective Date"), subject to the following provisions: (a) to the extent that the Plan authorizes the Award of Incentive Stock Options, stockholder approval for the Plan shall be obtained within 12 months of the Effective Date; and (b) the failure to obtain stockholder for the Plan as contemplated by subparagraph (a) of this Section 13.1 shall not invalidate the Plan; provided, however, that (i) in the absence of such stock holder approval, Incentive Stock Options may not be awarded under the Plan and (ii) any Incentive 10 Stock Options theretofore awarded under the Plan shall be converted into Nonqualified Options upon terms and conditions determined by the Board to reflect, as nearly as is reasonably practicable in its sole determination, the terms and conditions of the Incentive Stock Options being so converted. 12.2 Termination Date. Unless terminated by the Board, this Plan shall continue to remain effective until such time as no further awards may be granted and all awards granted under the Plan are no longer outstanding. Notwithstanding the foregoing, grants of Incentive Stock Options may be made only during the ten-year period following the Effective Date. 13. GENERAL PROVISIONS. 13.1 Written Agreements. Each award granted under the Plan shall be confirmed by, and shall be subject to the terms, of the Agreement executed by the Company and the Holder. The Committee may terminate any award made under the Plan if the Agreement relating thereto is not executed and returned to the Company within 10 days after the Agreement has been delivered to the Holder for his or her execution. 13.2 Unfunded Status of Plan. The Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a Holder by the Company, nothing contained herein shall give any such Holder any rights that are greater than those of a general creditor of the Company. 13.3 Employees. (a) Engaging in Competition With the Company; Disclosure of Confidential Information. If a Holder's employment with the Company or a Subsidiary is terminated for any reason whatsoever, and within three months after the date thereof such Holder either (i) accepts employment with any competitor of, or otherwise engages in competition with, the Company or (ii) discloses to anyone outside the Company or uses any confidential information or material of the Company in violation of the Company's policies or any agreement between the Holder and the Company, the Committee, in its sole discretion, may require such Holder to return to the Company the economic value of any award that was realized or obtained by such Holder at any time during the period beginning on that date that is six months prior to the date such Holder's employment with the Company is terminated. (b) Termination for Cause. The Committee may, if a Holder's employment with the Company or a Subsidiary is terminated for cause, annul any award granted under this Plan to such employee and, in such event, the Committee, in its sole discretion, may require such Holder to return to the Company the economic value of any award that was realized or obtained by such Holder at any time during the period beginning on that date that is six months prior to the date such Holder's employment with the Company is terminated. (c) No Right of Employment. Nothing contained in the Plan or in any award hereunder shall be deemed to confer upon any Holder who is an employee of the Company or any Subsidiary any right to continued employment with the Company or any Subsidiary, nor shall it interfere in any way with the right of the Company or any Subsidiary to terminate the employment of any Holder who is an employee at any time. 13.4 Investment Representations; Company Policy. The Committee may require each person acquiring shares of Common Stock pursuant to a Stock Option or other award under the Plan to represent to and agree with the Company in writing that the Holder is acquiring the shares for investment without a view to distribution thereof. Each person acquiring shares of Common Stock pursuant to a 11 Stock Option or other award under the Plan shall be required to abide by all policies of the Company in effect at the time of such acquisition and thereafter with respect to the ownership and trading of the Company's securities. 13.5 Additional Incentive Arrangements. Nothing contained in the Plan shall prevent the Board from adopting such other or additional incentive arrangements as it may deem desirable, including, but not limited to, the granting of Stock Options and the awarding of Common Stock and cash otherwise than under the Plan; and such arrangements may be either generally applicable or applicable only in specific cases. 13.6 Withholding Taxes. Not later than the date as of which an amount must first be included in the gross income of the Holder for Federal income tax purposes with respect to any option or other award under the Plan, the Holder shall pay to the Company, or make arrangements satisfactory to the Committee regarding the payment of, any Federal, state and local taxes of any kind required by law to be withheld or paid with respect to such amount. If permitted by the Committee, tax withholding or payment obligations may be settled with Common Stock, including Common Stock that is part of the award that gives rise to the withholding requirement. The obligations of the Company under the Plan shall be conditioned upon such payment or arrangements and the Company or the Holder's employer (if not the Company) shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Holder from the Company or any Subsidiary. 13.7 Governing Law. The Plan and all awards made and actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Florida. 13.8 Other Benefit Plans. Any award granted under the Plan shall not be deemed compensation for purposes of computing benefits under any retirement plan of the Company or any Subsidiary and shall not affect any benefits under any other benefit plan now or subsequently in effect under which the availability or amount of benefits is related to the level of compensation (unless required by specific reference in any such other plan to awards under this Plan). 13.9 Non-Transferability. Except as otherwise expressly provided in the Plan or the Agreement, no right or benefit under the Plan may be alienated, sold, assigned, hypothecated, pledged, exchanged, transferred, encumbranced or charged, and any attempt to alienate, sell, assign, hypothecate, pledge, exchange, transfer, encumber or charge the same shall be void. 13.10 Applicable Laws. The obligations of the Company with respect to all Stock Options and awards under the Plan shall be subject to (i) all applicable laws, rules and regulations and such approvals by any governmental agencies as may be required, including, without limitation, the Securities Act of 1933, as amended, and (ii) the rules and regulations of any securities exchange on which the Common Stock may be listed. 13.11 Conflicts. If any of the terms or provisions of the Plan or an Agreement conflict with the requirements of Section 422 of the Code, then such terms or provisions shall be deemed inoperative to the extent they so conflict with such requirements. Additionally, if this Plan or any Agreement does not contain any provision required to be included herein under Section 422 of the Code, such provision shall be deemed to be incorporated herein and therein with the same force and effect as if such provision had been set out at length herein and therein. If any of the terms or provisions of any Agreement conflict with any terms or provisions of the Plan, then such terms or provisions shall be deemed inoperative to the extent they so conflict with the requirements of the Plan. Additionally, if any Agreement does not contain any provision required to be included therein under the Plan, such provision shall be deemed to be incorporated therein with the same force and effect as if such provision had been set out at length therein. 12 13.12 Non-Registered Stock. The shares of Common Stock to be distributed under this Plan have not been, as of the Effective Date, registered under the Securities Act of 1933, as amended, or any applicable state or foreign securities laws and the Company has no obligation to any Holder to register the Common Stock or to assist the Holder in obtaining an exemption from the various registration requirements, or to list the Common Stock on a national securities exchange or any other trading or quotation system, including the Nasdaq National Market and Nasdaq SmallCap Market. Plan Amendments Date Approved Date Approved by Stockholders, Sections Description of by Board necessary Amended Amendments - ------------- ---------------- -------- --------------- 13 EX-10 12 ex_10-3.txt AKROKERI-ASHANTI GOLD MINES AGREEMENT 02-16-2004 EXHIBIT 10.3 XTRA-GOLD RESOURCES CORP. 428 Aspen Forest Drive Oakville, Ontario L6J 6H5 CONFIDENTIAL - ------------ February 16, 2004 Akrokeri-Ashanti Gold Mines Inc. 56 Temperance Street, 4th Floor Toronto, Ontario M5H 3V5 Attention: Michael Cawood, President - ------------------------------------- Dear Sirs: RE: OFFER TO PURCHASE As you are aware, Xtra-Gold Resources Corp. ("Xtra") is interested in acquiring all outstanding shares of Goldenrae Mining Company Limited (the "Goldenrae Shares") owned by Akrokeri-Ashanti Gold Mines Inc. ("AAGM"). We understand that the Goldenrae Shares have been pledged as security for the repayment of the 14% convertible debentures (the "Debentures") issued by AAGM, of which approximately $4.2 million principal amount of the Debentures are outstanding and are currently in default. We also understand that the holders of the Debentures have subordinated their right to repayment to the holders of the 18% secured notes (the "Notes") issued by AAGM, of which approximately $1.2 principal amount of Notes are outstanding and in default. We have had preliminary discussions with some of the holders of the Debentures and Notes in regards to the purchase of the Goldenrae Shares from them following a foreclosure of their security interests and are confident that a transaction on this basis can be concluded. It is intended that the proposed transaction would result in the extinguishment of all amounts owing by AAGM and its subsidiaries to the holders of the Debentures and Notes. Before investing the time, effort and money that will be required to complete the proposed transaction, we want to ensure that we can acquire all of the outstanding shares (the "Shares") of Canadiana Gold Resources Limited ("Canadiana"), which we understand holds a Prospecting Licence on two distinct areas named Banso and Muoso (the "Licence") which are contiguous with the Goldenrae Mining Leases at Kwabeng and Pameng, as well as any indebtedness owing by Goldenrae to Canadiana to AAGM and affiliated companies (the "Debt"). We hereby offer to purchase the Shares for a purchase price of U.S.$25,000 payable in cash at closing. Closing will take place on February 16, 2004 or such earlier or later date as we may mutually agree (the "Closing"). You represent, warrant and covenant the following, which shall be true and correct on Closing, and acknowledge that we are relying on these representations, warranties and covenants in entering into this agreement: - 2 - 1. you have the full power and authority to enter into this agreement and all other agreements, documents and instruments to be executed and delivered by you in connection herewith, and to carry out the transactions described herein and therein; 2. at Closing all necessary corporate action shall have been taken to transfer the Shares to Xtra; 3. the Shares consist of 50,000 ordinary common shares of Canadiana which are issued and outstanding as fully paid and non-assessable and there are no other shares of Canadiana issued and outstanding nor does any person, firm or corporation have any right, option or privilege to acquire the Shares or any securities of Canadiana; 4. there is no Debt other than indebtedness owing from Goldenrae to AAGM representing advances made by AAGM (or one of its subsidiaries on its behalf) and indebtedness acquired by AAGM from former creditors of Goldenrae, all of which have been pledged as security for the Debentures; 5. the Shares will be conveyed to Xtra at Closing free and clear of all liens, encumbrances and adverse claims; and 6. other than approvals of the Government of Ghana, no authorization, consent or approval of any third party or any public or governmental body or authority is necessary for the transfer of the Shares to Xtra. We covenant and agree that: 1. in the event that Xtra abandons its bid to acquire the Goldenrae Shares or is unable to acquire the Goldenrae Shares for any reason whatsoever on or before December 31, 2004, then the transfer of the Shares contemplated by this agreement shall be considered null and void, and Xtra shall reconvey the Shares to AAGM for nil consideration; 2. following the acquisition of Canadiana, Xtra will transfer for nominal consideration or cause Canadiana to forgive approximately U.S.$175,000 of indebtedness owed by AAGM's Ghanaian subsidiary, Bonte Gold Mines Limited to Canadiana; 3. we will not option, sell, pledge, trade or otherwise dispose of all or portions of the Licence, or permit any adverse material change to occur in the business or property of Canadiana, with the exception of any Government of Ghana ruling, order or seizure, prior to the completion of the acquisition of the Goldenrae Shares under the terms of this agreement; and 4. we will use our best efforts to conclude a transaction with the holders of the Debentures and Notes that will result in the extinguishment of all amounts owing by AAGM and its subsidiaries to the holders of Debentures and Notes. At Closing you will provide certificates representing the Shares duly endorsed for transfer to Xtra, against payment of the purchase price by bank draft. - 3 - You also agree that, after Closing you will execute and deliver or cause to be executed and delivered, such instruments and take, or cause to be taken, such other actions as Xtra may reasonably require in order to carry out the intent of this agreement and the transfer of the Shares to Xtra, including the necessary consents of the Government of Ghana. If the foregoing is acceptable to you, please sign and return the duplicate copy of this letter to us, whereupon a binding agreement between us relating to the subject matter hereto shall be formed. DATED this 16th day of February, 2004. XTRA-GOLD RESOURCES CORP. Per: /s/ Paul Zyla Paul Zyla, President The foregoing is agreed to this 16th day of February, 2004. AKROKERI-ASHANTI GOLD MINES INC. Per: /s/ Michael Cawood Michael Cawood, President EX-10 13 ex_10-4.txt ONTARIO INC. SHARE PURCHASE AGREEMENT 12-22-2004 EXHIBIT 10.4 SHARE PURCHASE AGREEMENT THIS AGREEMENT made the 22nd day of December, 2004. BETWEEN: 2058168 ONTARIO INC., a corporation incorporated under the laws of the Province of Ontario (the "Vendor") - and- XTRA-GOLD RESOURCES CORP., a corporation incorporated under the laws of the State of Nevada (the "Xtra-Gold") - and - 2060768 ONTARIO CORP., a corporation incorporated under the laws of the Province of Ontario (the "Purchaser") WHEREAS under the authority of an Extraordinary resolution ("Extraordinary Resolution") of the holders of Notes (as defined below) of AAGM (as defined below), the Vendor has been appointed as the "Replacement Note Trustee" under that certain Amended and Restated Note Indenture originally dated December 20, 1999 between Akrokeri-Ashanti Gold Mines Inc. ("AAGM") and The Trust Company of Bank of Montreal, which subsequently transferred its interest to BNY Trust Company of Canada; AND WHEREAS the Vendor now owns, as a result of certain foreclosure proceedings undertaken by the Vendor for and on behalf of the holders of the 18% redeemable notes of AAGM (the "Notes"), those securities and that certain indebtedness listed in Appendix A attached hereto (the "Purchased Securities") in the capital of Bonte Gold Mines Limited ("Bonte") and Jeni Gold Mining Limited ("Jeni"), as trustee for the holders of Notes; AND WHEREAS as contemplated by Section 9 of the Extraordinary Resolution, Xtra-Gold, or an affiliate of Xtra-Gold, and the Vendor agreed to enter into this Agreement; AND WHEREAS the Purchaser is a wholly-owned subsidiary of Xtra-Gold; AND WHEREAS the Vendor has agreed to sell and the Purchaser has agreed to purchase all of the Purchased Securities on the terms and conditions hereinafter set out. NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the respective covenants and agreements herein contained, it is agreed by and between the parties hereto as follows: 1 Purchase and Sale of the Purchased Securities 1.1 Subject to the terms and conditions of this agreement, the Vendor hereby sells, assigns and transfers unto the Purchaser and the Purchaser hereby purchases from the Vendor the Purchased Securities in consideration for the allotment issue by Xtra-Gold to the Vendor of Six Hundred Thousand (600,000) shares of fully paid and non-assessable common stock ("Common Shares") of Xtra-Gold. - 2 - 2 Representations and Warranties 2.1 The Vendor hereby represents and warrants as follows: (a) the Vendor has all necessary power and capacity to enter into this agreement and to carry out its obligations hereunder and this agreement has been duly authorized, executed and delivered by the Vendor and constitutes a legal, valid and binding obligation of the Vendor; and (b) all necessary corporate actions and proceedings have been taken by the Vendor to permit the sale of the Purchased Securities to the Purchaser. 2.2 The Purchaser hereby represents and warrants as follows: (a) the Purchaser has all necessary power and capacity to enter into this agreement and to carry out its obligations hereunder and this agreement has been duly authorized, executed and delivered by the Purchaser and constitutes a legal, valid and binding obligation of the Purchaser; and (b) all necessary corporate actions and proceedings have been taken by the Purchaser to permit the due and valid purchase of the Purchased Securities from the Vendor. 2.3 Xtra-Gold hereby represents and warrants as follows: (a) Xtra-Gold has all necessary power and capacity to enter into this agreement and to carry out its obligations hereunder and this agreement has been duly authorized, executed and delivered by the Xtra-Gold and constitutes a legal, valid and binding obligation of Xtra-Gold; and (b) all necessary corporate actions and proceedings have been taken by Xtra-Gold to consummate the transaction contemplated hereunder. 2.4 The Purchaser acknowledges and confirms that the Purchased Securities are being sold to the Purchaser by the Vendor on an "as is where is" basis. 3 Covenants and Acknowledgements 3.1 The Vendor shall do, or cause to be done, all acts, deeds and things necessary to complete the transaction of purchase and sale of the Purchased Securities herein provided for so that following closing the Purchaser shall be the registered owner of such Purchased Securities. 3.2 The Vendor acknowledges that the Common Shares will not be registered under the U.S. Securities Act of 1933, as amended, and will be subject to resale restrictions. 4 Closing 4.1 The closing of the purchase and sale of the Purchased Securities shall take place contemporaneously with the execution of this agreement. The actual time when such closing is to take place is herein referred to as the "Time of Closing". - 3 - 4.2 At the Time of Closing, the Vendor shall deliver to the Purchaser certificates representing the Purchased Securities duly endorsed in blank for transfer, or accompanied by duly executed stock transfer powers in respect of such shares, and will cause the transfer of the Purchased Securities to be duly and regularly recorded in the name of the Purchaser against the delivery by Xtra-Gold to the Vendor of 600,000 Common Shares in the capital of Xtra-Gold in accordance with Section 4.3 hereof. 4.3 At or prior to the Time of Closing, the Vendor shall provide the Purchaser and Xtra-Gold with a direction providing for the issue and allotment of the Common Shares referred to in Section 4.2 hereof to the holders of the Notes, pro-rata in accordance with the quantum of indebtedness owed under the Notes, and X-tra-Gold shall deliver to the Vendor certificates representing such Common Shares. Immediately after receipt of the Common Shares, the Vendor agrees to distribute same to the holders of the Notes as per their entitlement thereto. 5 General 5.1 The covenants, representations and warranties herein contained shall survive the closing of the purchase and sale of the Purchased Securities herein provided for and notwithstanding such closing, shall continue in full force and effect for the respective benefit of the Purchaser, the Vendor and Xtra-Gold, as the case may be. 5.2 This agreement may be executed in one or more counterparts, each of which when so executed shall constitute an original and all of which together shall constitute one and the same agreement. 5.3 This agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. 5.4 The provisions of this agreement shall enure to the benefit of and shall be binding upon the parties hereto and their respective legal personal representatives, heirs, successors and assigns. IN WITNESS WHEREOF the parties hereto have executed this agreement as of the day and date first above written. 2058168 ONTARIO INC. Per: /s/ Bryon Mackie Bryon Mackie, President XTRA-GOLD RESOURCES CORP. Per: /s/ Paul Zyla Paul Zyla, President 2060765 ONTARIO CORP. Per: /s/ James Zyla James Zyla, President - 4 - Appendix A 1. Certificate No. C-06 - representing 100,000 shares of no par value in the capital of Bonte; 2. Certificate No. RP-01 - representing 5,000,000 Redeemable Preference shares of no par value in the capital of Bonte; 3. Promissory note dated December 20, 1999 issued by Bonte in favour of AAGM in the face amount of US$7,368,901.92; 4. Certificate No. A-01 - representing 10,000 Shares "A" in the capital of Jeni; and 5. Promissory note dated December 20, 1999 issued by Jeni in favour of AAGM in the face amount of US$1,029,108.00. EX-10 14 ex_10-5.txt ONTARIO INC. SHARE PURCHASE AGREEMENT 12-22-2004 EXHIBIT 10.5 SHARE PURCHASE AGREEMENT THIS AGREEMENT made the 22nd day of December, 2004. BETWEEN: 2058168 ONTARIO INC., a corporation incorporated under the laws of the Province of Ontario (the "Vendor") - and- XTRA-GOLD RESOURCES CORP., a corporation incorporated under the laws of the State of Nevada (the "Xtra-Gold") WHEREAS under the authority of an extraordinary resolution ("Extraordinary Resolution") of the holders of Debentures (as defined below) of AAGM (as defined below), the Vendor has been appointed as the "Replacement Note Trustee" under that certain Amended and Restated Note Indenture originally dated October 9, 1996 between Akrokeri-Ashanti Gold Mines Inc. ("AAGM") and CIBC Mellon Trust Company; AND WHEREAS the Vendor now owns, as a result of certain foreclosure proceedings undertaken by the Vendor for and on behalf of the holders of the 14% redeemable, convertible secured debentures of AAGM (the "Debentures"), those securities and that certain indebtedness listed in Appendix A attached hereto (the "Purchased Securities") in the capital of Goldenrae Mining Company Limited Limited ("Gondenrae"), as trustee for the holders of Debentures; AND WHEREAS as contemplated by Section 9 of the Extraordinary Resolution, the Vendor and the Purchaser have agreed to enter into this Agreement; AND WHEREAS the Vendor has agreed to sell and the Purchaser has agreed to purchase all of the Purchased Securities on the terms and conditions hereinafter set out. NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the respective covenants and agreements herein contained, it is agreed by and between the parties hereto as follows: 1 Purchase and Sale of the Purchased Securities 1.1 Subject to the terms and conditions of this agreement, the Vendor hereby sells, assigns and transfers unto the Purchaser and the Purchaser hereby purchases from the Vendor the Purchased Securities in consideration for the allotment issue by the Purchaser to the Vendor of Two Million Ninety-Eight Thousand Three Hundred and Fifty (2,098,350) shares of fully paid and non-assessable common stock ("Common Shares") of the Purchaser. - 2 - 2 Representations and Warranties 2.1 The Vendor hereby represents and warrants as follows: (a) the Vendor has all necessary power and capacity to enter into this agreement and to carry out its obligations hereunder and this agreement has been duly authorized, executed and delivered by the Vendor and constitutes a legal, valid and binding obligation of the Vendor; and (b) all necessary corporate actions and proceedings have been taken by the Vendor to permit the sale of the Purchased Securities to the Purchaser. 2.2 The Purchaser hereby represents and warrants as follows: (a) the Purchaser has all necessary power and capacity to enter into this agreement and to carry out its obligations hereunder and this agreement has been duly authorized, executed and delivered by the Purchaser and constitutes a legal, valid and binding obligation of the Purchaser; and (b) all necessary corporate actions and proceedings have been taken by the Purchaser to permit the due and valid purchase of the Purchased Securities from the Vendor. 2.3 Xtra-Gold hereby represents and warrants as follows: (a) Xtra-Gold has all necessary power and capacity to enter into this agreement and to carry out its obligations hereunder and this agreement has been duly authorized, executed and delivered by the Xtra-Gold and constitutes a legal, valid and binding obligation of Xtra-Gold; and (b) all necessary corporate actions and proceedings have been taken by Xtra-Gold to consummate the transaction contemplated hereunder. 2.4 The Purchaser acknowledges and confirms that the Purchased Securities are being sold to the Purchaser by the Vendor on an "as is where is" basis. 3 Covenants 3.1 The Vendor shall do, or cause to be done, all acts, deeds and things necessary to complete the transaction of purchase and sale of the Purchased Securities herein provided for so that following closing the Purchaser shall be the registered owner of such Purchased Securities. 3.2 The Vendor acknowledges that the Common Shares will not be registered under the U.S. Securities Act of 1933, as amended, and will be subject to resale restrictions. 4 Closing 4.1 The closing of the purchase and sale of the Purchased Securities shall take place contemporaneously with the execution of this agreement. The actual time when such closing is to take place is herein referred to as the "Time of Closing". - 3 - 4.2 At the Time of Closing, the Vendor shall deliver to the Purchaser certificates representing the Purchased Securities duly endorsed in blank for transfer, or accompanied by duly executed stock transfer powers in respect of such shares, and will cause the transfer of the Purchased Securities to be duly and regularly recorded in the name of the Purchaser against the delivery by the Purchaser to the Vendor of 2,098,350 Common Shares in the capital of the Purchaser in accordance with Section 4.3 hereof. 4.3 At or prior to the Time of Closing, the Vendor shall provide the Purchaser and Xtra-Gold with a direction providing for the issue and allotment of the Common Shares referred to in Section 4.2 hereof to the holders of the Debentures, pro-rata such shares to be fully paid and non-assessable, and the Purchaser shall deliver to the Vendor certificates representing such Common Shares. Immediately after receipt of the Common Shares, the Vendor agrees to distribute same to the holders of the Debentures as per their entitlement thereto. 5 General 5.1 The covenants, representations and warranties herein contained shall survive the closing of the purchase and sale of the Purchased Securities herein provided for and notwithstanding such closing, shall continue in full force and effect for the respective benefit of the Purchaser and the Vendor, as the case may be. 5.2 This agreement may be executed in one or more counterparts, each of which when so executed shall constitute an original and all of which together shall constitute one and the same agreement. 5.3 This agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. 5.4 The provisions of this agreement shall enure to the benefit of and shall be binding upon the parties hereto and their respective legal personal representatives, heirs, successors and assigns. IN WITNESS WHEREOF the parties hereto have executed this agreement as of the day and date first above written. 2058168 ONTARIO INC. Per: /s/ Bryon Mackie Bryon Mackie, President XTRA-GOLD RESOURCES CORP. Per: /s/ Paul Zyla Paul Zyla, President - 4 - Appendix A 1. Certificate A-002 representing 2,000,000 Class "A" shares of no par value in the capital of Goldenrae; 2. Certificate A-003 representing 33,000,000 Class "A" shares of no par value in the capital of Goldenrae; 3. Certificate C-001 representing 1 Class "A" share on no par value n the capital of Goldenrae; and 4. Promissory note dated September 28, 2001 issued by Goldenrae in favour of AAGM in the face amount of US$4,706,150. EX-10 15 ex_10-6.txt ZYLA STOCK CANCELLATION AGREEMENT DATED 12-22-2004 EXHIBIT 10.6 TO: XTRA-GOLD RESOURCES CORP. (THE "CORPORATION") FROM: PAUL ZYLA ("ZYLA") STOCK CANCELLATION AGREEMENT AND ACKNOWLEDGMENT ================================================================================ WHEREAS Zyla acknowledges that he is the registered holder of Five Million shares (the "XF SHARES") in the capital stock of Xtra-Gold Resources, Inc. ("XTRA FLORIDA"); AND WHEREAS pursuant to a stock exchange transaction between Xtra Florida and the Corporation (formerly Retinapharma International Ltd. at the time of such transaction) completed on or about November 21, 2003, Zyla exchanged the XF Shares in exchange for Five Million (5,000,000) shares in the common stock of the Corporation (the "XG SHARES"); AND WHEREAS on or about November 21, 2003, the Corporation completed a 5:1 forward stock split resulting in the XG Shares being consolidated into Twenty-five Million (25,000,000) XG Shares; AND WHEREAS at the time of issuance of the 25,000,000 XG Shares, the parties hereto agreed that Zyla would return a significant portion of such XG Shares to treasury for cancellation (the "STOCK Cancellation"), the amount of which would be determined and agreed to at a later date; AND WHEREAS the parties hereto acknowledge that the primary purpose for the Stock Cancellation of the XG Shares would be to minimize the dilution on the Corporation in the event that the Corporation issued further shares in consideration of future financings, acquisitions or other significant business transactions involving stock issuances; AND WHEREAS on or about December 22, 2004, the Corporation will complete an acquisition of Goldenrae Mining Company Limited ("GOLDENRAE") whereby 2,698,350 shares will be issued pro rata to note and debentureholders of Goldenrae (the "GOLDENRAE ACQUISITION"); THE UNDERSIGNED PARTIES HEREBY ACKNOWLEDGE AND AGREE that Zyla shall return to treasury for cancellation Twenty-four Million (24,000,000) of the XG Shares following completion of the Goldenrae Acquisition; THE UNDERSIGNED PARTIES HEREBY FURTHER ACKNOWLEDGE AND AGREE that Zyla shall not be paid any compensation for the Stock Cancellation; THE UNDERSIGNED PARTIES HEREBY FURTHER ACKNOWLEDGE AND AGREE that further Stock Cancellations or transfer of the remaining balance of XG Shares may occur from time to time at a consideration to be determined and agreed to between the parties at such time. DATED this 22nd day of December, 2004. XTRA-GOLD RESOURCES CORP. /s/ Paul Zyla Per: /s/ William Edward McKechnie PAUL ZYLA WILLIAM EDWARD (TED) MCKECHNIE Director EX-10 16 ex_10-7.txt MCKECHNIE STOCK CANCELLATION AGREEMENT 12-22-2004 EXHIBIT 10.7 TO: XTRA-GOLD RESOURCES CORP. (THE "CORPORATION") FROM: WILLIAM EDWARD (TED) MCKECHNIE ("MCKECHNIE") STOCK CANCELLATION AGREEMENT AND ACKNOWLEDGMENT ================================================================================ WHEREAS McKechnie acknowledges that he is the registered holder of Five Million shares (the "XF SHARES") in the capital stock of Xtra-Gold Resources, Inc. ("XTRA FLORIDA"); AND WHEREAS pursuant to a stock exchange transaction between Xtra Florida and the Corporation (formerly Retinapharma International Ltd. at the time of such transaction) completed on or about November 21, 2003, McKechnie exchanged the XF Shares in exchange for Five Million (5,000,000) shares in the common stock of the Corporation (the "XG SHARES"); AND WHEREAS on or about November 21, 2003, the Corporation completed a 5:1 forward stock split resulting in the XG Shares being consolidated into Twenty-five Million (25,000,000) XG Shares; AND WHEREAS at the time of issuance of the 25,000,000 XG Shares, the parties hereto agreed that McKechnie would return a significant portion of such XG Shares to treasury for cancellation (the "STOCK CANCELLATION"), the amount of which would be determined and agreed to at a later date; AND WHEREAS the parties hereto acknowledge that the primary purpose for the Stock Cancellation of the XG Shares would be to minimize the dilution on the Corporation in the event that the Corporation issued further shares in consideration of future financings, acquisitions or other significant business transactions involving stock issuances; AND WHEREAS on or about December 22, 2004, the Corporation will complete an acquisition of Goldenrae Mining Company Limited ("GOLDENRAE") whereby 2,698,350 shares will be issued pro rata to note and debentureholders of Goldenrae (the "GOLDENRAE ACQUISITION"); THE UNDERSIGNED PARTIES HEREBY ACKNOWLEDGE AND AGREE that McKechnie shall return to treasury for cancellation Twenty-three Million (23,000,000) of the XG Shares following completion of the Goldenrae Acquisition; THE UNDERSIGNED PARTIES HEREBY FURTHER ACKNOWLEDGE AND AGREE that McKechnie shall not be paid any compensation for the Stock Cancellation; THE UNDERSIGNED PARTIES HEREBY FURTHER ACKNOWLEDGE AND AGREE that further Stock Cancellations or transfer of the remaining balance of XG Shares may occur from time to time at a consideration to be determined and agreed to between the parties at such time. DATED this 22nd day of December, 2004. XTRA-GOLD RESOURCES CORP. /s/ William Edward McKechnie Per: /s/ Paul Zyla WILLIAM EDWARD MCKECHNIE PAUL ZYLA President and Chief Executive Officer EX-10 17 ex_10-9.txt MCKECHNIE STOCK OPTION AGREEMENT DATED 09-05-2005 EXHIBIT 10.9 XTRA-GOLD RESOURCES CORP. September 5, 2005 William Edward (Ted) McKechnie 446 Drake Circle Waterloo ON N2T 1L1 Dear Mr. McKechnie: RE: GRANT OF NONQUALIFIED STOCK OPTIONS We are pleased to advise you that on June 21, 2005, the board of directors of Xtra-Gold Resources Corp. ("XTRA-GOLD") authorized the award to you (the "OPTIONEE") of an option to purchase 300,000 shares of our common stock at a par value $.001 per share (the "OPTIONS"), upon the following terms and conditions: 1. The Options are granted to you in accordance with and subject to the terms and conditions of Xtra-Gold's 2005 Equity Compensation Plan (the "PLAN"). 2. The Options are nonqualified stock options. 3. The Options have a ten (10) year term (the "OPTION PERIOD") and are exercisable, on a pro rata basis as set forth in paragraph 7 hereunder, commencing on July 21, 2005, in accordance with the vesting schedule set out hereunder and shall terminate at 5:00 p.m. (Eastern Standard Time) on April 20, 2015 (the "EXPIRY DATE"). 4. The price at which the Options may be exercised is $0.55 per share. 5. The Options are transferable to a nominee as may be designated by the Optionee from time to time and may be exercised, in whole or in part, during the exercise period, as set forth herein or otherwise in accordance with the terms and conditions of the Plan. ================================================================================ TORONTO HEAD OFFICE 6 KERSDALE AVENUE TORONTO, ONTARIO, CANADA M5R 1J9 PHONE: (519) 59-1818 E-MAIL: TEDMCKECHNIE@ROGERS.COM PHONE: (416) 981-3055 WEB SITE: WWW.XTRAGOLD.COM Ted McKechnie - 2 - September 5, 2005 6. The exercise price and number of underlying shares issuable upon exercise of the Options (the "OPTION SHARES") are subject to adjustment in accordance with the Plan in the event of stock splits, dividends, reorganizations and similar corporate events. 7. The Options are to vest pro rata over the Option Period on a monthly basis in accordance with the following schedule: PRO RATA PORTION OF THE OPTIONS VESTING PERIOD 6,250 on the 21st day of each month of the Option Period following the date of grant 8. Any portion of the Options that have vested and has not been exercised (the "ACCRUED OPTIONS") shall accrue to the benefit of the Optionee, but in no event shall the Accrued Options be exercised later than the earlier of (a) the Expiry Date; and (b) the exercise date contemplated in subparagraphs 9(a), (b), (c), (d) and (e) hereunder. 9. (a) In the event of your termination as a result of your voluntary resignation, all Options that have vested but remain unexercised, must be exercised within six (6) months from the date of your resignation, failing which such unexercised Options will be cancelled. (b) In the event of your death during the Term, all Options that have vested but remain unexercised, must be exercised by your estate within one (1) year from the date of your death, failing which such unexercised Options will be cancelled. (c) In the event that you are terminated by Xtra-Gold, without cause, then in such event Xtra-Gold agrees that you shall retain 100% of the vested but unexercised Options and 100% of the unvested Options; provided, however that these Options are to be exercised no later than six (6) months from the date of such termination, failing which such unexercised Options will be cancelled. (d) In the event that you are terminated by Xtra-Gold, with cause, then in such event Xtra-Gold agrees that you shall retain 100% of the vested but unexercised Options; provided, however that these Options are to be exercised no later than six (6) months from the date of such termination, failing which such unexercised Options will be cancelled. All unvested Options will be cancelled immediately upon termination, with cause. Ted McKechnie - 3 - September 5, 2005 (e) In the event of a change of control of Xtra-Gold (as defined herein), all Options granted to you shall vest in which event, you will have the right to exercise such Options within 90 days following the completion of such change of control. For clarity purposes, a "CHANGE OF CONTROL" shall mean the occurrence of (a) any person, other than an Employee (as such term is used in Section 13(d) and 14(d) of the Exchange Act is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's outstanding securities then having the right to vote at elections of directors; or (b) the individuals who at the commencement date of the agreement entered into between the consultant and our Company (the "MC AGREEMENT"), constitute the Board, cease for any reason to constitute a majority thereof unless the election, or nomination for election, of each new director was approved by a vote of at least two-thirds of the directors then in office who were directors at the commencement of the MC Agreement; or (c) there is a failure to elect two or more candidates nominated by management of the Company to the Board; or (d) the business of the Company for which the consultant's services are principally performed is disposed of by the Company pursuant to a partial or complete liquidation of the Company, a sale of assets (including stock of a subsidiary of our Company) or otherwise. (f) The share certificate or certificates issued as a result of the exercise of Options from time to time shall bear a restrictive legend with respect to the resale of the Option Shares in connection therewith. In particular, until such time that a registration statement has been filed by Xtra-Gold and accepted by the U.S. Securities and Exchange Commission, in accordance with Rule 144: (i) the Option Shares cannot be resold unless held for two years; or alternatively (ii) if Xtra-Gold is a reporting company, then the applicable hold period shall be one year from the date of the issuance of Option Shares. 10. Neither the Options nor the Option Shares have been registered under the Securities Act of 1933, as amended (the "ACT"), and the Option Shares may not be sold, assigned, pledged, transferred or otherwise disposed of absent registration under the Act or the availability of an applicable exemption from registration. However, it is the intention of Xtra-Gold to qualify the Option Shares under a registration statement. All certificates evidencing the Option Shares will contain a legend describing this restriction on resale of the Option Shares. There is no assurance that there will be a public market into which you may sell the Option Shares or that you will be able to sell your Option Shares at a profit or at all. 11. In order to exercise the vested Options, you must provide us with written notice that you are exercising all or a portion of such Options. The written notice must specify the number of Option Shares that you are exercising your Options for, and must be accompanied by the exercise price described in paragraph 4 above. Your Option Shares will be issued to you within approximately one week following our receipt of your exercise notice and cleared funds evidencing the exercise price. Ted McKechnie - 4 - September 5, 2005 12. No rights or privileges of a stockholder of Xtra-Gold are conferred by reason of the grant of the Options to you. You will have no rights of a stockholder until you have delivered your exercise notice to us and we have received the exercise price of the Options in cleared funds and have delivered a share certificate or certificates to you evidencing the shares arising out of such exercise. 13. You understand that the Plan contains important information about your Options and your rights with respect to the Options. The Plan includes (a) terms relating to your right to exercise the Options; (b) important restrictions on your ability to transfer the Options or Option Shares; and (c) early termination of the Options following the occurrence of certain events, including the termination of your relationship with us. By signing below, you acknowledge your receipt of a copy of the Plan. By acceptance of your Options by way of execution of this Agreement, you agree to abide by the terms and conditions of this Agreement and the Plan. 14. We are a young company and are subject to all of the risks and uncertainties of a young company. We may never operate profitably. The exercise of your Options is a speculative investment and there is no assurance that you will realize a profit on the exercise of your Options. 15. The Options will become effective upon your acknowledgment of the terms and conditions of this Agreement and your delivery to us of a signed counterpart of this Agreement. 16. This Agreement and Plan contain all of the terms and conditions of your Options and supercedes all prior agreements or understandings relating to your Options. This Agreement shall be governed by the laws of the State of Florida without regard to the conflicts of laws provisions thereof. This Agreement may not be amended orally. We appreciate your continued support and contributions and are hopeful that your Options will provide financial benefits to you in the future. Yours very truly, XTRA-GOLD RESOURCES CORP. By: /s/ R. Kiomi Mori /rkm R. Kiomi Mori, Enclosure Secretary and Treasurer AGREED TO AND ACCEPTED this 5th day of September, 2005. /s/ WILLIAM EDWARD (TED) MCKECHNIE ---------------------------------- WILLIAM EDWARD (TED) MCKECHNIE EX-10 18 ex_10-10.txt MCKECHNIE STOCK OPTION AGREEMENT DATED 04-21-2006 EXHIBIT 10.10 XTRA-GOLD RESOURCES CORP. April 21, 2006 William Edward (Ted) McKechnie 446 Drake Circle Waterloo ON N2T 1L1 Dear Mr. McKechnie: RE: GRANT OF NONQUALIFIED STOCK OPTIONS We are pleased to advise you that on April 21, 2006, the board of directors of Xtra-Gold Resources Corp. ("XTRA-GOLD") authorized the award to you (sometimes hereinafter referred to as the "OPTIONEE") of an option to purchase 216,000 shares of our common stock at a par value $.001 per share (the "OPTIONS"), upon the following terms and conditions: 1. The Options are granted to you in accordance with and subject to the terms and conditions of Xtra-Gold's 2005 Equity Compensation Plan (the "PLAN"). 2. The Options are nonqualified stock options. 3. The Options have a three (3) year term (the "OPTION PERIOD") and are exercisable, on a pro rata basis as set forth in paragraph 7 hereunder, commencing on May 21, 2006, in accordance with the vesting schedule set out hereunder and shall terminate at 5:00 p.m. (Eastern Standard Time) on April 21, 2009 (the "EXPIRY DATE"). 4. The price at which the Options may be exercised is $0.70 per share. 5. The Options are transferable to a nominee as may be designated by you from time to time and may be exercised, in whole or in part, during the exercise period, as set forth herein or otherwise in accordance with the terms and conditions of the Plan. ================================================================================ TORONTO CORPORATE OFFICE 6 KERSDALE AVENUE TORONTO, ONTARIO, CANADA M5R 1J9 PHONE: (416) 653-5151 E-MAIL: KIOMI@SYMPATICO.CA PHONE: (416) 981-3055 WEB SITE: WWW.XTRAGOLD.COM Ted McKechnie - 2 - April 21, 2006 6. The exercise price and number of underlying shares issuable upon exercise of the Options (the "OPTION SHARES") are subject to adjustment in accordance with the Plan in the event of stock splits, dividends, reorganizations and similar corporate events. 7. The Options are to vest pro rata over the Option Period on a monthly basis in accordance with the following schedule: PRO RATA PORTION OF THE OPTIONS VESTING PERIOD 6,000 on the 21st day of each month of the Option Period following the date of grant 8. (a) Any portion of the Options that have vested and have not been exercised in a particular month shall accrue to the benefit of the Optionee (the "ACCRUED OPTIONS") and in connection therewith, you shall have the right to exercise the Accrued Options for a period of time as may be set out in the Option Plan referred to in (h) hereunder or in accordance with securities laws governing Xtra-Gold, but in no event shall the Accrued Options be exercised later than the earlier of (a) the Expiry Date; and (b) the exercise date contemplated in subparagraphs 8.(b), (c), (d), (e) and (f) hereunder. (b) In the event of termination as a result of the voluntary resignation of you or Goldeye Consultants Ltd. ("GOLDEYE"), a corporation of which you are a director which has entered into a consulting agreement dated July 1, 2006 with Xtra-Gold, all Accrued Options must be exercised within 90 days from the date of the resignation by either one of you, failing which the Accrued Options will be cancelled. (c) In the event of your death during the Option Period, all Accrued Options must be exercised by your estate within one year from the date of your death, failing which the Accrued Options will be cancelled. (d) In the event that you or Goldeye are terminated by Xtra-Gold, without cause, then in such event Xtra-Gold agrees that you may retain 100% of the Accrued Options and 100% of the unvested Options (the "UNVESTED OPTIONS"); provided, however that the Options referred to in this subparagraph must be exercised no later than 90 days following such termination, failing which such Options will be cancelled. (e) In the event that you or Goldeye are terminated by Xtra-Gold, with cause, then in such event Xtra-Gold agrees that you may retain 100% of the Accrued Options; provided, however that the Accrued Options must be exercised no later than 90 days following such termination, failing which such Accrued Options will be cancelled. All Unvested Options will be cancelled immediately upon your termination, with cause. Ted McKechnie - 3 - April 21, 2006 (f) In the event of a change of control of Xtra-Gold (as defined herein), all Options granted to you shall vest in which event, you will have the right to exercise such Options within 90 days following the completion of such change of control. For clarity purposes, a "CHANGE OF CONTROL" shall mean the occurrence of (a) any person, other than an Employee (as such term is used in Section 13(d) and 14(d) of the Exchange Act is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's outstanding securities then having the right to vote at elections of directors; or (b) the individuals who at the commencement date of the agreement entered into between the consultant and our Company (the "MC AGREEMENT"), constitute the Board, cease for any reason to constitute a majority thereof unless the election, or nomination for election, of each new director was approved by a vote of at least two-thirds of the directors then in office who were directors at the commencement of the MC Agreement; or (c) there is a failure to elect two or more candidates nominated by management of the Company to the Board; or (d) the business of the Company for which the consultant's services are principally performed is disposed of by the Company pursuant to a partial or complete liquidation of the Company, a sale of assets (including stock of a subsidiary of our Company) or otherwise. (g) The share certificate or certificates issued as a result of the exercise of Options from time to time shall bear a restrictive legend with respect to the resale of the shares issued in connection therewith. In particular, until such time that a registration statement has been filed by Xtra-Gold and effective with the U.S. Securities and Exchange Commission: (i) the Option Shares cannot be otherwise resold unless held for two years, in accordance with Rule 144(k); or alternatively (ii) if Xtra-Gold is a reporting company, then the applicable hold period shall be one year from the date of the issuance of Option Shares in accordance with Rule 144. (h) Xtra-Gold implemented and adopted a 2005 equity compensation plan (the "OPTION PLAN") which implementation and adoption was been approved in writing by the Board in June 2005. Xtra-Gold did not obtain shareholder approval. (i) The Options shall at all times be subject to the terms of the Option Agreement and the Option Plan. Ted McKechnie - 4 - April 21, 2006 9. Neither the Options nor the Option Shares have been registered under the Securities Act of 1933, as amended (the "ACT"), and the Option Shares may not be sold, assigned, pledged, transferred or otherwise disposed of absent registration under the Act or the availability of an applicable exemption from registration. However, it is the intention of Xtra-Gold to qualify the Option Shares under a registration statement. All certificates evidencing the Option Shares will contain a legend describing this restriction on resale of the Option Shares. There is no assurance that there will be a public market into which you may sell the Option Shares or that you will be able to sell your Option Shares at a profit or at all. 10. In order to exercise the vested Options, you must provide us with written notice that you are exercising all or a portion of such Options. The written notice must specify the number of Option Shares that you are exercising your Options for, and must be accompanied by the exercise price described in paragraph 4 above. Your Option Shares will be issued to you within approximately one week following our receipt of your exercise notice and cleared funds evidencing the exercise price. 11. No rights or privileges of a stockholder of Xtra-Gold are conferred by reason of the grant of the Options to you. You will have no rights of a stockholder until you have delivered your exercise notice to us and we have received the exercise price of the Options in cleared funds and have delivered a share certificate or certificates to you evidencing the shares arising out of such exercise. 12. You understand that the Plan contains important information about your Options and your rights with respect to the Options. The Plan includes (a) terms relating to your right to exercise the Options; (b) important restrictions on your ability to transfer the Options or Option Shares; and (c) early termination of the Options following the occurrence of certain events, including the termination of your relationship with us. By signing below, you acknowledge your receipt of a copy of the Plan. By acceptance of your Options by way of execution of this Agreement, you agree to abide by the terms and conditions of this Agreement and the Plan. 13. We are a young company and are subject to all of the risks and uncertainties of a young company. We may never operate profitably. The exercise of your Options is a speculative investment and there is no assurance that you will realize a profit on the exercise of your Options. 14. The Options will become effective upon your acknowledgment of the terms and conditions of this Agreement and your delivery to us of a signed counterpart of this Agreement. 15. This Agreement and Plan contain all of the terms and conditions of your Options and supercedes all prior agreements or understandings relating to your Options. This Agreement shall be governed by the laws of the State of Florida without regard to the conflicts of laws provisions thereof. This Agreement may not be amended orally. Ted McKechnie - 5 - April 21, 2006 We appreciate your continued support and contributions and are hopeful that your Options will provide financial benefits to you in the future. Yours very truly, XTRA-GOLD RESOURCES CORP. /s/ R. Kiomi Mori /rkm R. Kiomi Mori, Enclosure Secretary and Treasurer AGREED TO AND ACCEPTED this 21st day of April, 2006. /s/ WILLIAM EDWARD (TED) MCKECHNIE ---------------------------------- WILLIAM EDWARD (TED) MCKECHNIE EX-10 19 ex_10-11.txt MORI STOCK OPTION AGREEMENT DATED 04-21-2006 EXHIBIT 10.11 XTRA-GOLD RESOURCES CORP. April 21, 2006 Rebecca Kiomi Mori 6 Kersdale Avenue Toronto ON M6M 1C8 Dear Ms. Mori: RE: GRANT OF NONQUALIFIED STOCK OPTIONS We are pleased to advise you that on April 21, 2006, the board of directors of Xtra-Gold Resources Corp. ("XTRA-GOLD") authorized the award to you (sometimes hereinafter referred to as the "OPTIONEE") of an option to purchase 108,000 shares of our common stock at a par value $.001 per share (the "OPTIONS"), upon the following terms and conditions: 1. The Options are granted to you in accordance with and subject to the terms and conditions of Xtra-Gold's 2005 Equity Compensation Plan (the "PLAN"). 2. The Options are nonqualified stock options. 3. The Options have a three (3) year term (the "OPTION PERIOD") and are exercisable, on a pro rata basis as set forth in paragraph 7 hereunder, commencing on May 21, 2006, in accordance with the vesting schedule set out hereunder and shall terminate at 5:00 p.m. (Eastern Standard Time) on April 21, 2009 (the "EXPIRY DATE"). 4. The price at which the Options may be exercised is $0.70 per share. 5. The Options are transferable to a nominee as may be designated by you from time to time and may be exercised, in whole or in part, during the exercise period, as set forth herein or otherwise in accordance with the terms and conditions of the Plan. 6. The exercise price and number of underlying shares issuable upon exercise of the Options (the "OPTION SHARES") are subject to adjustment in accordance with the Plan in the event of stock splits, dividends, reorganizations and similar corporate events. ================================================================================ TORONTO HEAD OFFICE 6 KERSDALE AVENUE TORONTO, ONTARIO, CANADA M5R 1J9 PHONE: (519) 59-1818 E-MAIL: TEDMCKECHNIE@ROGERS.COM PHONE: (416) 981-3055 WEB SITE: WWW.XTRAGOLD.COM Rebecca Kiomi Mori - 2 - April 21, 2006 7. The Options are to vest pro rata over the Option Period on a monthly basis in accordance with the following schedule: PRO RATA PORTION OF THE OPTIONS VESTING PERIOD 3,000 on the 21st day of each month of the Option Period following the date of grant 8. (a) Any portion of the Options that have vested and have not been exercised in a particular month shall accrue to the benefit of the Optionee (the "ACCRUED OPTIONS") and in connection therewith, you shall have the right to exercise the Accrued Options for a period of time as may be set out in the Option Plan referred to in (h) hereunder or in accordance with securities laws governing Xtra-Gold, but in no event shall the Accrued Options be exercised later than the earlier of (a) the Expiry Date; and (b) the exercise date contemplated in subparagraphs 8.(b), (c), (d), (e) and (f) hereunder. (b) In the event of termination as a result of your voluntary resignation, all Accrued Options must be exercised within 90 days from the date of the resignation by either one of you, failing which the Accrued Options will be cancelled. (c) In the event of your death during the Option Period, all Accrued Options must be exercised by your estate within one year from the date of your death, failing which the Accrued Options will be cancelled. (d) In the event that you are terminated by Xtra-Gold, without cause, then in such event Xtra-Gold agrees that you may retain 100% of the Accrued Options and 100% of the unvested Options (the "UNVESTED OPTIONS"); provided, however that the Options referred to in this subparagraph must be exercised no later than 90 days following such termination, failing which such Options will be cancelled. (e) In the event that you are terminated by Xtra-Gold, with cause, then in such event Xtra-Gold agrees that you may retain 100% of the Accrued Options; provided, however that the Accrued Options must be exercised no later than 90 days following such termination, failing which such Accrued Options will be cancelled. All Unvested Options will be cancelled immediately upon your termination, with cause. Rebecca Kiomi Mori - 3 - April 21, 2006 (f) In the event of a change of control of Xtra-Gold (as defined herein), all Options granted to you shall vest in which event, you will have the right to exercise such Options within 90 days following the completion of such change of control. For clarity purposes, a "CHANGE OF CONTROL" shall mean the occurrence of (a) any person, other than an Employee (as such term is used in Section 13(d) and 14(d) of the Exchange Act is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's outstanding securities then having the right to vote at elections of directors; or (b) the individuals who at the commencement date of the agreement entered into between the consultant and our Company (the "MC AGREEMENT"), constitute the Board, cease for any reason to constitute a majority thereof unless the election, or nomination for election, of each new director was approved by a vote of at least two-thirds of the directors then in office who were directors at the commencement of the MC Agreement; or (c) there is a failure to elect two or more candidates nominated by management of the Company to the Board; or (d) the business of the Company for which the consultant's services are principally performed is disposed of by the Company pursuant to a partial or complete liquidation of the Company, a sale of assets (including stock of a subsidiary of our Company) or otherwise. (g) The share certificate or certificates issued as a result of the exercise of Options from time to time shall bear a restrictive legend with respect to the resale of the shares issued in connection therewith. In particular, until such time that a registration statement has been filed by Xtra-Gold and effective with the U.S. Securities and Exchange Commission: (i) the Option Shares cannot be otherwise resold unless held for two years, in accordance with Rule 144(k); or alternatively (ii) if Xtra-Gold is a reporting company, then the applicable hold period shall be one year from the date of the issuance of Option Shares in accordance with Rule 144. (h) Xtra-Gold implemented and adopted a 2005 equity compensation plan (the "OPTION PLAN") which implementation and adoption was been approved in writing by the Board in June 2005. Xtra-Gold did not obtain shareholder approval. (i) The Options shall at all times be subject to the terms of the Option Agreement and the Option Plan. 9. Neither the Options nor the Option Shares have been registered under the Securities Act of 1933, as amended (the "ACT"), and the Option Shares may not be sold, assigned, pledged, transferred or otherwise disposed of absent registration under the Act or the availability of an applicable exemption from registration. However, it is the intention of Xtra-Gold to qualify the Option Shares under a registration statement. All certificates evidencing the Option Shares will contain a legend describing this restriction on resale of the Option Shares. There is no assurance that there will be a public market into which you may sell the Option Shares or that you will be able to sell your Option Shares at a profit or at all. Rebecca Kiomi Mori - 4 - April 21, 2006 10. In order to exercise the vested Options, you must provide us with written notice that you are exercising all or a portion of such Options. The written notice must specify the number of Option Shares that you are exercising your Options for, and must be accompanied by the exercise price described in paragraph 4 above. Your Option Shares will be issued to you within approximately one week following our receipt of your exercise notice and cleared funds evidencing the exercise price. 11. No rights or privileges of a stockholder of Xtra-Gold are conferred by reason of the grant of the Options to you. You will have no rights of a stockholder until you have delivered your exercise notice to us and we have received the exercise price of the Options in cleared funds and have delivered a share certificate or certificates to you evidencing the shares arising out of such exercise. 12. You understand that the Plan contains important information about your Options and your rights with respect to the Options. The Plan includes (a) terms relating to your right to exercise the Options; (b) important restrictions on your ability to transfer the Options or Option Shares; and (c) early termination of the Options following the occurrence of certain events, including the termination of your relationship with us. By signing below, you acknowledge your receipt of a copy of the Plan. By acceptance of your Options by way of execution of this Agreement, you agree to abide by the terms and conditions of this Agreement and the Plan. 13. We are a young company and are subject to all of the risks and uncertainties of a young company. We may never operate profitably. The exercise of your Options is a speculative investment and there is no assurance that you will realize a profit on the exercise of your Options. 14. The Options will become effective upon your acknowledgment of the terms and conditions of this Agreement and your delivery to us of a signed counterpart of this Agreement. 15. This Agreement and Plan contain all of the terms and conditions of your Options and supercedes all prior agreements or understandings relating to your Options. This Agreement shall be governed by the laws of the State of Florida without regard to the conflicts of laws provisions thereof. This Agreement may not be amended orally. We appreciate your continued support and contributions and are hopeful that your Options will provide financial benefits to you in the future. Yours very truly, XTRA-GOLD RESOURCES CORP. By: /s/ William Edward (Ted) McKechnie WEMcK/rkm William Edward (Ted) McKechnie, Enclosure Chairman and Chief Executive Officer AGREED TO AND ACCEPTED this 21st day of April, 2006. /s/ REBECCA KIOMI MORI ---------------------- REBECCA KIOMI MORI EX-10 20 ex_10-12.txt BYRON STOCK OPTION AGREEMENT DATED 05-01-2006 EXHIBIT 10.12 XTRA-GOLD RESOURCES CORP. May 1, 2006 Dr. Michael J. Byron 2459 Sanfrancisco Street Sudbury ON P3A 2G8 Dear Dr. Byron: RE: GRANT OF NONQUALIFIED STOCK OPTIONS We are pleased to advise you that on May 1, 2006, the board of directors of Xtra-Gold Resources Corp. ("XTRA-GOLD") authorized the award to you (sometimes hereinafter referred to as the "OPTIONEE") of an option to purchase 540,000 shares of our common stock at a par value $.001 per share (the "OPTIONS"), upon the following terms and conditions: 1. The Options are granted to you in accordance with and subject to the terms and conditions of Xtra-Gold's 2005 Equity Compensation Plan (the "PLAN"). 2. The Options are nonqualified stock options. 3. The Options have a three (3) year term (the "OPTION PERIOD") and are exercisable, on a pro rata basis as set forth in paragraph 7 hereunder, commencing on June 1, 2006, in accordance with the vesting schedule set out hereunder and shall terminate at 5:00 p.m. (Eastern Standard Time) on May 1, 2009 (the "EXPIRY DATE"). 4. The price at which the Options may be exercised is $0.70 per share. 5. The Options are transferable to a nominee as may be designated by you from time to time and may be exercised, in whole or in part, during the exercise period, as set forth herein or otherwise in accordance with the terms and conditions of the Plan. 6. The exercise price and number of underlying shares issuable upon exercise of the Options (the "OPTION SHARES") are subject to adjustment in accordance with the Plan in the event of stock splits, dividends, reorganizations and similar corporate events. ================================================================================ TORONTO HEAD OFFICE 6 KERSDALE AVENUE TORONTO, ONTARIO, CANADA M5R 1J9 PHONE: (519) 59-1818 E-MAIL: TEDMCKECHNIE@ROGERS.COM PHONE: (416) 981-3055 WEB SITE: WWW.XTRAGOLD.COM Dr. Michael J. Byron - 2 - May 1, 2006 7. The Options are to vest pro rata over the Option Period on a monthly basis in accordance with the following schedule: PRO RATA PORTION OF THE OPTIONS VESTING PERIOD 15,000 on the 1st day of each month of the Option Period following the date of grant 8. (a) Any portion of the Options that have vested and have not been exercised in a particular month shall accrue to the benefit of the Optionee (the "Accrued Options") and in connection therewith, you shall have the right to exercise the Accrued Options for a period of time as may be set out in the Option Plan referred to in (h) hereunder or in accordance with securities laws governing Xtra-Gold, but in no event shall the Accrued Options be exercised later than the earlier of (a) the Expiry Date; and (b) the exercise date contemplated in subparagraphs 8.(b), (c), (d), (e) and (f) hereunder. (b) In the event of termination as a result of your voluntary resignation, all Accrued Options must be exercised within 90 days from the date of your resignation, failing which the Accrued Options will be cancelled. (c) In the event of your death during the Option Period, all Accrued Options must be exercised by your estate within one year from the date of your death, failing which the Accrued Options will be cancelled. (d) In the event that you or Byron Geological Inc. are terminated by Xtra-Gold, without cause, then in such event Xtra-Gold agrees that you may retain 100% of the Accrued Options and 100% of the unvested Options (the "UNVESTED OPTIONS"); provided, however that the Options referred to in this subparagraph must be exercised no later than 90 days following such termination, failing which such Options will be cancelled. (e) In the event that you or Byron Geological Inc. are terminated by Xtra-Gold, with cause, then in such event Xtra-Gold agrees that you may retain 100% of the Accrued Options; provided, however that the Accrued Options must be exercised no later than 90 days following such termination, failing which such Accrued Options will be cancelled. All Unvested Options will be cancelled immediately upon your termination, with cause. Dr. Michael J. Byron - 3 - May 1, 2006 (f) In the event of (A) a change of control of Xtra-Gold, whether by an unrelated third party of Xtra-Gold or by a control block of Xtra-Gold stockholders; or (B) the sale of 51% or more of the assets of Xtra-Gold, all Options granted to you shall vest in which event, you will have the right to exercise such Options within 90 days following the completion of any event contemplated in this subparagraph. For clarity purposes, the assets of Xtra-Gold include the assets of its subsidiaries. For further clarity purposes, a "change of control" shall mean the purchase by and/or issuance to an unrelated third party of such number of shares in Xtra as constitutes a majority of issued and outstanding shares entitled to vote in an election of Xtra's Board. (g) The share certificate or certificates issued as a result of the exercise of Options from time to time shall bear a restrictive legend with respect to the resale of the shares issued in connection therewith. In particular, until such time that a registration statement has been filed by Xtra-Gold and effective with the U.S. Securities and Exchange Commission: (i) the Option Shares cannot be otherwise resold unless held for two years, in accordance with Rule 144(k); or alternatively (ii) if Xtra-Gold is a reporting company, then the applicable hold period shall be one year from the date of the issuance of Option Shares in accordance with Rule 144. (h) Xtra-Gold implemented and adopted a 2005 equity compensation plan (the "OPTION PLAN") which implementation and adoption was been approved in writing by the Board in June 2005. Xtra-Gold did not obtain shareholder approval. (i) The Options shall at all times be subject to the terms of the Option Agreement and the Option Plan. 9. Neither the Options nor the Option Shares have been registered under the Securities Act of 1933, as amended (the "ACT"), and the Option Shares may not be sold, assigned, pledged, transferred or otherwise disposed of absent registration under the Act or the availability of an applicable exemption from registration. However, it is the intention of Xtra-Gold to qualify the Option Shares under a registration statement. All certificates evidencing the Option Shares will contain a legend describing this restriction on resale of the Option Shares. There is no assurance that there will be a public market into which you may sell the Option Shares or that you will be able to sell your Option Shares at a profit or at all. Dr. Michael J. Byron - 4 - May 1, 2006 10. In order to exercise the vested Options, you must provide us with written notice that you are exercising all or a portion of such Options. The written notice must specify the number of Option Shares that you are exercising your Options for, and must be accompanied by the exercise price described in paragraph 4 above. Your Option Shares will be issued to you within approximately one week following our receipt of your exercise notice and cleared funds evidencing the exercise price. 11. No rights or privileges of a stockholder of Xtra-Gold are conferred by reason of the grant of the Options to you. You will have no rights of a stockholder until you have delivered your exercise notice to us and we have received the exercise price of the Options in cleared funds and have delivered a share certificate or certificates to you evidencing the shares arising out of such exercise. 12. You understand that the Plan contains important information about your Options and your rights with respect to the Options. The Plan includes (a) terms relating to your right to exercise the Options; (b) important restrictions on your ability to transfer the Options or Option Shares; and (c) early termination of the Options following the occurrence of certain events, including the termination of your relationship with us. By signing below, you acknowledge your receipt of a copy of the Plan. By acceptance of your Options by way of execution of this Agreement, you agree to abide by the terms and conditions of this Agreement and the Plan. 13. We are a young company and are subject to all of the risks and uncertainties of a young company. We may never operate profitably. The exercise of your Options is a speculative investment and there is no assurance that you will realize a profit on the exercise of your Options. 14. The Options will become effective upon your acknowledgment of the terms and conditions of this Agreement and your delivery to us of a signed counterpart of this Agreement. 15. This Agreement and Plan contain all of the terms and conditions of your Options and supercedes all prior agreements or understandings relating to your Options. This Agreement shall be governed by the laws of the State of Florida without regard to the conflicts of laws provisions thereof. This Agreement may not be amended orally. We appreciate your continued support and contributions and are hopeful that your Options will provide financial benefits to you in the future. Yours very truly, XTRA-GOLD RESOURCES CORP. By: /s/ William Edward (Ted) McKechnie WEMcK/rkm William Edward (Ted) McKechnie, Enclosure Chairman and Chief Executive Officer AGREED TO AND ACCEPTED this 1st day of May, 2006. /s/ DR. MICHAEL J. BYRON ------------------------ DR. MICHAEL J. BYRON EX-10 21 ex_10-13.txt CLEMENT STOCK OPTION AGREEMENT DATED 05-01-2006 EXHIBIT 10.13 XTRA-GOLD RESOURCES CORP. May 1, 2006 Yves P. Clement c/o 422 St. George Sudbury ON P3B 2L6 Dear Mr. Clement: RE: GRANT OF NONQUALIFIED STOCK OPTIONS We are pleased to advise you that on May 1, 2006, the board of directors of Xtra-Gold Resources Corp. ("XTRA-GOLD") authorized the award to you (sometimes hereinafter referred to as the "OPTIONEE") of an option to purchase 324,000 shares of our common stock at a par value $.001 per share (the "OPTIONS"), upon the following terms and conditions: 1. The Options are granted to you in accordance with and subject to the terms and conditions of Xtra-Gold's 2005 Equity Compensation Plan (the "PLAN"). 2. The Options are nonqualified stock options. 3. The Options have a three (3) year term (the "OPTION PERIOD") and are exercisable, on a pro rata basis as set forth in paragraph 7 hereunder, commencing on June 1, 2006, in accordance with the vesting schedule set out hereunder and shall terminate at 5:00 p.m. (Eastern Standard Time) on May 1, 2009 (the "EXPIRY DATE"). 4. The price at which the Options may be exercised is $0.70 per share. 5. The Options are transferable to a nominee as may be designated by you from time to time and may be exercised, in whole or in part, during the exercise period, as set forth herein or otherwise in accordance with the terms and conditions of the Plan. 6. The exercise price and number of underlying shares issuable upon exercise of the Options (the "OPTION SHARES") are subject to adjustment in accordance with the Plan in the event of stock splits, dividends, reorganizations and similar corporate events. ================================================================================ TORONTO HEAD OFFICE 6 KERSDALE AVENUE TORONTO, ONTARIO, CANADA M5R 1J9 PHONE: (519) 59-1818 E-MAIL: TEDMCKECHNIE@ROGERS.COM PHONE: (416) 981-3055 WEB SITE: WWW.XTRAGOLD.COM Yves P. Clement - 2 - May 1, 2006 7. The Options are to vest pro rata over the Option Period on a monthly basis in accordance with the following schedule: PRO RATA PORTION OF THE OPTIONS VESTING PERIOD 9,000 on the 1st day of each month of the Option Period following the date of grant 8. (a) Any portion of the Options that have vested and have not been exercised in a particular month shall accrue to the benefit of the Optionee (the "ACCRUED OPTIONS") and in connection therewith, you shall have the right to exercise the Accrued Options for a period of time as may be set out in the Option Plan referred to in (h) hereunder or in accordance with securities laws governing Xtra-Gold, but in no event shall the Accrued Options be exercised later than the earlier of (a) the Expiry Date; and (b) the exercise date contemplated in subparagraphs 8.(b), (c), (d), (e) and (f) hereunder. (b) In the event of termination as a result of your voluntary resignation, all Accrued Options must be exercised within 90 days from the date of your resignation, failing which the Accrued Options will be cancelled. (c) In the event of your death during the Option Period, all Accrued Options must be exercised by your estate within one year from the date of your death, failing which the Accrued Options will be cancelled. (d) In the event that you are terminated by Xtra-Gold, without cause, then in such event Xtra-Gold agrees that you may retain 100% of the Accrued Options and 100% of the unvested Options (the "UNVESTED OPTIONS"); provided, however that the Options referred to in this subparagraph must be exercised no later than 90 days following such termination, failing which such Options will be cancelled. (e) In the event that you are terminated by Xtra-Gold, with cause, then in such event Xtra-Gold agrees that you may retain 100% of the Accrued Options; provided, however that the Accrued Options must be exercised no later than 90 days following such termination, failing which such Accrued Options will be cancelled. All Unvested Options will be cancelled immediately upon your termination, with cause. Yves P. Clement - 3 - May 1, 2006 (f) In the event of a change of control of Xtra-Gold (as defined herein), all Options granted to you shall vest in which event, you will have the right to exercise such Options within 90 days following the completion of such change of control. For clarity purposes, a "CHANGE OF CONTROL" shall mean the occurrence of (a) any person, other than an Employee (as such term is used in Section 13(d) and 14(d) of the Exchange Act is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's outstanding securities then having the right to vote at elections of directors; or (b) the individuals who at the commencement date of the agreement entered into between the consultant and our Company (the "MC AGREEMENT"), constitute the Board, cease for any reason to constitute a majority thereof unless the election, or nomination for election, of each new director was approved by a vote of at least two-thirds of the directors then in office who were directors at the commencement of the MC Agreement; or (c) there is a failure to elect two or more candidates nominated by management of the Company to the Board; or (d) the business of the Company for which the consultant's services are principally performed is disposed of by the Company pursuant to a partial or complete liquidation of the Company, a sale of assets (including stock of a subsidiary of our Company) or otherwise. (g) The share certificate or certificates issued as a result of the exercise of Options from time to time shall bear a restrictive legend with respect to the resale of the shares issued in connection therewith. In particular, until such time that a registration statement has been filed by Xtra-Gold and effective with the U.S. Securities and Exchange Commission: (i) the Option Shares cannot be otherwise resold unless held for two years, in accordance with Rule 144(k); or alternatively (ii) if Xtra-Gold is a reporting company, then the applicable hold period shall be one year from the date of the issuance of Option Shares in accordance with Rule 144. (h) Xtra-Gold implemented and adopted a 2005 equity compensation plan (the "OPTION PLAN") which implementation and adoption was been approved in writing by the Board in June 2005. Xtra-Gold did not obtain shareholder approval. (i) The Options shall at all times be subject to the terms of the Option Agreement and the Option Plan. 9. Neither the Options nor the Option Shares have been registered under the Securities Act of 1933, as amended (the "ACT"), and the Option Shares may not be sold, assigned, pledged, transferred or otherwise disposed of absent registration under the Act or the availability of an applicable exemption from registration. However, it is the intention of Xtra-Gold to qualify the Option Shares under a registration statement. All certificates evidencing the Option Shares will contain a legend describing this restriction on resale of the Option Shares. There is no assurance that there will be a public market into which you may sell the Option Shares or that you will be able to sell your Option Shares at a profit or at all. Yves P. Clement - 4 - May 1, 2006 10. In order to exercise the vested Options, you must provide us with written notice that you are exercising all or a portion of such Options. The written notice must specify the number of Option Shares that you are exercising your Options for, and must be accompanied by the exercise price described in paragraph 4 above. Your Option Shares will be issued to you within approximately one week following our receipt of your exercise notice and cleared funds evidencing the exercise price. 11. No rights or privileges of a stockholder of Xtra-Gold are conferred by reason of the grant of the Options to you. You will have no rights of a stockholder until you have delivered your exercise notice to us and we have received the exercise price of the Options in cleared funds and have delivered a share certificate or certificates to you evidencing the shares arising out of such exercise. 12. You understand that the Plan contains important information about your Options and your rights with respect to the Options. The Plan includes (a) terms relating to your right to exercise the Options; (b) important restrictions on your ability to transfer the Options or Option Shares; and (c) early termination of the Options following the occurrence of certain events, including the termination of your relationship with us. By signing below, you acknowledge your receipt of a copy of the Plan. By acceptance of your Options by way of execution of this Agreement, you agree to abide by the terms and conditions of this Agreement and the Plan. 13. We are a young company and are subject to all of the risks and uncertainties of a young company. We may never operate profitably. The exercise of your Options is a speculative investment and there is no assurance that you will realize a profit on the exercise of your Options. 14. The Options will become effective upon your acknowledgment of the terms and conditions of this Agreement and your delivery to us of a signed counterpart of this Agreement. 15. This Agreement and Plan contain all of the terms and conditions of your Options and supercedes all prior agreements or understandings relating to your Options. This Agreement shall be governed by the laws of the State of Florida without regard to the conflicts of laws provisions thereof. This Agreement may not be amended orally. We appreciate your continued support and contributions and are hopeful that your Options will provide financial benefits to you in the future. Yours very truly, XTRA-GOLD RESOURCES CORP. By: /s/ William Edward (Ted) McKechnie WEMcK/rkm William Edward (Ted) McKechnie, Enclosure Chairman and Chief Executive Officer AGREED TO AND ACCEPTED this 1st day of May, 2006. /s/ YVES P. CLEMENT ------------------- YVES P. CLEMENT EX-10 22 ex_10-14.txt ABUDULAI STOCK OPTION AGREEMENT DATED 05-01-2006 EXHIBIT 10.14 XTRA-GOLD RESOURCES CORP. May 1, 2006 Alhaji Nantogma Abudulai P.O. Box CT2654 Cantonment Accra, Ghana Dear Mr. Abudulai: RE: GRANT OF NONQUALIFIED STOCK OPTIONS We are pleased to advise you that on May 1, 2006, the board of directors of Xtra-Gold Resources Corp. ("XTRA-GOLD") authorized the award to you (sometimes hereinafter referred to as the "OPTIONEE") of an option to purchase 108,000 shares of our common stock at a par value $.001 per share (the "OPTIONS"), upon the following terms and conditions: 1. The Options are granted to you in accordance with and subject to the terms and conditions of Xtra-Gold's 2005 Equity Compensation Plan (the "PLAN"). 2. The Options are nonqualified stock options. 3. The Options have a three (3) year term (the "OPTION PERIOD") and are exercisable, on a pro rata basis as set forth in paragraph 7 hereunder, commencing on June 1, 2006, in accordance with the vesting schedule set out hereunder and shall terminate at 5:00 p.m. (Eastern Standard Time) on May 1, 2009 (the "EXPIRY DATE"). 4. The price at which the Options may be exercised is $0.70 per share. 5. The Options are transferable to a nominee as may be designated by you from time to time and may be exercised, in whole or in part, during the exercise period, as set forth herein or otherwise in accordance with the terms and conditions of the Plan. 6. The exercise price and number of underlying shares issuable upon exercise of the Options (the "OPTION SHARES") are subject to adjustment in accordance with the Plan in the event of stock splits, dividends, reorganizations and similar corporate events. ================================================================================ TORONTO HEAD OFFICE 6 KERSDALE AVENUE TORONTO, ONTARIO, CANADA M5R 1J9 PHONE: (519) 59-1818 E-MAIL: TEDMCKECHNIE@ROGERS.COM PHONE: (416) 981-3055 WEB SITE: WWW.XTRAGOLD.COM Alhaji Nantogma Abudulai - 2 - May 1, 2006 7. The Options are to vest pro rata over the Option Period on a monthly basis in accordance with the following schedule: PRO RATA PORTION OF THE OPTIONS VESTING PERIOD 3,000 on the 1st day of each month of the Option Period following the date of grant 8. (a) Any portion of the Options that have vested and have not been exercised in a particular month shall accrue to the benefit of the Optionee (the "ACCRUED OPTIONS") and in connection therewith, you shall have the right to exercise the Accrued Options for a period of time as may be set out in the Option Plan referred to in (viii) hereunder or in accordance with securities laws governing Xtra-Gold, but in no event shall the Accrued Options be exercised later than the earlier of (a) the Expiry Date; and (b) the exercise date contemplated in subparagraphs 8.(b), (c), (d), (e) and (f) hereunder. (b) In the event of termination as a result of your voluntary resignation, all Accrued Options must be exercised within 90 days from the date of your resignation, failing which the Accrued Options will be cancelled. (c) In the event of your death during the Option Period, all Accrued Options must be exercised by your estate within one year from the date of your death, failing which the Accrued Options will be cancelled. (d) In the event that you are terminated by Xtra-Gold, without cause, then in such event Xtra-Gold agrees that you may retain 100% of the Accrued Options and 100% of the unvested Options (the "UNVESTED OPTIONS"); provided, however that the Options referred to in this subparagraph must be exercised no later than 90 days following such termination, failing which such Options will be cancelled. (e) In the event that you are terminated by Xtra-Gold, with cause, then in such event Xtra-Gold agrees that you may retain 100% of the Accrued Options; provided, however that the Accrued Options must be exercised no later than 90 days following such termination, failing which such Accrued Options will be cancelled. All Unvested Options will be cancelled immediately upon your termination, with cause. Alhaji Nantogma Abudulai - 3 - May 1, 2006 (f) In the event of a change of control of Xtra-Gold (as defined herein), all Options granted to you shall vest in which event, you will have the right to exercise such Options within 90 days following the completion of such change of control. For clarity purposes, a "CHANGE OF CONTROL" shall mean the occurrence of (a) any person, other than an Employee (as such term is used in Section 13(d) and 14(d) of the Exchange Act is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's outstanding securities then having the right to vote at elections of directors; or (b) the individuals who at the commencement date of the agreement entered into between the consultant and our Company (the "MC AGREEMENT"), constitute the Board, cease for any reason to constitute a majority thereof unless the election, or nomination for election, of each new director was approved by a vote of at least two-thirds of the directors then in office who were directors at the commencement of the MC Agreement; or (c) there is a failure to elect two or more candidates nominated by management of the Company to the Board; or (d) the business of the Company for which the consultant's services are principally performed is disposed of by the Company pursuant to a partial or complete liquidation of the Company, a sale of assets (including stock of a subsidiary of our Company) or otherwise. (g) The share certificate or certificates issued as a result of the exercise of Options from time to time shall bear a restrictive legend with respect to the resale of the shares issued in connection therewith. In particular, until such time that a registration statement has been filed by Xtra-Gold and effective with the U.S. Securities and Exchange Commission: (i) the Option Shares cannot be otherwise resold unless held for two years, in accordance with Rule 144(k); or alternatively (ii) if Xtra-Gold is a reporting company, then the applicable hold period shall be one year from the date of the issuance of Option Shares in accordance with Rule 144. (h) Xtra-Gold implemented and adopted a 2005 equity compensation plan (the "OPTION PLAN") which implementation and adoption was been approved in writing by the Board in June 2005. Xtra-Gold did not obtain shareholder approval. (i) The Options shall at all times be subject to the terms of the Option Agreement and the Option Plan. 9. Neither the Options nor the Option Shares have been registered under the Securities Act of 1933, as amended (the "ACT"), and the Option Shares may not be sold, assigned, pledged, transferred or otherwise disposed of absent registration under the Act or the availability of an applicable exemption from registration. However, it is the intention of Xtra-Gold to qualify the Option Shares under a registration statement. All certificates evidencing the Option Shares will contain a legend describing this restriction on resale of the Option Shares. There is no assurance that there will be a public market into which you may sell the Option Shares or that you will be able to sell your Option Shares at a profit or at all. Alhaji Nantogma Abudulai - 4 - May 1, 2006 10. In order to exercise the vested Options, you must provide us with written notice that you are exercising all or a portion of such Options. The written notice must specify the number of Option Shares that you are exercising your Options for, and must be accompanied by the exercise price described in paragraph 4 above. Your Option Shares will be issued to you within approximately one week following our receipt of your exercise notice and cleared funds evidencing the exercise price. 11. No rights or privileges of a stockholder of Xtra-Gold are conferred by reason of the grant of the Options to you. You will have no rights of a stockholder until you have delivered your exercise notice to us and we have received the exercise price of the Options in cleared funds and have delivered a share certificate or certificates to you evidencing the shares arising out of such exercise. 12. You understand that the Plan contains important information about your Options and your rights with respect to the Options. The Plan includes (a) terms relating to your right to exercise the Options; (b) important restrictions on your ability to transfer the Options or Option Shares; and (c) early termination of the Options following the occurrence of certain events, including the termination of your relationship with us. By signing below, you acknowledge your receipt of a copy of the Plan. By acceptance of your Options by way of execution of this Agreement, you agree to abide by the terms and conditions of this Agreement and the Plan. 13. We are a young company and are subject to all of the risks and uncertainties of a young company. We may never operate profitably. The exercise of your Options is a speculative investment and there is no assurance that you will realize a profit on the exercise of your Options. 14. The Options will become effective upon your acknowledgment of the terms and conditions of this Agreement and your delivery to us of a signed counterpart of this Agreement. 15. This Agreement and Plan contain all of the terms and conditions of your Options and supercedes all prior agreements or understandings relating to your Options. This Agreement shall be governed by the laws of the State of Florida without regard to the conflicts of laws provisions thereof. This Agreement may not be amended orally. We appreciate your continued support and contributions and are hopeful that your Options will provide financial benefits to you in the future. Yours very truly, XTRA-GOLD RESOURCES CORP. By: /s/ William Edward (Ted) McKechnie WEMcK/rkm William Edward (Ted) McKechnie, Enclosure Chairman and Chief Executive Officer AGREED TO AND ACCEPTED this 1st day of May, 2006. /s/ ALHAJI NANTOGMA ABUDULAI ---------------------------- ALHAJI NANTOGMA ABUDULAI EX-10 23 ex_10-15.txt MCKECHNIE STOCK OPTION AGREEMENT DATED 08-01-2006 EXHIBIT 10.15 XTRA-GOLD RESOURCES CORP. August 1, 2006 William Edward (Ted) McKechnie 446 Drake Circle Waterloo ON N2T 1L1 Dear Mr. McKechnie: RE: GRANT OF NONQUALIFIED STOCK OPTIONS We are pleased to advise you that on August 1, 2006, the board of directors of Xtra-Gold Resources Corp. ("XTRA-GOLD") authorized the award to you (sometimes hereinafter referred to as the "OPTIONEE") of an option to purchase 200,000 shares of our common stock at a par value $.001 per share (the "OPTIONS"), upon the following terms and conditions: 1. The Options are granted to you in accordance with and subject to the terms and conditions of Xtra-Gold's 2005 Equity Compensation Plan (the "PLAN"). 2. The Options are nonqualified stock options. 3. The Options have a three (3) year term (the "OPTION PERIOD") and are exercisable, on a pro rata basis as set forth in paragraph 7 hereunder, commencing on September 1, 2006, in accordance with the vesting schedule set out hereunder and shall terminate at 5:00 p.m. (Eastern Standard Time) on September 1, 2009 (the "EXPIRY DATE"). 4. The price at which the Options may be exercised is $0.90 per share. 5. The Options are transferable to a nominee as may be designated by you from time to time and may be exercised, in whole or in part, during the exercise period, as set forth herein or otherwise in accordance with the terms and conditions of the Plan. 6. The exercise price and number of underlying shares issuable upon exercise of the Options (the "OPTION SHARES") are subject to adjustment in accordance with the Plan in the event of stock splits, dividends, reorganizations and similar corporate events. 7. The Options are to vest pro rata over the Option Period on a monthly basis in accordance with the following schedule: ================================================================================ TORONTO HEAD OFFICE 6 KERSDALE AVENUE TORONTO, ONTARIO, CANADA M5R 1J9 PHONE: (519) 59-1818 E-MAIL: TEDMCKECHNIE@ROGERS.COM PHONE: (416) 981-3055 WEB SITE: WWW.XTRAGOLD.COM Ted McKechnie - 2 - August 1, 2006 PRO RATA PORTION OF THE OPTIONS VESTING PERIOD 5,555 on the 1st day of each month of the Option Period following the date of grant from September 1, 2006 to July 1, 2009 5,575 on the 1st day of August, 2009 8. (a) Any portion of the Options that have vested and have not been exercised in a particular month shall accrue to the benefit of the Optionee (the "ACCRUED OPTIONS") and in connection therewith, you shall have the right to exercise the Accrued Options for a period of time as may be set out in the Option Plan referred to in (h) hereunder or in accordance with securities laws governing Xtra-Gold, but in no event shall the Accrued Options be exercised later than the earlier of (a) the Expiry Date; and (b) the exercise date contemplated in subparagraphs 8.(b), (c), (d), (e) and (f) hereunder. (b) In the event of termination as a result of the voluntary resignation of you or Goldeye Consultants Ltd. ("GOLDEYE"), a corporation of which you are a director which has entered into a consulting agreement dated July 1, 2006 with Xtra-Gold, all Accrued Options must be exercised within 90 days from the date of the resignation by either one of you, failing which the Accrued Options will be cancelled. (c) In the event of your death during the Option Period, all Accrued Options must be exercised by your estate within one year from the date of your death, failing which the Accrued Options will be cancelled. (d) In the event that you or Goldeye are terminated by Xtra-Gold, without cause, then in such event Xtra-Gold agrees that you may retain 100% of the Accrued Options and 100% of the unvested Options (the "UNVESTED OPTIONS"); provided, however that the Options referred to in this subparagraph must be exercised no later than 90 days following such termination, failing which such Options will be cancelled. (e) In the event that you or Goldeye are terminated by Xtra-Gold, with cause, then in such event Xtra-Gold agrees that you may retain 100% of the Accrued Options; provided, however that the Accrued Options must be exercised no later than 90 days following such termination, failing which such Accrued Options will be cancelled. All Unvested Options will be cancelled immediately upon your termination, with cause. Ted McKechnie - 3 - August 1, 2006 (f) In the event of a change of control of Xtra-Gold (as defined herein), all Options granted to you shall vest in which event, you will have the right to exercise such Options within 90 days following the completion of such change of control. For clarity purposes, a "CHANGE OF CONTROL" shall mean the occurrence of (a) any person, other than an Employee (as such term is used in Section 13(d) and 14(d) of the Exchange Act is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's outstanding securities then having the right to vote at elections of directors; or (b) the individuals who at the commencement date of the agreement entered into between the consultant and our Company (the "MC AGREEMENT"), constitute the Board, cease for any reason to constitute a majority thereof unless the election, or nomination for election, of each new director was approved by a vote of at least two-thirds of the directors then in office who were directors at the commencement of the MC Agreement; or (c) there is a failure to elect two or more candidates nominated by management of the Company to the Board; or (d) the business of the Company for which the consultant's services are principally performed is disposed of by the Company pursuant to a partial or complete liquidation of the Company, a sale of assets (including stock of a subsidiary of our Company) or otherwise. (g) The share certificate or certificates issued as a result of the exercise of Options from time to time shall bear a restrictive legend with respect to the resale of the shares issued in connection therewith. In particular, until such time that a registration statement has been filed by Xtra-Gold and effective with the U.S. Securities and Exchange Commission: (i) the Option Shares cannot be otherwise resold unless held for two years, in accordance with Rule 144(k); or alternatively (ii) if Xtra-Gold is a reporting company, then the applicable hold period shall be one year from the date of the issuance of Option Shares in accordance with Rule 144. (h) Xtra-Gold implemented and adopted a 2005 equity compensation plan (the "OPTION PLAN") which implementation and adoption was been approved in writing by the Board in June 2005. Xtra-Gold did not obtain shareholder approval. (i) The Options shall at all times be subject to the terms of the Option Agreement and the Option Plan. 9. Neither the Options nor the Option Shares have been registered under the Securities Act of 1933, as amended (the "ACT"), and the Option Shares may not be sold, assigned, pledged, transferred or otherwise disposed of absent registration under the Act or the availability of an applicable exemption from registration. However, it is the intention of Xtra-Gold to qualify the Option Shares under a registration statement. All certificates evidencing the Option Shares will contain a legend describing this restriction on resale of the Option Shares. There is no assurance that there will be a public market into which you may sell the Option Shares or that you will be able to sell your Option Shares at a profit or at all. Ted McKechnie - 4 - August 1, 2006 10. In order to exercise the vested Options, you must provide us with written notice that you are exercising all or a portion of such Options. The written notice must specify the number of Option Shares that you are exercising your Options for, and must be accompanied by the exercise price described in paragraph 4 above. Your Option Shares will be issued to you within approximately one week following our receipt of your exercise notice and cleared funds evidencing the exercise price. 11. No rights or privileges of a stockholder of Xtra-Gold are conferred by reason of the grant of the Options to you. You will have no rights of a stockholder until you have delivered your exercise notice to us and we have received the exercise price of the Options in cleared funds and have delivered a share certificate or certificates to you evidencing the shares arising out of such exercise. 12. You understand that the Plan contains important information about your Options and your rights with respect to the Options. The Plan includes (a) terms relating to your right to exercise the Options; (b) important restrictions on your ability to transfer the Options or Option Shares; and (c) early termination of the Options following the occurrence of certain events, including the termination of your relationship with us. By signing below, you acknowledge your receipt of a copy of the Plan. By acceptance of your Options by way of execution of this Agreement, you agree to abide by the terms and conditions of this Agreement and the Plan. 13. We are a young company and are subject to all of the risks and uncertainties of a young company. We may never operate profitably. The exercise of your Options is a speculative investment and there is no assurance that you will realize a profit on the exercise of your Options. 14. The Options will become effective upon your acknowledgment of the terms and conditions of this Agreement and your delivery to us of a signed counterpart of this Agreement. 15. This Agreement and Plan contain all of the terms and conditions of your Options and supercedes all prior agreements or understandings relating to your Options. This Agreement shall be governed by the laws of the State of Florida without regard to the conflicts of laws provisions thereof. This Agreement may not be amended orally. We appreciate your continued support and contributions and are hopeful that your Options will provide financial benefits to you in the future. Yours very truly, XTRA-GOLD RESOURCES CORP. By: /s/ R. Kiomi Mori /rkm R. Kiomi Mori, Enclosure Secretary and Treasurer AGREED TO AND ACCEPTED this 1st day of August, 2006. /s/ WILLIAM EDWARD (TED) MCKECHNIE ---------------------------------- WILLIAM EDWARD (TED) MCKECHNIE EX-10 24 ex_10-16.txt MILLS STOCK OPTION AGREEMENT DATED 08-01-2006 EXHIBIT 10.16 XTRA-GOLD RESOURCES CORP. August 1, 2006 John Douglas Mills 105 Somers Road Antigonish NS B2G 2K9 Canada Dear Mr. Mills: RE: GRANT OF NONQUALIFIED STOCK OPTIONS We are pleased to advise you that on August 1, 2006, the board of directors of Xtra-Gold Resources Corp. ("XTRA-GOLD") authorized the award to you (sometimes hereinafter referred to as the "OPTIONEE") of an option to purchase 200,000 shares of our common stock at a par value $.001 per share (the "OPTIONS"), upon the following terms and conditions: 1. The Options are granted to you in accordance with and subject to the terms and conditions of Xtra-Gold's 2005 Equity Compensation Plan (the "PLAN"). 2. The Options are nonqualified stock options. 3. The Options have a three (3) year term (the "OPTION PERIOD") and are exercisable, on a pro rata basis in accordance with the vesting schedule set out hereunder and shall terminate at 5:00 p.m. (Eastern Standard Time) on August 1, 2009 (the "EXPIRY DATE"). 4. The price at which the Options may be exercised is $0.90 per share. 5. The Options are transferable to a nominee as may be designated by you from time to time and may be exercised, in whole or in part, during the exercise period, as set forth herein or otherwise in accordance with the terms and conditions of the Plan. 6. The exercise price and number of underlying shares issuable upon exercise of the Options (the "OPTION SHARES") are subject to adjustment in accordance with the Plan in the event of stock splits, dividends, reorganizations and similar corporate events. 7. The Options shall vest as to 100,000 each upon the achievement of the following benchmarks: ================================================================================ TORONTO HEAD OFFICE 6 KERSDALE AVENUE TORONTO, ONTARIO, CANADA M5R 1J9 PHONE: (519) 59-1818 E-MAIL: TEDMCKECHNIE@ROGERS.COM PHONE: (416) 981-3055 WEB SITE: WWW.XTRAGOLD.COM John Douglas Mills - 2 - August 1, 2006 (a) upon successful and profitable completion of the bulk processing pilot plan (the "BULK TEST") to be conducted at the Kwabeng Project and completion and acceptance by the Board of a full scale mine plan for the Kwabeng Project ............................. 100,000 (b) three months after the earlier occurrence of one of the following events: (i) the commencement of full scale mining production at the Kwabeng Project; or (ii) training of a replacement project manager .. 100,000 ------- TOTAL OPTIONS TO VEST ............................... 200,000 ======= 8. (a) Any portion of the Options that have vested and have not been exercised (the "ACCRUED OPTIONS") immediately following achievement of any one of the benchmarks noted above shall accrue to the benefit of the Optionee and in connection therewith, you shall have the right to exercise the Accrued Options for a period of time as may be set out in the Option Plan referred to in subparagraph (h) hereunder or in accordance with securities laws governing Xtra-Gold, but in no event shall the Accrued Options be exercised later than the earlier of (a) the Expiry Date; and (b) the exercise date contemplated in subparagraphs 8.(b), (c), (d) and (e) hereunder. (b) In the event of termination as a result of the voluntary resignation of you or J.D. Mining Ltd. ("JDM"), a corporation of which you are a director and officer which has entered into a consulting agreement dated August 1, 2006 with Xtra-Gold, all Accrued Options must be exercised within 90 days from the date of the resignation by either one of you, failing which the Accrued Options will be cancelled. (c) In the event of your death during the Option Period, all Accrued Options must be exercised by your estate within one year from the date of your death, failing which the Accrued Options will be cancelled. (d) In the event that you or JDM are terminated by Xtra-Gold, without cause, then in such event Xtra-Gold agrees that you may retain 100% of the Accrued Options and 50% of the unvested Options (the "UNVESTED OPTIONS"); provided, however that the Options referred to in this subparagraph must be exercised no later than 90 days following such termination, failing which such Options will be cancelled. John Douglas Mills - 3 - August 1, 2006 (e) In the event that you or JDM are terminated by Xtra, with cause, then in such event Xtra-Gold agrees that you may retain 100% of the Accrued Options; provided, however that the Accrued Options must be exercised no later than 90 days following such termination, failing which such Accrued Options will be cancelled. All Unvested Options will be cancelled immediately upon termination, with cause. (f) The share certificate or certificates issued as a result of the exercise of Options from time to time shall bear a restrictive legend with respect to the resale of the shares issued in connection therewith. In particular, until such time that a registration statement has been filed by Xtra-Gold and effective with the U.S. Securities and Exchange Commission: (i) the Option Shares cannot be otherwise resold unless held for two years, in accordance with Rule 144(k); or alternatively (ii) if Xtra-Gold is a reporting company, then the applicable hold period shall be one year from the date of the issuance of Option Shares in accordance with Rule 144. (g) Xtra-Gold implemented and adopted a 2005 equity compensation plan (the "OPTION PLAN") which implementation and adoption was been approved in writing by the Board in June 2005. Xtra-Gold did not obtain shareholder approval. (h) The Options shall at all times be subject to the terms of the Option Agreement and the Option Plan. 9. Neither the Options nor the Option Shares have been registered under the Securities Act of 1933, as amended (the "ACT"), and the Option Shares may not be sold, assigned, pledged, transferred or otherwise disposed of absent registration under the Act or the availability of an applicable exemption from registration. However, it is the intention of Xtra-Gold to qualify the Option Shares under a registration statement. All certificates evidencing the Option Shares will contain a legend describing this restriction on resale of the Option Shares. There is no assurance that there will be a public market into which you may sell the Option Shares or that you will be able to sell your Option Shares at a profit or at all. 10. In order to exercise the vested Options, you must provide us with written notice that you are exercising all or a portion of such Options. The written notice must specify the number of Option Shares that you are exercising your Options for, and must be accompanied by the exercise price described in paragraph 4. above. Your Option Shares will be issued to you within approximately one week following our receipt of your exercise notice and cleared funds evidencing the exercise price. John Douglas Mills - 4 - August 1, 2006 11. No rights or privileges of a stockholder of Xtra-Gold are conferred by reason of the grant of the Options to you. You will have no rights of a stockholder until you have delivered your exercise notice to us and we have received the exercise price of the Options in cleared funds and have delivered a share certificate or certificates to you evidencing the shares arising out of such exercise. 12. You understand that the Plan contains important information about your Options and your rights with respect to the Options. The Plan includes (a) terms relating to your right to exercise the Options; (b) important restrictions on your ability to transfer the Options or Option Shares; and (c) early termination of the Options following the occurrence of certain events, including the termination of your relationship with us. By signing below, you acknowledge your receipt of a copy of the Plan. By acceptance of your Options by way of execution of this Agreement, you agree to abide by the terms and conditions of this Agreement and the Plan. 13. We are a young company and are subject to all of the risks and uncertainties of a young company. We may never operate profitably. The exercise of your Options is a speculative investment and there is no assurance that you will realize a profit on the exercise of your Options. 14. The Options will become effective upon your acknowledgment of the terms and conditions of this Agreement and your delivery to us of a signed counterpart of this Agreement. 15. This Agreement and Plan contain all of the terms and conditions of your Options and supercedes all prior agreements or understandings relating to your Options. This Agreement shall be governed by the laws of the State of Florida without regard to the conflicts of laws provisions thereof. This Agreement may not be amended orally. We appreciate your continued support and contributions and are hopeful that your Options will provide financial benefits to you in the future. Yours very truly, XTRA-GOLD RESOURCES CORP. /s/ Rebecca Kiomi Mori /rkm Rebecca Kiomi Mori, Enclosure Secretary and Treasurer AGREED TO AND ACCEPTED this 1st day of August, 2006. /s/ John Douglas Mills John Douglas Mills EX-10 25 ex_10-17.txt CLEMENT MANAGEMENT AGREEMENT 05-01-2006 EXHIBIT 10-17 MANAGEMENT CONSULTING AGREEMENT THIS AGREEMENT is made as of the 1st day of May, 2006. BETWEEN: XTRA-GOLD RESOURCES CORP., a company incorporated under the laws of the State of Nevada (hereinafter referred to as "XTRA") OF THE FIRST PART - - and - YVES P. CLEMENT, of the City of Burnaby, in the Province of British Columbia (hereinafter referred to as "CLEMENT") OF THE SECOND PART WHEREAS Clement possesses the requisite knowledge and experience in connection with precious metals and mineral exploration; AND WHEREAS Xtra is desirous of appointing Yves P. Clement as Vice-President, Exploration ("VPE") of Xtra and further wishes to engage Clement on a management consulting basis with a view to Clement providing certain services to Xtra. NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the sum of Ten ($10.00) Dollars, the receipt and sufficiency of which is hereby acknowledged by the parties hereto and other good and valuable consideration, the parties hereto agree as follows: 1. SERVICES TO BE PROVIDED (a) Clement shall provide management consulting services (the "SERVICES") as may be required by Xtra from time to time. (b) The scope of the Services will be strictly of a consulting nature, wherein Clement will provide the Services as set out in Schedule "A" annexed hereto. - 2 - 2. COMPENSATION (a) Clement shall be paid Cdn.$120,000.00 per annum (plus GST) in connection with the Services (the "FEES") and the Fees shall be paid to Clement on the following terms and in a manner of payment to be agreed to between the Parties: (i) 50% of the Fees (Cdn.$60,000.00) shall be paid by Xtra; and (ii) it is the understanding of Xtra that Clement will enter into a separate agreement with Ginguro Exploration Inc. ("GINGURO"), upon completion of a financing (the "FINANCING") currently undertaken by Ginguro, whereby 50% of the Fees (Cdn.$60,000.00) shall be paid by Ginguro; provided, however, that until such time that the Financing is completed: (iii) 100% of the Fees (Cdn.$120,000.00) shall be paid by Xtra. (b) STOCK OPTIONS On or about the date of this Agreement, the Board shall grant Clement an aggregate of 324,000 non-qualified stock options (the "OPTIONS") on the following terms and as more particularly set forth in a stock option agreement (the "OPTION AGREEMENT") to be entered into between the Parties: (i) the price at which the Options may be exercised is U.S.$0.70 per share; (ii) the term of the Options shall be for three (3) years and shall expire three (3) years from the date of grant (the "EXPIRY DATE"); (iii) the Options shall vest over a three (3) year period at the rate of 9,000 Options per month; (iv) any portion of the Options that have vested and have not been exercised in a particular month shall accrue to the benefit of Clement (the "ACCRUED OPTIONS") and in connection therewith, Clement shall have the right to exercise the Accrued Options for a period of time as may be set out in the Option Plan referred to in (viii) hereunder or in accordance with securities laws governing Xtra, but in no event shall the Accrued Options be exercised later than the earlier of (a) the Expiry Date; and (b) the exercise date contemplated in subparagraphs (v), (vi) and (vii) hereunder; (v) in the event of (i) a takeover of Xtra whether by a unrelated third party of Xtra or by a control block of its stockholders; or (ii) a sale of more than 51% of its assets, all Options granted to Clement shall vest in which event Clement will have the right to exercise such Options within 90 days following the completion of such takeover or sale. - 3 - (vi) in the event that Clement is terminated by Xtra, without cause, then in such event Xtra agrees that Clement shall retain 100% of the Accrued Options and 50% of the unvested Options (the "UNVESTED OPTIONS"); provided, however that the Options referred to in this subparagraph must be exercised no later than 90 days following such termination, failing which these Options will be cancelled; (vii) in the event that Clement is terminated by Xtra, with cause, then in such event Xtra agrees that Clement shall retain 100% of the vested but unexercised Options (the "VESTED OPTIONS"); provided, however that the Vested Options must be exercised no later than 90 days following such termination, failing which such Vested Options will be cancelled. All unvested Options will be cancelled immediately upon termination, with cause; (viii) Xtra implemented and adopted a 2005 equity compensation plan (the "OPTION PLAN") which implementation and adoption was been approved in writing by the Board in June 2005; and (ix) the Options shall at all times be subject to the terms of the Option Agreement and the Option Plan. For purposes of clarity of subparagraph 2 (vi) and (vii), Clement shall mean and include the VPE. 3. PLACE OF WORK Clement shall render the Services primarily at his place of business; however, upon request, will provide the Services at such other place or places as may be reasonably requested by Xtra from time to time as deemed appropriate for the performance of his Services. 4. TIME The VPE's daily schedule and hours worked on any given day shall generally be at Clement's discretion, but at all times shall be subject to and dependent upon Xtra's needs. Xtra relies upon Clement to ensure that he devotes sufficient time as deemed necessary in order to fulfill the spirit and purpose of this Agreement. 5. REIMBURSEMENT FOR EXPENSES INCURRED BY CLEMENT ON BEHALF OF XTRA Clement will submit an expense report for expenses actually and properly incurred on behalf of Xtra on a monthly basis in the form provided by Xtra for such purpose. Xtra shall reimburse Clement for approved reasonable expenses within five (5) business days following receipt of Clement's itemized monthly expense report. Clement agrees to provide proper receipts for expenses incurred and submitted. - 4 - 6. REPRESENTATIONS OF CLEMENT (a) Clement represents that he has the requisite qualifications, experience and capabilities to perform the Services to a standard of care, skill and diligence acceptable within the mining industry. (b) Clement shall complete an Officer's and Director's Questionnaire (the "QUESTIONNAIRE"). The parties hereto acknowledge that the Questionnaire had not been completed prior to the execution of this Agreement. The parties agree that Xtra shall have the right to terminate this Agreement without advance notice in the event that the Questionnaire reveals information that, in the determination of the Board, could reasonably adversely affect Xtra's disclosure in its SEC filings. (c) Clement further represents that none of the following events has occurred during the previous 10 years: (i) there has been no bankruptcy filed by or against Clement or any business of which Clement was a general partner or executive officer at the time the petition was filed or within two (2) years prior to the filing; (ii) Clement has not been convicted in a criminal proceeding or is the subject of a pending criminal proceeding (except traffic violations); (iii) Clement is not and has not been subject to any order, judgment or decree not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting the involvement in any type of business, securities or banking activities; and (iv) Clement has not been found by a court of competent jurisdiction (in a civil action), the SEC or the CFTC of violating a federal or state securities or commodities law, and the judgment has not been reversed, vacated or suspended. 7. INDEPENDENT CONSULTANT (a) Clement shall not be construed to be an employee of Xtra and at all times shall remain an independent consultant. (b) Clement shall not be entitled to nor shall receive any benefit normally provided to Xtra's employees including, but not limited to, vacation pay, health, disability and other insurance coverage, sick pay or retirement funds. - 5 - (c) No withholding for income taxes or any other tax or contribution shall be deducted from payments rendered to Clement. Clement herein agrees to be solely responsible for the payment or taxes or contributions due on any amounts received by Clement under this Agreement. 8. TOOLS OF TRADE AND SUPPLIES Unless otherwise agreed to by Xtra in advance, Clement shall be solely responsible for procuring, paying for and maintaining any computer equipment, software, tools or supplies necessary or appropriate for the performance of the Services. 9. EXCLUSIVITY OF CLEMENT Nothing herein shall be deemed to require Clement to provide his Services exclusively to Xtra, provided however, that Clement shall be prohibited from direct competition against Xtra where he may provide similar Services to third party companies. In particular, Clement agrees to provide Xtra with a first right of refusal on all recommendations made by him with respect to mineral and acquisition properties as set out in paragraph 14 herein. In particular, for purposes of paragraphs 9 and 14, the Parties hereto agree that the area of interest is established as being any mineral property situate in Africa. 10. CONFIDENTIALITY (a) During the term of this Agreement and thereafter for a period of two (2) years, Clement shall maintain all matters involving Xtra and the Services performed by Clement in the strictest of confidence, except insofar as shall be required in order for Clement to perform the Services hereunder or as may be authorized in writing by Xtra, or as may come into the public domain through sources beyond the control of Clement or Xtra or as may be required by law. (b) Clement hereby agrees to enter into and execute a confidentiality, non-competition and non-disclosure agreement simultaneously with the execution of this Agreement. (c) Upon termination of this Agreement, Clement warrants that he shall deliver to Xtra forthwith any and all materials and information relating to the Services including, but not limited to, any and all files, agreements, reports, correspondence, business plans, technical and financial data. 11. INDEMNIFICATION In the event of any legal action commenced by a corporation or an individual with respect to Clement's Services under this Agreement, Xtra hereby agrees to indemnify and hold harmless Clement from and against all such actions, claims, liabilities, costs and expenses and the legal fees and disbursements in connection therewith shall be borne by Xtra; provided that the indemnification - 6 - provided under this paragraph shall not be available to the extent of Clement's gross negligence, willful misconduct, violation of applicable statute, rule or regulation, or under circumstances where applicable law does not permit indemnification. 12. OWNERSHIP OF INFORMATION Any and all information produced as a result of the Services provided by Clement or any documentation deriving therefrom shall remain the exclusive property of Xtra and Clement shall have no claim or interest therein, except as referred to hereunder in paragraph 14. 13. INSURANCE (a) Xtra hereby agrees to consider death and dismemberment insurance coverage (the "INSURANCE") for any person attending or working upon its mineral properties in Ghana. (b) Provided that Xtra determines that the Insurance can be purchased at a reasonable cost, Xtra hereby agrees to purchase the Insurance. 14. RIGHT OF FIRST REFUSAL Subject to paragraph 9 of this Agreement, in the event that Xtra declines any interest in acquiring a particular mining property, Clement shall have the right to pursue other potential purchasers for such purpose. 15. ASSIGNMENT Clement may not assign his interests under this Agreement or any of the Services to be provided by Clement without having first obtained the consent in writing of Xtra. 16. TERM The term of this Agreement is for three (3) years commencing on May 1, 2006 (the "TERM"). Thereafter, in the event that Xtra fails to provide 60 days' notice in writing to Clement to the contrary, the Term will be renewed in increments of one (1) year in accordance with the existing terms and conditions of this Agreement, unless such terms and conditions are otherwise amended and agreed to in writing between the Parties. 17. TERMINATION (a) Except as provided in paragraph 6(b) of this Agreement, either Clement or Xtra may terminate this Agreement without reason or cause by first providing the other party with three (3) months' written notice in advance of such termination. - 7 - (b) Xtra may terminate this Agreement, without providing Clement with any notice of termination, in the event of any one of the following causes: (i) Clement is convicted of a crime; (ii) Clement commits fraud or similar actions against Xtra; (iii) Clement commits willful misconduct; or (iv) Clement commits habitual intoxication or substance abuse. (c) In the event of the voluntary termination by Clement, any unexercised Options or Accrued Options shall be cancelled 90 days following such termination. (d) In the event of termination of Clement by Xtra, without notice, for cause as set out in subparagraph (b) above, any unexercised Options or Accrued Options shall be cancelled immediately. (e) Clement agrees to maintain all matters herein in confidence, in perpetuity, except as referred to in paragraph 14 above, unless disclosure of such matters is required pursuant to a court of law. 18. RETIREMENT ALLOWANCE (a) In the event that Xtra terminates Clement, without cause, at any time during the Term; provided however that Clement shall have provided the Services for at least six (6) months, Clement shall be paid a pro rata portion of his Fees based on 50% of his Fees for an 18 month period. For clarity purposes, the Parties hereto agree that Clement shall be paid an aggregate sum of CAD$90,000 upon: (i) execution and delivery of a full and final release; (ii) execution and delivery of corporate resignations of any offices held by the VPE; and (iii) the return of all Xtra property in the possession of Clement as set out in paragraph 10(c) of this Agreement. 19. ADDRESS FOR DELIVERY OR NOTICE Each notice under this Agreement shall be made in writing and may be sent by facsimile or electronic formatted transmission (e-mail) or delivered to the address for such Party as noted hereunder: - 8 - (a) if to Xtra, (i) by regular mail or courier to: 3151 Clint Moore Road - and - 6 Kersdale Avenue Suite 204 Toronto ON M6M 1C8 Boca Raton FL 33496 (ii) by e-mail transmission to: tedmckechnie@rogers.com with a copy to: kiomi@sympatico.ca (iii) by fax to: (416) 981-3055 (b) if to Clement, (i) by regular mail or courier to: #212 - 5932 Patterson Avenue Burnaby BC V5H 4B4 (ii) by e-mail transmission to: ypclement@hotmail.com (iii) by fax to: (604) 454-9237 Either Party may change its mailing address, e-mail address or facsimile number by notifying the other Party in writing. 20. SEVERABILITY AND CONSTRUCTION OF AGREEMENT Each section, paragraph, term and provision of this Agreement and any portion thereof shall be considered severable and, if for any reason whatsoever, any portion of this Agreement is determined to be invalid, contrary to or in conflict with any applicable present or future law, rule or regulation by a final ruling issued by a court of jurisdiction, agency or tribunal with valid jurisdiction, then that ruling shall not impair the operation of any other portions of this Agreement as may remain otherwise intelligible (all of which shall remain binding on the Parties hereto and continue to be of full force and effect as of the date upon which the ruling becomes final). - 9 - 21. CONSENTS AND WAIVERS No consent or waiver by either Party in respect of any breach of a provision of this Agreement shall be deemed to be a consent or waiver of any other breach of this Agreement. 22. ENUREMENT This Agreement shall enure to the benefit of and be binding upon the Parties hereto and their respective heirs, executors, administrators, successors and permitted assigns. 23. ENTIRE AGREEMENT This document contains the entire agreement made between the Parties hereto as of the date of this Agreement and no representations, inducements, promises or agreements not embodied or referenced herein shall be of any force or effect, unless the same are set forth in writing and signed by the Parties hereto. 24. AMENDMENTS TO AGREEMENT This Agreement may be amended from time to time as agreed to in writing between the Parties. Any amending agreement together with the unamended sections of this Agreement shall then constitute the entire agreement between the Parties. 25. APPLICABLE LAW For all purposes, this Agreement will be governed exclusively by and be construed and enforced in accordance with the laws prevailing in the State of Nevada. 26. EXECUTION OF AGREEMENT This Agreement may be signed by the Parties hereto in counterpart, each of which counterpart when so signed shall be deemed to be an original, and such counterparts together shall constitute one and the same instrument and notwithstanding the date of execution will be deemed to bear the execution date as set forth in this Agreement. This Agreement may be executed by facsimile and such facsimile or facsimiles shall be deemed to represent the original Agreement. 27. NO PARTNERSHIP OR AGENCY The Parties hereto have not created a partnership and nothing contained in this Agreement shall in any manner whatsoever constitute any Party as the partner, agent or legal representative of the other Party, nor create any fiduciary relationship between them for any purpose whatsoever. No Party shall have any authority to act for or assume any obligation or responsibility on behalf of the other Party, except as may be from time to time agreed to in writing between the Parties or as otherwise expressly provided. - 10 - IN WITNESS WHEREOF the Parties hereto have executed this Agreement as of the date first above written. SIGNED, SEALED AND DELIVERED ) XTRA-GOLD RESOURCES CORP. in the presence of ) ) ) Per: /s/ William Edward McKechnie ) ---------------------------- ) William Edward McKechnie ) Chairman and CEO ) /s/ John McKenzie ) /s/ YVES P. CLEMENT --------------------- ) ---------------------------- Witness ) YVES P. CLEMENT - 11 - SCHEDULE "A" JOB DESCRIPTION OF THE VICE-PRESIDENT, EXPLORATION OF XTRA-GOLD RESOURCES CORP. POSITION HELD: Vice-President, Exploration ("VPE") INCUMBENT: Yves P. Clement ("CLEMENT") TERMS OF REFERENCE This written job description of the responsibilities and accountability of the position of the VPE has been prepared to empower the Board with a means of directing, assessing, encouraging and compensating the activities of Xtra's VPE. This job description forms the basis for and an addendum to the terms of the management consulting agreement entered into between Xtra and Clement (the "MC AGREEMENT"). COMPLIANCE Clement's performance of his Responsibilities set forth hereunder shall, at all times, be subject to his compliance with the provisions of applicable laws, rules and regulations. Clement shall be subject to and agrees to comply with all internal policies instituted by Xtra and applicable to its executive officers. RANGE OF APPLICATION The provisions contained in the MC Agreement will be reviewed, assessed and authorized by the Board in the manner set out in the MC Agreement and any independent compensation committee (the "ICC") comprised of the unrelated directors of Xtra that may be formed at a later date. SCOPE OF SERVICES The scope of the Services, in particular, the job description and responsibilities of the VPE, shall include but not be limited to: o making project or property site attendances as may be required from time to time, preparing progress reports from time to time with respect to Xtra's mineral exploration projects, conducting due diligence as may be required from time to time in connection with potential mineral properties; reviewing geological data and liaising with principal owners of mineral properties in which Xtra may wish to acquire an interest, meeting with government authorities and retaining technical experts as may be required from time to time; o all reporting of activities and/or progress reports shall be made directly to Mike Byron, President, Exploration; - 12 - o consulting with other parties in the mining industry from time to time in connection with the matters referred to above with a view to making recommendations to the Board; o making recommendations to the Board and its relevant committees with respect to the acquisition and/or abandonment of mineral exploration properties; o meeting or discussing with the Chairman and Chief Executive Officer, the Board or its committees as may be required from time to time to provide regular and timely reports of plans and operations in connection with the business of the Xtra; and o preparing, having approved by the Board and implementing plans for the operation of Xtra including plans for exploration programs, costs of operations, other expenditures in connection with Xtra's mineral projects. SPECIFIC ACCOUNTABILITY The Board and/or the ICC will review the performance of the VPE in connection with each of the above-noted responsibilities (the "RESPONSIBILITIES"), which may be amended from time to time, and will record and discuss their assessment with Clement six (6) months following the execution of the MC Agreement or such late date as may be determined by the Board and/or the ICC. Thereafter, the Board and/or the ICC will annually review the performance of the VPE in connection with the Responsibilities and will record and discuss this assessment with Clement at such time. PERFORMANCE Above-average performance is expected in all areas of responsibility and considered compensation is provided within the position's compensation and stock option base. The success of Xtra and its ability to thrive and prosper in a competitive environment, together with the successful performance by the VPE will be recognized in a reward for initiative and the Board and/or the ICC may elect to award additional compensation to be determined, based on the achievement of milestones as may be established from time to time. EX-10 26 ex_10-18.txt GOLDEYE MANAGEMENT AGREEMENT DATED 07-01-2006 EXHIBIT 10.18 MANAGEMENT CONSULTING AGREEMENT THIS AGREEMENT is made effective as of the 1st day of July, 2006. BETWEEN: XTRA-GOLD RESOURCES CORP. a company incorporated under the laws of the State of Nevada, having a head office at 6 Kersdale Avenue, Toronto ON M6M 1C8 Canada (hereinafter referred to as "XTRA") - - and - GOLDEYE CONSULTANTS LTD. a company incorporated under the laws of the Turks & Caicos Islands, British West Indies, having a head office at P.O. Box 150, Design House Providenciales, Turks & Caicos Islands, British West Indies (hereinafter referred to as "GOLDEYE") - - and - WILLIAM EDWARD MCKECHNIE (hereinafter referred to as "MCKECHNIE") WHEREAS Goldeye possesses the requisite knowledge and experience in connection with the precious metals industry, mineral exploration and production, in particular, the ability to provide senior management services to a mining company; AND WHEREAS McKechnie has been a director of Xtra since November 2003 and the Chairman and Chief Executive Officer of Xtra since August 2005; AND WHEREAS McKechnie is a director of Goldeye; AND WHEREAS McKechnie was appointed as a director of Goldeye in May 2006; - 2 - AND WHEREAS Xtra wishes to engage Goldeye on a management consulting basis with a view to Goldeye providing certain business consulting services to Xtra. NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the mutual covenants contained in this agreement and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each of the parties hereto, Xtra, Goldeye and McKechnie (collectively referred to as the Parties") agree as follows: 1. SERVICES TO BE PROVIDED (a) Goldeye shall provide management consulting services (the "SERVICES") to Xtra as may be required by Xtra from time to time. The Services shall only be fulfilled by McKechnie and shall not be delegated or assigned, except with the express written consent of Xtra. (b) The scope of the Services are set out in Schedule "A" annexed hereto and will be strictly of a consulting nature. 2. COMPENSATION (a) Effective July 1, 2006, Goldeye shall be paid a monthly fee of Cdn.$5,000.00 in connection with the Services (the "FEES") and the Fees shall be paid to Goldeye in a manner of payment to be agreed to between the Parties. (b) The Parties acknowledge that Goldeye has been paid an aggregate amount of Cdn.$20,000.00 retroactively from March 1, 2006 for Services provided during the months of March, April, May and June, 2006. (c) Xtra agrees to increase the Fees payable to Goldeye to Cdn.$10,000.00 upon the earlier of the bulk test at the Kwabeng concession located in the Republic of Ghana (i) achieving profitability; or (ii) being completed. (d) Xtra agrees to increase the Fees payable to Goldeye to Cdn.$15,000.00 upon the earlier of the full scale mining operation to be conducted at the Kwabeng concession (a) achieving profitability; or (b) having occurred for two months. (e) Any other compensation to be paid to Goldeye, including bonus payments, shall be reviewed by the board of directors of Xtra (the "BOARD") and/or the Compensation Committee, if such committee is formed at the relevant time, in the following manner: (i) on the earlier of: A. six (6) months from the effective date of this Agreement; B. Xtra becoming a reporting company; - 3 - (ii) two months of profitability having being achieved from the full scale mining operation at the Kwabeng concession; and (iii) such other time that the Board and/or the Compensation Committee existing at such time may deem appropriate. 3. PLACE OF WORK Goldeye shall render the Services at such place or places where Xtra conducts its business. 4. TIME The daily schedule in connection with providing the Services and the hours worked on any given day shall generally be at Goldeye's discretion, but at all times shall be subject to and dependent upon Xtra's needs. Xtra relies upon Goldeye to ensure that sufficient time is devoted as is necessary in order to fulfill the spirit and purpose of this Agreement. 5. REIMBURSEMENT FOR EXPENSES INCURRED BY GOLDEYE ON BEHALF OF XTRA Goldeye will submit an expense report for expenses actually and properly incurred on behalf of Xtra on no less than a monthly basis in the form provided by Xtra for such purpose. Xtra shall reimburse Goldeye for approved reasonable expenses within five (5) business days following receipt of Goldeye's itemized monthly expense report. Goldeye agrees to provide proper receipts for expenses incurred and submitted. 6. REPRESENTATIONS OF GOLDEYE AND MCKECHNIE (a) Goldeye and McKechnie each represent that McKechnie has the requisite qualifications, experience and capabilities to perform the Services to a standard of care, skill and diligence acceptable within the mining industry and that the Services will be provided and this Agreement performed in compliance with all applicable laws, ordinances, rules and regulations. (b) Goldeye and McKechnie each further represent that, during the previous 10 years: (i) there has been no bankruptcy filed by or against Goldeye, McKechnie or by or against any business of which Goldeye and/or McKechnie was a general partner or executive officer at the time the petition was filed or within two (2) years prior to the filing; - 4 - (ii) neither Goldeye nor McKechnie has been charged with or convicted in a criminal proceeding anywhere of an offence which is or would be an indictable offence for which a pardon has not been granted; (iii) neither Goldeye nor McKechnie has been subject to any order, judgment or decree not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting its/his involvement in any type of business, securities or banking activities; and (iv) neither Goldeye nor McKechnie has been found by a court of competent jurisdiction (in a civil action), the SEC or the CFTC of violating a federal or state securities or commodities law where the judgment has not been reversed, vacated or suspended. 7. INDEPENDENT CONSULTANT (a) Goldeye shall provide the Services as an independent contractor and McKechnie is not and shall not be construed to be an employee of Xtra and Xtra is not responsible for McKechnie's wages or benefits or any matters pertaining thereto. (b) Goldeye and McKechnie shall not be entitled to or receive any benefit normally provided to Xtra's employees including, but not limited to, vacation pay, health, disability and other insurance coverage, sick pay or retirement funds. (c) No withholding for income taxes or any other tax or contribution shall be deducted from payments made by Xtra to Goldeye. Goldeye herein agrees to be solely responsible for the payment of taxes or contributions due on any amounts paid by Xtra under this Agreement. Goldeye agrees to indemnify and hold harmless Xtra for any and all demands or claims for taxes, withholding taxes or any other form of payment to any government authority from Xtra in respect of Goldeye or McKechnie including interest, penalties and costs in connection therewith. This section survives the termination of this Agreement. 8. TOOLS OF TRADE AND SUPPLIES Goldeye shall provide all equipment, tools, books and materials used in the Services and shall be solely responsible for procuring, paying for and maintaining any computer equipment, software, tools or supplies necessary or appropriate for the performance of the Services, unless otherwise agreed to in advance by Xtra. 9. EXCLUSIVITY OF GOLDEYE Subject to the terms and conditions of the Confidentiality and Non-Compete Agreement referred to in paragraph 10 of this Agreement, a copy of which is annexed hereto as Schedule "B", Goldeye and McKechnie are not required to provide their services exclusively to Xtra. - 5 - 10. CONFIDENTIALITY AND NON-COMPETE AGREEMENT AND OWNERSHIP OF INFORMATION Goldeye and McKechnie agree to the terms of and shall enter and execute a Confidentiality and Non-Compete Agreement in the form and substance annexed hereto as Schedule "B" simultaneously with the execution of this Agreement. 11. INDEMNIFICATION In the event of any legal action commenced by a corporation or an individual with respect to the Services under this Agreement, Xtra hereby agrees to indemnify and hold harmless Goldeye from and against all such actions, claims, liabilities, costs and expenses and the legal fees and disbursements in connection therewith shall be borne by Xtra; provided that the indemnification provided under this paragraph shall not be available to the extent of Goldeye's or McKechnie's gross negligence, a breach of this Agreement by Goldeye or McKechnie, willful misconduct by Goldeye or McKechnie, violation of any applicable laws, ordinances, rules or regulations by Goldeye or McKechnie, or under circumstances where applicable law does not permit indemnification. 12. ASSIGNMENT This Agreement shall be binding upon the Parties and their respective heirs, executors, legal representatives, successors and assigns. This Agreement shall not be assignable by any Party without the express written consent of all Parties. 13. TERM The term of this Agreement is for a fixed term of five (5) years commencing on July 1, 2006 and ending on June 30, 2011 (the "TERM") unless terminated earlier in accordance with paragraph 14 below. The Term of this Agreement may only be renewed by written agreement of all Parties. If the Parties have not reached a written agreement respecting any renewal of the Term of this Agreement on or before March 31, 2011, then, unless otherwise agreed in writing, they each shall be entitled to act on the assumption that this Agreement shall expire at the end of the Term. Upon expiry of the Term, Goldeye shall have no further entitlements. 14. TERMINATION (a) Goldeye may terminate this Agreement at any time during the Term without reason or cause by providing Xtra with three (3) months' written notice of termination, which notice may be waived in whole or part by Xtra. - 6 - (b) Xtra may terminate this Agreement at any time during the Term without reason or cause by payment to Goldeye of Goldeye's Fees for a six (6) month period following such termination at the rate in effect and in the manner and at the time of payment in effect at the time of termination. For clarity purposes, the Parties agree that, pursuant to this subparagraph 14(b), on termination, Goldeye shall be paid Fees over the six (6) month period following termination at the rate in effect at the time of termination, that is Fees totaling (i) CAD$30,000.00, in the event that the Fees are CAD$5,000.00 per month; or (ii) CAD$60,000.00, in the event that the Fees are CAD$10,000.00 per month; or (iii) CAD$90,000.00, in the event that the Fees are CAD$15,000.00 per month. Payment of the Fees shall not be reduced by amounts earned by Goldeye during the six (6) month period following termination from alternative sources of work. (c) Xtra may terminate this Agreement without providing Goldeye with any notice of termination or payment in lieu thereof in the event of any one of the following causes: (i) Goldeye or McKechnie commit a material breach of this Agreement or of the Confidentiality and Non-Compete Agreement referred to in paragraph 10 herein, a copy of which is annexed hereto as Schedule "B"; (ii) a bankruptcy is filed by or against Goldeye or McKechnie or any business of which Goldeye and/or McKechnie was a general partner or executive officer at the time the petition was filed or within two (2) years prior to the filing; (iii) Goldeye or McKechnie is charged or convicted in a criminal proceeding anywhere of an offence which is or would be an indictable offence for which a pardon has not been granted; (iv) Goldeye or McKechnie become subject to any order, judgment or decree of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting their involvement in any type of business, securities or banking activities; (v) Goldeye or McKechnie is found by a court of competent jurisdiction (in a civil action), the SEC or the CFTC of violating a federal or state securities or commodities law; (vi) Goldeye or McKechnie commit fraud or similar offence against Xtra; (vi) any other act or omission which would amount to cause for termination of this Agreement at law. - 7 - With respect to the foregoing events set out in this paragraph 14(c), Xtra shall not be required to pay any Fees to Goldeye, save and except for those Fees outstanding for services rendered to the date of termination of this Agreement, prorated from the date upon which Fees were last paid to Goldeye to the date of termination of this Agreement. (d) In the event that Xtra terminates this Agreement, or Goldeye provides notice of termination of this Agreement under paragraph 14(a), at any time within 6 months of a Change of Control of Xtra as hereinafter defined, Xtra shall pay Goldeye on such termination a lump sum payment representing 100% of the Fees for an eighteen (18) month period at the rate in effect at the time of termination. For clarity purposes, the Parties hereto agree that, pursuant to this subparagraph 14(d), Xtra shall pay Goldeye a lump sum payment based on its monthly Fees in effect at the time of termination of either (i) CAD$90,000.00, in the event that the Fees are CAD$5,000.00 per month; (ii) CAD$180,000.00, in the event that the Fees are CAD$10,000.00 per month, or (iii) CAD$270,000.00, in the event that the Fees are CAD$15,000.00 per month, as well as any Fees payable for services rendered to the date of termination, prorated from the date upon which Fees were last paid to Goldeye to the date of termination. Where termination under this paragraph 14(a) is initiated by Xtra, payments made by Xtra under this paragraph 14(a) are in substitution of and not in addition to the payments referred to in paragraph 14(b). For clarity purposes, a "CHANGE OF CONTROL" shall mean the occurrence of (a) any person, other than an Employee (as such term is used in Section 13(d) and 14(d) of the Exchange Act is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's outstanding securities then having the right to vote at elections of directors; or (b) the individuals who at the commencement date of the agreement entered into between the consultant and our Company (the "MC AGREEMENT"), constitute the Board, cease for any reason to constitute a majority thereof unless the election, or nomination for election, of each new director was approved by a vote of at least two-thirds of the directors then in office who were directors at the commencement of the MC Agreement; or (c) there is a failure to elect two or more candidates nominated by management of the Company to the Board; or (d) the business of the Company for which the consultant's services are principally performed is disposed of by the Company pursuant to a partial or complete liquidation of the Company, a sale of assets (including stock of a subsidiary of our Company) or otherwise. (e) Upon expiry of the Term or the earlier termination of this Agreement, however caused: (i) McKechnie agrees that he will execute and deliver to Xtra all corporate resignations from any officer or director positions held by him in Xtra or in any of its subsidiaries; and - 8 - (ii) McKechnie and Goldeye agree to deliver to Xtra all property of or belonging to or administered by Xtra or its subsidiaries that is within their possession or under their control including, without limiting the generality of the foregoing, all Propriety Information and Documents as defined in the Confidentiality and Non-Compete Agreement referred to in paragraph 10 of this Agreement, a copy of which is annexed hereto as Schedule "B" (f) The termination payments contemplated in subparagraphs 14(a) and (d) above will be made upon: (i) execution and delivery to Xtra of a full and final release by McKechnie and Goldeye in a form and substance satisfactory to Xtra; (ii) execution and delivery to Xtra of all corporate resignations from any officer or director positions held by McKechnie in Xtra and in any of its subsidiaries; and (ii) the delivery to Xtra of all property of or belonging to or administered by Xtra or its subsidiaries that is within their possession or under their control including, without limiting the generality of the foregoing, all Propriety Information and Documents as defined in the Confidentiality and Non-Compete Agreement referred to in paragraph 10 of this Agreement, a copy of which is annexed hereto as Schedule "B". 15. ADDRESS FOR DELIVERY OR NOTICE Each notice under this Agreement shall be made in writing and may be sent by facsimile or electronic formatted transmission (e-mail) or delivered to the address for such Party as noted hereunder: (a) if to Xtra, (i) by regular mail or courier to: 6 Kersdale Avenue Toronto ON M6M 1C8 (ii) by e-mail transmission to: kiomi@sympatico.ca (iii) by fax to: (416) 981-3055 - 9 - (b) if to Goldeye, (i) by regular mail or courier to: P.O. Box 150, Design House Providenciales Turks & Caicos Islands, British West Indies (ii) by e-mail transmission to: tedmckechnie@rogers.com (c) if to McKechnie, (i) by regular mail or courier to: 446 Drake Circle Waterloo ON N2T 1L1 (ii) by e-mail transmission to: tedmckechnie@rogers.com Any of the Parties may change their mailing address, e-mail address or facsimile number by notifying the other Parties in writing. 16. SEVERABILITY AND CONSTRUCTION OF AGREEMENT Each section, paragraph, term and provision of this Agreement and any portion thereof shall be considered severable and, if for any reason whatsoever, any portion of this Agreement is determined to be invalid, contrary to or in conflict with any applicable present or future law, rule or regulation by a final ruling issued by a court of jurisdiction, agency or tribunal with valid jurisdiction, then that ruling shall not impair the operation of any other portions of this Agreement as may remain otherwise intelligible (all of which shall remain binding on the Parties and continue to be of full force and effect as of the date upon which the ruling becomes final). 17. CONSENTS AND WAIVERS No consent or waiver by any Party in respect of any breach of a provision of this Agreement shall be deemed to be a consent or waiver of any other breach of this Agreement. - 10 - 18. ENUREMENT This Agreement shall enure to the benefit of and be binding upon the Parties and their respective heirs, executors, administrators, successors and permitted assigns. This Agreement may not be assigned by Goldeye or McKechnie, but may be assigned by Xtra. 19. ENTIRE AGREEMENT This document and the Confidentiality and Non-Compete Agreement referred to in paragraph 10 herein contains the entire agreement made between the Parties as of the effective date of this Agreement and no representations, inducements, promises or agreements not embodied or referenced herein shall be of any force or effect, unless the same are set forth in writing and signed by the Parties hereto. 20. AMENDMENTS TO AGREEMENT This Agreement may be amended from time to time as agreed to in writing between the Parties. Any amending agreement together with the unamended sections of this Agreement shall then constitute the entire agreement between the Parties. 21. GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL This Agreement will be governed by and construed in accordance with the laws prevailing in the State of Nevada. The parties acknowledge and agree that the courts in Toronto, Ontario shall be the exclusive venue and proper forum in which to adjudicate any case or controversy arising either, directly or indirectly, under or in connection with this Agreement and the Parties further agree that, in the event of litigation arising out of or in connection with this Agreement in these courts, they will not contest or challenge the jurisdiction or venue of these courts. The Parties further agree and hereby waive and release any right to a trial by jury in any action arising out of the interpretation, enforcement or breach of this Agreement. 22. EXECUTION OF AGREEMENT This Agreement may be signed by the Parties in counterparts, each of which counterpart when so signed shall be deemed to be an original, and such counterparts together shall constitute one and the same instrument and notwithstanding the date of execution will be deemed to bear the execution date as set forth in this Agreement. This Agreement may be executed by facsimile and such facsimile or facsimiles shall be deemed to represent the original Agreement. 23. NO PARTNERSHIP OR AGENCY The Parties hereto have not created a partnership and nothing contained in this Agreement shall in any manner whatsoever constitute Xtra on the one hand, and Goldeye and McKechnie on the other hand, as a partner, agent or legal representative of the other or others as the case may be, nor create any - 11 - fiduciary relationship between them for any purpose whatsoever. Xtra on the one hand, and Goldeye and McKechnie on the other hand, shall not have any authority to act for or assume any obligation or responsibility on behalf of the other or others as the case may be, except as may be from time to time agreed to in writing or as otherwise expressly provided herein. IN WITNESS WHEREOF the Parties have executed this Agreement effective as of the date first above written. SIGNED, SEALED AND DELIVERED ) XTRA-GOLD RESOURCES CORP. in the presence of ) ) ) Per: /s/ Rebecca Kiomi Mori ) Rebecca Kiomi Mori ) Secretary and Treasurer ) ) ) GOLDEYE CONSULTANTS LTD. ) ) ) Per: /s/ William Edward McKechnie ) William Edward McKechnie ) Director ) ) ) /s/ William Edward McKechnie ) William Edward McKechnie SCHEDULE "A" BUSINESS CONSULTING SERVICES TO BE PROVIDED TO XTRA-GOLD RESOURCES CORP. BY GOLDEYE CONSULTANTS LTD. TERMS OF REFERENCE These written business consulting services which includes responsibilities (the "RESPONSIBILIIES") and accountability has been prepared to empower the Board with a means of directing, assessing, encouraging and compensating the activities of Goldeye and forms the basis for and an addendum to the terms of the management consulting agreement entered into between Xtra and Goldeye Consultants Ltd. ("GOLDEYE") (the "MC AGREEMENT"). COMPLIANCE The managerial consulting services and performance thereto of Goldeye in fulfilling its Responsibilities set forth hereunder shall, at all times, be subject to compliance with the provisions of applicable laws, rules and regulations. Goldeye shall be subject to and agrees to comply with all internal policies instituted by Xtra. RANGE OF APPLICATION The provisions contained in the MC Agreement will be reviewed, assessed and authorized by the Board in the manner set out in the MC Agreement and any compensation committee (the "COMPENSATION COMMITTEE") of Xtra that may be formed at a later date. SCOPE OF SERVICES The scope of the Services shall include but not be limited to: - - overseeing ongoing organization and development of the corporate infrastructure of Xtra resulting in a value added support team; - - identifying, developing and directing the implementation of Xtra's business strategy; - - planning and directing Xtra's activities to achieve stated/agreed targets and standards for financial and trading performance, quality, culture and compliance with regulatory matters; - - ensuring organization accountability, internal controls and responsibilities are being complied with by all support team members; - - using best efforts to achieve performance benchmarks established from time to time; - - establishing and assessing performance benchmarks of all support team members; A-2 - - recruiting, selecting and developing executive team members as may be required from time to time to achieve financial and corporate objectives of Xtra; - - maintaining and developing Xtra's culture, values and reputation within its industry and with all key support, consultants, vendors, partners, financial institutions and regulatory authorities; - - attending and preparing for potential investor meetings and the financial community with a view to increasing Xtra's shareholder base; and - - communicating with the Board and senior management on a regular basis during the course of each year during the Term of the MC Agreement to review and discuss Xtra's business operations and strategies. SPECIFIC ACCOUNTABILITY Goldeye shall report directly to the Board. The Board and/or the Compensation Committee will review the performance of Goldeye in connection with each of the Responsibilities, which may be amended from time to time, and will record and discuss their assessment with Goldeye within thirty (30) days of the commencement of full scale placer mine production by Xtra or any of its subsidiaries, but in no event later than six (6) months following the execution of the management consulting agreement dated July 1, 2006 of which this Schedule "A" forms a part thereof. Thereafter, the Board and/or the Compensation Committee will review the performance of Goldeye on a quarterly in connection with the Responsibilities and will record and discuss this assessment with Goldeye at such time. PERFORMANCE Above-average timely performance is expected in all areas of responsibility and considered compensation is provided within the position's compensation and stock option base. The success of Xtra and its ability to thrive and prosper in a competitive environment, together with the successful performance by Goldeye will be recognized in a reward for initiative and the Board and/or the Compensation Committee may elect to award additional compensation to be determined, based on the achievement of milestones as may be established from time to time. SCHEDULE "B" CONFIDENTIALITY AND NON-COMPETE AGREEMENT THIS CONFIDENTIALITY AND NON-COMPETE AGREEMENT (the "AGREEMENT") is made and entered into as of the 1st day of July, 2006. BETWEEN: GOLDEYE CONSULTANTS LTD. P.O. Box 150, Design House Providenciales, Turks & Caicos Islands, British West Indies (hereinafter referred to as "GOLDEYE") - - and - WILLIAM EDWARD MCKECHNIE, 446 Drake Circle - Suite 100 Waterloo ON N2T 1L1 (hereinafter referred to as "MCKECHNIE") - - and - XTRA-GOLD RESOURCES CORP., a Nevada corporation having a head office at 6 Kersdale Avenue Toronto ON M6M 1C8 Canada (hereinafter referred to as "XTRA-GOLD") WHEREAS as of the date of this Agreement, Xtra-Gold and/or its subsidiaries, Xtra-Gold Mining Limited, Xtra-Gold Exploration Limited, Xtra Oil & Gas (Ghana) Limited (collectively, referred to as "XTRA-GOLD") are engaged in the exploration, development, mineral extraction and production of gold and other resources in the Republic of Ghana (the "BUSINESS"); AND WHEREAS Xtra-Gold has established a valuable reputation, expertise and goodwill in its Business; AND WHEREAS Goldeye and McKechnie, by virtue of Goldeye's engagement with Xtra-Gold and/or any of its subsidiaries, are and may become familiar with and possessed with the manner and methods of business, trade secrets, customer, client, employee and stockholder lists and other confidential information pertaining to the Business; B-2 AND WHEREAS in consideration of and as a condition to Xtra-Gold's engagement of Goldeye's consulting services on the terms and conditions set out in the Management Consulting Agreement made effective as of July 1, 2006 between Xtra-Gold, Goldeye and McKechnie (hereinafter the "CONSULTING AGREEMENT"), Goldeye and McKechnie agreed to enter into this Confidentiality and Non-Compete Agreement; NOW THEREFORE IN CONSIDERATION OF Xtra-Gold's engagement of Goldeye's consulting services on the terms and conditions set out in the Consulting Agreement and other good and valuable consideration the receipt of which is hereby acknowledged, Goldeye, McKechnie and Xtra-Gold (hereinafter the "PARTIES") agree as follows: 1. COVENANT NOT TO COMPETE Goldeye and McKechnie each acknowledge and recognize the highly competitive nature of Xtra-Gold's Business and that the goodwill, continued patronage, and specifically the names and addresses of Xtra-Gold's Clients (as defined herein) constitute a substantial asset of Xtra-Gold having been acquired through considerable time, money and effort. Accordingly, Goldeye and McKechnie each agree to the following: (i) that during the Restricted Period (as hereinafter defined) and within the Restricted Area (as hereinafter defined), they will not, individually or in conjunction with others, directly or indirectly, engage in any Business Activities (as hereinafter defined), whether as an officer, director, proprietor, employer, partner, independent contractor, investor (other than as a holder solely as an investment of less than one percent (1%) of the outstanding capital stock of a publicly traded corporation), consultant, advisor, agent, creditor or otherwise; (ii) that during the Restricted Period and within the Restricted Area, they will not, directly or indirectly, compete with Xtra-Gold by soliciting, inducing or influencing any of Xtra-Gold's Clients to discontinue or reduce their business relationship with Xtra-Gold; (iii) that during the Restricted Period and within the Restricted Area, they will not (A) directly or indirectly recruit, solicit or otherwise influence any employee, consultant or agent of Xtra-Gold to discontinue their employment, consultancy or agency relationship with Xtra-Gold as the case may be, or (B) in connection with any business which competes directly or indirectly with the Business Activities of Xtra-Gold (the "COMPETITIVE BUSINESS"), employ or seek to employ, or cause or permit to employ or seek to employ for any Competitive Business any person who is then (or was at any time within six (6) months prior to the date) an employee, consultant or agent of Xtra-Gold; or (C) directly or indirectly discourage any Xtra-Gold Client from doing business with Xtra-Gold. 2. NON-DISCLOSURE OF INFORMATION Goldeye and McKechnie each acknowledge that as a result of their relationship with Xtra-Gold, they have and will continue to acquire confidential information, whether or not originated by them, that relates to the Business or B-3 affairs of Xtra-Gold and/or its customers (hereafter the "PROPRIETARY INFORMATION") including , but not limited to, Xtra-Gold's trade secrets, private or secret processes, methods and ideas, as they exist from time to time, stockholder, customer or vendor lists, products, services, mining methods, development, technical information, marketing activities and procedures, credit and financial data concerning Xtra-Gold and/or Xtra-Gold's Clients. Goldeye and McKechnie each agree that the Proprietary Information is a valuable, special and unique asset of Xtra-Gold and/or its Clients as the case may be, that access thereto and knowledge thereof was and continues to be essential to the performance of their services to Xtra-Gold, and that it is reasonable and necessary for each of them to make the following covenants regarding their conduct during and subsequent to the term of the Consulting Agreement: (i) at all times during and subsequent to the term of the Consulting Agreement, they will not disclose the Proprietary Information to any person or entity (other than as necessary in carrying out the services contemplated in the Consulting Agreement) without first obtaining Xtra-Gold's written consent unless such Proprietary Information has been publicly disclosed generally without breach of this Agreement or upon written advice of legal counsel reasonably satisfactory to Xtra-Gold that they are legally required to disclose such Proprietary Information; (ii) at all times during and subsequent to the term of the Consulting Agreement , they will not use, copy, transfer or destroy any Proprietary Information (other than as necessary in carrying out the services contemplated in the Consulting Agreement) without first obtaining Xtra-Gold's written consent, and they will take all reasonable precautions to prevent inadvertent use, copying, transfer or destruction of any Proprietary Information unless such Proprietary Information has been publicly disclosed generally without breach of this agreement or upon written advice of legal counsel reasonably satisfactory to Xtra-Gold that they are legally required to disclose such Proprietary Information; (iii) Documents (as hereinafter defined) prepared by Goldeye or McKechnie or that come into their possession during their association with Xtra-Gold are and remain the property of Xtra-Gold, whether or not such Documents contain Proprietary Information; and (iv) on the expiry of the term of the Consulting Agreement or such earlier termination of the Consulting Agreement, however caused, or on receipt of Xtra-Gold's written request, they shall deliver to Xtra-Gold at Xtra-Gold's principal place of business as provided in this Agreement all property of or belonging to or administered by Xtra-Gold and/or its Clients including without limiting the generality of the foregoing, all Propriety Information and Documents within their possession or under their control. 3. DEVELOPMENT OF INTELLECTUAL PROPERTY (i) Goldeye and McKechnie each agree that they will, during the term of the Consulting Agreement, disclose promptly to Xtra-Gold in writing any and all inventions, special B-4 procedures, processes or products and any improvements in or modifications of existing inventions, special procedures, processes, or products relating to or connected with the Business Activities, whether or not patentable, conceived, developed or made by them either alone or in conjunction with others during the term of the Consulting Agreement, whether conceived, developed or made upon Xtra-Gold's premises, or with Xtra-Gold's material or facilities, or otherwise, and all of said inventions, special procedures, processes, products, improvements and modifications shall be the sole and exclusive property of Xtra-Gold. (ii) At the option and request of Xtra-Gold, Goldeye and McKechnie will promptly execute, acknowledge and deliver during the term of the Consulting Agreement and at all times thereafter, without any payment or other consideration from Xtra-Gold, such applications, assignments and other instruments which Xtra-Gold shall deem necessary in order to (i) apply for and obtain letters patent, trademarks, service marks or other intellectual property protection in the United States and any foreign countries for any and all of the aforesaid inventions or discoveries described above, and (ii) assign and convey to Xtra-Gold the sole and exclusive right, title and interest therein, and they will assist Xtra-Gold or its nominee in every proper way, at Xtra-Gold's cost and expense, in accomplishing any and all of the foregoing. 4. DEFINITIONS In this Agreement, the following terms have the meanings: (a) DOCUMENTS. "DOCUMENTS" shall mean all original written, recorded, or graphic matters whatsoever, and any and all copies thereof, including, but not limited to: papers, books, records, tangible things, correspondence, communications, electronically transmitted messages (e-mails and faxes), memoranda, work-papers, reports, presentations, affidavits, statements, summaries, analyses, evaluations, stockholder and client records and information, agreements, agendas, advertisements; instructions, charges, manuals, brochures, publications, directories, industry lists, schedules, client lists, vendor lists, statistical records, training manuals, computer printouts, books of account, records and invoices, technical data, including but not limited to mining leases, prospecting licences, permits, feasibility reports, surveys, site plans, mining operation plans reflecting business operations; all things similar to any of the foregoing however denominated. In all cases where originals are not available, the term "Documents" shall also mean identical copies of original documents or non-identical copies thereof. (b) XTRA-GOLD'S CLIENTS. The "XTRA-GOLD'S CLIENTS" mean any persons, partnerships, corporations, stockholders, potential investors, professional associations or advisors or other organizations for or with whom Xtra-Gold performed or intended to perform Business Activities at any time during the period Goldeye performed consulting services for Xtra-Gold or McKechnie held any offices or directorships in Xtra-Gold including under the Consulting Agreement. B-5 (c) RESTRICTIVE PERIOD. The "RESTRICTIVE PERIOD" means during the term of the Consulting Agreement and for a period of two (2) years following the termination of the Consulting Agreement, however caused. (d) RESTRICTED AREA. The "RESTRICTED AREA" means within 100 kilometers from where Xtra-Gold carries on its Business. (e) BUSINESS ACTIVITIES. "BUSINESS ACTIVITIES" means the Business during the 12 month period prior to the expiry of the term of the Consulting Agreement or its earlier termination. 5. COVENANTS AS ESSENTIAL INDUCEMENTS OF THIS AGREEMENT It is understood by and between the parties hereto that the foregoing covenants contained in this Agreement are essential inducements to Xtra-Gold to engage Goldeye and McKechnie under the Consulting Agreement, and that but for the agreement by Goldeye and McKechnie to comply with such covenants, Xtra-Gold would not have agreed to continue to engage them. Such covenants by Goldeye and McKechnie shall be construed to be agreements independent of any other provisions of this Agreement. The existence of any other claim or cause of action, whether predicated on any other provision in this Agreement, or otherwise, as a result of the relationship between the Parties shall not constitute a defense to the enforcement of such covenants against Goldeye and/or McKechnie. 6. SURVIVAL AFTER TERMINATION OF AGREEMENT Notwithstanding anything to the contrary contained in this Agreement, the covenants contained herein shall survive the engagement of Goldeye and McKechnie by Xtra-Gold and shall continue in force after expiry of the term or other termination of the Consulting Agreement, however caused. 7. REMEDIES (i) Goldeye and McKechnie each acknowledge and agree that Xtra-Gold's remedy at law for a breach or threatened breach of any of the provisions of this Agreement would be inadequate and the breach shall be per se deemed as causing irreparable harm to Xtra-Gold. In recognition of this fact, in the event of a breach by Goldeye and/or McKechnie of any of the provisions of this Agreement, Goldeye and McKechnie each agree that, in addition to any remedy at law available to Xtra-Gold, including, but not limited to monetary damages, Xtra-Gold, without posting any bond, shall be entitled to obtain, and they each agree not to oppose Xtra-Gold's request for equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available to Xtra-Gold. B-6 (ii) Goldeye and McKechnie each acknowledge that the granting of a temporary injunction, temporary restraining order or permanent injunction merely prohibiting the use of Proprietary Information would not be an adequate remedy upon breach or threatened breach of this Agreement and consequently agree, upon proof of any such breach, to the granting of injunctive relief prohibiting any form of competition with Xtra-Gold. Nothing herein contained shall be construed as prohibiting Xtra-Gold from pursuing any other remedies available to it for such breach or threatened breach. (iii) Nothing herein contained shall be construed as prohibiting Xtra-Gold from pursuing any other remedies available to it for such breach or threatened breach. 8. COUNTERPARTS This Agreement may be signed by the Parties in counterparts, each of which counterpart when so signed shall be deemed to be an original, and such counterparts together shall constitute one and the same instrument and notwithstanding the date of execution will be deemed to bear the execution date as set forth in this Agreement. This Agreement may be executed by facsimile and such facsimile or facsimiles shall be deemed to represent the original Agreement. 9. BINDING EFFECT/ASSIGNMENT This Agreement shall be binding upon the Parties and their respective heirs, executors, legal representatives, successors and assigns. This Agreement shall not be assignable by any Party without the express written consent of all Parties. 10. GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL This Agreement will be governed by and construed in accordance with the laws prevailing in the State of Nevada. The parties acknowledge and agree that the courts in Toronto, Ontario shall be the exclusive venue and proper forum in which to adjudicate any case or controversy arising either, directly or indirectly, under or in connection with this Agreement and the Parties further agree that, in the event of litigation arising out of or in connection with this Agreement in these courts, they will not contest or challenge the jurisdiction or venue of these courts. The Parties further agree and hereby waive and release any right to a trial by jury in any action arising out of the interpretation, enforcement or breach of this Agreement. 11. SEVERABILITY The invalidity, illegality or unenforceability of any provision or provisions of this Agreement will not affect any other provision of this Agreement, which will remain in full force and effect, nor will the invalidity, illegality or unenforceability of a portion of any provision of this Agreement affect the balance of such provision. In the event that any one or more of the provisions contained in this Agreement or any portion thereof shall for any reason be held to be invalid, illegal or unenforceable in any respect, this Agreement shall be reformed, construed and enforced as if such invalid, illegal or unenforceable provision had never been contained herein. B-7 12. EXPENSES TO ENFORCE If it becomes necessary for Xtra-Gold to institute legal action to enforce the terms and conditions of this Agreement, and such legal action results in a final judgment in favor of Xtra-Gold, then Goldeye and McKechnie each agree to reimburse Xtra-Gold for all direct, indirect or incidental expenses incurred, including, but not limited to, all attorney's fees, court costs and other expenses incurred throughout all negotiations, trials or appeals undertaken in order to enforce Xtra-Gold's rights hereunder. 13. NOTICES Any notice required or permitted to be given under the terms of this Agreement shall be sufficient if in writing and if sent postage prepaid by registered or certified mail, return receipt requested; by overnight delivery; by courier; or by confirmed facsimile as set forth in the first paragraph of this Agreement, or at such other place as any of the Parties may designate. THE PARTIES TO THIS AGREEMENT HAVE READ THIS AGREEMENT, UNDERSTAND ITS TERMS AND CONDITIONS, HAVE HAD THE OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL OF THEIR OWN CHOICE AND AGREE TO BE BOUND BY ITS TERMS AND CONDITIONS. IN WITNESS WHEREOF, the Parties have executed this Agreement effective as of the date first above written. XTRA-GOLD RESOURCES CORP. By: /s/ R. Kiomi Mori R. Kiomi Mori Secretary and Treasurer GOLDEYE CONSULTANTS LTD. By: /s/ William Edward McKechnie William Edward McKechnie Director /s/ William Edward McKechnie William Edward McKechnie Chief Executive Officer --------------------------- Office Held (if applicable) EX-10 27 ex_10-19.txt MORI MANAGEMENT AGREEMENT DATED 07-01-2006 EXHIBIT 10.19 MANAGEMENT CONSULTING AGREEMENT THIS AGREEMENT is made as of the 1st day of July, 2006. BETWEEN: XTRA-GOLD RESOURCES CORP., a company incorporated under the laws of the State of Nevada, having a head office at 6 Kersdale Avenue Toronto ON M6M 1C8 Canada (hereinafter referred to as "XTRA") OF THE FIRST PART - - and - REBECCA KIOMI MORI, of the City of Toronto, in the Province of Ontario (hereinafter referred to as "KIOMI") OF THE SECOND PART WHEREAS Kiomi possesses the requisite knowledge and experience in connection with securities, corporate, accounting and regulatory matters with respect to public companies, specifically within the mining industry; AND WHEREAS Kiomi has been the Secretary and Treasurer of Xtra since September 2005 and a director since April 21, 2006 and has been providing consulting services to Xtra since June 2005; AND WHEREAS Xtra wishes to engage Kiomi on a management consulting basis with a view to providing certain business consulting services to Xtra. NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the sum of Ten ($10.00) Dollars, the receipt and sufficiency of which is hereby acknowledged by the parties hereto and other good and valuable consideration, the parties hereto agree as follows: 1. SERVICES TO BE PROVIDED (a) Kiomi shall provide management consulting services (the "SERVICES") as may be required by Xtra from time to time. - 2 - (b) The scope of the Services are as set out in Schedule "A" annexed hereto and will be strictly of a consulting nature. 2. COMPENSATION (a) FEES (i) Effective July 1, 2006, Kiomi shall be paid a monthly fee of CAD$8,500.00 in connection with the Services (the "FEES"); (ii) the Fees shall be paid to Kiomi pro rata in four installments during each month of the Term (defined herein) or in such other manner of payment as agreed to between the Parties; (iii) Xtra agrees to increase the Fees payable to Kiomi to Cdn$10,000.00 upon the earlier of the full scale mining operation to be conducted at the Kwabeng concession (a) achieving profitability; or (b) having occurred for two months; and (iv) a compensation review in connection with any further increase in the Fees shall be at the discretion of the Chief Executive Officer (the "CEO") and/or the Compensation Committee (if one is formed at the relevant time) of Xtra who shall consider and determine if an increase in Fees is warranted and, in no event shall such review occur later than July 1, 2007. (b) OTHER COMPENSATION Any other compensation to be paid to Kiomi, including bonus payments, shall be reviewed and considered by the CEO and/or the Compensation Committee at such time as is deemed appropriate by the CEO but in no event shall such review occur later than March 31, 2007. On April 21, 2006, the board of directors of Xtra (the "BOARD") granted Kiomi an aggregate of 108,000 non-qualified stock options (the "OPTIONS") on the following terms and as more particularly set forth in a stock option agreement (the "OPTION AGREEMENT") entered into between the Parties: (i) the price at which the Options may be exercised is U.S.$0.70 per share; (ii) the term of the Options shall be for three (3) years (the "OPTION PERIOD") and shall expire three (3) years from the date of grant (the "EXPIRY DATE"); (iii) the Options shall vest over the Option Period at the rate of 3,000 Options in each month of the Option Period from May 21, 2006; - 3 - (iv) any portion of the Options that have vested and have not been exercised in a particular month shall accrue to the benefit of Kiomi (the "ACCRUED OPTIONS") and in connection therewith, Kiomi shall have the right to exercise the Accrued Options for a period of time as may be set out in the Option Plan referred to in (viii) hereunder or in accordance with securities laws governing Xtra, but in no event shall the Accrued Options be exercised later than the earlier of (a) the Expiry Date; and (b) the exercise date contemplated in subparagraphs (v), (vi), (vii), (viii) and (ix) hereunder; (v) in the event of termination as a result of Kiomi's voluntary resignation, all Accrued Options must be exercised within 90 days from the date of the resignation by Kiomi, failing which the Accrued Options will be cancelled; (vi) in the event of the death of Kiomi during the Term, all Accrued Options must be exercised by Kiomi's estate within one year from the date of Kiomi's death, failing which the Accrued Options will be cancelled; (vii) in the event of a Change of Control of Xtra (as defined herein), all Options granted to Kiomi shall vest in which event, Kiomi will have the right to exercise such Options within 90 days following the completion of such Change of Control. For clarity purposes, a "CHANGE OF CONTROL" shall mean the occurrence of (a) any person, other than an Employee (as such term is used in Section 13(d) and 14(d) of the Exchange Act is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's outstanding securities then having the right to vote at elections of directors; or (b) the individuals who at the commencement date of the agreement entered into between the consultant and our Company (the "MC Agreement"), constitute the Board, cease for any reason to constitute a majority thereof unless the election, or nomination for election, of each new director was approved by a vote of at least two-thirds of the directors then in office who were directors at the commencement of the MC Agreement; or (c) there is a failure to elect two or more candidates nominated by management of the Company to the Board; or (d) the business of the Company for which the consultant's services are principally performed is disposed of by the Company pursuant to a partial or complete liquidation of the Company, a sale of assets (including stock of a subsidiary of our Company) or otherwise. - 4 - (viii) in the event that Kiomi is terminated by Xtra, without cause, then in such event Xtra agrees that Kiomi may retain 100% of the Accrued Options and 100% of the unvested Options (the "UNVESTED OPTIONS"); provided, however that the Options referred to in this subparagraph must be exercised no later than 90 days following such termination, failing which such Options will be cancelled; (ix) in the event that Kiomi is terminated by Xtra, with cause, then in such event Xtra agrees that Kiomi may retain 100% of the Accrued Options; provided, however that the Accrued Options must be exercised no later than 90 days following such termination, failing which such Accrued Options will be cancelled. All unvested Options will be cancelled immediately upon termination, with cause; (x) Xtra implemented and adopted a 2005 equity compensation plan (the "OPTION PLAN") which implementation and adoption was been approved in writing by the Board in June 2005; and (xi) the Options shall at all times be subject to the terms of the Option Agreement and the Option Plan. 3. The term of this Agreement is for a fixed term of five (5) years commencing on July 1, 2006 and ending on June 30, 2011 (the "TERM") unless terminated earlier in accordance with paragraph 14 below. The Term of this Agreement may only be renewed by written agreement of all Parties. If the Parties have not reached a written agreement respecting any renewal of the Term of this Agreement on or before March 31, 2011, then, unless otherwise agreed in writing, they each shall be entitled to act on the assumption that this Agreement shall expire at the end of the Term. Upon expiry of the Term, Kiomi shall have no further entitlements. 4. PLACE OF WORK Kiomi shall render the Services primarily at her place of business at 6 Kersdale Avenue, Toronto, Ontario; however, she agrees to provide the Services at such other place or places as may be reasonably requested by Xtra from time to time. 5. TIME Kiomi's daily schedule and hours worked on any given day shall generally be at Kiomi's discretion, but at all times shall be subject to and dependent upon Xtra's needs. For clarity purposes, Kiomi shall provide her Services for a minimum period of 40 hours per week and up to a maximum period of 60 hours per week. Xtra relies upon Kiomi to ensure that she devotes sufficient time as is necessary in order to fulfill the spirit and purpose of this Agreement. 6. REIMBURSEMENT FOR EXPENSES INCURRED BY KIOMI ON BEHALF OF XTRA Kiomi will submit an expense report for expenses actually and properly incurred on behalf of Xtra on no less than a monthly basis in the form provided by Xtra for such purpose. Xtra shall reimburse Kiomi for approved reasonable - 5 - expenses within five (5) business days following receipt of Kiomi's itemized expense report. Kiomi agrees to provide proper receipts for expenses incurred and submitted. 7. REPRESENTATIONS OF KIOMI (a) Kiomi represents that she has the requisite qualifications, experience and capabilities to perform the Services to a standard of care, skill and diligence acceptable within the mining industry and that the Services will be provided in accordance with all applicable laws, ordinances, rules and regulations. (b) Kiomi further represents that none of the following events have occurred during the previous 10 years: (i) there has been no bankruptcy filed by or against Kiomi or any business of which Kiomi was a general partner or executive officer at the time the petition was filed or within two (2) years prior to the filing; (ii) Kiomi has not been charged with or convicted in a criminal proceeding anywhere of an offence which is or would be an indicatable offence for which a pardon has not been granted; (iii) Kiomi is not and has not been subject to any order, judgment or decree not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting the involvement in any type of business, securities or banking activities; and (iv) Kiomi has not been found by a court of competent jurisdiction (in a civil action), the SEC or the CFTC of violating a federal or state securities or commodities law, and the judgment has not been reversed, vacated or suspended. 8. INDEPENDENT CONSULTANT (a) Kiomi shall provide the Services as an independent contractor and is not and shall not be construed to be an employee of Xtra and Xtra is not responsible for Kiomi's wages or benefits or any matters pertaining thereto. (b) Kiomi shall not be entitled to or receive any benefit normally provided to Xtra's employees including, but not limited to, vacation pay, health, disability and other insurance coverage, sick pay or retirement funds. (c) No withholding for income taxes or any other tax or contribution shall be deducted from payments made by Xtra to Kiomi. Kiomi herein agrees to be solely responsible for the - 6 - payment of taxes or contributions due on any amounts paid by Xtra under this Agreement. Kiomi agrees to indemnify and hold harmless Xtra for any and all demands or claims for taxes, withholding taxes or any other form of payment to any government authority from Xtra in respect of Kiomi including interest, penalties and costs in connection therewith. This section survives the termination of this Agreement. 9. TOOLS OF TRADE AND SUPPLIES Kiomi shall provide all equipment, tools, books and materials used in the Services and shall be solely responsible for procuring, paying for and maintaining any computer equipment, software, tools or supplies necessary or appropriate for the performance of her Services, unless otherwise agreed to in advance by Xtra. 10. EXCLUSIVITY OF KIOMI Subject to the terms and conditions of the Confidentiality and Non-Compete Agreement referred to in paragraph 11 of this Agreement, a copy of which is annexed hereto as Schedule "B", Kiomi is not required to provide her services exclusively to Xtra. 11. CONFIDENTIALITY AND NON-COMPETE AGREEMENT AND OWNERSHIP OF INFORMATION Kiomi agrees to the terms of and shall enter and execute a Confidentiality and Non-Compete Agreement in the form and substance annexed hereto as Schedule "B" simultaneously with the execution of this Agreement. 12. INDEMNIFICATION In the event of any legal action commenced by a corporation or an individual with respect to the Services under this Agreement, Xtra hereby agrees to indemnify and hold harmless Kiomi from and against all such actions, claims, liabilities, costs and expenses and the legal fees and disbursements in connection therewith shall be borne by Xtra; provided that the indemnification provided under this paragraph shall not be available to the extent of Kiomi's gross negligence, a breach of this Agreement by Kiomi, willful misconduct by Kiomi, violation of any applicable laws, ordinances, rules or regulations by Kiomi, or under circumstances where applicable law does not permit indemnification. 13. ASSIGNMENT This Agreement shall be binding upon the Parties and their respective heirs, executors, legal representatives, successors and assigns. This Agreement shall not be assignable by any Party without the express written consent of all Parties. - 7 - 14. TERMINATION (a) Kiomi may terminate this Agreement at any time during the Term without reason or cause by providing Xtra with three (3) months' written notice of termination, which notice may be waived in whole or part by Xtra. (b) Xtra may terminate this Agreement at any time during the Term without reason or cause by payment to Kiomi of her Fees for a six (6) month period following such termination at the rate in effect and in the manner and at the time of payment in effect at the time of termination. For clarity purposes, the Parties agree that, pursuant to this subparagraph 14(b), on termination, Kiomi shall be paid Fees over the six (6) month period following termination at the rate in effect at the time of termination, that is Fees totaling (i) CAD$51,000.00, in the event that the Fees are CAD$8,500.00 per month; or (ii) CAD$180,000.00, in the event that the Fees are CAD$10,000.00 per month. Payment of the Fees shall not be reduced by amounts earned by Kiomi during the six (6) month period following termination from alternative sources of work. (c) Xtra may terminate this Agreement without providing Kiomi with any notice of termination or payment in lieu thereof in the event of any one of the following causes: (i) Kiomi has completed an Officer's and Director's Questionnaire (the "QUESTIONNAIRE") and agrees that Xtra shall have the right to terminate this Agreement immediately with cause in the event that the Questionnaire reveals information that, in the determination of the Board, could reasonably adversely affect Xtra's disclosure in its SEC filings; (ii) Kiomi commits a material breach of this Agreement or of the Confidentiality and Non-Compete Agreement referred to in paragraph 11 herein, a copy of which is annexed hereto as Schedule "B"; (iii) a bankruptcy is filed by or against Kiomi or any business of which Kiomi was a general partner or executive officer at the time the petition was filed or within two (2) years prior to the filing; (iv) Kiomi is charged or convicted in a criminal proceeding anywhere of an offence which is or would be an indictable offence for which a pardon has not been granted; (v) Kiomi become subject to any order, judgment or decree of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting their involvement in any type of business, securities or banking activities; - 8 - (vi) Kiomi is found by a court of competent jurisdiction (in a civil action), the SEC or the CFTC of violating a federal or state securities or commodities law; (vii) Kiomi commits fraud or similar offence against Xtra; (vii) any other act or omission which would amount to cause for termination of this Agreement at law. With respect to the foregoing events set out in this paragraph 14(c), Xtra shall not be required to pay any Fees to Kiomi, save and except for those Fees outstanding for services rendered to the date of termination of this Agreement, prorated from the date upon which Fees were last paid to Kiomi to the date of termination of this Agreement. (d) In the event that Xtra terminates this Agreement, or Kiomi provides notice of termination of this Agreement under paragraph 14(a), at any time within 6 months of a Change of Control of Xtra as hereinafter defined, Xtra shall pay Kiomi on such termination a lump sum payment representing 100% of the Fees for an eighteen (18) month period at the rate in effect at the time of termination. For clarity purposes, the Parties hereto agree that, pursuant to this subparagraph 14(d), Xtra shall pay Kiomi a lump sum payment based on her monthly Fees in effect at the time of termination of either (i) CAD$90,000.00, in the event that the Fees are CAD$8,500.00 per month; (ii) CAD$180,000.00, in the event that the Fees are CAD$10,000.00 per month, as well as any Fees payable for services rendered to the date of termination, prorated from the date upon which Fees were last paid to Kiomi to the date of termination. Where termination under this paragraph 14(a) is initiated by Xtra, payments made by Xtra under this paragraph 14(a) are in substitution of and not in addition to the payments referred to in paragraph 14(b). For clarity purposes, a "CHANGE OF CONTROL" shall mean the occurrence of (a) any person, other than an Employee (as such term is used in Section 13(d) and 14(d) of the Exchange Act is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's outstanding securities then having the right to vote at elections of directors; or (b) the individuals who at the commencement date of the agreement entered into between the consultant and our Company (the "MC AGREEMENT"), constitute the Board, cease for any reason to constitute a majority thereof unless the election, or nomination for election, of each new director was approved by a vote of at least two-thirds of the directors then in office who were directors at the commencement of the MC Agreement; or (c) there is a failure to elect two or more candidates nominated by management of the Company to the Board; or (d) the business of the Company for which the consultant's services are - 9 - principally performed is disposed of by the Company pursuant to a partial or complete liquidation of the Company, a sale of assets (including stock of a subsidiary of our Company) or otherwise. (e) Upon expiry of the Term or the earlier termination of this Agreement, however caused: (i) Kiomi agrees that he will execute and deliver to Xtra all corporate resignations from any officer or director positions held by her in Xtra or in any of its subsidiaries; and (ii) Kiomi agrees to deliver to Xtra all property of or belonging to or administered by Xtra or its subsidiaries that is within their possession or under their control including, without limiting the generality of the foregoing, all Propriety Information and Documents as defined in the Confidentiality and Non-Compete Agreement referred to in paragraph 11 of this Agreement, a copy of which is annexed hereto as Schedule "B" (f) The termination payments contemplated in subparagraphs 14(a) and (d) above will be made upon: (i) execution and delivery to Xtra of a full and final release by Kiomi in a form and substance satisfactory to Xtra; (ii) execution and delivery to Xtra of all corporate resignations from any officer or director positions held by Kiomi in Xtra and in any of its subsidiaries; and (ii) the delivery to Xtra of all property of or belonging to or administered by Xtra or its subsidiaries that is within their possession or under their control including, without limiting the generality of the foregoing, all Propriety Information and Documents as defined in the Confidentiality and Non-Compete Agreement referred to in paragraph 11 of this Agreement, a copy of which is annexed hereto as Schedule "B". 15. ADDRESS FOR DELIVERY OR NOTICE Each notice under this Agreement shall be made in writing and may be sent by facsimile or electronic formatted transmission (e-mail) or delivered to the address for such Party as noted hereunder: - 10 - (a) if to Xtra, (i) by regular mail or courier to: 446 Drake Circle Waterloo ON N2T 1L1 (ii) by e-mail transmission to: tedmckechnie@rogers.com (iii) by fax to: (416) 981-3055 (b) if to Kiomi, (i) by regular mail or courier to: 6 Kersdale Avenue Toronto ON M6M 1C8 (ii) by e-mail transmission to: kiomi@sympatico.ca (iii) by fax to: (416) 981-3055 Either Party may change its mailing address, e-mail address or facsimile number by notifying the other Party in writing. 16. SEVERABILITY AND CONSTRUCTION OF AGREEMENT Each section, paragraph, term and provision of this Agreement and any portion thereof shall be considered severable and, if for any reason whatsoever, any portion of this Agreement is determined to be invalid, contrary to or in conflict with any applicable present or future law, rule or regulation by a final ruling issued by a court of jurisdiction, agency or tribunal with valid jurisdiction, then that ruling shall not impair the operation of any other portions of this Agreement as may remain otherwise intelligible (all of which shall remain binding on the Parties hereto and continue to be of full force and effect as of the date upon which the ruling becomes final). 17. CONSENTS AND WAIVERS No consent or waiver by either Party in respect of any breach of a provision of this Agreement shall be deemed to be a consent or waiver of any other breach of this Agreement. - 11 - 18. ENUREMENT This Agreement shall enure to the benefit of and be binding upon the Parties hereto and their respective heirs, executors, administrators, successors and permitted assigns. This Agreement may not be assigned by Kiomi, but may be assigned by Xtra. 19. ENTIRE AGREEMENT This document and the Confidentiality and Non-Compete Agreement referred to in paragraph 11 herein contains the entire agreement made between the Parties as of the effective date of this Agreement and no representations, inducements, promises or agreements not embodied or referenced herein shall be of any force or effect, unless the same are set forth in writing and signed by the Parties hereto. 20. AMENDMENTS TO AGREEMENT This Agreement may be amended from time to time as agreed to in writing between the Parties. Any amending agreement together with the unamended sections of this Agreement shall then constitute the entire agreement between the Parties. 21. GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL This Agreement will be governed by and construed in accordance with the laws prevailing in the State of Nevada. The parties acknowledge and agree that the courts in Toronto, Ontario shall be the exclusive venue and proper forum in which to adjudicate any case or controversy arising either, directly or indirectly, under or in connection with this Agreement and the Parties further agree that, in the event of litigation arising out of or in connection with this Agreement in these courts, they will not contest or challenge the jurisdiction or venue of these courts. The Parties further agree and hereby waive and release any right to a trial by jury in any action arising out of the interpretation, enforcement or breach of this Agreement. 22. EXECUTION OF AGREEMENT This Agreement may be signed by the Parties hereto in counterpart, each of which counterpart when so signed shall be deemed to be an original, and such counterparts together shall constitute one and the same instrument and notwithstanding the date of execution will be deemed to bear the execution date as set forth in this Agreement. This Agreement may be executed by facsimile and such facsimile or facsimiles shall be deemed to represent the original Agreement. 23. NO PARTNERSHIP OR AGENCY The Parties hereto have not created a partnership and nothing contained in this Agreement shall in any manner whatsoever constitute any Party as the partner, agent or legal representative of the other Party, nor create any - 12 - fiduciary relationship between them for any purpose whatsoever. No Party shall have any authority to act for or assume any obligation or responsibility on behalf of the other Party, except as may be from time to time agreed to in writing between the Parties or as otherwise expressly provided. IN WITNESS WHEREOF the Parties hereto have executed this Agreement as of the date first above written. SIGNED, SEALED AND DELIVERED ) XTRA-GOLD RESOURCES CORP. in the presence of ) ) ) ) Per: /s/ William Edward McKechnie ) William Edward McKechnie ) Chairman and CEO ) ) ) ___________________________________ ) /s/ REBECCA KIOMI MORI Signature of Witness Print Name ) REBECCA KIOMI MORI SCHEDULE "A" JOB DESCRIPTION OF THE SECRETARY AND TREASURER OF XTRA-GOLD RESOURCES CORP. POSITION HELD: Secretary and Treasurer ("ST") INCUMBENT: Kiomi Mori ("KIOMI") TERMS OF REFERENCE This written job description of the responsibilities (collectively, the "RESPONSIBILITIES") and accountability of the position of the ST has been prepared to empower the CEO and/or the Board with a means of directing, assessing, encouraging and compensating the activities of Xtra's ST. This job description forms the basis for and an addendum to the terms of the management consulting agreement entered into between Xtra and Kiomi (the "MC AGREEMENT"). COMPLIANCE Kiomi's performance of her Responsibilities set forth hereunder shall, at all times, be subject to her compliance with the provisions of applicable laws, rules and regulations. Kiomi shall be subject to and agrees to comply with all internal policies instituted by Xtra and applicable to its executive officers. SCOPE OF SERVICES The scope of the Services, in particular, the job description and responsibilities of the ST, shall include but not be limited to: CUSTODIAL RESPONSIBILITIES The ST is the custodian of all of Xtra's records and, as such, ensures that its records are maintained as required by law and made available when required by authorized persons. These records include founding documents, i.e. articles of incorporation and any amendments thereto, resolutions, by-laws, minutes of the Board and committee meetings held from time to time, directors, officers and securityholders' registers, financial reports and other official records. CORPORATE RESPONSIBILITIES o ensuring that accurate and sufficient documentation exists to meet legal requirements; o preparing and maintaining all corporate records including, among other things, minutes of meetings, resolutions, by-laws, consents and resignations and various corporate and securities registers; o attending all Board meetings as a voting member and acting as Secretary of and recording minutes of such meetings; A-2 o preparing meeting materials for directors and stockholders' meetings, including annual general meetings; and o preparing and filing of all documentation necessary to maintain Xtra and its subsidiaries in good standing, including corporate and regulatory filings. ACCOUNTING RESPONSIBILITIES o continuously examining and refining budget and other financial processes; o conducting an annual budget meeting with the CEO and the Board; o preparing and submitting monthly financial reports to the CEO and the Board; o preparing an overall G&A for Xtra on no less than a quarterly basis; o overseeing the audit process and liaising with Xtra's independent auditors as may be required from time to time; o maintaining the financial records of Xtra and posting of all transactions in an acceptable accounting application (currently "QuickBooks"); o issuing checks and processing wire transfers and transfer payments to consultants, professional advisors and vendors o ensuring the effective management of Xtra's financial operations by: o ensuring that all external reporting obligations are met in a timely fashion; o ensuring the integrity of Xtra's cash, receivables and payables management; o assisting with the completion of all major financial transactions; o monitoring Xtra's overall financial health; o enforcing financial discipline/guidelines and controls to key players of Xtra; and o implementing and conducting "checks and balances" procedures for Xtra and its subsidiaries; o assisting with the development, execution and communication of Xtra's overall financial strategy to its stockholders through design and execution of a strategy to communicate key elements of Xtra's financial objectives; o assessing Xtra's financial management needs and current capabilities from time to time and providing such assessments to the CEO; A-3 o providing recommendations to the CEO and/or the Board on major financial decisions and carrying out the financial policy decisions made by Xtra's senior management; and o reviewing all financial reports prepared by Xtra's subsidiaries and discussing same with the CEO and/or the Board. GENERAL ADMINISTRATIVE RESPONSIBILITIES o liaising with counsel, auditors, stock transfer agent and all other professional advisors; o reviewing all incoming documentation, including legal and financial matters and proactively attending to any required action; o acting as a designated signing officer for the execution of certain documentation including counter-execution of checks, correspondence, documents, applications, reports, contracts or other documents on behalf of Xtra; o managing the general correspondence on behalf of the Board, except for the preparation of correspondence assigned to others. o communicating with the Chief Executive Officer ("CEO") on a regular basis during the course of the year to review and discuss Xtra's business; o proactively participating in strategic planning and internal control policies; and o drafting of agreements as may be required from time to time. SPECIFIC ACCOUNTABILITY The ST is accountable to and shall report directly to the CEO. The ST is also accountable to the Board. The CEO will review her performance in connection with each of the above-noted Responsibilities, which may be amended from time to time, and will record and discuss his assessment with the Board and the ST within thirty (30) days of the commencement of full scale placer mine production, but in no event later than six (6) months following the execution of the management consulting agreement dated July 1, 2006 of which this Schedule "A" forms a part thereof. Thereafter, the CEO, and/or the Board and/or the Compensation Committee will review the performance of the ST on an annual basis in connection with the Responsibilities and will record and discuss this assessment with the ST at such time. PERFORMANCE Above-average timely performance is expected in all areas of responsibility. The success of Xtra-Gold and its ability to thrive and prosper in a competitive environment, together with the successful performance by the ST will be recognized in a reward for initiative and the CEO, Board and/or the Compensation Committee may elect to award additional compensation to be determined, based on the achievement of milestones as may be established from time to time. SCHEDULE "B" CONFIDENTIALITY AND NON-COMPETE AGREEMENT THIS CONFIDENTIALITY AND NON-COMPETE AGREEMENT (the "AGREEMENT") is made and entered into as of the 1st day of July, 2006. BETWEEN: REBECCA KIOMI MORI, 6 Kersdale Avenue Toronto ON M6M 1C8 (hereinafter referred to as "KIOMI") - - and - XTRA-GOLD RESOURCES CORP., a Nevada corporation having a head office at 6 Kersdale Avenue Toronto ON M6M 1C8 Canada (hereinafter referred to as "XTRA-GOLD") WHEREAS as of the date of this Agreement, Xtra-Gold and/or its subsidiaries, Xtra-Gold Mining Limited, Xtra-Gold Exploration Limited, Xtra Oil & Gas (Ghana) Limited (collectively, referred to as "XTRA-GOLD") are engaged in the exploration, development, mineral extraction and production of gold and other resources in the Republic of Ghana (the "BUSINESS"); AND WHEREAS Xtra-Gold has established a valuable reputation, expertise and goodwill in its Business; AND WHEREAS Kiomi, by virtue of her engagement with Xtra-Gold and/or any of its subsidiaries, is and may become familiar with and possessed with the manner and methods of business, trade secrets, customer, client, employee and stockholder lists and other confidential information pertaining to the Business; AND WHEREAS in consideration of and as a condition to Xtra-Gold's engagement of Kiomi's consulting services on the terms and conditions set out in the Management Consulting Agreement made effective as of July 1, 2006 between Xtra-Gold and Kiomi (hereinafter the "CONSULTING AGREEMENT"), Kiomi agreed to enter into this Confidentiality and Non-Compete Agreement; B-2 NOW THEREFORE IN CONSIDERATION OF Xtra-Gold's engagement of Kiomi's consulting services on the terms and conditions set out in the Consulting Agreement and other good and valuable consideration the receipt of which is hereby acknowledged, Kiomi and Xtra-Gold (hereinafter the "PARTIES") agree as follows: 1. COVENANT NOT TO COMPETE Kiomi acknowledges and recognizes the highly competitive nature of Xtra-Gold's Business and that the goodwill, continued patronage, and specifically the names and addresses of Xtra-Gold's Clients (as defined herein) constitute a substantial asset of Xtra-Gold having been acquired through considerable time, money and effort. Accordingly, Kiomi agrees to the following: (i) that during the Restricted Period (as hereinafter defined) and within the Restricted Area (as hereinafter defined), she will not, individually or in conjunction with others, directly or indirectly, engage in any Business Activities (as hereinafter defined), whether as an officer, director, proprietor, employer, partner, independent contractor, investor (other than as a holder solely as an investment of less than one percent (1%) of the outstanding capital stock of a publicly traded corporation), consultant, advisor, agent, creditor or otherwise; (ii) that during the Restricted Period and within the Restricted Area, she will not, directly or indirectly, compete with Xtra-Gold by soliciting, inducing or influencing any of Xtra-Gold's Clients to discontinue or reduce their business relationship with Xtra-Gold; (iii) that during the Restricted Period and within the Restricted Area, she will not (A) directly or indirectly recruit, solicit or otherwise influence any employee, consultant or agent of Xtra-Gold to discontinue their employment, consultancy or agency relationship with Xtra-Gold as the case may be, or (B) in connection with any business which competes directly or indirectly with the Business Activities of Xtra-Gold (the "COMPETITIVE BUSINESS"), employ or seek to employ, or cause or permit to employ or seek to employ for any Competitive Business any person who is then (or was at any time within six (6) months prior to the date) an employee, consultant or agent of Xtra-Gold; or (C) directly or indirectly discourage any Xtra-Gold Client from doing business with Xtra-Gold. 2. NON-DISCLOSURE OF INFORMATION Kiomi acknowledges that as a result of her relationship with Xtra-Gold, she has and will continue to acquire confidential information, whether or not originated by her, that relates to the Business or affairs of Xtra-Gold and/or its customers (hereafter the "PROPRIETARY INFORMATION") including, but not limited to, Xtra-Gold's trade secrets, private or secret processes, methods and ideas, as they exist from time to time, stockholder, customer or vendor lists, products, services, mining methods, development, technical information, marketing activities and procedures, credit and financial data concerning Xtra-Gold and/or Xtra-Gold's Clients. Kiomi agrees that the Proprietary B-3 Information is a valuable, special and unique asset of Xtra-Gold and/or its Clients as the case may be, that access thereto and knowledge thereof was and continues to be essential to the performance of her services to Xtra-Gold, and that it is reasonable and necessary for her to make the following covenants regarding her conduct during and subsequent to the term of the Consulting Agreement: (i) at all times during and subsequent to the term of the Consulting Agreement, she will not disclose the Proprietary Information to any person or entity (other than as necessary in carrying out the services contemplated in the Consulting Agreement) without first obtaining Xtra-Gold's written consent unless such Proprietary Information has been publicly disclosed generally without breach of this Agreement or upon written advice of legal counsel reasonably satisfactory to Xtra-Gold that she is legally required to disclose such Proprietary Information; (ii) at all times during and subsequent to the term of the Consulting Agreement , she will not use, copy, transfer or destroy any Proprietary Information (other than as necessary in carrying out the services contemplated in the Consulting Agreement) without first obtaining Xtra-Gold's written consent, and she will take all reasonable precautions to prevent inadvertent use, copying, transfer or destruction of any Proprietary Information unless such Proprietary Information has been publicly disclosed generally without breach of this agreement or upon written advice of legal counsel reasonably satisfactory to Xtra-Gold that she is legally required to disclose such Proprietary Information; (iii) Documents (as hereinafter defined) prepared by Kiomi or that come into their possession during her association with Xtra-Gold are and remain the property of Xtra-Gold, whether or not such Documents contain Proprietary Information; and (iv) on the expiry of the term of the Consulting Agreement or such earlier termination of the Consulting Agreement, however caused, or on receipt of Xtra-Gold's written request, she shall deliver to Xtra-Gold at Xtra-Gold's principal place of business as provided in this Agreement all property of or belonging to or administered by Xtra-Gold and/or its Clients including without limiting the generality of the foregoing, all Propriety Information and Documents within her possession or under their control. 3. DEVELOPMENT OF INTELLECTUAL PROPERTY (i) Kiomi agrees that she will, during the term of the Consulting Agreement, disclose promptly to Xtra-Gold in writing any and all inventions, special procedures, processes or products and any improvements in or modifications of existing inventions, special procedures, processes, or products relating to or connected with the Business Activities, whether or not patentable, conceived, developed or made by them either alone or in conjunction with others during the term of the Consulting Agreement, whether conceived, developed or made upon Xtra-Gold's premises, or with Xtra-Gold's material or facilities, or otherwise, and all of said inventions, special procedures, processes, products, improvements and modifications shall be the sole and exclusive property of Xtra-Gold. B-4 (ii) At the option and request of Xtra-Gold, Kiomi will promptly execute, acknowledge and deliver during the term of the Consulting Agreement and at all times thereafter, without any payment or other consideration from Xtra-Gold, such applications, assignments and other instruments which Xtra-Gold shall deem necessary in order to (i) apply for and obtain letters patent, trademarks, service marks or other intellectual property protection in the United States and any foreign countries for any and all of the aforesaid inventions or discoveries described above, and (ii) assign and convey to Xtra-Gold the sole and exclusive right, title and interest therein, and she will assist Xtra-Gold or its nominee in every proper way, at Xtra-Gold's cost and expense, in accomplishing any and all of the foregoing. 4. DEFINITIONS In this Agreement, the following terms have the meanings: (a) DOCUMENTS. "DOCUMENTS" shall mean all original written, recorded, or graphic matters whatsoever, and any and all copies thereof, including, but not limited to: papers, books, records, tangible things, correspondence, communications, electronically transmitted messages (e-mails and faxes), memoranda, work-papers, reports, presentations, affidavits, statements, summaries, analyses, evaluations, stockholder and client records and information, agreements, agendas, advertisements; instructions, charges, manuals, brochures, publications, directories, industry lists, schedules, client lists, vendor lists, statistical records, training manuals, computer printouts, books of account, records and invoices, technical data, including but not limited to mining leases, prospecting licences, permits, feasibility reports, surveys, site plans, mining operation plans reflecting business operations; all things similar to any of the foregoing however denominated. In all cases where originals are not available, the term "Documents" shall also mean identical copies of original documents or non-identical copies thereof. (b) XTRA-GOLD'S CLIENTS. The "XTRA-GOLD'S CLIENTS" mean any persons, partnerships, corporations, stockholders, potential investors, professional associations or advisors or other organizations for or with whom Xtra-Gold performed or intended to perform Business Activities at any time during the period Kiomi performed consulting services for Xtra-Gold or held any offices or directorships in Xtra-Gold including under the Consulting Agreement. (c) RESTRICTIVE PERIOD. The "RESTRICTIVE PERIOD" means during the term of the Consulting Agreement and for a period of two (2) years following the termination of the Consulting Agreement, however caused. B-5 (d) RESTRICTED AREA. The "RESTRICTED AREA" means within 100 kilometers from where Xtra-Gold carries on its Business. (e) BUSINESS ACTIVITIES. "BUSINESS ACTIVITIES" means the Business during the 12 month period prior to the expiry of the term of the Consulting Agreement or its earlier termination. 5. COVENANTS AS ESSENTIAL INDUCEMENTS OF THIS AGREEMENT It is understood by and between the parties hereto that the foregoing covenants contained in this Agreement are essential inducements to Xtra-Gold to engage Kiomi under the Consulting Agreement, and that but for the agreement by Kiomi to comply with such covenants, Xtra-Gold would not have agreed to continue to engage them. Such covenants by Kiomi shall be construed to be agreements independent of any other provisions of this Agreement. The existence of any other claim or cause of action, whether predicated on any other provision in this Agreement, or otherwise, as a result of the relationship between the Parties shall not constitute a defense to the enforcement of such covenants against Kiomi. 6. SURVIVAL AFTER TERMINATION OF AGREEMENT Notwithstanding anything to the contrary contained in this Agreement, the covenants contained herein shall survive the engagement of Kiomi by Xtra-Gold and shall continue in force after expiry of the term or other termination of the Consulting Agreement, however caused. 7. REMEDIES (i) Kiomi acknowledges and agrees that Xtra-Gold's remedy at law for a breach or threatened breach of any of the provisions of this Agreement would be inadequate and the breach shall be per se deemed as causing irreparable harm to Xtra-Gold. In recognition of this fact, in the event of a breach by Kiomi of any of the provisions of this Agreement, Kiomi agrees that, in addition to any remedy at law available to Xtra-Gold, including, but not limited to monetary damages, Xtra-Gold, without posting any bond, shall be entitled to obtain, and she agrees not to oppose Xtra-Gold's request for equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available to Xtra-Gold. (ii) Kiomi acknowledges that the granting of a temporary injunction, temporary restraining order or permanent injunction merely prohibiting the use of Proprietary Information would not be an adequate remedy upon breach or threatened breach of this Agreement and consequently agree, upon proof of any such breach, to the granting of injunctive relief prohibiting any form of competition with Xtra-Gold. Nothing herein contained shall be construed as prohibiting Xtra-Gold from pursuing any other remedies available to it for such breach or threatened breach. B-6 (iii) Nothing herein contained shall be construed as prohibiting Xtra-Gold from pursuing any other remedies available to it for such breach or threatened breach. 8. COUNTERPARTS This Agreement may be signed by the Parties in counterparts, each of which counterpart when so signed shall be deemed to be an original, and such counterparts together shall constitute one and the same instrument and notwithstanding the date of execution will be deemed to bear the execution date as set forth in this Agreement. This Agreement may be executed by facsimile and such facsimile or facsimiles shall be deemed to represent the original Agreement. 9. BINDING EFFECT/ASSIGNMENT This Agreement shall be binding upon the Parties and their respective heirs, executors, legal representatives, successors and assigns. This Agreement shall not be assignable by any Party without the express written consent of all Parties. 10. GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL This Agreement will be governed by and construed in accordance with the laws prevailing in the State of Nevada. The parties acknowledge and agree that the courts in Toronto, Ontario shall be the exclusive venue and proper forum in which to adjudicate any case or controversy arising either, directly or indirectly, under or in connection with this Agreement and the Parties further agree that, in the event of litigation arising out of or in connection with this Agreement in these courts, they will not contest or challenge the jurisdiction or venue of these courts. The Parties further agree and hereby waive and release any right to a trial by jury in any action arising out of the interpretation, enforcement or breach of this Agreement. 11. SEVERABILITY The invalidity, illegality or unenforceability of any provision or provisions of this Agreement will not affect any other provision of this Agreement, which will remain in full force and effect, nor will the invalidity, illegality or unenforceability of a portion of any provision of this Agreement affect the balance of such provision. In the event that any one or more of the provisions contained in this Agreement or any portion thereof shall for any reason be held to be invalid, illegal or unenforceable in any respect, this Agreement shall be reformed, construed and enforced as if such invalid, illegal or unenforceable provision had never been contained herein. 12. EXPENSES TO ENFORCE If it becomes necessary for Xtra-Gold to institute legal action to enforce the terms and conditions of this Agreement, and such legal action results in a final judgment in favor of Xtra-Gold, then Kiomi agrees to reimburse Xtra-Gold for all direct, indirect or incidental expenses incurred, including, but not limited to, all attorney's fees, court costs and other expenses incurred throughout all negotiations, trials or appeals undertaken in order to enforce Xtra-Gold's rights hereunder. B-7 13. NOTICES Any notice required or permitted to be given under the terms of this Agreement shall be sufficient if in writing and if sent postage prepaid by registered or certified mail, return receipt requested; by overnight delivery; by courier; or by confirmed facsimile as set forth in the first paragraph of this Agreement, or at such other place as any of the Parties may designate. THE PARTIES TO THIS AGREEMENT HAVE READ THIS AGREEMENT, UNDERSTAND ITS TERMS AND CONDITIONS, HAVE HAD THE OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL OF THEIR OWN CHOICE AND AGREE TO BE BOUND BY ITS TERMS AND CONDITIONS. IN WITNESS WHEREOF, the Parties have executed this Agreement effective as of the date first above written. XTRA-GOLD RESOURCES CORP. By: /s/ William Edward McKechnie William Edward McKechnie Chief Executive Officer /s/ Rebecca Kiomi Mori Rebecca Kiomi Mori Secretary and Treasurer --------------------------- Office Held (if applicable) EX-10 28 ex_10-21.txt ABUDULAI MANAGEMENT AGREEMENT DATED 11-01-2006 EXHIBIT 10.21 CONSULTING AGREEMENT THIS AGREEMENT is made as of the 1st day of November, 2006. BETWEEN: XTRA-GOLD RESOURCES CORP., a company incorporated under the laws of the State of Nevada, having an office at 6 Kersdale Avenue Toronto ON M6M 1C8 Canada (hereinafter referred to as "XTRA-GOLD") OF THE FIRST PART - - and - ALHAJI NANTOGMA ABUDULAI P.O. Box CT2654 Cantonment, Accra, Ghana (hereinafter referred to as "ABUDULAI") OF THE SECOND PART WHEREAS Abudulai possesses the requisite knowledge and experience in connection with precious metals and mineral exploration companies, in particular, with respect to business administration and operations for a Ghanaian mining company; AND WHEREAS Abudulai was appointed as Vice-President, Ghana Operations on April 1, 2005 and was further appointed as the President, Community Relations and director of Xtra-Gold's three Ghanaian subsidiaries; namely Xtra-Gold Mining Limited ("XG MINING"), Xtra-Gold Exploration Limited ("XGEL") and Xtra Oil and Gas (Ghana) Limited; AND WHEREAS Xtra-Gold is desirous of engaging the services of Abudulai to assist with the business management of its Ghanaian subsidiaries. NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the sum of Ten ($10.00) Dollars, the receipt and sufficiency of which is hereby acknowledged by the parties hereto and other good and valuable consideration, the parties hereto agree as follows: - 2 - 1. SERVICES (a) Abudulai shall perform the managerial consulting services (the "SERVICES") set forth in Schedule "A" as may be required from time to time as authorized and directed by the Chief Executive Officer ("CEO") of Xtra-Gold or such other officer as may be designated by him. (b) The scope of the Services will be primarily of a consulting nature, wherein Abudulai will provide the Services as set out in Schedule "A" annexed hereto. 2. FEES (a) Rate i. Xtra-Gold shall pay Abudulai a consulting fee at a rate of US$1,000.00 (the "FEE") per month; ii. Abudulai shall submit an itemized monthly invoice to Xtra-Gold in order to receive the Fee. (b) Xtra-Gold shall: i. pay the Fee within one week following the submission of Abudulai's invoice but in no event later then the end of the relevant month; and ii. process a wire transfer payment of the Fee as part of the following month's budget submitted to Xtra-Gold by XG Mining or in such other manner as determined by Xtra-Gold. (c) The parties hereto agree that the Fee may be paid on a pro rata weekly or other basis but in no event shall the Fee be paid in advance of providing the Services, unless otherwise approved in writing by Xtra-Gold. 3. TERM (a) The initial term ("TERM") of this Agreement is for one year commencing on the date first above written and may only be renewed on such terms and conditions as the parties hereto may agree to in writing prior to the end of the Term, failing which this Agreement will immediately terminate and be of no further force and effect. (b) Notice of renewal may emanate from either party provided that unless the Parties mutually agree in writing, no renewal of this Agreement shall come into force. - 3 - (c) Subsequent renewals of the Term shall be agreed upon in writing between the parties no less than 30 days prior to the expiration of the Term and shall be made on the same terms and conditions as set out in this Agreement. 4. REIMBURSEMENT OF EXPENSES Abudulai will submit a report of reasonable expenses actually and properly incurred, for each month during which the Services were performed, by facsimile or electronic mail transmission to the CEO and Secretary and Treasurer of Xtra-Gold for their review and approval, together with original valid receipts. Xtra-Gold shall reimburse Abudulai for his approved expenses within 10 days after receipt of each expense report. 5. REPRESENTATIONS OF ABUDULAI (a) Abudulai represents that he has the requisite qualifications, experience and capabilities to perform the Services to a standard of care, skill and diligence acceptable within the mining sector. (b) The parties hereto acknowledge that Abudulai has completed an Officer's and Director's Questionnaire (the "QUESTIONNAIRE"). The parties hereto agree that Xtra-Gold shall have the right to terminate this Agreement without advance notice in the event that the Questionnaire reveals information that, in the determination of the board of directors of Xtra-Gold (the "BOARD"), could reasonably adversely affect Xtra-Gold's disclosure in its SEC filings. 6. STOCK OPTIONS On May 1, 2006, the "BOARD" granted Abudulai an aggregate of 108,000 non-qualified stock options (the "OPTIONS") on the following terms and as more particularly set forth in a stock option agreement (the "OPTION AGREEMENT") entered into between the Parties: (a) the price at which the Options may be exercised is U.S.$0.70 per share; (b) the term of the Options shall be for three (3) years (the "OPTION PERIOD") and shall expire three (3) years from the date of grant (the "EXPIRY DATE"); (c) the Options shall vest at the rate of 3,000 Options in each month of the Option Period from June 1, 2006; (d) any portion of the Options that have vested and have not been exercised (the "ACCRUED Options"), shall accrue to the benefit of Abudulai for a period of time as may be set out in the Option Plan referred to in subparagraph (j) hereunder or in accordance with securities laws governing Xtra-Gold, but in no event shall the Accrued Options be exercised later than the earlier of (a) the Expiry Date; and (b) the exercise date contemplated in subparagraphs (e), (f), (g) and (h) hereunder; - 4 - (e) in the event of termination as a result of Abudulai's voluntary resignation, all Accrued Options must be exercised within 90 days from the date of the resignation by Abudulai, failing which the Accrued Options will be cancelled; (f) in the event of the death of Abudulai during the Term, all Accrued Options must be exercised by Abudulai's estate within one year from the date of Abudulai's death, failing which the Accrued Options will be cancelled. (g) in the event that Abudulai is terminated by Xtra-Gold, without cause, then in such event Xtra-Gold agrees that Abudulai shall retain 100% of the Accrued Options and 50% of the unvested Options (the "Unvested Options"); provided, however that the Options referred to in this subparagraph must be exercised no later than 90 days following such termination, failing which such Options will be cancelled; (h) in the event that Abudulai is terminated by Xtra-Gold, with cause, then in such event Xtra-Gold agrees that Abudulai shall retain 100% of the Accrued Options; provided, however that the Accrued Options must be exercised no later than 90 days following such termination, failing which the Accrued Options will be cancelled. All Unvested Options will be cancelled immediately upon termination, with cause; (i) in the event of a Change of Control of Xtra (as defined herein), all Options granted to Abudulai shall vest in which event, Abudulai will have the right to exercise such Options within 90 days following the completion of such Change of Control. For clarity purposes, a "CHANGE OF CONTROL" shall mean the occurrence of (a) any person, other than an Employee (as such term is used in Section 13(d) and 14(d) of the Exchange Act is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's outstanding securities then having the right to vote at elections of directors; or (b) the individuals who at the commencement date of the agreement entered into between the consultant and our Company (the "MC AGREEMENT"), constitute the Board, cease for any reason to constitute a majority thereof unless the election, or nomination for election, of each new director was approved by a vote of at least two-thirds of the directors then in office who were directors at the commencement of the MC Agreement; or (c) there is a failure to elect two or more candidates nominated by management of the Company to the Board; or (d) the business of the Company for which the consultant's services are principally performed is disposed of by the Company pursuant to a partial or complete liquidation of the Company, a sale of assets (including stock of a subsidiary of our Company) or otherwise. (j) Xtra-Gold implemented and adopted a 2005 equity compensation plan (the "OPTION PLAN") which implementation and adoption was approved in writing by the Board in June 2005; - 5 - (k) the share certificate or certificates issued as a result of the exercise of the Options from time to time shall bear a restrictive legend with respect to the resale of the shares in connection therewith. In particular, until such time that a registration statement has been filed by Xtra-Gold and accepted by the U.S. Securities and Exchange Commission, in accordance with Rule 144: (i) the shares cannot be resold unless held for two years; or alternatively (ii) if Xtra-Gold is a reporting company, then the applicable hold period shall be one year from the date of the issuance of shares; and (l) the Options shall at all times be subject to the terms of the Option Agreement and the Option Plan. 7. PLACE OF WORK Abudulai shall render the Services primarily in the Republic of Ghana or at such other place or places as may be reasonably requested by Xtra-Gold from time to time as deemed appropriate for the performance of his Services. 8. INDEPENDENT CONSULTANT (a) Abudulai shall not be construed to an employee or agent of Xtra-Gold or any of its subsidiaries (collectively referred to as "XTRA-GOLD") but is and at all times shall remain an independent contractor, who shall have no authority to bind or commit Xtra-Gold in any manner excepting only where specifically authorized in writing to that effect. (b) Abudulai shall not be entitled to nor shall receive any benefit normally provided to Xtra-Gold's employees including, but not limited to, vacation pay, disability and other insurance coverage, not otherwise referred to herein, and sick pay or retirement funds; (c) In accordance with Ghanaian law, as Xtra-Gold is a non-resident, Xtra-Gold is not required to withhold any portion of the Fee paid to Abudulai nor is it required to submit any withholding tax to the Ghana Internal Revenue Services. (d) No withholding for federal or state income taxes or any other tax or contribution shall be deducted from payments rendered to Abudulai. Abudulai herein agrees to be solely responsible for the payment of taxes or contributions due on any amounts received by Abudulai under this Agreement. 9. EXCLUSIVITY OF ABUDULAI Abudulai agrees to provide his Services exclusively to Xtra-Gold during the Term; except for services which he provides to CME & Company or its subsidiaries; and to the Canadian Business Association in Ghana as its President; provided however, should Abudulai be required to provide his services to any other unrelated party, he must notify Xtra-Gold within seven days of such event and obtain its written consent. - 6 - 10. PROGRESS REPORTS Abudulai shall provide written progress reports to Xtra-Gold within three (3) days following each week of each month during the Term of this Agreement and any subsequent renewal thereof. 11. CONFIDENTIALITY During the term of this Agreement and thereafter, in perpetuity, Abudulai shall maintain all matters involving Xtra-Gold and the Services performed by Abudulai in the strictest confidence, except insofar as shall be required in order for Abudulai to perform the Services hereunder or as may be authorized in writing by Xtra-Gold, or as may come into the public domain through sources beyond the control of Abudulai or Xtra-Gold or as may be required by law. 12. INDEMNIFICATION In the event of any legal action commenced by a corporation or an individual with respect to Abudulai's Services under this Agreement, Xtra-Gold hereby agrees to indemnify and hold harmless Abudulai from and against all such actions, claims, liabilities, costs and expenses and the legal fees and disbursements in connection therewith shall be borne by Xtra-Gold; provided that the indemnification provided under this paragraph shall not be available to the extent of Abudulai's gross negligence, willful misconduct, violation of any applicable statute, rule or regulation, or under circumstances where applicable law does not permit indemnification. 13. OWNERSHIP OF INFORMATION Any and all information and work product, documents or any related data or material with respect to the Services provided by Abudulai shall remain the exclusive property of Xtra-Gold and Abudulai shall have no claim or interest therein whatsoever. This term shall survive the expiration or earlier termination of this Agreement. 14. ASSIGNMENT Abudulai may not assign this Agreement or any of the Services without having first obtaining the written approval of Xtra-Gold. 15. TERMINATION With respect to termination of this Agreement: (a) either Abudulai or Xtra-Gold may terminate this Agreement without reason or cause by first providing the other Party with one (1) month's written notice in advance of such termination; (b) Xtra-Gold may terminate this Agreement, without providing Abudulai with any notice of termination, in the event of any one of the following causes: - 7 - (i) Abudulai is convicted of a crime; (ii) Abudulai commits fraud or similar actions against Xtra-Gold; (iii) Abudulai commits willful misconduct; or (iv) Abudulai commits habitual intoxication or substance abuse. (c) upon termination of this Agreement, Abudulai warrants that he shall deliver to Xtra-Gold at its request any and all materials, work product and information relating to the Services including, but not limited to, any and all files, agreements, reports, correspondence, analytical work, equipment and every other matter related thereof; and (d) Abudulai shall also maintain all matters herein in confidence in perpetuity after such termination, unless required to disclose such matters under law. 16. ADDRESS FOR DELIVERY OR NOTICE Each notice under this Agreement shall be made in writing and may be sent by facsimile or electronic formatted transmission (e-mail) or delivered to the address for such Party as noted hereunder: (a) if to Xtra-Gold: (i) by regular mail or courier to: 6 Kersdale Avenue Toronto ON M6M 1C8 Canada (ii) by fax transmission to: (416) 981-3055 (iii) by e-mail transmission to: tedmckechnie@rogers.com; with a copy to: kiomi@sympatico.ca (b) if to Abudulai: (i) by regular mail or courier to: CT2654 Cantonments, Accra, Ghana - 8 - (ii) by fax to: 011 233 21 519106 (iii) by e-mail transmission to: abudulain@yahoo.com Either party may change its mailing address, e-mail address or facsimile number by notifying the other party in writing. 20. SEVERABILITY AND CONSTRUCTION OF AGREEMENT Each section, paragraph, term and provision of this Agreement and any portion thereof shall be considered severable and, if for any reason whatsoever, any portion of this Agreement is determined to be invalid, contrary to or in conflict with any applicable present or future law, rule or regulation by a final ruling issued by a court, agency or tribunal with competent jurisdiction, then that ruling shall not impair the operation of any other portions of this Agreement as may remain otherwise intelligible (all of which shall remain binding on the parties hereto and continue to be of full force and effect as of the date upon which the ruling becomes final). 21. CONSENTS AND WAIVERS No consent or waiver by either party in respect of any breach of a provision of this Agreement shall be deemed a consent or waiver of any other breach of this Agreement and no party shall have the benefit of a plea of laches or acquiescence on account of consent, waiver or forbearance of any antecedent breach of any provision of this Agreement. 22. ENUREMENT This Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and permitted assigns. 23. ENTIRE AGREEMENT This document contains the entire agreement made between the parties hereto as of the date of this Agreement and no representations, inducements, promises or agreements not embodied or referenced herein shall be of any force or effect, unless the same are set forth in writing and signed by the parties hereto. 24. AMENDMENTS TO AGREEMENT This Agreement may be amended from time to time as agreed to in writing between the parties. Any amending agreement together with the unamended sections of this Agreement shall then constitute the entire agreement between the parties. - 9 - 25. GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL This Agreement will be governed by and construed in accordance with the laws prevailing in the State of Nevada. The parties acknowledge and agree that the courts in Toronto, Ontario shall be the exclusive venue and proper forum in which to adjudicate any case or controversy arising either, directly or indirectly, under or in connection with this Agreement and the Parties further agree that, in the event of litigation arising out of or in connection with this Agreement in these courts, they will not contest or challenge the jurisdiction or venue of these courts. The Parties further agree and hereby waive and release any right to a trial by jury in any action arising out of the interpretation, enforcement or breach of this Agreement. 26. COUNTERPARTS This Agreement may be signed by the parties hereto in counterparts, each of which counterpart when so signed shall be deemed to be an original, and such counterparts together shall constitute one and the same instrument and notwithstanding the date of execution will be deemed to bear the execution date as set forth in this Agreement. This Agreement may be executed by facsimile and such facsimile or facsimiles shall be deemed to represent the original Agreement. 27. NO PARTNERSHIP OR AGENCY The parties hereto have not created a partnership and nothing contained in this Agreement shall in any manner whatsoever constitute any party as the partner, agent or legal representative of the other party, nor create any fiduciary relationship between them for any purpose whatsoever. No party shall have any authority to act for or assume any obligation or responsibility on behalf of the other party, except as may be from time to time agreed to in writing between the parties or as otherwise expressly provided. IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the date first above written. SIGNED, SEALED AND DELIVERED ) XTRA-GOLD RESOURCES CORP. in the presence of ) ) ) Per: /s/ William Edward (Ted) McKechnie ) WILLIAM EDWARD (TED) MCKECHNIE ) Chairman and ChiefExecutive Officer ) ) /s/ Patience Mensah ) /s/ Alhaji Nantogma Abudulai - ----------------------------------- ) ---------------------------- Signature of Witness ) ALHAJI NANTOGMA ABUDULAI ) Patience Mensah ) - ----------------------------------- ) Print Name of Witness ) SCHEDULE "A" SCOPE OF SERVICES TO BE PROVIDED BY ALHAJI NANTOGMA ABUDULAI TO XTRA-GOLD RESOURCES CORP. The scope of the Services shall not include "day to day" operations of our Ghanaian subsidiaries but shall include, among other things: --> managing and improving community and government relations as may be required from time to time including but not necessarily restricted to, relationships with the Minerals Commission, the Minister of Lands, Forestry and Mines, the Water Resources Commission, the Environmental Protection Agency and the Ghana National Petroleum Corporation, by acting as Xtra-Gold's primary liaison and attending meetings with related officials on an as needed basis; --> managing specific executions on an as needed basis including, but not limited to, facilitating the procurement of licences, leases, permits and other government approvals and handling any political or environmental issues that may arise from time to time; --> facilitating the exchange of information and/or documentation with Ghanaian governmental authorities; --> participating in property acquisitions and dispositions from time to time; --> reviewing all material contracts to be entered into by the Ghanaian subsidiaries and providing comment to the Chairman of the Ghanaian subsidiaries and the CEO of Xtra-Gold; --> providing support in connection with financial approvals as may be required from time to time including, but not limited to review of monthly budgets, expenditures and capital costs of the Ghanaian subsidiaries and counter-execution of cheques; --> providing representation of Xtra-Gold with respect to its Ghanaian operations; --> participating in meetings of the management committee as a member of such committee; --> providing weekly status/progress reports to the Chairman of the Ghanaian subsidiaries, with a copy to the CEO of Xtra-Gold on matters being attended to on behalf of Xtra-Gold and reporting directly to the Chairman; --> reviewing compensation structure and/or issues in connection with Accra support staff and labourers at the Mine Camp; --> liaising from time to time with our Ghanaian professional advisors; --> providing support with respect to the procurement of goods in Ghana. - A2 - SPECIFIC ACCOUNTABILITY The CEO of Xtra-Gold together and/or the Chairman of the Ghanaian subsidiaries shall review the performance of Abudulai in connection with each of the above-noted responsibilities (the "RESPONSIBILITIES"), which may be amended from time to time, and will record and discuss their assessment with the board of directors of the relevant company and Abudulai within thirty (30) days following the commencement of full scale mine production at XG Mining's Kwabeng Project, but in no event later than six (6) months following the execution of the management consulting agreement dated November 1, 2006 of which this Schedule "A" forms a part thereof. Thereafter, the CEO and/or the Board will review the performance of Abudulai on an annual basis in connection with the Responsibilities and will record and discuss this assessment with Abudulai at such time. PERFORMANCE Above-average timely performance is expected in all areas of responsibility and considered compensation is provided within the position's compensation and stock option base. The success of Xtra-Gold and its ability to thrive and prosper in a competitive environment, together with the successful performance by Abudulai will be recognized in a reward for initiative and the Board may elect to award additional compensation to be determined, based on the achievement of such milestones as may be established from time to time. EX-10 29 ex_10-24.txt PROSPECTING LICENCE W/BANSO & MUOSO CONCESSIONS EXHIBIT 10.24 Dated this 24th day of September, 2001 GOVERNMENT OF THE REPUBLIC OF GHANA AND CANADIANA GOLD RESOURCES LIMITED __________________________________________________ PROSPECTING LICENCE __________________________________________________ SOLICITOR OF THE SUPREME COURT TERM: TWO (2) YEARS (RENEWABLE) COMMENCEMENT: 24-09-2001 EXPIRY DATE: 23-09-2003 FILE NO.: LVB 16931/2001 THIS AGREEMENT is made the 24th day of September, 2001 BETWEEN THE GOVERNMENT OF THE REPUBLIC OF GHANA (hereinafter called "THE GOVERNMENT") acting by-Dr. KWAKU AFRIYIE, the Minister of Lands, Forestry and Mines (hereinafter called "THE MINISTER") of the One Part and CANADIANA GOLD RESOURCES LIMITED having its registered office at 7 SHIPPI LINK, EAST CANTONMENTS, P. O. BOX CT-1079, ACCRA, GHANA (hereinafter called "THE COMPANY") of the Other Part. WHEREAS: - -------- A. It is Government's policy to take all such steps as it deems appropriate and effective for prospecting for minerals in the Republic of Ghana and for producing gold and diamonds thereby ensuring that the maximum possible benefits accrue to the nation from the exploitation of its mineral resources; B. In pursuit of the above policy Government desires to secure the co-operation of Companies which possess the necessary financial and managerial qualifications and skills for carrying out mineral operations; C. The Company, which warrants its financial, technical and managerial competence for undertaking mineral operations has declared itself willing to engage in prospecting operations in Ghana on the understanding that it shall bear the risk and cost of such prospecting operations and on establishing that there are good prospects for undertaking commercial mining operations it may apply for and be granted a mining lease subject to the provisions of the Minerals and Mining Law, 1986 (PNDCL 153); WITNESSESS AS FOLLOWS: - ---------------------- 1. The Government hereby grants unto the Company the right and licence to Prospect for and prove gold and diamonds under or in the area described in the Schedule hereto and demarcated on the map which forms part of his AGREEMENT (hereinafter called "the Licence Area") excluding any parts to be relinquished from time to time for a term of TWO (2) YEARS from the 24th day of September, 2001 with a right of extension as hereinafter provided. 1 2. RIGHTS OF THE COMPANY: ---------------------- a. The Company shall have the right to conduct such geological and geophysical investigations in the Licensed Area as it considers necessary to determine an adequate quantity of geologically proven and mineable reserve of gold and diamonds. b. The Company may exercise all or any of the rights and powers granted hereunder through agents, independent contractors or sub-contractors. c. The Company shall not conduct any operations in a sacred area and shall not without the prior consent of the Minister conduct any operations: i. within twenty metres of any building, installations, reservoir, dam, public road, railway or area appropriated for a railway; or ii. in an area occupied by a market, burial ground, cemetery or within a town or village or an area set apart for, used, appropriated or dedicated to a public purpose. d. Nothing contained in this Agreement shall be deemed to permit the Company to dispense with the necessity of applying for and obtaining any permit or authority which the Company may be required by law or regulation to obtain in respect of any works and/or activities to be carried out hereunder. 3. RIGHTS OF THIRD PARTIES: ------------------------ a. The Government reserves the right to grant Licences to third parties for prospecting or enter into Agreements for the production of minerals other than gold and diamonds in the Licensed Area, provided that any such activity shall not unreasonably interfere with the rights granted to the Company hereunder. 2 b. The Company shall not hinder or prevent members of the local population from exercising the following customary rights and privileges in or over the Licensed Area: i. to hunt game ii. to gather firewood for domestic purposes iii. to collect snails iv. to till and cultivate farms v. to observe rites in respect of groves and other areas held to be sacred. Provided always that where the exercise of these customary rights and privileges unduly interferes with or obstructs the operations of the Company hereunder, the Company shall make arrangements with members of the said local population for the limitation or waiver of such rights and privileges, such arrangements to include the payment of compensation where necessary. The Government shall furnish such assistance as is reasonably required in the making of such arrangements. 4. CONDUCT OF OPERATIONS: ---------------------- a. The Company shall conduct all of its operations hereunder with due diligence, efficiency and economy to the maximum extent possible consistent with good mining industry practice and in a proper workmanlike manner observing sound technical and engineering principles and practices, using appropriate modern and effective equipment, machinery, materials and methods and to pay particular regard to the protection of the environment. b. The Company shall maintain all equipment in good repair and all pits and trenches and all excavated areas in safe and good condition and take all practicable steps: i. to prevent damage to adjoining farms and villages; 3 ii. to avoid damage to trees, crops, building, structures and other property in the Licensed Area to the extent however, that any such damage is unavoidable the Company shall pay fair and reasonable compensation. The Company shall provide and maintain in good repair and condition proper roads, gates, stiles and fences for the convenient occupation of the surface of the Licensed Area. c. The Company shall use its best efforts to exercise its rights and powers granted by this Agreement in such manner as not to cause interference with or avoidable obstruction or interruption to the felling of timber by the licensed timber operators within the Licensed Area and the Government shall furnish assistance to the Company to make appropriate arrangements with such operators to permit the prospecting programme to proceed without interference or delay. 5. WORKING OBLIGATIONS: -------------------- a. The Company shall with due diligence and by means of modern geological, geophysical and other methods normally associated with mineral prospecting and within three months of the date of this Agreement or at such other time as the Minister may specify, commence prospecting operations with a view to establishing the existence of gold and diamonds in economic quantities. b. The Company, having prior to the commencement of this Agreement submitted its programme of work to the Government, shall carry out its operations in accordance with the programme and the Chief Executive of the Minerals Commission, Chief Inspector of Mines or any other officer authorized by the Government shall from time to time inspect the operations to ensure that the Company does so. 4 c. The Company shall diligently continue to carry out its operations hereunder and shall spend as actual direct prospecting expenditure not less than the minimum amounts specified in its work programme. d. If on the termination or expiration of this Agreement for any reason other than force majeure the Company shall not have spent the amounts specified in the work programme, the difference between the amount actually expended and the stipulated minimum for the year in which termination or expiration takes place shall be paid to the Government within thirty days after the date of such termination or expiration provided that if the termination shall be occasioned by force majeure or upon adequate proof, by the Company that gold and diamonds mineralization does not exist in sufficient quantities in the area to warrant completion of the work programme, the Company shall not be liable to pay to the Government any difference on the stipulated minimum expenditure. 6. NOTIFICATION OF DISCOVERY OF OTHER MINERALS: -------------------------------------------- The Company shall report forthwith to the Minister, the Chief Inspector of Mines, the Director of Geological Survey and the Chief Executive of the Minerals Commission the discovery in the Licensed Area of any other minerals and the Company shall be given the first option to prospect further and to work the said minerals subject to satisfactory arrangements between the Government and the Company. 7. SAMPLES: -------- a. The Company shall not during the currency of this Agreement destroy, except in analyses, any cores or samples obtained from the Licensed Area without the prior written consent of the Director of Ghana Geological Survey. 5 b. The Company shall provide the Director of Ghana Geological Survey and the Chief Inspector of Mines with such samples from the Licensed Area as they may from time to time reasonably request. c. All cores and samples obtained from the Licensed Area shall be delivered to the Director of Ghana Geological Survey on the termination of this Agreement and in the event of the Company not obtaining a mining lease. 8. RECORDS: -------- a. The Company shall maintain at its registered office copies of the following: i. full and complete records and books of account relating to the prospecting programme. ii. the detailed results and analysis of all surveys, boring, pitting, investigations and other testing conducted pursuant to the provisions of this Agreement. b. The records referred to in the foregoing paragraph shall include copies of all geological, geophysical, geochemical, drilling and pitting reports relating to the Licensed Area and all maps, drawings and diagrams pertaining to these reports. c. The said records, with the exception of proprietary technical information, shall be made available for inspection at reasonable times without delaying work on the prospecting programme, by the Chief Inspector of Mines and the Chief Executive of the Minerals Commission or their representatives, upon request, and shall be retained in Ghana, unless removed with Government's consent. d. Failure to keep such records and to produce them for inspection upon receipt of reasonable notice shall constitute just cause for the cancellation of this Licence. e. Copies of the aforementioned records shall be delivered to the Chief Executive of the Minerals Commission and the Chief Inspector of Mines on the termination of this Agreement and in the event of the Company not obtaining a mining lease in respect of the Licensed Area. 6 9. REPORTS: -------- a. The Company shall furnish to the Chief Inspector of Mines, the Director of Ghana Geological Survey and the Chief Executive of the Minerals Commission, not later than the 15th of each third month, a report giving a general description of the work done by the Company in the preceding quarter and containing a description accompanied by a sketch plan of the areas where any gold or any other minerals were found, particulars of the type of minerals found and the number and weight of samples taken, if any. b. The Company shall furnish to the Chief Inspector of Mines, Chief Executive of the Minerals Commission and the Director of Ghana Geological Survey not later than sixty days after the end of each calendar year, an Annual Report in such form as may be prescribed. c. All records, reports, plans and information which the Company is required to supply to the Government and its agents pursuant to the provisions of this Agreement shall be supplied at the expense of the Company. d. Any information or material supplied by the Company to the Government pursuant to the provisions of this Agreement shall be treated by the Government, its officers and agents as confidential and shall not be revealed to third parties except with the consent of the Company (which consent shall not be unreasonably withheld) for a period of 12 months with respect to technical information and 36 months with respect to financial information from the date of submission of such information. The Government and persons authorized by the Government may nevertheless use any such information received from the Company for the purpose of preparing and publishing general reports on minerals in Ghana. 7 10. FINANCIAL OBLIGATION: --------------------- a. The Company shall pay to the Government: i. in consideration of the grant of the right of prospecting for gold and diamonds in the Licensed Area an amount of US $ 15,000.00 (fifteen thousand U.S. Dollars) within 30 days from the date of this Agreement. ii. a yearly rent of (cent) 214,640.00 (two hundred and fourteen thousand, six hundred and forty cedis) b. Payment of the rent specified in the foregoing paragraph shall be made yearly in advance, the first year's payment having been made before the execution of this Agreement. 11. ASSIGNMENT, MORTGAGE, ETC: -------------------------- a. The Company shall not assign, mortgage, sublet or otherwise transfer any interest in the Licensed Area without the prior written consent of the Government. b. The Government may impose such conditions on the giving of such consent as it thinks fit. 12. SURRENDER OF PART OF LICENSED AREA: ----------------------------------- a. The Company may surrender at any time and from time to time by giving not less than three months' notice to the Chief Inspector of Mines and the Chief Executive of the Minerals Commission, all its rights hereunder in respect of any part or parts of the Licensed Area. The Company shall be relieved of all obligations in respect of the part or parts of the Licensed Area so surrendered except those obligations which accrued prior to the effective date of surrender. 8 b. The Company shall leave the part of the Licensed Area surrendered and everything thereon in a safe condition. The Company shall take all reasonable measures to restore the surface of such part of the Licensed Area surrendered and all structures thereon not the property of the Company to their original condition. In the event that the Company fails to do so, the Chief Inspector of Mines shall make such part and everything thereon safe and in good condition at the expense of the Company. 13. RENEWAL OF LICENCE: ------------------- a. If the Company applies in writing to the Government not less than three months before the expiration of this Agreement for a renewal of the licence hereof and if the Company shall not be in default at that time in the performance of any of its obligations hereunder the Company may, subject to the provisions of the law, be granted a period not exceeding two years upon such terms and conditions as the parties may then agree. b. A further renewal of the licence may be granted in accordance with the provisions of the Minerals and Mining Law 1986, PNDCL 153. 14. RE-ENTRY BY GOVERNMENT: ----------------------- If the operations and activities of the Company in accordance with the prospecting programme shall cease in the Licensed Area before the same have been completed and if such cessation shall be due entirely to the fault of the Company, the Government may, upon giving the notice and following the procedure required in paragraph 15 below, re-enter the Licensed Area and take possession of all buildings, erections, plants and materials thereon without compensation to the Company (such right of entry not to prejudice any additional remedy of the Government), and thereupon the Agreement shall terminate. 15. TERMINATION BY THE GOVERNMENT: ------------------------------ a. The Government may, subject to the provisions of this paragraph, terminate this Agreement if any of the following events shall occur: 9 i. the Company shall fail to make any of the payments described in this Agreement on the payment date; or ii. the Company shall contravene or fail to comply with any other condition of this Agreement; or iii. the Company shall become insolvent or commit any act of bankruptcy or enter into any agreement or composition with its creditors or take advantage of any law for the benefit of debtors or go into liquidation, whether compulsory or voluntary, except for the purposes of reconstruction or amalgamation; or iv. the Company knowingly submits any false statement to the Government in connection with this Agreement. b. If and whenever the Government decides to terminate this Agreement pursuant to clauses (i) and (ii) of the preceding sub-paragraph, the Government shall give the Company notice specifying the particular contravention or failure and permit the Company to remedy the same within twenty-one days of such notice or such longer period as the Minister may specify in such notice as reasonable in the circumstances. c. If the Company shall fail to remedy an event specified in clauses (i) and (ii) of sub-paragraph (a) of this paragraph within the stated period, or an event specified in clauses (iii) and (iv) of the said sub-paragraph shall occur, the Government may by notice to the Company terminate this Agreement. d. Upon termination of this Agreement by the Government every right of the Company hereunder shall cease (save as specifically otherwise provided hereunder) but subject nevertheless and without prejudice to any obligation or liability imposed or incurred under this Agreement or applicable law prior to the effective date of termination. 10 e. No delay or omission or course of dealing by the Government shall impair any of its rights hereunder or be construed to be a waiver of an event specified in sub-paragraph (a) of this paragraph or acquiescence therein. 16. ASSETS ON TERMINATION OR EXPIRATION: ------------------------------------ Upon the termination or expiration of this Agreement, the Company may within sixty days from the effective date of such termination, remove from the Licensed Area any structures and installations erected and any movables placed thereon by the Company. Any structures, installations and movables not so removed within the said period shall become the property of the Government without charge. 17. FORCE MAJEURE: -------------- a. Failure on the part of the Company to comply with any of the terms and conditions hereof (except the obligations to make payment of monies to the Government) shall not be grounds for cancellation or give the Government any claim for damages in so far as such failure arises from force majeure, the Company having taken all appropriate precautions, due care and reasonable alternative measures with the objective of avoiding such failure and of carrying out its obligations hereunder. The Company shall take all reasonable measures to remove such inability to fulfill the obligations hereunder with the minimum of delay. b. For purposes of this paragraph force majeure includes acts of God, war, insurrection, earthquake, storm, flood or other adverse weather condition but shall not include any event caused by the failure to observe good mining industry practice or by the negligence of the Company or any of its employees or contractors. c. The Company shall notify the Minister within twenty-four hours of an event of force majeure affecting its ability to fulfill the terms and conditions hereof. 11 d. The period of this Agreement shall be extended for a period of time equal to the period or periods during which the company was affected by any of the conditions set forth in sub-paragraph (b) of this paragraph, but not to exceed six months in the aggregate. 18. FOREIGN EXCHANGE: ----------------- a. Subject to sub-paragraph (b) of this paragraph the Company shall, during the term of this Agreement and so long as it does not derive any revenue from its operations hereunder, finance such operations in the following manner: i. by converting to Ghana currency through authorized dealers such amounts of foreign currency as will be sufficient to cover the Company's operating expenses required to be paid in Ghana currency including any payments to the Government and third parties provided that the terms of any loans obtained abroad shall be in conformity with currency international commercial and monetary conditions and that prior notice of such loans and advances shall be furnished to the Bank of Ghana. ii. By directly purchasing and/or hiring abroad as is necessary for conducting the prospecting programme with its foreign currency funds and importing to and/or using in Ghana freely and without restrictions such machinery, equipment, materials and services of any nature whatsoever as will be required by the Company for its operations hereunder. b. The Company may be required to pay all its rentals and other licensing fees to the Government in dollars or other freely convertible currency, or such currencies as shall be specified by the Bank of Ghana. c. All conversions of currency shall be made at the prevailing official rates of exchange. 12 19. PRODUCTION AGREEMENT: --------------------- If upon the expiration of this Agreement the Company shall have carried out its obligations hereunder to the satisfaction of the Government and shall have successfully established to the Government that the development of a mine from ore reserves established within the Licensed Area is economically and financially feasible, then the Government shall grant to the Company the first option to (i) acquire a lease for the purposes of mining in the Licensed Area, and (ii) participate in a mining project in the Licensed Area subject to negotiation with the Government of satisfactory terms for such licence and participation. 20. NOTICE: ------- Any application, notice, consent, approval, direction, or instruction hereunder shall be in writing and shall be served by hand or by registered mail. Delivery by hand shall be deemed to be effective when made, and delivery by registered mail shall be deemed to be effective at such time as it would in the ordinary course of registered mail be delivered to the addressee. Until changed by appropriate notice, the Company's address in Ghana is its registered office as set forth above and the addresses of the Government officials are as follows: i. The Hon. Minister, Ministry of Mines, P.O. Box M.212, Accra ii. The Chief Inspector of Mines, Mines Department, P.O. Box 3634, Accra iii. The Director, Ghana Geological Survey, P.O. Box M.80, Accra iv. The Chief Executive, Minerals Commission, P.O. Box M.248, Accra v. The Director, Survey Department, P.O. Box 191, Accra vi. The Governor, Bank of Ghana, P.O. Box 2674, Accra 13 21. ARBITRATION: ------------ Subject to the provisions hereof, if any time during the continuance of this Agreement or after its termination any question or dispute shall arise regarding the rights, powers, duties and liabilities of the parties hereto such question or dispute shall be referred to arbitration in accordance with the Arbitration Act 1961 (Act 38). In such event, there shall be two arbitrators, one to be appointed by each party. 22. GOVERNING LAW: -------------- This Agreement shall be governed by, construed and interpreted in accordance with the laws of Ghana. 23. HEADINGS: --------- The headings given to paragraphs in this Agreement are for convenience only and shall not affect the construction or interpretation of this Agreement. THE SCHEDULE ABOVE REFERRED TO: ------------------------------- Area 'A' -------- All that piece or parcel of land containing a total approximate area of 51.67 square kilometres lying to the North of Latitudes 6(degree)13'04", 6(degree)14'10" and 6(degree)14'42"; South of Latitudes 6(degree)15'54", 6(degree)16'52", 6(degree)16'55", 6(degree)16'56", 6(degree)17'04" and 6(degree)20'00"; East of Longitudes 0(degree)38'18", 0(degree)38'20", 0(degree)39'42" and 04(degree)0'00"; West of Longitudes 0(degree)35'52", 0(degree)35'59", 0(degree)36'38" and 0(degree)38'00"; 14 Area 'B' -------- All that piece or parcel of land containing an approximate area of 55.65 square kilometres lying to the North of Latitudes 6(degree)20'00", 6(degree)20'20", 6(degree)20122", 6(degree)20'30", 6(degree)20'35", 6(degree)20'50" and 6(degree)21'35"; South of Latitudes 6(degree)21'25", 6(degree)21'37", 6(degree)22'40", 6(degree)22'55" and 6(degree)23'16"; East of Longitudes 0(degree)36'30", 0(degree)38'06", 0(degree)38'13" and 0(degree)38'44"; West of Longitudes 0(degree)30'00" and 0(degree)31'16"; in the East Akim District of the Eastern Region of the Republic of Ghana which pieces or parcels of land are more particularly delineated on the plan annexed hereto for the purposes of identification and not of limitation. 15 IN WITNESS WHEREOF the parties hereto have executed this Agreement the day and year first above written. SIGNED AND SEALED with the SEAL ) of the Ministry of Lands, Forestry & ) Mines and DELIVERED by ) the said DR. KWAKU AFRIYIE ) /s/ Dr. Kwaku Afriyie Minister of Lands Forestry & Mines ) Dr. Kwaku Afriyie, Minister for and on behalf of the Government of ) Ministry of Lands, Forestry & Mines Republic of Ghana in the presence: ) The COMMON SEAL/STAMP of the said ) CANADIANA GOLD RESOURCES ) was affixed to these presents and the ) same were DELIVERED in the ) presence of: ) /s/ Michael Cawood - ------------------ Michael Cawood Managing Director Sam Okudzeto ------------ Director/Secretary 16 OATH OF PROOF ------------- I, George Banful, of Minerals Commission MAKE OATH and SAY that on the 24th. day of September, 2001 I was present and saw - DR. KWAKU AFRIYIE - the Minister of Lands, Forestry and Mines duly execute the Instrument now produced to me and Marked "A" and that the said DR. KWAKU AFRIYIE can read and write, Sworn at Accra this...23rd... day of November, 2001 Before Me /s/ /s/ George Banful ------------------ ----------------- REGISTRAR OF LANDS DEPONENT This is the Instrument Marked "A" Referred to in the Oath of George Banful SWORN before me this ......23rd... day of November, 2001 /s/ ------------------ REGISTRAR OF LANDS On the...23rd...day of November, 2001 at ...9: 20...O'clock in the forenoon this Instrument was proved before me by the Oath of the within-named George Banful to have been duly executed by the within-named DR. KWAKU AFRIYIE /s/ ------------------ REGISTRAR OF LANDS 17 EX-25 30 ex_10-25.txt PROSPECTING LICENCE W/APAPAM CONCESSION EXHIBIT 10.25 Dated this 29th day of March 2004 GOVERNMENT OF THE REPUBLIC OF GHANA AND GOLDENRAE MINING COMPANY LIMITED __________________________________________________ PROSPECTING LICENCE __________________________________________________ SOLICITOR OF THE SUPREME COURT TERM: TWO (2) YEARS (RENEWABLE) COMMENCEMENT: 29-03-2004 EXPIRY DATE: 28-03-2006 FILE NO.: PL. 5/142 LVB 4528/04 THIS AGREEMENT is made the 29th day of March 2004 BETWEEN THE GOVERNMENT OF THE REPUBLIC OF GHANA (hereinafter called "THE GOVERNMENT") acting by MRS. CECILIA BANNERMAN, the Minister of Mines (hereinafter called "THE MINISTER") of the One Part and GOLDENRAE MINING LIMITED having its registered office at 7 SHIPPI LINK EAST CANTONMENTS, PMB 23, CANTONMENTS - ACCRA, GHANA (hereinafter called "THE COMPANY") of the Other Part. WHEREAS: - -------- A. It is Government's policy to take all such steps as it deems appropriate and effective for prospecting for minerals in the Republic of Ghana and for producing gold and diamonds hereby ensuring that the maximum possible benefits accrue to the nation from the exploitation of its mineral resources; B. In pursuit of the above policy Government desires to secure the co-operation of Companies which possess the necessary financial and managerial qualifications and skills for carrying out mineral operations; C. The Company, which warrants its financial, technical and managerial competence for undertaking mineral operations has declared itself willing to engage in prospecting operations in Ghana on the understanding that it shall bear the risk and cost of such prospecting operations and on establishing that there are good prospects for undertaking commercial mining operations it may apply for and be granted a mining lease subject to the provisions of the Minerals and Mining Law, 1986 (PNDCL 153); WITNESSESS AS FOLLOWS: - ---------------------- 1. The Government hereby grants unto the Company the right and licence to Prospect for and prove gold and diamonds under or in the area described in the Schedule hereto and demarcated on the map which forms part of this AGREEMENT (hereinafter called "the Licence Area") excluding any parts to be relinquished from time to time for a term of TWO (2) YEARS from the 24 day of March 2004 with a right of extension as hereinafter provided. 1 2. RIGHTS OF THE COMPANY: ---------------------- a. The Company shall have the right to conduct such geological and geophysical investigations in the Licensed Area as it considers necessary to determine an adequate quantity of geologically proven and mineable reserve of gold and diamonds. b. The Company may exercise all or any of the rights and powers granted hereunder through agents, independent contractors or sub-contractors. c. The Company shall not conduct any operations in a sacred area and shall not without the prior consent of the Minister conduct any operations: i. within twenty metres of any building, installations, reservoir, dam, public road, railway or area appropriated for a railway; or ii. in an area occupied by a market, burial ground, cemetery or within a town or village or an area set apart for, used, appropriated or dedicated to a public purpose. d. Nothing contained in this Agreement shall be deemed to permit the Company to dispense with the necessity of applying for and obtaining any permit or authority which the Company may be required by law or regulation to obtain in respect of any works and/or activities to be carried out hereunder. 3. RIGHTS OF THIRD PARTIES: ------------------------ a. The Government reserves the right to grant licenses to third parties for prospecting or enter into Agreements for the production of minerals other than gold and diamonds in the Licensed Area, provided that any such activity shall not unreasonably interfere with the rights granted to the Company hereunder. 2 b. The Company shall not hinder or prevent members of the local population from exercising the following customary rights and privileges in or over the Licensed Area: i. to hunt game ii. to gather firewood for domestic purposes iii. to collect snails iv. to till and cultivate farms v. to observe rites in respect of groves and other areas held to be sacred. Provided always that where the exercise of these customary rights and privileges unduly interferes with or obstructs the operations of the Company hereunder, the Company shall make arrangements with members of the said local population for the limitation or waiver of such rights and privileges, such arrangements to include the payment of compensation where necessary. The Government shall furnish such assistance as is reasonably required in the making of such arrangements. 4. CONDUCT OF OPERATIONS: ---------------------- a. The Company shall conduct all of its operations hereunder with due diligence, efficiency and economy to the maximum extent possible consistent with good mining industry practice and in a proper workmanlike manner observing sound technical and engineering principles and practices, using appropriate modern and effective equipment, machinery, materials and methods and to pay particular regard to the protection of the environment. b. The Company shall maintain all equipment in good repair and all pits and trenches and all excavated areas in safe and good condition and take all practicable steps:- 3 i. to prevent damage to adjoining farms and villages; ii. to avoid damage to trees, crops, building, structures and other property in the Licensed Area to the extent however, that any such damage is unavoidable the Company shall pay fair and reasonable compensation. The Company shall provide and maintain in good repair and condition proper roads, gates, stiles and fences for the convenient occupation of the surface of the Licensed Area. c. The Company shall use its best efforts to exercise its rights and powers granted by this Agreement in such manner as not to cause interference with or avoidable obstruction or interruption to the felling of timber by the licensed timber operators within the Licensed Area and the Government shall furnish assistance to the Company to make appropriate arrangements with such operators to permit the prospecting programme to proceed without interference or delay. 5. WORKING OBLIGATIONS: -------------------- a. The Company shall with due diligence and by means of modern geological, geophysical and other methods normally associated with mineral prospecting and within three months of the date of this Agreement or at such other time as the Minister may specify, commence prospecting operations with a view to establishing the existence of gold and diamonds in economic quantities. b. The Company, having prior to the commencement of this Agreement submitted its programme of work to the Government, shall carry out its operations in accordance with the programme and the Chief Executive of the Minerals Commission, Chief Inspector of Mines or any other officer authorized by the Government shall from time to time inspect the operations to ensure that the Company does so. 4 c. The Company shall diligently continue to carry out its operations hereunder and shall spend as actual direct prospecting expenditure not less than the minimum amounts specified in its work programme. d. If on the termination or expiration of this Agreement for any reason other than force majeure the Company shall not have spent the amounts specified in the work programme, the difference between the amount actually expended and the stipulated minimum for the year in which termination or expiration takes place shall be paid to the Government within thirty days after the date of such termination or expiration provided that if the termination shall be occasioned by force majeure or upon adequate proof, by the Company that gold and diamonds mineralization does not exist in sufficient quantities in the area to warrant completion of the work programme, the Company shall not be liable to pay to the Government any difference on the stipulated minimum expenditure. 6. NOTIFICATION OF DISCOVERY OF OTHER MINERALS: -------------------------------------------- The Company shall report forthwith to the Minister, the Chief Inspector of Mines, the Director of Geological Survey and the Chief Executive of the Minerals Commission the discovery in the Licensed Area of any other minerals and the Company shall be given the first option to prospect further and to work the said minerals subject to satisfactory arrangements between the Government and the Company. 7. SAMPLES: -------- a. The Company shall not during the currency of this Agreement destroy, except in analyses, any cores or samples obtained from the Licensed Area without the prior written consent of the Director of Ghana Geological Survey. 5 b. The Company shall provide the Director of Ghana Geological Survey and the Chief Inspector of Mines with such samples from the Licensed Area as they may from time to time reasonably request. c. All cores and samples obtained from the Licensed Area shall be delivered to the Director of Ghana Geological Survey on the termination of this Agreement and in the event of the Company not obtaining a mining lease. 8. RECORDS: -------- a. The Company shall maintain at its registered office copies of the following:- i. full and complete records and books of account relating to the prospecting programme. ii. the detailed results and analysis of all surveys, boring, pitting, investigations and other testing conducted pursuant to the provisions of this Agreement. b. The records referred to in the foregoing paragraph shall include copies of all geological, geophysical, geochemical, drilling and pitting reports relating to the Licensed Area and all maps, drawings and diagrams pertaining to these reports. c. The said records, with the exception of proprietary technical information, shall be made available for inspection at reasonable times without delaying work on the prospecting programme, by the Chief Inspector of Mines and the Chief Executive of the Minerals Commission or their representatives, upon request, and shall be retained in Ghana, unless removed with Government's consent. d. Failure to keep such records and to produce them for inspection upon receipt of reasonable notice shall constitute just cause for the cancellation of this Licence. e. Copies of the aforementioned records shall be delivered to the Chief Executive of the Minerals Commission and the Chief Inspector of Mines on the termination of this Agreement and in the event of the Company not obtaining a mining lease in respect of the Licensed Area. 6 9. REPORTS: -------- a. The Company shall furnish to the Chief Inspector of Mines, the Director of Ghana Geological Survey and the Chief Executive of the Minerals Commission, not later than the 15th of each third month, a report giving a general description of the work done by the Company in the preceding quarter and containing a description accompanied by a sketch plan of the areas where any gold and diamonds or any other minerals were found, particulars of the type of minerals found and the number and weight of samples taken, if any. b. The Company shall furnish to the Chief Inspector of Mines, Chief Executive of the Minerals Commission and the Director of Ghana Geological Survey not later than sixty days after the end of each calendar year, an Annual Report in such form as may be prescribed. c. All records, reports, plans and information which the Company is required to supply to the Government and its agents pursuant to the provisions of this Agreement shall be supplied at the expense of the Company. d. Any information or material supplied by the Company to the Government pursuant to the provisions of this Agreement shall be treated by the Government, its officers and agents as confidential and shall not be revealed to third parties except with the consent of the Company (which consent shall not be unreasonably withheld) for a period of 12 months with respect to technical information and 36 months with respect to financial information from the date of submission of such information. The Government and persons authorized by the Government may nevertheless use any such information received from the Company for the purpose of preparing and publishing general reports on minerals in Ghana. 7 10. FINANCIAL OBLIGATION: --------------------- a. The Company shall pay to the Government: i. in consideration of the grant of the right of prospecting for gold and diamonds in the Licensed Area an amount of US$15,000.00 (fifteen thousand U.S. Dollars) within 30 days from the date of this Agreement. ii. a yearly rent of (cent) 67,000.00 (sixty seven thousand cedis) b. Payment of the rent specified in the foregoing paragraph shall be made yearly in advance, the first year's payment having been made before the execution of this Agreement. 11. ASSIGNMENT, MORTGAGE, ETC: -------------------------- a. The Company shall not assign, mortgage, sublet or otherwise transfer any interest in the Licensed Area without the prior written consent of the Government. b. The Government may impose such conditions on the giving of such consent as it thinks fit. 12. SURRENDER OF PART OF LICENSED AREA: ----------------------------------- a. The Company may surrender at any time and from time to time by giving not less than three months' notice to the Chief Inspector of Mines and the Chief Executive of the Minerals Commission, all its rights hereunder in respect of any part or parts of the Licensed Area. The Company shall be relieved of all obligations in respect of the part or parts of the Licensed Area so surrendered except those obligations which accrued prior to the effective date of surrender. b. The Company shall leave the part of the Licensed Area surrendered and everything thereon in a safe condition. The Company shall take all reasonable measures to restore the surface of such part of the 8 Licensed Area surrendered and all structures thereon not the property of the Company to their original condition. In the event that the Company fails to do so, the Chief Inspector of Mines shall make such part and everything thereon safe and in good condition at the expense of the Company. 13. RENEWAL OF LICENCE: ------------------- a. If the Company applies in writing to the Government not less than three months before the expiration of this Agreement for a renewal of the licence hereof and if the Company shall not be in default at that time in the performance of any of its obligations hereunder the Company may, subject to the provisions of the law, be granted a period not exceeding two years upon such terms and conditions as the parties may then agree. b. A further renewal of the licence may be granted in accordance with the provisions of the Minerals and Mining Law 1986, PNDCL 153. 14. RE-ENTRY BY GOVERNMENT: ----------------------- If the operations and activities of the Company in accordance with the prospecting programme shall cease in the Licensed Area before the same have been completed and if such cessation shall be due entirely to the fault of the Company, the Government may, upon giving the notice and following the procedure required in paragraph 15 below, re-enter the Licensed Area and take possession of all buildings, erections, plants and materials thereon without compensation to the Company (such right of entry not to prejudice any additional remedy of the Government), and thereupon the Agreement shall terminate. 15. TERMINATION BY THE GOVERNMENT: ------------------------------ a. The Government may, subject to the provisions of this paragraph, terminate this Agreement if any of the following events shall occur: i. the Company shall fail to make any of the payments described in this Agreement on the payment date; or 9 ii. the Company shall contravene or fail to comply with any other condition of this Agreement; or iii. the Company shall become insolvent or commit any act of bankruptcy or enter into any agreement or composition with its creditors or take advantage of any law for the benefit of debtors or go into liquidation, whether compulsory or voluntary, except for the purposes of reconstruction or amalgamation; or iv. the Company knowingly submits any false statement to the Government in connection with this Agreement. b. If and whenever the Government decides to terminate this Agreement pursuant to clauses (i) and (ii) of the preceding sub-paragraph, the Government shall give the Company notice specifying the particular contravention or failure and permit the Company to remedy the same within twenty-one days of such notice or such longer period as the Minister may specify in such notice as reasonable in the circumstances. c. If the Company shall fail to remedy an event specified in clauses (i) and (ii) of sub-paragraph (a) of this paragraph within the stated period, or an event specified in clauses (iii) and (iv) of the said sub-paragraph shall occur, the Government may by notice to the Company terminate this Agreement. d. Upon termination of this Agreement by the Government every right of the Company hereunder shall cease (save as specifically otherwise provided hereunder) but subject nevertheless and without prejudice to any obligation or liability imposed or incurred under this Agreement or applicable law prior to the effective date of termination. e. No delay or omission or course of dealing by the Government shall impair any of its rights hereunder or be construed to be a waiver of an event specified in sub-paragraph (a) of this paragraph or acquiescence therein. 10 16. ASSETS ON TERMINATION OR EXPIRATION: ------------------------------------ Upon the termination or expiration of this Agreement, the Company may within sixty days from the effective date of such termination, remove from the Licensed Area any structures and installations erected and any movables placed thereon by the Company. Any structures, installations and movables not so removed within the said period shall become the property of the Government without charge. 17. FORCE MAJEURE: -------------- a. Failure on the part of the Company to comply with any of the terms and conditions hereof (except the obligations to make payment of monies to the Government) shall not be grounds for cancellation or give the Government any claim for damages in so far as such failure arises from force majeure, the Company having taken all appropriate precautions, due care and reasonable alternative measures with the objective of avoiding such failure and of carrying out its obligations hereunder. The Company shall take all reasonable measures to remove such inability to fulfill the obligations hereunder with the minimum of delay. b. For purposes of this paragraph force majeure includes acts of God, war, insurrection, earthquake, storm, flood or other adverse weather condition but shall not include any event caused by the failure to observe good mining industry practice or by the negligence of the Company or any of its employees or contractors. c. The Company shall notify the Minister within twenty-four hours of an event of force majeure affecting its ability to fulfill the terms and conditions hereof. d. The period of this Agreement shall be extended for a period of time equal to the period or periods during which the company was affected by any of the conditions set forth in sub-paragraph (b) of this paragraph, but not to exceed six months in the aggregate. 11 18. FOREIGN EXCHANGE: ----------------- a. Subject to sub-paragraph (b) of this paragraph the Company shall, during the term of this Agreement and so long as it does not derive any revenue from its operations hereunder, finance such operations in the following manner: i. by converting to Ghana currency through authorized dealers such amounts of foreign currency as will be sufficient to cover the Company's operating expenses required to be paid in Ghana currency including any payments to the Government and third parties provided that the terms of any loans obtained abroad shall be in conformity with currency international commercial and monetary conditions and that prior notice of such loans and advances shall be furnished to the Bank of Ghana. ii. By directly purchasing and/or hiring abroad as is necessary for conducting the prospecting programme with its foreign currency funds and importing to and/or using in Ghana freely and without restrictions such machinery, equipment, materials and services of any nature whatsoever as will be required by the Company for its operations hereunder. b. The Company may be required to pay all its rentals and other licensing fees to the Government in dollars or other freely convertible currency, or such currencies as shall be specified by the Bank of Ghana. c. All conversions of currency shall be made at the prevailing official rates of exchange. 12 19. PRODUCTION AGREEMENT: --------------------- If upon the expiration of this Agreement the Company shall have carried out its obligations hereunder to the satisfaction of the Government and shall have successfully established to the Government that the development of a mine from ore reserves established within the Licensed Area is economically and financially feasible, then the Government shall grant to the Company the first option to (i) acquire a lease for the purposes of mining in the Licensed Area, and (ii) participate in a mining project in the Licensed Area subject to negotiation with the Government of satisfactory terms for such licence and participation 20. NOTICE: ------- Any application, notice, consent, approval, direction, or instruction hereunder shall be in writing and shall be served by hand or by registered mail. Delivery by hand shall be deemed to be effective when made, and delivery by registered mail shall be deemed to be effective at such time as it would in the ordinary course of registered mail be delivered to the addressee. Until changed by appropriate notice, the Company's address in Ghana is its registered office as set forth above and the addresses of the Government officials are as follows: i. The Hon. Minister, Ministry of Mines, P.O. Box M.212, Accra. ii. The Chief Inspector of Mines, Mines Department, P.O. Box 3634, Accra iii. The Director, Ghana Geological Survey, P.O. Box M.80, Accra iv. The Chief Executive, Minerals Commission, P.O. Box M.248, Accra v. The Director, Survey Department, P.O. Box 191, Accra vi. The Governor, Bank of Ghana, P.O. Box 2674, Accra. 21. ARBITRATION: ------------ Subject to the provisions hereof, if any time during the continuance of this Agreement or after its termination any question or dispute shall arise regarding the rights, powers, duties and liabilities of the parties hereto such question or dispute shall be referred to arbitration in accordance with the Arbitration Act 1961 (Act 38). In such event, there shall be two arbitrators, one to be appointed by each party. 13 22. GOVERNING LAW: -------------- This Agreement shall be governed by, construed and interpreted in accordance with the laws of Ghana. 23. HEADINGS: --------- The headings given to paragraphs in this Agreement are for convenience only and shall not affect the construction or interpretation of this Agreement. THE SCHEDULE ABOVE REFERRED TO: ------------------------------- All that piece or parcel of land containing an approximate area of 33.65 square kilometres lying to the North of Latitudes 6(degree)06'35", 6(degree)07'13" and 6(degree)08'35"; South of Latitudes 6(degree)09145", 6(degree)10'06", 6(degree)11'01", 6(degree)11'05" and 6(degree)11'15"; East of Longitudes 0(degree)34'35", 0(degree)35'04", 0(degree)36'01" and 0(degree)36'22"; West of Longitudes 0(degree)31'52", 0(degree)32'55", 0(degree)33'19" and 0(degree)33'41" in the East Akim District of the Eastern Region of the Republic of Ghana which piece or parcel of land is more particularly delineated on the plan annexed hereto for the purposes of identification and not of limitation. 14 IN WITNESS WHEREOF the parties hereto have executed this Agreement the day and year first above written. SIGNED AND SEALED with the SEAL ) of the Ministry of Lands, Forestry & ) Mines and DELIVERED by ) the said MRS. CECILIA BANNERMAN ) /s/ Cecilia Bannerman Minister of Mines for and on behalf of ) Cecilia Bannerman, Minister the Government of the ) Ministry of Mines Republic of Ghana in the presence: ) /s/ Ohene Okai - -------------- Ohene Okai Witness The COMMON SEAL/STAMP of the said ) GOLDENRAE MINING COMPANY LTD. ) was affixed to these presents and the ) same were DELIVERED in the ) presence of: ) /s/ Michael Cawood - ------------------ Michael Cawood Managing Director /s/ Mabel Ocran - --------------- Mabel Ocran Secretary 15 OATH OF PROOF ------------- I, George Banful, of Minerals Commission MAKE OATH and SAY that on the 25th. day of March, 2004 I was present and saw MRS. CECILIA BANNERMAN, the Minister of Mines duly execute the Instrument now produced to me and Marked "A" and that the said MRS. CECILIA BANNERMAN can read and write, Sworn at Accra this...21st... day of April, 2004 Before Me /s/ /s/ George Banful ------------------ ----------------- REGISTRAR OF LANDS DEPONENT This is the Instrument Marked "A" Referred to in the Oath of George Banful SWORN before me this 21st... day of April, 2004 /s/ ------------------ REGISTRAR OF LANDS High Court Accra On the...21st...day of April, 2004 at 12:14 O'clock in the afternoon this Instrument was proved before me by the Oath of the within-named George Banful to have been duly executed by the within-named George Banful. /s/ ------------------ REGISTRAR OF LANDS Chief Registrar High Court Accra 16 EX-10 31 ex_10-26.txt PROSPECTING LICENCE W/EDUM BANSO CONCESSION EXHIBIT 10.26 GOVERNMENT OF THE REPUBLIC OF GHANA AND ADOM MINING LIMITED __________________________________________________ PROSPECTING LICENCE __________________________________________________ SOLICITOR OF THE SUPREME COURT TERM: TWO (2) YEARS (RENEWABLE) COMMENCEMENT: 08-05-1991 EXPIRY DATE: 07-05-1991 FILE NO.: LVB 2324/91 THIS AGREEMENT is made the 8th day of May 1991 BETWEEN THE GOVERNMENT OF THE REPUBLIC OF GHANA (hereinafter called "THE GOVERNMENT") acting by-the PNDC Secretary for Lands and Natural Resources (hereinafter called "THE SECRETARY") of the One Part and ADOM MINING LIMITED having its registered office at P. O. Box 0977, Osu-Accra (hereinafter called "THE COMPANY") of the Other Part. WHEREAS: - -------- 1) Government's policy to take all such steps as it deems appropriate and effective for prospecting for minerals throughout the territories of the Republic of Ghana and for producing these minerals thereby ensuring that the maximum possible benefits accrue to the nation from the exploitation of mineral resources. 2) In pursuit of the above policy Government desires to secure the co-operation of Companies which possess to the Government's satisfaction, the necessary financial and managerial qualifications and skills for carrying out mining operations. 3) The Company, whose financial, technical and managerial competence for undertaking mineral operations has been established to the Government's satisfaction, has declared itself willing to engage in prospecting operations in Ghana on the understanding that it shall bear the sole risk and cost of such prospecting operations trusting that after the achievement of commercial production, it shall enjoy the prospect of reasonable rewards. The Company is also willing that once the prospecting operations come to an end and an economically and financially feasible mining project has been successfully established, the Government shall, if it so desires, have the option to participate in development and production operations. WITNESSESS AS FOLLOWS: - ---------------------- 1. The Government hereby grants unto the Company the right and licence to Prospect for and prove gold under or in the area described in the Schedule - 2 - hereto and demarcated on the map which forms part of this AGREEMENT (hereinafter called "the Licence Area") excluding any parts to be relinquished from time to time for a term of TWO (2) YEARS from the 8th day of May, 1991 with a right of extension as hereinafter provided. 2. RIGHTS OF THE COMPANY: ---------------------- a. The Company shall have the right to conduct such geological and geophysical investigations in the Licensed Area as it considers necessary to determine an adequate quantity of geologically proven and mineable reserve of gold. b. The Company may exercise all or any of the rights and powers granted hereunder through agents, independent contractors or sub-contractors. c. The Government shall secure for the Company, upon request by the Company, to the extent authorized by law and at the Company's expense, surface rights for the erection, operation and maintenance of buildings, works and installations together with such wayleaves as the Company may reasonably require for the exercise of its rights and obligations under this Agreement; provided that any damage to private propert shall be subject to adequate compensation by the Company. d. The Company shall not, however, conduct any operations in a sacred area and shall not, without the prior consent of the Secretary conduct any operations: i. within fifty yards of any building, installations, reservoir, dam, public road, railway or area appropriated for a railway; or ii. in an area occupied by a market, burial ground, cemetery or within a town or village or an area set apart for, used, appropriated or dedicated to a public purpose. e. Nothing contained in this Agreement shall be deemed to permit the Company to dispense with the necessity of applying for and obtaining any permit or authority which the Company may be required by law or regulation to obtain in respect of any works and/or activities to be carried out hereunder. - 3 - 3. RIGHTS OF THIRD PARTIES: ------------------------ a. The Government reserves the right to grant Licenses to third parties for prospecting or enter into Agreements for the production of minerals other than gold in the Licensed Area, provided that any such activity shall not unreasonably interfere with the rights granted to the Company hereunder. b. The Company shall not hinder or prevent members of the local population from exercising the following customary rights and privileges in or over the Licensed Area: i. to hunt game ii. to gather firewood for domestic purposes iii. to collect snails iv. to till and cultivate farms v. to observe rites in respect of groves and other areas held to be sacred. Provided always that where the exercise of these customary rights and privileges unduly interferes with or obstructs the operations of the Company hereunder, the Company shall make arrangements with members of the said local population for the limitation or waiver of such rights and privileges, such arrangements to include the payment of compensation where necessary. The Government shall furnish such assistance as is reasonably required in the making of such arrangements. 4. CONDUCT OF OPERATIONS: ---------------------- a. The Company shall conduct all of its operations hereunder with due diligence, efficiency and economy to the maximum extent possible consistent with good mining industry practice and in a proper workmanlike manner observing sound technical and engineering principles and practices, using appropriate modern and effective equipment, machinery, materials and methods and to pay particular regard to the protection of the environment. - 4 - b. The Company shall maintain all equipment and all pits and trenches in good repair and all excavated areas in safe and good condition and take all practicable steps: i. to prevent damage to adjoining farms and villages; ii. to avoid damage to trees, crops, building, structures and other property in the Licensed Area to the extent however, that any such damage is unavoidable the Company shall pay fair and reasonable compensation. The Company shall provide and maintain in good repair and condition proper roads, gates, stiles and fences for the convenient occupation of the surface of the Licensed Area. c. The Company shall use its best efforts to exercise its rights and powers granted by this Agreement in such manner as not to cause interference with or avoidable obstruction or interruption to the felling of timber by the Licensed timber operators within the Licensed Area and the Government shall furnish assistance to the Company to make appropriate arrangements with such operators to permit the prospecting programme to proceed without interference or delay. 5. WORKING OBLIGATIONS: -------------------- a. The Company shall with due diligence and by means of modern geological, geophysical and other methods normally associated with mineral prospecting and within three months of the date of this Agreement or at such other time as the Secretary may specify, commence prospecting operations with a view to establishing the existence of gold in economic quantities. b. The Company, having prior to the commencement of this Agreement submitted its programme of work to the Government, shall carry out its operations in accordance with the programme and the Chief Inspector of Mines shall from time to time inspect the operations to ensure that the Company does so. - 5 - c. The Company shall diligently continue to carry out its operations hereunder and shall spend as actual direct prospecting expenditure not less than the minimum amounts specified in its work programme. d. If on the termination or expiration of this Agreement for any reason other than force majeure the Company shall not have spent the amounts specified in the work programme, the difference between the amount actually expended and the stipulated minimum for the year in which termination or expiration takes place shall be paid to the Government within thirty days after the date of such termination or expiration. 6. NOTIFICATION OF DISCOVERY OF OTHER MINERALS: -------------------------------------------- The Company shall report forthwith to the Secretary, the Chief Inspector of Mines, the Director of Geological Survey and the Chief Executive of the Minerals Commission the discovery in the Licensed Area of any other minerals subject to satisfactory arrangements between the Government and the Company. 7. SAMPLES ------- a. The Company shall not during the currency of this Agreement destroy, except in analyses, any cores or samples obtained from the Licensed Area without the prior written consent of the Director of Ghana Geological Survey. b. The Company shall provide the Director of Ghana Geological Survey and the Chief Inspector of Mines with such samples from the Licensed Area as they may from time to time reasonably request. 8. RECORDS ------- a. The Company shall maintain at its registered office copies of the following: i. full and complete records and books of account relating to the prospecting programme in Ghana. ii. the detailed results and analysis of all investigations, surveys, boring, pitting and other testing conducted pursuant to the provisions of this Agreement. - 6 - b. The records referred to in the foregoing paragraph shall include copies of all geological, geophysical, geochemical, drilling and pitting reports relating to the Licensed Area and all maps, drawings and diagrams pertaining to these reports. c. The said records, with the exception of proprietary technical information, shall be made available for inspection at reasonable times without delaying work on the prospecting programme, by the Chief Inspector of Mines and the Chief Executive, Minerals Commission, upon request, and shall be retained in Ghana, unless removed with Government's consent. d. Failure to keep such records and to produce them for inspection upon receipt of reasonable notice shall constitute just cause for the cancellation of this Licence. 9. REPORTS ------- a. The Company shall furnish to the Chief Inspector of Mines, the Director of Ghana Geological Survey and the Chief Executive of the Minerals Commission, not later than the 15th of each fourth month, a report giving a general description of the work done by the Company in the preceding quarter and containing a description accompanied by a sketch plan of the areas where any gold and any other minerals were found, particulars of the type of minerals found and the number and weight of samples taken, if any. b. All records, reports, plans and information which the Company is required to supply to the Government and its agents pursuant to the provisions of this Agreement shall be supplied at the expense of the Company. c. Any information or material supplied by the Company to the Government pursuant to the provisions of this Agreement shall be treated by the Government, its officers and agents as confidential and shall not be revealed to third parties except with the consent of the Company (which consent shall not be unreasonably withheld) for a period of 12 months with respect to technical information and 36 months with respect to financial information from the date of submission of such information. The - 7 - Government and persons authorized by the Government may nevertheless use any such information received from the Company for the purpose of preparing and publishing general reports on minerals in Ghana. 10. FINANCIAL OBLIGATION: --------------------- a. The Company shall pay to the Government: i. in consideration of the grant of the right of prospecting for gold in the Licensed Area an amount of Two hundred and fifty thousand cedis ((cent)250,000.00) within 30 days from the date of this Agreement. ii. a yearly rent of Twenty one thousand nine hundred and ninety cedis ((cent) 21,990) b. Payment of the rent specified in the foregoing paragraph shall be made yearly in advance, the first year's payment having been made before the execution of this Agreement. 11. ASSIGNMENT, MORTGAGE, ETC: -------------------------- a. The Company shall not assign, mortgage, sublet or otherwise transfer this Agreement provided however that any of the rights and powers granted by this agreement or any interest therein may be transferred with the prior written consent of the Government. b. The Government may impose such conditions on the giving of such consent as it thinks fit. 12. SURRENDER OF PART OF LICENSED AREA: ----------------------------------- a. The Company may surrender at any time and from time to time by giving not less than three months' notice to the Chief Inspector of Mines and the Chief Executive of the Minerals Commission, all its rights hereunder in respect of any part or parts of the Licensed Area. The Company shall be relieved of all obligations in respect of the part or parts of the Licensed Area so surrendered except those obligations which accrued prior to the effective date of surrender. - 8 - b. The Company shall leave the part of the Licensed Area surrendered and everything thereon in a safe condition. The Company shall take all reasonable measures to restore the surface of such part of the Licensed Area surrendered and all structures thereon not the property of the Company to their original condition. In the event that the Company fails to do so, the Chief Inspector of Mines shall make such part and everything thereon safe and in good condition at the expense of the Company. 13. EXTENSION: ---------- a. If the Company applies in writing to the Government not less than three months before the expiration of this Agreement for an extension of the term hereof and if the Company shall not be in default at that time in the performance of any of its obligations hereunder the Company may, subject to the provisions of the law, be granted an extension for a period not exceeding two years upon such terms and conditions as the parties may then agree. b. A further extension may be granted in accordance with the provisions of the Law. 14. RE-ENTRY BY GOVERNMENT: ----------------------- If the operations and activities of the Company in accordance with the prospecting programme shall cease in the Licensed Area before the same have been completed and if such cessation shall be due entirely to the fault of the Company, the Government may, upon giving the notice and following the procedure required in paragraph 15 below, re-enter the Licensed Area and take possession of all buildings, erections, plants and materials thereon without compensation to the Company (such right of entry not to prejudice any additional remedy of the Government), and thereupon the Agreement shall terminate. 15. TERMINATION BY THE GOVERNMENT: ------------------------------ a. The Government may, subject to the provisions of this paragraph, terminate this Agreement if any of the following events shall occur: i. the Company shall fail to make any of the payments described in this Agreement on the payment date; or - 9 - ii. the Company shall contravene or fail to comply with any other condition of this Agreement; or iii. the Company shall become insolvent or commit any act of bankruptcy or enter into any agreement or composition with its creditors or take advantage of any law for the benefit of debtors or go into liquidation, whether compulsory or voluntary, except for the purposes of reconstruction or amalgamation; or iv. the Company knowingly submits any false statement to the Government in connection with this Agreement. b. If and whenever the Government decides to terminate this Agreement pursuant to clauses (i) and (ii) of the preceding sub-paragraph, the Government shall give the Company notice specifying the particular contravention or failure and permit the Company to remedy the same within twenty-one days of such notice or such longer period as the Secretary may specify in such notice as reasonable in the circumstances. c. If the Company shall fail to remedy an event specified in clauses (i) and (ii) of sub-paragraph (a) of this paragraph within the stated period, or an event specified in clauses (iii) and (iv) of the said sub-paragraph shall occur, the Government may by notice to the Company terminate this Agreement. d. Upon termination of this Agreement by the Government every right of the Company hereunder shall cease (save as specifically otherwise provided hereunder) but subject nevertheless and without prejudice to any obligation or liability imposed or incurred under this Agreement or applicable law prior to the effective date of termination. e. No delay or omission or course of dealing by the Government shall impair any of its rights hereunder or be construed to be a waiver of an event specified in sub-paragraph (a) of this paragraph or acquiescence therein. 16. ASSETS ON TERMINATION OR EXPIRATION: ------------------------------------ Upon the termination or expiration of this Agreement, the Company may within Sixty days from the effective date of such termination, remove from the Licensed - 10 - Area any structures and installations erected and any movables placed thereon by the Company. Any structures, installations and movables not so removed within the said period shall become the property of the Government without charge. 17. FORCE MAJEURE: -------------- a. Failure on the part of the Company to comply with any of the terms and conditions hereof (except the obligations to make payment of monies to the Government) shall not be grounds for cancellation or give the Government any claim for damages in so far as such failure arises from force majeure, the Company having taken all appropriate precautions, due care and reasonable alternative measures with the objective of avoiding such failure and of carrying out its obligations hereunder. The Company shall take all reasonable measures to remove such inability to fulfill the obligations hereunder with the minimum of delay. b. For purposes of this paragraph force majeure includes acts of God, war, insurrection, earthquake, storm, flood or other adverse weather condition but shall not include any event caused by the failure to observe good mining industry practice or by the negligence of the Company or any of its employees or contractors. c. The Company shall notify the Secretary within twenty-four hours of an event of force majeure affecting its ability to fulfill the terms and conditions hereof. d. The period of this Agreement shall be extended for a period of time equal to the period or periods during which the company was affected by any of the conditions set forth in sub-paragraph (b) of this paragraph, but not to exceed six months in the aggregate. 18. FOREIGN EXCHANGE: ----------------- a. Subject to sub-paragraph (b) of this paragraph the Company shall, during the term of this Agreement and so long as it does not derive any revenue from its operations hereunder, finance such operations in the following manner: - 11 - i. by converting to Ghana currency through authorized dealers such amounts of foreign currency as will be sufficient to cover the Company's operating expenses required to be paid in Ghana currency including any payments to the Government and third parties provided that the terms of any loans obtained abroad shall be in conformity with current international, commercial and monetary conditions and that prior notice of such loans and advances shall be furnished to the Bank of Ghana. ii. By directly purchasing and/or hiring abroad as is necessary for conducting the prospecting programme with its foreign currency funds and importing to and/or using in Ghana freely and without restrictions such machinery, equipment, materials and services of any nature whatsoever as will be required by the Company for its operations hereunder. b. The Company may be required to pay all its rentals and other licensing fees to the Government in dollars or other freely convertible currency, or such currencies as shall be specified by the Bank of Ghana. c. All conversions of currency shall be made at the prevailing official rates of exchange. 19. PRODUCTION AGREEMENT: --------------------- If upon the expiration of this Agreement the Company shall have carried out its obligations hereunder to the satisfaction of the Government and shall have successfully established to the Government that the development of a mine from ore reserves established within the Licensed Area is economically and financially feasible, then the Government shall grant to the Company the first option to (i) acquire a License for the purposes of mining gold in the Licensed Area, and (ii) participate in a mining Project in the Licensed Area subject to negotiation with the Government of satisfactory terms for such licence and participation. 20. NOTICE: ------- Any application, notice, consent, approval, direction, or instruction hereunder shall be in writing and shall be served by hand or by registered mail. Delivery by - 12 - hand shall be deemed to be effective when made and delivery by registered mail shall be deemed to be effective at such time as it would in the ordinary course of registered mail be delivered to the addressee. Until changed by appropriate notice, the Company's address in Ghana is its registered office as set forth above and the addresses of the Government officials are as follows: i. The PNDC Secretary, Ministry of Lands and Natural Resources, P.O. Box M.212, Accra. ii. The Chief Inspector of Mines, Mines Department, P.O. Box 254, Takoradi. iii. The Director of Geological Survey , Geological Survey Department, P.O. Box M.80, Accra iv. The Chief Executive, Minerals Commission, P.O. Box M.248, Accra v. The Chief Survey Officer, Survey Department, P.O. Box 191, Accra vi. The Governor, Bank of Ghana, P.O. Box 2674, Accra. 21. POLITICAL ACTIVITY: ------------------- Neither the Company nor any of its employees who is not a citizen of Ghana shall engage in political activity of any kind in Ghana nor make a donation, gift or grant to any political party or for political purposes in Ghana. 22. ARBITRATION: ------------ Subject to the provisions hereof, if any time during the continuance of this Agreement or after its termination any question or dispute shall arise regarding the rights, powers, duties and liabilities of the parties hereto such question or dispute shall be referred to arbitration in accordance with the Arbitration Act 1961 (Act 38). In such event, there shall be two arbitrators, one to be appointed by each party. 23. GOVERNING LAW: -------------- This Agreement shall be governed by, construed and interpreted in accordance with the laws of Ghana. 24. HEADINGS: -------- The headings given to paragraphs in this Agreement are for convenience only and shall not affect the construction or interpretation of this Agreement. - 13 - THE SCHEDULE ABOVE REFERRED TO: All that pieces or parcels of land containing an approximate area of 43.98 square kilometers lying to the north and south of Latitudes 5(degree) 00 and 5(degree) 071 respectively; and bounded on the east by Longitude 1(degree) 52 and west by Longitude 1(degree) 57 in the Mpohor Wassa East district of the Western Region of the Republic of Ghana which piece or parcel of land is more particularly delineated on the plan annexed hereto for the purposes of identification and not of limitation. - 14 - IN WITNESS WHEREOF the parties hereto of the first part has hereunto set his hand and affixed the Seal of the Ministry of Lands and Natural Resources and the party hereto of the second part has hereunto caused its Common Seal to be affixed the day and year first above written. SIGNED AND SEALED with the SEAL ) of the Ministry of Lands and ) Naturall Resources and DELIVERED by ) the said PNDC Secretary for Lands and ) /s/ Natural Resources for and on behalf of ) Minister the Government of the ) Ministry of Lands & Natural Resources Republic of Ghana in the presence: ) /s/ Witness The COMMON SEAL/STAMP of the said ) ADOM MINING LIMITED ) was affixed to these presents and the ) same were DELIVERED in the ) presence of: ) /s/ Managing Director /s/ Secretary - 15 - OATH OF PROOF ------------- I, James Ackah, of Minerals Commission MAKE OATH and SAY that on the 8th day of May, 2004 I was present and saw the PNDC Secretary for Lands and Natural Resources duly execute the Instrument now produced to me and Marked "A" and that the said JOE AHIMA DANSO can read and write, Sworn at Accra this...21st... day of May, 2001 Before Me /s/ /s/ James Ackah REGISTRAR OF LANDS DEPONENT This is the Instrument Marked "A" Referred to in the Oath of James Ackah SWORN before me this 21st... day of May, 2001 /s/ REGISTRAR OF LANDS On the...21st...day of May, 1991 at 11:50 O'clock in the forenoon this Instrument was proved before me by the Oath of the within-named to have been duly executed by the within-named Joe Ahima Danso. /s/ REGISTRAR OF LANDS Chief Registrar High Court Accra EX-10 32 ex_10-28.txt CONSULTING AGREEMENT DATED JANUARY 17, 2006 EXHIBIT 10.28 BIO CONSULT LTD. (ENVIRONMENTAL MANAGEMENT CNSULTANTS) P.O. Box GP 794, Accra TEL +233-21-253331/+233-244-027111 E-mail: bioconsultltd@yahoo.com AGREEMENT BETWEEN XTRA-GOLD MINING LIMITED AND BIO CONSULT LIMITED CONCERNING THE PREPARATION OF AN ENVIRONMENTAL IMPACT STATEMENT FOR THE KIBI MINING PROJECT This agreement is made this 17TH day of January, 2006, between XTRA-GOLD MINING LIMITED ("Xtra-Gold"), of 3rd Floor, Kojo Bruce House, No. 5 Okai Mensah, represented by its authorized agent, Mr. Alhaji Nantogma Abudulai, who is also the Vice-President, Ghana Operations of Xtra-Gold Resources Corp., the owner as to a 90% interest of Xtra-Gold herein referred to as the CLIENT and BIO CONSULT LTD. of P.O. BOX GP 794, Accra, represented by their Director, Mr. Kweku Kyeremeh, hereinreferred to as the CONSULTANT that. The Kibi Mining Project (hereinafter the "PROJECT") refers to the planned alluvial mining operation at the Kwabeng, Pameng and Apapam concessions in the Eastern Region of Ghana. The Kwabeng and Pameng concessions are each covered by a mining lease while the Apapam concession is covered by a prospecting license. The Client intends to apply for the addition of the Apapam concession to the existing mining lease for Pameng. 1. The Consultant will assemble a team of experts to conduct studies and prepare an Environmental Impact Statement (EIS) for the Project for submission to the Environmental Protection Agency on behalf of Xtra-Gold. 2. The Consultant's team will include: o An Environmental Specialist o Mining Engineer o Sociologist o Environmental Technician o Hydrogeologist Who will conduct the studies in an environmentally sustainable manner that will satisfy the requirement for obtaining environmental clearance or permit from the Environmental Protection Agency. 3. In the preparation of the EIS the Consultant will follow the outline contained in the Environmental Impact Assessment Procedures. 4. The Consultant's plan of work for the studies will be as follows: i. Acquire / produce relevant maps, sites plans and proposals. ii. Conduct reconnaissance surveys of project area and select sites for investigations and environmental quality monitoring. 1 iii. Collect and collate existing data on the project area, conduct consultants with relevant agencies and communities and prepare draft Scoping Report. iv. Submit draft Scoping report to Xtra-Gold for comments. v. Conduct public forum to discuss project proposals with stakeholders and interested and affected person (IAPs) vi. Revise draft Scoping report based on comments from Xtra-Gold and public forum. vii. Submit Scoping report to EPA for review viii. Conduct environmental quality monitoring and analysis of samples. ix. Conduct data analysis and compile draft report x. Submit draft EIS to Xtra-Gold for comments. xi. Revise draft EIS based on comments from Xtra-Gold xii. Submit final draft to EPA xiii. Revise draft EIS based on comments from EPA xiv. Submit FINAL to EPA 5. The studies will be completed and the FINAL REPORT submitted within a period of three (3) months from the date of this agreement, excluding the periods during which reports submitted by the Consultants are reviewed by Consultants are reviewed by Xtra-Gold or EPA. 6. The format for the preparation of the EIS will be as follows: 6.1 Description of the proposed project a. Purpose and justification of the project b. Project description c. Primary impact area 6.2 Description of the existing environmental conditions. a. Natural environment b. Human-made environment 2 6.3 Assessment of Environmental Impacts a. Impacts on topography, geology and soils b. Impacts on water quality and drainage c. Impacts on land use, zoning and socio-economic characteristics of the project's area of influence d. Aesthetic impacts and landscape e. Health impacts f. Impacts on air quality g. Noise nuisance and traffic impacts h. Impacts related to possible population displacement and resettlements. 6.4 Unavoidable adverse impacts a. Disruption of subsistence agricultural lands b. Increased traffic c. Modification of hydrological regime 6.5 Alternatives to the proposed project a. No certain scenario b. Alternative within the proposed project 7. THE CONSULTANT WILL SUBMIT HIS REPORTS AS FOLLOWS: - Two (2) copies draft scoping report for review by management of Xtra-Gold - Ten (10) copies of final scoping report for submission to the Environmental Protection Agency - Two (2) copies of draft Environmental Impact Statement for review by Xtra-Gold - Twelve (12) copies of draft Environmental Impact Statement for review by EPA - Eight (8) copies of final Environmental Impact Statement for submission to the Environmental Protection Agency 3 8.0 In consideration of the above job Xtra-Gold agrees to pay the Consultant the negotiated amount of $33,400 EXCLUDING Value Added Tax. Payment for the service shall be as follows; 8.1 1ST PAYMENT: - 50% of the contract sum of $16,700 after signing the agreement and upon submission of the Consultant's invoice for mobilization. 8.2 2ND PAYMENT: - 30% of the contract sum of $10,020 upon submission and clearance of Scoping and Terms of Reference (TOR) by the Environmental Protection Agency. If the Scoping and TOR is not cleared by the EPA, the CONSULTANT will cover all further costs required to revise the Scoping and TOR such that they are cleared by the EPA. 8.1 3RD PAYMENT: - 20% of the contract sum of $6,680 upon receipt of the Environmental Protection Agency's permit invoice. If the EPA permit is not received, the CONSULTANT will cover all further costs required to obtain such receipt. 9.0 Any dispute rising out of this agreement shall be referred to a single arbitrator agreed between Xtra-Gold and the Consultant. IN WITNESS WHEREOF the parties here to have executed this Agreement as of the day and year first above written. SIGNED AND SEALED with the common Seal of XTRA-GOLD MINING LIMITED /s/ Alhaji Nantogma Abudulai and DELIVERED in the presence of ALHAJI NANTOGMA ABUDULAI Authorized Agent of Xtra-Gold Mining Limited and Vice-President, Ghana Operations of Xtra-Gold Resources Corp. WITNESS SIGNED AND SEALED with the common /s/ Kweku Kyeremeh Seal of BIO CONSULT LIMITED KWEKU KYEREMEH And DELIVERED in the presence of Director WITNESS /s/ Samuel Nunoo Samuel Nunoo CHARGES FOR THE APAPAM STUDY WILL BE DISCUSSED LATER 4 EX-10 33 ex_10-29.txt PURCHASE & SALE AGREEMENT DATED SEPTEMBER 1, 2006 EXHIBIT 10.29 PURCHASE AND SALE AGREEMENT BETWEEN: XTRA OIL & GAS LTD. - AND - TRISTAR OIL & GAS PARTNERSHIP Dated: September 22, 2006 PURCHASE AND SALE AGREEMENT --------------------------- THIS AGREEMENT made as of September 22, 2006 BETWEEN: XTRA OIL & GAS LTD., a corporation, having an office in Toronto, Ontario (hereinafter referred to as "VENDOR") - and - TRISTAR OIL & GAS PARTNERSHIP, a general partnership, having an office in Calgary, Alberta, by its managing partner TRISTAR OIL & GAS LTD. (hereinafter referred to as "PURCHASER") WHEREAS Vendor wishes to sell and Purchaser wishes to purchase the Assets subject to and in accordance with the terms and conditions hereof; NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and the mutual covenants and agreements hereinafter set forth, the Parties have agreed as follows: ARTICLE 1 INTERPRETATION 1.1 DEFINITIONS In this Agreement, including the recitals and the Schedules, unless the context otherwise requires: (a) "ABANDONMENT AND RECLAMATION OBLIGATIONS" means all obligations to abandon the Wells and restore and reclaim the surface sites thereof, to decommission and remove all facilities and equipment comprising the Tangibles and restore and reclaim the surface sites thereof and to reclaim and restore the lands to which the Surface Rights relate; (b) "AFES" means authorities for expenditure, cash calls or mail ballots issued under operating agreements relating to any of the Assets authorizing expenditures and similar items; (c) "THIS AGREEMENT", "HEREIN", "HERETO", "HEREOF" and similar expressions refer to this Purchase and Sale Agreement; - 2 - (d) "AGREEMENT DEFAULT" means a misrepresentation or breach of warranty or covenant made by a Party or the failure of a party to perform or observe any of the covenants or agreements to be performed by such Party under this Agreement or any certificate or instrument delivered in connection herewith; (e) "APPLICABLE LAW" means any law, statute, regulation, rule, ordinance, order or directive enacted or issued by any Governmental Authority having jurisdiction over Vendor, Purchaser or the Assets, and includes, without limitation, the provisions and conditions of any permit, license or other governmental or regulatory authorization in respect of the Assets or any of them; (f) "ASSETS" means the Vendor's entire right, title, estate and interest (whether contingent, legal or beneficial) in and to the Petroleum and Natural Gas Rights, the Tangibles and the Miscellaneous Interests; (g) "BASE PRICE" has the meaning specified in section 2.2; (h) "BUSINESS DAY" means any day other than a Saturday, Sunday or statutory holiday in the Province of Alberta; (i) "CLOSING" means the transfer of beneficial ownership of the Assets from Vendor to Purchaser and the completion of other matters incidental thereto as provided for herein; (j) "CLOSING DATE" means October 13, 2006, or such other date as may be agreed upon in writing by Vendor and Purchaser; (k) "CLOSING TIME" means 2:00 p.m., Calgary time on the Closing Date, or such other time as may be agreed upon in writing by Vendor and Purchaser; (l) "DATA" means all records, data and information directly related to the Assets, including well files, lease files, agreement files and production records, including but not limited to, all geological, geophysical and geochemical data, including the Seismic related to the assets, and all interpretations related thereto; (m) "ENCANA FARMOUT AGREEMENT" means the SE Saskatchewan Joint Venture dated December 13, 2004 among Caribgold Minerals Ltd., EnCana Corporation & EnCana Oil & Gas Partnership, as amended; (n) "EFFECTIVE TIME" means 8:00 a.m., Calgary time, on the 1st day of September, 2006; - 3 - (o) "ENVIRONMENTAL LAW" means any Applicable Law relating to: (i) protection of the environment, persons or the public welfare from actual or potential exposure (or the effects of exposure) to any actual or potential release, discharge, spill or emission (whether past or present); or (ii) the manufacture, processing, production, gathering, transportation, use, treatment, storage or disposal of any chemical, raw material, pollutant, contaminant or toxic, corrosive or hazardous substance, by-product or waste; (p) "ENVIRONMENTAL LIABILITIES" means all liabilities pertaining to the Assets in respect of the environment, whether or not caused by a breach of any Environmental Law and whether or not resulting from operations conducted with respect to the Assets, including, without limitation, liabilities related to: (i) the transportation, storage, use or disposal of toxic or hazardous substances or hazardous, dangerous or non-dangerous oilfield substances or waste; (ii) the release, spill, escape or emission of toxic or hazardous substances; (iii) any other pollution or contamination of the surface, substrate, soil, air, ground water, surface water or marine environments; (iv) damages and losses suffered by Third Parties as a result of the occurrences in paragraphs (i) to (iii) of this section; and (v) any obligations imposed by an Environmental Law to protect the environment or to rectify environmental problems; (q) "FACILITIES" means the facilities described in Schedule "C"; (r) "GST" means the goods and services tax payable pursuant to the GST Legislation; (s) "GST LEGISLATION" means the Excise Tax Act, 1985 R.S.C., c. E-15, as amended, and the regulations thereunder; (t) "GENERAL CONVEYANCE" means the general conveyance in the form of Schedule "F"; (u) "GOVERNMENTAL AUTHORITY" means any federal, provincial or local government or governmental regulatory body and any of their respective boards, subdivisions, agencies, instrumentalities, authorities or tribunals; (v) "INTERIM PERIOD" means the period from and including the Effective Time up to but not including the Closing Date; - 4 - (w) "LANDS" means the Vendor's entire interest in and to those lands within the areas outlined in red on the land plat attached hereto as Schedule "A-1" including, without limitation, the lands set forth and described in Schedule "A" and any lands pooled or unitized therewith, including the Petroleum Substances within, upon or under such lands, subject to the restrictions and exclusions set forth in the Leases as to Petroleum Substances and geological formations; (x) "LAND SCHEDULE" means Schedule "A"; (y) "LEASES" means the leases, options to lease, licenses, permits and similar documents of title described in the Land Schedule under the heading "Leases" by virtue of which the holder thereof is entitled to drill for, win, take, own or remove Petroleum Substances within, upon or under the Lands or by virtue of which the holder thereof is deemed to be entitled to a share of Petroleum Substances removed from the Lands or any lands with which the Lands are pooled or unitized and includes, if applicable, all renewals and extensions of such documents and documents issued in substitution therefor; (z) "LOSSES" means, in respect of a Party and in relation to a matter, all losses, costs, claims, expenses, liabilities and damages which such Party suffers, sustains, pays or incurs in connection with such matter and includes taxes (other than refundable taxes), reasonable costs of legal counsel (on a full indemnity basis) and other consultants and reasonable costs of investigating and defending claims arising from such matter, regardless of whether such claims are sustained but does not include consequential or indirect losses or loss of profits; (aa) "MISCELLANEOUS INTERESTS" means, subject to any and all limitations and exclusions provided for in this definition, Vendor's interests in all property, assets, interests and rights (other than the Petroleum and Natural Gas Rights and the Tangibles) directly related to the Petroleum and Natural Gas Rights or the Tangibles, including, without limitation, any and all of the following: (i) contracts and agreements directly related to the Petroleum and Natural Gas Rights or the Tangibles including, without limitation, the Title and Operating Documents; (ii) the Surface Rights; (iii) the Data; (iv) the Wells, including well bores and casing; and (v) proceeds of property damage insurance in respect of events occurring between the Effective Time and the Closing Date; but not including Petroleum Substances in tanks or in storage at the Effective Time; - 5 - (bb) "PARTIES" means the parties to this Agreement and "PARTY" means any one of them; (cc) "PERMITTED ENCUMBRANCES" means: (i) liens for taxes, assessments and governmental charges which are not due; (ii) liens incurred or created in the ordinary course of business as security in favour of the person who is conducting the development or operation of the property to which such liens relate for Vendor's proportionate share of costs and expenses of such development or operation which are not due at the Closing Date; (iii) builders' liens, warehousemen's liens, materialmen's liens, processor's liens and similar liens in respect of costs related to the Assets incurred in the ordinary course of the oil and gas business which are not due at the Closing Date; (iv) easements, rights of way, servitudes and other similar rights in land (including, without limitation, rights of way and servitudes for roads, railways, sewers, drains, gas and oil pipelines, gas and water mains and electric light, power, telephone, telegraph and cable television conduits, poles, wires and cables); (v) the right reserved to or vested in any municipality or government or other public authority by the terms of any lease, license, franchise, grant or permit or by any statutory provision, to terminate any such lease, license, franchise, grant or permit or to require annual or other periodic payments as a condition of the continuance thereof; (vi) rights of general application reserved to or vested in any Governmental Authority to levy taxes on Petroleum Substances or any of them or the income therefrom, and governmental requirements and limitations of general application as to production rates or operations; (vii) royalties, liens, adverse claims, penalties, reductions in interests and other encumbrances disclosed in the Land Schedule; (viii) the reservations, limitations, provisos and conditions in any grants or transfers from the Crown of any of the Lands or interests therein and statutory exceptions to title; (ix) the Sale, Processing and Transportation Agreements and agreements respecting the operation of wells by contract field operators which are either terminable on not greater than thirty (30) day's notice (without an early termination penalty or other cost) or identified in Schedule "D"; - 6 - (x) provisions for penalties and forfeitures under agreements as a consequence of non-participation in operations, provided that any such penalties or forfeitures which apply to the Assets as a result of Vendor's election or deemed election not to participate in a particular operation prior to date hereof shall be identified in Schedule "A"; (xi) the terms and conditions of the Title and Operating Documents provided that the following items must be identified in a Schedule hereto to qualify as a Permitted Encumbrance: (A) any overriding royalties, net profits interests or other encumbrances applicable to the Assets; (B) any potential reduction of Vendor's interest in the Assets because of a payout conversion; (C) any Rights of First Refusal; and (D) any penalty or forfeiture that applies to the Assets because of Vendor's election not to participate in a particular operation; and (xii) liens granted in the ordinary course of business to a public utility, municipality, or Governmental Authority with respect to operations pertaining to any of the Assets; (dd) "PETROLEUM AND NATURAL GAS RIGHTS" "PETROLEUM AND NATURAL GAS RIGHTS" means the interests of Vendor in respect of the Leases to the extent they apply to the Lands, including, without limitation, any existing contractual right of the Vendor to earn an interest in the Lands under a farmin, or other similar arrangements, any net carried interest and any overriding royalty, net profits interest or other encumbrance accruing to the Vendor on the Lands including, without limitation, those described in Schedule "A"; (ee) "PETROLEUM SUBSTANCES" means crude oil, petroleum, natural gas, natural gas liquids, natural gas derived from coal, and other related hydrocarbons (except coal) and any and all other substances (including sulphur), whether liquid, solid or gaseous and whether hydrocarbons or not, produced in association therewith; (ff) "PRIME RATE" means the rate of interest, expressed as a rate per annum, designated by the main branch in Calgary of the Bank of Montreal as the reference rate used by it to determine rates of interest charged by it on Canadian dollar commercial loans made in Canada and which is announced by such bank, from time to time, as its prime rate, provided that whenever such bank announces a change in such reference rate, the "Prime Rate" shall correspondingly change effective on the date the change in such reference rate is effective; (gg) "PURCHASE PRICE" has the meaning ascribed thereto in section 2.2; (hh) "PURCHASER" means TriStar Oil & Gas Partnership; (ii) "RIGHTS OF FIRST REFUSAL" or "ROFR" means a right of first refusal, preemptive right of purchase or similar right whereby a Third Party has the right to acquire or - 7 - purchase an interest in or portion of the Assets as a consequence of Vendor having agreed to sell the Assets to Purchaser in accordance with this Agreement; (jj) "SALE, PROCESSING AND TRANSPORTATION AGREEMENTS" means agreements for the sale of Petroleum Substances produced from the Lands or lands pooled or unitized therewith and agreements providing for the gathering, transportation, compression, processing, treatment or storage of Petroleum Substances produced from the Lands or lands pooled or unitized therewith; (kk) "SEISMIC" means all records, books, documents, licences, reports and data and all sale, trading and reproduction rights associated with the Lands and the seismic programs, line or lines set out in Schedule "G" hereto, including without limitation: (i) all permanent records of basic field data including, but not limited to, any and all microfilm or paper copies of seismic driller's reports, monitor records, observer's reports and survey notes and any and all copies of magnetic field tapes or conversions thereof; (ii) all permanent records of the processed field data including, but not limited to, any and all microfilm or paper copies of shot point maps, pre- and post-stacked record sections including amplitude, phase and structural displays, post-stack data manipulations including filters, migrations and wavelet enhancements, and any and all copies of final stacked tapes and any manipulations and conversions thereof; (iii) in the case of 3D seismic, in addition to the foregoing, all permanent records or bin locations, bin fold, static corrections, surface elevations and any other relevant information; (iv) including, without limitation, access to view any trade seismic data in possession of Vendor within the area outlined in red on Schedule "A-1"; and (v) any and all interpretations of the foregoing; (ll) "SPECIFIC CONVEYANCES" means all conveyances, assignments, transfers, novations and other documents or instruments that are reasonably required or desirable, in accordance with normal oil and gas industry practices, to convey, assign and transfer the Assets to Purchaser and to novate Purchaser into the Title and Operating Documents in the place and stead of Vendor with respect to the Assets; (mm) "SURFACE RIGHTS" means all rights to enter upon, use or occupy the surface of lands (including, but not limited to, the Lands) which are used or held for use in connection with the Petroleum and Natural Gas Rights or the Tangibles, including rights to enter upon and occupy the surface of lands on which the Tangibles and the Wells are located and rights to use the surface of lands to gain access thereto; - 8 - (nn) "TAKE OR PAY OBLIGATIONS" means take or pay and similar obligations related to the Assets arising after the Effective Time as a result of payments made prior to the Effective Time by or on behalf of buyers of Petroleum Substances in lieu of or in satisfaction of their obligations to buy Petroleum Substances or as prepayment of the price to be paid for Petroleum Substances; (oo) "TANGIBLES" means: (i) the interest of Vendor in the Facilities listed in Schedule "C" (subject to the noted exceptions set forth therein); and (ii) the interests of Vendor which are directly related to the Petroleum and Natural Gas Rights in all other tangible depreciable property and assets used or intended to be used in producing, processing, gathering, treating, measuring or injecting Petroleum Substances or any of them from the Lands or lands pooled or unitized therewith or in connection with water injection or removal operations that pertain to the Petroleum and Natural Gas Rights, including, without limitation, gas plants, oil batteries, production equipment, pipelines, pipeline connections, meters, dehydrators, motors, compressors, treaters, dehydrators, scrubbers, separators, pumps, tanks, boilers and communication equipment; (pp) "THIRD PARTY" means any partnership, corporation, trust, unincorporated organization, union, government, governmental department or agency, individual or any heir, executor, administrator or other legal representative of an individual other than a Party; (qq) "TITLE AND OPERATING DOCUMENTS" means (i) the Leases (ii) all agreements relating to the ownership or operation of the Petroleum and Natural Gas Rights or the Tangibles or the Surface Rights entered into in the normal course of business, including, without limitation: the EnCana Farmout Agreement, operating procedures; unit agreements and unit operating agreements; agreements for the construction, ownership and operation of gas plants, pipelines, gas gathering systems and similar facilities; pooling agreements, royalty agreements, farmin agreements, farmout agreements and participation agreements; agreements respecting the gathering, measurement, processing, compression or transportation of Petroleum Substances; well operating contracts; and surface leases, pipeline easements, road use agreements and other contracts granting the right to use the surface of lands; and (iii) all permits, licenses and approvals issued or granted by Governmental Authorities pertaining to the ownership or operation of the Petroleum and Natural Gas Rights or the Tangibles or the gathering, processing, treatment, storage, measurement, transportation or sale of the production of Petroleum Substances from the Lands or lands pooled or unitized therewith; and (rr) "WELLS" means all producing, shut-in, abandoned, suspended, capped, injection and disposal wells, located on the Lands or lands pooled or unitized therewith, in which Vendor has an interest, including, without limitation those set forth in Schedule "B". - 9 - 1.2 ARTICLE, SECTION AND SCHEDULE REFERENCES Except as otherwise expressly provided, a reference in this Agreement to an "Article", "section", "subsection", "paragraph" or "Schedule" is a reference to an article, section, subsection, paragraph or schedule to this Agreement. 1.3 INTERPRETATION NOT AFFECTED BY HEADINGS The headings in this Agreement are for convenience only and shall not affect the construction or interpretation of this Agreement. 1.4 INCLUDED WORDS When the context reasonably permits, words suggesting the singular shall be construed as suggesting the plural and vice versa, and words suggesting one gender shall be construed as suggesting other genders. 1.5 SCHEDULES The following Schedules are attached to and form a part of this Agreement: Schedule "A" - Land Schedule Schedule "A-1" - Land Plat Schedule "B" - Wells Schedule "C" - Facilities Schedule "D" - Sale, Processing and Transportation Agreements Schedule "E" - AFEs Schedule "F" - General Conveyance Schedule "G" - Seismic Schedule "H" - Disclosure Schedule Wherever any term or condition, express or implied, of such Schedules conflicts or is at variance, with any term or condition in the body of this Agreement, such term or condition in the body of this Agreement shall prevail. 1.6 CURRENCY All references to "$" or "Dollars" herein are references to Canadian currency. 1.7 KNOWLEDGE OR AWARENESS Where in this Agreement a representation or warranty is limited to the knowledge or awareness of Vendor, such knowledge or awareness consists of the actual knowledge or awareness, as the case may be, of the current employees of Vendor at or above the supervisory level, after reasonable inquiry. For the avoidance of doubt, knowledge or awareness does not include the knowledge of any Third Party or constructive knowledge. - 10 - ARTICLE 2 PURCHASE AND SALE 2.1 PURCHASE AND SALE Vendor hereby agrees to sell the Assets to Purchaser and Purchaser hereby agrees to purchase the Assets from Vendor, subject to and in accordance with this Agreement. 2.2 PURCHASE PRICE The purchase price to be paid by Purchaser to Vendor for the Assets will be Three Hundred Fifty Thousand Dollars ($350,000.00) (the "BASE PRICE") plus or minus (as applicable) the net amount of the adjustments made pursuant to Article 4 (collectively, the "PURCHASE PRICE"). 2.3 ALLOCATION OF PURCHASE PRICE The Base Price shall be allocated among the Assets as follows: To Petroleum and Natural Gas Rights: $ 280,000.00 To Tangibles: ...................... $ 69,990.00 To Miscellaneous Interests: ........ $ 10.00 ------------ TOTAL .............................. $ 350,000.00 2.4 PAYMENT OF PURCHASE PRICE The Purchase Price shall be paid by Purchaser to Vendor as follows: (a) at Closing, Purchaser shall pay to Vendor by certified cheque, bank draft or wire transfer the Base Price plus or minus (as applicable) the adjustments to be made at Closing pursuant to Article 4; and (b) the adjustments made pursuant to Article 4 after Closing shall be paid in accordance with the provisions of Article 4. 2.5 GST The Purchase Price does not include GST. At Closing, Purchaser shall pay to Vendor by certified cheque or bank draft an amount equal to the statutory rate of GST of the portion of the Purchase Price allocated to Tangibles pursuant to section 2.3 on account of the GST payable by Purchaser in respect of its purchase of the Assets pursuant hereto. Vendor shall remit such amount to the appropriate taxation authorities in accordance with the GST Legislation. Purchaser shall be responsible for the payment of any additional GST payable in respect of its purchase of the Assets pursuant hereto and any interest and penalties payable in respect of such additional GST and shall indemnify and save harmless Vendor in respect thereof. Each Party represents that its registration number for GST purposes is: - 11 - Vendor - o Purchaser - 806608949 RT0001 ARTICLE 3 CLOSING 3.1 PLACE OF CLOSING Unless otherwise agreed to in writing by the Parties, Closing shall take place at the Closing Time at the offices of Heenan Blaikie LLP located at 1200, 425 - 1st Street SW, Calgary, Alberta. 3.2 EFFECTIVE TIME OF TRANSFER The transfer and assignment of the Assets from Vendor to Purchaser shall be effective as of the Effective Time; however, possession and title to the Assets shall not pass to Purchaser until Closing, provided Closing occurs. 3.3 DELIVERIES AT CLOSING (a) At Closing, Vendor shall table the following: (i) the General Conveyance fully executed by Vendor; (ii) as many Specific Conveyances as may be reasonably prepared prior to Closing fully executed by Vendor (and in any particular case where this may not be possible due to timing constraints an undertaking by Vendor to provide the remaining Specific Conveyances at the earliest possible date); (iii) the releases and registerable discharges or no interest letters referred to in subsection 5.1(i) hereof; (iv) the certificates described in section 5.1; and (v) such other items as may be specifically required hereunder or as may be reasonably requested by Purchaser. (b) At Closing, Purchaser shall table the following: (i) the amounts payable at Closing on account of the Purchase Price and GST in accordance with sections 2.4(a) and 2.5; (ii) the certificates described in section 5.2; and - 12 - (iii) such other items as may be specifically required hereunder or as may be reasonably requested by Vendor. In addition, Purchaser will execute the General Conveyance and the Specific Conveyances tabled by Vendor. 3.4 DELIVERY OF DATA Vendor shall also deliver at Closing, or within a reasonable time thereafter, to Purchaser original copies of the Data including the Seismic. 3.5 SPECIFIC CONVEYANCES Vendor shall use reasonable efforts to prepare at its cost and as required in accordance with Applicable Law the Specific Conveyances prior to Closing to convey the Assets to the Purchaser or its nominee. None of the Specific Conveyances shall confer or impose upon a Party any greater right or obligation than contemplated in this Agreement. All Specific Conveyances that are prepared and circulated to Purchaser in a reasonable time prior to the Closing Time shall be executed and delivered by the Parties at Closing. Purchaser shall bear all costs to register the Specific Conveyances and post all security as may be required to cause the transfer of all licenses associated therewith to be approved by all Governmental Authorities. Vendor shall circulate and register all such Specific Conveyances that by their nature require circulation or registration promptly after Closing. ARTICLE 4 ADJUSTMENTS 4.1 COSTS AND REVENUES TO BE APPORTIONED (a) Except as otherwise provided in this Agreement, all costs and expenses relating to the Assets (including, without limitation, maintenance, development, capital and operating costs) and all revenues relating to the Assets (including, without limitation, proceeds from the sale of production and fees from processing, treating or transporting Petroleum Substances on behalf of Third Parties) shall be apportioned as of the Effective Time between Vendor and Purchaser on an accrual basis in accordance with generally accepted accounting principles, provided that: (i) deposits made by Vendor relative to operations on the Lands shall be returned to Vendor; (ii) costs and expenses of work done, services provided and goods supplied shall be deemed to accrue for the purposes of this Article when the work is done or the goods (other than inventory) or services are provided, regardless of when such costs and expenses become payable; - 13 - (iii) no adjustment shall be made in respect of Alberta Royalty Tax Credits or, except as otherwise provided herein, Vendor's overhead; (iv) where Vendor is the operator of any particular Asset, Vendor will be entitled to all overhead recoveries and operator's fees for the period up to the Effective Time; (v) revenues from the sale of Petroleum Substances will be adjusted on the basis of the date the Petroleum Substances are produced; (vi) all rentals and similar payments in respect of the Leases or Surface Rights comprised in the Assets and all taxes (other than income taxes) levied with respect to the Assets or operations in respect thereof shall be apportioned between Vendor and Purchaser on a per diem basis as of the Effective Time; and (vii) Petroleum Substances attributable to the Assets which were produced, but not sold, as of the Effective Time shall be retained by Vendor and Vendor shall be responsible for all royalties or other encumbrances thereon. Petroleum Substances will be deemed to be sold on a first in, first out basis. (b) Subject to the foregoing provisions of this section 4.1, for the purposes of the Interim Period, all benefits and obligations relating to the Assets, including revenue, expenses, operating costs and expenses, capital costs, lease rentals, royalty obligations and the proceeds from the sale of production from the Lands, are to be received by or paid by the Vendor and adjusted for on the interim statement of adjustments or the final statement of adjustments and as provided in subsection 4.2(c), in an amount equal to: (i) the proceeds from the sale of production from the Lands for the Interim Period, minus (ii) all royalties and operating expenses for the Interim Period, minus (iii) those capital expenses for which Purchaser is responsible for the Interim Period. Vendor shall report all net revenue and pay all income tax on the net revenue for the Interim Period. 4.2 ADJUSTMENTS TO ACCOUNT (a) An interim accounting of the adjustments pursuant to section 4.1 shall be made at Closing, based on Vendor's good faith estimate of the costs and expenses paid by Vendor prior to Closing and the revenues received by Vendor prior to Closing. Vendor and Purchaser shall cooperate in preparing such interim accounting and Vendor shall provide a statement setting forth - 14 - the adjustments to be made at Closing not later than four (4) Business Days prior to Closing and shall assist Purchaser in verifying the amounts set forth in such statement. A further accounting of the adjustments pursuant to section 4.1 shall be conducted within six (6) months following the Closing Date. Additional adjustments will be made after such six (6) month period as and when they are ascertained by the Parties, provided that, subject to subsection (c) of this section, the Parties shall not be obligated to make an adjustment more than two (2) years after Closing unless such adjustment has been specifically requested, by written notice, within such period. All adjustments after Closing shall be settled by payment by the Party required to make payment hereunder within thirty (30) days of being notified of the determination of the amount owing. (b) During the two (2) year period following the Closing Date, Purchaser may audit the books, records and accounts of Vendor respecting the Assets, for the purpose of effecting adjustments pursuant to this Article. Such audit shall be conducted upon reasonable notice to Vendor at Vendor's offices during Vendor's normal business hours, and shall be conducted at the sole expense of Purchaser. (c) Notwithstanding subsection 4.2(a), the Parties will be required to make an adjustment pursuant to this Article 4 more than two (2) years after Closing if: (i) the adjustment arises from a Crown royalty audit commenced prior to four (4) years after the end of the calendar year in which Closing occurs and a written request for the adjustment is given by one Party to the other Party within one hundred and twenty (120) days of the requesting Party's receipt of the results of the audit; or (ii) the adjustment arises from a joint venture audit commenced prior to two (2) years after the end of the calendar year in which Closing occurs and a written request for the adjustment is given by one Party to the other Party within one hundred and twenty (120) days of the requesting Party's receipt of the results of the audit. (d) All adjustments provided for in this Article shall be adjustments to the Purchase Price. An adjustment payable by a Party after Closing pursuant to this section 4.2 which is not paid within thirty (30) days of a written request for payment from the other Party, shall bear interest at the Prime Rate percent per annum payable by the paying Party to the other Party from the end of such thirty (30) day period until the adjustment is paid. 4.3 ARBITRATION OF DISPUTES Either Party may, at any time, refer to arbitration a dispute between the Parties respecting the requirement for or the amount of an adjustment pursuant to the provisions of this Article 4. - 15 - 4.4 POST-CLOSING ACCOUNTING (a) For a period of twenty-four (24) months after Closing, the Parties shall provide reasonable assistance to each other in the remittance or recoupment of any overpayment or underpayment of royalties relating to the Assets. (b) Vendor shall invoice all joint interest owners for all billable costs attributable to the operations pertaining to the Assets for which Vendor is the operator until the month following the month in which Closing occurs. All subsequent joint interest billings for such Assets shall be prepared and distributed by Purchaser. The Parties shall provide reasonable assistance to each other in the collection or recoupment of any overpayment or underpayment of joint operations accounts receivable. 4.5 DEPOSITS, CASH CALLS AND OPERATING FUNDS The Assets do not include deposits made by Vendor which relate to the Assets or cash call advances, operating fund payments or similar advances made by Vendor to an operator of the Assets. Such amounts shall, at the option of Vendor, either be returned to Vendor and (if required) replaced by Purchaser or be transferred by Vendor to Purchaser, in which event Purchaser shall reimburse the amount thereof to Vendor. ARTICLE 5 CONDITIONS OF CLOSING 5.1 PURCHASER'S CONDITIONS The obligation of Purchaser to purchase the Assets pursuant hereto is subject to the satisfaction at or prior to the Closing Date of the following conditions, which are for the exclusive benefit of Purchaser and may be waived by Purchaser: (a) Representations and Warranties: The representations and warranties of Vendor herein contained shall be true in all material respects when made and as of the Closing Date and a certificate of an officer of Vendor to that effect shall have been delivered by Vendor to Purchaser at Closing; (b) Obligations: All obligations of Vendor contained in this Agreement to be performed prior to or at Closing shall have been timely performed in all material respects and a certificate of an officer of Vendor to that effect shall have been delivered by Vendor to Purchaser at Closing; (c) Approval of Transactions: Purchaser shall have obtained any necessary approvals to complete the transactions contemplated herein, from its boards of directors; (d) No Adverse Damage: There shall be no physical damage to any of the Tangibles from the date hereof to the Closing Date, ordinary wear and tear excepted therefrom; - 16 - (e) Delivery of Conveyance Documents: Vendor shall have delivered to Purchaser the General Conveyance and those of the Specific Conveyances prepared prior to Closing executed by Vendor and those other documents and materials described in section 3.3(a)(iv) which are to be provided to Purchaser at Closing; (f) Inspection of Assets: Purchaser and/or its agent shall have been given the opportunity to complete an inspection of all associated wellsites and equipment and to make environmental and other assessments of the Assets to the reasonable satisfaction of the Purchaser which condition shall be satisfied or waived by Purchaser three (3) Business Days prior to the Closing Date; (g) Review of Records: Purchaser shall be permitted access to review Vendor's records with respect to revenues received and royalties and operating costs paid regarding the operation of the Assets and confirming that same are as represented by Vendor and are satisfactory to Purchaser, which condition shall be satisfied or waived by Purchaser three (3) Business Days prior to the Closing Date; (h) Title Review: Purchaser shall be permitted access to review Vendor's Title and Operating Documents with respect to the Vendor's title to the Assets and confirming the Vendor's title to the Assets is as represented by Vendor and are satisfactory to Purchaser, which condition shall be satisfied or waived by Purchaser three (3) Business Days prior to the Closing Date; (i) Discharges: Vendor shall have delivered to Purchaser releases and registrable discharges or no-interest letters from all parties holding security interests in the Assets; and (j) Concurrent Closing: Concurrent with the Closing as provided for herein, Purchaser shall close the acquisition to purchase from Ranger Canyon Energy Inc. its interest in the Assets (as applicable). If any of the foregoing conditions has not been complied with, or waived by Purchaser at or before the Closing Date, Purchaser may, terminate its obligations to purchase the Assets from Vendor by written notice to Vendor and, in such event Purchaser and Vendor shall be released and discharged from all obligations hereunder except as provided in sections 5.3 and 5.4. 5.2 VENDOR'S CONDITIONS The obligation of Vendor to sell the Assets pursuant hereto is subject to the satisfaction at or prior to the Closing Date of the following conditions, which are for the exclusive benefit of Vendor and may be waived by Vendor: (a) Representations and Warranties: The representations and warranties of Purchaser herein contained shall be true in all material respects when made and as of the Closing Date and a certificate of an officer of Purchaser to that effect shall have been delivered by Purchaser to Vendor at Closing; - 17 - (b) Obligations: All obligations of Purchaser contained in this Agreement to be performed prior to or at Closing shall have been timely performed in all material respects and a certificate of an officer of Purchaser to that effect shall have been delivered by Purchaser to Vendor at Closing; (c) Payment: All amounts to be paid by Purchaser to Vendor pursuant hereto shall have been paid to Vendor by Purchaser in accordance with and in the form stipulated in this Agreement; and (d) Delivery of Conveyance Documents: Purchaser shall have executed and delivered to Vendor at least one copy of the General Conveyance and those of the Specific Conveyances tabled by Vendor at Closing, and delivered to the Vendor the other documents and materials described in section 3.3(b). If any of the foregoing conditions has not been complied with, or waived by Vendor at or before the Closing Date, Vendor may, terminate its obligations to sell the Assets to Purchaser by written notice to Purchaser and, in such event Purchaser and Vendor shall be released and discharged from all obligations hereunder except as provided in sections 5.3 and 5.4. 5.3 EFFORTS TO FULFILL CONDITIONS PRECEDENT Purchaser and Vendor shall proceed diligently and in good faith and use all reasonable efforts to fulfill and assist in the fulfillment of the conditions precedent. In furtherance of this intent, Vendor shall use all reasonable efforts to ensure Purchaser has direct contact and communication with and the cooperation of the operator of the Assets to enable Purchaser to complete its due diligence review of the Assets. 5.4 FAILURE OF A CONDITION DUE TO A BREACH If a condition set forth in section 5.1 or 5.2 is not satisfied as a result of a breach by a Party of its obligations hereunder, subject to section 2.5, such Party shall be liable to the other Party for the other Party's Losses resulting from such breach whether it elects to terminate its obligations to purchase or sell the Assets pursuant hereto. 5.5 OFFICER'S CERTIFICATES GENERALLY A certificate of an officer of a Party delivered pursuant hereto shall be made by such officer on behalf of such Party and such officer shall have no personal liability in respect thereof. - 18 - ARTICLE 6 REPRESENTATIONS AND WARRANTIES 6.1 REPRESENTATIONS AND WARRANTIES OF VENDOR The Vendor represents and warrants to Purchaser that: (a) Standing: Vendor is, and at the Closing Date shall continue to be a corporation, validly existing and in good standing under the laws of Alberta and the jurisdictions in which the Assets are located. Vendor has all the requisite power and authority to sell, assign, transfer and convey the Assets to Purchaser in accordance with this Agreement; (b) No Conflicts: The consummation of the transaction contemplated herein will not violate, nor be in conflict with, any provision of any agreement or instrument to which Vendor is a party or by which Vendor is bound or any judgment, decree, order, law, statute, rule or regulation applicable to Vendor; (c) Execution of Documents: This Agreement has been duly executed and delivered by Vendor and all other documents (including the General Conveyance and the Specific Conveyances) executed and delivered pursuant hereto will be duly executed and delivered, and this Agreement does, and such documents will, constitute legal, valid and binding obligations of Vendor enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, preference, reorganization, moratorium and other similar laws affecting creditors' rights generally and the discretion of courts with respect to equitable or discretionary remedies and defenses; (d) Finders' Fees: Vendor has not incurred any obligation or liability, contingent or otherwise, for brokers' or finders' fees in respect of this transaction for which Purchaser shall have any obligation or liability; (e) No Authorizations: No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body exercising jurisdiction over the Assets or Vendor is required for the due execution, delivery and performance by Vendor of this Agreement; (f) Title: Except as expressly set forth in this Agreement, Vendor does not warrant title to the Assets but Vendor does warrant that Vendor has not done any act or thing whereby any of the Assets may be cancelled or determined and, except for Permitted Encumbrances, the title to the Assets is now and at the Closing Time will be free and clear of all liens, mortgages, royalties, encumbrances and adverse claims created by, through or under Vendor or any affiliate of Vendor or of which Vendor is aware; (g) Quiet Enjoyment: Subject to the rents, covenants, conditions and stipulations in the Leases and Permitted Encumbrances, from and after Closing, Purchaser will be entitled to hold and enjoy the interests in the Assets attributed to Vendor in the - 19 - Schedules hereto for Purchaser's own use and benefit without any interruption of or by Vendor or any Third Party claiming by, through or under Vendor; (h) No Lawsuits or Claims: There are no judgments and no claims, proceedings, actions or lawsuits in existence, or, to the Vendor's knowledge, threatened against or with respect to the Assets or the interests of Vendor therein that would have a material adverse affect on the aggregate value or operation of the Assets, other than as disclosed in Schedule "H"; (i) No Breaches of Law: It has not received any written notice of any violation of Applicable Law or any writ, injunction or decree of any court or any Governmental Authority in relation to the Assets which violation would have a material adverse affect on the aggregate value or operation of the Assets or which has not been remedied, other than as disclosed in Schedule "H"; (j) No Defaults: It has received no written notice of the occurrence of any act or omission whereby it is or would, with notice or lapse of time or both, be in material default under Applicable Law or the terms of any Lease, the Title and Operating Documents or other agreement pertaining to its Assets, where such a default would adversely impact the Assets, or any of them, other than as disclosed in Schedule "H"; (k) EnCana Farmout Agreement: In respect of the EnCana Farmout Agreement, as of the date hereof and as of the Closing Date, the Optionee shall have complied with all the terms and conditions contained therein (including, without limitation, all requirements and obligations to be performed by Optionee during the Exploration Period) and as of the date hereof Vendor has earned no less than six (6) gross sections of land within one (1) of the Exploration Blocks and still retains all rights and options to earn its interests in the two (2) remaining Exploration Blocks, the one (1) Sub Exploration Block and the ROFR Option Block. Capitalized terms used in this section 6.1(k) and not otherwise defined herein, shall have the meanings ascribed to such terms in the EnCana Farmout Agreement; (l) AFEs: Except as set forth in Schedule "E" to this Agreement, there are no outstanding AFEs or other financial commitments, which exceed $10,000, pursuant to which expenditures in respect of the Assets other than normal operating costs are or may be required after the Effective Time; (m) Assessments: To Vendor's knowledge, all royalties, ad valorem, property, production, severance and similar taxes and assessments based on or measured by the Vendor's ownership of the Assets or the production of Petroleum Substances from the Lands or the receipt of proceeds therefrom payable by the Vendor and that accrued prior to the Effective Time (including all prior years) have been properly and fully paid and discharged or will be so paid when due; (n) No Reduction: The interests of the Vendor in the Assets are not subject either to reduction by virtue of the conversion or other alteration of the interest of any Third Party claiming - 20 - by, through or under Vendor, or to reduction by the operation of any penalty created by, through or under Vendor, except for the Permitted Encumbrances or as disclosed in the Land Schedule; (o) Sale, Processing and Transportation Agreements: Except as set forth in Schedule "D", Vendor is not a party to or bound by any Sale, Processing or Transportation Agreements which cannot be terminated without penalty on notice from Vendor of thirty (30) days or less; (p) Production Penalty: To the knowledge of the Vendor, none of the Wells producing Petroleum Substances that are allocable to the Assets are subject to any production penalty of any nature including, without limitation, contractual penalties or restrictions (other than those penalties imposed in the ordinary course of the oil and gas industry by a governmental authority), except as set forth in Schedule "A"; (q) Production Allowables: To the knowledge of the Vendor, none of the Wells producing Petroleum Substances that are allocable to the Assets have produced in excess of applicable government established production allowables and the Vendor has not received notice of nor is it aware of any change or proposed change in the government established production allowables for any of the Wells producing Petroleum Substances that are allocable to the Assets that are not applicable generally in the Province of Saskatchewan, except as set forth in Schedule "H"; (r) Take or Pay: There are no Take or Pay Obligations related to the Assets; (s) Areas of Mutual Interest: Except as identified in Schedule "A", there are no areas of mutual interest or areas of exclusion applicable to the Assets that remains in effect as of the Closing Date and the best of the Vendor's knowledge, Vendor has fully complied with and has not breached any of the terms of any such areas of mutual interest or areas of exclusion in respect of the Assets; (t) All Vendor's Assets: The Assets comprise all of the Vendor's petroleum and natural gas rights in the Province of Saskatchewan; (u) Rights of First Refusal: Except as set forth in Schedule "A"; the Assets are not subject to any other Rights of First Refusal and such Rights of First Refusal are not triggered by the transactions contemplated herein; (v) Offset Obligations: To the knowledge of the Vendor, and except as set forth in Schedule "H", it has not received any notice from or on behalf of, any lessor that a Lease is subject to an offset obligation, including an unsatisfied obligation to drill a well or surrender rights or an obligation to pay compensatory royalties, nor is the Vendor aware or any such existing obligation; (w) Environmental Matters: Vendor has not received: - 21 - (i) any orders or directives under any Environmental Law which requires any work, repairs, construction or capital expenditures with respect to the Assets which have not been fully complied with in all material respects; (ii) any notice under any Environmental Law with respect to a breach thereof related to the Assets from any Third Party alleging any Environmental Liabilities which have not been rectified or cured in all material respects; and (iii) to Vendor's knowledge, no particular circumstance exists that may give rise to any of the foregoing; (x) Residency: Vendor is not a non-resident of Canada within the meaning of the Income Tax Act (Canada); (y) Interests in Tangibles: The interests of Vendor in the Facilities are as set forth in Schedule "C" and the interests of Vendor in the Tangibles are beneficially owned by Vendor free and clear of all security interests, encumbrances and other third party claims and interests of any nature whatsoever, except Permitted Encumbrances; (z) Competition Act: The Vendor will comply with the Competition Act (Canada) to the extent applicable to the transactions herein; and (aa) Operations: Where the Vendor is the operator of the Assets, such Assets have been maintained and operated by the Vendor in accordance with generally accepted oil and gas field practices and, to the Vendor's knowledge, those Assets that are not operated by the Vendor have been similarly maintained and operated, except, in either case, as disclosed in Schedule "H". 6.2 NEGATION OF OTHER REPRESENTATIONS AND WARRANTIES (a) Vendor expressly negates any representations or warranties, whether written or verbal, made by Vendor, its agents, servants or employees except as expressly enumerated in section 6.1(a) and in particular, without limiting the generality of the foregoing, Vendor disclaims all liability and responsibility for any such representation, warranty, statement or information made or communicated (orally or in writing) to Purchaser or any of its employees, agents, consultants or representatives. (b) The Purchaser acknowledges that the Assets will be purchased on an "as is, where is" basis and, except for the representations and warranties expressly enumerated in section 6.1, there are no collateral agreements, conditions, representations or warranties of any nature whatsoever made by Vendor, express or implied, arising at law, by statute or in equity or otherwise with respect to the Assets and in particular, without limiting the generality of the foregoing, there are no collateral agreements, conditions, representations or warranties made by Vendor, express or implied, arising at law, by statute or in equity or otherwise - 22 - with respect to: (i) the quantity or quality of Petroleum Substances in the Lands or lands pooled or unitized therewith or the recoverability of Petroleum Substances from the Lands or lands pooled or unitized therewith; (ii) the value of the Assets or the revenues or cash flows from production from the Lands; (iii) any engineering, geological or other interpretations or economic evaluations of the Assets; (iv) the rates of production of Petroleum Substances from the Lands or lands pooled or unitized therewith; (v) the quality, condition, fitness, merchantability or serviceability of the Assets or (vi) the suitability of their use for any purpose. Without restricting the generality of the foregoing, but subject to section 6.1, Purchaser acknowledges that it has made its own independent investigation, analysis, evaluation and inspection of Assets and the state and condition thereof and that it has relied solely on such investigation, analysis, evaluation and inspection as to its assessment of the condition, quantum and value of the Assets. (c) Except with respect to the representations and warranties in section 6.1, Purchaser forever releases and discharges Vendor and its directors, officers, servants, agents and employees from any claims and all liability (whether by contract, in tort, by statute or otherwise howsoever) to Purchaser or Purchaser's assigns and successors, as a result of the use or reliance upon advice, information or materials pertaining to the Assets which was delivered or made available to Purchaser by Vendor or its directors, officers, servants, agents or employees prior to or pursuant to this Agreement, including, without limitation, any evaluations, projections, reports and interpretive materials prepared by Vendor or otherwise in Vendor's possession. 6.3 REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser represents and warrants to the Vendor that: (a) Standing: It is a partnership, duly organized and validly existing under the laws of the jurisdiction of its formation, is authorized to carry on business in all jurisdictions in which the Assets are located, and shall have prior to the Closing Date, the requisite power and authority to purchase and pay for its portion of the Assets in accordance with this Agreement; (b) No Conflicts: The consummation of the transaction contemplated herein will not violate, nor be in conflict with, any provision of any agreement or instrument to which Purchaser is a party or by which Purchaser is bound or any judgment, decree, order, law, statute, rule or regulation applicable to it; (c) Execution of Documents: Subject to Purchaser receiving approval from the board of directors of its managing partner, this Agreement has been duly executed and delivered by Purchaser and all other documents (including the General Conveyance and the Specific Conveyances) executed and delivered by Purchaser pursuant hereto will be duly executed and delivered, and this Agreement does, and such documents will, constitute legal, valid and binding obligations of Purchaser enforceable in accordance with their respective - 23 - terms, subject to bankruptcy, insolvency, preference, reorganization, moratorium and other similar laws affecting creditors' rights generally and the discretion of the courts with respect to equitable or discretionary remedies and defenses; (d) Finders' Fees: Purchaser has not incurred any liability, contingent or otherwise, for brokers' or finders' fees in respect of this transaction for which Vendor shall have any obligation or liability; (e) Investment Canada and Competition Act: Purchaser will comply with the Investment Canada Act (Canada) and the Competition Act (Canada) to the extent applicable to the transactions herein; (f) No Authorizations: Subject to Purchaser receiving approval by its board of directors, no authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body exercising jurisdiction over the Assets or over Purchaser is required for the due execution, delivery and performance by Purchaser of this Agreement; and (g) Qualification: Purchaser meets all qualification requirements of all Governmental Authorities and under Applicable Law to purchase, accept and hold the Assets. 6.4 SURVIVAL Except as otherwise provided herein, all representations and warranties contained in this Agreement on the part of each of the Parties shall survive for a period of twelve (12) months from the Closing Date. ARTICLE 7 INDEMNITIES FOR REPRESENTATIONS AND WARRANTIES 7.1 VENDOR'S INDEMNITIES FOR REPRESENTATIONS AND WARRANTIES Subject to section 7.3, Vendor shall indemnify Purchaser, from and against all of Purchaser's Losses relating to the Assets resulting from the representations and warranties contained in section 6.1 being breached or not being accurate. 7.2 PURCHASER'S INDEMNITIES FOR REPRESENTATIONS AND WARRANTIES Subject to section 7.3, Purchaser shall indemnify Vendor from and against all of Vendor's Losses resulting from the representations and warranties contained in section 6.3 being breached or not being accurate. 7.3 LIMITATION No claim under this Article 7 shall be made or be enforceable by a Party unless written notice of such claim, with reasonable particulars, is given by such Party to the Party against whom the claim is made within a period of twelve (12) months from the Closing Date. No claim shall be made by a Party in respect of the representations and - 24 - warranties made by the other Party in this Agreement except pursuant to this Article 7. The maximum cumulative liability of Vendor to Purchaser in respect of the indemnity in section 7.1 shall not exceed the Base Price. ARTICLE 8 INDEMNITIES 8.1 PURCHASER'S GENERAL INDEMNITY Provided Closing has occurred, Purchaser shall: (a) be liable to the Vendor for all its Losses; and in addition, (b) indemnify and hold harmless Vendor and each of its directors, officers, agents and employees from and against all Losses, as a result of any matter attributable to the Assets and occurring or accruing on or subsequent to the Effective Time, except any Losses of Vendor insofar as they are caused by a breach of the Vendors representations and warranties under section 6.1 or the gross negligence or wilful misconduct of the Vendor, or any of its directors, officers, agents or employees. 8.2 ENVIRONMENTAL MATTERS AND ABANDONMENT AND RECLAMATION OBLIGATIONS Provided that Closing has occurred, Purchaser shall: (a) be liable to the Vendor for all of its Losses; and, in addition (b) indemnify and hold harmless Vendor and each of its directors, officers, agents and employees from and against all Losses in respect of all Environmental Liabilities and all Abandonment and Reclamation Obligations howsoever and by whomsoever caused and whether they occur or arise in whole or in part prior to, on or subsequent to the Effective Time. Purchaser shall not be entitled to exercise and hereby waives any rights or remedies Purchaser may now or in the future have against Vendor in respect of such Environmental Liabilities or the Abandonment and Reclamation Obligations, whether such rights and remedies are pursuant to the common law or statute or otherwise, including without limitation, the right to name Vendor as a third party to any action commenced by any Third Party against Purchaser. Nothing in this section, however, will operate to limit any representation or warranty made by the Vendor under subsection 6.1(w) with respect to the environmental condition of the Assets or to affect the Purchaser's right to make a claim against the Vendor for breach thereof, pursuant to section 7.1, subject to section 6.4 and sections 7.3. - 25 - 8.3 VENDOR'S GENERAL INDEMNITY Provided Closing has occurred, Vendor shall: (a) be liable to the Purchaser for all of Purchaser's Losses; and shall, in addition, (b) indemnify and hold harmless Purchaser and each of its directors, officers, agents and employees from and against all Losses as a direct result of any matter attributable to the Assets and occurring or accruing prior to the Effective Time, except any Losses of Purchaser insofar as they are caused by the gross negligence or wilful misconduct of the Purchaser, or any of their respective directors, officers, agents or employees. ARTICLE 9 RIGHTS OF FIRST REFUSAL 9.1 RIGHT OF FIRST REFUSALS It is the Parties' belief that there are no ROFRs that are applicable to the transactions contemplated by this Agreement. Notwithstanding this, the Parties agree that if contrary to their common understanding and belief with respect to this issue, if any Third Party is able to establish its entitlement to a ROFR with respect to any of the Assets, or any interest therein, as a result of the completion of the transactions provided for in this Agreement, and is able to enforce the same, Purchaser shall comply with such ROFR. ARTICLE 10 MAINTENANCE OF ASSETS 10.1 MAINTENANCE OF ASSETS PRIOR TO CLOSING From the date hereof until the Closing Date, Vendor shall, to the extent that the nature of its interest permits, and subject to the Title and Operating Documents and any other agreements and documents to which the Assets are subject: (a) operate and maintain the Assets in a proper and prudent manner in accordance with good oil and gas industry practices and in material compliance with all Applicable Law; (b) maintain adequate insurance in accordance with good oil and gas industry practices to cover the risks associated with the Assets and the operations thereof; (c) pay or cause to be paid all costs and expenses relating to the Assets which become due from the date hereof to the Closing Date; and - 26 - (d) perform and comply with all covenants and conditions contained in the Title and Operating Documents and any other agreements and documents to which the Assets are subject, provided that where Vendor is not the operator, Vendor shall be obligated to do only that which a prudent non-operator would be expected to do in similar circumstances in accordance with accepted industry practices. 10.2 CONSENT OF PURCHASER Notwithstanding section 10.1, from the date hereof until the Closing Date, Vendor shall not, without the written consent of Purchaser, which consent shall not be unreasonably withheld by Purchaser and which, if provided, will be provided in a timely manner: (a) make any commitment or propose, initiate or authorize any capital expenditure with respect to the Assets of which Vendor's share is in excess of $10,000, except in case of an emergency or in respect of amounts which Vendor is committed to expend or is deemed to authorize without its specific authorization or approval; (b) surrender or abandon any of the Assets; (c) amend or terminate any Title and Operating Document or enter into any new agreement or commitment relating to the Assets; or (d) sell, encumber or otherwise dispose of any of the Assets or any part or portion thereof except sales of Petroleum Substances in the normal course of business. 10.3 FOLLOWING CLOSING (a) Following Closing, Vendor shall hold its title to the Assets in trust for Purchaser, as bare legal trustee, until all necessary Specific Conveyances including notifications, registrations and other steps required to transfer such title to Purchaser have been completed; (b) From the date hereof, Vendor shall represent Purchaser in all matters arising under a Title and Operating Document until Purchaser is substituted as a party thereto in the place of Vendor, whether by novation, notice of assignment or otherwise and, in furtherance thereof: (i) all payments relating to the Assets received by Vendor following Closing pursuant to the Title and Operating Document, other than those to which Vendor is entitled under Article 4, shall be received and held by Vendor in trust for Purchaser and Vendor shall promptly remit such amounts to Purchaser; (ii) Vendor shall forward all statements, notices and other information received by it pursuant to such Title and Operating Document that pertain to the Assets to Purchaser (including, without limitation, - 27 - any independent operation notices and any potential acquisitions pursuant to any active areas of mutual interest in respect of the Assets) promptly following their receipt by Vendor; and (iii) Vendor shall forward to other parties to the Title and Operating Document such notices and elections pursuant to such Title and Operating Document pertaining to the Assets as Purchaser may reasonably request (including, without limitation, any elections made by Purchaser in respect of any independent operation notices and any potential acquisitions pursuant to any active areas of mutual interest in respect of the Assets); (c) Purchaser shall indemnify and save harmless Vendor from and against all of Vendor's Losses arising as a consequence of the provisions of subsection 10.3(a) and (b) hereof, except to the extent caused by the gross negligence or wilful misconduct of Vendor or its servants, agents or employees and except for Vendor's overhead and general administrative costs. Acts or omissions taken by Vendor or its servants or agents with the approval of Purchaser shall not constitute gross negligence or wilful misconduct for purposes of this subsection. 10.4 TRANSFER OF OPERATORSHIP Purchaser acknowledges that Vendor may not be able to transfer operatorship of any of the Assets to Purchaser at or after Closing. Vendor covenants with Purchaser that Vendor shall do such commercially reasonable things as Purchaser may request in order to obtain the appropriate consents and approvals for the assignment and transfer to Purchaser of operatorship of those of the Assets which Vendor currently operates. ARTICLE 11 ARBITRATION 11.1 GENERAL ARBITRATION PROVISIONS Any disagreement between the Parties shall be referred to arbitration before a single arbitrator. Any such arbitration, including the selection of the arbitrator, shall be governed by the Arbitration Act (Alberta). The decision of any such arbitrator shall be final and binding on the Parties and the costs and fees relating thereto shall be borne and paid in the manner the arbitrator determines to be fair and equitable. ARTICLE 12 GENERAL 12.1 FURTHER ASSURANCES Each Party will, from time to time and at all times after Closing, without further consideration, do such further acts and deliver all such further assurances, deeds and documents as shall be reasonably required in order to fully perform and carry out the terms of this Agreement. - 28 - 12.2 NO MERGER The covenants, representations, warranties and indemnities contained in this Agreement shall survive Closing and shall not merge in any assignments, conveyances, transfers or other documents executed and delivered at or after Closing, notwithstanding any rule of law, equity or statute to the contrary and such rules are hereby waived. 12.3 ENTIRE AGREEMENT The provisions contained in any and all documents and agreements collateral hereto shall at all times be read subject to the provisions of this Agreement and, in the event of conflict, the provisions of this Agreement shall prevail. This Agreement supersedes all other agreements, documents, writings and verbal understanding among the Parties relating to the subject matter hereof and expresses the entire agreement of the Parties with respect to the subject matter hereof. 12.4 GOVERNING LAW This Agreement shall be subject to and interpreted, construed and enforced in accordance with the laws of the Province of Alberta and the laws of Canada applicable therein and shall be treated as a contract made in the Province of Alberta. The Parties irrevocably attorn and submit to the jurisdiction of the courts of the Province of Alberta and courts of appeal therefrom in respect of all matters arising out of this Agreement. 12.5 ENUREMENT This Agreement may not be assigned by a Party without the prior written consent of the other Party, which consent may be unreasonably and arbitrarily withheld. This Agreement shall be binding upon and shall enure to the benefit of the Parties and their respective administrators, trustees, receivers, successors and permitted assigns. 12.6 TIME OF ESSENCE Time shall be of the essence in this Agreement. 12.7 NOTICES The addresses and fax number of each Party for notices shall be as follows: Vendor: Xtra Oil & Gas Ltd. 6 Kersdale Avenue Toronto ON M6M 1C8 Attention: Kiomi Mori, Secretary-Treasurer Fax: (416) 981-3055 - 29 - Purchaser: TriStar Oil & Gas Partnership 800, 350 - 7th Avenue SW Calgary, Alberta T2P 3N9 Attention: Vice-President, Land Fax: (403) 218-6075 Any notice, communication or statement (a "NOTICE") required, permitted or contemplated hereunder shall be in writing and shall be delivered as follows: (a) by delivery to a Party between 8:00 a.m. and 4:00 p.m. on a Business Day at the address of such Party for notices, in which case the notice shall be deemed to have been received by that Party when it is delivered; (b) by fax to a Party to the fax number of such Party for notices, in which case, if the notice was faxed prior to 4:00 p.m. on a Business Day the notice shall be deemed to have been received by that Party when it was faxed and if it is faxed on a day which is not a Business Day or is faxed after 4:00 p.m. on a Business Day, it shall be deemed to have been received on the next following Business Day; or (c) except in the event of an actual or threatened postal strike or other labour disruption that may affect mail service, by first class registered postage prepaid mail to a Party at the address of such Party for notices, in which case the notice shall be deemed to have been received by that Party on the fifth (5th) Business Day following the date of mailing. A Party may from time to time change its address for service or its fax number for service by giving written notice of such change to the other Party. 12.8 INVALIDITY OF PROVISIONS In case any of the provisions of this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality or enforceability of the remaining, provisions contained herein shall not in any way be affected or impaired thereby. 12.9 WAIVER No waiver by any Party of any breach (whether actual or anticipated) of any of the terms, conditions, representations or warranties contained herein shall take effect or be binding upon that Party unless the waiver is expressed in writing under the authority of that Party. Any waiver so given shall extend only to the particular breach so waived and shall not limit or affect any rights with respect to any other or future breach. 12.10 REMEDIES GENERALLY No failure on the part of any Party in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or - 30 - partial exercise of any such right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy in law or in equity or by statute or otherwise conferred. 12.11 AMENDMENT This Agreement shall not be varied in its terms or amended by oral agreement or by representations or otherwise other than by an instrument in writing dated subsequent to the date hereof, executed by a duly authorized representative of each Party. 12.12 POST-CLOSING INFORMATION AND ACCESS Notwithstanding, any other provision in this Agreement, if, pursuant to applicable securities legislation at any time within three (3) years from the date hereof, the Purchaser requires audited operating statements for the Assets or other documentation required under applicable securities legislation including without limitation, National Instrument 41-101 or National Instrument 41-501, as applicable, for a period during which the Assets were owned by Vendor, Vendor shall, in a timely manner (i) provide Purchaser with any applicable material in its possession or under its control, and, if necessary, (ii) provide access to its records to an independent auditing firm selected by the Purchaser for purposes of preparing such statements, at the Purchaser's sole cost and expense. The Purchaser shall cause the audit to be carried out so as to cause a minimum of inconvenience to the business and operations of Vendor. If the independent auditors require the assistance of Vendor's personnel to find, collect or interpret the necessary information from Vendor's records, Vendor shall use reasonable efforts to cause such assistance to be provided and the Purchaser shall reimburse Vendor for the reasonable costs associated with its personnel providing such assistance. Such audit access shall be requested and conducted solely for the purposes of complying with applicable securities legislation and for no other purpose. In no event will the obligations of Vendor hereunder be interpreted to expand or extend the representations and warranties given by Vendor in this Agreement. 12.13 PUBLIC ANNOUNCEMENTS Prior to Closing, no Party shall release any information concerning this Agreement and the transactions herein provided for without the prior written consent of the other Party, which consent shall not be unreasonably withheld. Nothing contained herein shall prevent a Party at any time from furnishing information (i) to any Governmental Authority or to the public if required by Applicable Law, provided that the Parties shall advise each other in advance of any public statement which they propose to make; or (ii) in connection with obtaining consents or complying with Rights of First Refusal. 12.14 COUNTERPART EXECUTION This Agreement may be executed in counterpart and by facsimile and other electronic means and all such executed counterparts together shall constitute one agreement. - 31 - 12.15 AMENDMENTS TO SCHEDULES The Parties agree and acknowledge that the Schedules attached hereto represent the best reflection of the Parties understanding of the constituent respective information for each Schedule at the date of the execution of this Agreement, however the Parties will work diligently together to finalize each such Schedule prior to the Closing Date in accordance with section 12.11. IN WITNESS WHEREOF, the Parties have executed this Agreement, effective as of the day and year first above written. XTRA OIL & GAS LTD. TRISTAR OIL & GAS PARTNERSHIP, by its managing PARTNER, TRISTAR OIL & GAS LTD. Per: /s/ WILLIAM EDWARD MCKECHNIE Per: -------------------------------- -------------------------------- WILLIAM EDWARD MCKECHNIE President and Director Per: /s/ REBECCA KIOMI MORI Per: -------------------------------- -------------------------------- REBECCA KIOMI MORI Secretary-Treasurer and Director - 32 - SCHEDULE "A" TO A PURCHASE AND SALE AGREEMENT DATED {}, 2006 BETWEEN XTRA OIL & GAS LTD. AND TRISTAR OIL & GAS PARTNERSHIP ________________________________________________________________________________ LAND SCHEDULE This Schedule consists of _______ pages, including this page - 33 - SCHEDULE "A-1" TO A PURCHASE AND SALE AGREEMENT DATED {}, 2006 BETWEEN XTRA OIL & GAS LTD. AND TRISTAR OIL & GAS PARTNERSHIP ________________________________________________________________________________ LAND PLAT This Schedule consists of 2 pages, including this page - 34 - SCHEDULE "B" TO A PURCHASE AND SALE AGREEMENT DATED {}, 2006 BETWEEN XTRA OIL & GAS LTD. AND TRISTAR OIL & GAS PARTNERSHIP ________________________________________________________________________________ WELLS This Schedule consists of _______ pages, including this page - 35 - SCHEDULE "C" TO A PURCHASE AND SALE AGREEMENT DATED {}, 2006 BETWEEN XTRA OIL & GAS LTD. AND TRISTAR OIL & GAS PARTNERSHIP ________________________________________________________________________________ FACILITIES - 36 - SCHEDULE "D" TO A PURCHASE AND SALE AGREEMENT DATED {}, 2006 BETWEEN XTRA OIL & GAS LTD. AND TRISTAR OIL & GAS PARTNERSHIP ________________________________________________________________________________ SALE, PROCESSING AND TRANSPORTATION AGREEMENTS - 37 - SCHEDULE "E" TO A PURCHASE AND SALE AGREEMENT DATED {}, 2006 BETWEEN XTRA OIL & GAS LTD. AND TRISTAR OIL & GAS PARTNERSHIP ________________________________________________________________________________ AFES - 38 - SCHEDULE "F" TO A PURCHASE AND SALE AGREEMENT DATED {}, 2006 BETWEEN XTRA OIL & GAS LTD. AND TRISTAR OIL & GAS PARTNERSHIP ________________________________________________________________________________ GENERAL CONVEYANCE This Schedule consists of 3 pages, including this page - 39 - GENERAL CONVEYANCE ------------------ This Agreement made this o day of o, 200o, BETWEEN: XTRA OIL & GAS LTD. (hereinafter referred to as "VENDOR") - and - TRISTAR OIL & GAS PARTNERSHIP (hereinafter collectively referred to as "PURCHASER") WHEREAS Vendor has agreed to sell and convey the Assets to Purchaser and Purchaser has agreed to purchase and receive the Assets from Vendor; NOW THEREFORE for the consideration provided in the Purchase Agreement and in consideration of the premises hereto and the covenants and agreements hereinafter set forth and contained, the parties hereto covenant and agree as follows: 1. DEFINITIONS In this General Conveyance including the premises hereto, "Purchase Agreement" means the agreement entitled "Purchase and Sale Agreement" dated o, 2006 and made between Vendor and Purchaser. In addition, the definitions provided for in the Purchase Agreement are adopted herein by this reference. 2. CONVEYANCE Pursuant to and for the consideration provided for in the Purchase Agreement, Vendor hereby sells, assigns, transfers, conveys and sets over to Purchaser the entire right, title, estate and interest of Vendor in and to the Assets, to have and to hold the same absolutely, together with all benefit and advantage to be derived therefrom. 3. EFFECTIVE TIME Possession and beneficial ownership of the Assets shall pass from Vendor to Purchaser on the Closing Date. For all other purposes this General Conveyance shall be effective as of the Effective Time. 4. SUBORDINATE DOCUMENT This General Conveyance is executed and delivered by the parties hereto pursuant to the Purchase Agreement and the provisions of the Purchase Agreement shall prevail in the event of a conflict between the provisions of the Purchase Agreement and the provisions of this General Conveyance. - 40 - 5. ENUREMENT This General Conveyance shall be binding upon and shall enure to the benefit of each of the Parties hereto and their respective trustees, receivers, receiver-managers, successors and permitted assigns. 6. FURTHER ASSURANCES Each party hereto will, from time to time and at all times hereafter, at the request of the other party but without further consideration, do all such further acts and execute and deliver all such further documents as shall be reasonably required in order to fully perform and carry out the terms hereof. 7. TIME OF ESSENCE Time shall be of the essence in this General Conveyance. 8. GOVERNING LAW This General Conveyance shall be construed in accordance with and governed by the laws of the Province of Alberta. 9. COUNTERPART EXECUTION This General Conveyance may be executed in counterpart and all executed counterparts together shall constitute one agreement. IN WITNESS WHEREOF the parties hereto have executed this General Conveyance on the date first above written. XTRA OIL & GAS LTD. TRISTAR OIL & GAS PARTNERSHIP, by its managing partner, TRISTAR OIL & GAS LTD. Per: /s/ William Edward McKechnie Per: /s/ Jeremy Wallis William Edward McKechnie Jeremy Wallis President Vice President, Land Per: /s/ Rebecca Kiomi Mori Rebecca Kiomi Mori Secretary-Treasurer - 41 - SCHEDULE "G" TO A PURCHASE AND SALE AGREEMENT DATED {}, 2006 BETWEEN XTRA OIL & GAS LTD. AND TRISTAR OIL & GAS PARTNERSHIP ________________________________________________________________________________ SEISMIC - 42 - SCHEDULE "H" TO A PURCHASE AND SALE AGREEMENT DATED {}, 2006 BETWEEN XTRA OIL & GAS LTD. AND TRISTAR OIL & GAS PARTNERSHIP ________________________________________________________________________________ DISCLOSURE SCHEDULE TABLE OF CONTENTS ARTICLE 1 INTERPRETATION.......................................................1 1.1 DEFINITIONS..........................................................1 1.2 ARTICLE, SECTION AND SCHEDULE REFERENCES.............................9 1.3 INTERPRETATION NOT AFFECTED BY HEADINGS..............................9 1.4 INCLUDED WORDS.......................................................9 1.5 SCHEDULES............................................................9 1.6 CURRENCY.............................................................9 1.7 KNOWLEDGE OR AWARENESS...............................................9 ARTICLE 2 PURCHASE AND SALE...................................................10 2.1 PURCHASE AND SALE...................................................10 2.2 PURCHASE PRICE......................................................10 2.3 ALLOCATION OF PURCHASE PRICE........................................10 2.4 PAYMENT OF PURCHASE PRICE...........................................10 2.5 GST.................................................................10 ARTICLE 3 CLOSING.............................................................11 3.1 PLACE OF CLOSING....................................................11 3.2 EFFECTIVE TIME OF TRANSFER..........................................11 3.3 DELIVERIES AT CLOSING...............................................11 3.4 DELIVERY OF DATA....................................................12 3.5 SPECIFIC CONVEYANCES................................................12 ARTICLE 4 ADJUSTMENTS.........................................................12 4.1 COSTS AND REVENUES TO BE APPORTIONED................................12 4.2 ADJUSTMENTS TO ACCOUNT..............................................13 4.3 ARBITRATION OF DISPUTES.............................................14 4.4 POST-CLOSING ACCOUNTING.............................................15 4.5 DEPOSITS, CASH CALLS AND OPERATING FUNDS............................15 ARTICLE 5 CONDITIONS OF CLOSING...............................................15 5.1 PURCHASER'S CONDITIONS..............................................15 5.2 VENDOR'S CONDITIONS.................................................16 5.3 EFFORTS TO FULFILL CONDITIONS PRECEDENT.............................17 5.4 FAILURE OF A CONDITION DUE TO A BREACH..............................17 5.5 OFFICER'S CERTIFICATES GENERALLY....................................17 ARTICLE 6 REPRESENTATIONS AND WARRANTIES......................................18 6.1 REPRESENTATIONS AND WARRANTIES OF VENDOR............................18 6.2 NEGATION OF OTHER REPRESENTATIONS AND WARRANTIES....................21 6.3 REPRESENTATIONS AND WARRANTIES OF PURCHASER.........................22 6.4 SURVIVAL............................................................23 - ii - ARTICLE 7 INDEMNITIES FOR REPRESENTATIONS AND WARRANTIES......................23 7.1 VENDOR'S INDEMNITIES FOR REPRESENTATIONS AND WARRANTIES.............23 7.2 PURCHASER'S INDEMNITIES FOR REPRESENTATIONS AND WARRANTIES..........23 7.3 LIMITATION..........................................................23 ARTICLE 8 INDEMNITIES.........................................................24 8.1 PURCHASER'S GENERAL INDEMNITY.......................................24 8.2 ENVIRONMENTAL MATTERS AND ABANDONMENT AND RECLAMATION OBLIGATIONS...24 8.3 VENDOR'S GENERAL INDEMNITY..........................................25 ARTICLE 9 RIGHTS OF FIRST REFUSAL.............................................25 ARTICLE 10 MAINTENANCE OF ASSETS..............................................25 10.1 MAINTENANCE OF ASSETS PRIOR TO CLOSING..............................25 10.2 CONSENT OF PURCHASER................................................26 10.3 FOLLOWING CLOSING...................................................26 10.4 TRANSFER OF OPERATORSHIP............................................27 ARTICLE 11 ARBITRATION........................................................27 11.1 GENERAL ARBITRATION PROVISIONS......................................27 ARTICLE 12 GENERAL............................................................27 12.1 FURTHER ASSURANCES..................................................27 12.2 NO MERGER...........................................................28 12.3 ENTIRE AGREEMENT....................................................28 12.4 GOVERNING LAW.......................................................28 12.5 ENUREMENT...........................................................28 12.6 TIME OF ESSENCE.....................................................28 12.7 NOTICES.............................................................28 12.8 INVALIDITY OF PROVISIONS............................................29 12.9 WAIVER..............................................................29 12.10 REMEDIES GENERALLY..................................................29 12.11 AMENDMENT...........................................................30 12.12 POST-CLOSING INFORMATION AND ACCESS.................................30 12.13 PUBLIC ANNOUNCEMENTS................................................30 12.14 COUNTERPART EXECUTION...............................................30 12.15 AMENDMENTS TO SCHEDULES.............................................31 Schedule "A" - Land Schedule Schedule "A-1" - Land Plat Schedule "B" - Wells Schedule "C" - Facilities Schedule "D" - Sale, Processing and Transportation Agreements Schedule "E" - AFEs Schedule "F" - General Conveyance Schedule "G" - Seismic Schedule "H" - Disclosure Schedule EX-14 34 ex_14.txt CODE OF ETHICS EXHIBIT 14 XTRA-GOLD RESOURCES CORP. CODE OF BUSINESS CONDUCT AND ETHICS (ADOPTED BY THE BOARD OF DIRECTORS ON MARCH 24, 2006) INTRODUCTION This Code of Business Conduct and Ethics (the "CODE") covers a wide range of business practices and procedures. It does not cover every issue that may arise but it sets out basic principles to guide all employees of the Company. All of our officers, directors and employees must conduct themselves accordingly and seek to avoid even the appearance of improper behavior. The Code should also be provided to and followed by the Company's agents and representatives, including consultants. If a law conflicts with a policy in this Code, you must comply with the law. If you have any questions about these conflicts, you should ask your supervisor how to handle the situation. Those who violate standards in this Code will be subject to disciplinary action, up to and including termination of employment. If you are in a situation that you believe may violate or lead to a violation of this Code, follow the guidelines described in Section 14 of this Code. 1. COMPLIANCE WITH LAWS, RULES AND REGULATIONS Obey the law, both in letter and in spirit, is the foundation on which our ethical standards are built. All employees must respect and obey the laws of the cities, states and countries in which we operate. Although not all employees are expected to know the details of these laws, it is important to know enough about them to determine when to seek advice from supervisors, managers or other appropriate personnel. 2. CONFLICTS OF INTEREST A "conflict of interest" exists when a person's private interests interferes in any way with the interests of the Company. A conflict situation can arise when an employee, officer or director takes actions or has interests that may make it difficult to perform his or her Company work objectively and efficiently. Conflicts of interest may also arise when an employee, officer or director, or members of his or her family, receives improper personal benefits as a result of his or her position in the Company. Loans to, or guarantees of obligations of, employees and their family members may create conflicts of interest. It is almost always a conflict of interest for a Company employee to work simultaneously for a competitor, customer or supplier. You are not allowed to work for a competitor as a consultant or board member. The best policy is to avoid any direct or indirect business connection with our customers, suppliers or competitors, except on our behalf. Conflicts of interest are prohibited as a matter of Company policy, except under guidelines approved by our board of directors ("BOARD OF DIRECTORS"). Conflicts of interest may not always be clear-cut, so if you have a question, you should consult with higher levels of management. Any employee, officer or director who becomes aware of a conflict or potential conflict should bring it to the attention of a supervisor, manager or other appropriate personnel or consult with the procedures described in Section 14 of this Code. Code of Business Conduct and Ethics Page 1 3. INSIDER TRADING Employees who have access to confidential information are not permitted to use or share that information for stock trading purposes or for any other purpose except the conduct of our business. All non-public information about the Company should be considered confidential information. To use non-public information for persona financial benefit or to "tip" others who might make an investment decision on the basis of this information is not only unethical but also illegal. 4. CORPORATE OPPORTUNITIES Employees, officer and directors are prohibited from taking for themselves personally, opportunities that are discovered through the use of corporate property, information or position without the consent of the Board of Directors. No employee may use corporate property, information or position for improper personal gain, and no employee may compete with the Company, directly or indirectly. 5. COMPETITION AND FAIR DEALING We seek to outperform our competition fairly and honestly. Stealing proprietary information, possessing trade secret information that was obtained without the owner's consent, or inducing such disclosures by past or present employees of other companies is prohibited. Each officer, director and employee should respect the rights of and deal fairly with the Company's customers, suppliers, competitors and employees. No employee should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other intentional unfair-dealing practice. The purpose of business entertainment and gifts in a commercial setting is to create good will and sound working relationships, not to gain unfair advantage with customers. No gift, or entertainment should ever be offered, given, provided or accepted by any Company employee, family member of an employee or agent, unless it (a) is not in cash, (b) is consistent with customary business practices, (c) is not excessive in value, (d) cannot be construed as a bribe or payoff and (e) does not violate any laws or regulations. Please discuss with your supervisor any gifts or proposed gifts that you are not certain are appropriate. 6. DISCRIMINATION AND HARASSMENT The diversity of the Company's employees is a tremendous asset. We are firmly committed to providing equal opportunity in all respects aspects of employment and will not tolerate illegal discrimination or harassment of any kind. Examples include derogatory comments based on racial or ethnic characteristics and unwelcome sexual advances. Code of Business Conduct and Ethics Page 2 7. HEALTH AND SAFETY The Company strives to provide each employee with a safe and healthy work environment. Each employee has responsibility for maintaining a safe and healthy workplace for all employees by following safety and health rules and practices and reporting accidents, injuries and unsafe equipment, practices or conditions. Violence and threatening behavior are not permitted. Employees should report to work in condition to perform their duties, free from the influence of illegal drugs or alcohol. The use of alcohol and/or illegal drugs in the workplace will not be tolerated. 8. RECORD-KEEPING The Company requires honest and accurate recording and reporting of information in order to make responsible business decisions. For example, only the true and actual number of hours worked should be reported. Many employees regularly use business expense accounts, which must be documented and recorded accurately. If you are not sure whether a certain expense is legitimate, ask your supervisor or the Company's controller or chief financial officer ("CFO"). All of the Company's books, records, accounts and financial statements must be maintained in reasonable detail, must appropriately reflect the Company's transactions and must conform to both applicable legal requirements and to the Company's systems of accounting and internal controls. Unrecorded or "off the books" funds or assets should not be maintained unless permitted by applicable laws or regulations. Business records and communications often become public, and we should avoid exaggeration, derogatory remarks, guesswork or inappropriate characterizations of people and companies that can be misunderstood. This applies equally to e-mail, internal memos and formal reports. Records should always be retained or destroyed according to the Company's record retention policies. In accordance with these policies, in the event of litigation or governmental investigation please consultant your supervisor. All e-mail communications are the property of the Company and employees, officers and directors should not expect that Company or personal e-mail communications are private. All e-mails are the property of the Company. No employee, officer or director shall use Company computers, including to access the internet, for personal or non-Company business. 9. CONFIDENTIALITY Employees must maintain the confidentiality of confidential information entrusted to them by the Company or its customers, except when disclosure is required by laws or regulations. Confidential information includes all non-public information that might be of use to competitors, or harmful to the Company or its customers, if disclosed. It also includes information that suppliers and customers have entrusted to us. The obligation to preserve confidential information continues even after employment ends. In connection with this obligation, employees, officers and directors may be required to execute confidentiality agreements confirming their agreement to be bound not to disclose confidential information. If you are uncertain whether particular information is confidential or non-public, please consult your supervisor. Code of Business Conduct and Ethics Page 3 10. PROTECTION AND PROPER USE OF COMPANY ASSETS All officers, directors and employees should endeavor to protect the Company's assets and ensure their efficient use. Theft, carelessness and waste have a direct impact on the Company's profitability. Any suspected incident of fraud or theft should be immediately reported for investigation. Company equipment should not be used for non-Company business. The obligation of officers, directors and employees to protect the Company's assets includes it proprietary information. Proprietary information includes intellectual property such as trade secrets, patents, trademarks and copyrights, as well as business, marketing and service plans, engineering and manufacturing ideas, designs, databases, records, salary information and any unpublished financial data and reports. Unauthorized use or distribution of this information would violate Company policy. It could also be illegal and result in civil or even criminal penalties. 11. PAYMENTS TO GOVERNMENT PERSONNEL The Unites States Foreign Corrupt Practices Act prohibits giving anything of value, directly or indirectly, to officials of foreign governments or foreign political candidates in order to obtain or retain business. It is strictly prohibited to make illegal payments to government officials of any country. In addition, the U. S. government has a number of laws and regulations regarding business gratuities that may be accepted by U.S. government personnel. The promise, offer or delivery to an official or employee of the U.S. government of a gist, favor or other gratuity in violation of these rules would not only violate Company policy, but could also be a criminal offense. State and local governments, as well as foreign governments, may have similar rules. 12. WAIVERS OF THE CODE OF BUSINESS CONDUCT AND ETHICS Any waiver of the provisions of this Code may be made only by the Board of Directors and will be promptly disclosed as required by law or stock exchange rule or regulation. 13. REPORTING ANY ILLEGAL OR UNETHICAL BEHAVIOR Employees are encouraged to talk with supervisors, managers or Company officials about observed illegal or unethical behavior, and when in doubt about the best course of action in a particular situation. It is the Company's policy not to allow retaliation for reports of misconduct by others made in good faith by employees. Employees are expected to cooperate in internal investigations of misconduct, and the failure to do so could serve as grounds for termination. Any employee may submit a good faith concern regarding questionable accounting or auditing matters without fear of dismissal or retaliation of any kind. Code of Business Conduct and Ethics Page 4 14. COMPLIANCE PROCEDURES We must all work to ensure prompt and consistent action against violations of this Code. However, in some situations, it is difficult to know if a violation has occurred. Since we cannot anticipate every situation that may arise, it is important that we have a way to approach a new question or problem. These are steps to keep in mind: o MAKE SURE YOU HAVE ALL THE FACTS. In order to reach the rights solutions, we must be as fully informed as possible. o ASK YOURSELF, WHAT SPECIFICALLY AM I BEING ASKED TO DO - DOES IT SEEM UNETHICAL OR IMPROPER? This will enable you to focus on the specific question you are faced with, and the alternatives you have. Use your judgment and common sense; if something seems unethical or improper, it probably is. o CLARIFY YOUR RESPONSIBILITY AND ROLE. In most situations, there is shared responsibility. Are your colleagues informed? It may help to get others involved and discuss the problem. o DISCUSS THE PROBLEM WITH YOUR SUPERVISOR. This is the basic guidance for all situations. In many cases, your supervisor will be more knowledgeable about the question, and will appreciate being brought into the decision-making process. Keep in mind that it is your supervisor's responsibility to help solve problems. If your supervisor does not or cannot remedy the situation, or you are uncomfortable binging the problem to the attention of your supervisor, bring the issue to the attention of the human resources supervisor, or to an officer of the Company. o YOU MAY REPORT ETHICAL VIOLATIONS IN CONFIDENCE AND WITHOUT FEAR OF RETALIATION. If your situation requires that your identity be kept secret, your anonymity will be protected. The Company does not permit retaliation of any kind for good faith reports of ethical violations. o ALWAYS ASK FIRST - ACT LATER. If you are unsure of what to do in any situation, seek guidance BEFORE YOUR ACT. CODE OF ETHICS FOR THE CHIEF EXECUTIVE OFFICER AND SENIOR FINANCIAL OFFICERS The Company has a Code of Business Conduct and Ethics applicable to all employees, officers and directors of the Company. The Chief Executive Officer ("CEO") and senior financial officers of the Company, including its CFO and principal accounting officer, are bound by the provisions set forth therein relating to ethical conduct, conflicts of interest and compliance with law. In addition to the Code of Business Conduct and Ethics, the CEO and senior financial officers of the Company are also subject to the following specific policies: Code of Business Conduct and Ethics Page 5 1. The CEO and senior financial officers are responsible for full, fair, accurate, timely and understandable disclosure in the periodic reports and other filings required to be made by the Company with the Securities and Exchange Commission. Accordingly, it is the responsibility of the CEO and each senior financial officer promptly to bring to the attention of the Board of Directors any material information of which he or she may become aware that affects the disclosures made by the Company in its public filings or otherwise impairs the ability of the Company to make full, fair, accurate, timely and understandable public disclosures. 2. The CEO and each senior financial officer shall promptly bring to the attention of the Company's Audit Committee any information he or she may have concerning (a) significant deficiencies in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize and report financial data or (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's financial reporting, disclosures or internal controls. 3. The CEO and each senior financial officer shall promptly bring to the attention of the Board of Directors and the Audit Committee any information he or she may have concerning any violation of the Company's Code of Business Conduct and Ethics, including any actual or apparent conflicts of interest between personal and processional relationships, involving management or other employees who have a significant rule in the Company's financial reporting, disclosures or internal controls. 4. The CEO and each senior financial officer shall promptly bring to the attention of the Board of Directors and Audit Committee any information he or she may have concerning evidence of a material violation of the securities or other laws, rules or regulations applicable to the Company and the operation of its business, by the Company or any agent thereof, or of violation of the Code of Business Conduct and Ethics or of these additional procedures. 5. The Board of Directors shall determine, or designate appropriate persons to determine, appropriate actions to be taken in the event of violations of the Code of Business Conduct and Ethics of these additional procedures by the CEO and the Company's senior financial officers. Such actions shall be reasonably designed to deter wrongdoing and to promote accountability for adherence to the Code of Business Conduct and Ethics and to these additional procedures, and shall include written notices to the individual involved that the Board has determined that there has been a violation, censure by the Board, demotion or reassignment of the individual involved, suspension with or without pay or benefits (as determined by the Board) and termination of the individual's employment. In determining what action is appropriate in a particular case, the Board of Directors or such designee shall take into account all relevant information, including the nature and severity of the violation, whether the violation was a single occurrence or repeated occurrences, whether the violation appears to have been intentional or inadvertent, whether the individual in question had been advised prior to the violation as to the proper course of action and whether or not the individual in question had committed other violations in the past. Code of Business Conduct and Ethics Page 6 EX-23 35 ex_23-2.txt CONSENT OF DAVIDSON & COMPANY LLP EXHIBIT 23.2 DAVIDSON & COMPANY LLP Chartered Accountants A Partnership of Incorporated Professionals ________________________________________________________________________________ CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the use in this Registration Statement on Form SB-2 of Xtra-Gold Resources Corp. and Subsidiaries of our report dated March 16, 2006 appearing in the Prospectus, which is part of such Registration Statement, and to the reference of us under the heading "Experts" in such Prospectus. "DAVIDSON & COMPANY LLP" Vancouver, Canada Chartered Accountants November 28, 2006 A Member of SC INTERNATIONAL ============================ 1200 - 609 Granville Street, P.O. Box 10372, Pacific Centre, Vancouver, BC, Canada, V7Y 1G6 Telephone (604) 687-0947 Fax (604) 687-6172 -----END PRIVACY-ENHANCED MESSAGE-----