-----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, AD3Xoi1Pm3slVjGOxKb3n9nkrSqTLmPs1ZPzAPywQm63bcUS8F/xB44ZDHLy6gKF qR8FnyWkejMD8zfY4+aByw== 0001035704-06-000785.txt : 20061113 0001035704-06-000785.hdr.sgml : 20061113 20061113160143 ACCESSION NUMBER: 0001035704-06-000785 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 17 FILED AS OF DATE: 20061113 DATE AS OF CHANGE: 20061113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: US GOLD CANADIAN ACQUISITION CORP CENTRAL INDEX KEY: 0001360405 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 421701924 STATE OF INCORPORATION: A0 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-138633-01 FILM NUMBER: 061208959 BUSINESS ADDRESS: STREET 1: 2201 KIPLING STREET SUITE 100 CITY: LAKEWOOD STATE: CO ZIP: 80215 BUSINESS PHONE: (303) 238-1438 MAIL ADDRESS: STREET 1: 2201 KIPLING STREET SUITE 100 CITY: LAKEWOOD STATE: CO ZIP: 80215 FILER: COMPANY DATA: COMPANY CONFORMED NAME: U S GOLD CORP CENTRAL INDEX KEY: 0000314203 STANDARD INDUSTRIAL CLASSIFICATION: MINERAL ROYALTY TRADERS [6795] IRS NUMBER: 840796160 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-138633 FILM NUMBER: 061208960 BUSINESS ADDRESS: STREET 1: 2201 KIPLING ST STREET 2: STE 100 CITY: LAKEWOOD STATE: CO ZIP: 80215-1545 BUSINESS PHONE: 3032381438 MAIL ADDRESS: STREET 1: 2201 KIPLING STREET STE 100 CITY: LAKEWOOD STATE: CO ZIP: 80215 FORMER COMPANY: FORMER CONFORMED NAME: U S SILVER STATE MINING CORP DATE OF NAME CHANGE: 19880706 FORMER COMPANY: FORMER CONFORMED NAME: SILVER STATE MINING CORP DATE OF NAME CHANGE: 19880629 S-4 1 d40357sv4.htm FORM S-4 sv4
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As filed with the Securities and Exchange Commission on November 13, 2006
Registration No. 333-          
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form S-4
 
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
 
U.S. Gold Corporation
(Exact name of registrant as specified in its charter)
 
         
Colorado   1041   84-0796160
(State or other jurisdiction of
incorporation or organization) 		  (Primary Standard Industrial
Classification Code Number) 		  (I.R.S. Employer
Identification No.)
 
     
2201 Kipling Street, Suite 100
Lakewood, Colorado 80215-1545
(303) 238-1438 		  Ann S. Carpenter, President
U.S. Gold Corporation
2201 Kipling Street, Suite 100
Lakewood, Colorado 80215-1545
(303) 238-1438
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices) 		  (Name, address, including zip code, and telephone number,
including area code, of agent for service)
 
US Gold Canadian Acquisition Corporation
(Exact name of registrant as specified in its charter)
 
     
Alberta   42-1701924
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
2201 Kipling Street, Suite 100
Lakewood, Colorado 80215-1545
(303) 238-1438 		  Fraser Milner Casgrain LLP
2900 Manulife Place, 10180-101 Street
Edmonton, Alberta, Canada T5J 3V5
(780) 423-7100
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices) 		  (Name, address, including zip code, and telephone number,
including area code, of agent for service)
with copies to:
George A. Hagerty, Esq.
Christopher J. Walsh, Esq.
Hogan & Hartson L.L.P.
One Tabor Center
1200 Seventeenth St., Suite 1500
Denver, CO 80202
Phone: (303) 899-7300
 
Approximate date of commencement of proposed sale to the public:  As soon as practicable after this registration statement becomes effective and upon consummation of the transactions described herein
 
If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: o
 
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: o
 
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:
 
CALCULATION OF REGISTRATION FEE
 
                         
            Proposed Maximum
 		    Proposed Maximum
 		    Amount of
Title of Each Class of
 		    Amount to be
 		    Offering
 		    Aggregate
    Registration
Securities to be Registered(1)     Registered(2)     Price per Unit     Offering Price(3)     Fee
U.S. Gold Corporation common stock, no par value
    5,303,738     N/A     $26,939,619.84     $2,882.54(4)
US Gold Canadian Acquisition Corporation exchangeable shares, no par value
    5,303,738     N/A     $26,939,619.84               (5)
                         
 
(1) This registration statement relates to the common stock of U.S. Gold Corporation, a Colorado corporation, and an identical number of exchangeable shares of US Gold Canadian Acquisition Corporation, a company incorporated under the Business Corporations Act (Alberta) and a wholly owned subsidiary of U.S. Gold Corporation, to be issued: (a) in connection with an offer to purchase all of the issued and outstanding common shares of Coral Gold Resources Ltd., a corporation existing under the Business Corporations Act (British Columbia), or Coral Gold; (b) in connection with any contemplated subsequent acquisition transaction to acquire any Coral Gold common shares not acquired in the offer to purchase; and (c) upon exercise of warrants to purchase Coral Gold common shares, which will be assumed and converted into warrants to purchase exchangeable shares of US Gold Canadian Acquisition Corporation in connection with any contemplated subsequent acquisition transaction.
 
(2) This amount is based upon the registrants’ estimate of the maximum number of shares of U.S. Gold Corporation common stock issuable upon the terms described herein: (a) in exchange for the exchangeable shares issued by US Gold Canadian Acquisition Corporation pursuant to the offer to purchase all of the issued and outstanding common shares of Coral Gold, and any subsequent acquisition transactions; and (b) in connection with the assumption by US Canadian Acquisition Corporation of outstanding warrants to purchase Coral Gold common shares; each of (a) and (b) based on the outstanding number of Coral Gold common shares and outstanding warrants and exercisable options to purchase Coral Gold common shares as reported by Coral Gold as of November 5, 2006.
 
(3) Covers all of the securities set forth in footnote 2. Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(f)(1) and Rule 457(c) under the Securities Act of 1933, as amended (the “Securities Act”), based on $3.36, the average of the high and low prices for Coral Gold’s common shares as reported by the TSX Venture Exchange on November 8, 2006 converted to U.S. Dollars based on the Canadian to U.S. dollar exchange rate as of that date, and 8,017,744, the estimated maximum number of common shares of Coral Gold that could be exchanged in the offer.
 
(4) Pursuant to Rule 457(b) of the Securities Act, the registration fee is being offset by the fee required in connection with the proxy statement on Schedule 14A filed by U.S. Gold Corporation on October 26, 2006, which fee was (a) reduced pursuant to Rule 0-11 by the fee required to be paid in connection with the registration statement on Form S-4 (Registration No. 333-138233) filed by U.S. Gold Corporation and US Gold Canadian Acquisition Corporation on October 26, 2006, which fee was offset pursuant to Rule 457(p) by a portion of the registration fee associated with the registration statement on Form S-4 (Registration No. 333-133726) originally filed on May 2, 2006 by US Gold Holdings Corporation and U.S. Gold Corporation, or the prior registration statement and (b) offset by a portion of the registration fee associated with the prior registration statement. US Gold Holdings Corporation and US Gold Canadian Acquisition Corporation are wholly-owned subsidiaries of U.S. Gold Corporation.
 
(5) The registration fee for the exchangeable shares of US Gold Canadian Acquisition Corporation is reflected in the registration fee payable for the shares of U.S. Gold Corporation common stock.
 
The Registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrants 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 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a) may determine.
 

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The information contained in this prospectus may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
 
 
SUBJECT TO COMPLETION, DATED NOVEMBER 13, 2006
 
(US GOLD LOGO)
U.S. GOLD CORPORATION and
US GOLD CANADIAN ACQUISITION CORPORATION
 
OFFER TO PURCHASE
all of the outstanding common shares of
CORAL GOLD RESOURCES LTD.
on the basis of
0.63 of an exchangeable share of US Gold Canadian Acquisition Corporation
for each Coral Gold common share
 
U.S. Gold Corporation (“U.S. Gold,” “we,” “us,” or “our company”) and its wholly-owned subsidiary, US Gold Canadian Acquisition Corporation, or Canadian Exchange Co., hereby offer to purchase all of the outstanding common shares of Coral Gold Resources Ltd. The offer will be open for acceptance until the expiry time, which is 5:00 p.m. (Vancouver time) on [     ], 2006, unless extended or withdrawn.
 
Coral Gold’s common shares are listed for trading on the TSX Venture Exchange, or the TSX-V, under the symbol “CGR” and quoted on the Over-the-Counter Bulletin Board, or OTCBB, under the symbol “CGREF.” Our common stock is quoted on the OTCBB under the symbol “USGL” and listed on the Toronto Stock Exchange, or the TSX, under the symbol “UXG,” and we have made an application for listing our common stock on the American Stock Exchange, or AMEX.
 
Under the offer, each Coral Gold common share that is tendered in the offer and accepted for purchase will be exchanged for 0.63 of an exchangeable share of Canadian Exchange Co. The exchangeable shares of Canadian Exchange Co. will be exchangeable for shares of common stock of U.S. Gold on a one-for-one basis and will have the rights, privileges, restrictions and conditions described in this prospectus.
 
The offer is subject to certain conditions, each of which is set forth in the section entitled “The Offer — Conditions of the Offer” on page 43 of this prospectus.
 
The offer is being made only for Coral Gold’s common shares and is not being made for any warrants, options or other securities that may entitle the holder to acquire common shares of Coral Gold. Any holder of these securities who wishes to accept the offer must exercise or convert those securities according to their terms and deposit the common shares received upon exercise or conversion in accordance with the procedures described in this prospectus for the offer under the sections entitled “The Offer — Time for Acceptance” and “The Offer — Manner of Acceptance” on pages 46 and 47, respectively, of this prospectus. Any such exercise or conversion must be sufficiently in advance of the expiry time to permit the common shares acquired on the exercise or conversion of those securities to be tendered pursuant to the offer in accordance with these procedures. However, after completion of the offer, we may implement a statutory plan of arrangement or similar transaction providing for the mandatory exchange of all remaining outstanding Coral Gold common shares for additional exchangeable shares of Canadian Exchange Co. in order to acquire full ownership of Coral Gold, which we expect we would structure so that warrants to purchase Coral Gold common shares would be exchanged for warrants to purchase exchangeable shares of Canadian Exchange Co. and U.S. Gold would assume or adopt the Coral Gold stock option plan so that options under that plan would be exercisable for shares of common stock of U.S. Gold. See the section entitled “The Offer — Subsequent Acquisition Transaction” on page 54 of this prospectus.
 
In this prospectus we are not asking you for, and you are requested not to send us, a proxy. We are registering on the registration statement, of which this prospectus is a part, the exchangeable shares of Canadian Exchange Co. to be issued in the offer, as well as the shares of common stock of U.S. Gold issuable upon exchange of the exchangeable shares in accordance with the terms described in this prospectus.
 
The securities offered in this prospectus involve certain risks. For a discussion of risk factors that you should consider in evaluating the offer, see the section entitled “Risk Factors” beginning on page 20 of this prospectus.
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
 
The dealer managers for the offer are
GMP SECURITIES L.P.
     
In Canada:   In the United States:
GMP SECURITIES L.P.    GRIFFITHS McBURNEY CORP.
 
 
The date of this prospectus is          , 2006

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  20
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  35
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  A-1
  B-1
  C-1
  D-1
  E-1
  F-1
  G-1
  H-1
  I-1
  J-1
  K-1
 Articles of Incorporation
 Form of Articles of Incorporation
 Bylaws
 Opinion of Fraser Milner Casgrain LLP
 Opinion and Consent of Hogan & Hartson L.L.P.
 Consent of Stark Winter Schenkein & Co., LLP.
 Consent of Ernst & Young LLP
 Consent of Robert T. McCusker
 Form of Letter of Acceptance and Transmittal
 Form of Notice of Guaranteed Delivery


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ABOUT THIS PROSPECTUS
 
We have filed with the SEC a registration statement on Form S-4, under the Securities Act of 1933, as amended, or the Securities Act, with respect to the securities offered by this prospectus. This prospectus, which constitutes part of the registration statement, does not contain all of the business and financial information about U.S. Gold set forth in the registration statement, certain parts of which have been incorporated by reference into the registration statement in accordance with the rules and regulations of the SEC. You should review the registration statement and the exhibits to the registration statement for further information with respect to us and our securities.
 
References to “us”, “we”, “our” and similar terms refer to U.S. Gold.
 
IMPORTANT NOTE
 
You should rely only on information contained or incorporated by reference in this prospectus. We have not authorized anyone to provide you with information different from that contained or incorporated in this prospectus.
 
This document does not constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction in which such offer or solicitation is unlawful. The offer is not being made or directed to, nor is this document being mailed to, nor will deposits be accepted from or on behalf of, shareholders in any jurisdiction in which the making or acceptance of the offer would not be in compliance with the laws of such jurisdiction. However, we may, in our sole discretion, take such action as we may deem necessary to extend the offer to shareholders in any such jurisdiction.
 
You should not assume that the information contained or incorporated by reference in this prospectus is accurate as of any date other than the date on the front of this prospectus or the dates of the documents incorporated by reference.
 
WHERE YOU CAN FIND MORE INFORMATION
 
We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and we file annual, quarterly and periodic reports and proxy statements and file or furnish other information with the SEC. Coral Gold is subject to the reporting requirements of the Exchange Act applicable to foreign private issuers and accordingly files or furnishes reports, including annual reports on Form 20-F, reports on Form 6-K and other information, with the SEC. The SEC maintains a web site (http://www.sec.gov) on which these reports, proxy statements and other information are made available. These reports, proxy statements and other information may also be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities.
 
THIS PROSPECTUS AND THE ACCOMPANYING LETTER OF ACCEPTANCE AND TRANSMITTAL AND NOTICE OF GUARANTEED DELIVERY CONTAIN IMPORTANT INFORMATION. YOU SHOULD CAREFULLY READ THESE DOCUMENTS IN THEIR ENTIRETY BEFORE MAKING A DECISION WITH RESPECT TO THE OFFER.


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INCORPORATION BY REFERENCE OF CERTAIN DOCUMENTS AND INFORMATION OF U.S. GOLD FOR U.S. SHAREHOLDERS
 
The SEC allows us to “incorporate by reference” certain information we have filed with them into this prospectus. This means that we can disclose important information about us by referring U.S. shareholders to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this prospectus, except for any information that is superseded by information that is included directly in this document. For U.S. shareholders, the prospectus incorporates important business and financial information about us that is not included in or delivered with this prospectus.
 
The following documents filed with the SEC are incorporated by reference into this prospectus:
 
  •  Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005, filed with the SEC on April 7, 2006;
 
  •  Quarterly Report on Form 10-QSB/A for the quarterly period ended June 30, 2006, filed with the SEC on August 24, 2006;
 
  •  Current Reports on Form 8-K filed with the SEC on February 27, March 6, March 31, May 1, June 30, July 6, July 7, July 25, August 8, August 9, August 29, September 6 and October 20, 2006 (except to the extent any information contained in a current report is furnished to, and not filed with, the SEC); and
 
  •  Any future filings made by us with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until the earlier of the date that the offer is consummated or the date the offer is terminated.
 
Statements contained in this prospectus as to the contents of any contract or other documents are not necessarily complete, and in each instance investors are referred to the copy of the contract or other document filed as an exhibit to the registration statement or incorporated by reference herein, each such statement being qualified in all respects by such reference and the exhibits and schedules thereto. You may review our subsequent reports filed from time to time with the SEC on Forms 10-KSB, 10-QSB and 8-K and any amendments thereto. See the section entitled “Where You Can Find More Information” on page iv of this prospectus.
 
You may request a copy of these filings incorporated herein by reference, including exhibits to these documents that are specifically incorporated by reference, at no cost to you, by writing or calling us at the following address or telephone number:
 
Corporate Secretary
U.S. Gold Corporation
2201 Kipling Street, Suite 1000
Lakewood, Colorado 80215-1545
303-238-1438
 
In order to obtain timely delivery, you must request the information no later than [          ], which is five business days before the proposed expiry date of the offer.
 
INFORMATION CONCERNING CORAL GOLD
 
We have not had complete access to the non-public books and records of Coral Gold. We have obtained the information about Coral Gold contained in this prospectus from Coral Gold and publicly available sources. In addition to the information filed by Coral Gold with the SEC under the Exchange Act, Coral Gold files audited annual financial statements, unaudited interim financial statements, management’s discussion and analysis, proxy statements or information circulars and other information with the Canadian Securities Administrators on the System for Electronic Document Analysis and Retrieval, or SEDAR. The information concerning Coral Gold contained in this prospectus, including Appendix A (Information Concerning Coral Gold) has been taken from Coral Gold’s Annual Report on Form 20-F for the fiscal year ended January 31, 2006 filed with the SEC on July 31, 2006, and from Coral Gold’s Report of Foreign Private Issuer on Form 6-K filed with the SEC on October 11, 2006. The information contained in this prospectus about Coral Gold, including Appendix A (Information Concerning


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Coral Gold) and all reconciliations of Coral Gold’s financial information, which Coral Gold prepares in accordance with Canadian generally accepted accounting principles, or Canadian GAAP, to U.S. generally accepted accounting principles, or U.S. GAAP, and from Canadian dollars to U.S. dollars, included in the historical and pro forma financial information contained in this prospectus are based exclusively on information taken directly from Coral Gold’s public reports and securities filings or on information provided to us by Coral Gold, unless expressly noted otherwise. Although we have no reason to doubt the accuracy or completeness of the information relating to Coral Gold, we are not in a position to independently assess or verify this information, including Coral Gold’s financial statements. See the section entitled “Risk Factors — We have been unable to independently verify the reliability of information about White Knight, Coral Gold, Nevada Pacific and Tone Resources contained in this prospectus” on page 22 of this prospectus.
 
FORWARD-LOOKING STATEMENTS
 
Some of the information included in this prospectus and certain other documents we filed or will file with the SEC (as well as information included in other documents accompanying this prospectus or included in other statements made by us, our representatives, and information about Coral Gold, White Knight Resources Ltd., or White Knight, Nevada Pacific Gold Ltd., or Nevada Pacific, and Tone Resources Limited, or Tone Resources) may contain forward-looking statements. Forward-looking statements do not relate strictly to historical or current facts, often will be phrased in the future-tense, and may include the words “may,” “could,” “should,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan” or other words or expressions of similar meaning. Forward-looking statements that relate to U.S. Gold or our business are based on our beliefs and expectations about future events, and include statements that reflect management’s plans, objectives, goals, expectations, anticipations and intentions with respect to our financial condition, results of operations, future performance and business, including statements relating to our business strategy and our current and future development plans.
 
Although we believe that the expectations reflected in any forward-looking statements are reasonable, any or all of the forward-looking statements in this prospectus or in documents accompanying this prospectus may prove to be incorrect. This may occur as a result of inaccurate assumptions or as a consequence of known or unknown risks and uncertainties. Many factors discussed in this prospectus and in documents accompanying this prospectus, some of which are beyond our control, will be important in determining U.S. Gold’s future performance following a combination, if any, of the businesses or assets of U.S. Gold and White Knight, Coral Gold, Nevada Pacific and Tone Resources, which we refer to in this prospectus as the target companies. Consequently, actual results may differ materially from those predicted in or that might be anticipated from forward-looking statements. Therefore, you should not regard such forward-looking statements as a representation that the predictions or expectations reflected in the forward-looking statements will be achieved, and you should not place undue reliance on such forward-looking statements.
 
Uncertainties that could affect the accuracy of forward-looking statements, besides the specific risk factors identified in the section entitled “Risk Factors” beginning on page 20 of this prospectus, include:
 
  •  decisions of foreign countries and banks within those countries;
 
  •  technological changes in the mining industry;
 
  •  the level of demand for our products;
 
  •  changes in our business strategy;
 
  •  interpretation of drill hole results and the geology, grade and continuity of mineralization;
 
  •  the uncertainty of reserve estimates and timing of development expenditures;
 
  •  unexpected changes in business and economic conditions;
 
  •  changes in interest rates and currency exchange rates;
 
  •  timing and amount of production;
 
  •  changes in mining, processing and overhead costs;


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  •  access and availability of materials, equipment, supplies, labor and supervision, power and water;
 
  •  results of current and future exploration activities;
 
  •  results of pending and future feasibility studies;
 
  •  local and community impacts and issues;
 
  •  accidents and labor disputes; and
 
  •  commodity price fluctuations.
 
We undertake no obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise, other than to reflect a material change in the information previously disclosed, as required by applicable law. You should review our subsequent reports filed from time to time with the SEC on Forms 10-KSB, 10-QSB and 8-K, and any amendments thereto. As noted in the section entitled “Incorporation by Reference of Certain Documents and Information of U.S. Gold for U.S. Shareholders” beginning on page v of this prospectus, several of these reports are incorporated by reference into this prospectus.
 
REPORTING CURRENCIES AND FINANCIAL PRINCIPLES
 
All references to “$” or “dollars” in this document refer to United States dollars, unless otherwise indicated. All financial information contained in this prospectus is reported in U.S. dollars unless otherwise noted. References to Canadian dollars in this prospectus are indicated as “Cdn$”.
 
Our financial statements are prepared in accordance with U.S. GAAP. The target companies’ audited consolidated financial statements and the notes thereto are stated by each respective target company to have been prepared in accordance with Canadian GAAP. All reconciliations of the target companies’ financial data from Canadian GAAP to U.S. GAAP and, where applicable, from Canadian dollars to U.S. dollars included in the historical and pro forma financial information contained in this prospectus are based on information taken directly from the target companies’ public reports and filings or provided to us by the target companies unless expressly noted otherwise.


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SUMMARY
 
This summary highlights information more fully described elsewhere in this prospectus and may not contain all the information that is important to you. This summary is not intended to be a substitute for the information contained in this prospectus and is qualified in its entirety by the more detailed descriptions provided elsewhere in this prospectus and in the documents incorporated by reference, including the section “Risk Factors” beginning on page 20 of this prospectus and our consolidated pro forma financial statements and notes.
 
The Offerors
 
U.S. Gold
 
We are engaged in the exploration for gold and other precious metals. We hold a 100% interest in the Tonkin Springs property in Eureka County, Nevada, subject to paramount title in the United States. This property consists of approximately 36 square miles of unpatented lode mining claims and millsite claims located on the Battle Mountain-Eureka Trend, also known as the Cortez Trend, approximately 45 miles northwest of the town of Eureka in north-central Nevada. We are presently in the exploration stage at the Tonkin Springs property. We have not generated revenue from mining operations since 1990.
 
We were organized as a corporation under the laws of the State of Colorado on July 24, 1979 under the name Silver State Mining Corporation. On June 21, 1988, we changed our name to U.S. Gold Corporation.
 
Our principal executive offices are located at 2201 Kipling Street, Suite 100, Lakewood, Colorado, 80215 and our telephone number is (303) 238-1438. Our website is www.usgold.com. Information contained on the website is not incorporated by reference into this prospectus and you should not consider information contained on the website as part of this prospectus. Our common stock is listed on the Toronto Stock Exchange, or the TSX under the symbol “UXG” and is quoted on the OTCBB under the symbol “USGL.” It is a condition of the offer that our common stock also be approved for listing on the AMEX, with respect to which application has been made. We are subject to the reporting requirements of the Exchange Act and, as such, file or furnish reports and other information with the SEC from time to time.
 
In addition to this offer to purchase all of the outstanding common shares of Coral Gold, we expect to commence separate offers to purchase all of the outstanding common shares of each of Nevada Pacific, Tone Resources, and White Knight at the same time as the offer or as soon as practicable following, among other things, the completion or updating by Nevada Pacific and Tone Resources, respectively, of formal valuations required and the consideration being offered to them under those offers, under applicable Canadian law of their common shares, obtaining any necessary consents from the respective auditors of Nevada Pacific, Tone Resources, and White Knight, and satisfaction of other regulatory requirements. Like Coral Gold, each of these companies conducts mineral exploration activities in the Cortez Trend in Nevada and has mineral exploration properties that are adjacent to or near our Tonkin Springs property. We believe the significant benefits to combining U.S. Gold, White Knight, Coral Gold, Nevada Pacific and Tone Resources, include:
 
  •  a larger land position within the Cortez Trend and a larger exploration program;
 
  •  a stronger cash position and reduced costs;
 
  •  enhanced trading liquidity and better market focus; and
 
  •  greater technical expertise.
 
Upon successful completion of the offers to purchase the outstanding common shares of White Knight, Nevada Pacific, Coral Gold and Tone Resources, which we refer to in this prospectus as the strategic offers, our combined company would strive to become the premier exploration company in Nevada. However, Coral Gold shareholders should be aware that the successful completion of any or all of our offers to purchase all of the outstanding shares of Nevada Pacific, Tone Resources and White Knight is not a condition of this offer. See the section entitled “Intentions of the Offerors — Strategic Rationale for the Offer” on page 58 of this prospectus.


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Canadian Exchange Co.
 
Our wholly-owned subsidiary, US Gold Canadian Acquisition Corporation, or Canadian Exchange Co., is a corporation we incorporated under the Business Corporations Act (Alberta) solely for the purpose of making the strategic offers. Canadian Exchange Co. has no significant assets and has not engaged in any business or other activities to date.
 
In connection with this offer and the other strategic offers, Canadian Exchange Co. will issue its exchangeable shares in exchange for the validly tendered and not validly withdrawn common shares of each of White Knight, Coral Gold, Nevada Pacific and Tone Resources. The exchangeable shares are being issued in connection with the offers to achieve intended tax efficiencies, as described in the sections entitled “Material Canadian Federal Income Tax Considerations” and “Material U.S. Federal Income Tax Considerations” on pages 63 and 73, respectively, of this prospectus. The exchangeable shares are exchangeable into shares of our common stock on a one-for-one basis and are intended to have, to the extent practicable, the same economic, voting and other rights of our common stock. Under the exchangeable share provisions, the holders of the exchangeable shares will be entitled to annually elect one of the three directors of Canadian Exchange Co. See the section entitled “The Offer — Exchangeable Shares” on page 35 of this prospectus.
 
Canadian Exchange Co.’s executive office is located at 2900 Manulife Place, 10180-101 Street, Edmonton, Alberta, Canada T5J 3V5 and its telephone number is (780) 423-7100.
 
Coral Gold
 
Coral Gold is a natural resource company primarily engaged in the exploration and development of natural resource properties. Coral Gold’s principal business activities are the exploration of certain mineral properties located in Nevada and California. Since Coral Gold’s 2002 fiscal year, Coral Gold has made aggregate principal expenditures of Cdn$4,616,090 on the Robertson mining claims in Nevada.
 
Coral Gold was organized under The Company Act — British Columbia, Canada on January 22, 1981 under the name of Carol Energy Corporation. Coral Gold’s name was changed to Coral Energy Corporation on March 3, 1982, to Coral Gold Corp. on September 9, 1987, and to Coral Gold Resources Ltd. on September 14, 2004 in conjunction with a 10 to 1 share consolidation. On July 15, 2005, Coral Gold transitioned under the Business Corporations Act (British Columbia) which came into effect on March 29, 2004. The principal place of business of Coral Gold is located at 455 Granville Street, Suite 400, Vancouver, British Columbia V6C 1T1, and its telephone number is (604) 682-3701. Coral Gold’s common shares are listed on the TSX-V under the symbol “CGR” and quoted on the OTCBB under the symbol “CGREF.”
 
The Offer
 
Coral Gold Common Shares
 
We are offering to purchase, upon the terms and subject to the conditions of the offer, all of the outstanding common shares of Coral Gold, including any common shares that may be issued after the date of the offer and prior to its expiry time. Each Coral Gold common share which is tendered in the offer and accepted for purchase will be exchanged for 0.63 of an exchangeable share of Canadian Exchange Co. The exchangeable shares will, under the circumstances described in this prospectus, be exchangeable for shares of common stock of U.S. Gold on a one-for-one basis.
 
Your participation in the offer and the receipt of the exchangeable shares may result in different tax consequences, depending upon facts specific to you. You should carefully review the description of the tax consequences of the proposed transactions under the sections entitled “Material Canadian Federal Income Tax Considerations” and “Material U.S. Federal Income Tax Considerations,” on pages 63 and 73, respectively, of this prospectus, and you are encouraged to seek independent tax advice with respect to your specific circumstances.


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Warrants, Options or Other Securities
 
The offer is being made only for common shares of Coral Gold and is not being made for any warrants, options or other securities that may entitle the holder to acquire common shares of Coral Gold. Any holder of these securities who wishes to accept the offer must first exercise those securities and tender the common shares issued, upon exercise in advance of the expiry time of the offer in accordance with the procedures described under the sections entitled “The Offer — Time for Acceptance” and “— Manner of Acceptance” on pages 46 and 47, respectively, of this prospectus. However, after completion of the offer, we may implement a subsequent merger or similar acquisition transaction to acquire full ownership of Coral Gold, which we expect we would structure so that any Coral Gold warrants would be exchanged for warrants to purchase exchangeable shares of Canadian Exchange Co., and so that the Coral Gold stock option plan would be assumed or adopted by us and options to purchase Coral Gold common shares would entitle the option holders to purchase shares of our common stock, in each case with appropriate adjustments to the exercise price of any warrant or option. See the section entitled “The Offer — Subsequent Acquisition Transaction” on page 54 of this prospectus.
 
Fractional Shares
 
Fractional exchangeable shares will not be issued in the offer. Instead, the number of exchangeable shares to be issued to each tendering shareholder will be either rounded up (if the fractional interest is 0.5 or more) or down (if the fractional interest is less than 0.5) to the next whole number. For purposes of this rounding, all Coral Gold common shares deposited by a tendering shareholder will be aggregated.
 
Total Expected Issuance of U.S. Gold Shares
 
Based on information provided by Coral Gold as of November 5, 2006, the total number of Coral Gold common shares that are outstanding or underlying outstanding options or warrants is 8,017,744. Based on this number and the exchange ratio of 0.63 of an exchangeable share of Canadian Exchange Co., we expect to issue approximately 5,051,179 exchangeable shares of Canadian Exchange Co. in connection with the offer. The disclosure in this prospectus regarding the anticipated effects of the transactions on our voting power and our shareholder’s ownership percentage in us after giving effect to the proposed acquisition of Coral Gold and the other target companies and upon the exchange of the exchangeable shares for shares of our common stock is based on this expectation.
 
Background and Reason for the Issuance of the Exchangeable Shares
 
The exchangeable shares are being issued in connection with this offer in lieu of U.S. Gold common stock to enable, to the extent permissible and applicable, the Coral Gold shareholders to take advantage of a full or partial tax deferral (rollover) available under the Income Tax Act (Canada), as amended, or the Tax Act, as described in the sections entitled “The Offer — Exchangeable Shares” on page 35 of this prospectus, “Material Canadian Federal Income Tax Considerations” on page 63 of this prospectus and “Material U.S. Federal Income Tax Considerations” on page 73 of this prospectus. The exchangeable shares, by virtue of the redemption and exchange rights attaching to them and the provisions of the Voting and Exchange Trust Agreement and the Support Agreement described below, are intended to provide the holders with the economic and voting rights that are, as nearly as practicable, equivalent to those of a share of common stock of U.S. Gold.
 
Conditions of the Offer
 
The offer is subject to a number of conditions, which are described below under the heading “The Offer — Conditions of the Offer” on page 43 of this prospectus and include that:
 
(i) at least the greater of (1) 662/3% of Coral Gold common shares deemed outstanding on a fully-diluted basis or (2) 80% of the issued and outstanding Coral Gold common shares shall have been validly deposited at the time the Coral Gold common shares are accepted for purchase under the offer;


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(ii) Coral Gold shall not have entered into or effectuated any agreement or transaction with any person or entity having the effect of impairing our ability to acquire Coral Gold or otherwise diminishing our expected economic value of the acquisition of Coral Gold;
 
(iii) the shares of our common stock shall have been approved for listing on the AMEX, the additional shares of common stock of U.S. Gold issuable upon exchange of the exchangeable shares offered under this offer shall have been approved for listing on the TSX, and the exchangeable shares shall have been approved for listing on the TSX and AMEX;
 
(iv) the registration statement of which this prospectus is a part for the exchangeable shares and the shares of our common stock that may be issued upon the exchange of the exchangeable shares shall have become effective under the Securities Act, and no stop order suspending the effectiveness of the registration statement or a proceeding seeking a stop order shall have been issued nor shall there have been proceedings for that purpose initiated or threatened by the SEC;
 
(v) all necessary orders shall have been obtained from relevant Canadian securities regulatory authorities in respect of the exchangeable shares to be issued in the offer, the shares of our common stock that may be issued upon the exchange of any such exchangeable shares and the resale of the exchangeable shares or shares of our common stock;
 
(vi) our shareholders shall have approved prior to the expiry time (1) an amendment to our articles of incorporation to create a new class of our stock comprised of one share of preferred stock, designated Series A Special Voting Preferred Stock, no par value, to be issued in connection with the strategic offers; (2) the issuance of the exchangeable shares of Canadian Exchange Co. in connection with the strategic offers, and (3) the issuance of an equivalent number of shares of common stock of U.S. Gold upon the exchange of the exchangeable shares; and
 
(vii) all necessary approvals, consents, clearances or waivers have been obtained or received from any governmental regulatory agency, authority or commission in connection with the offer and the subsequent acquisition transaction.
 
Time and Manner of Acceptance
 
The offer is open for acceptance, unless withdrawn or extended at our sole discretion, until 5:00 p.m. (Vancouver Time) on [          ], 2006, or the expiry time. We may extend or change the expiry time to any later time or times and date or dates as we may fix from time to time, as described under the heading “The Offer — Extension of the Expiry Time or Variation or Change of the Offer” on page 46 of this prospectus.
 
You may accept the offer by depositing the originally executed certificate or certificates representing Coral Gold common shares you desire to tender, together with a duly completed and signed letter of transmittal (printed on blue paper), at the offices of Kingsdale Shareholder Services Inc., which is acting as depositary, specified in the letter of transmittal at or before the expiry time of the offer. The offer will be deemed to be accepted only if the depositary has actually received these documents at or before the expiry time of the offer. If your shares are registered in the name of a broker, dealer, bank, trust company or other nominee you should request your nominee to effect the transaction. If your stock certificate for your Coral Gold common shares is not immediately available or has been lost, you may use the procedures for guaranteed delivery set forth in the notice of guaranteed delivery (printed on green paper). See the section entitled “The Offer — Manner of Acceptance” on page 47 of this prospectus.
 
Acceptance for Purchase of, and Payment for, Deposited Coral Gold Common Shares
 
If all conditions described in the section entitled “The Offer — Conditions of the Offer” on page 43 of this prospectus have been satisfied or waived by us at the expiry time, all Coral Gold common shares that have been properly deposited and not withdrawn will be required to be accepted by us for purchase promptly following the expiry time and, in any event, not later than 10 days after the expiry time. The exchangeable shares will be promptly issued to all holders of Coral Gold common shares accepted for purchase and, in any event, within three business days of having been accepted for purchase. For the purposes of this prospectus, the term business day means any day


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other than a Saturday, Sunday, a public holiday or a day on which commercial banks are not open for business in Toronto, Ontario or Denver, Colorado under applicable law. See the section entitled “The Offer — Acceptance for Purchase of, and Payment for, Deposited Common Shares” on page 48 of this prospectus.
 
Right to Withdraw
 
All deposits of Coral Gold common shares under the offer are irrevocable, unless withdrawn by a Coral Gold shareholder. Shareholders may withdraw any deposited common shares before the common shares are accepted by us, if we have not issued the exchangeable shares in consideration for these shares within three business days after having been accepted, and under certain other circumstances. See the section entitled “The Offer — Right to Withdraw” on page 51 of this prospectus.
 
Risk Factors
 
An investment in the exchangeable shares and the business combination with Coral Gold are subject to certain risks. See the section entitled “Risk Factors” beginning on page 20 of this prospectus.
 
Dissenters’ Rights
 
No dissenters’ rights are available in connection with the offer. However, if after completion of the offer we determine to acquire any remaining interests in Coral Gold by way of plan of arrangement or other similar transaction, Coral Gold’s remaining shareholders may have the right to dissent and demand payment of the fair value of their common shares under Section 238 of the Business Corporations Act (British Columbia). If the statutory procedures are complied with, this right could lead to a judicial determination of the fair value required to be paid to such dissenting shareholders for their common shares. This judicially determined fair value of Coral Gold common shares could be more or less than the amount paid per Coral Gold common share in the subsequent acquisition transaction or in the offer. See the section entitled “The Offer — Dissenters’ Rights” on page 53 of this prospectus.
 
Purpose of the Offer
 
We are making the offer in order for us ultimately to acquire, directly or indirectly, all of the issued and outstanding Coral Gold common shares. If the conditions of the offer are satisfied or waived and we accept for purchase and pay for Coral Gold common shares validly tendered in the offer, we currently intend to acquire, directly or indirectly, any remaining outstanding Coral Gold common shares in accordance with applicable law by way of a subsequent acquisition transaction. See the section entitled “The Offer — Subsequent Acquisition Transaction” on page 54 of this prospectus.
 
Subsequent Acquisition Transaction
 
We or Canadian Exchange Co. intend to cause a special meeting of Coral Gold shareholders to be held following completion of the offer to consider a statutory plan of arrangement under which:
 
(i) all remaining outstanding Coral Gold common shares would be exchanged for exchangeable shares of Canadian Exchange Co. in order to acquire full ownership of Coral Gold;
 
(ii) warrants to purchase Coral Gold common shares would be exchangeable for warrants to purchase exchangeable shares of Canadian Exchange Co., with appropriate adjustments to the exercise prices of these warrants;
 
(iii) Coral Gold shareholders who did not deposit their common shares under the offer would be entitled to receive exchangeable shares in the same exchange ratio offered in the offer; and
 
(iv) the Coral Gold stock option plan would be assumed or adopted by U.S. Gold so that options under that plan would be exercisable for shares of U.S. Gold common stock with appropriate adjustments to the exercise prices of these options.
 
See the section entitled “The Offer — Subsequent Acquisition Transaction” on page 54 of this prospectus.


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Plans for Coral Gold
 
Upon successful completion of the offer and any subsequent acquisition transaction, we intend to take appropriate actions to optimize and rationalize the combined entities’ assets, operations, management, personnel, general and administrative functions and corporate structure. If permitted by applicable law, subsequent to the completion of the offer and any subsequent acquisition transaction, if necessary, we intend to delist the Coral Gold common shares from the TSX-V and cause Coral Gold to cease to be a reporting issuer under the securities laws of all applicable jurisdictions.
 
Other Target Companies
 
Each of the other target companies is an exploration stage company based in Vancouver, British Columbia engaged in the acquisition and exploration of mineral properties primarily located on the major gold trends in the north-central region of Nevada.
 
Nevada Pacific.  Nevada Pacific owns an exploratory property portfolio covering approximately 890 square miles of mineral rights in Mexico, including the Magistral Gold Mine, ten properties in Nevada and one in Utah. The Nevada property portfolio covers approximately 85 square miles, including portions of two significant gold producing regions: the Battle Mountain/Eureka Trend/Cortez Trend and the Carlin Trend. We intend to offer to purchase all of the outstanding shares of Nevada Pacific on the basis of 0.23 of an exchangeable share for each common share of Nevada Pacific. Nevada Pacific’s common shares are listed on the TSX-V under the symbol “NPG-V.”
 
Tone Resources.  Tone Resources is focused on gold and holds substantially all interests in eight projects (10 claim groups) in Elko, Eureka, Lander, and Pershing counties in Nevada. All of Tone Resource’s properties are located near infrastructure facilities of currently producing gold mines. We intend to offer to purchase all of the outstanding shares of Tone Resources on the basis of 0.26 of an exchangeable share for each common share of Tone Resources. Tone Resources’ common shares are listed on the TSX-V under the symbol “TNS-V” and quoted on the Pink Sheets under the symbol “TONRF.”
 
White Knight.  In 1993, White Knight began to acquire gold exploration properties in Nevada and has focused solely on exploration and operation of properties in Nevada since that time. Currently, White Knight’s efforts are exploratory in nature in each of the 18 Nevada properties where it holds an interest. White Knight continues to explore for projects to acquire in Nevada. We intend to offer to purchase all of the outstanding shares of White Knight on the basis of 0.35 of an exchangeable share for each common share of White Knight. White Knight’s common shares are listed on the TSX-V under the symbol “WKR-V.”
 
Audited financial statements and unaudited interim financial statements of Tone Resources, Nevada Pacific and White Knight are included in Appendices C, D and E, respectively, of this prospectus.
 
Interests of Certain Related Parties in the Offer
 
On March 4, 2006 Coral Gold closed a non-brokered private placement of 1,500,000 common shares at a price of Cdn$3.00 per share. Robert R. McEwen, the Chairman of our Board of Directors and our Chief Executive Officer, purchased 1,250,000 shares in the private placement.
 
As of the date of this prospectus, Mr. McEwen beneficially owns 1,250,000 Coral Gold common shares, which represents approximately 18% of the outstanding Coral Gold common shares as of November 5, 2006. Mr. McEwen also beneficially owns 25,000,000, 9,552,427 and 5,000,000 common shares (assuming exercise of all outstanding warrants to purchase common shares held by him) of Nevada Pacific, White Knight and Tone Resources, respectively, which represents approximately 30%, 16% and 22%, respectively, of the outstanding common shares of these companies based on information provided to us by these companies. As a shareholder of each target company and of U.S. Gold, Mr. McEwen may have interests that differ from the holders of Coral Gold common shares. See the section entitled “Relationships Between the Offerors and Coral Gold” on page 62 of this prospectus.


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Certain Effects of the Strategic Offers
 
If all of the strategic offers are successfully completed and the subsequent acquisitions consummated to the extent necessary, the voting power of our existing shareholders will be diluted. It is expected that the former shareholders of White Knight, Coral Gold, Nevada Pacific and Tone Resources will own, in the aggregate exchangeable shares entitling them to approximately 48% of the aggregate voting power of U.S. Gold (or approximately 47% on a fully-diluted basis). As a result of the strategic offers, we may experience a change in control, although it appears unlikely that will be the case upon issuance of the shares due to Mr. McEwen’s ownership in the target companies. See the section entitled “Relationships Between the Offerors and Coral Gold — Beneficial Ownership of and Trading in Securities of Coral Gold” on page 62 of this prospectus. If all of the strategic offers are successfully completed and the subsequent acquisitions consummated to the extent necessary, the former shareholders of White Knight, Coral Gold, Nevada Pacific and Tone Resources other than Mr. McEwen will own, in the aggregate, exchangeable shares entitling them to approximately 40% of the aggregate voting power of U.S. Gold (or approximately 37% on a fully-diluted basis).


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Selected Historical Financial Data of U.S. Gold
 
The following are selected consolidated financial data for U.S. Gold for each of the years in the five-year period ended December 31, 2005 and for the six months ended June 30, 2006 and 2005. The information with respect each of the years in the five-year period ended December 31, 2005 has been derived from and should be read in conjunction with the audited consolidated financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Reports on Form 10-KSB for the fiscal years ended December 31, 2005 and December 31, 2004, filed with the SEC on April 7, 2006 and March 30, 2005, respectively. The information with respect to the six-month periods ended June 30, 2006 and 2005 has been derived from and should be read in conjunction with our unaudited consolidated financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Quarterly Report on Form 10-QSB for the quarter ended June 30, 2006, as filed with the SEC on August 14, 2006 (and amended on Form 10-QSB/A on August 24, 2006). The unaudited financial statement data includes, in our opinion, all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair presentation of our financial position and results of operations for these periods. Certain documents we filed with the SEC are incorporated by reference into this prospectus. See the sections entitled “The Offerors — U.S. Gold” on page 32 and “Incorporation by Reference of Certain Documents and Information of U.S. Gold for U.S. Shareholders” on page v of this prospectus. All of our historical financial data is presented in accordance with U.S. GAAP. Historical results are not indicative of the results to be expected in the future and results of interim periods are not necessarily indicative of results for the entire year.
 
This selected historical financial data should be read together with the summary selected unaudited pro forma consolidated financial information beginning on page 10 of this prospectus.
 
U.S. Gold Historical Financial Data
 
                                                         
    Six Months Ended
 		    Fiscal Year Ended
 		 
    June 30,     December 31,  
    2006     2005     2005     2004     2003     2002     2001  
    ($ in thousands except share data)  
 
Operating data
                                                       
Other revenue
  $ 488     $ 526     $ 1,052     $ 39     $ 636     $ 56     $ 560  
Net loss from operations before cumulative-effect gain on accounting change
  $ (66,070 )   $ (431 )   $ (2,991 )   $ (794 )   $ (1,027 )   $ (1,375 )   $ (136 )
Net loss
  $ (66,070 )   $ (431 )   $ (2,991 )   $ (794 )   $ (623 )   $ (1,375 )   $ (136 )
Basic and diluted loss per share
  $ (1.98 )   $ (0.02 )   $ (0.12 )   $ (0.04 )   $ (0.04 )   $ (0.09 )   $ (0.01 )
Weighted average shares
    33,296,755       20,485,915       25,931,172       20,028,173       17,696,098       15,334,157       14,011,400  
Balance sheet data
                                                       
Cash, cash equivalents and short term investments
  $ 30,066     $ 107     $ 678     $ 75     $ 198     $ 4     $ 72  
Inventories
    0       0       0       0       0       0       0  
Property, plant and equipment
    102       90       53       104       8       15       25  
Other assets
    46,159       2,712       4,810       1,256       1,595       3,455       3,406  
Total assets
  $ 76,327     $ 2,909     $ 5,541     $ 1,435     $ 1,801     $ 3,474     $ 3,503  
Current liabilities
  $ 3,245     $ 137     $ 1,791     $ 35     $ 80     $ 434     $ 29  
Long-term obligations
    10       557       16       570       545       545       420  
Other long-term liabilities and deferred gain
    136,073       1,760       1,201       0       0       1,826       1,826  
Shareholders’ equity
  $ (63,001 )   $ 455     $ 2,533     $ 830     $ 1,176     $ 669     $ 1,228  
Total liabilities and shareholders’ equity
  $ 76,327     $ 2,909     $ 5,541     $ 1,435     $ 1,801     $ 3,474     $ 3,503  


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Selected Historical Financial Data of Coral Gold
 
The following selected historical financial data of Coral Gold is derived from Coral Gold’s publicly filed audited consolidated financial statements for each of the years in the five-year period ended January 31, 2006. This summary data should be read together with Coral Gold’s Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Appendix A hereto (Information Concerning Coral Gold) and Coral Gold financial statements and the accompanying notes included in Appendix B (Financial Statements of Coral Gold). Coral Gold’s publicly filed financial statements are, according to Coral Gold, prepared in accordance with Canadian GAAP, which differs from U.S. GAAP in certain respects and are presented in Canadian dollars, unless otherwise indicated. See the sections entitled “Reporting Currencies and Financial Principles” on page vii of this prospectus and Note 10 to Coral Gold’s financial statements contained in Appendix B (Financial Statements of Coral Gold). Historical results are not indicative of the results to be expected in the future and results of interim periods are not necessarily indicative of results for the entire year.
 
                                                         
                Fiscal Year Ended
 		 
    Six Months Ended
 		    January 31,  
    July 31,           2005
 		    2004
 		    2003
 		    2002
 		 
Canadian GAAP
  2006     2005     2006     Restated(1)     Restated(1)     Restated(1)     Restated(1)  
    (Cdn$ in thousands except share data)  
 
Operating data
                                                       
Other revenue
  $ 71     $ 6     $ 20     $ 34     $ 15     $ 11     $ 1  
Net loss
  $ (587 )   $ (330 )   $ (3,067 )   $ (879 )   $ (754 )   $ (756 )   $ (1,128 )
Basic and diluted loss per share
  $ (0.09 )   $ (0.07 )   $ (0.64 )   $ (0.19 )   $ (0.20 )   $ (0.27 )   $ (0.54 )
Balance sheet data
                                                       
Cash, cash equivalents and short term investments
  $ 3,975     $ 970     $ 663     $ 1,472     $ 2,625     $ 393     $ 154  
Inventories
    0       0       0       0       0       0       0  
Property, plant and equipment
    3       4       4       5       6       4       0  
Mineral properties and deferred exploration costs
    10,633       8,758       10,096       8,472       7,574       7,159       5,877  
Other assets
    660       770       623       789       691       1,332       533  
Total assets
  $ 15,271     $ 10,502     $ 11,386     $ 10,738     $ 10,896     $ 8,888     $ 6,564  
Current liabilities
  $ 437     $ 208     $ 759     $ 163     $ 161     $ 387     $ 260  
Long-term obligations
    0       0       0       0       0       0       0  
Other long-term liabilities
    1,475       0       1,475       318       318       318       217  
Shareholders’ equity
  $ 13,359     $ 10,294     $ 9,152     $ 10,257     $ 10,417     $ 8,183     $ 6,087  
Total liabilities and shareholders’ equity
  $ 15,271     $ 10,502     $ 11,386     $ 10,738     $ 10,896     $ 8,888     $ 6,564  
 
 
(1) See Note 2 of Coral Gold’s Financial Statements included in Appendix B to this prospectus.


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Summary Selected Unaudited Pro Forma Consolidated Financial Data for U.S. Gold and Coral Gold
 
The following summary selected unaudited pro forma consolidated financial data has been prepared to give effect to our proposed acquisition of Coral Gold as if it had been completed on January 1, 2005.
 
The selected unaudited pro forma consolidated financial data presented below are presented in accordance with U.S. GAAP and in U.S. dollars. Because Coral Gold has a different fiscal year end and interim period than U.S. Gold and its financial statements are prepared in accordance with Canadian GAAP in Canadian dollars, we have prepared the following unaudited pro forma financial data in U.S. dollars and in accordance with U.S. GAAP based on quarterly financial data, including reconciliations from Canadian GAAP to U.S. GAAP, provided to us by Coral Gold. The selected unaudited pro forma consolidated financial data presented below are for illustrative purposes only and are not necessarily indicative of the actual operating results or financial position that would have resulted if we and Coral Gold had combined at the beginning of the periods presented, nor is it necessarily indicative of any future operating results or financial position of U.S. Gold if combined with Coral Gold. To construct the pro forma financial information, we allocated the proposed purchase price of Coral Gold using our best estimates of fair value. These estimates are based on the most recently available information. To the extent there are significant changes to the business of Coral Gold, the assumptions and estimates reflected herein could change significantly. Accordingly, the purchase accounting adjustments reflected in the unaudited pro forma consolidated financial data below are preliminary and subject to change. In addition, the selected unaudited pro forma consolidated financial data presented below does not reflect any potential operating efficiencies of the combined entities. For additional information concerning the basis of presentation of the pro forma consolidated financial information, see the notes to the unaudited pro forma consolidated financial statements set forth in Appendix G (Unaudited Pro Forma Consolidated Financial Statements of U.S. Gold) to this prospectus.
 
We have not had complete access to the non-public books and records of Coral Gold. As a result, some of the historical financial information regarding Coral Gold used by us in the preparation of this summary has been derived from the publicly filed documents of Coral Gold. Although we have no reason to doubt the accuracy or completeness of Coral Gold’s publicly filed documents or of the financial data it has provided to us for purposes of preparing the following unaudited pro forma consolidated financial data, we are not in a position to independently assess or verify that information, including its financial statements. See the section entitled “Risk Factors — We have been unable to independently verify the reliability of information in this prospectus regarding White Knight, Coral Gold, Nevada Pacific and Tone Resources” on page 22 of this prospectus. This summary data should be read together with the unaudited pro forma consolidated financial statements as at and for the six months ended June 30, 2006 and for the year ended December 31, 2005 included in Appendix G (Unaudited Pro Forma Consolidated Financial Statements of U.S. Gold) and in Appendix H (Unaudited Pro Forma Consolidated Supplementary Financial Statements of U.S. Gold), which are incorporated into and form part of this prospectus.
 
Data for Canadian Exchange Co. has not been included because it had not yet been formed and did not conduct business during any of the periods discussed below.


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U.S. Gold and Coral Gold
Summary Selected Unaudited Pro Forma
Consolidated Financial Data
 
                 
    Year Ended
 		    Six Months Ended
 		 
    December 31,
 		    June 30,
 		 
U.S. GAAP
  2005     2006  
    ($ in thousands except per share data)  
 
Operating data
               
Other revenue
  $ 1,049     $ 545  
Net loss from operations before cumulative-effect gain on accounting change
  $ (4,430 )   $ (68,614 )
Net loss
  $ (4,430 )   $ (68,614 )
Basic and diluted loss per share
  $ (0.15 )   $ (1.83 )
Weighted average shares
    30,137,668       37,503,251  
Balance sheet data
               
Cash, cash equivalents and short term investments
          $ 34,218  
Inventories
            0  
Property, plant and equipment
            105  
Mineral properties and deferred exploration costs
            33,617  
Other assets
            46,861  
Total assets
          $ 114,801  
Current liabilities
          $ 5,061  
Long-term obligations
            10  
Other long-term liabilities and deferred gain
            144,590  
Shareholders’ equity
          $ (34,860 )
Total liabilities and shareholders’ equity
          $ 114,801  


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Summary Selected Unaudited Pro Forma Consolidated Supplementary Financial Data for U.S. Gold and White Knight, Coral Gold, Nevada Pacific and Tone Resources
 
The following summary selected unaudited pro forma consolidated supplementary financial data has been prepared to give effect to all of our proposed acquisitions of White Knight, Coral Gold, Nevada Pacific and Tone Resources as if all of them had been completed on January 1, 2005.
 
The selected unaudited pro forma consolidated financial data presented below are presented in accordance with U.S. GAAP and in U.S. dollars and are constructed as a result of each of the target companies having different fiscal year ends than U.S. Gold. The selected unaudited pro forma consolidated financial data presented below are for illustrative purposes only and are not necessarily indicative of the actual operating results or financial position that would have resulted if we and any or all of the target companies had combined at the beginning of the periods presented, nor is it necessarily indicative of any future operating results or financial position of U.S. Gold if combined with one or more of the target companies. To construct the pro forma financial information, we allocated the proposed purchase price of each target company using our best estimates of fair value. These estimates are based on the most recently available information. To the extent there are significant changes to the businesses of any of the target companies, the assumptions and estimates reflected herein could change significantly. Accordingly, the purchase accounting adjustments reflected in the unaudited pro forma consolidated financial data below are preliminary and subject to change. In addition, the selected unaudited pro forma consolidated financial data presented below does not reflect any potential operating efficiencies resulting from the acquisitions. For additional information concerning the basis of presentation of the pro forma consolidated financial information, see the notes to the unaudited pro forma consolidated financial statements set forth in Appendix H (Unaudited Pro Forma Consolidated Supplementary Financial Statements of U.S. Gold) to this prospectus.
 
We have not had complete access to the non-public books and records of White Knight, Coral Gold, Nevada Pacific and Tone Resources. As a result, some of the historical financial information regarding White Knight, Coral Gold, Nevada Pacific and Tone Resources used by us in the preparation of this summary has been derived in part from the publicly filed documents of White Knight, Coral Gold, Nevada Pacific and Tone Resources. In addition, because the target companies have different fiscal year ends than U.S. Gold, and their respective financial statements are prepared in accordance with Canadian GAAP and, with the exception of Nevada Pacific, in Canadian dollars, we have prepared the following unaudited pro forma financial data in U.S. dollars and in accordance with U.S. GAAP based on quarterly financial data, including reconciliations from Canadian GAAP to U.S. GAAP, provided to us by White Knight, Coral Gold, Nevada Pacific and Tone Resources. Although we have no reason to doubt the accuracy or completeness of the publicly filed documents of White Knight, Coral Gold, Nevada Pacific and Tone Resources or of the financial data they have provided to us for purposes of preparing the following unaudited pro forma consolidated financial data, we are not in position to independently assess or verify that information, including any financial statements. See the section entitled “Risk Factors — We have been unable to independently verify the reliability of information in this prospectus regarding White Knight, Coral Gold, Nevada Pacific and Tone Resources” on page 22 of this prospectus.
 
This summary data should be read together with our unaudited pro forma consolidated supplementary financial statements as at December 31, 2005 and for the year then ended, and as at June 30, 2006, included in Appendix H (Unaudited Pro Forma Consolidated Supplementary Financial Statements of U.S. Gold), which are incorporated into and form part of the prospectus.
 
Data for Canadian Exchange Co. has not been included because it had not yet been formed and did not conduct business during any of the periods discussed below.


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Unaudited Pro Forma
Consolidated Supplementary
for U.S. Gold and White Knight, Coral Gold,
Nevada Pacific and Tone Resources
 
                 
    Year Ended
 		    Six Months Ended
 		 
    December 31,
 		    June 30,
 		 
U.S. GAAP
  2005     2006  
    ($ in thousands except per share data)  
 
Operating data
               
Mining revenue
  $ 8,881     $ 2,943  
Other revenue
  $ 1,511     $ 743  
Net loss from operations before cumulative-effect gain on accounting change
  $ (12,407 )   $ (75,588 )
Net loss
  $ (12,407 )   $ (75,588 )
Basic and diluted loss per share
  $ (0.17 )   $ (0.95 )
Weighted average shares
    71,858,117       79,223,700  
Balance sheet data
               
Cash, cash equivalents and short term investments
          $ 51,263  
Inventories
            394  
Property, plant and equipment
            9,591  
Mineral properties and deferred exploration costs
            379,528  
Other assets
            47,793  
Total assets
          $ 488,569  
Current liabilities
          $ 20,776  
Long-term obligations
            10  
Other long-term liabilities and deferred gain
            222,478  
Shareholders’ equity
          $ 245,305  
Total liabilities and shareholders’ equity
          $ 488,569  


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Unaudited Historical and Pro Forma Comparative Per Share Information
 
The following tables summarize unaudited per share information for U.S. Gold and Coral Gold separately on a historical basis and on an equivalent unaudited pro forma consolidated basis to give effect to our acquisition of Coral Gold as if it had been completed on January 1, 2005. This information should be read in conjunction with:
 
  •  Our audited consolidated financial statements included in our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005 and our unaudited consolidated interim financial statements included in our Quarterly Report on Form 10-QSB/A for the quarter ended June 30, 2006;
 
  •  Coral Gold’s audited consolidated financial statements for the fiscal year ended January 31, 2006 included in Appendix B (Financial Statements of Coral Gold);
 
  •  Our unaudited pro forma consolidated financial statements as at December 31, 2005 and for the year then ended included in Appendix G (Unaudited Pro Forma Consolidated Financial Statements of U.S. Gold); and
 
  •  Our unaudited pro forma consolidated supplementary financial statements as at December 31, 2005 and June 30, 2006, and for the year and interim period then ended, respectively, included in Appendix H (Unaudited Pro Forma Consolidated Supplementary Financial Statements of U.S. Gold).
 
Each of the above is incorporated into and forms part of the prospectus. See the section entitled “Incorporation by Reference of Certain Documents and Information of U.S. Gold for U.S. Shareholders” on page v of this prospectus.
 
The pro forma information is presented for illustrative purposes only and is not necessarily indicative of the actual operating results or financial position that would have resulted if we and Coral Gold, or we and any or all of the target companies had combined at the beginning of the period presented, nor is it necessarily indicative of the future operating results or financial position of the combined company. The historical book value per share is computed by dividing total shareholders’ equity by the number of shares outstanding at the end of the period. The unaudited pro forma consolidated income per share is computed by dividing the unaudited pro forma consolidated income from continuing operations available to holders of common stock by the unaudited pro forma consolidated weighted average number of shares outstanding. The unaudited pro forma consolidated book value per share is computed by dividing total unaudited pro forma consolidated shareholders’ equity by the unaudited pro forma consolidated number of common stock outstanding at the end of the period. The historical per share information of U.S. Gold and Coral Gold was derived from our and Coral Gold’s respective historical annual financial statements and are constructed as a result of Coral Gold having a different fiscal year end and interim period than U.S. Gold.
 
We have not had complete access to the non-public books and records of Coral Gold. We have, however, obtained the information contained in or incorporated herein relating to Coral Gold from Coral Gold and from publicly available sources. Although we have no reason to doubt the accuracy or completeness of the public filings of Coral Gold, we are not in a position to independently assess or verify that information, including any financial statements. See the section entitled “Risk Factors — We have been unable to independently verify the reliability of information in this prospectus regarding White Knight, Coral Gold, Nevada Pacific and Tone Resources” on page 22 of this prospectus.


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    Six Months Ended
 		    Year Ended
 		 
    June 30,
 		    December 31,
 		 
    2006     2005  
 
U.S. Gold — Historical
               
Historical per common share:
               
Income per basic share
  $ (1.98 )   $ (0.12 )
Income per diluted share
  $ (1.98 )   $ (0.12 )
Dividends declared
  $ 0     $ 0  
Book value per share
  $ (1.89 )   $ 0.08  
 
                 
    Six Months Ended
 		    Year Ended
 		 
    July 31,
 		    January 31,
 		 
    2006     2006  
 
Unaudited Coral Gold — Historical (Canadian GAAP and Cdn$)                
Historical per common share:
               
Income per basic share
  $ (0.09 )   $ (0.64 )
Income per diluted share
  $ (0.09 )   $ (0.64 )
Dividends declared
  $ 0     $ 0  
Book value per share
  $ 1.98     $ 1.79  
 
                 
    Six Months Ended
 		    Year Ended
 		 
    June 30,
 		    December 31,
 		 
    2006     2005  
 
Unaudited Pro Forma Condensed Combined U.S. Gold and Coral Gold (U.S. GAAP)                
Unaudited pro forma condensed combined per common share of U.S. Gold:
               
Income per basic share
  $ (1.83 )   $ (0.15 )
Income per diluted share
  $ (1.83 )   $ (0.15 )
Dividends declared
  $ 0     $ 0  
Book value per share
  $ (0.93 )   $ —  
 
                 
    Six Months Ended
 		    Year Ended
 		 
    June 30,
 		    December 31,
 		 
    2006     2005  
 
Unaudited Pro Forma Condensed Combined U.S. Gold and White Knight, Coral Gold, Tone Resources and Nevada Pacific (U.S. GAAP)                
Unaudited pro forma condensed combined per common share of U.S. Gold:
               
Income per basic share
  $ (0.95 )   $ (0.17 )
Income per diluted share
  $ (0.95 )   $ (0.17 )
Dividends declared
  $ 0     $ 0  
Book value per share
  $ 3.10     $ —  


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Currency Exchange Rates
 
The following table sets forth the rate of exchange for one U.S. dollar expressed in Canadian dollars, for each period indicated: (i) the exchange rate at the end of the period; (ii) the average rate; and (iii) the high and low rates for each year. For the purposes of this section, rate of exchange means the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York.
 
                                                         
    Six Months
 		       
    Ended
 		       
    June 30,     Year Ended December 31,  
    2006     2005     2005     2004     2003     2002     2001  
                (Cdn$)  
 
High rate during year
  $ —     $ —     $ 1.2703     $ 1.3970     $ 1.5750     $ 1.6128     $ 1.5849  
Low rate during year
    —       —       1.1560       1.1775       1.2923       1.5108       1.4933  
Rate at end of period
    1.1150       1.2256       1.1656       1.2034       1.2923       1.5800       1.5925  
Average rate for period
    1.1311       1.2354       1.2083       1.2984       1.3916       1.5702       1.5519  
 
On March 3, 2006, the last trading day before the announcement of our proposed business combination with Coral Gold, the exchange rate for one U.S. dollar expressed in Canadian dollars was Cdn$1.1352. On November 10, 2006, the most recent trading day practicable before the filing of this prospectus, the exchange rate for one U.S. dollar expressed in Canadian dollars was Cdn$1.1361. The table below sets forth the high and low exchange rate for one U.S. dollar expressed in Canadian dollars for each month during the past six months preceding the date of this offer.
 
                 
    High     Low  
    (Cdn$)  
 
May 2006
    1.1233       1.0989  
June 2006
    1.1240       1.0991  
July 2006
    1.1514       1.1112  
August 2006
    1.1312       1.1078  
September 2006
    1.1272       1.1056  
October 2006
    1.1384       1.1154  
November 1, 2006 to November 10, 2006
    1.1361       1.0989  
 
Comparative Market Data
 
The Coral Gold common shares are currently traded on the TSX-V under the symbol “CGR” and quoted on the OTCBB under the symbol “CGREF.” Our common stock is listed on the TSX under the symbol “UXG” and quoted on the OTCBB under the symbol “USGL.” The following table sets forth the closing prices of the Coral Gold common shares as reported on the TSX-V and the OTCBB and shares of our common stock as reported on the TSX and the OTCBB on (1) March 3, 2006, the last trading day preceding the public announcement of the proposed business combination with Coral Gold and (2) November 10, 2006, the most recent trading day practicable before the filing of this prospectus. Our common stock first began trading on the TSX on August 30, 2006.
 
                                                 
    TSX-V   OTCBB   TSX
    March 3,
 		  November 10,
 		  March 3,
 		  November 10,
 		  March 3,
 		  November 10,
Issuer
  2006   2006   2006   2006   2006   2006
    (Cdn$)   ($)   (Cdn$)
 
                                                 
Coral Gold
  $ 3.25     $ 3.62     $ 2.85     $ 3.20     $  —     $ —  
U.S. Gold
    —       —       5.65       5.00       —       5.69  


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Comparative Per Share Market Price and Dividend Information
 
The following table sets forth, for each of the calendar quarters ending on the dates indicated, the reported high and low sales prices per share, and the average daily trading volumes, reported by the TSX-V, the TSX and the OTCBB, as applicable. Neither we nor Coral Gold declared dividends on our respective shares during these periods.
 
Data for Canadian Exchange Co. has not been included because it had not yet been formed and did not conduct business during any of the periods discussed below. Our common stock began trading on the TSX on August 30, 2006.
 
                                                                                                 
    U.S. Gold
 		    U.S. Gold
 		    Coral Gold
 		    Coral Gold
 		 
    OTCBB     TSX     OTCBB     TSX-V  
                Avg.
 		                Avg.
 		                Avg.
 		                Avg.
 		 
                Daily
 		                Daily
 		                Daily
 		                Daily
 		 
    High     Low     Volume     High     Low     Volume     High     Low     Volume     High     Low     Volume  
    ($)     (Cdn$)     ($)     (Cdn$)  
 
2004
                                                                                               
March 31
  $ 1.85     $ 0.81       77,486     $ —     $ —       —     $ 0.42     $ 0.22       6,053     $ 0.55     $ 0.29       9,757  
June 30
    1.06       0.61       42,638       —       —       —       0.29       0.13       4,149       0.36       0.19       6,338  
September 30
    0.75       0.40       44,432       —       —       —       1.30       0.14       6,042       1.70       0.19       10,517  
December 31
    0.57       0.40       24,155       —       —       —       1.60       0.90       8,748       1.95       1.12       7,381  
2005
                                                                                               
March 31
    0.44       0.37       44,061       —       —       —       2.00       0.92       5,807       2.40       1.12       6,743  
June 30
    0.60       0.30       24,751       —       —       —       1.49       1.06       3,112       1.89       1.31       2,480  
September 30
    2.82       0.35       304,298       —       —       —       1.78       1.08       5,874       2.10       1.31       6,079  
December 31
    3.96       1.94       243,627       —       —       —       3.63       0.76       19,001       4.17       0.90       17,600  
2006
                                                                                               
March 31
    9.09       3.48       276,535       —       —       —       5.45       2.61       31,020       6.34       3.06       20,318  
June 30
    10.30       5.75       310,081       —       —       —       5.96       2.55       19,630       6.99       2.87       16,125  
September 30
    9.20       3.95       242,550       7.50       4.48       18,005       4.05       2.75       6,482       4.29       3.08       11,362  
Through November 10
    5.45       4.05       307,019       6.40       4.61       17,928       3.48       2.51       5,023       3.95       3.02       9,576  
 
Investment Considerations
 
We believe that the consideration offered for the Coral Gold common shares under the offer is fair. You are urged to consider the following factors in making your decision to accept the offer:
 
(i) the consideration offered represents a premium for Coral Gold shareholders of approximately 25% based on the closing prices of Coral Gold common shares on the OTCBB and the shares of common stock of U.S. Gold on the OTCBB on March 3, 2006, the last trading day prior to the announcement of this offer, and a premium for Coral Gold shareholders of approximately -1.0% based on the closing prices of Coral Gold common shares on the TSX-V and the shares of common stock of U.S. Gold on the TSX on November 10, 2006, the most recent trading day practicable before the filing of this prospectus;
 
(ii) we believe that there are significant benefits to bringing together U.S. Gold with Coral Gold and with the three other target companies exploring in the Cortez Trend in Nevada;
 
(iii) the liquidity and trading price of the Coral Gold common shares may be adversely affected if we are not successful in acquiring 100% of the Coral Gold common shares; and
 
(iv) the Coral Gold common shares may fail to meet the criteria for continued listing on the TSX-V even if we are not successful in acquiring 100% of the outstanding Coral Gold common shares.
 
Additional factors we urge you to consider when determining whether to accept the offer are set forth in the section entitled “Investment Considerations” on page 60 of this prospectus.


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Income Tax Considerations
 
Material Canadian Federal Income Tax Considerations
 
The disposition of Coral Gold common shares (and ancillary rights as defined in the section entitled “Material Canadian Federal Income Tax Considerations — Receipt of Ancillary Rights” on page 64 of this prospectus) in the offer may be a taxable event to a Canadian resident Coral Gold shareholder. However, a Canadian resident Coral Gold shareholder who disposes of his or her Coral Gold common shares for consideration that includes exchangeable shares (and ancillary rights) and who makes a valid tax election with Canadian Exchange Co. and files such election in prescribed form and within the prescribe time may obtain a full or partial tax deferral (rollover) of any capital gains otherwise arising upon the disposition of those shares. A Coral Gold shareholder who is not a Canadian resident and for which the Coral Gold common shares is not “taxable Canadian property” will not be subject to tax under the Tax Act on the disposition of those shares.
 
The exchangeable shares may be “qualified investments” for Registered Retirement Savings Plans, Registered Retirement Income Funds, Deferred Profit Sharing Plans and Registered Education Savings Plans for Canadian income tax purposes provided they are listed on a “prescribed stock exchange” (which currently includes the TSX and AMEX).
 
A more detailed description of the Canadian federal income tax consequences of the offer is set forth below under the heading “Material Canadian Federal Income Tax Considerations” on page 63 of this prospectus. Coral Gold’s Canadian resident shareholders should be aware that the Canadian federal income tax consequences of the offer may depend upon their own individual situations, and that participating in the offer may subject them to federal, provincial or foreign tax consequences that are not discussed in this prospectus. You are urged to consult your own tax advisor for a full understanding of the tax consequences of participating in the offer.
 
Material U.S. Federal Income Tax Considerations
 
The offer is structured with the intent to qualify as a tax-deferred exchange under Sections 368 or 351 of the U.S. Internal Revenue Code of 1986, as amended, referred to herein as the “Code,” provided that certain conditions and requirements are met. However, in its Forms 20-F filed with the U.S. Securities and Exchange Commission, Coral Gold has stated that it believes that it has been and continues to be a “passive foreign investment company” or “PFIC” within the meaning of Section 1297 of the Code. We have not verified whether this is the case. If Coral Gold is a PFIC, a U.S. shareholder of Coral Gold who has not made certain elections under the PFIC rules will be subject to tax under a special tax regime applicable to PFICs on gain realized with respect to the exchange of such shareholder’s Coral Gold shares for exchangeable shares and will not be eligible for tax-deferred treatment. Moreover, there is no direct authority addressing the proper characterization of instruments similar to the exchangeable shares and the exchange of common stock for exchangeable shares for U.S. federal income tax purposes. As a result, there is uncertainty concerning the treatment of the exchange of Coral Gold common shares. No rulings from the U.S. Internal Revenue Service or opinions of counsel will be requested in connection with the offer on the U.S. tax consequences of the offer.
 
You should be aware that the U.S. federal income tax consequences of the offer may depend upon your own individual situation, including your situation with respect to the PFIC rules, and that participating in the offer may subject you to state, local or foreign tax consequences that are not discussed in this prospectus. You are urged to consult your own tax advisor for a full understanding of the tax consequences of participating in the offer. See the section entitled “Material U.S. Federal Income Tax Considerations — U.S. Federal Income Tax Consequences to U.S. Holders of Coral Gold Common Shares” on page 74 of this prospectus.
 
Comparison of Shareholder Rights
 
The governing documents and laws of the respective jurisdictions of incorporation of U.S. Gold and Coral Gold vary; therefore, holders of Coral Gold common shares who tender their shares in the offer will have different rights once they become our shareholders or holders of exchangeable shares. See the section entitled “Comparison of Shareholder Rights” on page 81 of this prospectus.


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No Coral Gold Shareholder Vote Required
 
Because we are offering to purchase Coral Gold’s common shares directly from Coral Gold’s shareholders, there is no vote required of either Coral Gold’s board of directors or shareholders to complete this offer. A subsequent vote of Coral Gold’s board and shareholders may be required for any subsequent acquisition transaction that is effected after the closing of the offer. At that time we would control the vote of Coral Gold’s shareholders necessary to effect any subsequent transaction requiring approval by Coral Gold’s shareholders. In that event, Coral Gold’s remaining shareholders would be entitled to dissenter’s rights as described under the section entitled “The Offer — Dissenters’ Rights” on page 53 of this prospectus.
 
Valuation Requirements for Insider Bids
 
The offer is an “insider bid” within the meaning of applicable Canadian securities legislation by virtue of Robert R. McEwen’s equity interests in both U.S. Gold and Coral Gold. As a result, a formal valuation of the Coral Gold common shares and of the exchangeable shares being offered in exchange for them is required. A special committee of the board of directors of Coral Gold engaged Ross Glanville and Associates Ltd. and Bruce McKnight Minerals Advisor Service to jointly prepare a formal valuation of the Coral Gold common shares. Under applicable Canadian securities legislation, the formal valuation would be required as of an effective date that is not more than 120 days before the date of the offer. See the section entitled “Valuation Requirements for Insider Bids” on page 90 of this prospectus.
 
Regulatory Matters
 
Our obligation to accept for purchase and pay for Coral Gold common shares tendered in the offer is conditioned upon obtaining all governmental or regulatory consents or approvals that U.S. Gold, in its sole discretion, views as necessary or desirable to enable us to consummate the offer, on terms and conditions satisfactory to us. See the section entitled “Regulatory Matters” on page 90 of this prospectus.
 
Accounting Treatment
 
If consummated, the transactions described in this prospectus will be accounted for as a purchase transaction, with U.S. Gold as the acquirer of Coral Gold. See the section entitled “Accounting Treatment” on page 91 of this prospectus.


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RISK FACTORS
 
An investment in shares of our common stock or the exchangeable shares of Canadian Exchange Co. involves certain risks. You should consider the following discussion of risks in addition to the other information in this prospectus before depositing and exchanging your common shares of Coral Gold. In addition to historical information, the information in this prospectus contains “forward-looking” statements about U.S. Gold’s future business and performance, as described above in “Forward-Looking Statements.” Our actual future business, operating results, financial performance and the price of our common stock or the exchangeable shares of Canadian Exchange Co. may be very different from what we expect as of the date of this prospectus. The risks below address some of the specific risks and uncertainties relating to the offer, the subsequent acquisitions we have planned if all of the conditions set forth in the section entitled “Conditions of the Offer” are satisfied, the proposed integration of U.S. Gold and Coral Gold, and the receipt and ownership of shares of common stock of U.S. Gold or exchangeable shares of Canadian Exchange Co. You should also consider the risk factors set forth in U.S. Gold’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005, which is incorporated into and forms part of the prospectus. See the section entitled “Incorporation by Reference of Certain Documents and Information of U.S. Gold for U.S. Shareholders” on page v of this prospectus.
 
Business Combination Risks
 
Shareholders may receive securities with a market value lower than they expected.
 
If you tender your Coral Gold common shares and we accept those shares for purchase, you will receive 0.63 of an exchangeable share of Canadian Exchange Co. for each of your shares. The exchangeable shares of Canadian Exchange Co. will be exchangeable for shares of common stock of U.S. Gold on a one-for-one basis and are expected to be roughly equal in value to shares of U.S. Gold common stock. Based on the closing prices of Coral Gold common shares on the OTCBB and the shares of common stock of U.S. Gold on the OTCBB on March 3, 2006, the last trading day prior to the announcement of this offer, the value of the exchangeable shares of Canadian Exchange Co. being offered for your shares represented a premium of approximately 25%. Based on the closing prices of Coral Gold common shares on the TSX-V and the shares of common stock of U.S. Gold on the TSX on November 10, 2006, the most recent trading day practicable before the filing of this prospectus, the value of the exchangeable shares of Canadian Exchange Co. being offered for your shares represented a premium of approximately -1.0%. However, if the market price of U.S. Gold common stock declines before we accept your shares for purchase, the value of the consideration you will receive for your shares of Coral Gold will decline as well. The market price of our common stock may decline as a result of changes in, or market perceptions of changes in, the business, operations or prospects of U.S. Gold, market assessments of the likelihood we will be successful in completing the transactions described in this prospectus, regulatory considerations, general market and economic conditions and other factors over which we have no control.
 
If we are not successful in acquiring 100% of the common shares of Coral Gold, the liquidity and trading price of Coral Gold common shares not held by us may decline.
 
Our acquisition of any of the Coral Gold common shares will reduce the number of publicly-traded Coral Gold shares and the number of Coral Gold shareholders. Depending on the number of Coral Gold shares that we successfully purchase in this offer, between the period that we accept the shares tendered under this offer for purchase and the time we complete the subsequent transactions that will make Coral Gold a wholly-owned subsidiary of U.S. Gold, the liquidity and market value of the Coral Gold shares that we do not own would likely decrease.
 
The exchange of your common shares in the offer could be taxable to U.S. holders of Coral Gold common shares.
 
We have structured our offer with the intent that the exchange of your Coral Gold common shares for exchangeable shares of Canadian Exchange Co. will qualify as a tax-deferred exchange under Sections 368 or 351 of the Code for U.S. federal income tax purposes. There is, however, no authority or guidance from the Internal Revenue Service addressing the particular structure of the transaction. In addition, based upon its public filings,


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Coral Gold believes that it is a passive foreign investment company, referred to as a “PFIC,” under Section 1297 of the Code for U.S. federal income tax purposes. We have not, however, independently assessed or verified Coral Gold’s PFIC status. If Coral Gold is considered to be a PFIC, a U.S. shareholder of Coral Gold who has not made certain elections under the PFIC rules will be subject to tax on gain realized with respect to the exchange of such U.S. shareholder’s Coral Gold shares for exchangeable shares under a special tax regime applicable to PFICs and will not be eligible for tax-deferred treatment. You should be aware that the U.S. federal income tax consequences of the offer may depend upon your individual situation, including your situation with respect to the PFIC rules, and that participating in the offer may subject you to state, local or foreign tax consequences that are not discussed in this prospectus. We strongly urge you to consult your tax advisor for advice on the tax implications of the exchange of your shares of Coral Gold common shares for exchangeable shares of Canadian Exchange Co.
 
In the event Canadian Exchange Co. waives its right to withdraw or extend the offer where less than 80% of the issued and outstanding Coral Gold common shares are validly accepted for purchase or otherwise fails to obtain 80% of the issued and outstanding Coral Gold common shares for exchangeable shares, the offer will fail to qualify as a tax-deferred reorganization and the exchange will be taxable to U.S. holders of Coral Gold common shares.
 
The offer is subject to a number of closing conditions, which may be waived by us and Canadian Exchange Co., including that at least the greater of (i) 662/3% of Coral Gold common shares deemed outstanding on a fully-diluted basis or (ii) 80% of the issued and outstanding Coral Gold common shares shall have been validly deposited at the time the Coral Gold common shares are accepted for purchase under the offer. One of the requirements that must be satisfied in order for an exchange of shares pursuant to the offer to qualify as a tax-deferred reorganization is that the Canadian Exchange Co. must acquire ownership of at least 80 percent of Coral Gold shares solely for voting stock. If Canadian Exchange Co. accepts the shares tendered pursuant to the offer but obtains ownership of less than 80 percent of Coral Gold stock, the exchange of Coral Gold shares for exchangeable shares will not qualify as a tax-deferred reorganization for U.S. shareholders of Coral Gold and U.S. shareholders of Coral Gold shareholders will be required to recognize gain if, any, realized from the consummation of the offer.
 
If enough Coral Gold shareholders sell their shares to us, publicly available information about Coral Gold may decrease.
 
After our purchase of Coral Gold shares in connection with this offer, the number of Coral Gold shareholders may be significantly reduced. If the number of Coral Gold shareholders is sufficiently reduced, Coral Gold may no longer be required to comply with the public reporting requirements under applicable securities legislation in any country or province. If Coral Gold is no longer required to comply with public reporting requirements, the information you receive about Coral Gold will be reduced, which could impact your ability to make an investment decision regarding the Coral Gold shares.
 
Coral Gold shares may fail to meet the criteria for continued listing on the TSX-V even if we are unsuccessful in acquiring 100% of the outstanding Coral Gold shares.
 
Coral Gold is currently listed on the TSX-V. The rules and regulations of the TSX-V establish certain criteria that, if not met, could lead to the delisting of shares from the TSX-V. Among such criteria are the number of shareholders of the listed company, the number of the listed company’s shares that are publicly held and the aggregate market value of the listed company’s shares that are publicly held. Depending on the number of Coral Gold shareholders that deposit Coral Gold shares and the number of Coral Gold shares we acquire, it is possible that following the completion of this offer and prior to the time that a subsequent acquisition transaction makes Coral Gold a wholly-owned subsidiary of U.S. Gold, the Coral Gold shares would fail to meet the criteria for continued listing on the TSX-V. If this were to happen, Coral Gold shares could be delisted from the TSX-V and this could, in turn, adversely affect the market or result in a lack of an established market for those shares. We intend to cause Coral Gold to apply to delist the Coral Gold common shares from the TSX-V as soon as practicable after the successful completion of this offer and a subsequent acquisition transaction of Coral Gold.


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We have been unable to independently verify the reliability of information about White Knight, Coral Gold, Nevada Pacific and Tone Resources contained in this prospectus.
 
We have not had complete access to the non-public books and records of White Knight, Coral Gold, Nevada Pacific or Tone Resources. As a result, all historical information regarding White Knight, Coral Gold, Nevada Pacific and Tone Resources contained in this prospectus, including all historical financial information used in connection with the preparation of the pro forma financial information reflecting the pro forma effects of a combination of (i) U.S. Gold and Coral Gold and (ii) U.S. Gold and all of White Knight, Coral Gold, Nevada Pacific and Tone Resources, has been derived from publicly-available documents and certain information the target companies have provided to us. We have no reason to doubt the accuracy or completeness of these publicly-available documents or other information. Nevertheless, there could be inaccuracies or material omissions in the publicly-available or other information about or relating to White Knight, Coral Gold, Nevada Pacific or Tone Resources. If there are such inaccuracies or material omissions, this prospectus may also contain inaccuracies or material omissions, which could result in unanticipated liabilities or expenses for us, and may increase the cost of integrating the companies. This would likely adversely affect the operational plans of the combined company and its results of operations and financial condition.
 
After the consummation of the offer, Coral Gold would become a majority-owned subsidiary of U.S. Gold and our interests as a majority shareholder could differ from yours.
 
After the consummation of the offer, we expect to own a sufficient number of Coral Gold common shares so that we would have the power to elect the directors, appoint new management, approve certain actions requiring the approval of Coral Gold shareholders, including adopting certain amendments to Coral Gold’s organizational and governing documents and approving mergers or sales of Coral Gold’s assets. In particular, after the consummation of the offer we intend to acquire all of the Coral Gold common shares not deposited under the offer in a subsequent acquisition transaction, or, if a subsequent acquisition transaction is not available, to integrate Coral Gold and U.S. Gold by merger or other transaction whereby the operations of Coral Gold and U.S. Gold are combined. Our interests with respect to Coral Gold may differ from those of any remaining minority shareholders.
 
Change of control provisions in agreements triggered upon the acquisition of White Knight, Coral Gold, Nevada Pacific or Tone Resources may lead to adverse business or financial consequences.
 
Any of White Knight, Coral Gold, Nevada Pacific or Tone Resources may be a party to agreements that contain change of control provisions that may be triggered following our acquisition of the majority of the common shares of those companies. These change of control provisions, if triggered and not waived by any beneficiaries of those provisions, could result in termination of an agreement or in unanticipated expenses following our acquisition of shares of the relevant company and could adversely affect that company’s results of operations and financial condition. As mentioned above, we have not had complete access to the non-public books and records of White Knight, Coral Gold, Nevada Pacific or Tone Resources and do not know whether there are any change of control agreements or provisions in the agreements of the target companies, or the magnitude of payments or expenses or other adverse consequences, if any.
 
We may not be successful in completing the strategic offers described in this prospectus.
 
We are unable to predict when, if ever, our acquisitions of White Knight, Coral Gold, Tone Resources and Nevada Pacific will be completed. Further, management of one or more of the target companies may resist our efforts to complete those acquisitions. In addition, our current estimates of the value of these entities is based only on publicly available information, and we may determine through due diligence investigation of any or all of the target companies that acquiring one or more of them would be less advantageous than we currently believe. As a result of these or other factors, we may choose to terminate our acquisition efforts with, or be unable for other reasons to complete our acquisition of, one or more of the target companies. If we do not consummate the acquisition of one or more of those companies, the benefits of the acquisitions described in this prospectus may not be realized.


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The integration of any target companies that we acquire will present significant challenges and may disrupt and adversely impact our business or may not occur as planned.
 
The offer for your Coral Gold common shares described in this prospectus has been made with the expectation that its successful completion will result in improved operations by taking advantage of the synergies of consolidation and enhanced growth opportunities of the combined company. These anticipated benefits will depend in part on whether U.S. Gold’s and Coral Gold’s operations can be integrated in an efficient and effective manner.
 
These integration efforts will require the dedication of management resources, which will temporarily divert attention from the day-to-day business of the combined company. Most operational and strategic decisions, and certain staffing decisions, with respect to the combined company have not yet been made. These decisions and the integration of the two companies will present challenges to management, including the integration of systems and personnel of the two companies, and special risks, including possible unanticipated liabilities, unanticipated costs, including costs associated with complying with regulatory requirements we are not currently subject to, and the loss of key employees. The process of combining the organizations may cause an interruption of, or a loss of momentum in, the activities of any or all of the combined company’s business, which could have an adverse effect on the revenues and operating results of the combined company for an indeterminate period of time. The failure to successfully complete this integration process may prevent us from achieving the anticipated potential benefits of any such acquisition. If we fail to realize the anticipated benefits of any acquisition, the market value of our stock may be adversely affected.
 
Our shareholders may not approve the matters on which our offer is conditioned.
 
Our offer to acquire your shares is conditioned upon the approval by U.S. Gold shareholders, voting at a special shareholders’ meeting, of proposals relating to the offer. Among these proposals are the authorization and issuance of a new class of preferred stock of U.S. Gold and approval of the issuance of the stock of U.S. Gold that will be used as consideration for your shares. These proposals will require the affirmative vote of the holders of a majority of the shares of common stock of U.S. Gold voting at the meeting where a quorum is present. Our shareholders may not approve these proposals. If any of these proposals are not approved, we would not waive this condition to our offer and we would have no obligation to purchase your shares. Although we are unaware of any specific reason our shareholders would not approve these proposals, we cannot predict the outcome of the shareholder vote.
 
We will incur substantial costs in connection with the proposed acquisitions even if they are never completed.
 
We expect to incur acquisition-related expenses of approximately $6.5 million, consisting of investment banking, legal and accounting fees and financial printing and other related charges in connection with the proposed acquisitions. These amounts are preliminary estimates and the actual amounts may be higher or lower. Moreover, we are likely to incur additional expenses in future periods in connection with the integration of any acquired company’s business with our business. Some of these expenses will be incurred even if we do not complete the proposed acquisitions.
 
Completion of one or more of the acquisitions would result in the issuance of a significant amount of additional U.S. Gold common stock which may in turn depress the trading price of our stock.
 
While no formal agreement has been reached with regard to the acquisition of one or more of the target companies, completion of one or more of those acquisitions would result in the issuance of a significant amount of our common stock. If all of the offers were completed on the terms currently proposed, of which there is no assurance, Canadian Exchange Co. would issue up to 46,520,683 exchangeable shares in consideration for the currently outstanding shares of the target companies, or up to 54,434,998 exchangeable shares if currently outstanding options and warrants of the target companies are exercised and the underlying common shares tendered in accordance with the offer. If all of the exchangeable shares that may be issued in the offers are exchanged for our common stock, it would represent an increase in the outstanding shares of U.S. Gold common stock of approximately 93% of the common stock we presently have outstanding, or 109% if all outstanding options


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and warrants of the target companies are exercised. The issuance of such a significant amount of common stock could depress the trading price of our common stock and you may lose all or a part of your investment.
 
Operational Risks
 
We will require significant additional capital to continue our exploration activities, and, if warranted, to develop mining operations.
 
Upon completion of any of the acquisitions of White Knight, Coral Gold, Nevada Pacific or Tone Resources, substantial expenditures will be required to establish proven and probable reserves through drilling and analysis, to develop metallurgical processes to extract metal or develop the mining and processing facilities and infrastructure at any of our newly-acquired properties or mine sites. We will be required to expend significant amounts for geological and geochemical analysis, assaying, and, if warranted, feasibility studies with regard to the results of our exploration. We may not benefit from these investments if we are unable to identify commercially exploitable mineralized material. If we are successful in identifying reserves, we will require significant additional capital to construct a mill and other facilities necessary to extract those reserves. Our ability to obtain necessary funding, in turn, depends upon a number of factors, including the state of the national and worldwide economy and the price of gold. We may not be successful in obtaining the required financing for these or other purposes on terms that are favorable to us or at all, in which case, our ability to continue operating would be adversely affected. Failure to obtain such additional financing could result in delay or indefinite postponement of further exploration and the possible, partial or total loss of our potential interest in certain properties.
 
The ongoing operations and past mining activities of the target companies are subject to environmental risks, which we will assume after our acquisition of those companies and which could expose us to significant liability and delay, suspension or termination of our operations.
 
All phases of the operations of the target companies are subject to federal, state and local environmental regulation. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Environmental legislation is evolving in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects, and a heightened degree of responsibility for companies and their officers, directors and employees. Future changes in environmental regulation, if any, may adversely affect our operations, make our operations prohibitively expensive, or prohibit them altogether. Environmental hazards may exist on the properties in which we may hold interests in the future, including the properties of the target companies, that are unknown to us at the present and that have been caused by us, one of the target companies, or previous owners or operators, or that may have occurred naturally. Under applicable federal and state environmental laws, prior property owners may be liable for remediating any damage that those owners may have caused. Mining properties that the target companies may have transferred may cause us to be liable for remediating any damage that those companies may have caused. The liability could include response costs for removing or remediating the release and damage to natural resources, including ground water, as well as the payment of fines and penalties.
 
We depend on a limited number of personnel and the loss of any of these individuals could adversely affect our business.
 
Our company is dependent on three persons, namely our Chairman and Chief Executive Officer, President and Chief Operating Officer and Vice President and Chief Financial Officer. Robert R. McEwen, our Chairman and Chief Executive Officer, is responsible for strategic direction and the oversight of our business. Ann S. Carpenter, our President and Chief Operating Officer, is responsible for company management and overseeing our exploration and regulatory compliance. William F. Pass, our Vice President and Chief Financial Officer, is responsible for our public reporting and administrative functions. We rely heavily on these individuals for the conduct of our business. The loss of any of our existing officers would significantly and adversely affect our business and our ability to realize the perceived benefits of the acquisitions of the target companies. In that event, we would be forced to identify and retain an individual to replace the departed officer. We may not be able to replace one or more of these individuals on terms acceptable to us. We have no life insurance on the life of any officer.


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The nature of mineral exploration and production activities involves a high degree of risk and the possibility of uninsured losses that could materially and adversely affect our operations.
 
Exploration for minerals is highly speculative and involves greater risk than many other businesses. Many exploration programs do not result in the discovery of mineralization, and any mineralization discovered may not be of sufficient quantity or quality to be profitably mined. Few properties that are explored are ultimately advanced to the stage of producing mines. Our current exploration efforts are, and any future development or mining operations we may elect to conduct will be, subject to all of the operating hazards and risks normally incident to exploring for and developing mineral properties, such as, but not limited to:
 
  •  economically insufficient mineralized material;
 
  •  fluctuations in production costs that may make mining uneconomical;
 
  •  labor disputes;
 
  •  unanticipated variations in grade and other geologic problems;
 
  •  environmental hazards;
 
  •  water conditions;
 
  •  difficult surface or underground conditions;
 
  •  industrial accidents;
 
  •  metallurgical and other processing problems;
 
  •  mechanical and equipment performance problems;
 
  •  failure of pit walls or dams;
 
  •  unusual or unexpected rock formations;
 
  •  personal injury, fire, flooding, cave-ins and landslides; and
 
  •  decrease in reserves due to a lower gold price.
 
Any of these risks can materially and adversely affect, among other things, the development of properties, production quantities and rates, costs and expenditures and production commencement dates. We currently have no insurance to guard against any of these risks. If we determine that capitalized costs associated with any of our mineral interests are not likely to be recovered, we would incur a writedown of our investment in these interests. All of these factors may result in losses in relation to amounts spent which are not recoverable.
 
We do not insure against all risks to which we may be subject in our planned operations.
 
While we currently maintain insurance to insure against general commercial liability claims, our insurance will not cover all of the potential risks associated with our operations. For example, we do not have insurance on the mill at our Tonkin Springs property and we do not have business interruption insurance. We may also be unable to obtain insurance to cover other risks at economically feasible premiums or at all. Insurance coverage may not continue to be available, or may not be adequate to cover liabilities. We might also become subject to liability for environmental, pollution or other hazards associated with mineral exploration and production which may not be insured against, which may exceed the limits of our insurance coverage or which we may elect not to insure against because of premium costs or other reasons. Losses from these events may cause us to incur significant costs that could materially adversely affect our financial condition and our ability to fund activities on our property. A significant loss could force us to reduce or terminate our operations.


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We will be required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 and any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have a material adverse effect on the price of our common stock.
 
Under Section 404 of the Sarbanes-Oxley Act of 2002, we expect that we will be required to furnish a report by our management on internal control over financial reporting for the fiscal year ending December 31, 2007. Such a report must contain, among other matters, an assessment of the effectiveness of our internal control over financial reporting, including a statement as to whether or not our internal control over financial reporting is effective. This assessment must include disclosure of any material weaknesses in our internal control over financial reporting identified by our management. This report must also contain a statement that our auditors have issued an attestation report on our management’s assessment of such internal control over financial reporting. While we believe our internal control over financial reporting is effective, we are still constructing the system and processing documentation and performing the evaluations needed to comply with Section 404, which is both costly and challenging. The completion of the acquisition transactions described in this prospectus and the subsequent integration of the target companies into our operations may make it more difficult for us to comply with Section 404. We may not be able to complete our evaluation, testing and required remediation, if any, in a timely fashion. If we are unable to assert that our internal control over financial reporting is effective, or if we disclose significant deficiencies or material weaknesses in our internal control over financial reporting, investors could lose confidence in the accuracy and completeness of our financial reports, which would have a material adverse effect on our stock price.
 
The laws of the State of Colorado and our Articles of Incorporation may protect our directors from certain types of lawsuits.
 
The laws of the State of Colorado provide that our directors will not be liable to us or our shareholders for monetary damages for all but certain types of conduct as directors of the company. Our articles of incorporation permit us to indemnify our directors and officers 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 shareholders from recovering damages against our directors caused by their negligence, poor judgment or other circumstances. The indemnification provisions may require us to use our limited assets to defend our directors and officers against claims, including claims arising out of their negligence, poor judgment, or other circumstances.
 
Market Risks
 
A market for the exchangeable shares may not develop.
 
Because the shares of Canadian Exchange Co. may be exchanged, under the circumstances described in this prospectus, for shares of our common stock on a one-for-one basis, the economic value of those shares should be closely linked to the trading value of our common stock. Nevertheless, there can be no assurance that the exchangeable shares of Canadian Exchange Co. will be valued similarly to our common stock. If an active trading market in the exchangeable shares of Canadian Exchange Co. does not develop, or if after the exchangeable shares of Canadian Exchange Co. are listed on the TSX and AMEX, the exchangeable shares do not continue to meet the listing requirements of the TSX and/or AMEX, the market price of those shares may decline. Furthermore, although the exchangeable shares of Canadian Exchange Co. are exchangeable for our common stock, under the circumstances described in this prospectus, for an equivalent number of shares of common stock of U.S. Gold, the exchangeable shares of Canadian Exchange Co. have no trading history and will be less widely held than our common stock. This may cause those shares to trade at a lower market price, or to be less liquid, than either the Coral Gold common shares or our common stock.
 
Fluctuating gold prices could negatively impact our business plan.
 
The potential for profitability of our gold mining operations and the value of our mining property, currently and following completion of any of the proposed acquisitions of the target companies, are directly related to the market price of gold. The price of gold may also have a significant influence on the market price of our common stock. If we obtain positive drill results and progress our property to a point where a commercial production decision can be


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made, our decision to put a mine into production and to commit the funds necessary for that purpose must be made long before any revenue from production would be received. A decrease in the price of gold at any time during future exploration and development may prevent our property from being economically mined or result in the writeoff of assets whose value is impaired as a result of lower gold prices. The price of gold is affected by numerous factors beyond our control, including inflation, fluctuation of the United States dollar and foreign currencies, global and regional demand, the purchase or sale of gold by central banks, and the political and economic conditions of major gold producing countries throughout the world.
 
During the last five years, the average annual market price of gold has ranged between $271 per ounce and $445 per ounce, as shown in the table below:
 
Average Annual Market Price of Gold
 
                                     
2001   2002   2003   2004   2005
 
$ 271     $ 310     $ 364     $ 406     $ 445  
 
Although it may be possible for us in the future to protect against some price fluctuations by hedging if we identify commercially minable reserves on our mining property, the volatility of mineral prices represents a substantial risk, which no amount of planning or technical expertise can fully eliminate. In the event gold prices decline and remain low for prolonged periods of time, we might be unable to develop our property or produce any revenue.
 
Our stock price may be volatile and as a result you could lose all or part of your investment.
 
In addition to volatility associated with over the counter securities in general, the value of your investment could decline due to the impact of any of the following factors upon the market price of our common stock:
 
  •  changes in the worldwide price for gold;
 
  •  disappointing results from our exploration or development efforts;
 
  •  failure to meet our revenue or profit goals or operating budget;
 
  •  decline in demand for our common stock;
 
  •  downward revisions in securities analysts’ estimates or changes in general market conditions;
 
  •  technological innovations by competitors or in competing technologies;
 
  •  investor perception of our industry or our prospects; and
 
  •  general economic trends.
 
In addition, stock markets generally have experienced extreme price and volume fluctuations and the market prices of securities generally have been highly volatile. These fluctuations are often unrelated to operating performance of a company and may adversely affect the market price of our common stock. As a result, investors may be unable to resell their shares at a fair price.
 
Risks Relating to Our Business
 
The feasibility of mining our property has not been established, meaning that we have not completed exploration or other work necessary to determine if it is commercially feasible to develop the property.
 
We are currently an exploration stage company. We have no proven or probable reserves on our property, and neither do Coral Gold or Tone Resources. A “reserve,” as defined by regulation of the SEC, is that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. A reserve requires a feasibility study demonstrating with reasonable certainty that the deposit can be economically extracted and produced. We have not carried out any feasibility study with regard to all or a portion of our Tonkin Springs property. As a result, we currently have no reserves and there are no assurances that we will be able to prove


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that there are reserves or probable reserves on our properties or any of the properties we will acquire if the transactions described in this prospectus are completed.
 
The mineralized material identified in the Cortez Trend does not and may never have demonstrated economic viability. Substantial expenditures are required to establish reserves through drilling and there is no assurance that reserves will be established. The feasibility of mining in the Cortez Trend has not been, and may never be, established. Whether a mineral deposit can be commercially viable depends upon a number of factors, including the particular attributes of the deposit, including size, grade and proximity to infrastructure; metal prices, which can be highly variable; and government regulations, including environmental and reclamation obligations. If we are unable to establish some or all of our mineralized material as proven or probable reserves in sufficient quantities to justify commercial operations, we may not be able to raise sufficient capital to develop a mine, even if one is warranted. If we are unable to establish such reserves, the market value of our securities may decline, and you may lose some or all of your investment.
 
We are dependent upon production of gold or other precious metals from a single property, have incurred substantial losses since our inception in 1979, and may never be profitable.
 
Unless the offer for one or more of the target companies is successful, we are dependent on our one existing property. Since our inception in 1979, we have not been profitable. As of June 30, 2006, our accumulated deficit was approximately $104 million. To become profitable, we must identify additional mineralization and establish reserves at our mining property, and then either develop our property or locate and enter into agreements with third party operators. It could be years before we receive any revenues from gold production, if ever. We may suffer significant additional losses in the future and may never be profitable. We do not expect to receive revenue from operations in the foreseeable future, if at all. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.
 
Historical production of gold at our Tonkin Springs property may not be indicative of the potential for future development or revenue.
 
Historical production of gold from our Tonkin Springs property came from relatively shallow deposits, and in very limited quantities for a very limited period of time. Although we intend to explore deeper zones in an effort to identify additional mineralized material, due to the uncertainties associated with exploration, including variations in geology and structure, there is no assurance that our efforts will be successful. Investors in our securities should not rely on our historical operations as an indication that we will ever place our mining property into commercial production again. We expect to incur losses unless and until such time as our property enters into commercial production and generates sufficient revenue to fund our continuing operations.
 
Our continuing reclamation obligations at the Tonkin Springs property could require significant additional expenditures.
 
We are responsible for the reclamation obligations related to disturbances located on the Tonkin Springs property. The current estimate of reclamation costs for existing disturbances on the property to the degree required by the Federal Bureau of Land Management (BLM) and Nevada Division of Environmental Protection is approximately $3.3 million. As required by applicable regulations, we currently have in place a cash bond in the amount of $3.1 million to secure the reclamation of the property and anticipate increasing that amount by approximately $376,000 upon approval of the revised reclamation plan filed in September and bonding associated with the property-wide exploration permit. Reclamation bond estimates are required to be updated every three years or prior to new disturbances taking place that are not already bonded. We updated the reclamation obligation during September 2006 as noted above. There is a risk that any cash bond, even if augmented upon update of the reclamation obligations, could be inadequate to cover the costs of reclamation which could subject us to additional costs for the actual reclamation obligations. The satisfaction of bonding requirements and continuing reclamation obligations will require a significant amount of capital. There is a risk that we will be unable to fund these additional bonding requirements, and further that the regulatory authorities may increase reclamation and bonding requirements to such a degree that it would not be commercially reasonable to continue exploration activities.


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Title to mineral properties can be uncertain, and we are at risk of loss of ownership of our property.
 
Our ability to explore and operate our property depends on the validity of title to that property. The mineral properties making up the Tonkin Springs property and the property of the target companies consist of leases of unpatented mining claims and unpatented millsite claims. Unpatented mining claims provide only possessory title and their validity is often subject to contest by third parties or the federal government, which makes the validity of unpatented mining claims uncertain and generally more risky. These uncertainties relate to such things as the sufficiency of mineral discovery, proper posting and marking of boundaries, assessment work and possible conflicts with other claims not determinable from descriptions of record. Since a substantial portion of all mineral exploration, development and mining in the United States now occurs on unpatented mining claims, this uncertainty is inherent in the mining industry. We have not obtained a title opinion on our entire property, and do not intend to obtain title opinions on any of the properties of the target companies, with the attendant risk that title to some claims, particularly title to undeveloped property, may be defective. There may be valid challenges to the title to our property which, if successful, could impair development and/or operations.
 
We remain at risk that the mining claims may be forfeited either to the United States, or to rival private claimants due to failure to comply with statutory requirements as to location and maintenance of the claims or challenges to whether a discovery of a valuable mineral exists on every claim.
 
A significant portion of the lode claims comprising our Tonkin Springs property are subject to a lease in favor of a third party, which may expire in 2009 and which provides for a 5% royalty on production.
 
A total of 269 of our mining and millsite claims are subject to this lease. The lease requires annual payments of $150,000 or 455 ounces of gold, whichever is greater, and payment of a royalty of 5% of the gross sales price of gold or silver from the property before deduction of any expenses from the gross sales price. This lease may expire January 1, 2009. In the event we are unable to extend the lease or purchase the claims from the owner, we may be forced to forfeit the underlying claims, which in turn may adversely affect our ability to explore and develop the property. If we are successful in identifying sufficient mineralization to warrant placing the property into production, we will be obligated to pay the leaseholder a royalty of 5% of the production. The payment of this royalty, together with other royalties payable to third parties in respect of certain claims, will reduce our potential revenue.
 
We cannot assure you that we will have an adequate supply of water to complete desired exploration or development of our mining property.
 
In accordance with the laws of the State of Nevada, we have obtained permits to drill the water wells that we currently use to service the Tonkin Springs property and we plan to obtain all required permits for drilling water wells to serve other property we may acquire in the future. However, the amount of water that we are entitled to use from those wells must be determined by the appropriate regulatory authorities. A final determination of these rights is dependent in part on our ability to demonstrate a beneficial use for the amount water that we intend to use. Unless we are successful in developing the property to a point where we can commence commercial production of gold or other precious metals, we may not be able to demonstrate such beneficial use. Accordingly, there is no assurance that we will have access to the amount of water needed to operate a mine at the property.
 
Estimates of mineralized material at our Tonkin Springs property are based on drill results from shallow deposits and are not necessarily indicative of the results we may achieve from drilling at greater depths.
 
Previous operators at the Tonkin Springs property were focused on producing gold from shallow deposits in an effort to achieve immediate revenue. Our proposed drilling program for the remainder of 2006 and 2007 targets mineralization at greater depths and at different locations on our property. Estimates of mineralization in shallow zones is not necessarily indicative of mineralization at greater depths. In addition, estimates of mineralization are based on limited samples and many assumptions, and are inherently imprecise. Our ability to identify and delineate additional mineralization depends on the results of our future drilling efforts and our ability to properly interpret those results. We may be unable to identify any additional mineralization or reserves.


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Our industry is highly competitive, attractive mineral lands are scarce, and we may not be able to obtain quality properties.
 
We compete with many companies in the mining industry, including large, established mining companies with substantial capabilities, personnel and financial resources. There is a limited supply of desirable mineral lands available for claim-staking, lease or acquisition in the United States, and other areas where we may conduct exploration activities. We may be at a competitive disadvantage in acquiring mineral properties, since we compete with these individuals and companies, many of which have greater financial resources and larger technical staffs. From time to time, specific properties or areas which would otherwise be attractive to us for exploration or acquisition may be unavailable to us due to their previous acquisition by other companies or our lack of financial resources. Competition in the industry is not limited to the acquisition of mineral properties but also extends to the technical expertise to find, advance, and operate such properties; the labor to operate the properties; and the capital for the purpose of funding such properties. Many competitors not only explore for and mine precious metals, but conduct refining and marketing operations on a world-wide basis. Such competition may result in our company being unable not only to acquire desired properties, but to recruit or retain qualified employees or to acquire the capital necessary to fund our operation and advance our properties. Our inability to compete with other companies for these resources would have a material adverse effect on our results of operation and business.
 
Risks Related to Our Securities
 
The exercise of outstanding options and warrants and the future issuances of our common stock will dilute current shareholders and may reduce the market price of our common stock.
 
As of November 10, 2006, we have outstanding options and warrants to purchase a total of 11,259,500 shares of our common stock, which if completely exercised, would dilute existing shareholders’ ownership by approximately 23%. A significant portion of the outstanding options are exercisable at prices significantly below the current market price of our common stock as of November 10, 2006. If the market price of our stock remains at or above the exercise price, it is likely that these options will be exercised. Our Board of Directors has the authority to authorize the offer and sale of additional securities without the vote of or notice to existing shareholders. Based on the need for additional capital to fund expected growth, it is likely that we will issue additional securities to provide such capital and that such additional issuances may involve a significant number of shares. Issuance of additional securities underlying outstanding options as authorized by our Board of Directors in the future will dilute the percentage interest of existing shareholders and may reduce the market price of our common stock.
 
A small number of existing shareholders own a significant portion of our common stock, which could limit your ability to influence the outcome of any shareholder vote.
 
Our executive officers and directors, together with our largest non-executive shareholder, beneficially own approximately 36.2% of our common stock as of November 10, 2006. After the completion of the transactions described in this prospectus, we anticipate that our executive officers and directors, together with our largest non-executive shareholder, will beneficially own approximately 26.2% of our common stock. Under our articles of incorporation and the laws of the State of Colorado, the vote of a majority of the shares voting at a meeting at which a quorum is present is generally required to approve most shareholder action. As a result, these individuals and entities will be able to significantly influence the outcome of shareholder votes for the foreseeable future, including votes concerning the election of directors, amendments to our articles of incorporation or proposed mergers or other significant corporate transactions.
 
We have never paid a dividend on our common stock and we do not anticipate paying any in the foreseeable future.
 
We have not paid a dividend on our common stock to date, and we may not be in a position to pay dividends in the foreseeable future. Our ability to pay dividends will depend on our ability to successfully develop one or more properties and generate revenue from operations. Further, our initial earnings, if any, will likely be retained to finance our growth. Any future dividends will depend upon our earnings, our then-existing financial requirements and other factors, and will be at the discretion of our Board of Directors.


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Governmental and Regulatory Risks
 
If we are unable to satisfy the compliance order issued with regard to our Tonkin Springs property, we may forfeit our mine permit.
 
In May 2005, the Nevada Division of Environmental Protection issued a notice of alleged violation relating to disturbances at a portion of the Tonkin Springs property where mining was formerly conducted under the mine permit. As a result of that notice, we are under a compliance order to submit and implement a final closure plan for the previous mining operation by November 15, 2006. Our failure or inability to comply with that order and satisfy other regulations affecting our property could cause us to forfeit our existing permit and adversely affect our ability to obtain additional necessary permits. We anticipate completing the work requirements under the compliance order by November 15, 2006, with the possible exception of installation of certain equipment which is currently on order. We continue to work with the state and federal regulators, and we believe that the substantial compliance with the order would satisfy the regulators and would not result in negative implications to us.
 
We are subject to changes in the regulatory environment where we operate and may face additional regulatory requirements as a result of the acquisition of the target companies.
 
Our mining operations and exploration activities are subject to extensive regulation governing various matters, including licensing, production, taxes, water disposal, toxic substances, mine safety, development and permitting, exports and imports, occupational health and safety, and environmental protections. As a result of the proposed acquisition of the target companies, we may face additional regulatory requirements that we are not currently subject to. For example, Nevada Pacific conducts mining operations in Mexico and is subject to Mexican environmental laws and foreign investment regulations under the Law of Foreign Investment, and must comply with the terms of exploration and exploitation concessions granted by the Mexican government in connection with its mining operations. Continued compliance with the regulations currently applicable to us and compliance with the new regulations that we may become subject to as a result of the acquisition of the target companies are expected to increase our costs, including the costs of planning, designing, drilling, operating, developing, constructing, and closure and reclamation. In addition, these laws and regulations are subject to frequent change and reinterpretation. 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.
 
Our operations are subject to permitting requirements which could require us to delay, suspend or terminate our operations on our mining property.
 
Our operations, including our ongoing two-year exploration drilling program, require permits from the state and federal governments. We may be unable to obtain these permits in a timely manner, on reasonable terms, or at all. If we cannot obtain or maintain the necessary permits, or if there is a delay in receiving these permits, our timetable and business plan for exploration of the Tonkin Springs property will be adversely affected.
 
Legislation has been proposed that would significantly affect the mining industry.
 
Periodically, members of the U.S. Congress have introduced bills which would supplant or alter the provisions of the General Mining Law of 1872, which governs the unpatented claims that we control with respect to our Tonkin Springs property. One such amendment has become law and has imposed a moratorium on patenting of mining claims, which reduced the security of title provided by unpatented claims such as those on our Tonkin Springs property. If additional legislation is enacted, it could substantially increase the cost of holding unpatented mining claims by requiring payment of royalties, and could significantly impair our ability to develop mineral resources on unpatented mining claims. Such bills have proposed, among other things, to make permanent the patent moratorium, to impose a federal royalty on production from unpatented mining claims and to declare certain lands as unsuitable for mining. Although it is impossible to predict at this time what royalties may be imposed in the future, the imposition of such royalties could adversely affect the potential for development of such mining claims, and the economics of existing operating mines on federal unpatented mining claims. Passage of such legislation could adversely affect our business.


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THE OFFERORS
 
U.S. Gold
 
U.S. Gold is engaged in the exploration for gold and other precious metals. We hold a 100% interest in the Tonkin Springs property in Eureka County, Nevada, subject to paramount title in the United States. This property consists of approximately 36 square miles of unpatented lode mining claims and millsite claims located on the Battle Mountain-Eureka Trend, also known as the Cortez Trend, approximately 45 miles northwest of the town of Eureka in north-central Nevada. We are presently in the exploration stage at the Tonkin Springs property. We have not generated revenue from mining operations since 1990.
 
U.S. Gold was organized under the laws of the State of Colorado on July 24, 1979 under the name Silver State Mining Corporation. On June 21, 1988, we changed our name to U.S. Gold Corporation.
 
In July 2005, Robert R. McEwen became our largest shareholder by purchasing 11,100,000 shares of our common stock, representing 33.3% of our outstanding shares before the financing discussed immediately below. In August 2005, he became our Chairman and Chief Executive Officer. In November 2005, at a meeting of our shareholders, nominees of Mr. McEwen were elected as a majority of our board of directors. At that meeting, our shareholders also approved an increase in our authorized capital from 35,000,000 shares of common stock to 250,000,000 shares.
 
On February 22, 2006, U.S. Gold completed a private placement of 16,700,000 subscription receipts, with gross proceeds to us of $75,150,000. As part of that private placement, Mr. McEwen bought 667,000 subscription receipts, including 667,000 shares of common stock and warrants to purchase 333,500 shares of our common stock. As of the date of this prospectus, Mr. McEwen owns 11,767,000 shares of our common stock plus the 333,500 warrants, representing 24.0% of our outstanding shares (assuming the exercise of Mr. McEwen’s warrants).
 
We intend to hold a special meeting of shareholders, to be held at [     ] at [     ], local time, on [          ], 2006, at which U.S. Gold shareholders, as of [          ], the record date, will be asked to vote on matters necessary to enable us to acquire the target companies. An affirmative vote of a majority of the votes cast at the special meeting is required to approve the strategic offers. Abstentions and broker non-votes will have no effect on the outcome of any of the proposals voted at our special meeting. The number of shares of our common stock outstanding and entitled to vote at the special meeting is [     ]. Holders of our common stock do not have dissenters’ rights under Colorado law in connection with any of the matters to be acted on at the special meeting.
 
Information regarding the qualifications and compensation of our current directors and executive officers, such persons’ beneficial ownership of our securities and the existence of certain relationships and transactions between such individuals and us and our subsidiaries, can be found in our annual report on Form 10-KSB for the fiscal year ended December 31, 2005, filed with the SEC on April 7, 2006, which is incorporated into and forms a part of this prospectus. See the section entitled “Incorporation by Reference of Certain Documents and Information of U.S. Gold for U.S. Shareholders” on page v of this prospectus. Financial and other information about U.S. Gold as of the end of the quarter ended June 30, 2006 can be found in our quarterly report on Form 10-QSB, filed with the SEC on August 14, 2006, and amended on August 24, 2006, which is incorporated into and forms part of the prospectus. See the section entitled “Incorporation by Reference of Certain Documents and Information of U.S. Gold for U.S. Shareholders” on page v of this prospectus.
 
Our principal executive offices are located at 2201 Kipling Street, Suite 100, Lakewood, Colorado, U.S.A. 80215 and our telephone number is (303) 238-1438. Our website is www.usgold.com. Information contained on the website is not incorporated by reference into this prospectus, and you should not consider information contained on the website as part of this prospectus.
 
Description of Our Capital Stock
 
Our authorized capital consists of 250,000,000 shares of common stock, no par value per share. As of November 10, 2006, we had 49,996,755 shares of common stock issued and outstanding.


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The following discussion summarizes the rights and privileges of our capital stock. This summary is not complete, and you should refer to our articles of incorporation, as amended, which have been filed or incorporated as an exhibit to our annual report on Form 10-KSB for the fiscal year ended December 31, 2005, which is incorporated into and forms part of this prospectus.
 
The holders of our common stock are entitled to one vote for each share held of record on all matters submitted to stockholders, including the election of directors. Cumulative voting for directors is not permitted. Except as provided by special agreement, the holders of common stock are not entitled to any preemptive rights and the shares are not redeemable or convertible. All outstanding common stock is, and all common stock issuable upon exercise of warrants will be, when issued and paid for, fully paid and nonassessable. The number of authorized shares of common stock may be increased or decreased (but not below the number of shares then outstanding or otherwise reserved for issuance by us) by the affirmative vote of a majority of shares cast at a meeting of our security holders at which a quorum is present.
 
The holders of our common stock are entitled to dividends if, as and when declared by our board of directors from legally available funds. Upon any voluntary or involuntary liquidation, dissolution or winding up of our affairs, the holders of our common stock are entitled to share, on a pro rata basis, all assets remaining after payment to creditors and prior to liquidation rights, if any, of any series of outstanding preferred stock.
 
Pending shareholder approval at our special meeting in connection with the strategic offers, our authorized share capital will consist of 250,000,000 shares of common stock, no par value, and one share of preferred stock, no par value, designated Series A Special Voting Preferred Stock. See the section entitled “The Offer — Voting and Exchange Trust Agreement” on page 40 of this prospectus.
 
Our articles of incorporation and bylaws do not include any provision that would delay, defer or prevent a change in control of our company. However, pursuant to the laws of the State of Colorado, certain significant transactions would require the affirmative vote of a majority of the shares eligible to vote at a meeting of shareholders, which requirement could result in delays to or greater cost associated with a change in control of the company.
 
Additional information regarding our business and operations, description of property, management’s discussion and analysis of financial condition and results of operations is included in our annual report on Form 10-KSB for the fiscal year ended December 31, 2005, which is incorporated into and forms part of the prospectus; our quarterly report on Form 10-QSB/A for the quarter ended June 30, 2006, which is incorporated into and forms part of the prospectus; Appendix F (Unaudited Financial Statements of U.S. Gold Canadian Acquisition Corporation); Appendix G (Unaudited Pro Forma Consolidated Financial Statements of U.S. Gold); Appendix H (Unaudited Pro Forma Consolidated Supplementary Financial Statements of U.S. Gold) and Appendix I (Rights, Privileges, Restrictions and Conditions Attaching to the Exchangeable Shares of US Gold Canadian Acquisition Corporation) are incorporated into and form part of this prospectus. See the section entitled “Incorporation by Reference of Certain Documents and Information of U.S. Gold for U.S. Shareholders” on page v of this prospectus.
 
Canadian Exchange Co.
 
US Gold Canadian Acquisition Corporation, or Canadian Exchange Co., is a corporation incorporated under the Business Corporation Act (Alberta) and is our wholly-owned subsidiary. We formed Canadian Exchange Co. solely for the purpose of making the strategic offers. It has no significant assets or capitalization and has not engaged in any business or other activities to date. In connection with the strategic offers, among other things, Canadian Exchange Co. will acquire the benefit of the Support Agreement between U.S. Gold and Alberta ULC (see the section entitled “The Offer — Subsequent Acquisition Transaction” on page 54 of this prospectus for a description of Alberta ULC); and Canadian Exchange Co., and, to the extent the strategic offers are completed, will acquire common shares of White Knight, Coral Gold, Nevada Pacific and Tone Resources and incur liabilities in connection with the strategic offers. Canadian Exchange Co.’s registered office is located at 2900 Manulife Place, 10180-101 Street, Edmonton, Alberta, Canada T5J 3V5 and its telephone number is (780) 423-7100.
 
Robert R. McEwen, Ann S. Carpenter and William F. Pass are the current directors of Canadian Exchange Co. Each of Mr. McEwen, Ms. Carpenter and Mr. Pass has served as a director of Canadian Exchange Co. since


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Canadian Exchange Co.’s incorporation on April 18, 2006. The term of office of each director will expire not later than the close of the next annual meeting of shareholders of Canadian Exchange Co. In addition, Mr. McEwen currently serves as the Chairman and Chief Executive Officer, Ms. Carpenter currently serves as the President, and Mr. Pass currently serves as the Vice President, Secretary and Treasurer, of Canadian Exchange Co. Additional information regarding Mr. McEwen, Ms. Carpenter and Mr. Pass is included in U.S. Gold’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005, which is incorporated into and forms part of the prospectus. See the section entitled “Incorporation by Reference of Certain Documents and Information of U.S. Gold for U.S. Shareholders” on page v of this prospectus.
 
Additional information regarding Canadian Exchange Co. is included in Appendix F (Unaudited Financial Statements of U.S. Gold Canadian Acquisition Corporation), which is incorporated into and forms part of this prospectus.
 
In addition to an unlimited number of common shares, Canadian Exchange Co. is authorized to issue the exchangeable shares, as described in the section entitled “The Offer — Exchangeable Shares — Description of Exchangeable Shares” on page 36 of this prospectus, having substantially the attributes set out in Appendix I (Rights, Privileges, Restrictions and Conditions Attaching to the exchangeable shares of US Gold Canadian Acquisition Corporation), which is incorporated into and forms part of this prospectus.


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THE OFFER
 
Offer to Purchase
 
Common Shares
 
We hereby offer to purchase, upon the terms and subject to the conditions of the offer, all of the outstanding Coral Gold common shares, including any Coral Gold common shares that may be issued after the date of the offer and prior to the expiry time, on the basis of 0.63 of an exchangeable share of Canadian Exchange Co. for each Coral Gold common share. Each exchangeable share will, under the circumstances described herein, be exchangeable for shares of common stock of U.S. Gold on a one-for-one basis.
 
You are encouraged to consult your own advisors regarding the tax consequences of the proposed transactions. You should carefully review the description of the tax consequences of the proposed transactions under the sections entitled “Material Canadian Federal Income Tax Considerations” and “Material U.S. Federal Income Tax Considerations” on pages 63 and 73, respectively, of this prospectus and you are encouraged to seek independent tax advice with respect to your specific circumstances.
 
Warrants, Options or Other Securities
 
Our offer is being made only for Coral Gold common shares and is not being made for any warrants, options or other securities that may entitle the holder to acquire Coral Gold common shares. Any holder of such securities who wishes to accept the offer must exercise those securities and deposit Coral Gold common shares in accordance with the offer. Any such exercise must be sufficiently in advance of the expiry time to permit Coral Gold common shares acquired on the exercise of those securities to be tendered in the offer in accordance with the procedures described under the sections entitled “— Time for Acceptance” and “— Manner of Acceptance” on pages 46 and 47, respectively, of this prospectus. However, if, after completion of the offer, we implement a subsequent acquisition transaction, we intend to structure such transaction so that warrants would be exchanged for warrants to purchase exchangeable shares of Canadian Exchange Co. and the Coral Gold stock option plan would be assumed or adopted by U.S. Gold. See the section entitled “— Subsequent Acquisition Transaction” on page 54 of this prospectus.
 
Fractional Shares
 
Fractional exchangeable shares will not be issued in the offer. Instead, the number of exchangeable shares to be issued to each tendering shareholder will be either rounded up (if the fractional interest is 0.5 or more) or down (if the fractional interest is less than 0.5) to the next whole number. For rounding purposes, all Coral Gold common shares deposited by a shareholder will be aggregated.
 
Total Expected Issuance of U.S. Gold Shares
 
Based on information provided by Coral Gold as of November 5, 2006, the total number of Coral Gold common shares that are outstanding or underlying outstanding options or warrants is 8,017,744. Based on this number and the exchange ratio of 0.63 of an exchangeable share of Canadian Exchange Co., we expect to issue approximately 5,051,179 exchangeable shares of Canadian Exchange Co. in connection with the offer. The disclosure in this prospectus regarding the anticipated effects of the transactions on our voting power and our shareholder’s ownership percentage in us after giving effect to the proposed acquisition of Coral Gold and the other target companies and upon the exchange of the exchangeable shares for shares of our common stock is based on this expectation.
 
Exchangeable Shares
 
Background and Reason for the Issuance of Exchangeable Shares
 
The exchangeable shares being issued in connection with this offer in lieu of U.S. Gold common stock to enable, to the extent permissible and applicable, the Coral Gold shareholders to take advantage of a full or partial tax deferral (rollover) available under the Tax Act. The exchangeable shares by virtue of the redemption and exchange rights attaching to them and the provisions of the Voting and Exchange Trust Agreement, which will be entered into


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between U.S. Gold, Alberta ULC, Canadian Exchange Co. and a trustee to be determined, and the Support Agreement, which will be entered into between U.S. Gold, Alberta ULC, and Canadian Exchange Co., are intended to provide the holders thereof with the economic and voting rights that are, as nearly as practicable, equivalent to those of a share of common stock of U.S. Gold. See the section entitled “Material Canadian Federal Income Tax Considerations” on page 63 of this prospectus.
 
You should be aware that, in the other strategic offers, it is our intention that shareholders of Nevada Pacific, Tone Resources and White Knight may also receive exchangeable shares in exchange for their shares in such companies.
 
Description of Exchangeable Shares
 
The exchangeable shares are exchangeable on a one-for-one basis at any time at the option of the holder of the exchangeable shares into shares of U.S. Gold common stock. The following is a summary description of the material provisions of the rights, privileges, restrictions and conditions attaching to the exchangeable shares and is qualified in its entirety by reference to the full text of the share provisions included in Appendix I (Rights, Privileges, Restrictions and Conditions Attaching to the Exchangeable Shares of US Gold Canadian Acquisition Corporation), which is incorporated into and forms part of this prospectus.
 
Retraction of Exchangeable Shares by Holders
 
Subject to the retraction call right described below, holders of exchangeable shares will be entitled at any time to retract (i.e., to require Canadian Exchange Co. to redeem) any or all exchangeable shares held by them and to receive the retraction price per exchangeable share to be satisfied by issuance of one share of common stock of U.S. Gold, plus the dividend amount, which for purposes of this prospectus we define as the full amount of all declared and unpaid dividends on the exchangeable shares and all dividends and distributions declared on a share of common stock of U.S. Gold that have not yet been declared on the exchangeable shares. Holders of exchangeable shares may effect a retraction by presenting to Canadian Exchange Co. or its transfer agent the certificate(s) representing the exchangeable shares the holder desires to have Canadian Exchange Co. redeem, together with such other documents and instruments as may be required under the Business Corporation Act (Alberta), the articles of Canadian Exchange Co. or by its transfer agent, and a duly executed retraction request specifying that the holder desires to have the number of retracted shares specified therein redeemed by Canadian Exchange Co.
 
Upon receipt by Canadian Exchange Co. of a retraction request, Canadian Exchange Co. will promptly provide notice of this request to us and Alberta ULC. Instead of Canadian Exchange Co. redeeming the retracted shares, and provided that the retraction request is not revoked by the holder in the manner described below, we or Alberta ULC will have the right to purchase all but not less than all of the shares covered by the retraction request, which we refer to as our retraction call right. Under the retraction call right, we or Alberta ULC, as the case may be, will purchase from the holder and the holder will sell to us or Alberta ULC, as the case may be, the retracted shares. The retraction price per share will be equal to the current market price of a share of our common stock, calculated as provided in the share provisions (included in Appendix I and incorporated by reference in this prospectus) as of the last business day prior to the retraction date (described below), which shall be satisfied by delivering to the holder one share of our common stock plus the dividend amount, if any. The retraction date means the fifth business day after the date on which the retraction request is received by Canadian Exchange Co. See the section entitled “— Call Rights” on page 38 of this prospectus. In the event that we or Alberta ULC do not exercise the retraction call right, and provided that the retraction request is not revoked by the holder in the manner described below, Canadian Exchange Co. will redeem the retracted shares on the retraction date for the retraction price.
 
A holder of retracted shares may withdraw its retraction request, by written notice to Canadian Exchange Co. before the close of business on the business day immediately preceding the retraction date, in which case the retraction request will be null and void and the revocable offer will be deemed to have been revoked.
 
If, as a result of solvency provisions of applicable law, Canadian Exchange Co. is not permitted to redeem all exchangeable shares tendered by a retracting holder, Canadian Exchange Co. will redeem up to the maximum permissible number of exchangeable shares tendered by the holder. We or Alberta ULC will be required to purchase any exchangeable shares not redeemed by Canadian Exchange Co. in exchange for shares of our common stock on


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the retraction date under the optional exchange right described below. See the section entitled “— Voting and Exchange Trust Agreement — Optional Exchange Upon Canadian Exchange Co. Insolvency Event” on page 41 of this prospectus.
 
Distribution on Liquidation of Canadian Exchange Co.
 
In the event of the liquidation, dissolution or winding up of Canadian Exchange Co. or any other distribution of its assets among its shareholders for the purpose of winding up its affairs, holders of exchangeable shares shall be entitled, subject to applicable law, to receive from the assets of Canadian Exchange Co. a liquidation payment that will be satisfied by the issuance of one share of our common stock plus the dividend amount, if any, for each exchangeable share. This liquidation amount will be paid to the holders of exchangeable shares before any distribution of assets of Canadian Exchange Co. is made to the holders of the common shares or any other shares of Canadian Exchange Co. ranking junior to the exchangeable shares, and is subject to the exercise by us or Alberta ULC of our or its liquidation call right described in the section entitled “— Liquidation Call Right” below.
 
Automatic Exchange Upon Liquidation of U.S. Gold
 
Under the Voting and Trust Agreement, in the event of our liquidation, all of the then outstanding exchangeable shares will be automatically exchanged for shares of our common stock. To effect an automatic exchange, we, or at our option, Alberta ULC, will purchase all of the exchangeable shares from the holders on the fifth business day prior to the effective date of a liquidation. The purchase price payable for each exchangeable share purchased in a liquidation of U.S. Gold will be satisfied by the issuance of one share of our common stock plus the dividend amount, if any. See the section entitled “— Voting and Exchange Trust Agreement — Automatic Exchange Right Upon U.S. Gold Liquidation Event” on page 42 of this prospectus.
 
Redemption of Exchangeable Shares by Canadian Exchange Co.
 
The redemption date for the exchangeable shares will be the earlier of: (i) the seventh anniversary of the date on which exchangeable shares are first issued; and (ii) any date established by the board of directors of Canadian Exchange Co. for the redemption of exchangeable shares at such time as there are fewer than 10% of the total number of exchangeable shares issued in connection with the strategic offers (other than exchangeable shares held by us or our or its subsidiaries and subject to necessary adjustments to the number of shares to reflect permitted changes to exchangeable shares) outstanding.
 
Notice of the redemption date will be sent to us and Alberta ULC at the same time as it is sent to the holders of exchangeable shares and, notwithstanding any proposed redemption of the exchangeable shares, each of us and Alberta ULC will have a redemption call right to purchase all, but not less than all, of the outstanding exchangeable shares on the redemption date. The redemption price per share will equal the current market price of a share of our common stock, calculated as provided in the share provisions included in Appendix I, on the last business day prior to such redemption, which shall be satisfied by delivering to the holder one share of our common stock plus the dividend amount, if any. See the section entitled “— Call Rights” below.
 
Unless the relevant Canadian tax legislation is amended, any Canadian tax deferral obtained by a shareholder who receives exchangeable shares under the offer will end on the exchange or redemption of exchangeable shares for shares of our common stock. Moreover, if our rights or the rights of Alberta ULC to acquire exchangeable shares from the holders of exchangeable shares, which we refer to as our or its call rights, are not exercised upon a redemption (including a retraction) of the exchangeable shares by Canadian Exchange Co., a holder of exchangeable shares may realize a dividend for Canadian tax purposes that may exceed the holder’s economic gain. A holder of exchangeable shares will be subject to different Canadian federal income tax consequences depending upon whether the call rights are exercised or whether the relevant exchangeable shares are redeemed by Canadian Exchange Co. under the share provisions if the call rights are not exercised. See the sections entitled “Risk Factors” and “Material Canadian Federal Income Tax Considerations” on pages 20 and 63, respectively, of this prospectus. Subject to applicable law, and provided that we and Alberta ULC have not exercised the redemption call right, Canadian Exchange Co. will redeem all of the outstanding exchangeable shares upon at least 60 days prior notice to the holders of the exchangeable shares.


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Call Rights
 
In the circumstances described below, we and Alberta ULC will have certain overriding rights to acquire exchangeable shares from the holders. A holder of exchangeable shares will be subject to different Canadian federal income tax consequences depending upon whether the call rights are exercised or whether the relevant exchangeable shares are redeemed by Canadian Exchange Co. if the call rights are not exercised. See the section entitled “Material Canadian Federal Income Tax Considerations” on page 63 of this prospectus.
 
Retraction Call Right
 
Under the share provisions, each of we and Alberta ULC have an overriding retraction call right to acquire all but not less than all of the exchangeable shares that a holder of exchangeable shares requests Canadian Exchange Co. to redeem. Alberta ULC is only entitled to exercise its retraction call right with respect to those holders of exchangeable shares, if any, for which we have not exercised our retraction call right. The purchase price under the retraction call right is equal to the retraction call purchase price per share, which is the current market price of a share of our common stock, calculated as provided in the share provisions included in Appendix I, on the last business day prior to the retraction date. The purchase price will be satisfied by delivering to the holder one share of our common stock plus the dividend amount, if any.
 
At the time of a retraction request by a holder of exchangeable shares, Canadian Exchange Co. will promptly notify us and Alberta ULC and either we or Alberta ULC must then advise Canadian Exchange Co. within five business days if we choose to exercise the retraction call right. If we or Alberta ULC do not advise Canadian Exchange Co. within the five-business day period, Canadian Exchange Co. will notify the holder as soon as possible thereafter that neither of us will exercise the retraction call right. Unless the holder revokes his or her retraction request, on the retraction date the exchangeable shares that the holder has requested Canadian Exchange Co. to redeem will be acquired by us or Alberta ULC (assuming either we or Alberta ULC exercise the retraction call right) or redeemed by Canadian Exchange Co., as the case may be, in each case for the retraction call purchase price as described in the preceding paragraph.
 
Liquidation Call Right
 
Under the share provisions, each of we and Alberta ULC have an overriding liquidation call right, in the event of and notwithstanding a proposed liquidation, dissolution or winding up of Canadian Exchange Co., to acquire all but not less than all of the exchangeable shares then outstanding. Alberta ULC is only entitled to exercise its liquidation call right with respect to those holders of exchangeable shares, if any, for which we have not exercised our liquidation call right. The purchase price under the liquidation call right is equal to the liquidation call exercise price per share, which is the current market price of a share of our common stock, calculated as provided in the share provisions included in Appendix I, on the last business day prior to the effective date of such voluntary or involuntary liquidation, dissolution or winding up, or the liquidation date. The purchase price will be satisfied by delivering to the holder one share of our common stock plus the dividend amount, if any. Upon the exercise by us or Alberta ULC of the liquidation call right, the holders will be obligated to transfer their exchangeable shares to us or Alberta ULC, as the case may be. The acquisition by us or Alberta ULC of all of the outstanding exchangeable shares upon the exercise of the liquidation call right will occur on the effective date of the voluntary or involuntary liquidation, dissolution or winding up of Canadian Exchange Co.
 
To exercise the liquidation call right, we or Alberta ULC must notify Canadian Exchange Co.’s transfer agent in writing, as agent for the holders of the exchangeable shares, and Canadian Exchange Co. of our or Alberta ULC’s intention to exercise this right at least 55 days before the liquidation date in the case of a voluntary liquidation, dissolution or winding up of Canadian Exchange Co. and at least five business days before the liquidation date in the case of an involuntary liquidation, dissolution or winding up of Canadian Exchange Co. The transfer agent will notify the holders of exchangeable shares as to whether or not we or Alberta ULC have exercised the liquidation call right promptly after the expiry of the date by which the same may be exercised by us or Alberta ULC. If we or Alberta ULC exercise the liquidation call right on the liquidation date, we or Alberta ULC will purchase and the holders will sell all of the exchangeable shares for an amount equal to the liquidation call exercise price as described in the preceding paragraph.


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Redemption Call Right
 
Under the share provisions, each of we and Alberta ULC have an overriding redemption call right, notwithstanding the proposed automatic redemption of the exchangeable shares by Canadian Exchange Co. in the share provisions, to acquire all but not less than all of the exchangeable shares then outstanding. Alberta ULC is only entitled to exercise its redemption call right with respect to those holders of exchangeable shares, if any, for which we have not exercised our redemption call right. The purchase price under the redemption call right is equal to the redemption call purchase price, which is the current market price of a share of our common stock, calculated as provided in the share provisions included in Appendix I, on the last business day prior to the redemption date. The purchase price will be satisfied by delivering to the holder one share of our common stock plus the dividend amount, if any. Upon the exercise by us or Alberta ULC of the redemption call right, the holders will be obligated to transfer their exchangeable shares to us or Alberta ULC, as the case may be.
 
To exercise the redemption call right, we or Alberta ULC must notify Canadian Exchange Co.’s transfer agent in writing, as agent for the holders of the exchangeable shares, and Canadian Exchange Co. of our or Alberta ULC’s intention to exercise this right at least 30 days before the redemption date. The transfer agent will notify the holders of exchangeable shares as to whether or not we or Alberta ULC exercise the redemption call right promptly after the date by which the same may be exercised by us or Alberta ULC. If we or Alberta ULC exercise the redemption call right on the redemption date, we or Alberta ULC will purchase and the holders will sell all of the exchangeable shares for an amount equal to the redemption call purchase price as described in the preceding paragraph.
 
Effect of Call Rights Exercise
 
If U.S. Gold or Alberta ULC exercise one or more of its call rights, shares of our common stock will be directly issued to holders of exchangeable shares and we or Alberta ULC, as the case may be, will become the holder of the exchangeable shares. We or Alberta ULC will not be entitled to exercise any voting rights attached to the exchangeable shares that are acquired from the holders. If we or Alberta ULC decline to exercise the call rights when applicable, we will be required, under the Support Agreement we will enter into with Alberta ULC and Canadian Exchange Co., to issue shares of our common stock to the holders of exchangeable shares. The Canadian tax consequences resulting from the exercise by us or Alberta ULC, as the case may be, of one or more of the call rights are discussed in the section entitled “Material Canadian Federal Income Tax Considerations” on page 63 of this prospectus.
 
Voting Rights
 
Under the Voting and Exchange Trust Agreement we will enter into with Alberta ULC, Canadian Exchange Co. and a trust company to be determined, holders of exchangeable shares will be entitled to receive notice of and attend any meeting of our shareholders and to vote at any meetings. See the section entitled “— Voting and Exchange Trust Agreement — Voting Rights in U.S. Gold” on page 41 of this prospectus.
 
The number of directors of Canadian Exchange Co. will be fixed at three and the exchangeable share provisions will entitle holders of exchangeable shares to annually elect one director. However, except as required by applicable law, or as provided in the rights, privileges, restrictions and conditions of the exchangeable shares, the holders of the exchangeable shares shall not otherwise be entitled as such to receive notice of or to attend any meeting of the shareholders of Canadian Exchange Co. or to vote at any meeting held for any other purpose than the annual election of directors.
 
Ranking
 
Holders of exchangeable shares will be entitled to a preference over holders of any other common shares of Canadian Exchange Co. and any other shares ranking junior to the exchangeable shares with respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding up of Canadian Exchange Co., whether voluntary or involuntary, or any other distribution of the assets of Canadian Exchange Co. among its shareholders for the purpose of winding up its affairs.


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Dividends
 
Holders of exchangeable shares will be entitled to receive dividends equivalent to the dividends, if any, paid from time to time by us on shares of our common stock. The declaration date, record date and payment date for dividends on the exchangeable shares will be the same as that for any corresponding dividends on shares of our common stock.
 
Certain Restrictions
 
Except with the approval of the holders of the exchangeable shares, Canadian Exchange Co. will not be permitted to:
 
  •  pay any dividends on common shares or any other shares of Canadian Exchange Co. ranking junior to the exchangeable shares, other than stock dividends payable in common shares or any such other shares of Canadian Exchange Co. ranking junior to the exchangeable shares, as the case may be;
 
  •  redeem or purchase or make any capital distribution in respect of common shares or any other shares of Canadian Exchange Co. ranking junior to the exchangeable shares;
 
  •  redeem or purchase any other shares of Canadian Exchange Co. ranking equally with the exchangeable shares with respect to the payment of dividends or the distribution of assets in the event of the liquidation, dissolution or winding up of Canadian Exchange Co., whether voluntary or involuntary, or any other distribution of the assets of Canadian Exchange Co. among its shareholders for the purpose of winding up its affairs; or
 
  •  issue any shares of stock other than exchangeable shares and any other shares not ranking superior to the exchangeable shares,
 
unless, in the case of the first three bullet points above, all dividends on the outstanding exchangeable shares corresponding to dividends declared and paid to date on the shares of our common stock have been declared and paid on the exchangeable shares.
 
Amendment and Approval
 
Any approval required to be given by the holders of the exchangeable shares to add to, change or remove any right, privilege, restriction or condition attaching to the exchangeable shares or any other matter requiring the approval or consent of the holders of the exchangeable shares in accordance with applicable law shall be deemed to have been sufficiently given if it has been given in accordance with applicable law, subject to a minimum requirement that such approval be evidenced by a resolution passed by not less than 662/3% of the votes cast on such resolution at a meeting of holders of exchangeable shares duly called and held, excluding exchangeable shares beneficially owned by us or any of our subsidiaries.
 
Voting and Exchange Trust Agreement
 
The following is a summary description of the material provisions of the Voting and Exchange Trust Agreement between U.S. Gold, Alberta ULC, Canadian Exchange Co. and the voting and exchange trustee. This summary is qualified in its entirety by reference to the full text of the Voting and Exchange Trust Agreement, which is attached as Appendix J to this prospectus.
 
The purpose of the Voting and Exchange Trust Agreement will be to create a trust for the benefit of the registered holders from time to time of exchangeable shares (other than us or our subsidiaries). A voting and exchange trustee to be determined, will hold the one issued and outstanding share of U.S. Gold Series A Special Voting Preferred Stock in order to enable the voting and exchange trustee to exercise the voting rights attached thereto and will hold exchange rights in order to enable the voting and exchange trustee to exercise such rights, in each case as trustee for and on behalf of such registered holders.


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Voting Rights in U.S. Gold
 
Under the Voting and Exchange Trust Agreement, we will issue to the voting and exchange trustee one share of Series A Special Voting Preferred Stock to be held of record by the voting and exchange trustee as trustee for and on behalf of, and for the use and benefit of, the registered holders from time to time of exchangeable shares (other than us or our subsidiaries) and in accordance with the provisions of the Voting and Exchange Trust Agreement. During the term of the Voting and Exchange Trust Agreement, and under the terms of the Support Agreement, we will not be permitted to issue any additional shares of Series A Special Voting Preferred Stock without the consent of the holders of exchangeable shares.
 
Under the Voting and Exchange Trust Agreement, the voting and exchange trustee will be entitled to all of the voting rights, including the right to vote in person or by proxy, attaching to the one share of Series A Special Voting Preferred Stock on all matters that may properly come before our shareholders at a meeting of shareholders. The share of Series A Special Voting Preferred Stock will have that number of votes, which may be cast by the voting and exchange trustee at any meeting at which our shareholders are entitled to vote, equal to the number of outstanding exchangeable shares (other than shares held by us or our subsidiaries).
 
Each holder of an exchangeable share (other than us or our subsidiaries) on the record date for any meeting at which our shareholders are entitled to vote will be entitled to instruct the voting and exchange trustee to exercise one of the votes attached to the share of Series A Special Voting Preferred Stock for that exchangeable share. The voting and exchange trustee will exercise each vote attached to the share of Series A Special Voting Preferred Stock only as directed by the relevant holder and, in the absence of instructions from a holder as to voting, the voting and exchange trustee will not have voting rights with respect to such exchangeable share. A holder of an exchangeable share may, upon instructing the voting and exchange trustee, obtain a proxy from the voting and exchange trustee entitling the holder to vote directly at the relevant meeting the votes attached to the share of Series A Special Voting Preferred Stock to which the holder is entitled.
 
The voting and exchange trustee will send to the holders of the exchangeable shares the notice of each meeting at which our shareholders are entitled to vote, together with the related meeting materials and a statement as to the manner in which the holder may instruct the voting and exchange trustee to exercise the votes attaching to the share of Series A Special Voting Preferred Stock, at the same time as we send the notice and materials to our shareholders. The voting and exchange trustee will also send to the holders of exchangeable shares copies of all information statements, interim and annual financial statements, reports and other materials we send to our shareholders at the same time we send those materials to our shareholders. We will endeavor to obtain copies of materials sent by third parties to our shareholders generally, including dissident proxy circulars and tender and exchange offer circulars, as soon as possible after those materials are first sent to our shareholders and to deliver those materials to the voting and exchange trustee, which will send those materials to holders of exchangeable shares.
 
All rights of a holder of exchangeable shares to exercise votes attached to the share of Series A Special Voting Preferred Stock will cease upon the exchange of that holder’s exchangeable shares for shares of our common stock.
 
Optional Exchange Upon Canadian Exchange Co. Insolvency Event
 
We and Alberta ULC will agree in the Voting and Exchange Trust Agreement that, upon the insolvency of Canadian Exchange Co., a holder of exchangeable shares will be entitled to instruct the voting and exchange trustee to exercise an exchange right with respect to any or all of the exchangeable shares held by the holder, thereby requiring us or Alberta ULC to purchase the exchangeable shares from the holder. The purchase price payable for each exchangeable share purchased upon the insolvency of Canadian Exchange Co. will be satisfied by the issuance of one share of our common stock plus an additional amount equivalent to the full amount of all declared and unpaid dividends, if any, on the exchangeable share and all dividends and distributions declared on a share of common stock that have not yet been declared on the exchangeable shares.
 
As soon as practicable following an event of insolvency of Canadian Exchange Co. or any event that may, with the passage of time or the giving of notice or both, result in the insolvency of Canadian Exchange Co., Canadian Exchange Co. and we will give written notice of the insolvency or other event to the voting and exchange trustee. As


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soon as practicable after receiving the notice, the voting and exchange trustee will give notice to each holder of exchangeable shares of the event and will advise the holder of its rights with respect to the exchange right.
 
If, as a result of solvency provisions of applicable law, Canadian Exchange Co. is unable to redeem all of a holder’s exchangeable shares which the holder is entitled to have redeemed in accordance with the share provisions, the holder will be deemed to have exercised the optional exchange right with respect to the unredeemed exchangeable shares and we or Alberta ULC will be required to purchase those shares from the holder in the manner set forth above.
 
Automatic Exchange Right Upon U.S. Gold Liquidation Event
 
We will agree in the Voting and Exchange Trust Agreement that we will notify the voting and exchange trustee, upon the occurrence of either (a) a determination by our board of directors to institute voluntary liquidation, dissolution or winding up proceedings with respect to U.S. Gold or to affect any other distribution of our assets among our shareholders for the purpose of winding up our affairs, such notice to be given at least 60 days prior to the proposed effective date of such liquidation, dissolution, winding up or other distribution, or (b) the earlier of (i) receipt by us of notice of, and (ii) we otherwise become aware of any threatened or instituted claim, suit, petition or other proceeding with respect to involuntary liquidation, dissolution or winding up or to effect any other distribution of our assets among our shareholders for the purpose of winding up our affairs.
 
Immediately following receipt by the voting and exchange trustee of notice of such an event or potential event of insolvency, the voting and exchange trustee will give notice to each holder of exchangeable shares of the event or potential event and will advise the holder of its rights with respect to the automatic exchange right.
 
On the fifth business day prior to the effective date of such event of insolvency, we will automatically exchange all of the then outstanding exchangeable shares (other than exchangeable shares held by us or our subsidiaries) for a purchase price per exchangeable share equal to one share of our common stock plus the dividend amount.
 
Support Agreement
 
The following is a summary description of the material provisions of the Support Agreement, to be entered into between U.S. Gold, Alberta ULC and Canadian Exchange Co., and is qualified in its entirety by reference to the full text of the Support Agreement, which is attached as Appendix K to this prospectus.
 
Under the Support Agreement, we will covenant that, so long as exchangeable shares not owned by us or our subsidiaries are outstanding, we will, among other things:
 
(a) not declare or pay any dividend on the shares of our common stock unless (i) on the same day Canadian Exchange Co. declares or pays, as the case may be, an equivalent dividend on the exchangeable shares and (ii) Canadian Exchange Co. has sufficient money or other assets or authorized but unissued securities available to enable the due declaration and the due and punctual payment, in accordance with applicable law, of an equivalent dividend on the exchangeable shares;
 
(b) advise Canadian Exchange Co. in advance of the declaration of any dividend on the shares of our common stock and take other actions reasonably necessary to ensure that the declaration date, record date and payment date for dividends on the exchangeable shares are the same as those for any corresponding dividends on the shares of our common stock;
 
(c) ensure that the record date for any dividend declared on the shares of our common stock is not less than ten (10) business days after the declaration date of such dividend; and
 
(d) take all actions and do all things reasonably necessary or desirable to enable and permit Canadian Exchange Co., in accordance with applicable law, to pay the liquidation amount, the retraction price or the redemption price to the holders of the exchangeable shares in the event of a liquidation, dissolution or winding up of Canadian Exchange Co., a retraction request by a holder of exchangeable shares or a redemption of exchangeable shares by Canadian Exchange Co., as the case may be.


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The Support Agreement will also provide that, without the prior approval of Canadian Exchange Co. and the holders of exchangeable shares, we will not distribute additional shares of common stock of U.S. Gold or rights to subscribe therefor or other property or assets to all or substantially all holders of shares of our common stock, nor change any of the rights, privileges or other terms of our common stock, unless the same or an equivalent distribution on, or change to, the exchangeable shares (or in the rights of the holders thereof) is made simultaneously. In the event of any proposed tender offer, share exchange offer, issuer bid, take-over bid or similar transaction affecting our common stock, we will use reasonable efforts to take all actions necessary or desirable to enable holders of exchangeable shares to participate in such transaction to the same extent and on an economically equivalent basis as the holders of our common stock.
 
The Support Agreement will also provide that, as long as any outstanding exchangeable shares are owned by any person or entity other than us or any of our subsidiaries, we will, unless approval to do otherwise is obtained from the holders of the exchangeable shares, remain the direct or indirect beneficial owner of all of the issued and outstanding common shares of Canadian Exchange Co. and all issued and outstanding voting shares of Alberta ULC.
 
With the exception of changes for the purpose of:
 
(i) adding to the covenants of any or all of the parties;
 
(ii) evidencing successors of U.S. Gold;
 
(iii) making certain necessary amendments; or
 
(iv) curing ambiguities or clerical errors (provided, in each case, that our board of directors and the boards of directors of each of Canadian Exchange Co. and Alberta ULC are of the opinion that such amendments are not prejudicial to the interests of the holders of the exchangeable shares),
 
the Support Agreement may not be amended without the approval of the holders of the exchangeable shares.
 
Under the Support Agreement, each of us and Alberta ULC will not exercise, and will prevent their affiliates from exercising, any voting rights attached to the exchangeable shares owned by us or Alberta ULC or their affiliates on any matter considered at meetings of holders of exchangeable shares (including any approval sought from such holders in respect of matters arising under the Support Agreement).
 
Conditions of the Offer
 
We may withdraw the offer (in which event Canadian Exchange Co. shall not be required to accept for purchase and/or pay for any Coral Gold common shares tendered in the offer) or extend the period of time during which the offer is open (in which event the offerors may postpone accepting for purchase and paying for any Coral Gold common shares tendered in the offer), unless each of the following conditions has been satisfied or has been waived by us at or prior to the expiry time:
 
(a) there shall have been properly deposited and not withdrawn that number of Coral Gold common shares that constitutes at least the greater of (i) 662/3% of Coral Gold common shares deemed outstanding on a fully-diluted basis or (ii) 80% of the Coral Gold common shares issued and outstanding on the date the shares are accepted for purchase;
 
(b) Coral Gold shall not have entered into or effectuated any agreement or transaction with any person or entity having the effect of impairing our ability to acquire Coral Gold or otherwise diminishing the expected economic value to us of the acquisition of Coral Gold including, but not limited to, any material issuance of securities of Coral Gold, transfer of assets, the declaration of any extraordinary dividend, the adoption of a shareholder rights plan or any other transaction not in the ordinary course of Coral Gold’s business;
 
(c) the shares of our common stock shall have been approved for listing on AMEX, the additional shares of common stock of U.S. Gold issuable upon exchange of the exchangeable shares offered under this offer shall have been approved for listing on the TSX and AMEX and the exchangeable shares shall have been approved for listing on the TSX and the AMEX;


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(d) the registration statement for the exchangeable shares to be issued in the offer and the shares of our common stock that may be issued upon the exchange of any exchangeable shares shall have become effective under the Securities Act and no stop order suspending the effectiveness of the registration statement or a proceeding seeking a stop order shall have been issued nor shall there have been proceedings for that purpose initiated or threatened by the SEC and U.S. Gold and Canadian Exchange Co. shall have received all necessary state securities law or blue sky authorizations;
 
(e) all necessary orders shall have been obtained from relevant Canadian securities regulatory authorities in respect of the exchangeable shares to be issued in the offer, the shares of our common stock that may be issued upon the exchange of any such exchangeable shares and the resale of any exchangeable shares or shares of our common stock;
 
(f) U.S. Gold and Canadian Exchange Co. shall have received waivers relating to any change of control provisions in any note, bond, mortgage, indenture, license, lease, contract, agreement or other instrument or obligation to which Coral Gold or any of its subsidiaries is a party or by which any of them or any of their properties or assets may be bound, except such waivers the absence of which would not in the aggregate materially adversely affect U.S. Gold, Coral Gold and our and its respective subsidiaries;
 
(g) the holders of shares of our common stock, voting at a meeting of such holders, shall have approved the following prior to the expiry time:
 
(i) an amendment to our certificate of incorporation to create a new class of stock comprised of one share of preferred stock, designated Series A Special Voting Preferred Stock, no par value, to be issued in connection with the strategic offers; and
 
(ii) the issuance, in connection with the strategic offers, of the exchangeable shares, the U.S. Gold Series A Special Voting Preferred Stock providing holders of the exchangeable shares voting rights in U.S. Gold and the shares of our common stock issuable upon exchange of the exchangeable shares;
 
(h) the Coral Gold directors will have made commitments reasonably satisfactory to U.S. Gold and Canadian Exchange Co. to (i) effect an orderly transition of its board of directors contemporaneously with or promptly after Canadian Exchange Co. takes up and pays for the Coral Gold common shares deposited under the offer to purchase, including, if requested, resigning in favor of any nominees who may be specified by us and Canadian Exchange Co. and (ii) release Coral Gold from all claims as directors, other than existing rights to indemnification and insurance and customary directors fees and expenses for attendance at meetings of the board of directors;
 
(i) there shall not be in effect or threatened as of the expiry time, as it may be extended, any temporary restraining order, preliminary or permanent injunction or other order or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition challenging the offer or preventing the completion of the offer or any of the other transactions described in this offer, and there shall be no statute, rule, regulation, order, injunction or decree enacted, entered, promulgated or enforced by any court, administrative agency or commission or other governmental authority or instrumentality which requires consent or approval or challenges, prohibits, restricts or makes illegal the completion of the offer or the subsequent acquisition transaction;
 
(j) there shall not be pending or threatened any suit, action or proceeding by any governmental entity:
 
(i) challenging the offer, seeking to restrain or prohibit the completion of the offer or seeking to obtain from us or Coral Gold or our respective subsidiaries any damages that are material to Coral Gold and its subsidiaries, on a consolidated basis, or us and our subsidiaries, on a consolidated basis;
 
(ii) seeking to prohibit or limit the ownership or operation by us or Coral Gold or any of our subsidiaries of any material portion of the business or assets of Coral Gold or us or any of our subsidiaries or to compel Coral Gold or us or any of our subsidiaries to dispose of or hold separate any material portion of the business or assets of us or Coral Gold or any of our subsidiaries as a result of the offer;


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(iii) seeking to prohibit us from effectively controlling in any material respect the business or operations of Coral Gold; or
 
(iv) which otherwise is reasonably likely to have a material adverse effect on us or our subsidiaries, on a consolidated basis, or Coral Gold and its subsidiaries, on a consolidated basis;
 
(k) there shall be no change or threatened change in the business, properties, assets, liabilities, capitalization, shareholders’ equity, condition (financial or otherwise), operations, licenses or franchises, results of operations or prospects of Coral Gold or any of its subsidiaries, on a consolidated basis, that, in our reasonable judgment, has or may have a material adverse effect on Coral Gold and its subsidiaries, on a consolidated basis, and we shall not have become aware of any fact that, in our reasonable judgment, has or may have a material adverse effect on Coral Gold and its subsidiaries or their business or prospects or the value to us of the common shares of Coral Gold;
 
(l) U.S. Gold and Canadian Exchange Co. shall have obtained or received all approvals, consents, clearances or waivers required to be obtained or received from any governmental regulatory agency, authority or commission in connection with the offer and the subsequent acquisition transaction; and
 
(m) there shall not have occurred or been threatened:
 
(i) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market in the United States or Canada;
 
(ii) any extraordinary or material adverse change in the financial markets or major stock exchange indices in the United States or Canada or in the market price of Coral Gold common shares;
 
(iii) any change in the general political, market, economic or financial conditions in the U.S. or Canada that could, in our reasonable judgment, have a material adverse effect upon the business, properties, assets, liabilities, capitalization, shareholders equity, condition (financial or otherwise), operations, licenses or franchises, results of operations or prospects of Coral Gold or any of its subsidiaries;
 
(iv) any material change in U.S. dollar or Canadian dollar exchange rates or a suspension of, or limitation on, the markets therefor;
 
(v) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or Canada;
 
(vi) any limitation (whether or not mandatory) by any government, domestic, foreign or supranational, or governmental entity on, or other event that, in our reasonable judgment, might affect the extension of credit by banks or other lending institutions;
 
(vii) a commencement of war or armed hostilities or other national or international calamity involving the U.S. or Canada; or
 
(viii) in the case of any of the foregoing existing at the time of the commencement of the offer, a material acceleration or worsening thereof.
 
The conditions listed above are for the exclusive benefit of us and Canadian Exchange Co., and we may assert them regardless of the circumstances giving rise to any of the conditions. Unless precluded from doing so by applicable law, we may, in our sole discretion, waive any of these conditions in whole or in part. The determination as to whether any condition has been satisfied shall be final and binding on all parties.
 
The offerors reserve the right to terminate the offer on or prior to the expiry time if any condition to the offer remains unsatisfied or has not been waived or to comply with any applicable law.


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Time for Acceptance
 
The offer is open for acceptance, unless withdrawn or extended at our sole discretion, until the expiry time, being 5:00 p.m. (Vancouver Time) on [          ], 2006, or such later time or times and date or dates as we may fix from time to time.
 
See the section entitled “Extension of the Expiry Time or Variation or Change of the Offer” immediately below.
 
Extension of the Expiry Time or Variation or Change of the Offer
 
The offer is open for acceptance until the expiry time, being 5:00 p.m. (Vancouver Time) on [          ], 2006, unless earlier withdrawn.
 
We reserve the right at any time and from time to time to extend the offer or to vary or change the terms of the offer by giving written notice or other communication (confirmed in writing) of such extension or variation to the depositary at its principal office in Toronto, and by causing the depositary to provide as soon as practicable thereafter a copy of such notice in the manner set forth in the section entitled “— Notices and Delivery” on page 51 of this prospectus to all Coral Gold shareholders. We will make a public announcement of the extension or variation as soon as possible after giving notice of an extension or variation to the depositary (and in the case of an extension of the offer, no later than 9:00 a.m. (Vancouver time) on the day following the expiry time) and provide a copy of the notice to the TSX-V and AMEX, as applicable. Any notice of extension or variation will be deemed to have been given and to be effective on the day it is delivered or otherwise communicated in writing to the depositary at its principal office in Toronto.
 
Where the terms of the offer are varied, the offer will not expire before 10 business days after the notice of such variation has been mailed to shareholders, unless otherwise permitted by applicable law.
 
If, before the expiration of all rights of withdrawal with respect to the offer, a material change occurs in the information contained in this prospectus, as amended from time to time, that would reasonably be expected to affect the decision of a Coral Gold shareholder to accept or reject the offer (other than a change that is not within the control of the offerors or their affiliates), the offerors will give written notice of such change to the depositary at its principal office in Toronto, and will cause the depositary to promptly provide a copy of such notice in the manner provided in the section entitled “— Notices and Delivery” on page 51 of this prospectus to all shareholders, if required by applicable law. As soon as practicable after giving notice of such a material change to the depositary, we will make a public announcement of the change in information and provide a copy of the notice thereof to the TSX-V in accordance with the section entitled “— Notices and Delivery” on page 51 of this prospectus.
 
During any such extension or in the event of a material variation or change in information, all Coral Gold common shares previously deposited and not accepted for purchase or withdrawn will remain subject to the offer and may be accepted for purchase by us in accordance with the terms of the offer, subject to the withdrawal rights described in the section entitled “Right to Withdraw” below. An extension of the expiry time, a variation of the terms of the offer or a change in information does not constitute a waiver by any of the offerors of any rights described above in the section entitled “— Conditions of the Offer” on page 43 of this prospectus. If the consideration under the offer is increased, the increased consideration will be paid to all depositing shareholders whose Coral Gold common shares are accepted for purchase under the offer.
 
We will follow any extension, termination, variation, amendment or delay as promptly as practicable, with a public announcement. In the case of an extension, variation or amendment, any related announcement will be issued no later than 5:00 p.m. (Vancouver time), on the date on which the expiry time previously was to occur. Subject to applicable law and without limiting the manner in which the offerors may choose to make any public announcement, the offerors assume no obligation to publish, advertise or otherwise communicate any public announcement of this type other than in accordance with the section entitled “— Notices and Delivery” on page 51 of this prospectus.


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Acceptance of the Offer by Certain Related Parties
 
To our knowledge, after reasonable inquiry, none of our directors or senior officers nor any associate of our directors or senior officers, nor any person or company holding more than 10 per cent of any class of our equity securities, nor any person or company acting jointly or in concert with us, propose to accept the offer, except Robert R. McEwen. On March 7, 2006, Mr. McEwen announced that, in his capacity as a holder of Coral Gold common shares, he intended to support the proposal of U.S. Gold to acquire each of White Knight, Coral Gold, Nevada Pacific and Tone Resources. As of the date of this prospectus, Mr. McEwen beneficially owns 1,250,000 Coral Gold common shares, which, based on information provided to us by Coral Gold as of November 5, 2006, represents approximately 18.3% of the outstanding Coral Gold common shares. See the sections entitled “Background to the Offer” and “Relationships Between the Offerors and Coral Gold — Beneficial Ownership of and Trading in Securities of Coral Gold” on pages 57 and 62, respectively, of this prospectus.
 
Manner of Acceptance
 
Letter of acceptance and transmittal
 
You may accept the offer by delivering to Kingsdale Shareholder Services Inc., the depositary, at the office specified in the letter of acceptance and transmittal, so as to arrive there not later than the expiry time:
 
  •  the certificate(s) representing Coral Gold common shares you desire to tender; AND
 
  •  a letter of acceptance and transmittal (printed on BLUE paper) in the form accompanying the offer or a facsimile thereof, properly completed and duly executed as required by the instructions set out in the letter of acceptance and transmittal; AND
 
  •  any other document required by the instructions set forth in the letter of acceptance and transmittal.
 
Except as otherwise provided in the instructions set out in the letter of acceptance and transmittal or as may be permitted by the offerors, the signature on the letter of acceptance and transmittal must be guaranteed by an eligible institution. Eligible institution means a Canadian Schedule I chartered bank, a major trust company in Canada, a member of the Securities Transfer Agents Medallion Program (STAMP), a member of the Stock Exchanges Medallion Program (SEMP) or a member of the New York Exchange, Inc. Medallion Signature Program (MSP). If a letter of acceptance and transmittal is executed by a person other than the registered holder of Coral Gold common shares represented by the certificate(s) that are deposited, the certificate(s) must be endorsed or be accompanied by an appropriate share transfer power of attorney duly and properly completed by the registered holder, with the signature on the endorsement panel or share transfer power of attorney guaranteed by an eligible institution.
 
Alternatively, Coral Gold common shares may be deposited in compliance with the procedures set forth below for guaranteed delivery not later than the expiry time.
 
Procedure for Guaranteed Delivery
 
If you would like to deposit your Coral Gold common shares in the offer and the certificate(s) representing Coral Gold common shares are not immediately available or you cannot deliver the certificate(s) and all other required documents to the depositary at or prior to the expiry time, those Coral Gold common shares may nevertheless be deposited if all of the following conditions are met:
 
  •  the deposit is made by or through an eligible institution; AND
 
  •  a notice of guaranteed delivery (printed on GREEN paper) in the form accompanying the offer or a facsimile thereof, properly completed and duly executed, including a guarantee by an eligible institution in the form specified in the notice of guaranteed delivery, is received by the depositary at the office set out in the notice of guaranteed delivery, at or prior to the expiry time; AND
 
  •  the certificate(s) representing the deposited Coral Gold common shares in proper form for transfer together with a letter of acceptance and transmittal in the form accompanying the offer or a facsimile thereof, properly completed and duly executed, with any required signature guarantees and all other documents required by the letter of acceptance and transmittal, are received by the depositary at the office set out in the


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  notice of guaranteed delivery at or prior to 5:00 p.m. (Vancouver time) on the third trading day on the TSX-V after the expiry time.
 
The notice of guaranteed delivery may be delivered by hand or courier, transmitted by facsimile or mailed to the depositary at the office set out in the notice of guaranteed delivery and must include a guarantee by an eligible institution in the form set out in the notice of guaranteed delivery.
 
General
 
In all cases, payment for Coral Gold common shares deposited and accepted for purchase by us will be made only after timely receipt by the depositary of the certificate(s) representing Coral Gold common shares, a letter of acceptance and transmittal or a facsimile thereof, properly completed and duly executed, with the signatures guaranteed, if required, covering those Coral Gold common shares in accordance with the instructions in the letter of acceptance and transmittal, and any other required documents.
 
The method of delivery of certificates representing Coral Gold common shares, the letter of acceptance and transmittal and all other required documents is at the option and risk of the person depositing them. The offerors recommend that all of these documents be delivered by hand to the depositary and a receipt obtained, or, if mailed, that registered mail, with return receipt requested, be used and that proper insurance be obtained.
 
If your Coral Gold common shares are registered in the name of a nominee you should contact your broker, investment dealer, bank, trust company or other nominee for assistance in depositing your Coral Gold common shares under the offer.
 
All questions as to the validity, form, eligibility (including timely receipt) and acceptance of any Coral Gold common shares tendered in the offer will be determined by us in our sole discretion. Depositing shareholders agree that this determination shall be final and binding. We reserve the absolute right to reject any and all deposits that we determine not to be in proper form or that may be unlawful to accept under the laws of any jurisdiction. We reserve the absolute right to waive any defects or irregularities in the deposit of any Coral Gold common shares. Neither we nor the depositary or any other person will have any duty to give notice of any defects or irregularities in any deposit, or any liability for failure to give this notice. Our interpretation of the terms and conditions of this prospectus, the letter of acceptance and transmittal and the notice of guaranteed delivery will be final and binding.
 
No fee or commission will be payable by Coral Gold shareholders who deliver their shares directly to the depositary or utilizes the facilities of a soliciting dealer to accept the offer.
 
The offerors reserve the right, in accordance with applicable law, to permit a Coral Gold shareholder to accept the offer in a manner other than as set out above.
 
Acceptance for Purchase of, and Payment for, Deposited Coral Gold Common Shares
 
If all conditions described in the section entitled “Conditions of the Offer” on page 43 of this prospectus have been satisfied or waived by us at the expiry time, all Coral Gold common shares that have been properly deposited and not withdrawn will be required to be accepted for purchase promptly following the expiry time and, in any event, not later than 10 days after the expiry time. All Coral Gold common shares accepted for purchase under the offer will be paid for promptly and, in any event, within three business days of having been accepted for purchase.
 
Subject to applicable law, we expressly reserve the right to delay accepting for purchase and paying for any Coral Gold common shares. No Coral Gold common shares properly tendered in the offer will be accepted for purchase unless all Coral Gold common shares then properly tendered in the offer are accepted for purchase.
 
Coral Gold common shares properly deposited and not withdrawn in the offer will be deemed to have been accepted for purchase and accepted for payment if, as and when we give written notice or other communication confirmed in writing to the depositary at its principal office in Toronto to that effect.
 
Canadian Exchange Co. will pay for Coral Gold common shares properly tendered in the offer and not withdrawn by providing the depositary with certificates for exchangeable shares, as applicable, for transmittal to


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depositing shareholders. Under no circumstances will interest accrue or be paid to persons depositing Coral Gold common shares by any of us, Canadian Exchange Co. or the depositary, regardless of any delay in making payment for those shares.
 
Fractional shares will not be issued in the offer. Instead, the number of exchangeable shares to be issued to each shareholder will be rounded up (if the fractional interest is 0.5 or more) or down (if the fractional interest is less than 0.5) to the next whole number. For all rounding purposes, all Coral Gold common shares deposited by a shareholder will be aggregated.
 
The depositary will act as the agent of the shareholders who have properly deposited Coral Gold common shares under the offer for the purposes of receiving payment under the offer and transmitting that payment to those shareholders, and receipt of payment by the depositary will be deemed to constitute receipt of payment by those shareholders who have properly deposited Coral Gold common shares.
 
Settlement with each Coral Gold shareholder who has properly deposited Coral Gold common shares under the offer will be made by the depositary by forwarding a certificate representing the exchangeable shares, as payment for Coral Gold common shares accepted for purchase. Unless otherwise specified by the shareholder in the letter of acceptance and transmittal, share certificates will be issued in the name of the registered holder of Coral Gold common shares so deposited and forwarded by first class mail to the address specified in the letter of acceptance and transmittal. If no address is specified, share certificates will be sent to the address of the shareholder as shown on the register of shareholders maintained by or on behalf of Coral Gold. Share certificates mailed in accordance with this paragraph will be deemed to be delivered and payment will be deemed to be made at the time of mailing.
 
If the consideration payable in the offer is increased before the expiry time, the increased consideration will be paid for all Coral Gold common shares acquired in the offer, regardless of whether those shares were deposited before that increase in the consideration.
 
Power of Attorney
 
The execution of a letter of acceptance and transmittal by a shareholder irrevocably appoints Canadian Exchange Co. or its designees as the true and lawful agent, attorney and attorney in fact of that shareholder with respect to Coral Gold common shares deposited and purchased under the offer, and with respect to any and all stock dividends, securities, rights, warrants or other interests or distributions accrued, declared, paid, issued, transferred, made or distributed on or in respect of the purchased Coral Gold common shares on or after [          ], 2006. This appointment is effective from and after the date the purchased common shares are accepted for purchase and paid for under the offer, which we refer to as the effective date. This appointment affords Canadian Exchange Co. full power of substitution (such power of attorney being coupled with an interest being irrevocable), in the name and on behalf of the holder who deposited those Coral Gold common shares, to:
 
  •  register, record, transfer and enter the transfer of the purchased common shares and any other securities of Coral Gold on the books of Coral Gold;
 
  •  vote, execute and deliver any instruments of proxy, authorizations and consents in form and on terms satisfactory to Canadian Exchange Co. in respect of any purchased common shares and any or all other securities of Coral Gold, revoke any such instrument, authorization or consent given prior to or after the effective date, designate in any such instruments of proxy any person(s) as the proxy or the proxy nominee(s) of the shareholder in respect of those purchased common shares and those other securities for all purposes;
 
  •  execute, endorse and negotiate any cheques or other instruments representing any distribution payable to the holder; and
 
  •  exercise any and all other rights of a holder of purchased common shares and any other securities.
 
In addition, a Coral Gold shareholder who executes a letter of acceptance and transmittal agrees, from and after the date on which the purchased common shares are accepted for purchase and paid for under the offer:
 
  •  not to vote any of the purchased common shares or other securities at any meeting of holders of those securities;


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  •  not to exercise any other rights or privileges attached to any of those securities; and
 
  •  to deliver to Canadian Exchange Co. any and all instruments of proxy, authorizations or consents received in respect of all those securities.
 
All prior proxies given by a holder of purchased common shares with respect to those purchased common shares and to those other securities shall be revoked at the date on which the purchased common shares are accepted for purchase and paid for under the offer and no subsequent proxies may be given by that holder with respect to those purchased common shares or other securities.
 
Depositing Shareholders’ Representations and Warranties
 
The deposit of Coral Gold common shares in the offer will create and constitute a binding agreement between the applicable shareholder and each of U.S. Gold and Canadian Exchange Co. upon the terms and subject to the conditions of the offer, including the shareholder’s representation and warranty that:
 
  •  such shareholder has full power and authority to deposit, sell, assign and transfer Coral Gold common shares (and any other securities) being deposited and has not sold, assigned or transferred or agreed to sell, assign or transfer any of such Coral Gold common shares (and other securities) to any other person;
 
  •  the shareholder owns Coral Gold common shares (and any other securities) being deposited within the meaning of applicable securities laws;
 
  •  the deposit of those Coral Gold common shares (and any other securities) complies with applicable securities laws; and
 
  •  when those Coral Gold common shares (and any other securities) are accepted for purchase and paid for under the offer, Canadian Exchange Co. will acquire good title thereto free and clear of all liens, restrictions, charges, encumbrances and claims.
 
Return of Coral Gold Common Shares
 
If any Coral Gold common shares tendered in the offer are not accepted for purchase in the offer, or certificates are submitted for more Coral Gold common shares than are properly deposited, certificates for those Coral Gold common shares that are not accepted for purchase (or were not properly deposited) will be returned to the depositing Coral Gold shareholder without expense to the shareholder as soon as practicable after the expiry time or withdrawal or termination of the offer by sending certificates representing Coral Gold common shares not purchased by first class mail in the name of and to the address specified by the shareholder in the letter of acceptance and transmittal or, if a name or address is not specified, in the name and to the address shown on the share register maintained by or on behalf of Coral Gold.
 
Mail Service Interruption
 
Notwithstanding any other provisions of this offer, the letter of acceptance and transmittal and the notice of guaranteed delivery, share certificates and other relevant documents will not be mailed if we or Canadian Exchange Co. determine, in our reasonable discretion, that delivery by mail may be delayed by a disruption of mail service. Coral Gold shareholders entitled to share certificates and/or other relevant documents that are not mailed for this reason may take delivery thereof at the office of the depositary at which they deposited their Coral Gold common shares until such time as we have determined, in our reasonable discretion, that delivery by mail will no longer be delayed. Notwithstanding the section entitled “— Acceptance for Purchase of, and Payment for, Deposited Common Shares” on page 48 of this prospectus, but subject to the section entitled “— Notices and Delivery” on page 51 of this prospectus, share certificates and other relevant documents not mailed for this reason will, subject to applicable law, be conclusively deemed to have been delivered on the first day upon which they are available for delivery at the office of the depositary at which Coral Gold common shares were deposited. Notice of any such determination by U.S. Gold shall be given to holders of Coral Gold common shares in accordance with the section entitled “— Notices and Delivery” on page 51 of this prospectus.


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Notices and Delivery
 
Except as otherwise provided in this offer, any notice that we or Canadian Exchange Co. or the depositary may provide, give or cause to be given under the offer will be deemed to have been properly given if mailed to the registered holders of Coral Gold common shares at their respective addresses appearing in the registers maintained in respect of such Coral Gold common shares and will be deemed to have been delivered and received on the mailing date. These provisions shall apply notwithstanding any accidental omission to provide or give notice to any one or more holders of Coral Gold common shares and notwithstanding interruption of mail service in Canada, the United States or elsewhere following mailing. In the event of any interruption of mail service, we intend to make reasonable efforts to disseminate the notice by other means, such as publication. Subject to the approval of applicable regulatory authorities, in the event of any interruption of mail service, any notice that we or Canadian Exchange Co. or the depositary may provide, give or cause to be given under the offer will be deemed to have been properly provided or given to or received by holders of Coral Gold common shares if: (i) it is given to the TSX-V for dissemination through their facilities; (ii) it is published once in the National Edition of The Globe and Mail or The National Post; or (iii) it is given to the Canada Newswire Service or Dow Jones Newswire.
 
Right to Withdraw
 
Except as indicated herein or as otherwise required by applicable law, deposits of Coral Gold common shares are irrevocable. Coral Gold common shares tendered in the offer may be withdrawn by or on behalf of the depositing shareholder (unless otherwise required or permitted by applicable law):
 
(a) at any time before Coral Gold common shares have been accepted for purchase by the offerors under the offer;
 
(b) if the Coral Gold common shares have not been paid for by us or Canadian Exchange Co. within three business days after having been accepted for purchase; or
 
(c) at any time before the expiration of 10 days from the date upon which either:
 
(i) a notice of change relating to a change in the information contained in the offer, as amended from time to time, that would reasonably be expected to affect the decision of a Coral Gold shareholder to accept or reject the offer (other than a change that is not within the control of us, Canadian Exchange Co. or our affiliates, unless it is a change in a material fact relating to the shares of our common stock or the exchangeable shares), in the event that such change occurs at or before the expiry time or after the expiry time but before the expiry of all rights of withdrawal in respect of the offer; or
 
(ii) a notice of variation concerning a variation in the terms of the offer (other than a variation consisting solely of an increase in the consideration offered for Coral Gold common shares where the expiry time is not extended for more than 10 days);
 
is mailed, delivered, or otherwise properly communicated, but subject to abridgement of that period pursuant to such order or orders as may be granted by applicable courts or securities regulatory authorities and only if such deposited shares have not been accepted for purchase by the offerors at the date of the notice.
 
Notice of withdrawal of deposited Coral Gold common shares must:
 
(i) be made by a method that provides the depositary with a written or printed copy of such notice (which includes a facsimile);
 
(ii) be made by or on behalf of the depositing shareholder;
 
(iii) be signed by or on behalf of the shareholder who signed the letter of acceptance and transmittal that accompanied Coral Gold common shares being withdrawn;
 
(iv) specify the shareholder’s identity, the number of Coral Gold common shares to be withdrawn, the name of the registered shareholder of, and the certificate number shown on each certificate evidencing, Coral Gold common shares being withdrawn; and


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(v) be actually received by the depositary within the applicable time specified above. Any signature in the withdrawal notice must be guaranteed in the same manner as in the letter of acceptance and transmittal.
 
Withdrawals may not be rescinded. Any Coral Gold common shares withdrawn will be deemed not properly deposited for the purposes of the offer, but may be re-deposited at any time on or prior to the expiry time by following the applicable procedures described in the section entitled “— Manner of Acceptance” on page 47 of this prospectus.
 
In addition to the foregoing withdrawal rights, Coral Gold shareholders in certain provinces of Canada are entitled to statutory rights of rescission in certain circumstances. See the section entitled “Offerees’ Statutory Rights” on page 92 of this prospectus.
 
Dividends and Distributions
 
If, on or after the date of the offer, Coral Gold should subdivide, consolidate or otherwise materially change any of its common shares or its capitalization or disclose that it has taken any such action, we may make such adjustments as we deem appropriate to reflect such subdivision, consolidation or other change in the purchase price and other terms of the offer including (without limitation) the type of securities offered to be purchased and the amounts payable therefor.
 
Coral Gold common shares acquired in the offer shall be acquired free and clear of all encumbrances, together with all rights and benefits arising therefrom including the right to any and all cash and stock dividends, securities, rights, warrants or other interests or distributions which may be accrued, declared, paid, issued, distributed, made or transferred on or in respect of such Coral Gold common shares and which are made payable or distributable to the holders of those Coral Gold common shares of record on a date on or after the date of the offer. If Coral Gold should declare or pay any cash or stock dividend or make any other distribution on, or issue any securities, rights, warrants or other interests or distributions in respect of, deposited Coral Gold common shares after the date of the offer, such dividend, distribution or rights will be received and held by the depositing Coral Gold shareholder for the account of Canadian Exchange Co., and:
 
(i) in the case of cash dividends, distributions or payments, the amount of the dividends, distributions or payments shall be received and held by the depositing shareholders for their own account, and to the extent that such dividends, distributions or payments do not exceed the value of the consideration per Coral Gold common share payable by us or Canadian Exchange Co. in the offer (as determined by us or Canadian Exchange Co.), the consideration will be reduced by that number of exchangeable shares having a value equal to the amount of such dividend, distribution or payment;
 
(ii) in the case of non-cash dividends, distributions, payments, rights or other interests, the whole of any such non-cash dividend, distribution, payment, right or other interest shall be delivered by depositing shareholders to the depositary for the account of us or Canadian Exchange Co., accompanied by appropriate documentation of transfer; and
 
(iii) in the case of any cash dividends, distributions or payments in an amount that exceeds the consideration per Common Share payable by us or Canadian Exchange Co. (as determined by us or Canadian Exchange Co.), the whole of any such cash dividend, distribution or payment shall be received and held by the depositing shareholders for the account of us or Canadian Exchange Co. and shall be required to be promptly remitted and transferred by the depositing shareholders to the depositary for the account of us or Canadian Exchange Co., accompanied by appropriate documentation of transfer.
 
Pending such remittance (in the case of (ii) and (iii) above), we or Canadian Exchange Co. will be entitled to all rights and privileges as owner of any such dividend, distribution, payment, right or other interest and may withhold all of the exchangeable shares, as applicable, otherwise issuable by us or Canadian Exchange Co. to the non-remitting shareholder in the offer or deduct from the number of exchangeable shares with a value equal to the amount or value equal to the amount or value of the dividend, distribution, payment right or other interest, as determined by us or Canadian Exchange Co. in our sole discretion.


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Market Purchases
 
Neither we nor Canadian Exchange Co. will acquire beneficial ownership of Coral Gold common shares while the offer is outstanding, other than in the offer.
 
Other Terms
 
We reserve the right to transfer to one or more of our affiliates the right to purchase all or any portion of Coral Gold common shares tendered in the offer, but any such transfer will not relieve us or Canadian Exchange Co. of our and its obligations under the offer and will in no way prejudice the rights of persons depositing Coral Gold common shares to receive payment for Coral Gold common shares validly deposited and accepted for payment in the offer.
 
No broker, dealer or other person has been authorized to give any information or to make any representation or warranty on behalf of us or Canadian Exchange Co. or any of our affiliates in connection with the offer other than as contained in the offer, and, if any such information, representation or warranty is given or made, it must not be relied upon as having been authorized.
 
The provisions of this prospectus, together with the letter of acceptance and transmittal and the notice of guaranteed delivery accompanying this prospectus collectively comprise the terms and conditions of the offer.
 
We will determine in our reasonable discretion all questions relating to the interpretation of this prospectus, the letter of acceptance and transmittal and the notice of guaranteed delivery, the validity (including time of receipt) of any acceptance of the offer and any withdrawal of Coral Gold common shares, including, without limitation, the satisfaction or non-satisfaction of any condition, the validity, time and effect of any deposit of Coral Gold common shares or notice of withdrawal of Coral Gold common shares, and the due completion and execution of the letter of acceptance and transmittal. Our determination of such matters shall be final and binding for all purposes. We and Canadian Exchange Co. each reserve the right to waive any defect in acceptance with respect to any particular Coral Gold common share or any particular shareholder. There shall be no obligation on us, Canadian Exchange Co., the soliciting dealers or the depositary to give notice of any defects or irregularities in any acceptance or notice of withdrawal and no liability shall be incurred by any of them for failure to give any such notification.
 
This document does not constitute an offer or a solicitation to any person in any jurisdiction in which such offer or solicitation is unlawful. The offer is not being made to, nor will deposits be accepted from or on behalf of, shareholders in any jurisdiction in which the making or acceptance of the offer would not be in compliance with the laws of any such jurisdiction. However, we and Canadian Exchange Co. may, in our and their sole discretion, take such action as we may deem necessary to extend the offer to Coral Gold shareholders in any such jurisdiction.
 
Dissenters’ Rights
 
No dissenters’ rights are available in connection with the offer. However, any subsequent acquisition transaction may result in shareholders having the right to dissent and demand payment of the fair value of their Coral Gold common shares under Section 238 of the BCBCA. If the statutory procedures are complied with, this right could lead to a judicial determination of the fair value required to be paid to such dissenting shareholders for their Coral Gold common shares. The fair value of Coral Gold common shares so determined could be more or less than the amount paid per common share in the subsequent acquisition transaction or the offer. See the section entitled “— Subsequent Acquisition Transaction” on page 54 of this prospectus.
 
Judicial Developments
 
Prior to the pronouncement of Canadian OSC Rule 61-501 (or its predecessor OSC Policy 9.1) and AMF Regulation Q-27, Canadian courts had, in a few instances, granted preliminary injunctions to prohibit transactions which constituted going private transactions or business combinations within the meaning of OSC Rule 61-501 and AMF Regulation Q-27. The offerors have been advised that more recent notices and judicial decisions indicate a willingness to permit business combinations to proceed subject to compliance with requirements intended to ensure procedural and substantive fairness to the minority shareholders.


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Shareholders should consult their legal advisors for a determination of their legal rights with respect to any transaction that may constitute a business combination or going private transaction.
 
Subsequent Acquisition Transaction
 
If Canadian Exchange Co. accepts for purchase and pays for Coral Gold common shares validly tendered in the offer, we or Canadian Exchange Co. intend to take any necessary or advisable actions, including causing a special meeting of Coral Gold shareholders to be called to consider a transaction that would enable us or an affiliate to acquire all Coral Gold common shares not acquired in the offer. We or Canadian Exchange Co. currently intend to cause a special meeting of Coral Gold shareholders to be called following completion of the offer to consider a statutory plan of arrangement or similar transaction, which we refer to as a subsequent acquisition transaction, whereby: (i) Coral Gold warrants would be exchangeable for warrants to purchase exchangeable shares of Canadian Exchange Co. at the rate of 0.63 of an exchangeable share for each Coral Gold common share that the warrant holders had the right to purchase; (ii) Coral Gold shareholders who did not deposit their Coral Gold common shares under the offer would receive exchangeable shares in the same exchange ratio offered in the offer; and (iii) the Coral Gold stock option plan would be assumed or adopted by us or Canadian Exchange Co. The timing and details of any subsequent acquisition transaction will depend on a number of factors, including the number of Coral Gold common shares acquired in the offer and the terms of Coral Gold’s warrant indentures and stock option plan, and there can be no assurance that any subsequent acquisition transaction will be proposed, or if proposed, effected.
 
A subsequent acquisition transaction described above may constitute a “business combination” or a “going private transaction” within the meaning of certain applicable Canadian securities legislation, including OSC Rule 61-501 and AMF Regulation Q-27. Under OSC Rule 61-501 and AMF Regulation Q-27, subject to certain exceptions, a subsequent acquisition transaction may constitute a “business combination” or a “going private transaction” if it would result in the interest of a holder or beneficial owner of Coral Gold common shares being terminated without such holder’s or beneficial owner’s consent, irrespective of the nature of the consideration provided in substitution therefor. We expect that any subsequent acquisition transaction relating to Coral Gold common shares will be a “business combination” or a “going private transaction” under OSC Rule 61-501 and AMF Regulation Q-27.
 
In certain circumstances, the provisions of OSC Rule 61-501 and AMF Regulation Q-27 may also deem certain types of subsequent acquisition transactions to be “related party transactions.” However, if the subsequent acquisition transaction is a “business combination” or a “going private transaction” carried out in accordance with OSC Rule 61-501 and AMF Regulation Q-27 or an exemption therefrom, the “related party transaction” provisions therein do not apply to such transaction. We intend to carry out any such subsequent acquisition transaction in accordance with OSC Rule 61-501 and AMF Regulation Q-27, or any successor provisions, or exemptions therefrom, such that the “related party transaction” provisions of OSC Rule 61-501 and AMF Regulation Q-27 will not apply to such subsequent acquisition transaction.
 
OSC Rule 61-501 and AMF Regulation Q-27 provide that unless exempted, a corporation proposing to carry out a business combination or a going private transaction is required to prepare a formal valuation of Coral Gold common shares (and, subject to certain exceptions, any non-cash consideration being offered therefor) and provide to the holders of Coral Gold common shares a summary of such valuation or the entire valuation. In connection therewith, we intend to rely on any exemption then available or to seek waivers pursuant to OSC Rule 61-501 and AMF Regulation Q-27 exempting us or Coral Gold or their affiliates, as appropriate, from the requirement to prepare a valuation in connection with any subsequent acquisition transaction. An exemption is available under OSC Rule 61-501 and AMF Regulation Q-27 for certain business combinations or going private transactions completed within 120 days after the expiry of a formal take-over bid where the consideration under such transaction is at least equal in value to and is in the same form as the consideration that tendering shareholders were entitled to receive in the take-over bid, provided that certain disclosure is given in the take-over bid disclosure documents. We currently intend that the consideration offered under any subsequent acquisition transaction proposed by us would be equal in value to, and in the same form as, the consideration offered under the offer and that such subsequent acquisition transaction will be completed no later than 120 days after the expiry date and, accordingly, we expect to rely on these exemptions.


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Depending on the nature and the terms of the subsequent acquisition transaction, the provisions of the BCBCA may require the approval of at least 662/3% of the votes cast by holders of the outstanding Coral Gold common shares at a meeting duly called and held for the purpose of approving a subsequent acquisition transaction. OSC Rule 61-501 and AMF Regulation Q-27 would in effect also require that, in addition to any other required securityholder approval, in order to complete a business combination or a going private transaction, the approval of a majority of the votes cast by “minority” holders of Coral Gold common shares must be obtained unless an exemption is available or discretionary relief is granted by the OSC and the AMF. In relation to any subsequent acquisition transaction, the “minority” holders will be, subject to any available exemption or discretionary relief granted by the OSC and the AMF, as required, all Coral Gold shareholders other than us, any “related party” of ours or any other “interested party” (within the meaning of OSC Rule 61-501 and AMF Regulation Q-27) including any of our directors or senior officers, affiliate or insiders or any of our directors or senior officers or any person acting jointly or in concert with any of the foregoing.
 
OSC Rule 61-501 and AMF Regulation Q-27 also provide that we may treat Coral Gold common shares acquired pursuant to the offer as “minority” shares and vote them, or consider them voted, in favor of a subsequent acquisition transaction that is a business combination or a going private transaction, provided that, among other things: (a) the business combination or going private transaction is completed not later than 120 days after the expiry date; (b) the consideration for each security in the subsequent acquisition transaction is at least equal in value to and in the same form as the consideration paid in the offer; and (c) the Coral Gold shareholder who tendered such Coral Gold common shares to the offer was not (i) acting jointly or in concert with us in respect of the offer, (ii) a direct or indirect party to any “connected transaction” (as defined in OSC Rule 61-501) to the offer, or (iii) entitled to receive, directly or indirectly, in connection with the offer, a “collateral benefit” (as defined in OSC Rule 61-501) or consideration per security that is not identical in amount and form to the entitlement of shareholders in Canada. We currently intend that the consideration offered under any subsequent acquisition transaction proposed by us would be equal in value to, and in the same form as, the consideration offered under the offer and that such subsequent acquisition transaction will be completed no later than 120 days after the expiry date and, accordingly, the offerors intend to cause Coral Gold common shares acquired in the offer to be voted in favor of such transaction and to be counted as part of any minority approval required in connection with any such transaction.
 
In addition, under OSC Rule 61-501 and AMF Regulation Q-27, if, following the offer, U.S. Gold and our affiliates are the registered holders of 90% or more of Coral Gold common shares at the time the business combination or going private transaction is initiated, the requirement for minority approval under OSC Rule 61-501 and AMF Regulation Q-27 would not apply to the transaction if an enforceable right to dissent and seek fair value or a substantially equivalent right is made available to the minority Coral Gold shareholders.
 
Any subsequent acquisition transaction may also result in Coral Gold shareholders having the right to dissent and demand payment of the fair value of their Coral Gold common shares under Section 238 of the BCBCA. If the statutory procedures are complied with, this right could lead to a judicial determination of the fair value required to be paid to such dissenting shareholders for their Coral Gold common shares. The fair value of Coral Gold common shares so determined could be more or less than the amount paid per Coral Gold common share pursuant to the subsequent acquisition transaction or the offer.
 
The tax consequences to a Coral Gold shareholder of a subsequent acquisition transaction may differ from the tax consequences to such Coral Gold shareholder of accepting the offer. See the section entitled “Material Canadian Federal Income Tax Considerations” on page 63 of this prospectus. Shareholders should consult their legal advisors for a determination of their legal rights with respect to a subsequent acquisition transaction if and when proposed.
 
The timing and details of any subsequent acquisition transaction involving Coral Gold will necessarily depend on a variety of factors, including the number of Coral Gold common shares acquired in the offer. Although we currently intend to propose a subsequent acquisition transaction on the same terms as the offer, it is possible that, as a result of the number of Coral Gold common shares acquired under the offer, delays in our ability to effect such a transaction, information hereafter obtained by us, changes in general economic, industry, regulatory or market conditions or in the business of Coral Gold, or other currently unforeseen circumstances, such a transaction may not


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be so proposed or may be delayed or abandoned. We expressly reserve the right not to propose a subsequent acquisition transaction involving Coral Gold.
 
Rule 13e-3 under the Exchange Act is applicable to certain “going-private” transactions in the United States and may under certain circumstances be applicable to a subsequent acquisition transaction. We believe that Rule l3e-3 would not be applicable to a subsequent acquisition transaction unless the subsequent acquisition transaction is consummated more than one year after the termination of the offer. If applicable, Rule 13e-3 would require, among other things, that certain financial information concerning Coral Gold and certain information relating to the fairness of the subsequent acquisition transaction, and the consideration offered to minority shareholders be filed with the SEC and distributed to minority shareholders before the consummation of any such transaction.
 
The foregoing discussion of certain provisions of the Exchange Act is not a complete description of the Exchange Act or such provisions thereof and is qualified in its entirety by the reference to the Exchange Act.
 
If we are unable or decide not propose a subsequent acquisition transaction, or propose a subsequent acquisition transaction but cannot obtain any required approvals or exemptions promptly, we will evaluate other alternatives. These alternatives could include, to the extent permitted by applicable law, purchasing additional Coral Gold common shares in the open market, in privately negotiated transactions, in another take-over bid or exchange offer or otherwise, or from Coral Gold, or taking no actions to acquire additional Coral Gold common shares. Subject to applicable law, any additional purchases of Coral Gold common shares could be at a price greater than, equal to, or less than the price to be paid for Coral Gold common shares under the offer and could be for cash, securities and/or other consideration. Alternatively, we may take no action to acquire additional Coral Gold common shares, or may even sell or otherwise dispose of any or all Coral Gold common shares acquired in the offer, on terms and at prices then determined by us, which may vary from the price paid for Coral Gold common shares. The failure to consummate the subsequent acquisition transaction could adversely affect the U.S. tax treatment of shareholders of Coral Gold who exchange their Coral Gold shares for exchangeable shares in the offer.


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BACKGROUND TO THE OFFER
 
On March 5, 2006, we announced that we intended to acquire in stock transactions, all of the outstanding common shares of White Knight, Nevada Pacific, Coral Gold and Tone Resources, each of which is exploring in the Cortez Trend in Nevada. These proposals were made in letters sent on March 5, 2006 by Mr. McEwen to the chief executive officers of each of the target companies. We announced that our proposal represented a premium of 25% to the closing stock prices of each company’s shares on March 3, 2006 and that our board of directors had formed a special committee to evaluate the terms of each of the transactions in recognition of, among other things, the equity interests of Mr. McEwen in each of the four companies.
 
Coral Gold established a special committee of its board of directors to deal with our offer. The special committee selected Roman Friedrich & Company Ltd. of Vancouver to act as its financial adviser, to assist in responding to our offer and to investigate other alternatives that may be available to maximize shareholder value.
 
On March 27, 2006, our special committee of the board retained Wellington West Capital Markets Inc. to provide its opinion as to the fairness of the offer, from a financial point of view, to our shareholders. Based upon and subject to the matters described in their fairness opinion, Wellington West Capital Markets Inc. concluded that, as at April 6, 2006, the offer was fair, from a financial point of view, to our shareholders.
 
On May 1, 2006, we announced the commencement of the offer to purchase the shares of White Knight. We also announced that we intended to make formal offers to the shareholders of Tone Resources, Coral Gold and Nevada Pacific based on the same per share exchange ratios announced by us on March 5, 2006 as soon as practicable following the completion by each of the foregoing companies of formal valuations required under applicable law.
 
On June 5, 2006, we announced that, in view of certain United States securities regulatory requirements, we had terminated the offer to purchase White Knight common shares. We stated that we intended to commence the strategic offers by mailing new offer documents as soon as regulatory requirements could be satisfied, including the receipt of necessary information from each of the target companies. No formal offer to the shareholders of Coral Gold was made prior to June 5, 2006.
 
During the months of August and September 2006, our management, with the assistance of our financial and legal advisors, obtained and analyzed certain publicly available information regarding Coral Gold to evaluate the proposed acquisition of Coral Gold. Management also worked with our financial and legal advisors to consider various structuring and transaction alternatives for the strategic offers.
 
On September 28, 2006, the law firm of Hogan & Hartson L.L.P., our United States special counsel, sent a written request to Coral Gold’s outside counsel to provide us and their advisors with certain due diligence materials, including financial statements for the most recent completed fiscal period, and requested that Coral Gold instruct their independent auditors to provide a consent to the inclusion of Coral Gold’s financial statements in this prospectus.


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INTENTIONS OF THE OFFERORS
 
Strategic Rationale for the Offer
 
We are engaged in the exploration for gold and other precious metals. We hold a 100% interest in the Tonkin Springs gold property in Eureka County, Nevada, subject to paramount title in the United States. We have commenced an extensive two-year, property-wide, integrated exploration program at the Tonkin Springs gold property, focusing on evaluation of the structural and stratigraphic setting of the project. Our objectives are to expand the known mineralization and to discover mineralization in areas previously untested, targeting deeper mineralization. U.S. shareholders are cautioned that, although National Instrument 43-101 requires disclosure in Canada of measured, indicated and inferred mineral resources, the SEC does not recognize these classification categories for U.S. reporting purposes.
 
Coral Gold is a natural resource company primarily engaged in the exploration and development of natural resource properties. Coral Gold’s principal business activities are the exploration of certain mineral properties located in Nevada and California. Since Coral Gold’s 2002 fiscal year, Coral Gold has made aggregate principal expenditures of Cdn$2,498,084 on the Robertson mining claims in Nevada.
 
In addition to filing this prospectus, we expect to commence take-over bids for all of the outstanding common shares of Nevada Pacific, Tone Resources and White Knight as soon as practicable following the completion by Tone Resources and Coral Gold of formal valuations required under applicable law. We have also filed registration statements to register the exchangeable shares, and shares of our common stock issuable upon exchange of the exchangeable shares, which we intend to issue to the holders of the other target companies in these separate strategic offers. Each of the other target companies is an exploration stage company engaged in the acquisition and exploration of mineral properties primarily located on the major gold trends in the north-central region of Nevada and has mineral exploration properties that are adjacent to or near our Tonkin Springs gold property.
 
  •  Nevada Pacific.  Nevada Pacific owns an exploratory property portfolio covering approximately 890 square miles of mineral rights in Mexico, including the Magistral Gold Mine, ten properties in Nevada and one in Utah. The Nevada property portfolio covers approximately 85 square miles, including portions of two significant gold producing regions: the Battle Mountain/Eureka Trend/Cortez Trend and the Carlin Trend. We intend to offer to purchase all of the outstanding shares of Nevada Pacific on the basis of 0.23 of an exchangeable share for each common share of Nevada Pacific. Nevada Pacific’s common shares are listed on the TSX-V under the symbol “NPG-V.”
 
  •  Tone Resources.  Tone Resources is focused on gold and holds substantially all interests in eight projects (10 claim groups) in Elko, Eureka, Lander, and Pershing counties in Nevada. All of Tone Resource’s properties are located near infrastructure facilities of currently producing gold mines. We intend to offer to purchase all of the outstanding shares of Tone Resources on the basis of 0.26 of an exchangeable share for each common share of Tone Resources. Tone Resources’ common shares are listed on the TSX-V under the symbol “TNS-V” and quoted on the Pink Sheets in the United States under the symbol “TONRF.”
 
  •  White Knight.  In 1993, White Knight began to acquire gold exploration properties in Nevada and has focused solely on exploration and operation of properties in Nevada since that time. Currently, White Knight’s efforts are exploratory in nature in each of the 18 Nevada properties where it holds an interest. White Knight continues to explore for projects to acquire in Nevada. We intend to offer to purchase all of the outstanding shares of White Knight on the basis of 0.35 of an exchangeable share for each common share of White Knight. White Knight’s common shares are listed on the TSX-V under the symbol “WKR-V.”
 
If all of the strategic offers are successfully completed, the voting power of our shareholders will be diluted and it is expected that the shareholders of White Knight, Coral Gold, Nevada Pacific and Tone Resources will own, in the aggregate, approximately 48% of the outstanding shares and voting power of U.S. Gold (or approximately 47% on a fully-diluted basis).
 
We believe that there are significant benefits to bringing together U.S. Gold, White Knight, Coral Gold, Nevada Pacific and Tone Resources, including that the combined company will have:
 
  •  A larger land position within the Cortez Trend and a larger exploration program.  We hold a 100% interest in the Tonkin Springs exploration gold property in Eureka County, Nevada, subject to paramount title in the United States. This property consists of approximately 36 square miles of unpatented lode mining claims and


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  millsite claims located on the Battle Mountain-Eureka Trend, approximately 45 miles northwest of the town of Eureka, in north-central Nevada. Upon successful completion of the strategic offers, our land position would increase by approximately 344% to approximately 160 square miles. Over the next two years, we have planned 400,000 feet of exploration drilling on our Tonkin Springs exploration gold property at a cost of $30 million. If the strategic offers are successfully completed, we intend to aggressively explore the properties of White Knight, Coral Gold, Nevada Pacific and Tone Resources over the next two years to coincide with our exploration program at our Tonkin Springs exploration gold property.
 
  •  A stronger cash position and reduced costs.  On February 22, 2006, we completed a private placement of 16,700,000 subscription receipts, with gross proceeds to us of $75,150,000. Of the intermediate exploration companies currently exploring for gold in Nevada, we have one of the strongest cash positions. Successful completion of one or more of the strategic offers will also give us access to any additional cash resources of the companies acquired. Due to the strategic locations in Nevada of the assets of each of Nevada Pacific, Coral Gold, Tone Resources and White Knight and the elimination of redundant fees and costs, we expect that U.S. Gold would realize lower total costs than if each company were to remain a separate entity.
 
  •  Enhanced trading liquidity and better market focus.  U.S. Gold and Canadian Exchange Co. expect that the successful completion of the acquisition of the target companies would result in increased market capitalization and trading liquidity of the combined company, resulting in better market focus. Because of the increased market capitalization and liquidity of the combined company, we expect that the combined company will have greater access to equity and debt capital markets than U.S. Gold currently does, and greater appeal to institutional investors. It is a condition to the strategic offers that the shares of our common stock shall have been approved for listing on the AMEX and the exchangeable shares shall have been approved for listing on the TSX and AMEX. We expect that the enhanced access to the equity and debt capital markets resulting from the acquisition of the target companies would provide management of the combined company greater flexibility to execute its business plan under various financial market conditions.
 
  •  Additional technical expertise.  We believe that one or more of Nevada Pacific, Coral Gold, Tone Resources and White Knight has quality employees with good technical expertise. We hope to retain at least some of these key employees following the successful completion of the proposed acquisitions to assist in our business and operations going forward.
 
Upon successful completion of the strategic offers, the combined company would strive to become the premier exploration company in Nevada. However, you should be aware that the successful completion of any or all of our offers to purchase all of the outstanding shares of White Knight, Nevada Pacific and Tone Resources is not a condition of the offer.
 
Purpose of the Offer
 
We are making the offer to acquire, directly or indirectly, all of the outstanding Coral Gold common shares. If the conditions of the offer are satisfied or waived and we accept for purchase and pay for Coral Gold common shares validly tendered in the offer, we currently intend to acquire, directly or indirectly, all of the outstanding Coral Gold common shares in accordance with applicable law by way of a subsequent acquisition transaction. See the section entitled “The Offer — Subsequent Acquisition Transaction” on page 54 of this prospectus.
 
Plans for Coral Gold
 
Upon successful completion of the offer and any subsequent acquisition transaction, we intend to take appropriate actions to optimize and rationalize the combined entities’ assets, operations, management, personnel, general and administrative functions and corporate structure.
 
If permitted by applicable law, subsequent to the completion of the offer and, if necessary, any subsequent acquisition transaction, we intend to delist Coral Gold common shares from the TSX-V and cause Coral Gold to cease to be a reporting issuer under the securities laws of the applicable jurisdictions.


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INVESTMENT CONSIDERATIONS
 
We believe that the consideration offered for Coral Gold common shares under the offer is fair. You are urged to consider the following factors in making your decision to accept the offer.
 
The consideration offered under the offer provides a significant premium for Coral Gold’s shareholders.
 
We are offering to purchase, upon the terms and subject to the conditions of the offer, all of the outstanding Coral Gold common shares, including any Coral Gold common shares that may be issued after the date of the offer and prior to the expiry time, on the basis of 0.63 of an exchangeable share for each Coral Gold common share. The exchangeable shares will, under the circumstances described in this prospectus, be exchangeable for shares of our common stock on a one-for-one basis. Based on the closing prices of Coral Gold common shares on the OTCBB and the shares of our common stock on the OTCBB on March 3, 2006, the last trading day prior to the announcement of U.S. Gold’s proposed business combination with Coral Gold, this exchange ratio represented a premium of approximately 25% to shareholders over the trading price prior to the announcement of the offer. Based on the closing prices of Coral Gold common shares on the TSX-V and the shares of common stock of U.S. Gold on the TSX on November 10, 2006, the most recent trading day practicable before the filing of this prospectus, this exchange ratio represented a premium of approximately -1.0% to Coral Gold shareholders.
 
We believe that there are significant benefits to bringing together U.S. Gold with four other companies exploring in the Cortez Trend.
 
In addition to this prospectus, we expect to commence take-over bids for all of the outstanding common shares of Nevada Pacific, Tone Resources and White Knight as soon as practicable following the completion by White Knight, Nevada Pacific and Tone Resources of formal valuations required under applicable law. Like Coral Gold, each of these companies is exploring in the Cortez Trend in Nevada and has mineral exploration properties that are adjacent to or near U.S. Gold’s Tonkin Springs gold property. See the section entitled “Intentions of the Offerors — Strategic Rationale for the Offer” on page 58 of this prospectus. We believe that there are significant benefits to bringing together U.S. Gold, White Knight, Coral Gold, Nevada Pacific and Tone Resources, including that the combined company will have:
 
  •  a larger land position within the Cortez Trend and a larger exploration program;
 
  •  a stronger cash position and reduced costs;
 
  •  enhanced trading liquidity and better market focus; and
 
  •  greater technical expertise.
 
Upon successful completion of the strategic offers, the combined company would strive to become the premier exploration company in Nevada. However, you should be aware that the successful completion of any or all of our offers to purchase all of the outstanding shares of Nevada Pacific, Tone Resources and White Knight is not a condition of the offer.
 
The liquidity and trading price of Coral Gold common shares may be adversely affected if we are not successful in acquiring 100% of Coral Gold common shares.
 
Our acquisition of any Coral Gold common shares under the offer will reduce the number of Coral Gold common shares that might otherwise trade publicly, as well as the number of shareholders. Depending on the number of shareholders depositing and the number of Coral Gold common shares acquired by us under the offer, following the completion of the offer and prior to any subsequent acquisition transaction, the liquidity and market value of the remaining Coral Gold common shares held by the public would likely be adversely affected. After the purchase of Coral Gold common shares under the offer, it may be possible for Coral Gold to take steps towards the elimination of any applicable public reporting requirements under applicable securities legislation in any province in which it has an insignificant number of shareholders.


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The Coral Gold common shares may fail to meet the criteria for continued listing on the TSX-V even if the offerors are not successful in acquiring 100% of Coral Gold common shares.
 
The rules and regulations of the TSX-V establish certain criteria that, if not met, could lead to the delisting of Coral Gold common shares from the TSX-V. Among such criteria are the number of Coral Gold shareholders, the number of Coral Gold common shares publicly held and the aggregate market value of Coral Gold common shares publicly held. Depending on the number of Coral Gold shareholders depositing Coral Gold common shares and the number of Coral Gold common shares acquired by us under the offer, it is possible that, following the completion of the offer and prior to any subsequent acquisition transaction, Coral Gold common shares would fail to meet the criteria for continued listing on the TSX-V. If this were to happen, Coral Gold common shares could be delisted and this could, in turn, adversely affect the market or result in a lack of an established market for such shares. We intend to cause Coral Gold to apply to delist Coral Gold common shares from the TSX-V as soon as practicable after the successful completion of the offer and any subsequent acquisition transaction.


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RELATIONSHIPS BETWEEN THE OFFERORS AND CORAL GOLD
 
Beneficial Ownership of and Trading in Securities of Coral Gold
 
As of the date hereof, Robert R. McEwen, our Chairman and Chief Executive Officer, beneficially owns 1,250,000 Coral Gold common shares, which represents approximately 18.4% of the outstanding Coral Gold common shares as of November 5, 2006, or 15.6% of the outstanding Coral Gold common shares on a fully-diluted basis. Other than such securities, no securities of Coral Gold, are owned beneficially, directly or indirectly, nor is control or direction exercised over any securities of Coral Gold, by our directors or executive officers or, to the knowledge of such directors and executive officers after reasonable inquiry, by any of our associates or affiliates, by any associate of our directors or executive officers or by any person or company owning, directly or indirectly, more than 10% of any class of our securities. No person is acting jointly or in concert with us and Canadian Exchange Co. with respect to the offer.
 
Except for the purchases by Mr. McEwen of Coral Gold common shares described in the section entitled “Background to the Offer” on page 57 of this prospectus, no securities of Coral Gold have been purchased or sold during the 12-month period preceding the date of the offer by the offerors or the offerors’ directors or executive officers or, to the knowledge of such directors and executive officers after reasonable inquiry, by any of the offerors’ associates or affiliates, by any associate of the offerors’ directors or executive officers or by any person or company owning, directly or indirectly, more than 10% of any class of securities of the offerors.
 
Commitments to Acquire Securities of Coral Gold
 
Except in connection with the offer, neither of us, Canadian Exchange Co. nor any of our directors or executive officers, nor to the knowledge of our directors and executive officers after reasonable inquiry, any of our associates or affiliates, any associate of any of our directors or executive officers or any person or company owning, directly or indirectly, more than 10% of any class of our securities has entered into any commitments to acquire any equity securities of Coral Gold.
 
Arrangements, Agreements or Understandings
 
Except as described in this prospectus or in the attached appendices or documents, neither we nor, to the best of our knowledge, any of our directors, executive officers or other affiliates have any contract, arrangement, understanding or relationship with any other person with respect to any securities of Coral Gold, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any securities, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss or the giving or withholding of proxies. Except as described in the offer, there have been no contacts, negotiations or transactions between us or, to the best of our knowledge, any of our directors, executive officers or other affiliates on the one hand, and Coral Gold or its affiliates, on the other hand, relating to any merger, consolidation or acquisition, a tender offer or other acquisition of securities, an election of directors, or a sale or other transfer of a material amount of assets. Neither we, nor, to the best of our knowledge, any of the our directors, executive officers or other affiliates has had any transaction with Coral Gold or any of its executive officers, directors or affiliates that would require disclosure under the rules and regulations of the SEC applicable to the offer.
 
There are no arrangements or agreements made or proposed to be made between us and any of the directors or executive officers of Coral Gold and no payments or other benefits are proposed to be made or given by us to such directors or executive officers as compensation for loss of office or as compensation for remaining in or retiring from office if the offer is consummated.
 
MATERIAL CHANGES AND OTHER INFORMATION
 
Except for the offer and as otherwise disclosed publicly by Coral Gold, U.S. Gold is not aware of any information which indicates that any material change has occurred in the affairs of Coral Gold since the date of the last available published financial statements of Coral Gold.


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MATERIAL CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
 
In the opinion of Fraser Milner Casgrain LLP, Canadian counsel to U.S. Gold and Canadian Exchange Co., the following is, at the date hereof, a summary of the material Canadian federal income tax considerations applicable to shareholders who dispose of their Coral Gold common shares in the offer and who, for purposes of the Tax Act and at all relevant times, hold their Coral Gold common shares and will hold any exchangeable shares and shares of common shares of U.S. Gold as capital property and deal at arm’s length with, and are not affiliated with, U.S. Gold, Canadian Exchange Co., Alberta ULC and Coral Gold.
 
The Coral Gold common shares, the exchangeable shares and the shares of common stock of U.S. Gold will be considered to be capital property to a holder thereof provided such securities are not held in the course of carrying on a business of buying and selling securities and such securities are not acquired in a transaction considered to be an adventure in the nature of trade. A Canadian resident holder of Coral Gold common shares or exchangeable shares may in certain circumstances make an irrevocable election under subsection 39(4) of the Tax Act to have his or her Coral Gold common shares and exchangeable shares and every other “Canadian security” (as defined in the Tax Act) owned by such holder in the taxation year of election and in all subsequent taxation years deemed to be capital property. Where a shareholder makes an election under section 85 of the Tax Act in respect of the disposition of Coral Gold common shares, as described below, the exchangeable shares received in exchange will not be Canadian securities for this purpose.
 
This summary is not applicable to a shareholder: (i) that is a “financial institution” (as defined in the Tax Act for purposes of the mark-to-market rules); (ii) an interest in which is a “tax shelter investment” (as defined in the Tax Act); or (iii) with respect to whom U.S. Gold is or will be a “foreign affiliate” within the meaning of the Tax Act.
 
This summary is based on the facts set out in this prospectus, the current provisions of the Tax Act, the regulations thereunder and counsel’s understanding of the current published administrative policies and assessment practices of the Canada Revenue Agency, or the CRA. This summary also takes into account all proposed amendments to the Tax Act and the regulations thereunder publicly announced by or on behalf of the Minister of Finance (Canada) before the date of the offer (“Tax Proposals”). There can be no assurance that any such Tax Proposals will be implemented in their current form or at all. This summary is not exhaustive of all possible Canadian federal income tax considerations and, except as mentioned above, does not otherwise take into account or anticipate changes in the law, whether by judicial, governmental or legislative action or decision, or changes in the administrative policies or assessment practices of the CRA, nor does it take into account provincial, territorial or foreign income tax legislation or considerations, which may differ from the Canadian federal income tax considerations described herein.
 
THIS SUMMARY IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED TO BE, AND SHOULD NOT BE CONSTRUED AS, LEGAL OR TAX ADVICE TO ANY PARTICULAR SHAREHOLDER. ACCORDINGLY, SHAREHOLDERS ARE ENCOURAGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSEQUENCES OF DISPOSING OF THEIR COMMON SHARES PURSUANT TO THE OFFER AND ACQUIRING, HOLDING AND DISPOSING OF EXCHANGEABLE SHARES AND SHARES OF COMMON STOCK OF U.S. GOLD, HAVING REGARD TO THEIR PARTICULAR CIRCUMSTANCES.
 
For the purposes of the Tax Act, all amounts relating to the acquisition, holding or disposition of exchangeable shares or shares of common stock of U.S. Gold, including dividends, adjusted cost base and proceeds of disposition, must be converted into Canadian dollars using the Canadian/U.S. dollar exchange rate prevailing at the time such amounts arise.
 
Shareholders Resident in Canada
 
The following portion of this summary is applicable to a shareholder who, for the purposes of the Tax Act and any applicable income tax treaty or convention, is or is deemed to be a Canadian resident at all relevant times.


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Receipt of Ancillary Rights
 
A shareholder who receives exchangeable shares on a disposition of Coral Gold common shares in the offer will also be entitled to certain rights and benefits, referred to herein as ancillary rights, under the Voting and Exchange Trust Agreement, as discussed in the section entitled “Exchangeable Shares — Voting and Exchange Trust Agreement” on page 40 of this prospectus. A shareholder will be required to account for the ancillary rights in determining the proceeds of disposition of such holder’s Coral Gold common shares and the cost of the exchangeable shares received in the offer. U.S. Gold is of the view that the ancillary rights have a nominal fair market value given the other rights and benefits that shareholders will have upon completion of the offer including, without limitation, the right to exchange their exchangeable shares for shares of common shares of U.S. Gold on a one-for-one basis. Any such determination of value is not binding upon the CRA. Counsel expresses no opinion as to the appropriateness or accuracy of this valuation. A reference to exchangeable shares will be deemed to include a reference to ancillary rights, where applicable.
 
Grant of Call Rights
 
U.S. Gold is of the view that the liquidation call right, the redemption call right and the retraction call right, as discussed in the section entitled “— Call Rights” on page 38 of this prospectus, have a nominal fair market value and that accordingly, no amount should be allocated to the call rights. Any such determination of value is not binding upon the CRA. Counsel expresses no opinion as to the appropriateness or accuracy of this valuation. Provided that the valuation with respect to such call rights is correct, the granting of the call rights will not result in any material adverse income tax consequences to a shareholder. However, should the CRA challenge this valuation and ultimately succeed in establishing that the call rights have a fair market value in excess of a nominal amount, a shareholder receiving exchangeable shares pursuant to the offer will realize a capital gain in an amount equal to the fair market value of the call rights. See the section entitled “Taxation of Capital Gains or Capital Losses” below.
 
Exchange of Coral Gold Common Shares for Exchangeable Shares
 
No Election Transaction.  Subsection 85.1(1) of the Tax Act provides that where a taxpayer exchanges shares, or the exchanged shares, of any particular class of the capital stock of a taxable Canadian corporation for shares of another taxable Canadian corporation, or the purchaser corporation, and receives no consideration for the transfer of the exchanged shares other than shares of the purchaser corporation, the taxpayer is deemed to dispose of the exchanged shares for an amount equal to the adjusted cost base of the exchanged shares to the taxpayer immediately before the exchange and to acquire the shares of the purchaser corporation at a cost then equal to the adjusted cost base to the taxpayer of the exchanged shares immediately before the exchange. Subsection 85.1(1) does not apply if the taxpayer elects in the taxpayer’s return of income for the year in which the exchange occurs to recognize any gain or loss on the exchange or if the taxpayer makes a joint tax election pursuant to subsection 85(1) or (2) with respect to the exchanged shares. If section 85.1(1) applies to the exchange by a shareholder of Coral Gold common shares for exchangeable shares, the shareholder would dispose of Coral Gold common shares for an amount equal to its adjusted cost base of Coral Gold common shares immediately before the exchange and receive exchangeable shares with a cost to the shareholder equal to the adjusted cost base of Coral Gold common shares immediately before the exchange. If the ancillary rights represent consideration to the shareholders for the disposition of Coral Gold common shares, section 85.1 would not apply to the exchange by a shareholder of Coral Gold common shares for exchangeable shares. Shareholders are advised to consult their tax advisors as to whether subsection 85.1 may apply to an exchange by them of their Coral Gold common shares and whether they should make an election pursuant to subsection 85(1) or (2) as described below under “Section 85 Election.”
 
If subsection 85.1(1) does not apply to a shareholder, a shareholder who exchanges Coral Gold common shares for exchangeable shares will be considered to have disposed of such Coral Gold common shares for proceeds of disposition equal to the fair market value of the exchangeable shares (including the value of the ancillary rights) acquired by such shareholder on the exchange, unless such shareholder makes a joint tax election under subsection 85(1) or 85(2) of the Tax Act. As a result, such shareholder will realize a capital gain (or capital loss) to the extent that such proceeds of disposition, net of any reasonable costs of disposition, exceed (or are less than) the adjusted cost base of such Coral Gold common shares. See the section entitled “Taxation of Capital Gains


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or Capital Losses” below. The cost to a holder of exchangeable shares acquired on the exchange will be equal to the fair market value thereof at the time of acquisition.
 
Election Transaction.  A shareholder who exchanges Coral Gold common shares for exchangeable shares may make a joint tax election with Canadian Exchange Co. pursuant to subsection 85(1) of the Tax Act (or, in the case of a shareholder who is a partnership, pursuant to subsection 85(2) of the Tax Act). Such election may result in the full or partial deferral of capital gains otherwise arising on the exchange of Coral Gold common shares as described under “Non-Rollover Transaction.” Provided that, on the effective date, the adjusted cost base of such shareholder’s Coral Gold common shares equals or exceeds the fair market value of the ancillary rights acquired by such shareholder on the exchange, that shareholder may elect so as to not realize a capital gain for the purposes of the Tax Act on the exchange. The elected amount (as defined herein) will be determined by each shareholder who makes such a joint tax election, subject to the limitations under the Tax Act described below under “Section 85 Election.”
 
Section 85 Election
 
Canadian Exchange Co. will make a joint tax election under subsection 85(1) or subsection 85(2), as applicable, of the Tax Act (and the corresponding provisions of any applicable provincial tax legislation) with a shareholder who receives exchangeable shares on the exchange of Coral Gold common shares and at the amount elected by the shareholder, subject to the limitations under the Tax Act. The joint tax election allows a shareholder to elect an amount which, subject to the limitations under the Tax Act described below, will be treated for the purposes of the Tax Act as the shareholder’s proceeds of disposition of his or her Coral Gold common shares. Canadian Exchange Co. agrees only to execute any properly completed election forms and to forward such election forms by mail (within 30 days after the receipt thereof by Canadian Exchange Co.) to the applicable tax authorities with a copy to the shareholder. With the exception of the execution and filing of the election by Canadian Exchange Co., compliance with the requirements to ensure the validity of a joint tax election will be the sole responsibility of the shareholder making the election.  Accordingly, neither Canadian Exchange Co. nor the depositary will be responsible or liable for taxes, interest, penalties, damages or expenses resulting from the failure by anyone to properly complete any election within the time prescribed and in the form prescribed under the Tax Act (or the corresponding provisions of any applicable provincial legislation).
 
The relevant Canadian federal tax election form is CRA Form T2057 (or, in the event that Coral Gold common shares are held as partnership property, CRA Form T2058). For shareholders required to file in Québec, Québec Form TP-518V (or, in the event that Coral Gold common shares are held as partnership property, Québec Form TP-529V) will also be required. A tax election package, consisting of the relevant tax election forms, a tax election filing authorization letter, and a letter of instructions, may be obtained from the depositary. A shareholder interested in making a joint tax election should so indicate on the letter of acceptance and transmittal in the space provided therein and a tax election package will be sent to such shareholder.
 
In order to make a joint tax election, a shareholder must provide to the depository, at the address set forth on the back page hereof, on behalf of Canadian Exchange Co., two signed copies of the necessary election forms on or before the day which is 90 days after the effective date, duly completed with the details of the number of Coral Gold common shares transferred and the applicable elected amount for the purposes of the election. Certain Canadian provincial jurisdictions may require that a separate joint tax election be filed for provincial income tax purposes. Canadian Exchange Co. will also make a Canadian provincial joint tax election with a shareholder under the provision of any relevant Canadian provincial income tax legislation with similar effect to subsection 85(1) or subsection 85(2) of the Tax Act (and, if requested, an election pursuant to sections 518 or 529 of the Taxation Act (Quebec) or analogous provincial tax legislation). Shareholders are encouraged to consult their own tax advisors to determine whether separate election forms must be filed with any Canadian provincial taxing authority. It will be the responsibility of each shareholder who wishes to make such a joint tax election to obtain the necessary Canadian provincial election forms and to submit such forms to the depositary for execution and filing by Canadian Exchange Co.
 
Where Coral Gold common shares are held in joint ownership and two or more of the co-owners wish to elect, one of the co-owners designated for such purpose should file the designation and a copy of the CRA Form T2057 (and where applicable, the corresponding Québec form) for each co-owner, along with a list of all co-owners


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electing, which list should contain each co-owner’s percentage of ownership, the address and Canadian social insurance number or tax account number of each co-owner. Where Coral Gold common shares are held as partnership property, a partner validly designated by the partnership may file one copy of the CRA Form T2058 on behalf of all members of the partnership (and where applicable, the corresponding form in duplicate with the Québec taxation authorities). Such CRA Form T2058 (and Québec form, if applicable) must be accompanied by a letter signed by each partner authorizing the designated partner to complete and file the form, and a list containing the name, address, social insurance number or tax account number of each partner.
 
Where a joint tax election is made, pursuant to the limitations imposed by the Tax Act, the elected amount may not be:
 
  •  less than the fair market value of the ancillary rights received on a disposition of Coral Gold common shares pursuant to the offer;
 
  •  less than the lesser of: (a) the adjusted cost base to the shareholder of the shareholder’s Coral Gold common shares disposed of pursuant the offer, and (b) the fair market value of Coral Gold common shares; and
 
  •  greater than the fair market value of Coral Gold common shares so disposed of,
 
in each case, determined immediately before the time of the disposition. The amount elected by a shareholder in accordance with the foregoing limitations is referred to herein as the elected amount.
 
Elected amounts which do not comply with the foregoing limitations will be automatically adjusted pursuant to the provisions of the Tax Act.
 
Where a shareholder and Canadian Exchange Co. make a Canadian joint tax election, the Canadian tax treatment to the shareholder will be as follows:
 
  •  the shareholder will be deemed to have been disposed of Coral Gold common shares for proceeds of disposition equal to the elected amount;
 
  •  if the proceeds of disposition of Coral Gold common shares are equal to the aggregate of the adjusted cost base of the shareholder’s Coral Gold common shares, determined immediately before the time of the disposition, and any reasonable costs of disposition, no capital gain or capital loss will be realized by the shareholder;
 
  •  to the extent that the proceeds of disposition of Coral Gold common shares exceed (or are less than) the aggregate of the adjusted cost base to the shareholder of his or her Coral Gold common shares, determined immediately before the time of the disposition, and any reasonable costs of disposition, a capital gain (or capital loss) will be realized by the shareholder; and
 
  •  the cost to a shareholder of the exchangeable shares received in exchange for Coral Gold common shares will be equal to the amount by which the elected amount exceeds the fair market value of the ancillary rights received on the disposition of Coral Gold common shares pursuant to the offer.
 
In order for the CRA (and, where applicable, the Ministère du Revenu du Québec) to accept a joint tax election without a late filing penalty being paid by the shareholder, the election must be received by such revenue authorities on or before the day that is the earliest of the days on or before which either Canadian Exchange Co. or the shareholder is required to file an income tax return for the taxation year in which the exchange occurs. Canadian Exchange Co.’s taxation year is scheduled to end on December 31. Thus, where the exchange occurs prior to December 31, 2006, the tax election will, in the case of a shareholder who is an individual (other than a trust), generally have to be received by the revenue authorities by April 30, 2007 (being generally the last day for filing a tax return for the individual’s 2006 taxation year). Shareholders, other than individuals, are encouraged to consult their own advisors as soon as possible respecting the deadlines applicable to their own particular circumstances. However, regardless of such deadline, the tax election forms of a shareholder must be received by the depositary, as indicated above, no later than the 90th day after the effective date. If, for whatever reason, the current taxation year of Canadian Exchange Co. were to terminate before December 31, 2006, the joint tax election may have to be filed earlier to avoid late filing penalties. In such event, Canadian Exchange Co. has agreed to notify


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forthwith, through the depositary, every shareholder who received exchangeable shares on the exchange of their Coral Gold common shares of such change.
 
Any shareholder who does not ensure that the depositary has received a duly completed election form on or before the 90th day after the effective date, will not be able to benefit from the joint tax election. Accordingly, all shareholders who wish to enter into a joint tax election with Canadian Exchange Co. should give their immediate attention to this matter. The instructions for requesting a tax election package are set out in the letter of acceptance and transmittal. Shareholders are referred to Information Circular 76-19R3 and Interpretation Bulletin IT-291R3 issued by the CRA for further information respecting the joint tax election. Joint tax election forms are also available from the CRA and provincial tax authorities. Shareholders wishing to make the joint tax election are encouraged to consult their own tax advisors. The comments herein with respect to such elections are provided for general assistance only. The law in this area is complex and contains numerous technical requirements.
 
As discussed above, shareholders will be required to account for the ancillary rights in determining the proceeds of disposition of such shareholder’s Coral Gold common shares and the cost of the exchangeable shares received in the offer. U.S. Gold is of the view that the ancillary rights have a nominal fair market value given the other rights and benefits that shareholders also have upon completion of the offer including, without limitation, the right to exchange their exchangeable shares for shares of common stock of U.S. Gold on a one-for-one basis. Any such determination of value is not binding upon the CRA. Counsel expresses no opinion as to the appropriateness or accuracy of this valuation. A reference to exchangeable shares will be deemed to include a reference to ancillary rights, where applicable.
 
Exchangeable Shares/Shares of Common Stock of U.S. Gold
 
Dividends on Exchangeable Shares
 
Dividends received or deemed to be received on exchangeable shares by a shareholder who is an individual (including most trusts) will be included in computing the individual’s income for the taxation year in which such dividends are received and will be subject to the gross-up and dividend tax credit rules generally applicable to taxable dividends received from taxable Canadian corporations.
 
On June 29, 2006, the Minister of Finance (Canada) tabled in the House of Commons a notice of Ways and Means Motion to introduce an enhanced federal gross-up and dividend tax credit for “eligible dividends” paid after 2005 and received by individuals resident in Canada. If legislation is enacted as described in the notice of Ways and Means Motion, dividends received or deemed to be received on the exchangeable shares by a holder may qualify for the enhanced gross-up and dividend tax credit.
 
A shareholder that is a corporation will be required to include in computing its income for a taxation year any dividends received on the exchangeable shares and will generally be entitled to deduct such dividends in computing its taxable income.
 
A shareholder that is a “private corporation” as defined in the Tax Act or any other corporation resident in Canada and controlled or deemed to be controlled by or for the benefit of an individual (other than a trust) or a related group of individuals (other than trusts) may be liable to pay a refundable tax under Part IV of the Tax Act equal to 331/3% of dividends received or deemed to be received on the exchangeable shares to the extent that such dividends are deductible in computing the holder’s taxable income.
 
The exchangeable shares will be “taxable preferred shares” and “short-term preferred shares” for purposes of the Tax Act. Accordingly, Canadian Exchange Co. will be subject to a tax under Part VI.1 of the Tax Act equal to 662/3% (to be reduced to 50% under the Tax Proposals retroactively effective to dividends paid by a corporation in its 2003 and subsequent taxation years) of all dividends paid or deemed to be paid on the exchangeable shares. Canadian Exchange Co. will also be entitled to deduct 9/4 (to be increased to 3 times under the Tax Proposal retroactively effective to dividends paid by a corporation in its 2003 and subsequent taxation years) of any Part VI.1 tax payable in computing its taxable income.


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Dividends received or deemed to be received on the exchangeable shares will not be subject to the 10% tax under Part IV.1 of the Tax Act.
 
Dividends on Shares of Common Stock of U.S. Gold
 
Dividends received on shares of common stock of U.S. Gold will be included in a shareholder’s income for the purposes of the Tax Act. Such dividends received by a shareholder who is an individual will not be subject to the gross-up and dividend tax credit rules in the Tax Act. A shareholder that is a corporation will not be entitled to deduct the amount of such dividends in computing its taxable income. A shareholder that is a “Canadian-controlled private corporation” as defined in the Tax Act may be liable to pay an additional refundable tax of 62/3% on its “aggregate investment income” for the year which will include such dividends. Subject to the detailed rules in the Tax Act, a shareholder may be entitled to a foreign tax credit or deduction for any United States non-resident withholding tax paid on dividends received on shares of common stock of U.S. Gold.
 
Redemption or Exchange of Exchangeable Shares
 
On the redemption (including a retraction) of an exchangeable share by Canadian Exchange Co., the shareholder will be deemed to have received a dividend equal to the amount, if any, by which the redemption proceeds (being the fair market value at that time of the share of common stock of U.S. Gold plus the accrued and unpaid dividends, if any, received by the shareholder on the redemption) exceeds the paid-up capital for purposes of the Tax Act of the exchangeable share at the time of the redemption. A shareholder will be subject to tax on the amount of any such deemed dividend in the manner described above under the heading “Dividends on Exchangeable Shares.” On the redemption, the shareholder will also be considered to have disposed of the exchangeable share for proceeds of disposition equal to the redemption proceeds less the amount of such deemed dividend, and will realize a capital gain (or a capital loss) equal to the amount by which such proceeds of disposition, net of any reasonable costs of disposition, exceed (or are less than) the adjusted cost base of the exchangeable share to the shareholder. See the section entitled “Taxation of Capital Gains or Capital Losses” below. In some circumstances, the amount of any such deemed dividend received by a shareholder that is a corporation on the redemption of an exchangeable share may be treated as proceeds of disposition and not as a dividend.
 
Where an exchangeable share is exchanged with U.S. Gold or Alberta ULC for a share of common stock of U.S. Gold, the shareholder will realize a capital gain (or a capital loss) to the extent the proceeds of disposition of the exchangeable share, net of any reasonable costs of disposition, exceed (or are less than) the shareholder’s adjusted cost base of the exchangeable share. For this purpose, the proceeds of disposition will be the aggregate of the fair market value, at the time of the exchange, of the shares of common stock of U.S. Gold received on the exchange and any accrued and unpaid dividends received by the shareholder as part of the exchange consideration. See the section entitled “Taxation of Capital Gains or Capital Losses” below.
 
Because of the existence of the call rights and certain rights provided in the Voting and Exchange Trust Agreement, a holder of exchangeable shares cannot control whether such a holder will receive shares of common stock of U.S. Gold by way of redemption of the exchangeable shares by Canadian Exchange Co. or by way of a purchase of the exchangeable shares by U.S. Gold or Alberta ULC. If the call rights are not exercised on redemption or retraction of the exchangeable shares, a holder of exchangeable shares may realize a dividend for Canadian tax purposes that may exceed the holder’s economic gain.
 
As described above, the Canadian federal income tax consequences of a redemption by Canadian Exchange Co. differ from those of a purchase by U.S. Gold or Alberta ULC.
 
Acquisition and Disposition of Shares of Common Stock of U.S. Gold
 
The cost of the shares of common stock of U.S. Gold received on the retraction, redemption, exchange or purchase of exchangeable shares will be equal to the fair market value of such shares of common stock of U.S. Gold at that time and will be averaged with the adjusted cost base of all other shares of common stock of U.S. Gold held by the shareholder as capital property at that time for the purposes of determining the adjusted cost base of such shares of common stock of U.S. Gold.


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A disposition or deemed disposition of shares of common stock of U.S. Gold by a shareholder will result in a capital gain (or capital loss) to the extent that the proceeds of disposition, net of any reasonable costs of disposition, exceed (or are less than) the shareholder’s adjusted cost base of such shares of common stock of U.S. Gold. See the section entitled “Taxation of Capital Gains or Capital Losses” below.
 
Taxation of Capital Gains or Capital Losses
 
A shareholder will be required to include one-half of the amount of any capital gain (a “taxable capital gain”) in income, and will generally be required to deduct one-half of the amount of any capital loss (an “allowable capital loss”) against taxable capital gains realized by the shareholder in the year of disposition. Allowable capital losses not deducted in the taxation year in which they are realized may be carried back and deducted in any of the three preceding taxation years or carried forward and deducted in any subsequent taxation year against taxable capital gains realized in such years, to the extent and under the circumstances specified in the Tax Act.
 
A shareholder that is a “Canadian-controlled private corporation,” as defined in the Tax Act, may be liable to pay an additional refundable tax of 62/3% on its “aggregate investment income” for the year which will include an amount in respect of taxable capital gains.
 
If the holder of exchangeable shares is a corporation, the amount of any capital loss arising from a disposition or deemed disposition of such shares may be reduced by the amount of any dividends, including deemed dividends, which have been previously received on such shares to the extent and under the circumstances specified in the Tax Act. Similar rules may apply where the corporation is a member of a partnership or beneficiary of a trust that owns exchangeable shares or where the trust or partnership of which a corporation is beneficiary or a member is a member of a partnership or beneficiary of a trust that owns exchangeable shares. Shareholders to whom these rules may be relevant should consult their own tax advisors.
 
Alternative Minimum Tax
 
Individuals and certain trusts that receive or are deemed to receive taxable dividends on exchangeable shares, or realize a capital gain on the disposition or deemed disposition of Coral Gold common shares, the exchangeable shares or shares of common stock of U.S. Gold, may realize an increase in their liability for alternative minimum tax under the Tax Act.
 
Qualified Investments
 
The exchangeable shares issued in the offer, will be “qualified investments” under the Tax Act for trusts governed by registered retirement savings plans, registered retirement income funds, deferred profit sharing plans or registered education savings plans, or deferred plans, as defined in the Tax Act, provided the exchangeable shares are listed on a “prescribed stock exchange” (which currently includes the TSX and AMEX).
 
The ancillary rights will not be qualified investments under the Tax Act for such deferred plans. However, U.S. Gold is of the view that the ancillary rights have a nominal fair market value. Counsel expresses no opinion as to the appropriateness or the accuracy of this valuation. Any determination of value is not binding on the CRA. Where plans acquire property that is not a qualified investment, the plans are required to pay tax on the income and capital gains in respect of such property in accordance with the Tax Act. In addition, where a non-qualified investment is acquired by a trust governed by a registered retirement savings plan or a registered retirement income fund, the fair market value of the non-qualified investment at the time of acquisition will be included in the income of the annuitant under the plan. Where a non-qualified investment is acquired by a trust governed by a deferred profit sharing plan, the trust will be liable for a tax equal to the fair market value of the investment at the time the investment is acquired. The registration of a registered education savings plan becomes revocable if it acquires a non-qualified investment and, accordingly, exchangeable shares (by reason of the attached ancillary rights) are not suitable investments for trusts governed by registered education savings plans.
 
The shares of common stock of U.S. Gold issued in the offer, will be qualified investments under the Tax Act for Plans, provided such shares are listed on a “prescribed stock exchange” (which currently includes the TSX and AMEX).


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Foreign Property Information Reporting
 
A holder of exchangeable shares or shares of common stock of U.S. Gold who is a “specified Canadian entity” for a taxation year or a fiscal period and whose total cost amount of “specified foreign property,” including such exchangeable shares or shares of common stock of U.S. Gold, at any time in the year or fiscal period exceeds Cdn$100,000 will be required to file an information return for the year or period disclosing prescribed information.
 
Subject to certain exceptions, a taxpayer resident in Canada in the year will be a specified Canadian entity. Holders are encouraged to consult their tax advisors as to whether they must comply with these rules.
 
Foreign Investment Entity Status
 
On July 18, 2005, the Minister of Finance (Canada) released revised draft legislation relating to the income tax treatment of investments by Canadian residents in non-resident entities that constitute “foreign investment entities” (“FIEs”) applicable for taxation years commencing after 2002 (the “FIE Tax Proposals”). The FIE Tax Proposals, as currently drafted, would apply to require a shareholder that holds a “participating interest” (that is not an “exempt interest”) in a non-resident entity that is an FIE at the entity’s taxation year-end to take into account in computing the shareholder’s income for the shareholder’s taxation year that includes such taxation year-end: (i) an amount based on a prescribed rate of return on the “designated cost” of such participating interest held by a shareholder at the end of each month ending in the holder’s taxation year at which time the participating interest is held by the shareholder; (ii) in certain limited circumstances, any gains and losses accrued on such participating interest for the year; or (iii) in certain limited circumstances, a shareholder’s proportionate share of the FIE’s income (or loss) for the year calculated using Canadian tax rules. For the purposes of the FIE Tax Proposals, exchangeable shares and shares of common stock of U.S. Gold will constitute participating interests in U.S. Gold.
 
U.S. Gold will not be an FIE at the end of its taxation year provided that, at that time, the “carrying value” of all of U.S. Gold’s “investment property” is not greater than one-half of the “carrying value” of all its property. The determination of whether or not U.S. Gold is an FIE must be made on an annual basis at the end of each taxation year-end of U.S. Gold.
 
Even if U.S. Gold were an FIE at the end of one of its taxation years, an exchangeable share or a share of common stock of U.S. Gold, respectively, may be an exempt interest provided that throughout the period that such a security is held by a holder during such taxation year of U.S. Gold: (i) U.S. Gold is resident in the United States for the purposes of the Tax Act; (ii) the exchangeable share or the share of common stock of U.S. Gold (as applicable) is listed on a “prescribed stock exchange”; and (iii) the exchangeable share or the share of common stock of U.S. Gold (as applicable) constitutes an “arm’s length interest” (as defined for the purposes of the FIE Tax Proposals). It is expected that the exchangeable shares and the shares of common stock of U.S. Gold will be “arm’s length interests” of a particular shareholder thereof for the purposes of the FIE Tax Proposals provided that such shareholder (together with entities and individuals with whom the holder does not deal at arm’s length) does not hold, in the aggregate, more than 10% of the exchangeable shares or 10% of the shares of common stock of U.S. Gold, as applicable, based on the fair market value of such securities. In addition, an exchangeable share or share of common stock of U.S. Gold will only constitute an exempt interest at the end of U.S. Gold’s taxation year if, at that time, it is reasonable to conclude that the shareholder has no “tax avoidance motive” in respect of such exchangeable share or share of common stock of U.S. Gold. For this purpose, the shareholder will be regarded as having a tax avoidance motive only if it is reasonable to conclude that the main reasons for acquiring or holding such exchangeable shares or shares of common stock of U.S. Gold include directly or indirectly benefiting principally from income, profits, gains or increases in value in respect of investment property and from the deferral or reduction of tax that would have been payable on such income, profits or gains. Shareholders are encouraged to consult their own tax advisors regarding the determination of whether or not they have such a tax avoidance motive. The determination of whether exchangeable shares or shares of common stock of U.S. Gold constitute an exempt interest must be made on an annual basis at the end of the taxation year of U.S. Gold and no assurances can be given that the exchangeable shares or shares of common stock of U.S. Gold will constitute an exempt interest at any subsequent taxation year-end of U.S. Gold.


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Economic Statement of October 18, 2000
 
In the Economic Statement released on October 18, 2000 (the “Economic Statement”), the Minister of Finance (Canada) announced a proposal to formulate and introduce a rule to permit shares of a Canadian corporation held by a Canadian resident to be exchanged for shares of a foreign corporation on a tax-deferred basis. This statement included no details of the circumstances in which such tax-deferred share-for-share exchanges could occur but rather indicated that these rules would be developed in consultation with the private sector. The Economic Statement indicated that any such rules would not be effective before the public release of draft legislation including such rules. The Canadian Federal Budget of February 18, 2003, reiterated the statements made in the Economic Statement and indicated that draft legislative proposals would be released in the near future for public review and comment.
 
The Canadian Federal Budget of March 23, 2004 (the “2004 Budget”) indicated that it is intended that detailed proposals will be released for public comment within months after the release of the 2004 Budget. The 2004 Budget also indicated that the proposals are expected to be in the form of draft legislation and there has been no indication as to an effective date for the proposals.
 
It is not known whether the draft legislation containing the proposed amendments described above will be released in time to affect a subsequent exchange of exchangeable shares for shares of common stock of U.S. Gold, and it is therefore possible that such exchange of exchangeable shares may be achieved on a tax-deferred basis. In any case, until such rules are developed and released, it is not possible to state whether those rules would apply to a shareholder who exchanges exchangeable shares for shares of common stock of U.S. Gold. Shareholders are encouraged to consult their own tax advisors once the draft legislation is released, if at all, to determine how the draft legislation might apply to the holder’s particular circumstances.
 
Subsequent Acquisition Transaction
 
If Coral Gold common shares validly tendered in the offer are accepted for purchase and paid for, we currently intend to acquire, directly or indirectly, all of the remaining outstanding Coral Gold common shares in accordance with applicable law by way of a subsequent acquisition transaction. The tax treatment of a subsequent acquisition transaction to a shareholder will depend upon the exact manner in which the subsequent acquisition transaction is carried out and may be materially less favorable than would apply if Coral Gold common shares were tendered in the offer. Shareholders are encouraged to consult their own tax advisors for advice with respect to the income tax consequences to them of having their Coral Gold common shares acquired pursuant to a subsequent acquisition transaction.
 
The offerors currently intend to effect a subsequent acquisition transaction in the form of a statutory plan of arrangement or similar transaction as discussed above under the caption “The Offer — Subsequent Acquisition Transaction.” Upon the subsequent acquisition transaction, holders of warrants will receive warrants to purchase exchangeable shares of Canadian Exchange Co. on a tax-deferred basis. In addition, the Coral Gold stock option plan will be replaced on a tax-deferred basis with a stock option plan of U.S. Gold.
 
Under the current administrative practice of the CRA, shareholders who exercise their right of dissent in respect of a merger should be considered to have disposed of their Coral Gold common shares for proceeds of disposition equal to the amount paid by the acquiring corporation to the dissenting shareholder therefore, other than interest awarded by the court (if any). Because of uncertainties under the relevant legislation as to whether such amounts paid to a dissenting shareholder would be treated entirely as proceeds of disposition, or in part as the payment of a deemed dividend, dissenting shareholders are encouraged to consult with their own tax advisors in this regard.
 
Shareholders Not Resident in Canada
 
The following portion of the summary is applicable to holders of Coral Gold common shares who, for purposes of the Tax Act or any applicable income tax treaty or convention, have not been and will not be resident or deemed to be resident in Canada at any time while they have held Coral Gold common shares or will hold exchangeable shares and/or shares of common stock of U.S. Gold and who do not use or hold or are not deemed to use or hold such Coral


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Gold common shares, exchangeable shares and/or shares of common stock of U.S. Gold in carrying on a business in Canada, or a non-resident shareholder. Special rules, which are not discussed in this summary, may apply to a non-resident that is an insurer carrying on business in Canada and elsewhere.
 
Disposition of Coral Gold Common Shares or Exchangeable Shares
 
A non-resident shareholder will not be subject to capital gains tax under the Tax Act on the disposition of Coral Gold common shares in the offer or a disposition of exchangeable shares unless Coral Gold common shares or exchangeable shares, as the case may be, constitute “taxable Canadian property” of the shareholder for purposes of the Tax Act and the shareholder is not entitled to relief under an applicable income tax treaty or convention.
 
Generally, Coral Gold common shares or the exchangeable shares, as the case may be, will not be taxable Canadian property at a particular time provided that such shares are listed on a “prescribed stock exchange” (which currently includes the TSX and AMEX), and the shareholder, alone or together with persons with whom such shareholder does not deal at arm’s length, has not owned 25% or more of the issued shares of any class or series of shares in the capital of Coral Gold or Canadian Exchange Co., as the case may be, at any time during the five year period immediately preceding the particular time.
 
A non-resident shareholder whose Coral Gold common shares constitute taxable Canadian property may be eligible to make a joint tax election with Canadian Exchange Co. See the section entitled “Shareholders Resident in Canada — Section 85 Election”. Non-resident shareholders whose Coral Gold common shares or exchangeable shares constitute taxable Canadian property should consult their own tax advisors with respect to the Canadian tax consequences, including the effects thereon of the provisions of any income tax treaty or convention, of disposing of such shares.
 
Dividends On Exchangeable Shares
 
Dividends paid or deemed to be paid to a non-resident shareholder on exchangeable shares (including on a redemption of such shares by Canadian Exchange Co.) will be subject to Canadian withholding tax at the rate of 25% unless the rate is reduced under the provisions of an applicable income tax treaty or convention. See the section entitled “Shareholders Resident in Canada — Redemption or Exchange of Exchangeable Shares.” For example, under the Canada-United States tax treaty, the withholding tax rate is generally reduced to 15% in respect of a dividend paid to a person who is the beneficial owner thereof and who is resident in the United States for purposes of the Canada-United States tax treaty.


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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
 
In the opinion of Hogan & Hartson L.L.P., U.S. special counsel to U.S. Gold and Canadian Exchange Co., the following is, as of the date of the offer and to the extent it describes applicable provisions of U.S. federal income tax laws, an accurate summary of the material U.S. federal income tax considerations applicable to shareholders who dispose of their Coral Gold common shares pursuant to the offer. This summary is included for general information purposes only and does not purport to be a complete technical analysis or listing of all potential U.S. tax consequences that may be relevant to holders of Coral Gold common shares. It is not intended to be, nor should it be construed as being, legal or tax advice. For this reason, holders of Coral Gold common shares should consult their own tax advisors concerning the tax consequences of the proposed transaction. Further, this summary does not address any tax consequences arising under the income or other tax laws of any state, local or foreign jurisdiction or any tax treaties.
 
This discussion is based upon the provisions of the Code, the related Treasury regulations, administrative interpretations and court decisions, in each case as in effect or available as of the date of the offer, all of which are subject to change, possibly with retroactive effect. Any such change could affect the accuracy of the statements and the conclusions discussed below and the tax consequences of the proposed transaction.
 
This discussion applies only to persons that hold their Coral Gold common shares, and will hold their exchangeable shares, as capital assets within the meaning of section 1221 of the Code, and assumes (without verification by the offerors) that Coral Gold is not, and has not been, a “controlled foreign corporation” for U.S. federal income tax purposes and that Coral Gold has never been treated as a U.S. domestic corporation pursuant to Section 897(i) of the Code. If Coral Gold is a controlled foreign corporation or was a controlled foreign corporation during the period that U.S. holders (defined below) have held their Coral Gold common shares, special U.S. tax rules not discussed herein may substantially affect the tax consequences of the proposed transaction to U.S. holders. If Coral Gold is treated as a U.S. domestic corporation pursuant to Section 897(i) of the Code, the U.S. tax consequence of the proposed transaction to non-U.S. holders may differ from those described below. This summary does not address all aspects of U.S. federal income taxation that may be relevant to holders of Coral Gold common shares in light of their particular circumstances or that may be applicable to them if they are subject to special treatment under the U.S. federal income tax laws. Specifically, this summary does not address tax consequences that may apply to a holder of Coral Gold common shares that is:
 
  •  a financial institution, thrift, insurance company or mutual fund;
 
  •  a tax-exempt organization;
 
  •  an S corporation, an entity taxable as a partnership for U.S. federal income tax purposes or other pass-through entity or an owner thereof;
 
  •  a dealer in stocks and securities or foreign currencies or a trader or an investor in Coral Gold common shares who elects the mark-to-market method of accounting for such stock;
 
  •  a shareholder who received Coral Gold common shares from the exercise of employee stock options, stock purchase plans or otherwise as compensation, or from a tax-qualified retirement plan, individual retirement account or other qualified savings account;
 
  •  a U.S. holder (defined below) that has a functional currency other than the U.S. dollar;
 
  •  an expatriate or former long-term resident of the United States;
 
  •  a shareholder that owns (or is deemed to own) shares representing 10% or more of the voting power of Coral Gold;
 
  •  a shareholder that, immediately following completion of the acquisition of Coral Gold by U.S. Gold (through Canadian Exchange Co.), will own (or be deemed to own) exchangeable shares representing 5% or more of the total voting power or value of all shares of Canadian Exchange Co. stock; or
 
  •  a shareholder who holds Coral Gold common shares as part of a hedge against currency risk, straddle or a constructive sale or conversion transaction, or other risk reduction or integrated investment transaction.


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U.S. Federal Income Tax Consequences to U.S. Holders of Coral Gold Common Shares
 
For purposes of this summary, the term “U.S. holder” means a beneficial owner of Coral Gold common shares who is (i) an individual who is a citizen of the United States or who is resident in the United States for U.S. federal income tax purposes; (ii) a corporation or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized under the laws of the United States, any state thereof or the District of Columbia; (iii) a trust, if either (A) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (B) the trust has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person; or (iv) an estate that is subject to U.S. federal income tax on its income regardless of its source.
 
An entity that is classified as a partnership for U.S. federal income tax purposes is neither a U.S. holder nor a non-U.S. holder. The U.S. federal income tax treatment of a partnership and its partners depends upon a variety of factors not specifically addressed herein, including the activities of the partnership and the partners. Holders of Coral Gold common shares that are partnerships for U.S. federal income tax purposes, and partners in any such partnership, should consult their tax advisors concerning the U.S. federal income tax consequences of the exchange of Coral Gold common shares pursuant to the offer and of owning and disposing of exchangeable shares or shares of common stock of U.S. Gold.
 
In its Forms 20-F filed with the SEC, Coral Gold has stated that it believes that it has been and continues to be a “passive foreign investment company” or “PFIC” within the meaning of Section 1297 of the Code. We have not verified whether this is the case. The PFIC rules are highly complex, and the U.S. federal income tax consequences to a U.S. holder of Coral Gold common shares of the exchange of Coral Gold shares for exchangeable shares of Canadian Exchange Co. will vary substantially depending upon whether Coral Gold is a PFIC and whether the holder has made certain elections potentially available to a holder of Coral Gold shares under the PFIC rules. Each U.S. holder of Coral Gold shares is therefore strongly urged to consult with such holder’s tax advisor regarding the consequences to such holder of the application of the PFIC rules, taking into account such holder’s particular situation. See the discussion of the consequences of PFIC status under the heading “U.S. Federal Income Tax Consequences Arising from the Exchange by a U.S. Holder of Coral Gold Common Shares for Exchangeable Shares and Ancillary Rights” below.
 
U.S. Federal Income Tax Characterization of the Exchangeable Shares
 
There is no direct authority addressing the proper characterization and treatment of instruments with characteristics similar to the exchangeable shares and the ancillary rights for U.S. federal income tax purposes. Because the exchangeable shares are exchangeable into shares of U.S. Gold common stock, have dividend rights based on the dividends paid with respect to U.S. Gold common stock, and have the benefit of voting rights similar to the voting rights attributable to the shares of common stock of U.S. Gold, there is a significant chance that, for U.S. federal income purposes, the U.S. Internal Revenue Service, or the IRS, or the United States courts may treat the exchangeable shares as shares of U.S. Gold rather than as shares of Canadian Exchange Co. In the absence of specifically applicable authority and in view of the voting and other rights that holders of exchangeable shares have with respect to Canadian Exchange Co., the offerors intend to take the position that the exchangeable shares constitute stock of Canadian Exchange Co., and not stock of U.S. Gold, for U.S. federal income tax purposes. However, this characterization is not binding on the IRS, and the IRS or the courts could treat the exchangeable shares as shares of U.S. Gold. The offerors have not requested, nor do they intend to request, an opinion from United States legal counsel or a ruling from the IRS regarding the U.S. federal income tax classification of the exchangeable shares.
 
U.S. Federal Income Tax Characterization of the Exchange by a U.S. Holder of Coral Gold Common Shares for Exchangeable Shares and Ancillary Rights
 
This summary assumes that, as contemplated, (i) the offer will be consummated by Canadian Exchange Co., (ii) pursuant to the offer, Canadian Exchange Co. will obtain at least 80 percent of the shares of the single class of outstanding stock of Coral Gold, (iii) the sole consideration received by the shareholders of Coral Gold for their shares of Coral Gold stock (pursuant to the offer or in any other transaction that may be integrated with the offer for


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U.S. federal income tax purposes) will be voting exchangeable shares of Canadian Exchange Co., (iv) Coral Gold will thereafter be a corporate subsidiary of Canadian Exchange Co. and (v) U.S. Gold will acquire additional shares of common stock of Canadian Exchange Co. for cash in conjunction with the consummation of the offer.
 
The offer will be effected under the applicable provisions of Canadian law, which differ from analogous provisions of United States law. Whether the offer will qualify as a generally tax-deferred transaction under Section 368(a) of the Code (a “reorganization”) or under Section 351 of the Code will depend on the resolution of numerous factual issues, some of which will not be known until the effective time of consummation of the offer. There is no United States legal authority dealing with the tax consequences of a transaction identical to the offer, nor is there authority addressing the nature and status of securities like the exchangeable shares, and we have not requested, nor do we intend to request, an opinion from United States legal counsel or a ruling from the IRS regarding the tax characterization or consequences of the offer.
 
Based on current authority and the foregoing assumptions and subject to the discussion below: (i) if the exchangeable shares are regarded for U.S. federal income tax purposes as shares of common stock of U.S. Gold, the offer should, more likely than not, qualify as a reorganization for United States federal income tax purposes pursuant to Section 368(a) of the Code; and (ii) if the exchangeable shares are regarded instead as shares of stock of Canadian Exchange Co. and provided that the ancillary rights are not regarded as property rights that are separate and distinct from the exchangeable shares, the offer should, more likely than not, qualify as a reorganization. If the ancillary rights are treated as property rights that are separate from the exchangeable shares, the offer will not qualify as a reorganization pursuant to Section 368(a) of the Code, but exchanges pursuant to the offer are intended to qualify, in conjunction with the contemporaneous exchanges of exchangeable shares for shares in Nevada Pacific, Tone Resources and White Knight and the acquisition of additional common shares of Canadian Exchange Co. by U.S. Gold, as tax-deferred transactions pursuant to Section 351 of the Code. We believe that the ancillary rights should not be regarded as property rights that are separate and distinct from the exchangeable shares because, among other things, they are central to the definition of the economic and voting rights of the exchangeable shares and are not transferable apart from the exchangeable shares, but no assurances can be given that the IRS or the courts will agree with this position.
 
One of the requirements that must be satisfied in order for an exchange of shares pursuant to the offer to qualify as a reorganization is that Canadian Exchange Co. must acquire ownership of at least 80 percent of Coral Gold shares solely for voting stock. Under the terms of the offer, Canadian Exchange Co. has the right to accept Coral Gold shares tendered pursuant to the offer even if it does not thereby obtain 80 percent or greater ownership of Coral Gold stock. If Canadian Exchange Co. accepts the shares tendered pursuant to the offer but fails for any reason to obtain ownership of at least 80 percent of Coral Gold stock, the exchange of Coral Gold shares for exchangeable shares will not qualify as a reorganization.
 
U.S. Federal Income Tax Consequences Arising from the Exchange by a U.S. Holder of Coral Gold Common Shares for Exchangeable Shares and Ancillary Rights
 
Subject to the discussion of the PFIC rules below, if the offer qualifies as part of a reorganization, the following United States federal income tax consequences will result to U.S. holders, provided that the ancillary rights are not regarded as property rights that are separate and distinct from the exchangeable shares: (a) no gain or loss will be recognized by a U.S. holder that exchanges Coral Gold common shares for exchangeable shares pursuant to the offer; (b) the tax basis of a U.S. holder in the exchangeable shares acquired in exchange for Coral Gold common shares pursuant to the offer will be equal to such U.S. holder’s adjusted tax basis in Coral Gold common shares exchanged; and (c) the holding period of a U.S. holder for the exchangeable shares acquired in exchange for Coral Gold common shares pursuant to the offer will include such U.S. holder’s holding period for Coral Gold common shares exchanged. As discussed above, it is possible that the IRS may take the position that the ancillary rights constitute property rights that are separate and distinct from the exchangeable shares. In that case, the offer would not qualify as a reorganization under Section 368(a) of the Code, but the exchange of Coral Gold shares for exchangeable shares is intended to qualify as a transfer coming within Section 351 of the Code if the exchangeable shares are regarded as shares of Canadian Exchange Co. stock. If so, then, subject to the discussion of the PFIC rules below, the tax consequences of the offer for a U.S. Holder will be the same as those just described for a reorganization, except that the U.S. Holder would be required to recognize gain (calculated as described in the


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immediately following paragraph), if any, realized from the consummation of the offer up to the fair market value of the ancillary rights. The tax basis of such U.S. holder in the exchangeable shares would in that case be equal to such U.S. holder’s adjusted tax basis in the Coral Gold common shares exchanged plus the amount of gain recognized minus the fair market value of the ancillary rights received.
 
Subject to the discussion of the PFIC rules below, if the offer qualifies neither as a reorganization under Section 368(a) nor as a transfer coming within Section 351, a U.S. holder who exchanges Coral Gold shares for exchangeable shares will recognize gain or loss for U.S. federal income tax purposes equal to the difference between (1) the fair market value of the exchangeable shares and ancillary rights such holder receives, and (2) such holder’s adjusted tax basis for the Coral Gold shares exchanged. Such gain or loss will generally be capital gain or loss, and will be long-term capital gain or loss if the U.S. holder’s holding period for the Coral Gold shares is more than one year as of the date of the exchange. In the case of a non-corporate holder of Coral Gold shares, long-term capital gain will generally be taxed at a maximum U.S. federal income tax rate of 15%. The deductibility of capital losses is subject to limitations.
 
As mentioned above, in its Forms 20-F filed with the SEC, Coral Gold has stated that it believes that it has been and continues to be a PFIC within the meaning of Section 1297 of the Code. If so, the consequences to U.S. holders of Coral Gold common shares of exchanges pursuant to the offer will differ very significantly from those described above. The PFIC rules are extremely complex, and each U.S. Holder of Coral Gold shares is strongly urged to consult with his or her tax advisor regarding the substantial effect such rules may have on the tax consequences to such U.S. Holder of an exchange of Coral Gold shares for exchangeable shares pursuant to the offer and regarding certain tax elections that may be available to such U.S. Holder pursuant to the PFIC rules.
 
If Coral Gold is or has been a PFIC, the PFIC provisions of the Code will generally override the rules described in the preceding paragraphs regarding the tax treatment of reorganizations under Section 368(a), transfers under Section 351 and taxable transactions. Briefly, under the PFIC rules, when a U.S. holder of Coral Gold shares exchanges those shares for exchangeable shares, any gain realized by the holder on such exchange (measured by the excess, if any, of the fair market value of the exchangeable shares and ancillary rights received by the holder over the holder’s adjusted tax basis for his or her Coral Gold shares) is allocated ratably to each day of such holder’s holding period for such shares. The portion of the gain allocable to the year in which the exchange occurs is taxed as ordinary income, not as capital gain. Tax is calculated with respect to the portions of the gain allocated to each of the prior years of the shareholder’s holding period by multiplying the portion allocable to each prior year by the highest tax rate applicable to ordinary income in effect for such prior year. In addition, interest is charged with respect to the tax attributable to the gain allocated to such prior years. Thus, a U.S. holder who exchanges Coral Gold shares will generally be subject to an amount of tax equal to the sum of (i) the tax on the gain allocable to the year in which the exchange occurs, (ii) the tax on the gain allocable to each of the prior years of his holding period, and (iii) an interest charge with respect to such prior year tax amounts. These same rules would apply if the U.S. holder of Coral Gold shares sold those shares for cash.
 
As mentioned above, the provisions of Sections 368(a) and 351 of the Code that provide for tax-deferred treatment of certain share-for-share exchanges do not generally apply in the case of dispositions of shares of PFICs. Proposed U.S. Treasury Regulations provide for two exceptions to this general rule for certain specified types of dispositions of PFIC shares, but the offer does not appear to come within these exceptions.
 
The PFIC rules provide for certain tax elections that may be utilized by a U.S. holder who wishes to rid his or her shares of the “PFIC taint” so that these special, generally adverse PFIC tax rules will not be applicable with respect to sales or exchanges of those shares. The rules governing the availability and consequences of these PFIC elections are complex. Each U.S. holder of Coral Gold shares is strongly urged to consult with his or her tax advisor regarding the availability and consequences of the PFIC elections in light of such holder’s specific circumstances.
 
As discussed above, there are a number of areas of uncertainty regarding the U.S. federal income tax treatment of exchanges pursuant to the offer. Each U.S. holder is urged to consult with his or her own tax advisor regarding these matters.


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U.S. Federal Income Tax Consequences Arising from Holding the Exchangeable Shares
 
Receipt of Distributions
 
As discussed above, the offerors intend to take the position that the exchangeable shares are shares of Canadian Exchange Co., and not shares of U.S. Gold. Distributions, if any, paid with respect to the exchangeable shares out of Canadian Exchange Co.’s current or accumulated earnings and profits, as determined for U.S. federal income tax purposes, will be taxable as dividend income to U.S. holders. Dividends paid with respect to the exchangeable shares are expected to qualify for the lower tax rates applicable to net capital gains. To the extent that the amount of any distribution exceeds Canadian Exchange Co.’s current and accumulated earnings and profits for a taxable year, the distribution will first be treated as a tax-free return of capital to the extent of the U.S. holder’s tax basis, and any excess will be treated as capital gain. Subject to certain conditions and limitations, Canadian income tax withheld on dividends with respect to the exchangeable shares generally may be deducted in determining a U.S. holder’s federal taxable income or credited against a U.S. holder’s federal income tax liability.
 
As also discussed earlier, the IRS may take the view that the exchangeable shares should be treated as shares of U.S. Gold for U.S. federal income tax purposes. In that case, the determination of whether and to what extent a distribution is taxable as a dividend would be made by reference to the current and accumulated earnings and profits of U.S. Gold, rather than Canadian Exchange Co. Furthermore, the classification of the exchangeable shares as shares of U.S. Gold rather than Canadian Exchange Co. may affect adversely the calculation of the amount of Canadian withholding tax that may be credited against a U.S. holder’s federal income tax liability.
 
Dispositions of Exchangeable Shares
 
Generally, a U.S. holder will recognize gain or loss on any sale, exchange or other disposition of the exchangeable shares. The amount of gain or loss recognized will equal the difference between the holder’s adjusted tax basis in the exchangeable shares and the amount realized from the sale, exchange or other disposition, unless the disposition transaction qualifies for non-recognition treatment. Gain or loss will be long-term capital gain or loss if the U.S. holder’s holding period is more than one year. In the case of U.S. holders who are individuals, trusts or estates, any such long-term capital gain may be taxed at preferential rates. The deductibility of losses may be subject to limitations.
 
If a U.S. holder exchanges exchangeable shares for common shares of U.S. Gold, the U.S. income tax consequences of that exchange will depend upon whether the exchangeable shares are classified as shares of Canadian Exchange Co. or as shares of U.S. Gold for U.S. federal income tax purposes. If they are regarded as shares of Canadian Exchange Co., the exchange will be a taxable transaction, with the tax consequences described in the immediately preceding paragraph. If, on the other hand, the exchangeable shares are regarded as shares of U.S. Gold, the exchange of exchangeable shares for common stock of U.S. Gold should not be taxable.
 
Certain Passive Foreign Investment Company Considerations
 
If Canadian Exchange Co.  were treated as a “passive foreign investment company” for U.S. federal income tax purposes, this could have potentially adverse U.S. tax consequences to U.S. holders who dispose of or receive distributions with respect to exchangeable shares, which consequences may be different from the consequences discussed above under “U.S. Federal Income Tax Consequences Arising from Holding the Exchangeable Shares — Receipt of Distributions” and under “U.S. Federal Income Tax Consequences Arising from Holding the Exchangeable Shares — Dispositions of Exchangeable Shares.” U.S. holders should consult their own tax advisors with respect to the potential application of the rules governing passive foreign investment companies. The offerors do not intend or expect Canadian Exchange Co. to be a “passive foreign investment company” as defined in Section 1297(a) of the Code, but no assurances can be given in this regard.
 
U.S. Federal Income Tax Consequences Arising from Holding the Shares of Common Stock of U.S. Gold
 
Receipt of Distributions
 
Distributions, if any, paid with respect to shares of common stock of U.S. Gold out of U.S. Gold’s current or accumulated earnings and profits, as determined for U.S. federal income tax purposes, will be taxable as dividend


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income to U.S. holders. In the case of U.S. holders who are individuals, trusts or estates, any such dividend income will be subject to tax at the same preferential rates as net capital gains if the applicable requirements are satisfied. To the extent that the amount of any distribution exceeds U.S. Gold’s current and accumulated earnings and profits for a taxable year, the distribution will first be treated as a tax-free return of capital to the extent of the U.S. holder’s tax basis, and any excess will be treated as capital gain.
 
Dispositions of Shares of Common Stock of U.S. Gold
 
Generally, a U.S. holder will recognize gain or loss on any sale, exchange or other disposition of the shares of common stock of U.S. Gold equal to the difference between the U.S. holder’s adjusted tax basis in the shares of common stock of U.S. Gold and the amount realized from the sale, exchange or other disposition. Gain or loss will be long-term capital gain or loss if the U.S. holder’s holding period is more than one year. In the case of U.S. holders who are individuals, trusts or estates, any such long-term capital gain may be taxed at preferential rates. The deductibility of losses may be subject to limitations.
 
U.S. Federal Income Tax Consequences to Non-U.S. Holders of Coral Gold Common Shares
 
For purposes of this summary, the term non-U.S. holder means a beneficial owner of Coral Gold common shares that is not treated as a partnership for U.S. federal income tax purposes, and that is not a U.S. holder. (See the discussion of partnerships under the section entitled “U.S. Federal Income Tax Consequences to U.S. Holders of Coral Gold Common Shares,” above.)
 
As stated previously, this summary does not address the U.S. federal income tax consequences to shareholders that are subject to special rules. It also does not apply to a non-U.S. holder that is affected by the provisions of an income tax treaty to which the United States is a party, and does not address currency exchange issues. Any non-U.S. holder that may be subject to any of these tax rules is urged to consult his or her own tax advisor to determine the tax consequences to him or her of the exchange pursuant to the offer.
 
U.S. Federal Income Tax Consequences Arising from the Exchange of Coral Gold Common Shares for Exchangeable Shares and from the Exchange of Exchangeable Shares for Shares of Common Stock of U.S. Gold
 
Generally, subject to the discussion below, a non-U.S. holder will not be subject to U.S. federal income tax on the income or gain (if any) realized on the exchange of Coral Gold common shares for exchangeable shares and ancillary rights, or upon the exchange of exchangeable shares for shares of common stock of U.S. Gold, unless:
 
  •  the income or gain is effectively connected with the conduct by the non-U.S. holder of a trade or business, or, if a tax treaty applies, attributable to a permanent establishment maintained by the non-U.S. holder, in the United States; or
 
  •  the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition and certain other conditions are met, unless an applicable income tax treaty provides otherwise.
 
As noted above, if the exchangeable shares are regarded as shares of U.S. Gold for U.S. federal income tax purposes, the exchange of exchangeable shares for shares of common stock of U.S. Gold should not be taxable in any event.
 
U.S. Federal Income Tax Consequences Arising from Holding the Exchangeable Shares and Shares of Common Stock of U.S. Gold.
 
Receipt of Distributions on Exchangeable Shares
 
Assuming, as discussed above under “U.S. Federal Income Tax Consequences to U.S. Holders of Coral Gold Common Shares — U.S. Federal Income Tax Characterization of the Exchangeable Shares,” that the exchangeable shares are treated as shares of Canadian Exchange Co. for U.S. federal income tax purposes, rather than shares of common stock of U.S. Gold, dividends received by a non-U.S. holder with respect to the exchangeable shares


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should not be subject to U.S. withholding tax. However, a non-U.S. holder will be taxed in the United States on the receipt of dividends from Canadian Exchange Co. in the same manner as a U.S. holder if the non-U.S. holder has an office or other fixed place of business within the United States to which the dividends are attributable and the dividends are either derived in the active conduct of a banking, financing or similar business within the United States or received by a corporation the principal business of which is trading stock or securities for its account (unless otherwise provided in an applicable treaty).
 
Receipt of Distributions on Shares of Common Stock of U.S. Gold
 
Dividends received by a non-U.S. holder with respect to shares of common stock of U.S. Gold (and with respect to exchangeable shares if they are treated for U.S. tax purposes as shares of U.S. Gold) could be subject to U.S. withholding tax at a rate of 30%. The withholding tax rate could be reduced by an applicable income tax treaty in effect between the United States and the non-U.S. holder’s country of residence. For example, the withholding rate under the Canada-United States tax treaty on dividends paid by a U.S. corporation to residents of Canada is generally 15%. In addition, (a) a non-U.S. holder will be taxed in the same manner as a U.S. holder on dividends paid that are effectively connected with the non-U.S. holder’s conduct of a trade or business in the United States (unless otherwise provided in an applicable treaty) and will not be subject to the U.S. withholding tax provided that the non-U.S. holder provides the proper certification, and (b) a corporate non-U.S. holder may also be subject to an additional branch profits tax at a 30% rate (or such lower rate as may be specified in an applicable income tax treaty) on dividend income that is effectively connected with a U.S. trade or business.
 
Dispositions of Shares of Common Stock of U.S. Gold or Exchangeable Shares
 
Subject to the rules discussed below, a non-U.S. holder will not be subject to U.S. federal income tax on gain (if any) realized on the sale or exchange of exchangeable shares or on the sale or exchange of shares of common stock of U.S. Gold, unless:
 
  •  the gain is effectively connected with the conduct by the non-U.S. holder of a trade or business, or, if a tax treaty applies, attributable to a permanent establishment maintained by the non-U.S. holder, in the United States; or
 
  •  such non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition and certain other conditions are met, unless an applicable income tax treaty provides otherwise; or
 
In addition, under the Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”), if U.S. Gold is treated as a “U.S. Real Property Holding Corporation” (“USRPHC”) and the requirements set forth below are satisfied, then gain or loss recognized by a non-U.S. holder on the sale or exchange of exchangeable shares or shares of common stock of U.S. Gold will be subject to regular U.S. federal income tax, as if such gain or loss were effectively connected with the conduct of a U.S. trade or business by the holder. U.S. Gold will be treated as a USRPHC if at any time during the shorter of (x) the five-year period ending on the date of the sale or exchange of exchangeable shares or shares of common stock of U.S. Gold (as the case may be) or (y) the period during which a holder held exchangeable shares or shares of common stock of U.S. Gold, the fair market value of U.S. Gold’s United States real property interests equals or exceeds 50% of the sum of the fair market values of all of its interests in real property and all of its other assets used or held for use in a trade or business (as defined in applicable regulations). It is anticipated that U.S. Gold will be a USRPHC after consummation of the proposed transaction.
 
If U.S. Gold is treated as a USRPHC after the consummation of the proposed transaction, gain or loss from the sale or exchange of exchangeable shares or shares of common stock of U.S. Gold will be subject to tax under FIRPTA in the following circumstances:
 
  •  In the case of a non-U.S. holder who owns only shares of common stock of U.S. Gold (actually and constructively), the shares of common stock of U.S. Gold are treated as “regularly traded on an established securities market” and the non-U.S. holder holds more than 5% of the total fair market value of the shares of common stock of U.S. Gold outstanding (on a non-diluted basis) at the relevant determination time;


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  •  In the case of a non-U.S. holder who owns only exchangeable shares (actually and constructively, other than shares of common stock of U.S. Gold constructively owned by reason of ownership of exchangeable shares), either:
 
  •  The exchangeable shares are treated as “regularly traded on an established securities market” and such non-U.S. holder holds more than 5% of the total fair market value of the exchangeable shares outstanding at the relevant determination time, or
 
  •  The exchangeable shares are not treated as “regularly traded on an established securities market,” but the shares of common stock of U.S. Gold are “regularly traded on an established securities market,” and such non-U.S. holder holds exchangeable shares with a fair market value on the relevant date of determination greater than 5% of the total fair market value of the shares of common stock of U.S. Gold outstanding (on a non-diluted basis) on such date;
 
  •  In the case of a non-US holder who actually or constructively owns shares of common stock of U.S. Gold or exchangeable shares, such shares and exchangeable shares are not treated as “regularly traded on an established securities market.”
 
The offerors expect that the shares of common stock of U.S. Gold will be traded on the American Stock Exchange, or AMEX, and the TSX, and that the exchangeable shares will be traded on the TSX and AMEX. AMEX and the TSX should each be considered an “established securities market” for FIRPTA purposes. Once U.S. Gold’s listing application is approved, the shares of common stock of U.S. Gold generally will be considered to be “regularly traded” on AMEX for FIRPTA purposes for any calendar quarter during which they are regularly quoted by brokers or dealers making a market in such shares within the meaning of applicable Treasury regulations.
 
If income from the sale or exchange of exchangeable shares or shares of common stock of U.S. Gold is subject to tax based on FIRPTA, the transferee of such shares may be required to deduct and withhold a tax equal to 10 percent of the amount realized on the disposition, unless certain exceptions apply. Any tax withheld may be credited against the U.S. federal income tax owed by the non-U.S. holder for the year in which the sale or exchange occurs.
 
The foregoing summary of the possible application of FIRPTA rules to non-U.S. holders is only a summary of certain material aspects of these rules. If at any time the exchangeable shares are traded on an established securities market located in the United States, different rules, not described herein, may apply. Because the U.S. federal income tax consequences to a non-U.S. holder under FIRPTA may be significant and are complex and subject to uncertainty, non-U.S. holders are urged to discuss those consequences with their tax advisors.
 
Backup Withholding and Information Reporting
 
Information returns may be filed with the U.S. Internal Revenue Service in connection with payments on the shares of common stock of U.S. Gold or exchangeable shares and the proceeds from a sale or other disposition of such stock. Holders of shares of common stock of U.S. Gold or exchangeable shares may be subject to U.S. backup withholding tax on these payments if they fail to provide their taxpayer identification numbers to the paying agent and comply with certification procedures or otherwise establish an exemption from backup withholding. The amount of any backup withholding from a payment will be allowed as a credit against the holder’s U.S. federal income tax liability and may entitle the holder to a refund, provided that the required information is timely furnished to the U.S. Internal Revenue Service.
 
THE PRECEDING DISCUSSION OF U.S. FEDERAL INCOME TAX CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND IS NOT LEGAL OR TAX ADVICE. EACH SHAREHOLDER IS ENCOURAGED TO CONSULT ITS OWN TAX ADVISOR AS TO PARTICULAR TAX CONSEQUENCES OF PARTICIPATING IN THE OFFER AND TAX CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF EXCHANGEABLE SHARES OR SHARES OF COMMON STOCK OF U.S. GOLD, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR NON-U.S. TAX LAWS, AND OF ANY PROPOSED CHANGES IN APPLICABLE LAWS.


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COMPARISON OF SHAREHOLDER RIGHTS
 
Comparison of Rights of Holders of U.S. Gold Common Stock and Coral Gold Common Shares
 
U.S. Gold is a corporation organized in the United States and the rights of our shareholders are governed by the Colorado Business Corporation Act, or the Colorado Act, and our articles of incorporation, as amended, and bylaws. Coral Gold is a corporation organized in the Province of British Columbia and the rights of its shareholders are governed by the Business Corporations Act (British Columbia), referred to as the BCBCA, and other laws of Canada, and Coral Gold’s articles and notice of articles. Following the consummation of the offer, the subsequent acquisition transaction, and the exchange of the exchangeable shares, Coral Gold’s shareholders will become our shareholders and as such their rights will be governed by the Colorado Act and our articles of incorporation and bylaws.
 
The following is a summary of the material differences between the rights of holders of Coral Gold shares and the rights of holders of our shares. This summary is not a complete comparison of rights that may be of interest, and you should therefore read the full text of the respective corporate charters, articles and bylaws, as applicable, of Coral Gold and U.S. Gold.
 
         
    Coral Gold Shareholder Rights   U.S. Gold Shareholder Rights
 
Authorized Capital Stock
  Coral Gold’s authorized capital share structure is an unlimited number of common shares without par value.   Following shareholder approval at our special meeting in connection with the strategic offers, our authorized capital stock will be 250,000,001   shares consisting of 250,000,000   shares of common stock, no par value, and one share of preferred stock, no par value, designated Series   A Special Voting Preferred Stock.
Dividends
  Dividends may be declared at the discretion of Coral Gold’s board, subject to the rights of any shareholders holding shares with special rights to dividends. Dividends may be paid in cash, assets of Coral Gold, shares, bonds, debentures or other securities of Coral Gold, or in any one or more of those ways.   Our articles of incorporation provide that, and pursuant to the Colorado Act, our board may declare dividends. Dividends may be paid in cash, in property or in shares of capital stock.
Size of the Board
  The BCBCA provides that a public corporation must have at least three directors. Coral Gold’s articles provide that the number of first directors (those directors set in Coral Gold’s notice of articles) is set at 8. The size may be increased or decreased by the shareholders from time to time by ordinary resolution. If any director retires and no new director is elected, the size of the board is set at the number of directors who are actually in office. Coral Gold currently has 5   directors.   Our bylaws provide that there shall be seven directors and the board may increase or decrease, to not less than three, the number of directors by resolution.
Removal and Retirement
of Directors 		  Under the BCBCA, a director may be removed before the expiration of his or her term by a special resolution.

Coral Gold’s articles provide that the shareholders may by special resolution remove any director and by ordinary resolution appoint another person to fill the vacancy. If the shareholders do not elect or 		  Under our bylaws, at a meeting called for the purpose of removing directors, shareholders may, remove the entire board or any lesser number of directors, with or without cause by a majority vote of the shares entitled to vote at an election of directors.


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    appoint a director to fill the vacancy simultaneously with the removal of a director, the remaining directors or shareholders may elect or appoint a director to fill the vacancy.    
Directors Term
  Under Coral Gold’s articles, at each annual general meeting, shareholders entitled to vote at the annual general meeting must elect the entire board. If Coral Gold does not hold an annual general meeting, the directors appointed at the last annual general meeting shall continue in office until his or her successor is elected or appointed or the date on which he or she otherwise no longer holds office under the BCBCA or Coral Gold’s articles.   Our bylaws, as amended, provide that each director elected shall hold office until such director’s successor is elected and qualified.
Filling Vacancies on the Board   Under the BCBCA and Coral Gold’s articles, the directors may appoint a person as a director either to fill a vacancy on the board or as an addition to the board. The number of additional directors so appointed, however, cannot at any time exceed one-third of the number of first directors or one-third of the number of current directors who were elected or appointed pursuant to the articles. Any additional director shall hold office until the next annual general meeting, but shall be eligible for re-election at such meeting.

Under Coral Gold’s articles, if there are fewer directors in office than the number set in the articles as a quorum of directors (a majority of current directors or as set by the board), the board may only act to appoint directors up to the number established pursuant to in the articles as a quorum of directors or calling a shareholder meeting to fill those vacancies. If Coral Gold’s has no directors or fewer directors in office than the number established pursuant to Coral Gold’s articles as a quorum of directors, shareholders may elect or appoint directors to fill vacancies. 		  Our bylaws provide that any vacancy occurring in our board may be filled by the affirmative vote of a majority of our remaining directors, even if less than a quorum. A director elected to fill a vacancy shall be elected for the unexpired term of such director’s predecessor in office, and shall hold such office until his successor is duly elected and shall qualify. If a directorship is to be filled by reason of an increase in the number of directors, either a majority of the directors then in office or a majority of shareholders, may elect the successor. The director so chosen shall hold office until the next annual meeting and until such director’s successor has been elected and shall qualify.
Required Vote for Certain Transactions   Under the BCBCA, certain extraordinary corporate actions, such as continuances, certain mergers, sales, leases or other dispositions of all, or substantially all of, the property of a corporation (other than in the ordinary course of business), liquidations, dissolutions and certain arrangements, are required to be approved by special resolution of the shareholders.

For Coral Gold, a special resolution means 		  To effect a merger or share exchange under the Colorado Act, a corporation’s board must approve and adopt a plan of merger or plan of share exchange and recommend such plan to the shareholders. Such plan must be adopted by a majority of the shareholders of the corporation entitled to vote thereon unless the articles of incorporation require a greater vote. Under the Colorado Act, a corporation may sell, lease, exchange or otherwise

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    a resolution passed at a general meeting by a majority of at least two-thirds of the votes cast on the resolution.

In certain cases, an action that prejudices, adds restrictions to or interferes with a right or special right attached to issued shares of a class or series of shares must be approved separately by the holders of the class or series of shares being affected by special resolution. 		  dispose of all, or substantially all, of its property other than in the regular course of business on the terms and conditions and for the consideration determined by the board, if the board proposes and a majority of the shareholders entitled to vote approve the transaction. Our articles of incorporation and bylaws do not require a greater vote.
Calling a Meeting of Shareholders   Under Coral Gold’s articles, the directors have the power at any time to call special meetings of shareholders.

Under the BCBCA, the holders of not less than 5% of the issued shares of a corporation that carry the right to vote at a general meeting may requisition that the directors call a meeting of shareholders. Upon meeting the technical requirements set out in the BCBCA, the directors must call a meeting of shareholders to be held not more than four months after receiving the requisition. If the directors do not call such meeting within 21   days after receiving the requisition, the requisitioning shareholders or any of them holding in aggregate not less than 2.5% of the issued shares of the corporation that carry the right to vote at general meetings may call the meeting. 		  Our bylaws provide that a special meeting of shareholders may be called at any time by the president, by a majority of the board or upon written demand by shareholders holding 10% or more of all the votes entitled to be cast on any issue proposed to be considered at the meeting.
Quorum of Shareholders
  Coral Gold’s articles provide that a quorum for the transaction of business at any general meeting of shareholders is two shareholders or proxyholders representing two shareholders, or one shareholder and a proxyholder representing another shareholder. If there is only one shareholder entitled to vote at a meeting of shareholders, a quorum shall be one person and that shareholder, either present in person or by proxy, may vote at the meeting.

If within one half hour from the time appointed for a general meeting a quorum is not present, the general meeting, if convened by requisition of the shareholders, shall be dissolved. In any other case the meeting shall stand adjourned to the same day in the next week at the same time and place. If at such adjourned meeting a quorum is not present within one half hour from the time appointed, the person or persons present and being or representing 		  Our articles of incorporation provide that the holders of one-third of our stock entitled to vote at the meeting, present in person or represented by proxy, constitutes a quorum at any meeting of our shareholders.

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    by proxy, a shareholder or shareholders entitled to attend and vote at the meeting shall constitute a quorum.    
Notice of Meeting of Shareholders   Under the BCBCA, notices of the date, time and place of a general meeting of shareholders must be sent not less than 21   days nor more than two months before the meeting to each director and to each shareholder entitled to attend the meeting.

Under Coral Gold’s articles, the notice for a shareholder meeting for which special business will be conducted must state the nature of the special business to be discussed or approved. If a document is being considered by the shareholders, that document must be attached to the notice. 		  The Colorado Act and our bylaws provide that, whenever shareholders are required or permitted to take any action at a meeting, a written notice of the meeting stating, among other things, the place, date and time of the meeting must be given not less than ten nor more than 60   days before the date of the meeting to each stockholder entitled to vote at the meeting. Moreover, if the number of our authorized shares is to be increased, at least 30   days written notice of the shareholder meeting must be given.
Record Date for Notice of Meetings of Shareholders   The BCBCA and Coral Gold’s articles provides that the directors may fix in advance a date as the record date for the determination of shareholders entitled to receive notice of and vote at a meeting of shareholders, but such record date shall not precede the meeting date (i)   by more than two months or (ii)   by more than four months in the case of a meeting requisitioned by shareholders. If Coral Gold is a public company, the record date shall not be less than 21   days prior to the meeting date. If Coral Gold is not a public company, the record date shall not be less than 10   days prior to the meeting date. If no record date is fixed, the record date for the determination of shareholders entitled to receive notice of or vote at a meeting of shareholders shall be at 5:00   p.m. on the day immediately preceding the day on which the notice is given or, if no notice is given, the beginning of the meeting.   Under the Act and our bylaws, our board may fix in advance a date as the record date, provided that such date is not less than 10   days nor more than 50   days prior to the meeting. If our board does not fix the record date, the record date shall be 30   days prior to the shareholder meeting.
Dissenters’ or Appraisal Rights   The BCBCA provides that shareholders of a corporation are entitled to exercise dissent rights in respect of certain matters and to be paid the fair value of their shares in connection therewith. The dissent right is applicable where the corporation resolves to:
•   alter its articles to alter the restrictions on the powers of the corporation or on the business it its permitted to carry on;

•   approve certain mergers;
  The Colorado Act provides that a holder of shares of any class or series has the right, in certain circumstances, to dissent and obtain fair value of his or her shares. The Colorado Act grants these dissenters’ rights in the case of mergers or consolidations and certain sales or transfers of assets or a purchase of assets for stock. No dissenters’ rights are available for shares of any class or series that is listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or held of record by more than 2,000   shareholders, unless the agreement
   
•   approve an arrangement, where the terms of the arrangement permit dissent;
•   sell, lease or otherwise dispose of all or 		   

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substantially all of its undertaking; or

•   continue the corporation into another jurisdiction.
  of merger or consolidation requires the holders to accept for their shares anything other than:
•   shares of stock of the surviving corporation;
     

•   shares of stock of another corporation that are either listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers,   Inc. or held of record by more than 2,000   shareholders;
     

•   cash in lieu of fractional shares of the stock described in the two preceding bullets; or
     
•   any combination of the above. In addition, dissenters’ rights are not available to holders of shares of the surviving corporation if the merger did not require the vote of the shareholders of the surviving corporation.
Indemnification of Directors and Officers   Under the BCBCA, a corporation may indemnify an individual who is or was a director or officer of the corporation. However, indemnification is prohibited if:

•   such eligible party did not act honestly and in good faith with a view to the best interests of such corporation (or the other entity, as the case may be); and

•   in the case of a proceeding other than a civil proceeding, such eligible party did not have reasonable grounds for believing that such person’s conduct was lawful.

The BCBCA allows for the corporation to pay the expenses actually and reasonably incurred by the eligible party, provided that, the corporation receives from such eligible party an undertaking to repay the amounts advanced if it is ultimately determined that such payment is prohibited.

Despite the foregoing, on application of a corporation or eligible party, a court may:

   •   order a corporation to indemnify an eligible party in respect of an eligible proceeding;
 		  Our bylaws provide that we shall indemnify any person who is made or threatened to be made a party to any threatened, pending or completed action or suit or proceeding by reason of the fact that such person is or was a director, officer, employee or agent of U.S.   Gold or is or was serving at our request as a director, officer, employee or agent of another entity against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner he or she reasonably believed to be in the best interests of U.S.   Gold; but no indemnification shall be made by us in respect of any claim, issue, or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his or her duty to U.S.   Gold unless and only to the extent that the court determines upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnification for such expenses which the court deems proper. Such indemnification is authorized and conditioned upon a determination of a majority of our disinterested directors, or if no such quorum is available, by independent legal
   

   
   
   •   order a corporation to pay some or all of the expenses incurred by an eligible party in an eligible proceeding;
   


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   •   order enforcement of or any payment under an indemnification agreement;

   •   order the corporation to pay some or all of the expenses actually and reasonably incurred by a person in obtaining the order of the court; and/or

   •   make any other order the court considers appropriate.

Coral Gold’s articles require Coral Gold to indemnify directors of Coral Gold, former directors of Coral Gold or alternate directors of Coral Gold and their heirs and legal personal representative against all judgments, penalties, fines or amounts paid in settlement to which that person is or may be liable and Coral Gold must pay the expenses actually and reasonably incurred by that person after the final disposition of any legal proceeding or investigative action, whether current, threatened, pending or completed for which the director, former director or alternate director of Coral Gold has been made a party or is found liable. Coral Gold’s articles also provide that Coral Gold may indemnify any other person. The failure of a director, alternate director or officer of Coral Gold to comply with the BCBCA or the articles will not invalidate any indemnity that person is entitled to under the articles.
  counsel in a written opinion, that the indemnification of such person is proper in the circumstances because such person has met the standard of conduct.

Our bylaws also provide that to the extent a director, officer, employee or agent of U.S.   Gold has been successful on the merits in defense of any action, suit or proceeding ref erred to above or defense of any claim, issue or matter, he or she shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with such defense.

In addition, the Colorado Act and our bylaws allows for the advance payment of expenses of an officer or director who is indemnified prior to the final disposition of an action, provided that, in the case of a current director or officer, such person undertakes to repay any such amount advanced if it is later determined that such person is not entitled to indemnification with regard to the action for which the expenses were advanced.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrants pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
Director Liability
  Under the BCBCA, directors of a corporation who vote for or consent to a resolution that authorizes the corporation to do any of the following are jointly and severally liable to restore to the corporation any amount paid or distributed as a result and not otherwise recovered by the corporation:

•   carry on its business or exercise any power that it is restricted by its articles from carrying on or exercising;
 		  Our articles of incorporation provide that directors shall not be personally liable to U.S.   Gold or our shareholders for monetary damages for breach of fiduciary duty, except as prohibited by the Colorado Act, as follows:

•   for any breach of the director’s duty of loyalty to U.S.   Gold or its shareholders;
   
•   pay a commission or allow a discount contrary to the provisions of the BCBCA;

•   pay a dividend or acquire or redeem any of its shares where there are reasonable grounds for believing that the 		 
•   for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

•   for unlawful dividends under the Colorado Act; or

•   for any transaction from which the director derived an improper personal benefit.


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    corporation is insolvent or the payment of the dividend or the acquisition or redemption would render the corporation insolvent; or
 		   
   
•   indemnify a person in contravention of the BCBCA.


A director is not liable for the foregoing if the director relied, in good faith, on:
 		   
   

•   financial statements of the corporation represented to the director by an officer of the corporation or in a written report of the auditor of the corporation to fairly reflect the financial position of the corporation;
   
   

•   a written report of a lawyer, accountant, engineer, appraiser or other person whose profession lends credibility to a statement made by that person;
   
   

•   a statement of fact represented to the director by an officer of the corporation to be correct; or
   
   
•   any record, information or representation that the court considers provides reasonable grounds for the actions of the director, whether or not that record was forged, fraudulently made or inaccurate. 		   
    Furthermore, a director is not liable if the director did not know and could not reasonably have known that the act done by the director or authorized by the resolution voted for or consented to by the director was contrary to the BCBCA.    
Interested Shareholder Transactions   The rules or policies of certain Canadian securities regulatory authorities, including OSC Rule   61-501 and AMF Regulation Q-27, contain requirements in connection with “related party transactions.” A related party transaction means, generally, any transaction by which an issuer, directly or indirectly, completes one or more specified transactions with a related party including purchasing or disposing of an asset, issuing securities and assuming liabilities. A “related party” is defined in OSC Rule   61-501 and AMF Regulation Q-27 and includes directors and senior officers of the issuer and holders of voting securities carrying more than 10% of the voting rights attaching to all issued and outstanding voting securities or of a sufficient number of any securities of the issuer to materially affect control of the issuer.
  The Colorado Act and our articles of incorporation and bylaws do not prevent us from engaging in a transaction with an interested shareholder.


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OSC Rule   61-501 and AMF Regulation Q-27 require more detailed disclosure in the proxy material sent to securityholders in connection with a related party transaction, and, subject to certain exceptions, the preparation of a formal valuation with respect to the subject matter of the related party transaction and any non cash consideration offered in connection therewith, and the inclusion of a summary of the valuation in the proxy material. OSC Rule   61-501 and AMF Regulation Q-27 also require that, subject to certain exceptions, an issuer shall not engage in a related party transaction unless approval of the disinterested shareholders of Coral Gold for the related party transaction has been obtained 		   
Transactions with Directors and Officers   Under the BCBCA and Coral Gold’s articles, subject to certain exceptions, a director or senior officer of a corporation holds a “disclosable interest” in a contract or transaction if: (i)   the contract is material to the corporation; (ii)   the corporation has entered, or proposes to enter, into the contract or transaction; and (iii)   the director or senior officer has a direct or indirect material interest in the contract or transaction. Subject to certain exceptions under the BCBCA and unless the court orders otherwise, a director or senior officer of a corporation is liable to account to the corporation for any profit that accrues to the director or senior officer under or as a result of a contract or transaction in which the director or senior officer holds a disclosable interest. The exemptions from the requirement to account to the corporation for any profit include where the disclosable interest is disclosed to the directors of the corporation and the directors approve of the contract or transaction with any directors that hold a disclosable interest abstaining from the vote or the contract is approved by a special resolution of the shareholders. If all directors have a disclosable interest in a contract or transaction, any or all of those directors may vote on a directors’ resolution to approve the contract or transaction. Directors with a disclosable interest may be counted in the quorum at the directors’ meeting to approve the contract or transaction whether or not such directors vote at the directors’ meeting.
  Under the Colorado Act and our articles of incorporation, contracts and transactions between us and one or more of our directors and officers, or between us and any other entity in which one or more of our directors or officers are directors or officers or have a financial interest may be void or voidable unless: (i)   the material facts of the director’s or officer’s relationship or interest are disclosed or known to the board or committee and the board or committee authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, (ii)   the material facts of the director’s or officer’s relationship or interest are disclosed or known to the shareholders and the contract or transaction is approved in good faith by a vote of the shareholders, or (iii)   the contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified by the board, a committee or the shareholders.

Our articles of incorporation provide that the officers, directors and other members of our management shall be subject to the doctrine of “corporate opportunities” only insofar as it applies to business opportunities in which U.S.   Gold has expressed an interest as determined from time to time by the board as evidenced by resolutions appearing in our minutes. Once such areas of interest are delineated, all such business opportunities within such area of interest which come to the attention of the officers, directors, and other members of our


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Coral Gold’s articles also provide that a director or senior officer who holds any office or possesses any property or interest that conflicts materially with his or her duties or interests as a director or senior officer must disclose the nature of such conflict to the board. 		  management shall be disclosed promptly to U.S.   Gold and made available to us. Our board may reject any business opportunity presented to it and thereafter any officer, director or other member of management may avail himself or herself of such opportunity. Until such time as U.S.   Gold, through our board, has designated an area of interest, our officers, directors and other member of management shall be free to engage in such areas of interest on their own.

In addition, we adopted a corporate opportunity policy that defines the business opportunities in which we have an interest and prohibits our officers and directors from taking advantage of those opportunities without the approval of a majority of the disinterested directors or a committee of our board appointed for that purpose.
Consent Required to Transfer Shares   Coral Gold’s articles provide that no share may be sold, transferred or otherwise disposed of without the consent of Coral Gold’s board and the board is not required to give any reason for refusing its consent.   U.S.   Gold’s bylaws do not contain any restriction on the transfer or disposition of U.S.   Gold common stock.


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VALUATION REQUIREMENTS FOR INSIDER BIDS
 
The offer is an “insider bid” within the meaning of applicable Canadian securities legislation by virtue of Robert R. McEwen’s equity interests in both U.S. Gold and Coral Gold. As a result, a formal valuation of the Coral Gold common shares and of the consideration being offered in exchange for them is required. A special committee of the board of directors of Coral Gold engaged an independent valuator to prepare the formal valuation. Under applicable Canadian securities legislation, the formal valuation would be prepared as of an effective date that is not more than 120 days before the date of the offer.
 
EXPENSES OF THE OFFER
 
We estimate the total amount of the fees and expenses related to the strategic offers will be approximately $6.5 million.
 
REGULATORY MATTERS
 
Our obligation to accept for purchase and pay for Coral Gold common shares tendered pursuant to the offer is conditional upon, among other things, obtaining all governmental or regulatory consents or approvals that U.S. Gold, in our sole discretion, views as necessary or desirable to enable us to consummate the offer, on terms and conditions satisfactory to us. See the section entitled “The Offer — Conditions of the Offer” on page 43 of this prospectus.
 
Competition Act (Canada)
 
Our acquisition of Coral Gold common shares in the offer is not a transaction which requires pre-merger notification to the Commissioner of Competition appointed under Part IX of the Competition Act (Canada), or the Commissioner. Whether or not a pre-merger filing is required, however, the Commissioner may apply to the Competition Tribunal, a special-purpose quasi-judicial tribunal empowered to deal with certain matters under the Competition Act (Canada), to seek relief in respect of merger transactions (including share acquisitions) and, if the Competition Tribunal finds that a merger is likely to prevent or lessen competition substantially, it may order that the merger not proceed or, in the event that the merger has been completed, order its dissolution or the disposition of some of the assets or shares involved. Proceedings under the merger provisions of the Competition Act (Canada) may be instituted by the Commissioner for a period of three years after a merger transaction has been substantially completed. We are not aware of any grounds upon which such proceedings could be taken.
 
Investment Canada Act
 
The acquisition of Coral Gold common shares by us in the offer is not a transaction which is subject to governmental review or notification pursuant to the Investment Canada Act (Canada).
 
Hart-Scott-Rodino Act
 
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules promulgated thereunder by the United States Federal Trade Commission, or the FTC, certain transactions, including certain tender offers, may not be consummated unless notification has been given and certain information has been furnished to the FTC and the Antitrust Division of the United States Department of Justice and certain waiting period requirements have been satisfied. We have determined that the offer is not subject to the notification and reporting requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
 
Filings Under Other Jurisdictions
 
We have determined that aside from the Canadian requirement described herein, filings under foreign jurisdictions are not required.


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Canadian Securities Regulatory Matters
 
The distribution of the shares of our common stock and exchangeable shares under the offer is being made pursuant to statutory exemptions from the prospectus qualification and dealer registration requirements under applicable Canadian securities laws.
 
Although the resale of shares of common stock of U.S. Gold and exchangeable shares issued under the offer is subject to restrictions under the securities laws of certain Canadian jurisdictions, shareholders in such jurisdictions generally will be able to rely on statutory exemptions from such restrictions.
 
United States Securities Regulatory Matters
 
We have filed a registration statement with the SEC on Form S-4 registering the issuance of shares of common stock of U.S. Gold and exchangeable shares to be offered in connection with the offer. One of the conditions of the offer is that such registration statement has become and remains effective until the expiry time. See the section entitled “The Offer — Conditions of the Offer” on page 43 of this prospectus.
 
ACCOUNTING TREATMENT
 
If consummated, the transaction described in this prospectus will be accounted for as a purchase transaction, with U.S. Gold as the acquirer of Coral Gold. The offer is being made only for Coral Gold’s common shares and is not being made for any warrants, options or other securities that may entitle the holder to acquire common shares of Coral Gold. After completion of the offer, we may implement a statutory plan of arrangement or similar transaction to acquire full ownership of Coral Gold. We expect we would structure a subsequent acquisition transaction so that warrants to purchase Coral Gold common shares would be exchanged for warrants to purchase exchangeable shares of Canadian Exchange Co. and U.S. Gold would assume or adopt the Coral Gold stock option plan so that options under that plan would be exercisable for shares of common stock of U.S. Gold. As a result, for purposes of preparing the financial statements attached as Appendix G (Unaudited Pro Forma Consolidated Financial Statements of U.S. Gold) and Appendix H (Unaudited Pro Forma Consolidated Supplementary Financial Statements of U.S. Gold), the options to be issued by U.S. Gold and the warrants to purchase exchangeable shares of Canadian Exchange Co have been included as part of the purchase price consideration based on the outstanding warrants and options, as disclosed in the most recent publicly available financial statements of each of White Knight, Coral Gold, Nevada Pacific and Tone Resources.
 
DEPOSITARY
 
We have engaged Kingsdale Shareholder Services Inc. to act as depositary for the receipt of certificates in respect of Coral Gold common shares and related letters of acceptance and transmittal and notices of guaranteed delivery tendered pursuant to the offer and for the payment for Coral Gold common shares purchased by us under the offer. The depositary will receive reasonable and customary compensation from us for its services relating to the offer and will be reimbursed for certain out-of-pocket expenses. We have also agreed to indemnify the depositary against certain liabilities and expenses in connection with the offer, including certain liabilities under the securities laws of Canada.
 
Questions and requests for assistance concerning the offer should be made directly to the depositary.
 
DEALER MANAGER AND SOLICITING DEALER GROUP; INFORMATION AGENT
 
We have retained GMP Securities L.P. as dealer manager in Canada and Griffiths McBurney Corp. as dealer manager in the United States in connection with the offer and to provide various financial advisory services to U.S. Gold in connection with the offer. The dealer manager will receive customary compensation for their services in connection with the transactions contemplated by the offer and will be reimbursed for out-of-pocket expenses, including reasonable expenses of counsel and other advisors. We have agreed to indemnify the dealer manager and its affiliates against various liabilities and expenses in connection with its services in connection with the transactions contemplated by the offer, including various liabilities and expenses under securities laws. From


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time to time, the dealer manager and its affiliates may actively trade the debt and equity securities of U.S. Gold and Coral Gold for their own account or for the accounts of customers and, accordingly, may hold a long or short position in those securities. The dealer manager has in the past performed various investment banking and financial advisory services for us for which it has received customary compensation.
 
GMP Securities L.P. has the right to form a soliciting dealer group comprised of members of the Investment Dealers Association of Canada to solicit acceptances of the offer from persons who are not resident in the United States and Griffiths McBurney Corp. has the right to appoint sub-agents who are registered under applicable United States securities laws to solicit acceptances of the offer from persons who are resident in the United States. Each member of the soliciting dealer group, including the dealer manager, is referred to herein as a soliciting dealer. We have agreed to pay each soliciting dealer whose name appears in the appropriate space in the letter of acceptance and transmittal accompanying a deposit of Coral Gold common shares a fee of $0.01 for each such common share deposited and accepted for purchase by us under the offer. The aggregate amount payable to any soliciting dealer with respect to any single depositing holder of Coral Gold common shares will be not less than $25.00 nor more than $1,500.00, provided that such holder deposits no less than 1,000 Coral Gold common shares. If Coral Gold common shares deposited and registered in a single name are beneficially owned by more than one beneficial owner, the minimum and maximum amounts will be applied separately in respect of each such beneficial owner. We may require each soliciting dealer to furnish evidence of such beneficial ownership satisfactory to us at the time of deposit.
 
Coral Gold shareholders should contact the depositary, the dealer manager or a broker or dealer for assistance in accepting the offer and in depositing Coral Gold common shares with the depositary.
 
We have retained Kingsdale Shareholder Services Inc. to act as information agent in connection with the offer. The information agent will receive reasonable and customary compensation from us for services in connection with the offer, will be reimbursed for certain out-of-pocket expenses and will be indemnified against certain liabilities, including liabilities under securities laws and expenses incurred in connection therewith.
 
Other than as set forth above, we will not pay any fees or commissions to any broker, dealer or other person for soliciting deposits of Coral Gold common shares in the offer. We will reimburse brokers, dealers, commercial banks and trust companies and other nominees, upon request, for customary clerical and mailing expenses incurred by them in forwarding offering materials to their customers.
 
OFFEREES’ STATUTORY RIGHTS
 
Securities legislation in certain of the provinces and territories of Canada provides holders of Coral Gold common shares with, in addition to any other rights they may have at law, rights of rescission or to damages, or both, if there is misrepresentation in a circular or a notice that is required to be delivered to such shareholders. However, such rights must be exercised within prescribed time limits. Holders of Coral Gold common shares should refer to the applicable provisions of the securities legislation of their province or territory for particulars of those rights or consult with a lawyer.
 
DIRECTORS’ APPROVAL
 
The contents of this prospectus have been approved, and the sending thereof to the shareholders has been authorized, by the board of directors of each of U.S. Gold and Canadian Exchange Co.
 
EXPERTS
 
Technical Reports
 
Certain scientific and technical information contained in Appendix A (Information Concerning Coral Gold) relating to Coral Gold’s Robertson Property is based on technical reports filed on SEDAR (www.sedar.com) in accordance with the requirements of NI 43-101. The two reports, dated January 15, 2004 entitled “Geological


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Report on the Robertson Property” and dated April 25, 2006 entitled “Update of the Geological Report on the Robertson Property,” were prepared by Robert T. McCusker, P. Geol.
 
Independent Registered Accounting Firms
 
The consolidated financial statements of U.S. Gold Corporation as and for the years ended December 31, 2005, 2004 and 2003, and the unaudited balance sheet of US Gold Canadian Acquisition Corporation as of June 30, 2006, incorporated by reference or appearing elsewhere herein, have been included in reliance upon the reports of Stark Winter Schenkein Co., LLP, independent registered accounting firm, upon the authority of said firm as experts in accounting and auditing.
 
The consolidated financial statements of Coral Gold included in this registration statement have been audited by Ernst & Young, independent registered chartered accountants, as stated in its report appearing elsewhere herein, and are included in reliance upon the report of such firm given upon its authority as experts in accounting and auditing.
 
LEGAL MATTERS
 
Matters of Canadian law, including the legality of the exchangeable shares offered hereby, will be passed upon on behalf of the offerors by, and the opinion contained in the section entitled “Material Canadian Federal Income Tax Considerations” on page 63 of this prospectus has been provided by, Fraser Milner Casgrain LLP. The legality of the common stock of U.S. Gold offered hereby will be passed upon on behalf of the offerors by Dufford & Brown, P.C. The opinions contained in the section entitled “Material U.S. Federal Income Tax Considerations” on page 73 of this prospectus have been provided by Hogan & Hartson L.L.P.


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APPENDIX A
 
INFORMATION CONCERNING CORAL GOLD
 
Overview
 
Coral Gold is a natural resource company primarily engaged in the exploration of natural resource properties. Coral Gold’s principal business activities are the exploration of certain mineral properties located in Nevada and California.
 
In addition to the information filed by Coral Gold with the SEC under the Exchange Act, Coral Gold files audited annual consolidated financial statements, unaudited interim consolidated financial statements, management’s discussion and analysis, proxy statements or information circulars and other information with the SEDAR. The information concerning Coral Gold contained in this Appendix A has been taken from Coral Gold’s annual report on Form 20-F for the fiscal year ended January 31, 2006 filed with the SEC on July 31, 2006, and from Coral Gold’s Report of Foreign Private Issuer on Form 6-K filed with the SEC on October 11, 2006. Although we have no reason to doubt the accuracy or completeness of the information relating to Coral Gold, we are not in a position to independently assess or verify this information, including Coral Gold’s financial statements. See the section entitled “Risk Factors — We have been unable to independently verify the reliability of information in this prospectus regarding White Knight, Coral Gold, Nevada Pacific and Tone Resources” on page 22 of this prospectus.
 
Some terms used in this Appendix A may be unfamiliar to you. We have provided a Glossary of Terms beginning on page A-24 of this Appendix A for your reference.
 
Authorized and Outstanding Share Capital of Coral Gold
 
Coral Gold is authorized to issue an unlimited number of common shares without par value. The number of issued and outstanding securities of Coral Gold as of November 5, 2006 are as follows:
 
  •  6,812,460 Coral Gold common shares issued and outstanding;
 
  •  405,634 Coral Gold common shares issuable upon exercise of outstanding warrants; and
 
  •  799,650 Coral Gold common shares issuable upon exercise of outstanding options.
 
Coral Gold shareholders are entitled to receive notice of and attend any meetings of shareholders and to one vote per common share entitled to vote at all such meetings. Shareholders are entitled to receive such dividends as Coral Gold’s board of directors may declare from time to time, according to the number of shares held and subject to the rights, privileges, restrictions and conditions attaching to any other class of shares of Coral Gold.
 
Dividends and Dividend Policy
 
Based on publicly-available information, Coral Gold has never declared any dividends on Coral Gold common shares. Further, Coral Gold has not publicly stated that it has the intention to pay dividends in the future.
 
History and Development of Coral Gold
 
Coral Gold was organized under the Company Act (British Columbia) on January 22, 1981 under the name of Carol Energy Corporation. Coral Gold’s name was changed to Coral Energy Corporation on March 3, 1982, to Coral Gold Corp. on September 9, 1987, and to Coral Gold Resources Ltd. on September 14, 2004 in conjunction with a 10 to 1 share consolidation. On July 15, 2005, Coral Gold transitioned under the Business Corporations Act (British Columbia) which came into effect on March 29, 2004. The principal place of business of Coral Gold is located at 455 Granville Street, Suite 400, Vancouver, British Columbia V6C 1T1, and its telephone number is (604) 682-3701. Coral Gold’s common shares are listed on the TSX-V under the symbol “CGR” and quoted on the OTCBB under the symbol “CGREF.”


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Business Overview of Coral Gold
 
The legal and commercial name of Coral Gold is Coral Gold Resources Ltd. Coral Gold is a natural resource company primarily engaged in the exploration and development of natural resource properties. Since its fiscal year ended January 31, 2004, Coral Gold has made aggregate principal capital expenditures of approximately Cdn$4,616,090 on its properties known as the Robertson Mining Claims located in the State of Nevada.
 
Presently, Coral Gold’s principal business activity is the exploration of mineral properties. Coral Gold is in the process of exploring its mineral properties and has not yet determined whether its mineral properties contain ore reserves that are economically recoverable. There is no assurance that a commercially viable mineral deposit exists on any of Coral Gold’s properties, and future exploration will be required before final evaluation as to the economic and legal feasibility is determined.
 
Coral Gold’s mining claims are located in Nevada and California. Coral Gold’s present principal exploration activities have been focused on the Robertson Mining Claims located in Crescent Valley, Nevada. The Robertson Mining Claims comprise three separate claim groups known as: (i) the Robertson Property; (ii) the Carve Out Claims, and (iii) the Norma Sass and Ruf Claims.
 
Robertson Property — Operations and Activities
 
Coral Gold entered into an option agreement dated October 8, 1998, referred to as the “Option Agreement”, with Placer Dome U.S. Inc., referred to as “Placer”, which was later assigned by Placer to the Cortez Joint Venture, doing business as Cortez Gold Mines (a joint venture owned by Placer and Kennecott Minerals), which we refer to as “Cortez.”
 
Effective December 30, 1999, pursuant to the terms of the Option Agreement, Cortez elected to terminate the Option Agreement. This required Coral Gold to post its own security for the reclamation bond for the Robertson Property and obtain a full release of Placer’s guarantee of the original reclamation bond. In order to satisfy its obligations under the Option Agreement, Coral Gold spent a large portion of its fiscal year ended January 31, 2003 conducting reclamation on the Robertson Property to reduce its reclamation bond that Placer had guaranteed for Coral Gold. Coral Gold was able to obtain a release of Placer’s guarantee by conducting sufficient reclamation work to reduce the bonding requirement, and by raising sufficient funds to provide satisfactory alternative security for the reclamation bond. The reclamation bond was reduced to $786,100 during Coral Gold’s fiscal year ended January 31, 2003, for which Coral Gold posted cash. In Coral Gold’s fiscal year ended January 31, 2006, with more reclamation work having been completed and accounted for, the reclamation bond was further reduced to $228,205. Due to additional subsequent exploration, the reclamation bond was then increased to $282,268. The cost to Coral Gold to conduct the reclamation, prepare an updated reclamation plan, and other associated costs was approximately $28,156 for its fiscal year ended January 31, 2006 and $237,130 since 2003.
 
In its fiscal year ended January 31, 2006, Coral Gold completed the purchase of 1,391,860 shares of Marcus Corporation, a Nevada Corporation, referred to as “Marcus”, representing 98.49% of the total issued shares of Marcus. Marcus is a non-reporting Nevada corporation, which owns the Marcus mining claims, consisting of 39 unpatented lode claims and two placer claims, and which comprise a portion of Coral Gold’s Robertson Property. By acquiring Marcus, Coral Gold now controls Marcus and owns an indirect interest in the mining lease between Coral Gold and Marcus, which provides for an annual advanced royalty to Marcus of $12,000, and a 5% net smelter returns royalty up to a maximum payment of $2.5 million.
 
In consideration of the acquisition, Coral Gold issued one common share of Coral Gold for every four common shares of Marcus, for a total of 347,964 common shares of Coral Gold. In addition, each tendering Marcus shareholder received a non-transferable share purchase warrant, permitting such shareholders to purchase one additional common share of Coral Gold at an exercise price of Cdn$2.00 per share for a period of up to two years from the closing date of the acquisition, for every two shares of Coral Gold received on the share exchange.
 
The 2005 drilling program on the Robertson Mining Claims began on June 15, 2005 and was completed August 10, 2005, consisting of 12 vertical reverse-circulation drill holes, totaling 10,540 feet. The depth of the holes ranged from 500 feet to 1,200 feet. All twelve holes returned ore-grade intervals ranging in thickness from 10 feet to 150 feet.


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Two holes were aimed at assessing the potential westward extension of stratiform 39A-type mineralization in to the so-called “distal target” area, located approximately 1,500 feet northwest of the 39A zone. Both holes were completed to a depth of 1,200 feet. This mineralized area is currently defined by six widely spaced reverse circulation drill holes covering an area roughly 2,000 feet in a northwesterly direction by 900 feet in a southwesterly direction.
 
In the Gold Pan zone, four holes were collared roughly 400 feet apart in an area 500 to 1,000 feet east of the 39A Zone, to test the potential for deep 39A-type mineralization beneath the near-surface mineral resource. These holes were located at possible structural intersections that appear to exert control on the distribution of near-surface gold. Three of the holes encountered strong retrograde alteration at the projected depth where the stratiform 39A-type mineralization was expected.
 
The 2005 drilling identified much stronger mineralization than previously encountered in the “distal target” area suggesting potential for developing new mineral resources in this area with additional drilling. In the 39A Zone, drilling indicates that the southern portion remains open for limited expansion to the southeast. However, results from drilling at the extreme north end of the zone suggests good potential for discovering additional higher grade resources in that area with continued drilling. Results from three of the four wide spaced drill holes collared in the Gold Pan zone, identified a widespread zone of strongly developed retrograde alteration carrying local ore-grade values at depths (850 — 1,045 feet) where the 39A zone was projected to be.
 
Currently, Coral Gold’s initial drilling program for the 2006 calendar year, a Cdn$4 million exploration and evaluation program, is underway. Drilling on the property began on April 30, 2006 after a series of weather-related delays. The program is designed to expand the 39A/Gold Pan mineral resource and test a number of new targets. On June 28, 2006 and July 12, 2006, Coral Gold announced further drill results from certain holes on the Robertson Property, which are summarized below under the section entitled “Coral Gold’s Mineral Properties — Robertson Property — Results of 2006 Drilling Program” on page A-13 of this Appendix A.
 
Norma Sass and Ruf Claims — Operations and Activities
 
Effective December 31, 1999, Coral Gold and Levon Resources Ltd., referred to as “Levon”, entered into a fourth amended agreement whereby Levon could earn an undivided 50% interest in the Norma Sass and Ruf Claims upon completion of certain terms. This agreement was further amended effective December 31, 2001 (but signed on October 3, 2002), whereby Levon was transferred a 331/3% interest in Coral Gold’s interest in the Norma Sass and Ruf Claims, in consideration of 300,000 common shares of Levon previously issued to Coral Gold and the prior payment of Cdn$350,294 for exploration work. Coral Gold currently owns a 662/3% interest in the Norma Sass and Ruf claims (subject to certain royalties to underlying property owners, as described below), following the execution of the December 2001 fifth amending agreement with Levon.
 
On December 4, 2002, Coral Gold granted an option to acquire 331/3% of Coral Gold’s interest in the Norma Sass and Ruf Claims to Goldfranchise Corporation, referred to as “Goldfranchise.” In order to earn the interest, Goldfranchise was required to:
 
(a) pay Coral Gold $38,391.50, which has been received by Coral Gold;
 
(b) incur a minimum of $300,000 in exploration work on the Norma Sass and Ruf Claims, of which $100,000 had to be incurred on or before December 4, 2003, and the balance of $200,000 incurred on or before December 4, 2004; and
 
(c) pay Coral Gold 331/3% of all annual land fees, taxes, and advance royalties required to keep the claims in good standing, until Goldfranchise has exercised the option.
 
Goldfranchise failed to incur the exploration work required or to pay Coral Gold 331/3% of all annual land fees, taxes and advance royalties under the option, and the option has since been terminated.
 
In January 2005, Coral Gold announced the formation of an exploration agreement with Agnico-Eagle Mines Limited, referred to as “Agnico-Eagle.” The agreement covers Coral Gold’s Norma Sass, Blue Nugget and Lander Ranch claims. The Norma Sass agreement also includes Coral Gold’s partnership with Levon. Under the agreement, Agnico-Eagle can earn a 51% interest in the Norma Sass, Blue Nugget and Lander Ranch claims by completing at


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least 45,000 feet of exploration drilling and paying certain advance royalties. At its option, Agnico-Eagle may acquire the claim leases from the underlying owners for its benefit and Agnico-Eagle shall be deemed to have earned an additional 24% interest. Agnico-Eagle will then have the option of acquiring the remaining 25% interest by producing a positive feasibility study and making a positive production decision.
 
At the fifth anniversary of the Agnico-Eagle exploration agreement and every year thereafter until production occurs, the advance royalty payment will be $150,000 per annum. All advance royalty payments will be credited towards Agnico-Eagle’s payment of a royalty of 2.5% net smelter returns from production to Coral Gold and Levon.
 
Agnico-Eagle completed 13,980 feet of drilling in 2005 on the Norma Sass and Lander Ranch property. The Norma Sass program consisted of six drill holes, varying from 1,665 to 1,975 feet in depth. All six holes encountered alteration, silification and sulfidation in Lower Plate rocks. Two holes in the northeast corner of the property intersected gold. In the 2006 calendar year, Agnico-Eagle planned to drill another 15,000 feet in 12 to 15 holes. As of the date of this Prospectus, Coral Gold had not disclosed information related to this planned drilling. Agnico-Eagle is prepared to extend the program if favorable results are obtained.
 
Carve-Out Claims — Operations and Activities
 
Under the terms of an Exploration and Mining Venture Agreement dated July 11, 1997, Placer holds an undivided 61% interest, and Coral Gold has a 39% interest carried to production in the Carve-Out Claims.
 
Beginning in 1997 and continuing through 1998, Cortez conducted a series of exploratory drilling programs on the Carve-Out Claims with limited success. In 2002, Coral Gold conducted a drilling program on the Carve-Out Claims with follow-up drilling in the immediate vicinity of existing drill holes with mixed results. To date, no significant mineral resources have been discovered on the Carve-Out Claims. However, the wide-space deep drilling has established the presence of scattered significant gold values, anomalous levels of Carlin-type trace elements, key structural components and the occurrence of a preferred host strata.
 
Reclamation Activities
 
Coral Gold spent approximately Cdn$24,166 on reclamation and maintenance in its fiscal year ended January 31, 2006 on the Robertson Property. Coral Gold is reclaiming past mining and exploration related disturbances to public lands as required by the Bureau of Land Management and the Nevada Department of Environmental Protection.
 
Competition
 
The mining industry in which Coral Gold is engaged is highly competitive. Competitors include well-capitalized mining companies, independent mining companies and other companies having financial and other resources far greater than those of Coral Gold. The companies compete with other mining companies in connection with the acquisition of gold and other precious metal properties. In general, properties with a higher grade of recoverable mineral and/or which are more readily minable afford the owners a competitive advantage in that the cost of production of the final mineral product is lower. Thus, a degree of competition exists between those engaged in the mining industries to acquire the most valuable properties. As a result, Coral Gold may eventually be unable to acquire attractive gold mining properties.
 
Dependence on Customers and Suppliers
 
Coral Gold is not dependent upon a single or few customers or suppliers for revenues or its operations.
 
Environmental Regulations
 
Coral Gold’s exploration programs in Nevada and California are subject to state and federal environmental regulations. All operations involving the exploration for the production of minerals are subject to existing laws and regulations relating to exploration procedures, safety precautions, employee health and safety, air quality standards, pollution of streams and fresh water sources, odor, noise, dust and other environmental protection controls adopted by federal, state and local governmental authorities as well as the rights of adjoining property owners. Coral Gold


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may be required to prepare and present to federal, state or local authorities data pertaining to the effect or impact that any proposed exploration for or production of minerals may have upon the environment. All requirements imposed by any such authorities may be costly, time consuming and may delay commencement or continuation of exploration or production operations. Future legislation may significantly emphasize the protection of the environment, and, as a consequence, the activities of Coral Gold may be more closely regulated to further the cause of environmental protection. Such legislation, as well as further interpretation of existing laws in the United States, may require substantial increases in equipment and operating costs to Coral Gold and delays, interruptions, or a termination of operations, the extent of which cannot be predicted. Environmental problems known to exist at this time in the United States may not be in compliance with regulations that may come into existence in the future. This may have a substantial impact upon the capital expenditures required of Coral Gold in order to deal with such problem and could substantially reduce earnings. At the present time, Coral Gold’s exploration activities in Nevada are in compliance with all known environmental requirements.
 
The regulatory bodies that directly regulate Coral Gold’s activities are the Bureau of Land Management (Federal) and the Nevada Department of Environmental Protection (State).
 
Coral Gold’s Organizational Structure
 
Coral Gold has two wholly-owned subsidiaries, Coral Energy Corporation of California, a California corporation which holds title to Coral Gold’s California property, and Coral Resources, Inc., a Nevada corporation, which holds title to Coral Gold’s mining claims located in Nevada. In its fiscal year ended January 31, 2006 Coral Gold completed the purchase of 1,391,860 shares, representing 98.49% of the issued shares, of Marcus, a Nevada Corporation that owns the Marcus mining claims, consisting of 39 unpatented lode claims and two placer claims, and which comprise a portion of Coral Gold’s Robertson Property.
 
Coral Gold’s Mineral Properties
 
Presently, Coral Gold is an “exploration stage company”, as all of Coral Gold’s properties are currently in the exploratory stage of development. In order to determine if a commercially viable mineral deposit exists in any of Coral Gold’s properties, further geological work will need to be done and a final evaluation based upon the results obtained to conclude economic and legal feasibility.
 
Coral Gold’s primary focus has been on the Robertson Mining Claims in Nevada. The Robertson Mining Claims are located in Crescent Valley, Nevada on the western flanks of the Shoshone Range, 28 miles to the southeast of Battle Mountain, Nevada, which lies some 230 miles northeast of Reno, Nevada. The Robertson Mining Claims comprise approximately 11,000 acres in the Bullion Mining District, Lander County, Nevada, and currently include 724 unpatented and patented lode and placer mining claims. The Robertson Mining Claims are recorded under three separate claim groups known as: (i) the Robertson Property; (ii) the Carve-Out Claims; and (iii) the Norma Sass and Ruf Claims, as described more particularly below.
 
These mining claims have been acquired over a period of several years from different sources. The entire Robertson Mining Claims are subject to a 3% net smelter royalty to Geomex Development Eighth Partnership, referred to as “Geomex 8”, which royalty shall cease at such time as the sum of $1,250,000 has been paid to Geomex 8, and various mining leases requiring minimum annual advanced royalties ranging from 2% to 8% of net smelter returns.
 
There is no underground or surface plant or equipment located on the Robertson Mining Claims.


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MAP
 
Robertson Property
 
The Robertson Property is the subject of two technical reports dated January 15, 2004 and April 25, 2006 prepared by Robert T. McCusker, P.Geol. in accordance with the requirements of National Instrument 43-101 implemented by the Canadian Securities Administration (“NI 43-101”), referred to as the “McCusker Reports.” The following historical information concerning the Robertson Property is extracted from the McCusker Reports. The


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reader is referred to the entire text of the McCusker Reports, copies of which are available under Coral Gold’s filings on EDGAR at www.sec.gov and on SEDAR at www.sedar.com.
 
Description and Location of Robertson Property
 
The Robertson Property is located in eastern Lander County, Nevada, on public lands administered by the Bureau of Land Management, referred to as the “BLM.” The property is situated in Sections 2 — 10, 15 — 18, 20, 21, Township 28 North, Range 47 East and Sections 26, 32 and 34, Township 29 North, Range 47 East, Mt. Diablo Baseline & Meridian.
 
The Robertson Property is 27 air miles southeast of Battle Mountain and 60 miles southwest of Elko, Nevada. From Battle Mountain, the county seat, the property is reached by traveling 28 miles east on Interstate Highway 80, then 29 miles south on Nevada Highway 306 to the property turn off. The property is reached by driving two miles west on a well maintained gravel road. A network of unimproved dirt roads and tracks provide access to the remainder of the property.
 
The Robertson Property consists of 428 unpatented federal lode claims, 94 placer claims, nine patented lode claims and one unpatented mill site, covering over 4,500 acres. Two groups of claims totaling 82 claims are non-contiguous with the core group of claims. Coral Gold controls the surface and mineral tenures within the project area through recorded title, or through mining lease and mining lease with option to purchase agreements of the patented and unpatented mining claims. Coral Gold’s wholly-owned subsidiary, Coral Resources, Inc., is the owner of record with 100% interest in 359 claims and controls an additional 173 claims through a variety of mineral leases, as more particularly described below.
 
In 2001, a boundary agreement between Coral Gold and Cortez resolved claim boundary overlaps and seniority issues along the east and south sides of the Robertson claim block. This agreement required both parties to amend and/or abandon certain claims in order to achieve the agreed upon boundary. This was completed during the 2002 — 03 assessment year.
 
Approximately 173 of the 532 claims that comprise the Robertson Property are controlled by Coral Gold through six mining leases and option agreements. The claims held by Coral Gold under lease or option agreements require minimum advance royalty payments and production royalties in the event of production. Total annual payments for the various leases and minimum advance royalties are $55,800. A summary compilation of the terms of these agreements are presented in the table below:
 
Mining Lease and Option Agreements
 
                                 
    Number of
 		    Cash Buyout
 		    Production
 		    Advance Royalty
 		 
Company/Date
  Claims     of Lease     Royalty     Payment  
 
Tenabo Gold Mining Co.
    13     $ 2M       8% NSR *   $ 12,000/yr  
Nov. 30, 1975
                               
Fannie Komp
    76     $ 1M       5% GSR *   $ 24,000/yr  
Sept. 16, 1986
                               
Florence Johnson
    16     $ 50,000       5% GSR **   $ 1,800/yr  
Nov. 5, 1986
                               
Northern Nevada Au, Inc.
    12     $ 0.3M       4% GSR **   $ 9,600/yr  
Sept. 30, 1986
                               
Albany Gold Corp. (Geomex)
    All     $ 1.25M       3% NSR *     None/yr  
Mauzy, et al
    36     $ 0.75M       2% NSR *   $ 14,400/yr  
Apr. 21, 1989
                               
 
 
  *  NSR: Net Smelter Return
 
**  NSR: Gross Smelter Return


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Annual federal rental fees of $44,300, payable to the BLM, and Notice of Intent to Hold Mining Claims have been filed for the 2005 — 06 assessment year.
 
Environmental Liabilities of Robertson Property
 
In 1988 – 89, Coral Gold operated a small open pit gold mining operation and heap leach facility on the Robertson Property. The resulting disturbances include three small open pit mines, waste dumps, haul roads, drill roads, open drill holes, and a 350,000 ton heap leach facility and related recovery plant. In 1994, a reclamation plan for such disturbances was prepared by Amax Gold Exploration Inc., referred to as “Amax”, and submitted to the Battle Mountain office of the BLM. The cost to perform the reclamation of the Robertson mine site was estimated at that time to be $2,000,000. In 2001, Coral Gold began reclamation activities which were accelerated in 2002, with the recontouring of waste dumps, reclamation of the leach pad, haul roads and the filling of all open drill holes. As a result of this activity, in June 2003, the BLM reduced the bonding requirements for the project to $406,000. Coral Gold currently maintains a required performance bond with the Nevada State Office of the BLM. Coral Gold is working with the BLM and the United States Department of Interior in efforts to further reduce the bond.
 
In March 2003, on behalf of Coral Gold, SRK Consulting submitted a final plan for permanent closure with the BLM and Nevada Division of Environmental Protection, referred to as the “NDEP.” The closure plan was approved by both agencies. The major component of the closure plan was the installation of a site fluid management system. As a result of this work during 2004, the BLM lowered the bonding requirements to $228,205. Subsequently, due to additional exploration work, the reclamation bond was increased to $282,268 and Coral Gold currently maintains the required performance bond with the Nevada State Office of the BLM in that amount.
 
Permitting on Robertson Property
 
In 2002, Coral Gold submitted and was granted a five year renewal of Water Pollution Control Permit (NEV60035) by the NDEP for the Robertson Property. In addition, Coral Gold continues to conduct reclamation and exploration activities under a plan of operation (NV067688) approved in 1989 by the Bureau of Land Management, referred to as the “Plan of Operation.”
 
During the period 2000 through 2003, no exploration activity was conducted on the Robertson Property. However, during that period a significant amount of surface reclamation was completed on the property. As a result, new exploration activities in reclaimed areas will require submission and approval of an amendment to the Plan of Operation. Additionally, the National Historic Preservation Act requires that all operators on public lands conduct an archeological survey of the proposed sites of new disturbance. Much of the Robertson Property has been previously cleared under various surveys conducted by Amax. Recent and planned future exploration activities by Coral Gold have moved outside the area covered by previous archeological surveys. It is possible that future exploration will experience delays in receiving approval because additional surveys will be required by state and federal agencies. In 2004 — 05, Coral Gold conducted exploratory drilling under a series of amendments to the Plan of Operation which were approved by the Battle Mountain office of the BLM and NDEP.
 
There are no known environmental or threatened and endangered species issues at the Robertson Property that would provide grounds for denial of approval of an Amended Plan of Operation.
 
History and Exploration of Robertson Property
 
The Robertson Property is located in the Tenabo area, a sub-district of the Bullion mining district. Historic lode mining in this district dates from 1905 and Placer gold was discovered in many of the dry washes in the Tenabo area in 1916. Between 1937 — 39, a small dragline dredge and washing plant operated in the district, and a dredge was reported to be operating in lower Mill Gulch in 1945.
 
During the period 1966 — 70, a number of companies explored the district in search of porphyry copper-style mineralization. In 1968, while drilling a series of shallow rotary holes near the Gold Pan mine, Superior Oil discovered a small, but relatively high-grade zone of gold at shallow depths in what is now known as the Gold Pan zone. However, with additional drilling, Superior Oil lost interest in the district. They were soon followed by a number of mainly Vancouver-based junior mining companies, including Placer Development (1974 — 75), Teck


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Corporation (1977), Aaron Mining Ltd. (1975 — 86), and E & B Exploration Ltd. (1980 — 81), all of whom sporadically explored the Tenabo area with limited success. A summary of the drilling completed by these companies prior to Coral Gold’s involvement (1986) is presented in the table below:
 
Summary of Pre-Coral Gold Drilling Activities at Robertson Property
 
                 
        Number and Type of
 		       
Company
  Date of Activity   Holes Drilled   Drill Footage(ft)   Target
 
Superior Oil
  1968 — 70   92 Conv. Rotary   c. 32,000   Gold Pan
Placer Development
  1973 — 74   23 Conv. Rotary   c. 3,500   none
Teck Corporation
  1977   none   none   none
Aaron Mining Ltd. 
  1977   7 Conv. Rotary   c.300   Gold Quartz
E & B Exploration Ltd. 
  1980 — 81   148 Rev. Circlulation   30,807   Gold Pan
Totals
      270   66,607    
 
Modern open pit mining and heap leaching began as early as 1974, when Aaron Mining Ltd., referred to as “Aaron”, initiated a pilot leach operation on the Robertson Property. During the period 1978 — 80, Aaron expanded its leaching operations and continued exploration and began consolidating and acquiring claims in the district.
 
In 1986, Coral Gold acquired Aaron’s interest in the Robertson Property and immediately began a series of major drilling programs and continuing until 1989. Mining operations on the Robertson Property commenced in 1988, but were suspended less than one year later. During the operating life of the Robertson Property mine, approximately 350,000 tons of low-grade material was placed on leach pads from which about 6,200 ounces of gold were recovered.
 
During the period 1986 through 1989, Coral Gold completed approximately 380 reverse circulation drill holes and seven diamond drill holes, totaling about 109,377 ft. Much of this drilling was focused in four resource areas including the Gold Pan, Gold Quartz, Gold Quartz extension (also called Gold Quartz West) and the Triplet Gulch areas. The purpose of this drilling was to determine the limits and continuity of mineralization within these zones. Nearly all of the reverse circulation holes were drilled vertically to an average depth of about 300 ft.
 
During the later stages of Coral Gold’s exploration program, they completed two “deep” reverse circulation holes that reached depths of 1,400 ft and 1,810 ft, respectively. In addition to resource definition, Coral Gold also embarked on a program of district-wide exploratory and follow-up drilling of numerous surface anomalies.
 
In 1990, Coral Gold and Amax entered into an amended and restated option and earn-in agreement in which Amax could earn a 60% interest in the Robertson Property by producing a bankable feasibility study. From 1990, until they withdrew from the venture in 1996, Amax completed an exploration program that included drilling 338 reverse circulation holes and 62 diamond drill holes, totaling over 176,000 ft.
 
In 1998, Cortez, entered into an option and earn-in agreement with Coral Gold in which Cortez could earn a 70% interest in the Robertson Property by producing a bankable feasibility study. The focus of their exploration was to expand the 39A zone and test a number of outlying targets. During 1999, Cortez completed 46 reverse circulation drill holes and a single flood rotary hole, totaling 57,000 feet. Of the 13 holes directed at expanding the 39A zone, only two holes, 99401 and 99413, encountered significant mineralization. This drilling program did little to expand the resource. Of the remaining holes drilled by Cortez, only two holes (99406 and 99419) encountered significant mineralization. Both holes were designed to offset and/or follow up existing drill intersections and surface gold anomalies.
 
After completing this drilling program, Cortez declared its interest in renegotiating the terms of the Option Agreement with Coral Gold. When Coral Gold declined, Cortez subsequently terminated the Option Agreement on December 30, 1999, and did not earn an interest in the Robertson Property.
 
During 2004 and 2005, Coral Gold conducted three drilling programs consisting of 32 reverse circulation holes totaling 24,020 feet on the Robertson Property. The focus of this exploration was to expand and further define the


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39A Zone, test the “deep” Gold Pan Zone for extensions of the 39A Zone and offset previous ore-grade intersections in the “distal target area.”
 
Geological Setting of Robertson Property
 
Geologically, the Robertson Property consists of a series of relatively flat-lying, vertically stacked thrust sheets that form part of the Roberts Mountain allochthon, which is composed of siliciclastic rocks of Ordovician through Devonian age. The district is dominated by a very thick sequence of middle to late Devonian Slaven Chert composed mainly of argillite, chert, lesser siltstone and shale, and minor intermediate volcanic rocks. Structurally overlying the Slaven Chert along the north and east sides of the district are a sequence of rusty brown weathering siltstone, sandstone and very minor limestone of the Silurian Elder Sandstone.
 
Intruding the thick Paleozoic sequence is an elliptical-shaped, composite granodiorite stock (or lacolith) of Eocene age. The orientation of the principal axis of the stock is approximately east-west. Associated with it are numerous dikes, sills and plugs that vary in composition from diorite, the earliest known intrusion, to rhyolite, the latest. Most of the identified gold resources, including the Porphyry, Gold Pan and 39A zones, lie along or near the northern contact of the composite stock. A series of narrow and laterally continuous (up to 1,600 ft) intrusive “pebble” dikes extend northward from the northern contact of the granodiorite stock. Near contacts with the Tertiary intrusions, many of the sedimentary and volcanic rocks, and early phases of the stock, have undergone significant thermal metamorphism, intense recrystallization, bleaching and pervasive metasomatism. Many of these rocks have been converted to layered sequences of biotite, “quartz” and calc-silicate hornfels, marble, exoskarn and endoskarn.
 
Mineralization at the Robertson Property is strongly controlled by a system of low and high-angle faults and related fracture zones. Less commonly, brecciation associated with axial plane shear zones developed in isoclinal folds are also important hosts for mineralization, locally. Although individual structures host ore-grade gold, higher grades commonly occur where one or more structures intersect.
 
Deposit Types and Mineralization in Robertson Property
 
Coral Gold has been focusing its exploration activities on four zones localized along the northern contact of the Tenabo stock forming the general east-west trend. These zones are the Porphyry, Gold Pan, Altenburg Hill and 39A zones. The Porphyry, Gold Pan and Altenburg Hill zones occur in highly fractured hornfels and skarn units at the contact of the granodiorite stock, whereas the 39A zone is localized at the intersection of two high-angle faults in retrograde-altered hornfels.
 
The following is a summary of the main minerals identified at the Robertson Property:
 
             
Native gold
  Native silver   Electrum   Pyrite
Pyrrhotite
  Marcasite   Arsenopyrite   Stibnite
Chalcopyrite
  Sphalerite   Galena   Bournonite
Acanthite
  Loellingite   Gersdorffite   Tetradymite
Petzite
  Hessite   Hedleyite   Tellurobismuthite
Altaite
  Tetrhedrite   Bornite   Chalcocite
Covellite
  Digenite   Native copper   Cuprite
Chysocolla
  Azurite   Goethite   Magnetite
Hematite
  Illmenite   Scorodite    
 
Mineral Resource Estimates at Robertson Property
 
In late 2005, an independent third party was contracted by Coral Gold to undertake a preliminary assessment of the currently defined mineral resources at the Robertson Property. The results of this study are reported in a NI 43-101 compliant technical report dated April 25, 2006 prepared by R. T. McCusker entitled “Update of the Geological Report on the Robertson Property.” The purpose for this study was to update the 2001 resource estimate, include results from the 2004 — 05 drilling programs in the estimate and examine the effect of higher gold price on the economics of the existing resources. The mineral resource estimates of the Porphyry and combined 39A/Gold


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Pan Zones were conducted by an independent third party and a qualified person pursuant to NI 43-101. The Altenburg Hill and distal Target inferred mineral resources were estimated by R. T. McCusker, a qualified person pursuant to NI 43-101. A summary of the mineral resources estimated to be present on the Robertson Property are presented in the following table.
 
It should be noted that the resource classifications applied by an independent third party and R. T. McCusker conform to the Canadian Institute of Mining, Metallurgy and Petroleum definitions for measured, indicated and inferred mineral resources, respectively, pursuant to usage under NI 43-101. Further, it should also be noted that mineral resources that are not mineral reserves do not have demonstrated economic viability.
 
Cautionary Note to U.S. Investors concerning Estimates of Measured, Indicated and Inferred Resources
 
This section uses the terms “measured resources,” “inferred resources” and “indicated resources.” We advise United States investors that while those terms are recognized and required by Canadian regulations, the United States Securities and Exchange Commission does not recognize them. United States investors are cautioned not to assume that any part or all of mineral deposits in these categories will ever be converted into reserves.  “Inferred resources have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. United States investors are cautioned not to assume that part or all of an inferred resource exists, or is economically or legally minable.
 
Robertson Mineral Resource 2006 (by R.T. McCusker)
 
                                                                                                 
    Measured Mineral Resources     Indicated Mineral Resources     Total Measured and Indicated     Inferred Mineral Resources  
    Short
 		    Gold
 		          Short
 		    Gold
 		          Short
 		    Gold
 		    Contained
 		    Short
 		    Gold
 		    Contained
 		 
    tons
 		    Grade
 		    Contained
 		    tons
 		    Grade
 		    Contained
 		    tons
 		    Grade
 		    ozs
 		    Tons
 		    Grade
 		    ozs
 		 
Zone
  (000s)     (oz/ton)     ozs (000s)     (000s)     (oz/ton)     ozs (000s)     (000s)     (oz/ton)     (000s)     (000s)     (oz/ton)     (000s)  
 
Porphyry(1)
    10,600       0.020       212       2,100       0.018       37       12,700       0.020       249                          
39A/Gold Pan(2)
                            10,200       0.044       450       10,200       0.044       450       4,900       0.039       192  
Altenburg Hill(1)
                                                                            3,500       0.018       63  
Distal Target(3)
                                                                            1,008       0.178       179  
Total
    10,600       0.020       212       12,300       0.040       487       22,900       0.031       699       9,408       0.046       434  
 
 
(1) Calculated using a 0.010 oz Au/t cutoff grade.
 
(2) Calculated using a 0.015 oz Au/t cutoff grade.
 
(3) Calculated using a 0.05 oz Au/t cutoff grade.
 
An independent study prepared by a third party indicates that due to the low-grade nature of the Robertson mineral resources, they are sensitive to a number of parameters including gold recovery, operating costs, capital cost and gold price. Estimated net revenue generated by the 39A/Gold Pan and Porphyry resources at a gold price of $550/ounce and 683,000 ounces of recoverable gold generates a net revenue of $97.5 million, which makes the resources uneconomic as evaluated.


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Results of 2006 Drilling Program
 
Coral Gold’s initial drilling program for the 2006 calendar year, a Cdn$4 million exploration and evaluation program, is underway. The program is designed to expand the 39A/Gold Pan mineral resource and test a number of new targets. On June 28, 2006 and July 12, 2006, Coral Gold announced further drill results from certain holes on the Robertson Property, which are summarized in the table below:
 
July 28, 2006 Report
 
(source: Report of Robert T. McCusker filed by Coral Gold on SEDAR)
 
The principal intersections of gold mineralization were calculated using a cut off grade of 0.015 oz Au/t to calculate the average grade and thickness of the gold bearing zones as follows:
 
                                 
Hole No.
  Depth From (ft)     To (ft)     Width (ft)     Gold Grade (oz/ton)  
 
CR06-6
    710       745       35       0.021  
including
    770       860       90       0.027  
CR06-8
    310       345       35       0.046  
      470       505       35       0.011  
      615       740       125       0.083  
including
    685       735       50       0.149  
CR06-11
    700       715       15       0.032  
      745       805       60       0.027  
      880       890       10       0.072  
CR06-12
    410       465       45       0.017  
      610       645       35       0.046  
including
    610       615       5       0.210  
 
 
Because of the flat-lying nature of mineralization, the intersections cited above are thought to represent true thickness.
 
July 12, 2006 Report
 
(source: Report of Robert T. McCusker filed by Coral Gold on SEDAR)
 
The principal intersections of gold mineralization were calculated using a cut off grade of 0.015 oz Au/t (except where indicated) to calculate the average grade and thickness of the gold bearing zones as follows:
 
                                 
Hole No.
  Depth From (ft)     To (ft)     Thickness (ft)     Gold Grade (oz/ton)  
 
CR06-10
    405       450       45       0.043  
      520       535       15       0.027  
      605       620       15       0.053  
CR06-13
    90       125       35 *     0.025  
      300       365       65       0.022  
      395       420       25       0.028  
      485       520       35       0.032  
      595       640       45       0.034  
CR06-14
    105       115       10       0.075  
      565       630       65       0.067  
CR06-15
    630       650       20       0.041  
      665       700(TD )     35       0.082  
 
 
* Oxide mineralization; grade/thickness calculated using 0.01 oz Au/t cutoff grade.


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Because of the flat-lying nature of mineralization, the intersections cited above are thought to represent true thickness.
 
Proposed Exploration of Robertson Property
 
Coral Gold believes that there is a potential for discovery of additional mineral resources on the Robertson Property. Coral Gold plans to continue to explore the Robertson Property or seek third party partners for further exploration.
 
Carve-Out Claims
 
Coral Gold plans to rely on Cortez to further explore the property for mineral resources.
 
There is no underground or surface plant or equipment located on the Carve-Out Claims, nor any known body of commercial ore.
 
Norma Sass and Ruf Claims
 
Coral Gold currently owns a 662/3% interest in the Norma Sass and Ruf Claims, which originally were a part of the Carve-Out Claims, after an option agreement with Levon was amended on October 3, 2002 transferring to Levon a 331/3% interest in the Norma Sass and Ruf Claims. Levon is a British Columbia company also engaged in the exploration of precious minerals and has four directors in common to Coral Gold.
 
In January 2005, Coral Gold announced the formation of an exploration agreement with Agnico-Eagle. The agreement covers Coral Gold’s Norma Sass, Blue Nugget and Lander Ranch claims. The Norma Sass agreement also includes Coral Gold’s partnership with Levon. Under the agreement, Agnico-Eagle can earn a 51% interest in the Norma Sass, Blue Nugget and Lander Ranch claims by completing at least 45,000 feet of exploration drilling and paying certain advance royalties. At its option, Agnico-Eagle may acquire the claim leases from the underlying owners for its benefit and Agnico-Eagle shall be deemed to have earned an additional 24% interest. Agnico-Eagle will then have the option of acquiring the remaining 25% interest by producing a positive feasibility study and making a positive production decision.
 
At the fifth anniversary and every year thereafter until production occurs, the advance royalty payment will be $150,000 per annum. All advance royalty payments will be credited towards Agnico-Eagle’s payment of a royalty of 2.5% net smelter returns from production to Coral Gold and Levon. Agnico-Eagle has reserved the right to purchase 1% of this net smelter returns royalty (to reduce the royalty to Coral Gold and Levon to 1.5%) for a cash payment of $1.0 million. Coral Gold and Levon have agreed to share in any benefits from the agreement with Agnico-Eagle in proportion to their current respective interests in the Norma Sass Property.
 
There is no underground or surface plant or equipment located on the Norma Sass and Ruf Claims, nor any known body of commercial ore.
 
JDN Claims (formerly known as the JD Mining Claim)
 
On December 16, 1986, Coral Gold acquired six mining claims on 550 acres of land near Crescent Valley (Lander County), Nevada for $10,000. Coral Gold located an additional 28 unpatented lode mining claims covering some 30 acres in May 1996 and acquired a 100% interest by staking the “JDN Claims.” The JDN Claims are located approximately three miles north of the Robertson Mining Claims. In 1987, geological mapping was conducted. In its fiscal year ended January 31, 1994, Coral Gold optioned a 50% interest in the JDN claims to Mill Bay Ventures Inc., formerly First International Metals Corp., referred to as “Mill Bay”, a company with two directors in common to Coral Gold, for Cdn$10,000 and an initial installment of 50,000 common shares of Mill Bay. On February 5, 1997, Mill Bay exercised the option by issuing to Coral Gold an additional 50,000 common shares and completion of specified exploration work.
 
Access to the JDN Claims from Elko, Nevada, a regional mining supply center, is via Highways 80 and 306, a distance of approximately 102 kilometers to the community of Crescent Valley and then an additional 18 kilometers on a gravel access road from the community of Crescent Valley. A four-wheel drive vehicle is usually necessary to


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access all roads on the property. As of its fiscal year ended January 31, 2001, Coral Gold has written down the JDN Claims to a nominal value. There is no underground or surface plant or equipment located on the JDN Claims, nor any known body of commercial ore.
 
C-Eagle Claims
 
In 1987, Coral Gold acquired a 100% interest in the C-Eagle Claims. The C-Eagle Claims consist of 15 lode mineral claims, and are located at Corral Canyon, in Lander County, Nevada, approximately 16 kilometers north-northwest of Placer’s Cortez gold mine and comprises a total of approximately 646 acres. The C-Eagle Claims are approximately three miles west of Crescent Valley, Nevada, and approximately 18 miles southeast of Battle Mountain, Nevada. Access to the C-Eagle Claims from Elko, Nevada, a regional mining supply center, is via Highways 80 and 306, a distance of approximately 90 kilometers and then an additional 13 kilometers on a gravel access road from the community of Crescent Valley. A four-wheel drive vehicle is usually necessary to access all roads on the property.
 
The C-Eagle Claims are subject to a 3% net smelter royalty to Geomex 8, which royalty shall cease at such time as the sum of $1,250,000 has been paid to Geomex 8.
 
In its fiscal year ended January 31, 1994, Coral Gold optioned a 50% interest in these claims to Levon for Cdn$10,000 and 100,000 Levon common shares. During 1996, Levon exercised its option and holds a 50% interest in the C-Eagle Claims with Coral Gold. During Coral Gold’s fiscal year ended January 31, 2000, no substantial work at the C-Eagle Claims was conducted and as of its fiscal year ended January 31, 2001, Coral Gold has written down the C-Eagle Claims to a nominal value. There is no underground or surface plant or equipment on the C-Eagle Claims, nor any known body of commercial ore.
 
Ludlow Property
 
In 1981, Coral Gold purchased mining property consisting of approximately 128 acres in San Bernardino County, California, referred to as the “Ludlow Property.” The purchase price for the Ludlow Property was Cdn$28,187, and as of January 31, 2000, Coral Gold expended Cdn$36,885 on exploration costs. The property is located approximately six miles south of Ludlow, California, and is readily accessible by dirt road from Ludlow. Ludlow lies at the western junction of U.S. Highway 40 and Route 66. Old wagon roads allow any part of the property to be reached by an easy walk. The Ludlow property has previously been explored as evidenced by trenches, pits and shallow shafts and adits. The only recorded data relating to previous exploration applies to the Baghdad-Chase Mine which lies approximately two kilometers to the south of the Ludlow Property.
 
There has been no underground exploration or development work done on the claims by Coral Gold other than geochemical soil sampling and, to Coral Gold’s knowledge, there is no record of the previous work carried out on the claims as indicated by the evidence of trenches, pits and shallow shafts and adits that are located thereon. No exploration work has been performed on the property for Coral Gold’s past five fiscal years. In order to keep the mining title to the Ludlow Property in good standing, Coral Gold is required to pay property taxes. As of its fiscal year ended January 31, 2001, Coral Gold wrote down the Ludlow Property to a nominal value. There is no surface or underground plant or equipment on the Ludlow Property, nor any known body of commercial ore.
 
Legal Proceedings
 
Coral Gold is not and has not been, since July 1, 2004, a party to any material legal or arbitration proceeding, nor is any material governmental proceeding involving Coral Gold pending or known to be contemplated.
 
Exchange Controls
 
There is no law, governmental decree or regulation in Canada that restricts the export or import of capital or affects the remittance of dividends, interest or other payments to a non-resident holder of common shares other than withholding tax requirements. Any such remittances to United States residents are subject to withholding tax. See the section entitled “Taxation.”


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There is no limitation imposed by the laws of Canada or by the charter or other constituent documents of Coral Gold on the right of a non-resident to hold or vote the common shares, other than as provided in the Investment Act. The following discussion summarizes the principal features of the Investment Act for a non-resident who proposes to acquire the common shares of Coral Gold.
 
The Investment Act generally prohibits implementation of a reviewable investment by an individual, government or agency thereof, corporation, partnership, trust or joint venture (each an “entity”) that is not a “Canadian” as defined in the Investment Act (a “non-Canadian”), unless after review, the Director of Investments appointed by the minister responsible for the Investment Act is satisfied that the investment is likely to be of net benefit to Canada. An investment in the common shares by a non-Canadian other than a “WTO Investor” (as that term is defined by the Investment Act, and which term includes entities which are nationals of or are controlled by nationals of member states of the World Trade Organization) when Coral Gold was not controlled by a WTO Investor, would be reviewable under the Investment Act if it was an investment to acquire control of Coral Gold and the value of the assets of Coral Gold, as determined in accordance with the regulations promulgated under the Investment Act, equals or exceeds Cdn$5 million for direct acquisition and over Cdn$50 million for indirect acquisition, or if an order for review was made by the federal cabinet on the grounds that the investment related to Canada’s cultural heritage or national identity, regardless of the value of the assets of Coral Gold. An investment in the common shares by a WTO Investor, or by a non-Canadian when Coral Gold was controlled by a WTO Investor, would be reviewable under the Investment Act if it was an investment to acquire control of Coral Gold and the value of the assets of Coral Gold, as determined in accordance with the regulations promulgated under the Investment Act was not less than a specified amount, which for 2004 is any amount in excess of Cdn$137 million. A non-Canadian would acquire control of Coral Gold for the purposes of the Investment Act if the non-Canadian acquired a majority of the common shares. The acquisition of one third or more, but less than a majority of the common shares would be presumed to be an acquisition of control of Coral Gold unless it could be established that, on the acquisition, Coral Gold was not controlled in fact by the acquirer through the ownership of the common shares.
 
Certain transactions relating to the common shares would be exempt from the Investment Act, including: (a) an acquisition of the common shares by a person in the ordinary course of that person’s business as a trader or dealer in securities; (b) an acquisition of control of Coral Gold in connection with the realization of security granted for a loan or other financial assistance and not for a purpose related to the provisions of the Investment Act; and (c) an acquisition of control of Coral Gold by reason of an amalgamation, merger, consolidation or corporate reorganization following which the ultimate direct or indirect control in fact of Coral Gold, through the ownership of the common shares, remained unchanged.
 
Taxation
 
For a discussion of the material Canadian federal income tax consequences applicable to Shareholders holding or disposing of their common shares, and the exchangeable shares and shares of common stock of U.S. Gold see the sections entitled “Material Canadian Federal Income Tax Considerations” and “Material U.S. Federal Income Tax Considerations” on pages 63 and 73, respectively, of this prospectus.


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SELECTED FINANCIAL DATA OF CORAL GOLD
 
The selected historical financial information presented in the table below for each year ended January 31, 2006, 2005, 2004, 2003 and 2002 and the six-month periods ended July 31, 2006 and 2005 is derived from the audited and unaudited (interim) consolidated financial statements of Coral Gold respectively. The audited consolidated financial statements and notes for each year in the three year period ended January 31, 2006, 2005 and 2004 are included in this prospectus. The interim unaudited consolidated financial statements for the six-month period ended July 31, 2006 and 2005 have also been included. The selected historical financial information for each year ended January 31, 2003 and 2002, presented in the table below are derived from financial statements of Coral Gold that are not included in this prospectus. The selected financial information presented below should be read in conjunction with Coral Gold’s financial statements and the notes thereto and the Operating and Financial Review and Prospects included elsewhere in this prospectus.
 
The selected financial data and consolidated financial data have been prepared in accordance with Canadian generally accepted accounting principles, referred to as “Canadian GAAP.” For a reconciliation between Canadian and United States generally accepted accounting principles, referred to as “U.S. GAAP”, which differ in respect to the recording of the writedown of deferred exploration expenditures, mineral property acquisition costs, changes in gains or losses of marketable securities, proceeds of interests deposed of, deferred exploration expenditures and recognition of compensation expense upon the issuance of stock options, see “U.S. GAAP Reconciliation with Canadian GAAP” below.
 
In the tables below, all dollars are expressed in Canadian dollars unless otherwise stated.
 
                                                         
    Six Months Ended
 		       
    July 31     Year Ended January 31,  
Operations
  2006     2005     2006     2005     2004     2003     2002  
    (Unaudited)                                
 
General and Administrative
  $ 655,705     $ 329,443     $ 2,301,983     $ 866,085     $ 640,502     $ 538,893     $ 244,071  
Net Income (Loss)
    (586,683 )     330,286       (3,067,474 )     (878,819 )     (753,596 )     (755,999 )     (1,128,401 )
Net Income (Loss) Per Share
    (0.09 )     (0.07 )     (0.64 )     (0.19 )     (0.20 )     (0.27 )     (0.54 )
Weighted Average Number of Shares Issued
    6,425,173       4,650,030       4,789,881       4,629,892       3,686,398       2,805,433       2,095,913  
 
                                                         
    As at July 31     As at January 31,  
Balance Sheet
  2006     2005     2006     2005     2004     2003     2002  
    (Unaudited)           Restated(1)     Restated(1)     Restated(1)     Restated(1)  
 
Working Capital
  $ 3,703,767     $ 863,870     $ 36,519     $ 1,400,605     $ 2,601,586     $ (14,178 )   $ 356,553  
Total Assets
    15,270,553       10,501,557       11,385,912       10,737,683       10,896,355       8,888,094       6,564,304  
Liabilities
    1,911,918       525,204       2,233,748       480,289       479,095       705,499       477,095  
Shareholders’ Equity
    13,358,635       9,976,353       9,152,164       10,257,394       10,417,260       8,182,595       6,087,209  
 
 
(1) See Note 2 of Coral Gold’s Financial Statements included in Appendix B to this prospectus.
 


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    Reconciliation of Canadian GAAP to U.S. GAAP  
    Six Months Ended
 		       
    July 31     Year Ended January 31,  
U.S. GAAP Operations
  2006     2005     2006     2005     2004     2003     2002  
    (Unaudited)                                
 
Loss for year under Canadian GAAP
  $ (586,683 )   $ (330,286 )   $ (3,067,474 )   $ (878,819 )   $ (753,596 )   $ (755,999 )   $ (1,128,401 )
Adjustments:
                                                       
Deferred exploration expenditures
    (537,376 )     (285,811 )     (584,880 )     (897,908 )     (420,054 )     (1,351,302 )     (196,909 )
Stock based compensation
    —       —       —       —       —       (60,000 )     —  
Writedown of deferred exploration expenditures
    —       —       —       —       4,968       10,389       70,019  
Writedown of mineral property acquisition costs
    —       —       —       —       —               700,000  
Change in unrealized (gain) loss of marketable securities
    —       —       —       —       —       22,686       96,488  
Proceeds of interest deposed of
    —       —       —       —       —       56,681       —  
Net loss for the year under U.S. GAAP
    (1,124,059 )     (616,097 )     (3,652,354 )     (1,776,727 )     (1,168,682 )     (2,075,545 )     (458,803 )
Income (loss) per share under U.S. GAAP
    (0.17 )     (0.14 )     (0.76 )     (0.38 )     (0.32 )     (0.74 )     (0.22 )
 
                                                         
    As at July 31     As at January 31,  
Balance Sheet
  2006     2005     2006     2005     2004     2003     2002  
    (Unaudited)           Restated(1)     Restated(1)     Restated(1)     Restated(1)  
 
Total assets under Canadian GAAP
  $ 15,270,553     $ 10,501,557     $ 11,385,912     $ 10,737,683     $ 10,896,355     $ 8,888,094     $ 6,564,304  
Adjustments
    (9,588,800 )     (8,005,267 )     (9,065,945 )     (8,466,484 )     (6,682,435 )     (6,311,896 )     (5,075,070 )
Total assets under US GAAP
    5,681,753       2,496,290       2,319,967       2,271,199       4,213,920       2,576,198       1,489,234  
Total equity under Canadian GAAP
    13,358,635       10,294,353       9,152,164       10,257,394       10,417,260       8,182,595       6,087,209  
Adjustments
    (9,588,800 )     (8,005,267 )     (9,065,945 )     (8,466,484 )     (6,682,435 )     (6,311,896 )     (5,075,070 )
Total equity under US GAAP
    3,769,835       2,289,086       86,219       1,790,910       3,734,825       1,870,699       1,012,139  
 
 
(1) See Note 2 of Coral Gold’s Financial Statements included in Appendix B to this prospectus.
 
Exchange Rates
 
The following table sets forth information as to the period end, average, the high and the low exchange rate for Canadian Dollars and U.S. Dollars for the periods indicated based on the noon buying rate in New York City for cable transfers in Canadian Dollars as certified for customs purposes by the Federal Reserve Bank of New York (Canadian dollar = $1).
 
                                 
Year Ended January 31,
  Average     Period End     High     Low  
 
2002
  $ 1.5568     $ 1.5915     $ 1.6128     $ 1.4933  
2003
    1.5655       1.5286       1.6112       1.5108  
2004
    1.3803       1.3265       1.5315       1.2690  
2005
    1.2961       1.2396       1.3970       1.1775  
2006
    1.2061       1.1436       1.2703       1.1436  

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For more information on exchange rates, see the section entitled “Currency Exchange Rates” on page 16 of this prospectus.
 
Operating and Financial Review and Prospects of Coral Gold
 
This discussion and analysis of the operating results and the financial position of Coral Gold is for the years ended January 31, 2006, 2005 and 2004 and for the six months ended July 31, 2006 and 2005 and should be read in conjunction with the consolidated financial statements and the related notes attached hereto.
 
Operating Results
 
The principal business of Coral Gold has been the acquisition and exploration of precious mineral properties and, where warranted, developing and mining such properties, particularly those judged by Coral Gold to be potentially valuable for gold. Coral Gold’s mining claims are located in the states of Nevada and California in the United States. None of Coral Gold’s mineral properties are in production and Coral Gold has received no revenues.
 
Selected Financial Information
 
The following financial data is derived from Coral Gold’s consolidated financial statements for the three most recently completed fiscal years and the six month periods ended July 31, 2006 and 2005.
 
In the table below, all dollars are expressed in Canadian dollars.
 
                                         
    July 31,
 		    July 31,
 		    January 31,
 		    January 31,
 		    January 31,
 		 
    2006     2005     2006     2005     2004  
    (Unaudited)     (Unaudited)           Restated     Restated  
 
Loss before other items
  $ (655,705 )   $ (329,443 )   $ (2,301,983 )   $ (866,085 )   $ (640,502 )
Loss for the period
    (586,683 )     (330,286 )     (3,067,474 )     (878,819 )     (753,596 )
Loss per share
    (0.09 )     (0.07 )     (0.64 )     (0.19 )     (0.20 )
Total assets
    15,270,553       10,501,557       11,385,912       10,737,683       10,896,355  
Total liabilities
    1,911,918       525,204       2,233,748       480,289       479,095  
Working capital
    3,703,767       863,870       36,519       1,400,605       2,601,586  
 
During the six month period ended July 31, 2006, Coral Gold incurred a loss of Cdn$586,683 compared with a loss of Cdn$330,286 for the six month period ended July 31, 2005, an increase of Cdn$256,397, and a net loss per share of Cdn$0.09 compared to Cdn$0.07 in 2005. The primary reasons for the increase in the loss for the current six month period are the increased administrative expenses of approximately Cdn$326,262 offset by an increase in interest revenue of Cdn$65,071. Other items, which consist of a bad debt recovery of Cdn$3,464 and a decrease in foreign exchange losses of Cdn$1,327, helped to reduce the overall increase in loss for the period.
 
During its fiscal year ended January 31, 2006, Coral Gold incurred a loss of Cdn$3,067,474 compared to Cdn$878,819 in 2005, and a net loss per share of Cdn$0.64 compared to Cdn$0.19 in 2005. The 2006 loss includes a future income tax expense of Cdn$778,000 compared to Cdn$nil in 2005. The 2006 loss also includes interest income of Cdn$20,454, a decrease of Cdn$13,332 from 2005, a foreign exchange loss of Cdn$20,401, a decrease of Cdn$26,119 from 2005, and a Cdn$12,467 recovery of written off advances receivable compared to Cdn$nil in 2005. The decrease in interest income was due to the maturing of short term guaranteed investment certificates during the year and some cash being used in operations instead of the full amount being rolled over into new investment certificates.
 
Total assets during the period from January 31, 2006 to July 31, 2006 increased from Cdn$11,385,912 to Cdn$15,270,553 primarily due to cash raised from the exercising of stock options and warrants. The total assets have decreased in the quarter ended July 31, 2006 compared to the immediately preceding quarter due to significant exploration activities and this is expected to continue until such time that additional funds are raised.
 
Total assets have risen from Coral Gold’s fiscal year ended January 31, 2005 to Coral Gold’s fiscal year ended January 31, 2006 due to the increase in mineral property expenditures in Coral Gold’s fiscal year ended January 31, 2006. Mineral property expenditures were Cdn$584,880 in fiscal year ended January 31, 2006, representing a


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Cdn$313,028 decrease over fiscal year ended January 31, 2005. Actual net cash raised through the issuance of shares was Cdn$189,194 during the current year compared to Cdn$316,720 in 2005, a decrease of Cdn$127,526. In 2006 there were only options and warrants exercised compared to proceeds from private placements raised in 2005.
 
Coral Gold remains free of long term interest bearing debt and the total liabilities include current liabilities of Cdn$758,766 in 2006 which is Cdn$596,477 higher than 2005. This increase is largely due to a Cdn$525,000 bonus payable to a Director of Coral Gold. Long term liabilities increased from Cdn$318,000 in 2005 to Cdn$1,474,982 in 2006, a difference of Cdn$1,156,982. The entire 2005 long term liability amount was due to a future income tax liability whereas in 2006 the future income tax liability was Cdn$1,448,662, an increase of Cdn$1,130,662. This was a result of the valuation process in regards to the purchase of Marcus and United States tax loss carry-forwards that expired in the current year. Coral Gold has also recorded in 2006 an asset retirement obligation of Cdn$16,000 regarding reclamation of mineral properties and a non-controlling interest amount of Cdn$10,320 which contributed to the increase in total liabilities.
 
Coral Gold continues to have a reclamation bond as an asset with the State of Nevada however it has been lowered from Cdn$518,057 in 2005 to Cdn$260,976 in 2006. Management will continue to assess their asset retirement obligations and the associated liability will be adjusted in the period accordingly.
 
Six months ended July 31, 2006 compared with the six months ended July 31, 2005.
 
Coral Gold’s general and administrative expenses totaled Cdn$655,705 for the six month period ended July 31, 2006 compared with Cdn$329,443 for the six month period ended July 31, 2005, an increase of Cdn$326,262. The overall increase in expenses is primarily due to the same reasons as noted in the quarterly comparison above. Additional items that contributed to the increase in loss were Cdn$50,000 in directors’ fees and an increase of Cdn$23,830 in listing and filing fees. The directors’ fees were a result of the extra time and effort required of the special committee members in addressing our buyout offer. Higher listing and filing fees were a direct result of the private placement that was closed and sustaining fees to the TSX Venture Exchange. There was also a Cdn$36,400 stock based compensation expense that was recorded in the six month period ended July 31, 2005 compared to Cdn$nil in the current period which helped lessen the overall increase in costs.
 
Loss for the period
 
Coral Gold’s loss for the six months ended July 31, 2006 was Cdn$586,683 compared with a loss of Cdn$330,286 for the six months ended July 31, 2005, an increase of Cdn$256,397. The primary reasons for the increase in the loss for the current six month period are the increased administrative expenses of approximately Cdn$326,262 as discussed above offset by an increase in interest revenue of Cdn$65,071. Other items, which consist of a bad debt recovery of Cdn$3,464 and a decrease in foreign exchange losses of Cdn$1,327, helped to reduce the overall increase in loss for the period.
 
Summary of Quarterly Results
 
                                                                 
    2006
 		    2006
 		    2006
 		    2005
 		    2005
 		    2005
 		    2005
 		    2004
 		 
    Jul. 31
 		    Apr. 30
 		    Jan. 31
 		    Oct. 31
 		    Jul. 31
 		    Apr. 30
 		    Jan. 31
 		    Oct. 31
 		 
Period ended
  Q2     Q1     Q4     Q3     Q2     Q1     Q4     Q3  
    Cdn$  
 
Loss for the period
    (363,147 )     (223,536 )     (2,568,935 )     (168,253 )     (149,817 )     (180,467 )     (472,890 )     (195,850 )
Loss per share
    (0.05 )     (0.04 )     (0.51 )     (0.03 )     (0.03 )     (0.04 )     (0.10 )     (0.04 )
Total assets
    15,270,553       15,458,354       11,385,912       10,804,393       10,501,557       10,591,164       10,749,628       10,730,245  
                                                                 
 
The general trend has been an increase in overall expenses because of the increase in exploration activities, the associated support staff, continuing efforts to promote company awareness, and the change in accounting policy for stock-based compensation. Most recently, general and administrative expenses have risen due to the review of the Robertson property and due diligence conducted in response to U.S. Gold’s expectation to commence an offer to purchase all of the outstanding common shares of Coral Gold. This is most apparent in the increase in loss from Q1-April 30, 2006 to Q2-July 31, 2006. The quarter ending January 31, 2006 also rose sharply due to future income tax


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expense which were either not present or much less in the prior quarters. The quarters that stock-based compensation significantly impacts are Q4-January 31, 2005 for Cdn$343,000, Q1-April 30, 2005 for Cdn$36,400 and Q4-2006 for Cdn$1,019,700.
 
Total assets generally trend downward during the periods when there are no funds raised through private placements. Total assets started increasing in Q3-October 31, 2005 due to the purchase of Marcus Corporation with common shares, followed by cash raised from the exercising of stock options and warrants and a private placement in the next two quarters. The most recent quarter has resumed the downward trend due to significant exploration activities and is expected to continue until such time that additional funds are raised.
 
Year ended January 31, 2006 compared to Year ended January 31, 2005.
 
General and administrative expenses totaled Cdn$2,301,983 for the year ended January 31, 2006 compared with Cdn$866,085 for the year ended January 31, 2005, an increase of Cdn$1,435,898. As was the case with the fourth quarter comparison, the primary sources of the increase in costs were stock-based compensation and salaries and benefits which accounted for Cdn$712,567 and Cdn$545,422 of the Cdn$1,435,898 increase respectively. The balance of the increase in general and administrative expenses is due to increases of Cdn$11,208 in investor relations and shareholder information, Cdn$134,006 in legal and accounting, Cdn$30,000 in management fees and Cdn$23,944 in travel. The process of fulfilling SEC filing requirements, the purchase of Marcus and the property review for the Robertson property resulted in legal and accounting costs being higher in 2006. There was also an increase in effort to promote company awareness and investigate financing possibilities which contributed to the increase in costs. The increase in management fees is due to a timing difference as discussed above.
 
For the fiscal year ended January 31, 2006 compared to the fiscal year ended January 31, 2005, there were decreases in consulting fees, director’s fees, listing and filing fees, office and administration and transfer agent fees of Cdn$877, Cdn$2,000, Cdn$2,896, Cdn$11,903 and Cdn$3,346 respectively. The decrease in office and administration costs is due to a switch from contractors to in-house staff to fulfill various administrative functions. Overall staffing levels were higher for the year ended January 31, 2006 in order to handle the increase in activities to administer and promote Coral Gold.
 
Loss for the year ended January 31, 2006 was Cdn$3,067,474 compared with a loss of Cdn$878,819 for the year ended January 31, 2005, for an increase of Cdn$2,188,655. The primary reasons for the increase are increased administrative expenses of Cdn$1,435,898 as discussed above and a future income tax expense of Cdn$778,000 in 2006. A decrease of Cdn$13,332 in interest income was more than offset by increases of foreign exchange gains of Cdn$26,119 and the partial recovery of a previously written down advances receivable of Cdn$12,467.
 
Year ended January 31, 2005 compared to Year ended January 31, 2004.
 
The loss for the year ended January 31, 2005 was Cdn$878,819 compared with a loss of Cdn$753,596 for the year ended January 31, 2004, an increase of Cdn$125,223. The main reason for the increase is the stock-based compensation expense of Cdn$343,533 as discussed above. There were no write downs of investments or mineral properties during Coral Gold’s fiscal year ended January 31, 2005 as there were in its fiscal year ended January 31, 2004. The foreign exchange loss decreased from Cdn$140,623 to Cdn$46,520 in the current year due to the stronger Canadian dollar and the reclamation bond remaining at $406,000. The reclamation bond is converted to Canadian currency using the exchange rate as of the balance sheet date. The change in the exchange rate from January 31, 2004 to January 31, 2005 resulted in a decrease of Cdn$33,662 to the reclamation bond and comprises the majority of the foreign exchange loss for the year.
 
General and administrative expenses totaled Cdn$866,085 for the year ended January 31, 2005 compared with Cdn$640,502 for the year ended January 31, 2004, an increase of Cdn$225,583. As noted earlier this increase is due to a stock-based compensation expense of Cdn$343,533 in the current year as compared to Cdn$nil for Coral Gold’s fiscal year ended January 31, 2004. Due to the increase in mineral property related activities and support staff, consulting fees and salaries and benefits increased by Cdn$12,218 and Cdn$24,492 respectively. Coral Gold’s fiscal year ended January 31, 2005 has benefited from the efforts in its fiscal year ended January 31, 2004 to promote company awareness, establish a web site, and meet filing and listing requirements. The results are decreases in investor relations and shareholder information costs of Cdn$69,142, listing and filings fees of Cdn$23,198, office


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and miscellaneous expenses of Cdn$24,962 and legal and accounting fees of Cdn$6,263. Travel expenditures, directors’ fees, and management fees also experienced a decrease in Coral Gold’s fiscal year ended January 31, 2005.
 
During its fiscal year ended January 31, 2005, Coral Gold incurred a loss of Cdn$878,819 (compared with a loss of Cdn$753,596 for the year ended January 31, 2004) and a net loss per share of Cdn$0.19 (compared with a net loss per share of Cdn$0.20 for the year ended January 31, 2004). The 2005 loss includes interest income of Cdn$33,786, an increase of Cdn$18,602 from 2004 and a foreign exchange loss of Cdn$46,520, a decrease of Cdn$94,103 from 2004. The increase in interest income was due to a short term guaranteed investment certificate ranging from Cdn$1,350,000 to Cdn$2,000,000 being held through the year.
 
Total assets stayed relatively stable from Coral Gold’s 2004 fiscal year ended January 31, 2004 to its fiscal year ended January 31, 2005 due to the increase in mineral property expenditures offsetting the fewer funds being raised from private placements in Coral Gold’s 2005 fiscal year. Mineral property expenditures increased by Cdn$897,908 compared to an increase of Cdn$420,054 in 2004. The net issuance of shares for cash raised Cdn$316,720 during the current year compared to Cdn$2,196,541 in 2004, a decrease of Cdn$1,879,821. This resulted in the working capital being reduced by Cdn$1,200,981 over the course of 2005.
 
Currency Fluctuations
 
Currency fluctuations have had the most impact on current US$ assets and current US$ liabilities. A significant increase in value of the CDN$ compared to the US$ results in a foreign exchange loss when reporting in CDN$. A significant decrease in value of the CDN$ compared to the US$ results in a foreign exchange gain when reporting in CDN$.
 
Inflation
 
Historically, inflation has not affected Coral Gold’s business in the current locations where it is doing business and Coral Gold does not expect it to affect Coral Gold’s operations in the future.
 
Government Regulation
 
Coral Gold is subject to various federal and state laws and regulations including environmental laws and regulations. Environmental regulations impose, among other things, restrictions, liabilities and obligations in connection with the generation, handling, use, storage, transportation, treatment and disposal of hazardous substances and waste and in connection with spills, releases and emissions of various substances to the environment. Environmental regulation also requires that facility sites and other properties associated with Coral Gold’s operations be operated, maintained, abandoned and reclaimed to the satisfaction of applicable regulatory authorities. In addition, certain types of operations, including exploration and development projects and changes to certain existing projects, may require the submission and approval of environmental impact assessments or permit applications. Compliance with environmental regulation can require significant expenditures, including expenditures for clean up costs and damages arising out of contaminated properties and failure to comply with environmental regulations may result in the imposition of fines and penalties. Coral Gold believes that it is in substantial compliance with such laws and regulations. However, such laws and regulations may change in the future in a manner which will increase the burden and cost of compliance.
 
Certain laws and governmental regulations may impose liability on Coral Gold for personal injuries, clean-up costs, environmental damages and property damages, as well as administrative, civil and criminal penalties. Coral Gold maintains limited insurance coverage for sudden and accidental environmental damages, but do not maintain insurance coverage for the full potential liability that could be caused by sudden and accidental environmental damage. Accordingly, Coral Gold may be subject to liability or may be required to cease production from properties in the event of such damages.


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Liquidity and Capital Resources
 
At July 31, 2006, Coral Gold had cash and cash equivalents of Cdn$3,974,850 and working capital of Cdn$3,703,767. During the six month period ended July 31, 2006, Coral Gold raised gross proceeds of Cdn$4,500,000 through a private placement of 1,500,000 shares at a price of Cdn$3.00 per share. Coral Gold also raised proceeds of Cdn$322,688 from the exercising of 123,444 warrants and Cdn$47,475 from the exercising of 11,250 stock options. Coral Gold’s management feels it has sufficient cash on hand at this time to finance limited exploration work on its mineral properties and maintain operations. Mineral exploration and development is capital intensive and in order to maintain its interests and expand on its exploration program, Coral Gold will likely be required to raise new equity capital in the future. Coral Gold invested Cdn$537,376 during the six months ended July 31, 2006 on mineral exploration, of which the entire amount was expended on its Robertson property. There is no assurance that Coral Gold will be successful in raising new equity capital.
 
At this time, Coral Gold has no operating revenues, and does not anticipate any operating revenues until Coral Gold is able to find, acquire, place in production and operate a resource property. Historically, Coral Gold has raised funds through equity financing and the exercise of options and warrants to fund its operations.
 
The market price of natural resources is highly speculative and volatile. Instability in prices may affect the interest in resource properties and the development of and production from such properties. This may adversely affect Coral Gold’s ability to raise capital to acquire and explore resource properties.
 
Investor Relations
 
On October 4, 2006 Coral Gold also renewed a 12 month Investor Relations Agreement with Investor Relations Group Inc., formerly called Investors Relations Services Group John Mullen & Partners (“IRS”), to provide investor relations services in Europe. In consideration for the services rendered, Coral Gold has agreed to pay IRS fees totaling Cdn$24,000 plus expenses.
 
Coral Gold entered into a three (3) month Investor Relations Agreement on August 30, 2006 with Agoracom Investor Relations Corp. (“Agoracom”) to provide online marketing services. In consideration for the services rendered, Coral Gold has agreed to pay Agoracom fees totaling Cdn$9,000 and grant Agoracom the option to purchase 20,000 common shares at a price of Cdn$3.92 per share.
 
Subsequent Events
 
On March 15, 2006 Coral Gold appointed Mr. Lindsay Gorrill as the Company’s Chief Financial Officer.
 
On May 18, 2006 Mr. Robert McEwen also resigned as a director and as the Executive Chairman of Coral Gold.
 
On July 11, 2006, Mr. Louis Wolfin was appointed President of Coral Gold.
 
Equity Grants
 
Subsequent to the period ending July 31, 2006, Coral Gold granted incentive stock options for the purchase of up to 280,000 shares at a price of Cdn$3.92 per share exercisable on or before September 5, 2011 to directors, officers, employees and consultants of Coral Gold.
 
Research and development, patents and licenses, etc.
 
Coral Gold does not engage in any research and development and does not, therefore, have any plans related to research and development or expend any resources on research and development.
 
Trend information
 
Coral Gold is not producing any commercially marketable minerals from its mineral properties and therefore is not aware of any trends related to production, sales, or inventory.


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Off-balance sheet arrangements
 
Coral Gold has no off-balance sheet arrangements.
 
Tabular disclosure of contractual obligations
 
As at October 13, 2006, Coral Gold had the following contractual obligations:
 
                                         
                            More than
 		 
    Total     < 1 year     1-3 years     3-5 years     5 years  
 
Investor relations contract (Cdn$)
    24,000       24,000       —       —       —  
Site restoration liability (Cdn$)
    16,000       —       16,000       —       —  
Total (Cdn$)
    40,000       24,000       16,000       —       —  
 
Glossary
 
The following glossary and metric equivalents have been taken from Coral Gold’s annual report on Form 20-F for its fiscal year ended January 31, 2005, filed on July 31, 2006. This information should be read in conjunction with this section entitled “Coral Gold,” and does not apply to other sections of this prospectus.
 
 
     
GLOSSARY OF TECHNICAL TERMS
Au
  The elemental symbol for gold.
chalcopyrite
  Copper sulphide mineral.
Chert
  A rock resembling flint and consisting essentially of crypto-crystalline quartz or fibrous chalcedony.
cretaceous
  The geologic period extending from 135 million to 65 million years ago.
epidote
  Calcium, aluminum, iron silicate mineral commonly occurring in hydrothermally altered carbonate-bearing rocks.
fault
  A fracture in a rock where there has been displacement of the two sides.
grade
  The concentration of each ore metal in a rock sample, usually given as weight percent. Where extremely low concentrations are involved, the concentration may be given in grams per tonne (g/t or gpt) or ounces per ton (oz/t). The grade of an ore deposit is calculated, often using sophisticated statistical procedures, as an average of the grades of a very large number of samples collected from throughout the deposit.
GSR
  Payment of a percentage of gross mining profits commonly known as gross smelter return royalty.
hydrothermal
  Hot fluids, usually mainly water, in the earth’s crust which may carry metals and other compounds in solution to the site of ore deposition or wall rock alteration.
intrusive
  A rock mass formed below earth’s surface from magma which has intruded into a pre-existing rock mass.
lode claim
  A mining claim on an area containing a known vein or lode.
mineralization
  Usually implies minerals of value occurring in rocks.
net smelter or NSR Royalty
  Payment of a percentage of net mining profits after deducting applicable smelter charges.
placer claim
  A mining claim located upon gravel or ground whose mineral contents are extracted by the use of water, by sluicing, hydraulicking, etc.
porphyry
  Rock type with mixed crystal sizes, i.e. containing larger crystals of one or more minerals
pyrite
  Iron sulphide mineral.
pyrrhotite
  A bronze coloured mineral of metallic lustre that consists of ferrous sulphide and is attracted by a magnet.
quartz
  Silica or SiO2, a common constituent of veins, especially those containing gold and silver mineralization.
silification
  A process of fossilization whereby the original organic components of an organism are replaced by silica, as quartz, chalcedony, or opal.
sulfidation
  In conditioning a flotation pulp, addition of soluble alkaline sulfides in aqueous solution to produce a sulfide-metal layer on an oxidized ore surface.
 


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GLOSSARY OF TECHNICAL TERMS (Cont’d.)
veins
  The mineral deposits that are found filling openings in rocks created by faults or replacing rocks on either side of faults.
 
Terms Relating to Mineral Reserves and Resources
 
The following terms used in this Appendix A entitled “Information Concerning Coral Gold” are Canadian mining terms as defined in accordance with National Instrument 43-101 under the guidelines set out in Canadian Institute of Mining, Metallurgy and Petroleum Standards on Mineral Resources and Mineral Reserves Definitions and Guidelines. The definitions of the terms mineral reserve, proven mineral reserve and probable mineral reserve under Canadian standards are different than the definitions adopted by the SEC and applicable to U.S. companies filing reports with the SEC. It is the view of the SEC’s staff that:
 
  •  A final or bankable feasibility study is required to meet the requirements to designate reserves.
 
  •  A historic three year average price must be used in any reserve or cash flow analysis to designate reserves.
 
  •  To qualify as a reserve, the primary environmental analysis should be submitted to governmental authorities.
 
In addition, while the terms mineral resource, measured mineral resource, indicated mineral resource, and inferred mineral resource are recognized and required to be reported by Canadian regulations, the SEC does not recognize these terms. Information contained in this Appendix A entitled “Information Concerning Coral Gold” concerning descriptions of mineralization, resources and reserves may not be comparable to similar information made public by U.S. companies. Resources classified as indicated mineral resource and inferred mineral resource have an uncertain existence and uncertainty as to their economic and legal feasibility. You should not assume that any part or all of an inferred resource exists, or is economically mineable.
 
     
Mineral reserve
  The economically mineable part of a measured or indicated mineral resource demonstrated by a preliminary feasibility study. The study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A mineral reserve includes diluting materials and allowances for losses that might occur when the material is mined. Mineral reserves are categorized on the basis of the degree of confidence in the estimate of the quantity and grade of the deposit:
Proven mineral reserve
  For the part of a deposit which is being mined, or which is being developed and for which there is a detailed mining plan, the estimated quantity and grade or quality of that part of a measured mineral resource for which the size, configuration and grade or quality and distribution of values are so well established, and for which economic viability has been demonstrated by adequate information on engineering, operating, economic and other relevant factors, so that there is the highest degree of confidence in the estimate.
Probable mineral reserve
  The estimated quantity and grade or quality of that part of an indicated mineral resource for which economic viability has been demonstrated by adequate information on engineering, operating, economic and other relevant factors, at a confidence level which would serve as a basis for decisions on major expenditures. The degree of assurance, although lower than that for proven mineral reserves, is high enough to assume continuity between points of observation.
Mineral resource
  A concentration or occurrence of natural, solid, inorganic or fossilized organic material in or on the Earth’s crust in such form and quantity and of such a grade or quality that it has reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge.

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Measured mineral resource
  Part of a mineral resource for which a quantity grade or quality, density, shape and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity.
Indicated mineral resource
  Part of a mineral resource for which quantity grade or quality, density, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed.
Inferred mineral resource
  Part of a mineral resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.

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Metric Equivalents
 
The following formulas may be used to convert between metric equivalents:
 
             
        Multiply Metric
Metric Measurement
 
U.S. Equivalent
  Figure by:
 
Hectares
  Acres     2.471  
Meters
  Feet (ft.)     3.281  
Kilometers (km)
  Miles     0.621  
Tons
  Tons (2000 pounds)     1.102  
Grams/tonne
  Ounces (troy/tonne)     0.029  


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APPENDIX B — FINANCIAL STATEMENTS OF CORAL GOLD
 
 
CORAL GOLD RESOURCES LTD.
 
Consolidated Financial Statements
January 31, 2006, 2005 and 2004
(In Canadian Dollars)
 


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Shareholders of Coral Gold Resources Ltd.
 
We have audited the accompanying consolidated balance sheet of Coral Gold Resources Ltd. (an exploration stage enterprise) as of January 31, 2006, and the related consolidated statements of operations and deficit, cash flows and mineral properties for the year then ended, and for the period January 22, 1981 (inception) through January 31, 2006. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The consolidated financial statements as of January 31, 2005, and for the period January 22, 1981 (inception) through January 31, 2005, were audited by other auditors whose report dated April 13, 2005 except note 14, which is as of July 21, 2005 expressed an unqualified opinion on those statements. The consolidated financial statements for the period January 22, 1981 (inception) through January 31, 2005 prior to restatement, as described below, included total revenues and net loss of $2,176,079 and $20,510,872, respectively. Our opinion on the consolidated statements of operations and deficit, and cash flows for the period January 22, 1981 (inception) through January 31, 2006, insofar as it relates to amounts for prior periods through January 31, 2005 before restatement is based solely on the report of other auditors.
 
We conducted our audit in accordance with auditing standards generally accepted in the 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 misstatements. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit and the report of other auditors provide a reasonable basis for our opinion.
 
In our opinion, based on our audit and the report of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Coral Gold Resources Ltd., at January 31, 2006, and the results of its operations and its cash flows for the year then ended and the period from January 22, 1981 (inception) through January 31, 2006, in conformity with accounting principles generally accepted in the United States.
 
The consolidated financial statements of Coral Gold Resources Ltd. as of January 31, 2005 and for the years ended January 31, 2005 and 2004 were audited by other auditors who have ceased operations and whose report dated April 13, 2005 except note 14, which is as of July 21, 2005 expressed an unqualified opinion on those statements before the restatement adjustment described in Note 2.
 
As discussed above, the consolidated financial statements of Coral Gold Resources Ltd. as of January 31, 2005 and for the years ended January 31, 2005 and 2004 were audited by other auditors who have ceased operations. As described in Note 2, the Company recorded a prior period adjustment to account for an unrecorded future income tax liability arising from prior years. We audited the adjustment that was applied to restate the future income tax liability and deficit. Our procedures included (a) agreeing the future income tax liability recorded to a computation obtained from management and to underlying tax documents, and (b) testing the mathematical accuracy of the restated future income tax liability and deficit. In our opinion, such adjustment is appropriate and has been properly applied. However, we were not engaged to audit, review, or apply any procedures to the 2005 consolidated financial statements of the Company other than with respect to such adjustment and, accordingly, we do not express an opinion or any other form of assurance on the 2005 consolidated financial statements taken as a whole.
 
/s/ Ernst & Young LLP
Chartered Accountants
 
Vancouver, Canada,
May 31, 2006


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CORAL GOLD RESOURCES LTD.

Consolidated Balance Sheets
January 31, 2006 and 2005
 
                 
    2006     2005  
          Restated
 		 
          (Note 2)  
    (In Canadian Dollars)  
 
ASSETS
Current
               
Cash and cash equivalents
  $ 663,071     $ 1,472,146  
Advances receivable (note 13(a))
    62,358       78,101  
Prepaid expenses
    69,856       12,647  
                 
      795,285       1,562,894  
Investment securities (note 5)
    147,408       129,934  
Loan receivable (note 13(g))
    83,000       50,000  
Equipment (note 6)
    3,634       4,543  
Mineral properties (note 7)
    10,095,609       8,472,255  
Reclamation deposit (note 8)
    260,976       518,057  
                 
    $ 11,385,912     $ 10,737,683  
                 
 
LIABILITIES
Current
               
Accounts payable and accrued liabilities (note 13(h))
  $ 696,810     $ 85,937  
Advances payable to related parties (note 13(b))
    61,956       76,352  
                 
      758,766       162,289  
                 
Site restoration obligation (note 14)
    16,000       —  
                 
Future income tax liability (notes 3 and 15)
    1,448,662       318,000  
                 
Non-controlling interest
    10,320       —  
                 
 
SHAREHOLDERS’ EQUITY
Subscriptions received in advance (note 9)
    60,000       —  
Share subscriptions receivable
    —       (11,945 )
Share capital (note 10)
    31,560,337       30,754,678  
Contributed surplus (note 11)
    1,428,173       343,533  
Deficit
    (23,896,346 )     (20,828,872 )
                 
      9,152,164       10,257,394  
                 
    $ 11,385,912     $ 10,737,683  
                 
 
         
Commitments (note 12)
       
Approved by the Directors:
  /s/ Matthew Wayrynen
 		  /s/ Louis Wolfin
    Matthew Wayrynen   Louis Wolfin
 
The accompanying notes form an integral part of these financial statements.


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CORAL GOLD RESOURCES LTD.
 
Years Ended January 31, 2006, 2005 and 2004
 
                                 
    For the Period
 		                   
    January 22,
 		                   
    1981
 		                   
    (Inception) to
 		                   
    January 31,
 		                   
    2006     2006     2005     2004  
                Restated
 		    Restated
 		 
                (Note 2)     (Note 2)  
    (In Canadian Dollars)  
 
Revenue
                               
Sales
  $ 2,176,079     $ —     $ —     $ —  
Cost of Sales
    (5,383,348 )     —       —       —  
                                 
      (3,207,269 )     —       —       —  
                                 
Expenses
                               
Administrative services
    1,058,598       —       —       —  
Amortization
    2,728       909       1,136       684  
Consulting fees (note 13(c))
    227,528       40,603       41,480       29,262  
Directors fees (note 13(e))
    75,763       12,000       14,000       24,000  
Investor relations and shareholder Information
    1,901,480       85,283       74,075       143,217  
Legal and accounting
    2,599,764       208,314       74,308       80,571  
Listing and filing fees
    137,275       17,532       20,428       43,626  
Management fees (note 13(d))
    354,500       105,000       75,000       90,000  
Office and miscellaneous
    2,036,612       82,007       93,910       118,872  
Salaries and benefits
    921,759       625,351       79,929       55,437  
Stock-based compensation
    1,399,633       1,056,100       343,533       —  
Transfer agent fees
    52,056       9,124       12,470       11,437  
Travel
    931,194       59,760       35,816       43,396  
                                 
      11,698,890       2,301,983       866,085       640,502  
                                 
Loss before the following
    (14,906,159 )     (2,301,983 )     (866,085 )     (640,502 )
Other items
                               
Interest income
    854,290       20,454       33,786       15,184  
Foreign exchange gain (loss)
    (251,286 )     (20,401 )     (46,520 )     (140,623 )
Gain realized on disposition of option on property
    143,552       —       —       —  
Gain on sale of investment
    17,692       —       —       —  
Recovery (writedown) of advances receivable
    (348,323 )     12,467       —       36,320  
Financing costs
    (341,006 )     —       —       —  
Writedown of investment securities
    (809,828 )     —       —       (19,007 )
Loss on equipment disposals
    (32,784 )     —       —       —  
Writedown of equipment
    (16,335 )     —       —       —  
Writedown of mineral properties
    (7,110,148 )     —       —       (4,968 )
                                 
Loss for the year before future income taxes and non-controlling interest (balance carried forward)
  $ (22,800,335 )   $ (2,289,463 )   $ (878,819 )   $ (753,596 )
Loss for the year before future income taxes and non-controlling interest (balance carried forward)
  $ (22,800,335 )   $ (2,289,463 )   $ (878,819 )   $ (753,596 )
Future income tax expense (note 15)
    1,096,000       778,000       —       —  
Non-controlling interest loss
    11       11       —       —  
                                 
Loss for the period
  $ (23,896,346 )     (3,067,474 )     (878,819 )     (753,596 )
                                 
Deficit, beginning of the period
            (20,828,872 )     (19,950,053 )     (19,196,457 )
                                 
Deficit, end of the period
          $ (23,896,346 )   $ (20,828,872 )   $ (19,950,053 )
                                 
Basic and diluted:
                               
Loss per share
          $ (0.64 )   $ (0.19 )   $ (0.20 )
                                 
Weighted average number of common shares outstanding
            4,789,881       4,629,892       3,686,398  
                                 


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CORAL GOLD RESOURCES LTD.
 
Years Ended January 31, 2006, 2005 and 2004
 
                                 
    For the Period
 		                   
    January 22,
 		                   
    1981
 		                   
    (Inception) to
 		                   
    January 31,
 		                   
    2006     2006     2005     2004  
                Restated
 		       
                (Note 2)        
    (In Canadian Dollars)  
 
Cash flows from (used in) operating activities
                               
Loss for the period
  $ (23,896,346 )   $ (3,067,474 )   $ (878,819 )   $ (753,596 )
Adjustments for items not involving cash:
                               
— amortization
    2,728       909       1,136       684  
— writedown of equipment
    16,335       —       —       —  
— stock based compensation
    1,399,633       1,056,100       343,533       —  
— non-controlling interest
    11       11       —       —  
— future income tax expense
    1,096,000       778,000       —       —  
— writedown of investment securities
    809,828       —       —       19,007  
— writedown of mineral properties
    7,110,148       —       —       4,968  
— writedown of advances receivable
    348,323       12,467       —       (36,320 )
— loss on equipment disposals
    32,784       —       —       —  
— gain on sales of investments
    (17,692 )     —       —       —  
— gain realized on disposition of option on property
    (143,552 )     —       —       —  
Change in non-cash working capital:
                               
— (increase) decrease in advances receivable
    (410,681 )     3,276       (21,556 )     (19,258 )
— (increase) decrease prepaid expenses
    (69,856 )     (57,209 )     (1,671 )     (10,976 )
— investment securities
    (119,174 )     —       —       —  
— increase (decrease) in accounts payable and accrued liabilities
    696,810       610,873       7,590       (152,419 )
— (decrease) increase in advances payable
    61,956       (14,396 )     (6,397 )     (73,985 )
                                 
      (13,082,745 )     (677,443 )     (556,184 )     (1,021,895 )
                                 
Cash flows from (used in) investing activities
                               
Mineral properties acquisition and exploration expenditures incurred
    (16,023,742 )     (584,880 )     (897,908 )     (420,054 )
Acquisition of Marcus Corporation
    (14,498 )     (14,498 )     —       —  
Proceeds on sale of equipment
    92,732       —       —       —  
Loan receivable
    (83,000 )     (33,000 )     (50,000 )     —  
Purchase of equipment
    (145,485 )     —       —       (2,943 )
Purchase of investments
    (939,776 )     (17,474 )     —       —  
Advances receivable recovered
    —       —       —       36,320  
Decrease (increase) in reclamation deposit amounts
    (260,976 )     257,081       33,662       651,433  
                                 
      (17,374,745 )     (392,771 )     (914,246 )     264,756  
                                 
Cash flows from financing activities
                               
Subscriptions received in advance
    60,000       60,000       —       791,720  
Cash from share subscriptions receivable
    —       11,945       58,700       —  
Issuance of shares for cash, net
    31,031,432       189,194       316,720       2,196,541  
                                 
      31,091,432       261,139       375,420       2,988,261  
                                 
Net increase (decrease) in cash and cash equivalents
    633,942       (809,075 )     (1,095,010 )     2,231,122  
Cash and cash equivalents, beginning of year
    29,129       1,472,146       2,567,156       336,034  
                                 
Cash and cash equivalents, end of year
  $ 663,071     $ 663,071     $ 1,472,146     $ 2,567,156  
                                 
 
Supplementary disclosure of cash flow information:
 
                         
Cash Paid during the Year for:
  2006     2005     2004  
 
Interest
  $ 40     $ 145     $ 730  
Income taxes
    —       —       —  
                         


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CORAL GOLD RESOURCES LTD.
 
Years Ended January 31, 2006, 2005 and 2004
 
                                 
                Proceeds of
 		       
    Acquisition
 		    Exploration
 		    Interest
 		       
    Cost     Expenditures     Disposed of     Total  
    (In Canadian Dollars)  
 
Robertson Property (note 7(a) (i) and 7(a)(iii))
                               
Balance, January 31, 2004
  $ 801,956     $ 8,675,800     $ (1,937,625 )   $ 7,540,131  
2005 transactions, net
    —       890,292       —       890,292  
                                 
Balance, January 31, 2005
    801,956       9,566,092       (1,937,625 )     8,430,423  
2006 transactions, net
    —       1,623,354       —       1,623,354  
                                 
Balance, January 31, 2006
  $ 801,956     $ 11,189,446     $ (1,937,625 )   $ 10,053,777  
                                 
Ruf and Norma Sass Properties (note 7(a)(ii))
                               
Balance, January 31, 2004
  $ —     $ 73,514     $ (39,301 )   $ 34,213  
2005 transactions, net
    —       7,616       —       7,616  
                                 
Balance, January 31, 2005
    —       81,130       (39,301 )     41,829  
2006 transactions, net
    —       —       —       —  
                                 
Balance, January 31, 2006
  $ —     $ 81,130     $ (39,301 )   $ 41,829  
                                 
Eagle Property (note 7(b))
                               
Balance, January 31, 2004, 2005 and 2006
  $ 1     $ —     $ —     $ 1  
                                 
Ludlow Property (note 7(c))
                               
Balance, January 31, 2004, 2005 and 2006
  $ 1     $ —     $ —     $ 1  
                                 
JDN Property (note 7(d))
                               
Balance, January 31, 2004, 2005 and 2006
  $ 1     $ —     $ —     $ 1  
                                 
Total Properties
  $ 801,959     $ 11,270,576     $ (1,976,926 )   $ 10,095,609  
                                 


B-7

Table of Contents

CORAL GOLD RESOURCES LTD.
 
Years Ended January 31, 2006, 2005 and 2004
(In Canadian Dollars)
 
1.   Nature of Business and Going Concern
 
These consolidated financial statements have been prepared on a going-concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business in the foreseeable future. The Company is in the process of exploring its mineral interests and has not yet determined whether these properties contain ore reserves that are economically recoverable. The continued operations of the Company and the recoverability of mineral property costs is dependent upon the discovery of economically recoverable mineral reserves, the ability of the Company to obtain necessary financing to complete the development and upon future profitable production. Management’s plan in this regard is to raise equity financing as required.
 
2.   Prior Period Adjustment
 
During the year the Company recorded a prior period adjustment to account for an unrecorded future income tax liability arising from prior years. The effect of the restatement is that future income tax liability and deficit increased by $318,000 at January 31, 2005. The unrecorded future income tax liability pertained to periods prior to February 1, 2003, and as a result, the deficit, beginning of the period as disclosed in the consolidated statements of operations and deficit for the years ended January 31, 2005 and 2004 also increased by $318,000. The unrecorded future income tax liability did not change the Company’s loss for the period for either of the years ended January 31, 2005 or 2004.
 
3.   Marcus Corporation Acquisition
 
During the year ended January 31, 2006, the Company completed the following acquisition which was accounted for by the purchase method with effect from the date of acquisition.
 
On September 15, 2005, the Company acquired 98.49% of the issued and outstanding capital of Marcus Corporation (“Marcus”). The Company acquired the shares at a total cost, including costs of acquisition of $15,992, of $660,997. Consideration for the acquisition was paid through the issuance of common shares of the Company totalling 347,964, and 173,975 common share purchase warrants. The common shares were valued at $1.52 per share. The warrants were valued at $116,100 using the Black-Scholes option pricing model. The consideration has been allocated to identifiable assets acquired and liabilities assumed based on their estimated fair values with the excess consideration recorded to goodwill, as follows:
 
         
Cash
  $ 1,494  
Mineral Properties
    1,022,231  
Future Income taxes
    (352,662 )
Non-controlling interest
    (10,066 )
         
    $ 660,997  
         
 
4.   Significant Accounting Policies
 
  (a)   Basis of Consolidation
 
These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Coral Resources, Inc. and Coral Energy Corporation of California and its 98.49% owned subsidiary Marcus. Significant inter-company accounts and transactions have been eliminated.
 
These consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”), which are in conformity with United States generally accepted


B-8

Table of Contents

 
CORAL GOLD RESOURCES LTD.
 
Notes to Consolidated Financial Statements — (Continued)

accounting principles (“US GAAP”), except as described in note 18 to these consolidated financial statements. All figures are in Canadian dollars unless otherwise stated.
 
  (b)   Mineral Properties
 
The Company is in the exploration stage and defers all expenditures related to its mineral properties until such time as the properties are put into commercial production, sold or abandoned. Under this method, all amounts shown as mineral properties represent costs incurred to date less amounts amortized and/or written off and do not necessarily represent present or future values.
 
If the properties are put into commercial production, the expenditures will be depleted based upon the proven and probable reserves available. If the properties are sold or abandoned, the expenditures will be charged to operations. The Company does not accrue the estimated future costs, such as land taxes, of maintaining in good standing its mineral properties.
 
The carrying values of mineral interests, on a property-by-property basis, will be reviewed by management at least annually to determine if they have become impaired. If impairment is deemed to exist, the mineral property will be written down to its fair value. The ultimate recoverability of the amounts capitalized for the mineral properties is dependent upon the delineation of economically recoverable ore reserves, the Company’s ability to obtain the necessary financing to complete their development and realize profitable production or proceeds from the disposition thereof. Management’s estimates of recoverability of the Company’s investment in various projects have been based on current conditions. However, it is reasonably possible that changes could occur in the near term which could adversely affect management’s estimates and may result in future writedowns of capitalized property carrying values.
 
  (c)   Investment Securities
 
The investments in Mill Bay Ventures Inc. (formerly First International Metals Corp.) and Levon Resources Ltd. are carried at cost less writedowns determined to be other than temporary. They will be written down to their net realizable value if and when it has been determined that an other than temporary impairment to their value has occurred.
 
  (d)   Fair Value of Financial Instruments
 
The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash and cash equivalents, advances receivable, share subscriptions receivable, accounts payable and accrued liabilities and advances payable to related parties. Fair values were assumed to approximate carrying values for these financial instruments, except where noted, since they are short term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand. Management is of the opinion that the Company is not exposed to significant interest, credit or currency risks arising from these financial instruments.
 
At January 31, 2006 and 2005, the Company had approximately $nil and $nil, respectively, in cash balances at financial institutions which were in excess of the insured limits. Therefore, the company is not exposed to significant concentrations of credit risk.
 
  (e)   Foreign Currency Translation
 
Assets and liabilities denominated in foreign currencies are translated into Canadian dollars at exchange rates in effect at the balance sheet date for monetary items and at exchange rates prevailing at the transaction dates for non-monetary items. Revenues and expenses are translated at the average exchange rates prevailing during the year except for amortization, which is translated at historical exchange rates. Gains and losses on translation is included as income (loss) for the year.


B-9

Table of Contents

 
CORAL GOLD RESOURCES LTD.
 
Notes to Consolidated Financial Statements — (Continued)

  (f)   Use of Estimates

 
The preparation of financial statements in conformity with Canadian GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the period. Actual results may differ from those estimates.
 
  (g)   Impairment of Long-term Assets
 
The Company re-evaluates the recoverability of long-term assets, including loan receivable, equipment, mineral properties, and investment securities, based upon estimates using factors such as future asset utilization, business climate and future undiscounted cash flows expected to result from the use of the related assets or be realized on sale. The Company’s policy is to write-down assets to their fair value in the period when it is determined that the carrying amount of the asset is not likely to be recovered.
 
  (h)   Equipment
 
Equipment is recorded at historical cost less accumulated amortization. Amortization is charged to earnings in amounts sufficient to allocate the costs over their estimated useful lives on a straight-line basis using the following annual rates pro-rated from initial utilization:
 
         
Computer hardware
    20 %
Equipment
    20 %
 
  (i)   Cash and Cash Equivalents
 
Cash and cash equivalents include cash on deposit with banks, and highly liquid short-term interest bearing securities with maturities at the purchase date of three months or less.
 
                 
    2006     2005  
 
Cash
  $ 663,071     $ 122,146  
Cash equivalents
    —       1,350,000  
                 
    $ 663,071     $ 1,472,146  
                 
 
  (j)   Loss per Share
 
Diluted loss per share amounts are calculated giving effect to the potential dilution that would occur if securities or other contracts to issue common shares were exercised or converted to common shares. The treasury stock method is used to determine the dilutive effect of stock options and other dilutive instruments. The treasury stock method assumes that proceeds received from the exercise of stock options and warrants are used to repurchase common shares at the prevailing market rate.
 
Basic loss per share is computed using the weighted average number of common shares outstanding during the year.
 
  (k)   Income Taxes
 
Income taxes are accounted for using the liability method pursuant to Section 3465, Income Taxes, of The Handbook of the Canadian Institute of Chartered Accountants. Future taxes are recognized for the tax consequences of “temporary differences” by applying enacted or substantively enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. The effect on future taxes for a change in tax rates is recognized in income in the period that includes the


B-10

Table of Contents

 
CORAL GOLD RESOURCES LTD.
 
Notes to Consolidated Financial Statements — (Continued)

date of enactment or substantive enactment. In addition, Section 3465 requires the recognition of future tax benefits to the extent that realization of such benefits is more likely than not.
 
  (l)   Asset Retirement Obligation
 
Asset retirement obligations are accounted for pursuant to Section 3110, of the Handbook of the Canadian Institute of Chartered Accountants. It requires the recognition of the fair value of a liability for asset retirement obligations in the year in which such a liability is incurred; when a reasonable estimate can be made. At such time the present value of the asset retirement obligation (referred to as “site restoration obligations”) are to be added to the capitalized cost of the mineral property, and recorded as a liability at the equivalent amount. In periods subsequent to initial measurement, the asset retirement obligation is adjusted for both the passage of time and revisions to the original estimate. The site restoration obligations included in the capitalized cost of the property, as adjusted from time to time, are to be amortized to operations on the unit-of-production basis together with total mineral property costs capitalized.
 
  (m)   Stock-Based Compensation
 
The Company adopted Section 3870 (“CICA 3870”), Stock-based compensation and other stock-based payments, of the Handbook of the Canadian Institute of Chartered Accountants, which establishes standards for the recognition, measurement and disclosure of stock-based compensation and other stock-based payments made in exchange for goods and services. Section 3870 sets out a fair value based method of accounting that is required for all stock-based transactions. Under the recommendation, direct awards of stock granted to employees and directors are recorded at fair value on the date of grant and the associated expense is amortized over the vesting period.
 
5.   Investment Securities
 
                 
    2006     2005  
 
Levon Resources Ltd.
               
967,571 common shares (2005 — 967,571)
  $ 77,117     $ 77,117  
Mill Bay Ventures Inc.
(formerly First International Metals Corp.)
               
518,731 common shares (2005 — 324,565)
    70,291       52,817  
                 
    $ 147,408     $ 129,934  
                 
 
Levon Resources Ltd. (“Levon”) and Mill Bay Ventures Inc. (“Mill Bay”) are related to the Company by way of common management and directors. The fair market value of the Mill Bay and Levon common shares as at January 31, 2006 were $46,688 (2005 — $38,948), and $91,910 (2005 — $96,757), respectively.
 
6.   Equipment
 
                         
    2006  
          Accumulated
 		    Net Book
 		 
    Cost     Amortization     Value  
 
Computer hardware
  $ 5,926     $ 2,536     $ 3,390  
Equipment
    436       192       244  
                         
    $ 6,362     $ 2,728     $ 3,634  
                         
 


B-11

Table of Contents

CORAL GOLD RESOURCES LTD.
 
Notes to Consolidated Financial Statements — (Continued)

                         
    2005  
          Accumulated
 		    Net Book
 		 
    Cost     Amortization     Value  
 
Computer hardware
  $ 5,926     $ 1,688     $ 4,238  
Equipment
    436       131       305  
                         
    $ 6,362     $ 1,819     $ 4,543  
                         

 
7.   Mineral Properties
 
  (a)   Robertson Property
 
The Company has certain interests in 724 patented and unpatented load mining claims located in the Bullion Mining District, Lander County, Nevada, subject to NSR’s ranging from 4% to 10%, and which certain leases provide for advance royalty payments. The Robertson group is recorded under three separate claims groups known as the Core Claims (100% owned), the Carve-out Claims (39% carried interest) and the Norma Sass/Ruff Claims (66.67% owned).
 
(i)  Carve-out Claims — 39% carried interest
 
By an Agreement dated May 16, 1996, the Company granted Amax Gold Exploration Inc. (“Amax”) an option to purchase a 51% interest in 200 claims. Amax exercised the option by paying twice the amount the Company had incurred in exploration expenditures on the property. Under the terms of the Agreement, the Company could elect, and did elect, to have the 49% of its interest reverted to a 39% carried interest.
 
The Carve-out Claims Option Agreement was assignable by the Company or Amax. On September 13, 1995, the Company optioned 50% of its interest in 54 claims (subsequent known as the Ruff/Sass Claims — see Note 7(a)(ii)) to Levon Resources Ltd., and on March 24, 1997 Amax assigned it’s Option to Placer Dome Inc. (“Placer”). On July 11, 1997, Placer exercised its right to acquire a 51% interest in the claims by making a payment to the Company of US$615,359. The claims, that Placer had acquired a 51% interest in, excluded the Ruff/Sass claims as these were released back to the Company by Placer. Pursuant to the terms under the option agreement, the parties entered into an Exploration and Mining Venture Agreement dated July 11, 1997, and the Company exercised its right to have Placer advance the Company’s share of venture costs from inception of the Venture to commencement of commercial production in exchange for an additional undivided 10% interest in the properties.
 
(ii)  Ruff/Norma Sass — 66.67% owned
 
By an amended Option Agreement dated September 13, 1995, the Company had granted Levon Resources Ltd. (“Levon”), a company related by common directors, an option to purchase a 50% interest in 54 claims known as the Ruff/Sass Claims. On December 31, 2002, the Agreement was amended whereby Levon earned a 33.33% interest in the claims by the issuance to the Company of 300,000 common shares in Levon (received during previous fiscal years) and incurring $350,294 in exploration on the Property (incurred during prior years).
 
A third party holds a 3% net smelter returns royalty on the production from some of these mining claims, up to a limit of USD$1,250,000.
 
By an Option Agreement dated December 4, 2002 the Company granted Goldfranchise Corporation (“Goldfranchise”) an Option to acquire a 331/3% interest in the Ruff/Norma Sass claims. In order to earn the interest, Goldfranchise must:
 
a) Pay to Coral US$38,391.50;
 
  b)  Incur minimum expenditures on the property in the amount of US $300,000, of which $100,000 on or before December 4, 2003, and the balance of $200,000 on or before December 4, 2004; and
 
  c)  Pay to Coral 331/3% of all land fees, taxes, advance royalties required to keep the claims in good standing.

B-12

Table of Contents

 
CORAL GOLD RESOURCES LTD.
 
Notes to Consolidated Financial Statements — (Continued)

 
This Option Agreement with Goldfranchise has been terminated due Goldfranchise not fulfilling their obligations under the Agreement.
 
By way of an agreement dated December 30, 2004, the Company and Levon have assigned, sub-leased and granted a mining lease to a subsidiary of Agnico-Eagle Mines Ltd. (“AGE”) on the following properties: the Blue Nugget; the Blue Nugget #1 to #8; the Lander Ranch; the Lander Ranch #1 to the Lander Ranch #25 and the Lander Ranch Extension; the Blue Jay; the T and S; the Norma and the Norma #1 to the Norma #23; the Sass and the Sass #1 to the Sass #10; the DM #1 to the DM #8; the BA #1 to the BA #12; the PC #1 to the PC #20; and the PM #1 to the PM #12, in consideration for the following minimum advance royalty payments (in US dollars) and minimum work commitments:
 
                     
          Advance
 		     
          Royalty
 		     
Date
        (US$)    
Minimum Work
 
Execution of the Agreement
    December 30, 2004     $ 25,000     —
First Anniversary
    December 30, 2005     $ 30,000     13,000 ft of drilling
Second Anniversary
    December 30, 2006     $ 50,000     15,000 ft of drilling
Third Anniversary
    December 30, 2007     $ 75,000     17,000 ft of drilling
Fourth Anniversary
    December 30, 2008     $ 75,000     —
Fifth Anniversary
    December 30, 2009     $ 150,000     —
 
A minimum of 13,000 ft of exploration drilling was completed as part of the first year’s minimum work commitment. The initial advance royalty payment has been paid and received and the first anniversary payment has been received as well. Upon making the second and third year’s anniversary advance royalty payments, AGE will be obligated to complete the associated minimum work commitment for that year. After the third anniversary, or at anytime after the completion of at least 45,000 ft of drilling, AGE will have earned a 51% interest in the Norma Sass Property.
 
AGE, at its option, may provide the funds to acquire the leased claims from the underlying owners of such claims for the benefit of AGE, the Company and Levon, to earn an additional 24% interest (bringing AGE’s total interest to 75%). AGE will then have the option of acquiring the remaining 25% interest by producing a positive feasibility study and making a positive production decision.
 
At the fifth anniversary and every year thereafter until production occurs, the advance royalty payment will be $150,000 per annum. All advance royalty payments will be credited towards AGE’s payment of a royalty of 2.5% net smelter returns from production to the Company and Levon. AGE has reserved the right to purchase 1% of this net smelter returns royalty (to reduce the royalty to the Company and Levon to 1.5%) for a cash payment of USD$1.0 million. The Company and Levon have agreed to share in any benefits from the agreement with AGE in proportion to their current respective interests in the Norma Sass Property.
 
(iii)  Core claims — 100% owned
 
By an Option Agreement dated January 31, 1999 the Company granted Placer an option to acquire up to a 70% interest in the entire Robertson Property’s 724 claims. Under the terms of the Option, Placer guaranteed a Reclamation Bond required to be posted by the Company for previous exploration work on the Core Claims. The Option Agreement terminated on December 31, 1999. The Company was obligated under the terms of the Option to replace Placer’s guarantee. Subsequent to January 31, 2004, the Company replaced the guarantee by posting a cash bond (note 8).
 
(iv)  Marcus Corporation
 
By way of an agreement dated September 15, 2005, the Company has purchased 1,391,860 shares of Marcus Corporation (“Marcus”), representing 98.49% of the total issued shares of Marcus. Marcus owns the Marcus mining


B-13

Table of Contents

 
CORAL GOLD RESOURCES LTD.
 
Notes to Consolidated Financial Statements — (Continued)

claims, consisting of 39 unpatented lode claims and two Placer claims, and which comprise a portion of the Company’s Robertson Property. By acquiring Marcus, the Company will control Marcus, and own an indirect interest in the mining lease between the Company and Marcus, which provides for an annual advanced royalty to Marcus of US$12,000, and a 5% net smelter returns royalty up to a maximum payment of US$2.5 million. The mining lease with Marcus expires in 2007.
 
  (b)   Eagle Property
 
The Company holds a 50% interest in 45 lode mineral claims located at Corral Canyon in Lander County, Nevada, USA. During the year ended January 31, 2001, the Company decided to defer exploration on the property and to reduce the carrying value to a nominal amount.
 
  (c)   Ludlow Property
 
The Company owns a mineral property consisting of approximately 128 acres in the San Bernadino County, California, USA. During the year ended January 31, 2001, the Company decided to defer exploration on the property and to reduce the carrying value to a nominal amount.
 
  (d)   JDN Property
 
The Company holds a 50% interest in 34 lode mineral claims located in Lander County, Nevada USA. The JDN claims are located approximately three miles north of the Robertson Property. During the year ended January 31, 2001, the Company decided to defer exploration on the property and to reduce the carrying value to a nominal amount.
 
Ownership in mineral properties involves certain inherent risks due to the difficulties in determining the validity of certain claims, as well as the potential for problems arising from the frequently ambiguous conveyancing history characteristics of many mineral interests. The Company has investigated ownership of its mineral interests and, to the best of its knowledge, ownership of its properties is in good standing.
 
8.   Reclamation Deposit
 
Under the laws of the State of Nevada, the Company is required to have a reclamation deposit which covers the cost to reclaim the ground disturbed. The Company’s obligation at January 31, 1999 had been assumed by Placer as part of the Exploration and Development Option Agreement [note 7(a)]. As the Agreement was terminated on December 31, 1999, the Company was required to post its own security to guarantee performance under the Reclamation Bond.
 
During the year, a revised Reclamation Plan for the purposes of reducing the performance bond was approved by the Bureau of Land Management (the “Bureau”), reducing the required deposit to $260,976 (US$228,205) (2005 — $518,057).
 
Coral Resources Inc., as principal, placed the funds in trust with a fully secured standby letter of credit lodged as collateral in support of the bond.
 
9.   Subscriptions Received in Advance
 
During the year, the Company received $60,000 (2005 — $nil) towards private placements of 20,000 shares (2005 — nil). These shares were issued subsequent to year-end as part of the private placement that closed on March 4, 2006 (note 17(a)).
 
10.   Share Capital
 
(a) Authorized: Unlimited common shares without par value.


B-14

Table of Contents

 
CORAL GOLD RESOURCES LTD.
 
Notes to Consolidated Financial Statements — (Continued)

(b) Issued:
 
                         
    Shares     Amount     Deficit  
 
Balance, January 31, 2003
    3,470,993     $ 27,379,052     $ (19,196,457 )
2004 share issuances for cash:
                       
Private placements
    721,882       1,897,068          
Exercise of warrants
    149,310       357,368          
Exercise of stock options
    19,500       48,750          
Share issuance costs
    —       (36,000 )        
2004 loss
                    (753,596 )
                         
Balance, January 31, 2004
    4,361,685       29,646,238       (19,950,053 )
2005 share issuances for cash:
                       
Private placements
    255,220       1,039,464          
Exercise of warrants
    1,600       4,960          
Exercise of stock options
    30,400       76,000          
Share issuance costs
            (11,984 )        
2005 loss
                    (878,819 )
                         
Balance, January 31, 2005
    4,648,905       30,754,678       (20,828,872 )
2006 share issuances for cash:
                       
Exercise of warrants
    9,397       25,944          
Exercise of stock options
    102,500       174,250          
Shares returned to treasury
    (2,500 )     (11,000 )        
Fair value of stock options exercised
    —       87,560          
Shares issued for Marcus Corp purchase
    347,964       528,905          
2006 loss
                    (3,067,474 )
                         
Balance, January 31, 2006
    5,106,266     $ 31,560,337     $ (23,896,346 )
                         
 
(c) At January 31, 2006, the following director, officer and employee stock options are outstanding and exercisable enabling the holders to acquire additional common shares as follows:
 
                 
Number of Shares
 
Exercise Price
 
Expiry Date
 
  300,400     $ 1.70     December 1, 2009
  32,500     $ 1.70     April 12, 2010
  365,000     $ 3.55     December 12, 2010


B-15

Table of Contents

 
CORAL GOLD RESOURCES LTD.
 
Notes to Consolidated Financial Statements — (Continued)

The Company has granted founders, directors, officers and certain employees stock options. Stock option activity is summarized as follows:
 
                 
          Weighted
 		 
          Average
 		 
    Number
 		    Exercise
 		 
    of Shares     Price  
 
Balance outstanding, January 31, 2003
    202,750     $ 2.50  
2004 — Cancelled
    (10,000 )     2.50  
2004 — Exercised
    (19,500 )     2.50  
                 
Balance outstanding, January 31, 2004
    173,250       2.50  
2005 — Granted
    412,900       1.70  
2005 — Cancelled
    (20,250 )     1.71  
2005 — Exercised
    (30,400 )     2.50  
                 
Balance outstanding, January 31, 2005
    535,500       1.91  
2006 — Granted
    407,500       3.36  
2006 — Expired
    (142,600 )     2.50  
2006 — Exercised
    (102,500 )     1.70  
                 
Balance outstanding, January 31, 2006
    697,900     $ 2.67  
                 
 
The Company in fiscal 2005 adopted a formal stock option plan which provides for the granting of options to directors, officers, employees and consultants for a maximum of 706,000 shares (representing approximately 20% of the issued share capital of the Company as at the date of approval of the Plan by the Board). The Company recorded compensation expense of $1,056,100 (2005 — $343,533) with respect to stock options granted. The weighted average fair value of the options granted as at January 31, 2006 was $2.59 per share (2005 — $0.83 per share).
 
The fair value of options granted was estimated at the date of granting using the Black-Scholes option pricing model with the following assumptions: risk-free interest rates of 4.09% and 4.42%, dividend yield of 0.0%, volatility factors of 104.23% and 101.41, and a life of 5 years.
 
The Black-Scholes valuation model was developed for use in estimating the fair value of traded options, which are fully transferable and freely traded. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility, changes in the subjective input assumptions can materially affect the fair value estimate.
 
(d) At January 31, 2006, the Company has outstanding share purchase warrants enabling the holders to acquire additional common shares as follows. Subsequent to year-end, the warrants with expiry dates of February 16 and 17, 2006 expired without being exercised:
 
                 
Number of Shares
 
Exercise Price
 
Expiry Date
 
  104,380     $ 4.80     February 16, 2006
  148,340     $ 5.50     February 17, 2006
  391,900     $ 3.10     October 12, 2006
  200,000     $ 3.60     November 17, 2006
  100,000     $ 3.90     December 19, 2006
  171,078     $ 2.00     September 15, 2007
                 
  1,115,698              
                 


B-16

Table of Contents

 
CORAL GOLD RESOURCES LTD.
 
Notes to Consolidated Financial Statements — (Continued)

11.   Contributed Surplus

 
                 
    2006     2005  
 
Balance, beginning of the year
  $ 343,533     $ —  
Stock-based compensation expense
    1,056,100       343,533  
Warrants issued on acquisition of Marcus Corporation
    116,100       —  
Fair value of stock options exercised
    (87,560 )     —  
                 
    $ 1,428,173     $ 343,533  
                 
 
12.   Commitments
 
(a) The Company entered into a new cost-sharing agreement during 2005 to reimburse a related party for a variable percentage (2005 fixed percentage — 20%; 2004 fixed percentage — 20%) of its overhead expenses, to reimburse 100% of its out-of-pocket expenses incurred on behalf of the company, and to pay a percentage fee based on the total overhead and corporate expenses referred to above. The agreement may be terminated with one-month notice by either party.
 
A total of $166,203 (2005 — $135,140; 2004 — $107,393) was charged to operations in relation to the cost sharing agreement.
 
(b) The Company entered into a 12 month Investor Relations Agreement on July 1, 2005 with Investors Relations Services Group John Mullen & Partners (“IRS”) to provide investor relations services in Europe. In consideration for the services rendered, the Company has agreed to pay IRS fees totalling $18,000 plus expenses (2005 — $nil; 2004 — $nil).
 
13.   Related Party Transactions
 
Related party transactions not disclosed elsewhere in the financial statements are as follows:
 
(a) Included in advances receivable are amounts due from related parties, as well as third party receivables. These amounts due from related parties include $28,003 (2005 — $28,003) due from a joint venture with common management and common directors; $7,850 (2005 — $Nil) from a company controlled by a Director; $1,430 (2005 — $Nil) from a director of the Company and $13,124 (2006: $89,992 less an allowance for bad debt of $76,868; 2005: $122,048 less an allowance for bad debt of $90,621) with two companies with common management and common directors.
 
(b) Advances payable include $31,620 (2005 — $31,333) due to Directors in regards to past directors’ fees; $26,922 (2005 — $10,695) due to a company with common management in regards to the cost sharing agreement for overhead expenses; $nil (2005 — $32,540) to a company with common management and directors and $3,414 (2005 — $1,784) to a company controlled by a Director.
 
(c) Consulting fees of $30,000 (2005 — $30,000; 2004 — $22,500) were paid to a company owned by a director.
 
(d) Management fees of $105,000 (2005 — $75,000; 2004 — $90,000) were paid to a company owned by a director.
 
(e) Directors’ fees of $12,000 (2005 — $14,000; 2004 — $24,000) were paid to directors of the Company.
 
(f) An allowance in the amount of $209,840 (2005 — $209,840; 2004 — $209,840) has been accrued in respect of advances made to a Company with common management.


B-17

Table of Contents

 
CORAL GOLD RESOURCES LTD.
 
Notes to Consolidated Financial Statements — (Continued)

(g) The loan receivable of $83,000 (2005 — $50,000) is due from a subsidiary of a related company with common management that provides drilling services. The amount due is non-interest bearing, unsecured and due on demand.
 
(h) Included in accounts payable and accrued liabilities are bonuses payable to a director of the Company in the amount of $525,000 (2005 — $Nil).
 
These transactions are in the normal course of operations and are measured at the exchange amount, which is the consideration established and agreed to by the related parties, unless otherwise noted.
 
14.   Site Restoration Obligation
 
Management has assessed their site restoration obligations and the associated liability to be recognized in the current period. Management has estimated that the costs would approximate $16,000 (2005 — $nil). Management will continue to assess their site restoration obligations and the associated liability as further information becomes known.
 
15.   Income Taxes
 
The reconciliation of the future income tax recovery (expense) rate to the statutory rate is as follows:
 
                         
    2006     2005     2004  
          Restated
 		    Restated
 		 
          (Note 2)     (Note 2)  
 
Loss before taxes
  $ (2,289,463 )   $ (878,819 )   $ (753,596 )
Income tax rate
    34.75 %     35.62 %     35.62 %
Income tax recovery at the statutory rate
    795,474       313,035       268,431  
Permanent differences
    (354,610 )     (166,879 )     (49,269 )
Expiration of losses
    (1,018,575 )     (158,065 )     (285,593 )
Share issuance costs
    —       4,269       12,823  
Changes in income tax rates
    (95,008 )     (185 )     (498 )
Foreign exchange differences
    86,719       19,125       48,807  
Change in the valuation allowance
    (192,000 )     (11,300 )     5,299  
                         
Net future income tax recovery (expense)
  $ (778,000 )   $ —     $ —  
                         
 
The components of the future income tax assets (liabilities) are as follows:
 
                 
    2006     2005  
          Restated
 		 
          (Note 2)  
 
Future income assets:
               
Non-capital loss carry-forwards
  $ 2,758,000     $ 3,351,000  
Resource interests
    775,000       809,000  
Other
    112,338       141,000  
                 
      3,645,338       4,301,000  
Less: valuation allowance
    (2,181,000 )     (1,989,000 )
                 
Net future income tax asset
  $ 1,464,338     $ 2,312,000  
Future income tax liability:
               
Resource interests
    (2,913,000 )     (2,630,000 )
                 
Net future income tax liability
  $ (1,448,662 )   $ (318,000 )
                 


B-18

Table of Contents

 
CORAL GOLD RESOURCES LTD.
 
Notes to Consolidated Financial Statements — (Continued)

The valuation allowance reflects the Company’s estimate that the tax assets, more likely than not, will not be realized.
 
At January 31, 2006, the Company had, for Canadian tax purposes, operating losses aggregating approximately $3,798,000. These losses are available to reduce taxable incomes earned by the Canadian operations of future years and expire as follows:
 
         
2007
  $ 420,000  
2008
    243,000  
2009
    231,000  
2010
    527,000  
2011
    627,000  
2015
    522,000  
2016
    1,228,000  
         
    $ 3,798,000  
         
 
The net operating losses available to offset revenues of the US operations are approximately US$3,648,000 (2005 — US$4,700,000) and expire at various times through 2017.
 
16.   Segmented Information
 
The Company is involved in mineral exploration and development activities principally in United States. The Company is in the development stage and, accordingly, has no reportable segment revenues or operating results for each of the 2006, 2005 and 2004 fiscal year.
 
                         
    2006  
    Canada     USA     Total  
 
Current assets
  $ 695,738     $ 99,547     $ 795,285  
Investment in securities
    74,833       72,575       147,408  
Loan Receivable
    83,000       —       83,000  
Equipment
    3,634       —       3,634  
Mineral properties
    —       10,095,609       10,095,609  
Reclamation deposit
    —       260,976       260,976  
                         
    $ 857,205     $ 10,528,707     $ 11,385,912  
                         
 
                         
    2005  
    Canada     USA     Total  
 
Current assets
  $ 1,511,905     $ 50,989     $ 1,562,894  
Investment in securities
    57,359       72,575       129,934  
Loan Receivable
    50,000       —       50,000  
Equipment
    4,543       —       4,543  
Mineral properties
    —       8,472,255       8,472,255  
Reclamation deposit
    —       518,057       518,057  
                         
    $ 1,623,807     $ 9,113,876     $ 10,737,683  
                         


B-19

Table of Contents

 
CORAL GOLD RESOURCES LTD.
 
Notes to Consolidated Financial Statements — (Continued)

17.   Subsequent Events

 
(a) The Company closed a non-brokered private placement of 1,500,000 shares at a price of $3.00 per share on March 4, 2006.
 
(b) The Company announced on March 6, 2006 that it has received an offer by U.S. Gold Corporation to acquire all of the Company’s outstanding common shares. Under the proposal, U.S. Gold Corporation would offer 0.63 share of U.S. Gold common stock for each outstanding common share of the Company. To date this transaction has not closed.
 
18.   Differences Between Canadian And United States Generally Accepted Accounting Principles (Canadian GAAP And U.S. GAAP)
 
These consolidated financial statements and the selected financial data have been prepared under Canadian GAAP.
 
For each year of presentation, the modifications necessary in order for these consolidated financial statements to conform to U.S. GAAP have been suitably provided as follows:
 
  (a)   Reconciliation of Consolidated Balance Sheet items:
 
(i)  Reconciliation of Total Assets and Liabilities
 
                 
    2006     2005  
          Restated
 		 
          (Note 2)  
 
Total assets per CDN GAAP
  $ 11,385,912     $ 10,737,683  
Mineral properties (note 18(h))
    (9,057,135 )     (8,472,255 )
Investment securities
    (8,810 )     5,771  
                 
Total assets per US GAAP
  $ 2,319,967     $ 2,271,199  
                 
Total liabilities per US/CDN GAAP
  $ 2,233,748     $ 450,289  
                 
 
(ii)  Reconciliation of Deficit under U.S. GAAP
 
                         
    2006     2005     2004  
          Restated
 		    Restated
 		 
          (Note 2)     (Note 2)  
 
Deficit end of year per CDN GAAP
  $ (23,896,346 )   $ (20,828,872 )   $ (19,950,053 )
Stock compensation expense
    (60,000 )     (60,000 )     (60,000 )
Deferred exploration expenditures, net
    (9,057,135 )     (8,472,255 )     (7,574,347 )
                         
Deficit end of year per US GAAP
  $ (33,013,481 )   $ (29,361,127 )   $ (27,584,400 )
                         


B-20

Table of Contents

 
CORAL GOLD RESOURCES LTD.
 
Notes to Consolidated Financial Statements — (Continued)

  (b)   Reconciliation of Consolidated Statement of Income items:

 
Reconciliation of Net Loss under U.S. GAAP
 
                         
    Year Ended
 		    Year Ended
 		    Year Ended
 		 
    January 31,
 		    January 31,
 		    January 31,
 		 
    2006     2005     2004  
          Restated
 		       
          (Note 2)        
 
Net loss for the year per CDN GAAP
  $ (3,067,474 )   $ (878,819 )   $ (753,596 )
Deferred exploration expenditures
    (584,880 )     (897,908 )     (420,054 )
Writedown of deferred exploration expenditures
    —       —       4,968  
                         
Net loss for the year per U.S. GAAP
  $ (3,652,354 )   $ (1,776,727 )   $ (1,168,682 )
Unrealized gain (loss) on investment securities
    (14,581 )     5,771       —  
                         
Net comprehensive loss for the year per U.S. GAAP
  $ (3,696,935 )   $ (1,770,956 )   $ (1,168,682 )
                         
 
  (c)   Loss Per Share U.S. GAAP
 
                         
    Year Ended
 		    Year Ended
 		    Year Ended
 		 
    January 31,
 		    January 31,
 		    January 31,
 		 
    2006     2005     2004  
 
Loss Per Share
                       
— basic and diluted
  $ (0.76 )   $ (0.38 )   $ (0.32 )
                         
 
  (d)   Comprehensive Income
 
Statement of Financial Accounting Standards No. 130 requires the reporting of comprehensive income in addition to net earnings. Comprehensive income includes net income plus other comprehensive income; specifically, all changes in equity of a company during a period arising from non-owner sources.


B-21

Table of Contents

 
CORAL GOLD RESOURCES LTD.
 
Notes to Consolidated Financial Statements — (Continued)

Under US GAAP, a statement of changes in shareholders’ equity and comprehensive income in the following format would form a part of the annual consolidated financial statements:
 
Consolidated Statement of Changes in Shareholders’ Equity
 
                                                                         
                                              Accumulated
 		       
                                              Other
 		       
                                  Compre-
 		          Compre-
 		    Total
 		 
    Share Capital                 Additional
 		    hensive
 		          hensive
 		    Share-
 		 
    Number of
 		          Share
 		          Paid in
 		    Income
 		          Income
 		    holders’
 		 
    Shares     Amount     Subscriptions     Warrants     Capital     (Loss)     Deficit     (Loss)     Equity  
                                        Restated
 		          Restated  
                                        (Note 2)              
 
Balance forward, January 31, 2003
    3,470,994     $ 27,379,052     $ —     $ —     $ 60,000             $ (26,415,718 )   $ —     $ 1,023,334  
Share subscriptions
    —       —       791,720       —       —       —       —       —       791,720  
Issuance of shares (see Note 10(b))
    890,691       2,267,186       —       —       —       —       —       —       2,267,186  
Components of comprehensive income:
                                                                       
— net income (loss)
    —       —       —       —       —       (1,168,682 )     (1,168,682 )     —       (1,168,682 )
                                                                         
                                            $ (1,168,682 )                        
                                                                         
Balance, January 31, 2004
    4,361,685     $ 29,646,238     $ 791,720     $ —     $ 60,000             $ (27,584,400 )   $ —     $ 2,913,558  
                                                                         
Balance forward, January 31, 2004
    4,361,685     $ 29,646,238     $ 791,720     $ —     $ 60,000             $ (27,584,400 )   $ —     $ 2,913,558  
Share subscriptions
    —       —       (791,720 )     —       —       —       —       —       (791,720 )
Issuance of shares (see Note 10(b))
    287,220       1,108,440       (11,945 )     —       —       —       —       —       1,096,495  
Stock-based compensation expense
    —       —       —       —       343,533       —       —       —       343,533  
Components of comprehensive income:
                                                                       
— net income (loss)
    —       —       —       —       —       (1,776,727 )     (1,776,727 )     —       (1,776,727 )
— change in unrealized gain (loss) of marketable securities
    —       —       —       —       —       5,771       —       5,771       5,771  
                                                                         
                                            $ (1,770,956 )                        
                                                                         
Balance, January 31, 2005
    4,648,905     $ 30,754,678     $ (11,945 )   $ —     $ 403,533             $ (29,361,127 )   $ 5,771     $ 1,790,910  
Share subscriptions
    —       —       71,945       —       —       —       —       —       71,945  
Issuance of shares (see Note 10(b))
    457,361       805,659       —       116,100       —       —       —       —       921,759  
Stock-based compensation expense
    —       —       —       —       1,056,100       —       —       —       1,056,100  
Fair value of stock option exercises
    —       —       —       —       (87,560 )     —       —       —       (87,560 )
Components of Comprehensive income:
                                                                       
— net income (loss)
    —       —       —       —       —       (3,652,354 )     (3,652,354 )     —       (3,652,354 )
— change in unrealized gain (loss) of marketable securities
    —       —       —       —       —       (14,581 )     —       (14,581 )     (14,581 )
                                                                         
                                            $ (3,696,935 )                        
                                                                         
Balance, January 31, 2006
    5,106,266     $ 31,560,337     $ 60,000     $ 116,100     $ 1,372,073             $ (33,013,481 )   $ (8,810 )   $ 86,219  
                                                                         


B-22

Table of Contents

 
CORAL GOLD RESOURCES LTD.
 
Notes to Consolidated Financial Statements — (Continued)

  (e)   Supplemental Financial Information

 
(i)  Reconciliation of Cash Flows Under U.S. GAAP
 
Cash Flows from Operating Activities
 
                         
    2006     2005     2004  
 
Cash provided by (used in) operating activities per CDN GAAP
  $ (677,443 )   $ (556,184 )   $ (1,021,895 )
Deferred exploration expenditures
    (584,880 )     (897,908 )     (420,054 )
                         
Cash provided by (used in) operating activities per US GAAP
  $ (1,262,323 )   $ (1,454,092 )   $ (1,441,949 )
                         
 
Cash Flows from Investing Activities
 
                         
    2006     2005     2004  
 
Cash provided by (used in) investing activities per CDN GAAP
  $ (392,771 )   $ (914,246 )   $ 264,756  
Deferred exploration expenditures
    584,880       897,908       420,054  
                         
Cash provided by (used in) investing activities per US GAAP
  $ 192,109     $ (16,338 )   $ 684,810  
                         
 
  (f)   Additional Disclosure Required by U.S. GAAP
 
(i)  Operations in a Foreign Country
 
The Company is subject to numerous factors relating to conducting business in a foreign country (including, without limitation, economic, political and currency risk), any of which could have a significant impact on the Company’s operation.
 
The Company’s U.S. subsidiaries, Coral Resources, Inc., Marcus Corporation and Coral Energy Corporation of California are subject to U.S. corporation tax on profits.
 
  (g)   Additional Disclosure Required by SEC
 
The SEC requires that related party transactions be disclosed as a separate line in the financial statements. Under this requirement, the following related party transactions would have been shown separately as related party balances in the financial statements:
 
(i) Included in advances receivable are related party transactions of, $28,003 (2005 — $28,003; 2004 — $28,003) due from a joint venture with common management and common directors; $7,850 (2005 — $Nil; 2004 — $Nil) from a company controlled by a Director; $1,430 (2005 — $Nil; 2004 — $Nil) from a director of the Company and $13,124 (2006: $89,992 less an allowance for bad debt of $76,868; 2005: $122,048 less an allowance for bad debt of $90,621; 2004: $90,621) with two companies with common management and common directors.
 
(ii) Consulting fees of $30,000 (2005 — $30,000; 2004 — $22,500) were paid to a company owned by a director.
 
(iii) Management fees of $105,000 (2005 — $75,000; 2004 — $90,000) were paid to a company owned by a director.
 
(iv) Directors’ fees of $12,000 (2005 — $14,000; 2004 — $24,000) were paid to directors of the Company.


B-23

Table of Contents

 
CORAL GOLD RESOURCES LTD.
 
Notes to Consolidated Financial Statements — (Continued)

(v) An allowance in the amount of $209,840 (2005 — $209,840) has been accrued in respect of advances made to a company with common management.
 
(vi) The loan receivable of $83,000 (2005 — $50,000) is due from a subsidiary of a related company that provides drilling services. The amount due is non-interest bearing, unsecured and due on demand.
 
(vii) Included in accounts payable are $525,000 (2005 — $Nil) of amounts due to a Director of the Company, as a bonus.
 
(viii) Investment securities and marketable securities would be noted as a related party on the balance sheet.
 
  (h)   Deferred Exploration Expenditures
 
The Company follows the policy of deferring all acquisition and exploration costs relating to the mineral properties held. Under US GAAP, the deferred exploration expenditures would have been expensed in the year they were incurred (see note 7(a) to 7(d)).


B-24

Table of Contents

CORAL GOLD RESOURCES LTD.

Consolidated Balance Sheets
(In Canadian Dollars)
(Prepared by Management)
 
                 
    July 31,
 		    January 31,
 		 
    2006     2006  
    (Unaudited)  
 
ASSETS
Current
               
Cash and cash equivalents
  $ 3,974,850     $ 663,071  
Advances receivable (note 8(b))
    71,854       62,358  
Interest receivable
    12,585       —  
Prepaid expenses
    81,417       69,856  
                 
      4,140,706       795,285  
Investment securities
    147,408       147,408  
Loan receivable (note 8(e))
    83,000       83,000  
Equipment
    3,272       3,634  
Mineral properties (note 6)
    10,632,985       10,095,609  
Reclamation deposit
    263,182       260,976  
                 
    $ 15,270,553     $ 11,385,912  
                 
 
LIABILITIES
Current
               
Accounts payable and accrued liabilities (note 8(d))
  $ 390,902     $ 696,810  
Advances payable (note 8(c))
    46,037       61,956  
                 
      436,939       758,766  
                 
Site restoration obligation
    16,000       16,000  
                 
Future income tax liability
    1,448,662       1,448,662  
                 
Non-controlling interest
    10,317       10,320  
                 
 
SHAREHOLDERS’ EQUITY
Subscriptions received in advance
    —       60,000  
Share capital (note 7)
    36,413,491       31,560,337  
Contributed surplus
    1,428,173       1,428,173  
Deficit
    (24,483,029 )     (23,896,346 )
                 
      13,358,635       9,152,164  
                 
    $ 15,270,553     $ 11,385,912  
                 
 
NOTE 1 — NATURE OF BUSINESS AND GOING CONCERN
 
NOTE 9 — COMMITMENTS
 
Approved by the Directors:
 
             
/s/ Louis Wolfin
  Director   /s/ Gary Robertson
 		  Director


B-25

Table of Contents

CORAL GOLD RESOURCES LTD.

Consolidated Interim Statements of Operations and Deficit
(In Canadian Dollars)
(Unaudited — Prepared by Management)
 
                                         
    For the Period
 		                         
    January 22, 1981
 		    Three Months Ended
 		    Six Months Ended
 		 
    (Inception) to
 		    July 31,     July 31,  
    July 31, 2006     2006     2005     2006     2005  
 
Revenue
                                       
Sales
  $ 2,176,079     $ —     $ —     $ —     $ —  
Cost of sales
    (5,383,348 )     —       —       —       —  
                                         
      (3,207,269 )     —       —       —       —  
                                         
Expenses
                                       
Administrative services
    1,058,598       —       —       —       —  
Amortization
    3,090       181       159       362       443  
Consulting fees
    319,828       57,500       10,020       92,300       20,020  
Directors fees
    125,763       —       —       50,000       —  
Investor relations and shareholder information
    1,970,552       53,669       23,089       69,072       39,426  
Legal and accounting
    2,825,232       188,356       14,922       225,468       51,612  
Listing and filing fees
    168,686       2,440       4,381       31,411       7,581  
Management fees
    414,975       32,800       22,500       60,475       45,000  
Office and miscellaneous
    2,076,839       18,458       17,137       40,227       34,921  
Salaries and benefits
    958,962       18,071       25,614       37,203       49,735  
Stock-based compensation
    1,399,633       —       —       —       36,400  
Transfer agent fees
    62,600       6,844       3,136       10,544       4,890  
Travel
    969,837       27,325       17,498       38,643       39,415  
                                         
      12,354,595       405,644       138,456       655,705       329,443  
                                         
Operating loss
    (15,561,864 )     (405,644 )     (138,456 )     (655,705 )     (329,443 )
Other items
                                       
Interest income
    925,258       43,930       2,461       70,968       5,897  
Recovery of bad debt
    (344,859 )     3,464       —       3,464       —  
Foreign exchange gain (loss)
    (256,699 )     (4,897 )     (13,822 )     (5,413 )     (6,740 )
Gain realized on disposition of option on property
    143,552       —       —       —       —  
Gain on sale of investment
    17,692       —       —       —       —  
Financing costs
    (341,006 )     —       —       —       —  
Writedown of investment securities
    (809,828 )     —       —       —       —  
Loss on equipment disposals
    (32,784 )     —       —       —       —  
Writedown of equipment
    (16,335 )     —       —       —       —  
Writedown of mineral properties
    (7,110,148 )     —       —       —       —  
                                         
Loss for the period before future income taxes and non-controlling interest
  $ (23,387,021 )   $ (363,147 )   $ (149,817 )   $ (586,686 )   $ (330,286 )
Future income tax expense
    (1,096,000 )     —       —       —       —  
Non-controlling interest gain
    (8 )     —       —       3       —  
                                         
Loss for the period (balance carried forward)
  $ (24,483,029 )   $ (363,147 )   $ (149,817 )   $ (586,683 )   $ (330,286 )
                                         
Deficit, beginning of period
            (24,119,882 )     (21,009,341 )     (23,896,346 )     (20,828,872 )
                                         
Deficit, end of period
          $ (24,483,029 )   $ (21,159,158 )   $ (24,483,029 )   $ (21,159,158 )
                                         
Loss per share
          $ (0.05 )   $ (0.03 )   $ (0.09 )   $ (0.07 )
                                         
Weighted average number of common shares outstanding
            6,719,932       4,651,155       6,425,173       4,650,030  
                                         


B-26

Table of Contents

CORAL GOLD RESOURCES LTD.

Consolidated Interim Statements of Cash Flows
(In Canadian Dollars)
(Unaudited — Prepared by Management)
 
                                         
    For the period
 		                         
    January 22, 1981
 		    Three Months Ended
 		    Six Months Ended
 		 
    (inception) to
 		    July 31,     July 31,  
    July 31, 2006     2006     2005     2006     2005  
 
Cash flows from (used in) operating activities
                                       
Loss for the year
  $ (24,483,029 )   $ (363,147 )   $ (149,817 )   $ (586,683 )   $ (330,286 )
Adjustments for items not involving cash:
                                       
— amortization
    3,090       181       159       362       443  
— stock based compensation
    1,399,633       —       —       —       36,400  
— non-controlling interest
    8       —       —       (3 )     —  
— writedown of equipment
    16,335       —       —       —       —  
— future income tax expense
    1,096,000       —       —       —       —  
— writedown of investment securities
    809,828       —       —       —       —  
— writedown of mineral properties
    7,110,148       —       —       —       —  
— writedown of advances receivable
    348,323       —       —       —       —  
— loss on equipment disposals
    32,784       —       —       —       —  
— gain on sales of investments
    (17,692 )     —       —       —       —  
— gain realized on disposition of option on property
    (143,552 )     —       —       —       —  
                                         
      (13,828,124 )     (362,966 )     (149,658 )     (586,324 )     (293,443 )
Change in non-cash working capital:
                                       
— increase (decrease) in advances receivable
    (420,177 )     (19,172 )     (7,779 )     (9,496 )     4,378  
— increase in interest receivable
    (12,585 )     (12,585 )     —       (12,585 )     —  
— increase (decrease) prepaid expenses
    (81,417 )     (3,370 )     (18,457 )     (11,561 )     (15,090 )
— investment securities
    (119,174 )     —       —       —       —  
— increase (decrease) in accounts payable and accrued liabilities
    390,902       17,289       59,673       (305,908 )     51,220  
— decrease (increase) in advances payable
    46,037       (34,692 )     (363 )     (15,919 )     (6,305 )
                                         
      (14,024,538 )     (415,496 )     (116,584 )     (941,793 )     (259,240 )
                                         
Cash flows from (used in) investing activities
                                       
Mineral properties acquisition and exploration expenditures incurred
    (16,561,118 )     (413,977 )     (206,753 )     (537,376 )     (285,811 )
Acquisition of Marcus Corporation
    (14,498 )     —       —       —       —  
Proceeds on sale of equipment
    92,732       —       —       —       —  
Loan receivable
    (83,000 )     —       —       —       (33,000 )
Purchase of equipment
    (145,485 )     —       —       —       —  
Purchase of investments
    (939,776 )     —       —       —       —  
Decrease (increase) in reclamation deposit amounts
    (263,182 )     (2,206 )     12,702       (2,206 )     5,315  
                                         
      (17,914,327 )     (416,183 )     (194,051 )     (539,582 )     (313,496 )
                                         
Cash flows from financing activities
                                       
Subscriptions received in advance
    60,000       —       —       —       —  
Issuance of shares for cash, net
    35,824,586       192,749       11,900       4,793,154       12,845  
                                         
      35,884,586       192,749       11,900       4,793,154       12,845  
                                         
Net increase (decrease) in cash and cash equivalents
    3,945,721       (638,930 )     (298,735 )     3,311,779       (559,891 )
Cash and cash equivalents, beginning of period
    29,129       4,613,780       1,210,990       663,071       1,472,146  
                                         
Cash and cash equivalents, end of period
  $ 3,974,850     $ 3,974,850     $ 912,255     $ 3,974,850     $ 912,255  
                                         
Supplementary disclosure of cash flow information:
                                       
Cash paid during the period for:
                                       
Interest
          $ —     $ 40     $ —     $ 40  
Income taxes
            —       —       —       —  


B-27

Table of Contents

CORAL GOLD RESOURCES LTD.

Notes to Consolidated Interim Financial Statements
July 31, 2006
(In Canadian Dollars)
(Unaudited — Prepared by Management)
 
1.   Nature of Business and Going Concern
 
These consolidated financial statements have been prepared on a going-concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business in the foreseeable future. The Company is in the process of exploring its mineral interests and has not yet determined whether these properties contain ore reserves that are economically recoverable. The continued operations of the Company and the recoverability of mineral property costs is dependent upon the discovery of economically recoverable mineral reserves, the ability of the Company to obtain necessary financing to complete the development and upon future profitable production. Management’s plan in this regard is to raise equity financing as required.
 
2.   Prior Period Adjustment
 
During the year ended January 31, 2006 the Company recorded a prior period adjustment to account for an unrecorded future income tax liability arising from prior years. The effect of the restatement is that future income tax liability and deficit increased by $318,000 at January 31, 2005. The unrecorded future income tax liability pertained to periods prior to February 1, 2003, and as a result, the deficit, beginning of the period as disclosed in the consolidated statements of operations and deficit for the three and six month periods ended July 31, 2005 also increased by $318,000. The unrecorded future income tax liability did not change the Company’s loss for either of the three or six month periods ended July 31, 2005.
 
3.   Basis of Presentation
 
These unaudited interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) on a basis consistent with that followed in the most recent audited annual consolidated financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with Canadian GAAP have been condensed or omitted and therefore these unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto for the fiscal year ended January 31, 2006.
 
These unaudited interim consolidated financial statements have also been prepared in accordance with United States generally accepted accounting principles (“US GAAP”), except as described in note 12 to these unaudited consolidated financial statements. All figures are in Canadian dollars unless otherwise stated.
 
In the opinion of the Company’s management, all adjustments considered necessary for a fair presentation of these unaudited interim consolidated financial statements have been included and all such adjustments are of a normal recurring nature. Operating results for the three and six month periods ended July 31, 2006 are not necessarily indicative of the results that can be expected for the full fiscal year ending January 31, 2007.
 
4.   Basis of Consolidation
 
These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Coral Resources, Inc. and Coral Energy Corporation of California and its 98.49% owned subsidiary Marcus Corporation. Significant inter-company accounts and transactions have been eliminated.
 
5.   Comparative Figures
 
Certain of the comparative figures for 2005 have been reclassified, where applicable, to conform to the presentation adopted for the current year.


B-28

Table of Contents

 
CORAL GOLD RESOURCES LTD.
 
Notes to Consolidated Interim Financial Statements — (Continued)

6.   Mineral Properties

 
The following is a summary of mineral property expenditures for the six months ended July 31, 2006:
 
                 
Balance, beginning of period
          $ 10,095,609  
Robertson Property
               
Assays
  $ 48,950          
Consulting
    172,140          
Drilling
    240,671          
Field supplies and other
    4,999          
Lease payments
    53,300          
Reclamation
    9,376          
Water analysis
    481          
                 
Total expenditures for Robertson Property
            537,376  
                 
Balance, end of period
          $ 10,632,985  
                 
 
7.   Share Capital
 
  (a)   Authorized Unlimited common shares without par value
 
  (b)   Issued
 
                                 
    2006     2005  
    Shares     Amount     Shares     Amount  
 
Balance, January 31,
    5,106,266     $ 31,560,337       4,648,905     $ 30,754,678  
Private placements
    1,500,000       4,500,000       —       —  
Exercise of warrants
    58,212       160,064       —       —  
Exercise of stock options
    14,500       28,350       —       —  
Warrants returned to treasury
    (2,000 )     (11,000 )     —       —  
Share issuance costs
    —       (17,009 )     —       —  
                                 
Balance, April 30,
    6,676,978     $ 36,220,742       4,648,905     $ 30,754,678  
Exercise of warrants
    67,232       173,624       —       —  
Exercise of stock options
    11,250       19,125       7,000       11,900  
Cancelled shares
    —       —       (2,500 )     (11,000 )
                                 
Balance, July 31,
    6,755,460     $ 36,413,491       4,653,405     $ 30,755,578  
                                 


B-29

Table of Contents

 
CORAL GOLD RESOURCES LTD.
 
Notes to Consolidated Interim Financial Statements — (Continued)

  (c)   Share Purchase Warrants

 
A summary of share purchase warrants transactions for the three and six month periods ended July 31, 2006 to date is as follows:
 
         
    Number of
 		 
    Underlying
 		 
    Shares  
 
Balance, January 31, 2006
    1,115,698  
Granted
    —  
Exercised
    (58,212 )
Returned to treasury
    2,000  
Expired
    (252,720 )
         
Balance, April 30, 2006
    806,766  
Granted
    —  
Exercised
    (67,232 )
         
Balance, July 31, 2006
    739,534  
         
 
As at July 31, 2006, the following share purchase warrants were outstanding:
 
                 
Number of
 		       
Underlying
 		       
Shares
  Exercise Price  
Expiry Date
 
  333,900     $ 3.10     October 12, 2006
  192,500     $ 3.60     November 17, 2006
  100,000     $ 3.90     December 19, 2006
  113,134     $ 2.00     September 15, 2007
                 
  739,534              
                 
 
  (d)   Stock Options
 
During the six months ended July 31, 2006, there were no stock options granted by the Company.
 
A summary of the stock options granted and exercised for the three and six month periods ended July 31, 2006 is as follows:
 
                 
    Number
 		    Weighted Average
 		 
    of Options     Exercise Price  
 
Balance, January 31, 2006
    697,900     $ 2.67  
Exercised
    (14,500 )   $ 1.96  
                 
Balance, April 30, 2006
    683,400     $ 2.68  
Exercised
    (11,250 )   $ 1.70  
                 
Balance, July 31, 2006
    672,150     $ 2.70  
                 


B-30

Table of Contents

 
CORAL GOLD RESOURCES LTD.
 
Notes to Consolidated Interim Financial Statements — (Continued)

A summary of stock options outstanding and exercisable at the period ended July 31, 2006 is as follows:
 
                         
        Weighted Average
 		   
        Remaining
 		   
    Number
 		  Contractual
 		  Weighted Average
Exercise Price
  Outstanding   Life (yr)   Exercise Price
 
$1.70
    309,150       3.37     $ 1.70  
$3.55
    363,000       4.37     $ 3.55  
                         
 
8.   Related Party Transactions
 
Related party transactions not disclosed elsewhere in these statements are as follows:
 
a) During the three and six month periods ended July 31, 2006, the Company paid, or made provision for the future payment, of the following amounts to related parties:
 
i) $22,500 for the three months ended and $45,000 for the six months ended July 31, 2006 (three months ended July 31, 2005 — $22,500; six months ended July 31, 2005 — $45,000) to a private company controlled by an officer and former director for management fees;
 
ii) $7,500 for the three months ended and $15,000 for the six months ended July 31, 2006 (three months ended July 31, 2005 — $7,500; six months ended July 31, 2005 — $15,000) in consulting fees to a private company owned by a Director; and
 
iii) $Nil for the three months ended and $50,000 for the six months ended July 31, 2006 (three months ended July 31, 2005 — $nil; six months ended July 31, 2005 — $nil) in directors fees to directors of the Company.
 
b) Included in advances receivable are amounts due from related parties, as well as third party receivables. These amounts due from related parties include $28,003 (January 31, 2006 — $28,003) due from a joint venture with common management and common directors; $1,414 (January 31, 2006 — $7,850) due from a company controlled by a Director; $13,124 (July 31, 2006: $89,992 less an allowance for bad debt of $76,868; January 31, 2006: $89,992 less an allowance for bad debt of $76,868) with two companies with common management and common directors; and $nil (January 31, 2006 — $1,430) from a director of the Company.
 
c) Advances payable include $17,000 (January 31, 2006 — $31,620) due to Directors in regards to past directors’ fees; $22,676 (January 31, 2006 — $26,922) due to a company with common management in regards to the cost sharing agreement for overhead expenses; $5,325 (January 31, 2006 — $nil) to an officer of the Company in regards to management fees and $1,036 (January 31, 2006 — $3,414) due to a private company controlled by a Director of the Company.
 
d) Bonuses payable to a director of the Company of $525,000 were included in accounts payable and accrued liabilities as at January 31, 2006. $300,000 of that amount has been paid to the director in the six month period ended July 31, 2006. The balance still owing and included as part of accounts payable and accrued liabilities as of July 31, 2006 is $225,000.
 
e) The loan receivable of $83,000 (January 31, 2006 — $83,000) is due from a subsidiary of a related company with common management that provides drilling services. The amount due is non-interest bearing, unsecured and due on demand.
 
f) An allowance in the amount of $209,840 (January 31, 2006 — $209,840) has been accrued in respect of advances made to a company with common management.
 
These transactions are in the normal course of operations and are measured at the exchange amount, which is the consideration established and agreed to by the related parties, unless otherwise noted.


B-31

Table of Contents

 
CORAL GOLD RESOURCES LTD.
 
Notes to Consolidated Interim Financial Statements — (Continued)

9.   Commitment

 
The Company entered into a cost-sharing agreement during 2005 to reimburse a related party for a variable percentage of its overhead expenses, to reimburse 100% of its out-of-pocket expenses incurred on behalf of the company, and to pay a percentage fee based on the total overhead and corporate expenses referred to above. The agreement may be terminated with one-month notice by either party.
 
During the three and six month periods ending July 31, 2006 a total of $33,390 and $58,281 (three months ended July 31, 2005 — $47,235; six months ended July 31, 2005 — $92,006) respectively, was charged to operations in relation to the cost sharing agreement.
 
10.   Subsequent Events
 
The Company entered into a 3 month Investor Relations Agreement on August 30, 2006 with Agoracom Investor Relations Corp. (“Agoracom”), to provide online marketing services. In consideration for the services rendered, the Company has agreed to pay Agoracom fees totaling $9,000 and grant Agoracom the option to purchase 20,000 common shares at a price of $3.92 per share.
 
Subsequent to July 31, 2006 the Company renewed a 12 month Investor Relations Agreement with Investor Relations Group Inc., formerly called Investors Relations Services Group John Mullen & Partners (“IRS”), to provide investor relations services in Europe. In consideration for the services rendered, the Company has agreed to pay IRS fees totaling $18,000 plus expenses.
 
Subsequent to July 31, 2006 the Company granted incentive stock options for the purchase of up to 280,000 shares at a price of $3.92 per share exercisable on or before September 5, 2011 to directors, officers, employees and consultants of the Company.
 
Subsequent to July 31, 2006 the Company has had 1,000 share purchase warrants exercised for total proceeds of $3,100.
 
11.   Segmented Information
 
The Company is involved in mineral exploration and development activities principally in the United States. The Company is in the development stage, and accordingly, has no reportable segment revenues or operating results for each of the three and six month periods ended July 31, 2006 and 2005.
 
                         
    July 31, 2006  
    Canada     USA     Total  
 
Current assets
  $ 4,043,391     $ 97,315     $ 4,140,706  
Investment in securities
    74,833       72,575       147,408  
Loan receivable
    83,000       —       83,000  
Equipment
    3,272       —       3,272  
Mineral properties
    —       10,632,985       10,632,985  
Reclamation deposit
    —       263,182       263,182  
                         
    $ 4,204,496     $ 11,066,057     $ 15,270,553  
                         
 


B-32

Table of Contents

CORAL GOLD RESOURCES LTD.
 
Notes to Consolidated Interim Financial Statements — (Continued)

                         
    January 31, 2006  
    Canada     USA     Total  
 
Current assets
  $ 695,738     $ 99,547     $ 795,285  
Investment in securities
    74,833       72,575       147,408  
Loan receivable
    83,000       —       83,000  
Equipment
    3,634       —       3,634  
Mineral properties
    —       10,095,609       10,095,609  
Reclamation deposit
    —       260,976     $ 260,976  
                         
    $ 857,205     $ 10,528,707     $ 11,385,912  
                         

 
12.   Differences Between Canadian (“CDN”) and United States (“US”) GAAP
 
These consolidated financial statements and the selected financial data have been prepared under CDN GAAP.
 
For each period of presentation, the modifications necessary in order for these consolidated financial statements to conform to US GAAP have been suitably provided as follows:
 
  (a)   Reconciliation of Consolidated Balance Sheet items:
 
(i)  Reconciliation of Total Assets and Liabilities
                 
    July 31,
 		    January 31,
 		 
    2006     2006  
 
Total assets per CDN GAAP
  $ 15,270,553     $ 11,385,912  
Mineral properties
    (9,594,511 )     (9,057,135 )
Investment securities
    5,711       (8,810 )
                 
Total assets per US GAAP
  $ 5,681,753     $ 2,319,967  
                 
Total liabilities per CDN and US GAAP
  $ 1,911,918     $ 2,233,748  
                 
 
(ii)  Reconciliation of Deficit under U.S. GAAP
 
                 
    July 31,
 		    January 31,
 		 
    2006     2006  
 
Deficit end of period per CDN GAAP
  $ (24,483,029 )   $ (23,896,346 )
Stock compensation expense
    (60,000 )     (60,000 )
Deferred exploration expenditures, net
    (9,594,511 )     (9,057,135 )
                 
Deficit end of period per US GAAP
  $ (34,137,540 )   $ (33,013,481 )
                 

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CORAL GOLD RESOURCES LTD.
 
Notes to Consolidated Interim Financial Statements — (Continued)

  (b)   Reconciliation of Consolidated Statement of Income items:

 
Reconciliation of Net Loss under US GAAP
 
                                 
          Six Months Ended
 		 
    Three Months Ended July 31,     July 31,  
    2006     2005     2006     2005  
 
Net loss for the period per CDN GAAP
  $ (363,147 )   $ (149,817 )   $ (586,683 )   $ (330,286 )
Deferred exploration expenditures
    (413,977 )     (206,753 )     (537,376 )     (285,811 )
                                 
Net loss for the period under US GAAP
    (777,124 )     (356,570 )     (1,124,059 )     (616,097 )
Unrealized gain (loss) on investment securities
    (151,721 )     (24,189 )     14,521       (54,931 )
                                 
Net comprehensive loss for the period per US GAAP
  $ (928,845 )   $ (380,759 )   $ (1,109,538 )   $ (671,028 )
                                 
Loss per share under US GAAP — basic and diluted
  $ (0.14 )   $ (0.08 )   $ (0.17 )   $ (0.14 )
                                 
 
  (c)   Comprehensive Income
 
Statement of Financial Accounting Standards No. 130 requires the reporting of comprehensive income in addition to net earnings. Comprehensive income includes net income plus other comprehensive income; specifically, all changes in equity of a company during a period arising from non-owner sources.


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CORAL GOLD RESOURCES LTD.
 
Notes to Consolidated Interim Financial Statements — (Continued)

Under US GAAP, a statement of changes in shareholders’ equity and comprehensive income in the following format would form a part of the annual consolidated financial statements:
 
Consolidated Statement of Changes in Shareholders’ Equity
 
                                                                         
                                                    Total
 		 
                                              Accumulated
 		    Other
 		 
    Share Capital                 Additional
 		    Comprehensive
 		    Deficit
 		    Other
 		    Holders’
 		 
    Number of
 		          Share
 		          Paid In
 		    Income
 		    Restated
 		    Comprehensive
 		    Equity
 		 
    Shares     Amount     Subscriptions     Warrants     Capital     (Loss)     (Note 2)     Income (Loss)     Restated  
 
Balance forward, January 31, 2004
    4,361,685     $ 29,646,238     $ 791,720     $ —     $ 60,000             $ (27,584,400 )   $ —     $ 2,913,558  
Share subscriptions
    —       —       (791,720 )     —       —       —       —       —       (791,720 )
Issuance of shares (see Note 7(b))
    287,220       1,108,440       (11,945 )     —       —       —       —       —       1,096,495  
Stock-based compensation expense
    —       —       —       —       343,533       —       —       —       343,533  
Components of comprehensive income:
                                                                       
— net income (loss)
    —       —       —       —       —       (1,776,727 )     (1,776,727 )     —       (1,776,727 )
— change in unrealized gain (loss) of marketable securities
    —       —       —       —       —       5,771       —       5,771       5,771  
                                                                         
                                            $ (1,770,956 )                        
                                                                         
Balance, January 31, 2005
    4,648,905     $ 30,754,678     $ (11,945 )   $ —     $ 403,533             $ (29,361,127 )   $ 5,771     $ 1,790,910  
Share subscriptions
    —       —       71,945               —       —       —       —       71,945  
Issuance of shares (see Note 7(b))
    457,361       805,659       —       116,100       —       —       —       —       921,759  
Stock-based compensation expense
                                    1,056,100                               1,056,100  
Components of Comprehensive income:
                                                                       
— net income (loss)
    —       —       —               —       (3,652,354 )     (3,652,354 )     —       (3,652,354 )
— change in unrealized gain (loss) of marketable securities
    —       —       —               —       (14,581 )     —       (14,581 )     (14,581 )
                                                                         
                                            $ (3,666,935 )                        
                                                                         
Balance, January 31, 2006
    5,106,266     $ 31,560,337     $ 60,000     $ 116,100     $ 1,372,073             $ (33,013,481 )   $ (8,810 )   $ 86,219  
Share subscriptions
    —       —       (60,000 )             —       —       —       —       (60,000 )
Issuance of shares (see Note 7(b))
    1,649,194       4,853,154       —       —       —       —       —       —       4,853,154  
Components of Comprehensive income:
                                                                       
— net income (loss)
    —       —       —               —       (1,124,059 )     (1,124,059 )     —       (1,124,059 )
— change in unrealized gain (loss) of investment securities
    —       —       —               —       (14,521 )     —       (14,521 )     (14,521 )
                                                                         
                                            $ (1,109,538 )                        
                                                                         
Balance, July 31, 2006
    6,755,460     $ 36,413,491     $ —     $ 116,100     $ 1,372,073             $ (34,137,540 )   $ (5,711 )   $ 3,769,835  
                                                                         


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CORAL GOLD RESOURCES LTD.
 
Notes to Consolidated Interim Financial Statements — (Continued)

  (d)   Supplemental Financial Information

 
Reconciliation of Cash Flows under US GAAP
 
                                 
    Three Months Ended July 31,     Six Months Ended July 31,  
    2006     2005     2006     2005  
 
Cash Flows from Operating Activities
                               
Cash used in operating activities per CDN GAAP
  $ (415,496 )   $ (116,584 )   $ (941,793 )   $ (259,240 )
Deferred exploration expenditures
    (413,977 )     (206,753 )     (537,376 )     (285,811 )
                                 
Cash used in operating activities per US GAAP
  $ (829,473 )   $ (323,337 )   $ (1,479,169 )   $ (545,051 )
                                 
Cash Flows from Investing Activities
                               
Cash used in investing activities per CDN GAAP
  $ (416,183 )   $ (194,051 )   $ (539,582 )   $ (313,496 )
Deferred exploration expenditures
    413,977       206,753       537,376       285,811  
                                 
Cash provided by (used in) investing activities per US GAAP
  $ (2,206 )   $ 12,702     $ (2,206 )   $ (27,685 )
                                 
Cash provided by financing activities per CDN and US GAAP
  $ 192,749     $ 11,900     $ 4,793,154     $ 12,845  
                                 
 
  (d)   Additional Disclosure Required by US GAAP
 
(i)  Operations in a Foreign Country
 
The Company is subject to numerous factors relating to conducting business in a foreign country (including, without limitation, economic, political and currency risk), any of which could have a significant impact on the Company’s operation.
 
The Company’s U.S. subsidiaries, Coral Resources, Inc., Marcus Corporation and Coral Energy Corporation of California are subject to U.S. corporation tax on profits.
 
  (e)   Additional Disclosure Required by SEC
 
The SEC requires that related party transactions be disclosed as a separate line in the financial statements. Under this requirement, the following related party transactions would have been shown separately as related party balances in the financial statements:
 
(i) Included in advances receivable are amounts due from related parties, as well as third party receivables. These amounts due from related parties include $28,003 (January 31, 2006 — $28,003) due from a joint venture with common management and common directors; $1,414 (January 31, 2006 — $7,850) due from a company controlled by a Director; $13,124 (July 31, 2006: $89,992 less an allowance for bad debt of $76,868; January 31, 2006: $89,992 less an allowance for bad debt of $76,868) with two companies with common management and common directors; and $nil (January 31, 2006 — $1,430) from a director of the Company.
 
(ii) $7,500 for the three months ended and $15,000 for the six months ended July 31, 2006 (three months ended July 31, 2005 — $7,500; six months ended July 31, 2005 — $15,000) in consulting fees to a private company owned by a Director; and


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CORAL GOLD RESOURCES LTD.
 
Notes to Consolidated Interim Financial Statements — (Continued)

(iii) $22,500 for the three months ended and $45,000 for the six months ended July 31, 2006 (three months ended July 31, 2005 — $22,500; six months ended July 31, 2005 — $45,000) to a private company controlled by an officer and former director for management fees;
 
(iv) $Nil for the three months ended and $50,000 for the six months ended July 31, 2006 (three months ended July 31, 2005 — $nil; six months ended July 31, 2005 — $nil) in directors fees to directors of the Company.
 
(v) An allowance in the amount of $209,840 (January 31, 2006 — $209,840) has been accrued in respect of advances made to a company with common management.
 
(vi) The loan receivable of $83,000 (January 31, 2006 — $83,000) is due from a subsidiary of a related company that provides drilling services. The amount due is non-interest bearing, unsecured and due on demand.
 
(vii) Advances payable include $17,000 (January 31, 2006 — $31,620) due to Directors in regards to past directors’ fees; $22,676 (January 31, 2006 — $26,922) due to a company with common management in regards to the cost sharing agreement for overhead expenses; $5,325 (January 31, 2006 — $nil) to an officer of the Company in regards to management fees and $1,036 (January 31, 2006 — $3,414) due to a private company controlled by a Director of the Company.
 
(viii) Included in accounts payable is $225,000 (January 31, 2006 — $525,000) of amounts due to a Director of the Company, as a bonus.
 
(ix) Investment securities would be noted as a related party on the balance sheet.
 
  (f)   Deferred Exploration Expenditures
 
The Company follows the policy of deferring all acquisition and exploration costs relating to the mineral properties held. Under US GAAP, the deferred exploration expenditures would have been expensed in the year they were incurred (see note 6).


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APPENDIX C — FINANCIAL STATEMENTS OF TONE RESOURCES
 
 
TONE RESOURCES LIMITED
(An Exploration Stage Company)
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2005 and 2004
(Stated in Canadian Dollars)
 


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A Partnership of Incorporated Professionals Amisano Hanson
Chartered Accountants
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Directors,
Tone Resources Limited
(An Exploration Stage Company)
 
We have audited the consolidated balance sheets of Tone Resources Limited as at August 31, 2005 and 2004 and the consolidated statements of loss, cash flows and stockholders’ equity for the three years then ended. These consolidated 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 Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform an audit to obtain reasonable assurance 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.
 
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at August 31, 2005 and 2004 and the results of its operations and its cash flows for the three years then ended in accordance with Canadian generally accepted accounting principles.
 
/s/ AMISANO HANSON
Chartered Accountants
 
Vancouver, Canada
December 22, 2005
 
COMMENTS BY AUDITOR FOR US READERS ON CANADA — US REPORTING CONFLICT
 
In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when there is substantial doubt about a company’s ability to continue as a going concern. The accompanying consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern which assumes the realization of assets and discharge of liabilities in the normal course of business. As discussed in Note 1 to the financial statements, the Company has losses from operations and the recoverability of amounts shown for mineral property costs is dependent upon whether the properties contain reserves that are economically recoverable, which raises substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
Our report to the shareholders dated December 22, 2005, is expressed in accordance with Canadian reporting standards which do not permit a reference to such uncertainty in the auditors’ report when the uncertainty is adequately disclosed in the financial statements.
 
/s/ AMISANO HANSON
Chartered Accountants
 
Vancouver, Canada
December 22, 2005
 
750 WEST PENDER STREET, SUITE 604 TELEPHONE: 604-689-0188
VANCOUVER CANADA FACSIMILE: 604-689-9773
V6C 2T7 E-MAIL: amishan@telus.net


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TONE RESOURCES LIMITED
(An Exploration Stage Company)

CONSOLIDATED BALANCE SHEETS
August 31, 2005 and 2004
 
                 
    2005     2004  
    (Stated in Canadian Dollars)  
 
ASSETS
Current
               
Cash
  $ 5,069     $ 372,760  
GST recoverable
    6,508       2,711  
Prepaid expenses and advances — Note 6
    2,558       16,720  
                 
      14,135       392,191  
Reclamation bonds — Note 3
    34,584       37,865  
Mineral property costs — Notes 4 and 6 and Schedule 1
    1,124,298       905,596  
                 
    $ 1,173,017     $ 1,335,652  
                 
 
LIABILITIES
Current
               
Accounts payable
  $ 51,861     $ 29,884  
Due to related parties — Note 6
    77,204       12,385  
                 
      129,065       42,269  
                 
 
STOCKHOLDERS’ EQUITY
Share capital — Notes 5, 6, 7 and 9
    2,927,262       2,566,492  
Contributed surplus — Note 5
    621,849       376,251  
Deficit
    (2,505,159 )     (1,649,360 )
                 
      1,043,952       1,293,383  
                 
    $ 1,173,017     $ 1,335,652  
                 
Nature and Continuance of Operations — Note 1                
Commitments — Notes 4, 5 and 9                
Subsequent Events — Note 9                
 
See accompanying notes


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Table of Contents

TONE RESOURCES LIMITED
(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF LOSS
for the years ended August 31, 2005, 2004 and 2003
and for the period October 31, 2001 (Date of Inception) to August 31, 2005
 
                                 
                      October 31,
 		 
                      2001 (Date of
 		 
                      Inception) to
 		 
                      August 31,
 		 
    2005     2004     2003     2005  
    (Stated in Canadian Dollars)  
 
General and administrative expenses
                               
Accounting and audit fees — Note 6
  $ 35,808     $ 62,012     $ 56,768     $ 161,783  
Advertising and promotion
    32,937       28,174       681       74,602  
Consulting fees
    —       —       7,747       7,747  
Filing fees
    16,769       29,450       8,764       54,983  
Finance fees
    10,000       —       —       10,000  
Investor relations
    68,000       79,435       13,500       160,935  
Legal fees — Note 6
    59,192       179,391       35,644       288,480  
Management fees — Note 6
    151,581       181,036       189,295       587,482  
Office and miscellaneous
    13,334       14,971       11,617       49,417  
Rent — Note 6
    15,000       15,000       12,000       52,665  
Stock-based compensation — Note 6
    282,409       368,313       7,938       658,660  
Secretarial — Note 6
    11,389       13,462       11,240       38,146  
Telephone
    13,679       16,046       13,188       48,681  
Transfer agent fees
    8,213       6,912       4,236       19,361  
Travel
    37,865       82,241       63,578       185,381  
                                 
Loss before other items
    (756,176 )     (1,076,443 )     (436,196 )     (2,398,323 )
Other items
                               
Foreign exchange loss
    (17,389 )     (7,440 )     (4,265 )     (29,450 )
Interest income
    535       1,203       2,763       5,383  
Write-off of mineral property costs — Note 4
    (82,769 )     —       —       (82,769 )
                                 
Net loss for the year
  $ (855,799 )   $ (1,082,680 )   $ (437,698 )   $ (2,505,159 )
                                 
Basic and diluted loss per share
  $ (0.06 )   $ (0.09 )   $ (0.07 )        
                                 
Weighted average number of shares outstanding
    13,168,002       11,478,821       6,547,593          
                                 
 
See accompanying notes


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TONE RESOURCES LIMITED
(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended August 31, 2005, 2004 and 2003
and for the period October 31, 2001 (Date of Inception) to August 31, 2005
 
                                 
                      October 31,
 		 
                      2001 (Date of
 		 
                      Inception) to
 		 
                      August 31,
 		 
    2005     2004     2003     2005  
    (Stated in Canadian Dollars)  
 
Operating Activities
                               
Net loss for the year
  $ (855,799 )   $ (1,082,680 )   $ (437,698 )   $ (2,505,159 )
Add items not affecting cash:
                               
Stock-based compensation
    282,409       368,313       7,938       658,660  
Write-off of mineral property costs
    82,769       —       —       82,769  
Changes in non-cash working capital accounts:
                               
GST recoverable
    (3,797 )     11,305       (14,016 )     (6,508 )
Prepaid expenses and advances
    13,162       2,275       32,608       (2,558 )
Accounts payable
    71,921       (43,132 )     62,622       101,805  
Due to related parties
    65,819       5,617       11,162       77,204  
                                 
      (343,516 )     (738,302 )     (337,384 )     (1,593,787 )
                                 
Financing Activities
                               
Special warrants issued
    —       —       262,773       —  
Common shares issued
    220,015       1,280,135       576,473       2,786,507  
                                 
      220,015       1,280,135       839,246       2,786,507  
                                 
Investing Activities
                               
Reclamation bonds
    3,281       (2,900 )     (18,165 )     (34,584 )
Mineral property costs
    (247,471 )     (455,870 )     (347,435 )     (1,153,067 )
                                 
      (244,190 )     (458,770 )     (365,600 )     (1,187,651 )
                                 
Increase (decrease) in cash during the year
    (367,691 )     83,063       136,262       5,069  
Cash, beginning of the year
    372,760       289,697       153,435       —  
                                 
Cash, end of the year
  $ 5,069     $ 372,760     $ 289,697     $ 5,069  
                                 
Supplemental disclosure of cash flow information
                               
Cash paid for:
                               
Interest
  $ —     $ —     $ —          
                                 
Income taxes
  $ —     $ —     $ —          
                                 
Non-cash Transactions — Note 7
                               
 
See accompanying notes


C-5

Table of Contents

TONE RESOURCES LIMITED
(An Exploration Stage Company)
for the years ended August 31, 2005, 2004 and 2003

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
 
                                                     
        Number of
 		          Special
 		    Contributed
 		             
        Common Shares     Amount     Warrants     Surplus     Deficit     Total  
        (Stated in Canadian dollars)  
 
Balance, October 31, 2001
        —     $ —     $ —     $ —     $ —     $ —  
For cash:
                                                   
Issuance of founders shares
   — at $0.0001     5,000,000       500       —       —       —       500  
Issuance of special warrants
   — at $0.15     —       —       446,611       —       —       446,611  
Net loss for the period
        —       —       —       —       (128,982 )     (128,982 )
                                                     
Balance, August 31, 2002
        5,000,000       500       446,611       —       (128,982 )     318,129  
For cash:
                                                   
Initial public offering
   — at $0.50     1,532,700       766,350       —       —       —       766,350  
Issuance of special warrants
   — at $0.15     —       —       31,426       —       —       31,426  
     — at $0.50     —       —       231,347       —       —       231,347  
Less: share issue costs — Note 6
        —       (189,877 )     —       —       —       (189,877 )
Conversion of special warrants
        3,649,606       709,384       (709,384 )     —       —       —  
Stock-based compensation
        —       —       —       7,938       —       7,938  
Net loss for the year
        —       —       —       —       (437,698 )     (437,698 )
                                                     
Balance, August 31, 2003
        10,182,306       1,286,357       —       7,938       (566,680 )     727,615  
For cash:
                                                   
Pursuant to private placements
   — at $0.47     1,081,670       508,385       —       —       —       508,385  
     — at $0.50     1,543,500       771,750       —       —       —       771,750  
Stock-based compensation
        —       —       —       368,313       —       368,313  
Net loss for the year
        —       —       —       —       (1,082,680 )     (1,082,680 )
                                                     
Balance, August 31, 2004
        12,807,476       2,566,492       —       376,251       (1,649,360 )     1,293,383  
For cash:
                                                   
Pursuant to private placements
   — at $0.40     175,412       70,165       —       —       —       70,165  
     — at $0.40     250,000       100,000       —       —       —       100,000  
Pursuant to exercise of options
   — at $0.30     67,500       20,250       —       —       —       20,250  
     — at $0.50     59,200       29,600       —       —       —       29,600  
Shares for debt
   — at $0.45     110,986       49,944       —       —       —       49,944  
Mineral property costs
   — at $0.45     120,000       54,000       —       —       —       54,000  
Stock-based compensation
        —       —       —       282,409       —       282,409  
Stock based compensation charge on stock options exercised
        —       36,811       —       (36,811 )     —       —  
Net loss for the year
        —       —       —       —       (855,799 )     (855,799 )
                                                     
Balance, August 31, 2005
        13,590,574     $ 2,927,262     $ —     $ 621,849     $ (2,505,159 )   $ 1,043,952  
                                                     
 
See accompanying notes


C-6

Table of Contents

 
Schedule 1
 
TONE RESOURCES LIMITED
(An Exploration Stage Company)

CONSOLIDATED SCHEDULE OF MINERAL PROPERTY COSTS
August 31, 2005 and 2004
                                                                                         
                                              Big
 		    Crescent
 		             
    South
 		    Roberts
 		          Kent
 		    Red
 		    Battle
 		    Gold Bar
 		    Antelope
 		    Valley
 		             
    Keystone
 		    Creek
 		    Kobeh
 		    Springs
 		    Ridge
 		    Mountain
 		    North
 		    Springs
 		    North
 		    2005
 		    2004
 		 
    (Eureka)     (Eureka)     (Eureka)     (Pershing)     (Elko)     (Lander)     (Eureka)     (Lander)     (Eureka)     Total     Total  
    (Stated in Canadian Dollars)  
 
Property acquisition and maintenance costs
                                                                                       
Balance, August 31, 2004
  $ 25,522     $ 53,772     $ 123,284     $ 7,440     $ 54,226     $ 51,927     $ 14,583     $ 6,385     $ —     $ 337,139     $ 201,505  
Cash
    —       —       —       —       4,243       —       —       —       —       4,243       27,913  
Common shares — Note 6
    —       —       —       —       —       —       —       —       54,000       54,000       —  
Claims maintenance — Note 6
    3,693       7,122       17,540       1,319       35,318       9,891       2,506       6,571       28,769       112,729       96,718  
Title opinions
    —       —       —       —       —       —       —       —       —       —       11,003  
                                                                                         
Balance, August 31, 2005
    29,215       60,894       140,824       8,759       93,787       61,818       17,089       12,956       82,769       508,111       337,139  
                                                                                         
Deferred exploration costs
                                                                                       
Balance, August 31, 2004
    13,766       88,848       191,259       125       143,538       130,286       525       110       —       568,457       248,221  
Assaying
    —       —       —       —       17,062       —       4,884       —       —       21,946       59,771  
Consulting fees
    —       —       —       —       —       —       5,754       —       —       5,754       7,507  
Drilling
    —       —       —       —       87,196       —       —       —       —       87,196       224,653  
Field costs
    —       —       —       —       4,760       —       2,046       729       —       7,535       18,784  
Reclamation
    —       —       —       —       8,068       —       —       —       —       8,068       9,521  
                                                                                         
Balance, August 31, 2005
    13,766       88,848       191,259       125       260,624       130,286       13,209       839       —       698,956       568,457  
                                                                                         
Write-off mineral property — Note 4
    —       —       —       —       —       —       —       —       (82,769 )     (82,769 )     —  
                                                                                         
Totals
  $ 42,981     $ 149,742     $ 332,083     $ 8,884     $ 354,411     $ 192,104     $ 30,298     $ 13,795     $ —     $ 1,124,298     $ 905,596  
                                                                                         
 
See accompanying notes


C-7

Table of Contents

 
TONE RESOURCES LIMITED
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2005 and 2004
(Stated in Canadian Dollars)
 
Note 1   Nature and Continuance of Operations
 
The Company was incorporated on October 31, 2001 in the Yukon Territory. On March 1, 2005, the Company was continued to British Columbia from the Yukon Territory. The Company’s business is the exploration and development of its mineral properties located in Nevada, USA. The Company’s shares are publicly listed on the TSX Venture Exchange.
 
These consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern which assume that the Company will realize its assets and discharge its liabilities in the normal course of business. At August 31, 2005, the Company has a working capital deficiency if $114,930, has not yet achieved profitable operations and has accumulated losses of $2,505,159 since incorporation. No assurances can be given that the Company will be able to continue as a going concern. Its ability to continue as a going concern is dependent upon the ability of the Company to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. These financial statements do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should the Company be unable to continue its operations and therefore be required to realize its assets and discharge its liabilities in other than its the normal course of operations and at amounts different from those reflected in the financial statements. The Company has historically satisfied its capital needs primarily by issuing equity securities. Management plans to continue to provide for its capital needs during the year ended August 31, 2006, by the issuance of common stock and through loans.
 
The recoverability of amounts shown for mineral property costs is dependent upon the discovery of economically recoverable reserves and the ability to obtain the necessary financing to complete their exploration and development.
 
Note 2   Significant Accounting Policies
 
These consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) in Canada and are stated in Canadian dollars. Except as disclosed in Note 10, these financial statements conform in all material respects with GAAP in the United States of America. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates, which have been made using careful judgement. Actual results may differ from these estimates.
 
The financial statements have, in management’s opinion, been properly prepared within the framework of the significant accounting policies summarized below:
 
a)  Principles of Consolidation
 
These consolidated financial statements include the accounts of the Company and its wholly owned United States subsidiary, Tone Resources (US) Inc., which was incorporated on June 27, 2002 in the State of Nevada. All inter-company transactions and balances have been eliminated.


C-8

Table of Contents

 
TONE RESOURCES LIMITED
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

b)  Mineral Property Costs and Depletion
 
Property Acquisition Costs
 
Acquisitions of mineral properties are initially recorded at cost. Producing resource properties are depleted over their estimated useful lives based upon a method relating recoverable resource reserves to production. Non-producing resource properties that the Company abandons interest in are written off in the year of abandonment.
 
Deferred Exploration Costs
 
The Company capitalizes all exploration expenses that result in the acquisition and retention of mineral properties or an interest therein. The accumulated costs including applicable exploration expenses relative to non-productive resource properties that the Company abandons interest in are written off. Otherwise, the exploration expenses are depleted over the estimated useful lives of the producing resource properties on a method relating recoverable reserves to production.
 
The Company is in the process of exploring and developing its mineral properties and has not yet determined the amount of reserves available. Management reviews the carrying values of mineral properties on a periodic basis and will recognize impairment in value based upon current exploration results, the prospect of further work being carried out by the Company, the assessment of future probability of profitable revenues from the property or from the sale of the property. Write-downs due to impairment in value are charged to operations. Amounts shown for properties represent costs incurred net of write-downs and recoveries, and are not intended to represent present or future values.
 
c)  Environmental Costs
 
Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations and which do not contribute to current or future revenue generation are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable, and the cost can be reasonably estimated. Generally, the timing of these accruals coincides with the earlier of completion of a feasibility study or the Company’s commitment to a plan of action based on the then known facts.
 
d)  Financial Instruments
 
The carrying values of cash, accounts payable and due to related parties approximate fair value because of the short-term maturity of those instruments. It is management’s opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments.
 
The Company’s mineral exploration activities are located in the United States of America and expenditures are in U.S. dollars. Consequently some assets and liabilities are exposed to foreign currency fluctuations. As at August 31, 2005, cash of $868 (2004: $229,870) and accounts payable of $15,830 (2004: $17,108) denominated in U.S. dollars are included in these financial statements.
 
e)  Foreign Currency Translation
 
Monetary assets and liabilities denominated in a foreign currency are translated into Canadian dollars at exchange rates prevailing at the balance sheet date and non-monetary assets and liabilities are translated at exchange rates prevailing at the transaction dates. Foreign currency denominated revenues and expenses are translated at exchange rates prevailing at the transaction dates. Gains or losses arising from the translations are recognized in the current year.


C-9

Table of Contents

 
TONE RESOURCES LIMITED
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

f)  Basic and Diluted Loss Per Share
 
Basic earnings per share are computed by dividing the loss for the year by the weighted average number of common shares outstanding during the year. Diluted earnings per share reflect the dilution that would occur if potentially dilutive securities were exercised or converted to common shares. The dilutive effect of options and warrants and their equivalent is computed by application of the treasury stock method and the effect of convertible securities by the “if converted” method. Fully diluted amounts are not presented when the effect of the computations are anti-dilutive due to the losses incurred. Accordingly, there is no difference in the amounts presented for basic and diluted loss per share.
 
g)  Income Taxes
 
The Company accounts for income taxes by the asset and liability method. Under this method, current income taxes are recognized for the estimated income taxes payable for the current year. Future income tax assets and liabilities are recognized in the current year for temporary differences between the tax and accounting basis of assets and liabilities as well as for the benefit of losses available to be carried forward to future years for tax purposes that are more likely than not to be realized.
 
h)  Stock-based Compensation
 
The Company has a stock-based compensation plan as disclosed in Note 5. During the year ended August 31, 2004, the Company adopted CICA Handbook Section 3870 — “Stock-based Compensation and Other Stock-based Payments”. This change in accounting policy has been applied prospectively with no restatement of prior periods presented for the statements of loss and cash flows.
 
Under this standard, the Company must account for compensation expense based on the fair value of options granted under its stock-based compensation plan. Costs attributable to stock options granted to directors, employees or consultants are measured at fair value at the grant date, and expensed when vested with a corresponding increase to contributed surplus. Upon exercise of stock options, consideration paid by the option holder, together with the amount previously recognized in contributed surplus, is recorded as an increase to share capital.
 
Previously, the Company accounted for stock-based compensation using the settlement method. No compensation expense was recorded in the financial statements for stock options granted to directors and employees as the options had no intrinsic value at the date of grant. Consideration paid on the exercise of stock options was credited to share capital.
 
Note 3   Reclamation Bonds
 
The Company has certificates of deposit that earn interest at approximately 1% per annum. These deposits represent restricted cash as they are pledged as security to the Bureau of Land Management and are only released to the Company after the Company meets inspection requirements. Reclamation costs are added to mineral property costs as incurred.
 
Note 4   Mineral Property Costs
 
The Company holds 410 mining claims in Nevada, USA. The properties are located in Eureka, Pershing, Elko and Lander counties and are subject to royalties of 1% to 4% of net smelter returns. Certain of the royalties are payable to a company with a director in common.


C-10

Table of Contents

 
TONE RESOURCES LIMITED
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In addition, the Company holds two leased mineral rights located in Elko county, Nevada. Lease payments are due as follows for the years ended:
 
         
August 31, 2003
    US$ 12,000  (paid)
August 31, 2004
    12,000  (paid)
August 31, 2005
    12,000  (paid)
August 31, 2006
    20,000  (paid $10,000)
August 31, 2007
    30,000  
August 31, 2008
    35,000  
August 31, 2009
    40,000  
August 31, 2010
    45,000  
August 31, 2011
    50,000  
         
      US$256,000  
         
 
On March 9, 2004, the Company entered into an agreement with Teck Cominco. The agreement grants Teck Cominco the option to earn interests of up to 75% in any two of the Company’s current properties located in north-central Nevada as well as any other properties acquired by the Company until March 9, 2006 in this defined area of interest in Nevada. Teck Cominco has a first right of refusal on the Red Ridge property. Teck Cominco may earn the interests by completing expenditure requirements totalling $3,000,000 and preparing feasibility reports.
 
By an agreement dated October 19, 2004, the Company entered into a mining lease with a company with a common director to acquire 76 mining claims known as the Crescent Valley North claims located in Nevada in exchange for 120,000 common shares of the Company (issued). The claims were subject to a 4% net smelter return royalty. In addition, the claims required the following lease payments:
 
     
US$12,000
  Upon execution of the agreement (paid)
US$25,000
  Anniversaries 1 through 4
US$50,000
  Anniversaries 5 through 9
US$75,000
  Thereafter
 
During the year ended August 31, 2005, the Company abandoned its interest in these claims and wrote-off related mineral property costs in the amount of $82,769.
 
Note 5   Share Capital — Notes 6 and 9
 
a)   Authorized:
 
An unlimited number of common shares without par value
 
b)   Escrow:
 
At August 31, 2005 there were 1,542,000 common shares held in escrow by the Company’s transfer agent. These shares will be released from escrow as follows:
 
         
November 16, 2005 (subsequently released)
    771,000  
May 16, 2006
    771,000  
         
      1,542,000  
         


C-11

Table of Contents

 
TONE RESOURCES LIMITED
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

c)   Commitments:
 
i)   Stock-based Compensation Plan
 
Stock options are granted with an exercise price equal to the market price of the Company’s stock on the date of the grant. Pursuant to the stock-based compensation plan, options may not be granted at an exercise price of less than $0.10 per share. Stock options have a maximum term of five years. The Company’s options vest 25% on the date of the grant with the remaining 75% vesting over the next 18 months at a rate of 12.5% per quarter based on the original amount granted.
 
A summary of the status of the Company’s stock option plan as of August 31, 2005 and 2004 and the changes during the years then ended is presented below:
 
                                 
    2005     2004  
          Weighted
 		          Weighted
 		 
          Average
 		          Average
 		 
    Number
 		    Exercise
 		    Number
 		    Exercise
 		 
    of Shares     Price     of Shares     Price  
 
Options outstanding, beginning of year
    1,850,000     $ 0.50       2,000,000     $ 0.50  
Granted
    1,099,732     $ 0.41       550,000     $ 0.50  
Exercised
    (126,700 )   $ 0.39       —       —  
Cancelled
    (150,000 )   $ 0.50       (700,000 )   $ 0.50  
                                 
Options outstanding, end of year
    2,673,032     $ 0.50       1,850,000     $ 0.50  
                                 
Options exercisable, end of year
    2,115,291     $ 0.50       1,459,375     $ 0.50  
                                 
 
The following stock options were outstanding as at August 31, 2005:
 
                 
    Exercise
 		  Expiry
Number
 
Price
 
Date
 
  1,165,800     $ 0.50     May 16, 2008
  50,000     $ 0.50     June 09, 2008
  25,000     $ 0.50     July 21, 2008
  300,000     $ 0.50     November 14, 2008
  100,000     $ 0.50     December 18, 2008
  321,500     $ 0.30     September 2, 2009
  484,732     $ 0.50     February 1, 2010
  226,000     $ 0.40     July 26, 2010
                 
  2,673,032              
                 
 
At August 31, 2005, 557,741 of the above outstanding options were not yet vested with the optionees. These options will vest with the optionees over the period from September 2, 2005 to January 26, 2007.
 
Non-cash compensation charges totalling $282,409 (2004: $368,313) associated with vested options granted to directors, employees and consultants were recognized in the consolidated financial statements of the Company.


C-12

Table of Contents

 
TONE RESOURCES LIMITED
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

These compensation charges have been determined under the fair value method using the Black-Scholes option pricing model with the following assumptions:
 
                 
    Years Ended August 31,  
    2005     2004  
 
Expected dividend yield
    0.0 %     0.0 %
Expected volatility
    99.2 %     90.0 %
Risk-free interest rate
    2.0 %     2.0 %
Expected term in years
    5 years       5 years  
 
The weighted average fair value at the date of grant of the stock options granted was as follows:
 
                 
    Years Ended August 31,  
    2005     2004  
 
Weighted average fair value
  $ 0.29     $ 0.32  
Total options granted
    1,099,732       550,000  
Total fair value of options granted
  $ 314,972     $ 178,500  
Total fair value of options vested
  $ 282,409     $ 368,313  
 
ii)   Share Purchase Warrants
 
At August 31, 2005, there were 2,837,876 share purchase warrants outstanding entitling the holders thereof the right to purchase one common share for each warrant held as follows:
 
             
Number
 
Exercise Price
 
Expiry Date
 
  1,026,387     $0.50   December 8, 2005
  55,283     $0.50   January 15, 2006
  1,000,000     $0.75   March 31, 2006
  543,500     $0.75   July 5, 2006
  87,706     $0.60   May 26, 2006
        or at $0.80   November 26, 2006
  125,000     $0.60   June 14, 2006
             
        or at $0.80   December 14, 2006
  2,837,876          
             


C-13

Table of Contents

 
TONE RESOURCES LIMITED
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 6   Related Party Transactions — Notes 4, 5, 8 and 9

 
The Company incurred the following charges from directors and officers of the Company, a company with a director in common with the Company and the daughter of a director of the Company for the years ended August 31, 2005, 2004 and 2003 and for the period October 31, 2001 (Date of Inception) to August 31, 2005:
 
                                 
                      October 31,
 		 
                      2001 (Date of
 		 
                      Inception) to
 		 
                      August 31,
 		 
    2005     2004     2003     2005  
 
Accounting fees
  $ 13,725     $ —     $ —     $ 13,725  
Legal fees
    30,209       41,945       6,353       78,507  
Management fees
    151,581       181,036       189,295       587,482  
Mineral property costs
    —       —       —       87,247  
Mineral property acquisition costs
                               
— common shares
    54,000       —       —       54,000  
— cash
    15,717       —       47,043       15,717  
Rent
    15,000       15,000       12,000       52,665  
Share issue costs
    —       —       —       74,275  
Stock-based compensation
    197,763       286,813       —       484,576  
Secretarial
    11,389       13,462       11,090       37,996  
                                 
    $ 489,384     $ 538,256     $ 340,056     $ 1,486,190  
                                 
 
These charges were measured by the exchange amount, which is the amount agreed upon by the transacting parties.
 
Included in prepaid expenses and advances is $Nil (2004: $7,750) representing prepayment of management fees and rent to a director of the Company.
 
Amounts due to related parties are due to directors and officers of the Company and representing unpaid fees and expenses. These amounts are unsecured, non-interest bearing and have no specific terms of repayment.
 
During the year ended August 31, 2005, the Company issued 151,700 common shares for cash proceeds of $59,850 and 120,000 common shares for mineral property acquisition costs of $54,000 to directors of the Company and to a company with a director in common with the Company.
 
During the year ended August 31, 2004, the Company issued 110,000 common shares for cash proceeds of $52,000 to directors of the Company.
 
Note 7   Non-cash Transactions
 
Investing and financing activities that do not have a direct impact on current cash flows are excluded from the statements of cash flows. During the year ended August 31, 2005, the Company issued 120,000 common shares at $0.45 totalling $54,000 as a property acquisition cost pursuant to a mining lease. In addition, the Company issued 110,986 common shares at $0.45 to settle a debt of $49,944. These transactions have been excluded from the statement of cash flows.
 
During the year ended August 31, 2003, the company converted 3,649,606 special warrants to 3,649,606 common shares at a value of $709,384. This transaction has been excluded from the statement of cash flows.


C-14

Table of Contents

 
TONE RESOURCES LIMITED
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 8   Income Taxes

 
Significant components of the Company’s future tax assets and liabilities, after applying enacted corporate income tax rates, are as follows:
 
                 
    2005     2004  
 
Future income tax assets
               
Tax losses carried forward
  $ 1,022,523     $ 772,122  
Less: valuation allowance
    (1,022,523 )     (772,122 )
                 
    $ —     $ —  
                 
 
The Company recorded a valuation allowance against its future income tax assets based on the extent to which it is more likely-than-not that sufficient taxable income will not be realized during the carry forward periods to utilize all the future tax assets.
 
At August 31, 2005, the Company and its subsidiary have accumulated losses totalling $2,870,643, which may be carried forward to reduce future years income for federal and state income tax purposes. These losses, the potential benefit of which have not been recognized in these financial statements, expire as follows:
 
                         
          United States
 		       
    Canada     of America     Total  
 
2009
  $ 100,542     $ —     $ 100,542  
2010
    377,116       —       377,116  
2011
    661,076       —       661,076  
2015
    432,271       —       432,271  
2022
    —       96,061       96,061  
2023
    —       352,776       352,776  
2024
    —       487,178       487,178  
2025
    —       363,623       363,623  
                         
    $ 1,571,005     $ 1,299,638     $ 2,870,643  
                         
 
Note 9   Subsequent Events — Note 5
 
a) On October 7, 2005, the Company issued 88,000 common shares at $0.30 per share to a director of the Company for proceeds of $26,400 pursuant to the exercise of share purchase options outstanding at August 31, 2005.
 
b) On November 18, 2005, the Company granted a director of the Company 100,000 share purchase options entitling him to purchase one common share for each option held at $0.20 per share until November 18, 2010.
 
c) On December 1, 2005, the Company granted a director of the Company 50,000 share purchase options entitling him to purchase one common share for each option held at $0.35 per share until December 1, 2010.
 
d) On December 8, 2005, the Company issued 103,058 common shares (80,000 to a director of the Company) at $0.50 per share for proceeds of $51,529 pursuant to the exercise of share purchase warrants outstanding at August 31, 2005. The remaining 923,329 warrants expired.
 
e) On December 19, 2005, the Company issued 2,570,000 units (1,840,000 to directors of the Company) at $0.20 per unit pursuant to private placement agreements for total proceeds of $514,000. Each unit consists of one common share and one share purchase warrant entitling the holder thereof the right to purchase an additional


C-15

Table of Contents

 
TONE RESOURCES LIMITED
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

common share at $0.25 per share until December 19, 2007. The Company received regulatory approval for the issuance of a total 3,300,000 units at $0.20 per unit. The remaining 730,000 units are subject to disinterested shareholder approval at the Company’s next annual general meeting.
 
f) On December 20, 2005, the Company issued 25,000 common shares at $0.40 per share for proceeds of $10,000 pursuant to the exercise of share purchase options outstanding at August 31, 2005.
 
Note 10   Differences Between Canadian and United States Accounting Principles
 
These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Canada which differ in certain respects with those principles and practices that the Company would have followed had its financial statements been prepared in accordance with accounting principles and practices generally accepted in the United States.
 
The Company’s accounting principles generally accepted in Canada differ from accounting principles generally accepted in the United States as follows:
 
a)  Mineral Property Costs and Deferred Exploration Costs
 
Under accounting principles generally accepted in Canada (“Canadian GAAP”) resource property acquisition and exploration costs may be deferred and amortized to the extent they meet certain criteria. Under accounting principles generally accepted in the United States (“US GAAP”) resource property acquisition and exploration costs must be expensed as incurred. Therefore an additional expense is required under US GAAP.


C-16

Table of Contents

 
TONE RESOURCES LIMITED
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

b) The impact of the above on the consolidated financial statements is as follows:
 
                         
    2005     2004     2003  
 
Net Loss and Loss Per Share
                       
Net loss for the year per Canadian GAAP
  $ (855,799 )   $ (1,082,680 )   $ (437,698 )
Write-off of mineral property costs
    82,769       —       —  
Mineral property costs
    (301,471 )     (455,870 )     (347,435 )
                         
Net loss for the year per US GAAP
  $ (1,074,501 )   $ (1,538,550 )   $ (785,133 )
                         
Basic and diluted loss per share per US GAAP
  $ (0.08 )   $ (0.13 )   $ (0.12 )
                         
Total Assets and Liabilities
                       
Total assets per Canadian GAAP
  $ 1,173,017     $ 1,335,652          
Mineral property costs
    (1,124,298 )     (905,596 )        
                         
Total assets per US GAAP
  $ 48,719     $ 430,056          
                         
Total liabilities per Canadian and US GAAP
  $ 129,065     $ 42,269          
                         
Stockholders’ Equity
                       
Deficit, end of the year, per Canadian GAAP
  $ (2,505,159 )   $ (1,649,360 )        
Mineral property costs
    (1,124,298 )     (905,596 )        
                         
Deficit, end of the year, per US GAAP
    (3,629,457 )     (2,554,956 )        
Capital stock per Canadian and US GAAP
    2,927,262       2,566,492          
Contributed surplus per Canadian and US GAAP
    621,849       376,251          
                         
Stockholders’ equity (deficiency) per US GAAP
  $ (80,346 )   $ 387,787          
                         
Statements of Cash Flows
                       
Operating Activities per Canadian GAAP
  $ (343,516 )   $ (738,302 )   $ (337,384 )
Mineral property costs
    (247,471 )     (455,870 )     (347,435 )
                         
Operating Activities per US GAAP
  $ (590,987 )   $ (1,194,172 )   $ (684,819 )
                         
Financing Activities per Canadian and US GAAP
  $ 220,015     $ 1,280,135     $ 839,246  
                         
Investing Activities per Canadian GAAP
  $ (244,190 )   $ (458,770 )   $ (365,600 )
Mineral property costs
    247,471       455,870       347,435  
                         
Investing Activities per US GAAP
  $ 3,281     $ (2,900 )   $ (18,165 )
                         
 
Note 11   Comparative Figures
 
Certain comparative figures as at August 31, 2004 and for the years ended August 31, 2004 and 2003 have been reclassified in order to comply with the financial statement presentation adopted for the year ended August 31, 2005.


C-17

Table of Contents

 
TONE RESOURCES LIMITED
 
(An Exploration Stage Company)
 
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 
May 31, 2006
 
(Unaudited)
 
(Stated in Canadian Dollars)
 


C-18

Table of Contents

 
TONE RESOURCES LIMITED
(An Exploration Stage Company)
 
Interim Consolidated Balance Sheets
May 31, 2006 and August 31, 2005
(Unaudited)
 
                 
    May 31,
 		    August 31,
 		 
    2006     2005  
    (Stated in Canadian Dollars)
 		 
 
ASSETS
Current
               
Cash
  $ 1,304,315     $ 5,069  
GST recoverable
    14,717       6,508  
Prepaid expenses and advances
    10,630       2,558  
                 
      1,329,662       14,135  
Reclamation bonds
    32,742       34,584  
Mineral property costs — Notes 3 and 5 and Schedule 1
    1,254,834       1,124,298  
                 
    $ 2,617,238     $ 1,173,017  
                 
 
LIABILITIES
Current
               
Accounts payable
  $ 115,873     $ 51,861  
Due to related parties — Note 5
    17,562       77,204  
                 
      133,435       129,065  
                 
 
STOCKHOLDERS’ EQUITY
Share capital — Notes 4, 5, and 7
    5,348,694       2,927,262  
Contributed surplus — Note 4
    438,876       621,849  
Deficit
    (3,303,767 )     (2,505,159 )
                 
      2,483,803       1,043,952  
                 
    $ 2,617,238     $ 1,173,017  
                 
Nature and Continuance of Operations — Note 2
               
Commitments — Notes 3, 4 and 7
               
Subsequent Events — Note 7
               
 
See accompanying notes
 
APPROVED BY THE DIRECTORS:
 
     
/s/  Dan Huber
   Director
   
     
/s/  Scott Baxter
   Director
   


C-19

Table of Contents

TONE RESOURCES LIMITED
(An Exploration Stage Company)
 
Interim Consolidated Statements of Loss
for the three and nine months periods ended May 31, 2006 and 2005
and for the period October 31, 2001 (Date of Inception) to May 31, 2006
(Unaudited)
 
                                         
                            October 31,
 		 
                            2001 (Date of
 		 
    Three Months Ended
 		    Nine Months Ended
 		    Inception) to
 		 
    May 31,     May 31,     May 31,
 		 
    2006     2005     2006     2005     2006  
    (Stated in Canadian Dollars)
 		 
 
General and administrative expenses
                                       
Accounting and audit fees — Note 5
  $ 60,828     $ 8,000     $ 122,963     $ 22,454     $ 284,746  
Advertising and promotion
    15,834       6,472       50,042       29,493       124,644  
Consulting fees
    75,000       —       75,000       —       75,000  
Filing fees
    5,932       1,298       21,938       15,464       76,921  
Investor relations
    22,500       12,966       67,000       22,000       227,935  
Legal fees — Note 5
    118,447       18,028       118,756       40,042       407,236  
Management fees — Note 5
    71,272       47,156       130,202       157,939       717,684  
Office and miscellaneous
    1,690       1,495       5,908       7,096       67,689  
Rent — Note 5
    3,750       3,750       11,250       11,250       63,915  
Stock-based compensation — Note 5
    36,627       48,945       123,870       160,884       782,530  
Secretarial — Note 5
    3,435       1,798       8,743       8,833       46,889  
Telephone
    2,636       1,231       9,329       9,279       58,010  
Transfer agent fees
    2,297       3,091       9,633       7,550       28,994  
Travel
    16,374       12,493       32,306       25,165       217,687  
                                         
Loss before other items
    (436,622 )     (166,723 )     (786,940 )     (517,449 )     (3,179,880 )
Other items
                                       
Foreign exchange gain (loss)
    (8,767 )     (1,414 )     (11,668 )     (2,623 )     (41,118 )
Write-off of mineral property costs
    —       —       —       —       (82,769 )
                                         
Net loss for the period
  $ (445,389 )   $ (168,137 )   $ (798,608 )   $ (520,072 )   $ (3,303,767 )
                                         
Basic and diluted loss per share
  $ (0.02 )   $ (0.01 )   $ (0.05 )   $ (0.04 )        
                                         
Weighted average number of shares outstanding
    18,535,489       13,151,582       16,043,936       13,077,760          
                                         
 
See accompanying notes


C-20

Table of Contents

TONE RESOURCES LIMITED
(An Exploration Stage Company)
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
for the three and nine months periods ended May 31, 2006 and 2005
and for the period October 31, 2001 (Date of Inception) to February 28, 2006
(Unaudited)
 
                                         
                            October 31,
 		 
                            2001 (Date of
 		 
    Three Months Ended
 		    Nine Months Ended
 		    Inception) to
 		 
    May 31,     May 31,     May 31,
 		 
    2006     2005     2006     2005     2006  
    (Stated in Canadian Dollars)  
 
Operating Activities
                                       
Net loss for the period
  $ (445,389 )   $ (168,137 )   $ (798,608 )   $ (520,072 )   $ (3,303,767 )
Add items not affecting cash:
                                       
Write-off of mineral property costs
    —       —       —       —       82,769  
Stock-based compensation
    36,627       48,945       123,870       160,884       782,530  
Changes in non-cash working capital accounts:
                                       
GST recoverable
    (772 )     9,213       (8,209 )     13       (14,717 )
Subscriptions receivable
    3,500       —       —       —       —  
Prepaid expenses and advances
    14,977       12,788       (8,072 )     13,432       (10,630 )
Accounts payable
    42,787       25,911       64,012       13,998       115,873  
                                         
      (348,270 )     (71,280 )     (627,007 )     (331,745 )     (2,347,942 )
                                         
Financing Activities
                                       
Share subscriptions
    —       13,110       —       68,664       —  
Common shares issued
    1,490,587       70,530       2,114,589       215,325       4,922,271  
                                         
      1,490,587       83,640       2,114,589       283,989       4,922,271  
                                         
Investing Activities
                                       
Increase (decrease) in reclamation bonds
    1,154       —       1,842       2,278       (32,742 )
Mineral property costs
    (6,378 )     (9,134 )     (130,536 )     (234,288 )     (1,254,834 )
Increase (decrease) in due to related parties
    (24,030 )     —       (59,642 )     —       17,562  
                                         
      (29,254 )     (9,134 )     (188,336 )     (232,010 )     (1,270,014 )
                                         
INCREASE (DECREASE) IN CASH DURING THE PERIOD
    1,113,063       3,226       1,299,246       (279,766 )     1,304,315  
Cash, beginning of the period
    191,252       89,768       5,069       372,760       —  
                                         
CASH, END OF THE PERIOD
  $ 1,304,315     $ 92,994     $ 1,304,315     $ 92,994     $ 1,304,315  
                                         
Supplemental disclosure of cash flow information
                                       
Cash paid for:
                                       
Interest
  $ —     $ —     $ —     $ —     $ —  
                                         
Income taxes
  $ —     $ —     $ —     $ —     $ —  
                                         
Non-cash Transactions — Note 6
                                       
 
See accompanying notes


C-21

Table of Contents

TONE RESOURCES LIMITED
(An Exploration Stage Company)
INTERIM CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
for the period October 31, 2001 (Date of Inception) to May 31, 2006
(Unaudited)
 
                                                     
        Number of
 		                               
        Common
 		          Special
 		    Contributed
 		             
        Shares     Amount     Warrants     Surplus     Deficit     Total  
        (Stated in Canadian Dollars)  
 
Balance, October 31, 2001
        —     $ —     $ —     $ —     $ —     $ —  
For cash:
                                                   
Issuance of founders shares
  — at $0.0001     5,000,000       500       —       —       —       500  
Issuance of special warrants
  — at $0.15     —       —       446,611       —       —       446,611  
Net loss for the period
        —       —       —       —       (128,982 )     (128,982 )
                                                     
Balance, August 31, 2002
        5,000,000       500       446,611       —       (128,982 )     318,129  
For cash:
                                                   
Initial public offering
  — at $0.50     1,532,700       766,350       —       —       —       766,350  
Issuance of special warrants
  — at $0.15     —       —       31,426       —       —       31,426  
    — at $0.50     —       —       231,347       —       —       231,347  
Less: share issue costs — Note 6
        —       (189,877 )     —       —       —       (189,877 )
Conversion of special warrants
        3,649,606       709,384       (709,384 )     —       —       —  
Stock-based compensation
        —       —       —       7,938       —       7,938  
Net loss for the year
        —       —       —       —       (437,698 )     (437,698 )
                                                     
Balance, August 31, 2003
        10,182,306       1,286,357       —       7,938       (566,680 )     727,615  
For cash:
                                                   
Pursuant to private placements
  — at $0.47     1,081,670       508,385       —       —       —       508,385  
    — at $0.50     1,543,500       771,750       —       —       —       771,750  
Stock-based compensation
        —       —       —       368,313       —       368,313  
Net loss for the year
        —       —       —       —       (1,082,680 )     (1,082,680 )
                                                     
Balance, August 31, 2004
        12,807,476       2,566,492       —       376,251       (1,649,360 )     1,293,383  
For cash:
                                                   
Pursuant to private placements
  — at $0.40     175,412       70,165       —       —       —       70,165  
    — at $0.40     250,000       100,000       —       —       —       100,000  
Pursuant to exercise of options
  — at $0.30     67,500       20,250       —       —       —       20,250  
    — at $0.50     59,200       29,600       —       —       —       29,600  
Shares for debt
  — at $0.45     110,986       49,944       —       —       —       49,944  
Mineral property costs
  — at $0.45     120,000       54,000       —       —       —       54,000  
Stock-based compensation
        —       —       —       282,409       —       282,409  
Stock based compensation charge on stock options exercised
        —       36,811       —       (36,811 )     —       —  
Net loss for the year
        —       —       —       —       (855,799 )     (855,799 )
                                                     
Balance, August 31, 2005
        13,590,574       2,927,262       —       621,849       (2,505,159 )     1,043,952  
                                                     
 
See accompanying notes


C-22

Table of Contents

TONE RESOURCES LIMITED
(An Exploration Stage Company)
INTERIM CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
for the period October 31, 2001 (Date of Inception) to May 31, 2006
(Unaudited)
 
                                         
    Number of
 		          Contributed
 		             
    Common Shares     Amount     Surplus     Deficit     Total  
    (Stated in Canadian Dollars)  
 
Balance, August 31, 2005
    13,590,574       2,927,262       621,849       (2,505,159 )     1,043,952  
For cash:
                                       
Pursuant to a private placement — at $0.20
    3,300,000       660,000       —       —       660,000  
Pursuant to exercise of options — at $0.20
    60,000       12,000       —       —       12,000  
                                  — at $0.30
    301,999       90,600       —       —       90,600  
                                  — at $0.35
    22,500       7,875       —       —       7,875  
                                  — at $0.40
    105,000       42,000       —       —       42,000  
                                  — at $0.50
    579,800       289,900       —       —       289,900  
Pursuant to exercise of warrants — at $0.25
    95,000       23,750       —       —       23,750  
                                  — at $0.50
    158,341       79,170       —       —       79,170  
                                  — at $0.60
    146,531       87,919       —       —       87,919  
                                  — at $0.75
    1,148,500       861,375       —       —       861,375  
Less: share issue costs
    —       (40,000 )     —       —       (40,000 )
Stock based compensation
    —       —       123,870       —       123,870  
Stock based compensation charge on options exercised
    —       306,843       (306,843 )     —       —  
Net loss for the period
    —       —       —       (798,608 )     (798,608 )
                                         
Balance, May 31, 2006
    19,508,245     $ 5,348,694     $ 438,876     $ (3,303,767 )   $ 2,483,803  
                                         
 
See accompanying notes


C-23

Table of Contents

Schedule 1
 
TONE RESOURCES LIMITED.
(An Exploration Stage Company)
INTERIM CONSOLIDATED SCHEDULE OF MINERAL PROPERTY COSTS
for the nine months ended May 31, 2006
(Unaudited)
 
                                                                                 
                                              Big
 		    Crescent
 		       
    South
 		    Roberts
 		          Kent
 		    Red
 		    Battle
 		    Gold Bar
 		    Antelope
 		    Valley
 		       
    Keystone
 		    Creek
 		    Kobeh
 		    Springs
 		    Ridge
 		    Mountain
 		    North
 		    Springs
 		    North
 		       
    (Eureka)     (Eureka)     (Eureka)     (Pershing)     (Elko)     (Lander)     (Eureka)     (Lander)     (Eureka)     Total  
    (Stated in Canadian Dollars)  
 
Property acquisition and maintenance costs
                                                                               
Balance, August 31, 2004
  $ 25,522     $ 53,772     $ 123,284     $ 7,440     $ 54,226     $ 51,927     $ 14,583     $ 6,385     $ —     $ 337,139  
Cash
    —       —       —       —       4,243       —       —       —       —       4,243  
Common shares — Note 5
    —       —       —       —       —       —       —       —       54,000       54,000  
Claims maintenance — Note 5
    3,693       7,122       17,540       1,319       35,318       9,891       2,506       6,571       28,769       112,729  
                                                                                 
Balance, August 31, 2005
    29,215       60,894       140,824       8,759       93,787       61,818       17,089       12,956       82,769       508,111  
                                                                                 
Deferred exploration costs
                                                                               
Balance, August 31, 2004
    13,766       88,848       191,259       125       143,538       130,286       525       110       —       568,457  
Assaying
    —       —       —       —       17,062       —       4,884       —       —       21,946  
Consulting fees
    —       —       —       —       —       —       5,754       —       —       5,754  
Drilling
    —       —       —       —       87,196       —       —       —       —       87,196  
Field costs
    —       —       —       —       4,760       —       2,046       729       —       7,535  
Reclamation
    —       —       —       —       8,068       —       —       —       —       8,068  
                                                                                 
Balance, August 31, 2005
    13,766       88,848       191,259       125       260,624       130,286       13,209       839       —       698,956  
                                                                                 
Write-off mineral property — Note 4
    —       —       —       —       —       —       —       —       (82,769 )     (82,769 )
                                                                                 
Totals
  $ 42,981     $ 149,742     $ 332,083     $ 8,884     $ 354,411     $ 192,104     $ 30,298     $ 13,795     $ —     $ 1,124,298  
                                                                                 
 
See accompanying notes


C-24

Table of Contents

Schedule 1
Continued
 
TONE RESOURCES LIMITED.
(An Exploration Stage Company)
INTERIM CONSOLIDATED SCHEDULE OF MINERAL PROPERTY COSTS
for the nine months ended May 31, 2006
(Unaudited)
 
                                                                         
                                              Big
 		       
    South
 		    Roberts
 		          Kent
 		    Red
 		    Battle
 		    Gold Bar
 		    Antelope
 		       
    Keystone
 		    Creek
 		    Kobeh
 		    Springs
 		    Ridge
 		    Mountain
 		    North
 		    Springs
 		       
    (Eureka)     (Eureka)     (Eureka)     (Pershing)     (Elko)     (Lander)     (Eureka)     (Lander)     Total  
    (Stated in Canadian Dollars)  
 
Property acquisition and maintenance costs
                                                                       
Balance, August 31, 2005
  $ 29,215     $ 60,894     $ 140,824     $ 8,759     $ 93,787     $ 61,818     $ 17,089     $ 12,956     $ 425,342  
Cash — lease payments
    —       —       —       —       11,593       —       —       —       11,593  
Claims maintenance — Note 5
    1,088       2,080       5,121       401       2,577       2,886       746       932       15,831  
                                                                         
Balance, May 31, 2006
    30,303       62,974       145,945       9,160       107,957       64,704       17,835       13,888       452,766  
                                                                         
Deferred exploration costs
                                                                       
Balance, August 31, 2005
    13,766       88,848       191,259       125       260,624       130,286       13,209       839       698,956  
Assaying
    —       —       —       —       —       —       11,389       —       11,389  
Consulting fees
    —       —       —       —       —       —       853       —       853  
Drilling
    —       —       —       —       —       —       87,749       —       87,749  
Field costs
    —       —       —       —       —       —       3,121       —       3,121  
                                                                         
Balance, May 31, 2006
    13,766       88,848       191,259       125       260,624       130,286       116,321       839       802,068  
                                                                         
Totals
  $ 44,069     $ 151,822     $ 337,204     $ 9,285     $ 368,581     $ 194,990     $ 134,156     $ 14,727     $ 1,254,834  
                                                                         
 
See accompanying notes


C-25

Table of Contents

TONE RESOURCES LIMITED
(An Exploration Stage Company)

Notes to the Interim Consolidated Financial Statements
May 31, 2006
(Unaudited)
(Stated in Canadian Dollars)
 
Note 1 —  Interim Financial Statements
 
While the information presented in the accompanying interim three and nine months consolidated financial statements is unaudited, it includes all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in accordance with the accounting principles generally accepted in Canada. These financial statements are inconformity with generally accepted accounting principles in the United States of America, except as described in Note 8 to the consolidated financial statements. These interim financial statements follow the same accounting policies and methods of their application as the Company’s August 31, 2005 annual consolidated financial statements. All adjustments are of a normal recurring nature. It is suggested that these interim financial statements be read in conjunction with the Company’s August 31, 2005 annual financial statements.
 
Operating results for the three and nine months ended May 31, 2006 are not necessarily indicative of the results that can be expected for the year ended August 31, 2006.
 
Note 2 —  Nature and Continuance of Operations
 
The Company was incorporated on October 31, 2001 in the Yukon Territory. On March 1, 2005, the Company was continued to British Columbia from the Yukon Territory. The Company’s business is the exploration and development of its mineral properties located in Nevada, USA. The Company’s shares are publicly listed on the TSX Venture Exchange.
 
These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next twelve months. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At May 31, 2006, the Company had not yet achieved profitable operations, has accumulated losses of $3,303,767 since its inception and had working capital of $1,196,227 which may not be sufficient to sustain operations over the next twelve months and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.
 
The recoverability of amounts shown for mineral property costs is dependent upon the discovery of economically recoverable reserves and the ability to obtain the necessary financing to complete their exploration and development.
 
Note 3 —  Mineral Property Costs
 
The Company holds 410 mining claims in Nevada, USA. The properties are located in Eureka, Pershing, Elko and Lander counties and are subject to royalties of 1% to 4% of net smelter returns. Certain of the royalties are payable to a company with a director in common.


C-26

Table of Contents

 
TONE RESOURCES LIMITED
(An Exploration Stage Company)

Notes to the Interim Consolidated Financial Statements
(Unaudited) — (Continued)

In addition, the Company holds two leased mineral rights located in Elko county, Nevada. Lease payments are due as follows for the years ended:
 
         
August 31, 2003
    US$ 12,000  (paid)
August 31, 2004
    12,000  (paid)
August 31, 2005
    12,000  (paid)
August 31, 2006
    20,000  (paid $10,000)
August 31, 2007
    30,000  
August 31, 2008
    35,000  
August 31, 2009
    40,000  
August 31, 2010
    45,000  
August 31, 2011
    50,000  
         
      US$256,000  
         
 
On March 9, 2004, the Company entered into an agreement with Teck Cominco. The agreement grants Teck Cominco the option to earn interests of up to 75% in any two of the Company’s current properties located in north-central Nevada as well as any other properties acquired by the Company until March 9, 2006 in this defined area of interest in Nevada. Teck Cominco has a first right of refusal on the Red Ridge property. Teck Cominco may earn the interests by completing expenditure requirements totalling $3,000,000 and preparing feasibility reports.
 
Note 4 —  Share Capital — Notes 5 and 7
 
a) Authorized:
 
An unlimited number of common shares without par value
 
b) Escrow:
 
At May 31, 2006 there were no common shares held in escrow by the Company’s transfer agent.
 
c) Commitments:
 
i) Stock-based Compensation Plan
 
Stock options are granted with an exercise price equal to the market price of the Company’s stock on the date of the grant. Pursuant to the stock-based compensation plan, options may not be granted at an exercise price of less than $0.10 per share. Stock options have a maximum term of five years. The Company’s options vest 25% on the date of the grant with the remaining 75% vesting over the next 18 months at a rate of 12.5% per quarter based on the original amount granted.


C-27

Table of Contents

 
TONE RESOURCES LIMITED
(An Exploration Stage Company)

Notes to the Interim Consolidated Financial Statements
(Unaudited) — (Continued)

A summary of the status of the Company’s stock option plan as of August 31, 2005 and May 31, 2006 and the changes during the periods then ended is presented below:
 
                                 
    May 31,
 		    August 31,
 		 
    2006     2005  
          Weighted
 		          Weighted
 		 
          Average
 		          Average
 		 
    Number
 		    Exercise
 		    Number
 		    Exercise
 		 
    of Shares     Price     of Shares     Price  
 
Options outstanding, beginning of the period
    2,673,032     $ 0.50       1,850,000     $ 0.50  
Granted
    150,000     $ 0.25       1,099,732     $ 0.41  
Exercised
    (1,069,299 )   $ 0.41       (126,700 )   $ 0.39  
Cancelled
    —       —       (150,000 )   $ 0.50  
                                 
Options outstanding, end of the period
    1,753,733     $ 0.48       2,673,032     $ 0.50  
                                 
Options exercisable, end of the period
    1,523,695     $ 0.49       2,115,291     $ 0.50  
                                 
 
The following stock options were outstanding as at May 31, 2006:
 
                 
Number
  Exercise Price  
Expiry Date
 
  1,190,000     $ 0.50     May 16, 2008
  50,000     $ 0.50     June 09, 2008
  25,000     $ 0.50     July 21, 2008
  100,000     $ 0.50     November 14, 2008
  12,000     $ 0.30     September 2, 2009
  188,232     $ 0.50     February 1, 2010
  121,000     $ 0.40     July 26, 2010
  40,000     $ 0.20     November 18, 2010
  27,500     $ 0.35     December 2, 2010
                 
  1,753,732              
                 
 
At May 31, 2006, 230,037 of the above outstanding options were not yet vested with the optionees. These options will vest with the optionees over the period from June 2, 2006 to June 2, 2007.
 
Non-cash compensation charges associated with vested options granted to directors, employees and consultants for the nine months ended May 31, 2006 were $123,870 (May 31, 2005: $160,884). These compensation charges were determined under the fair value method using the Black-Scholes option pricing model with the following assumptions:
 
                 
    May 31,
 		  May 31,
    2006   2005
 
Expected dividend yield
    0.0 %     0.0 %
Expected volatility
    94.9 %     100.5 %
Risk-free interest rate
    2.0 %     2.0 %
Expected term in years
    5 years       5 years  


C-28

Table of Contents

 
TONE RESOURCES LIMITED
(An Exploration Stage Company)

Notes to the Interim Consolidated Financial Statements
(Unaudited) — (Continued)

The weighted average fair value at the date of grant of the stock options granted was as follows:
 
                 
    May 31,
 		    May 31,
 		 
    2006     2005  
 
Weighted average fair value
  $ 0.18     $ 0.29  
Total options granted
    150,000       873,732  
Total fair value of options granted
  $ 27,000     $ 249,432  
 
ii) Share Purchase Warrants
 
At May 31, 2006, there were 3,676,175 share purchase warrants outstanding entitling the holders thereof the right to purchase one common share for each warrant held as follows:
 
                 
Number
  Exercise Price  
Expiry Date
 
  405,000     $ 0.75     July 5, 2006
  2,475,000     $ 0.25     December 19, 2007
  41,175     $ 0.80     November 26, 2006
  25,000     $ 0.60     June 14, 2006
        or at $ 0.80     December 14, 2006
  730,000     $ 0.25     March 3, 2008
                 
  3,676,175              
                 
 
Subsequent to May 31, 2006, 200,000 share purchase warrants exercisable at $0.75 per warrant expired on July 5, 2006.
 
Note 5 —  Related Party Transactions — Notes 3, 4 and 7
 
The Company incurred the following charges from directors and officers of the Company, a company with a director in common with the Company and the daughter of a director of the Company for the three and nine months ended May 31, 2006 and 2005 and for the period October 31, 2001 (Date of Inception) to May 31, 2006:
 
                                         
                            October 31,
 		 
                            2001 (Date of
 		 
    Three Months Ended
 		    Nine Months Ended
 		    Inception) to
 		 
    May 31,     May 31,     May 31,
 		 
    2006     2005     2006     2005     2006  
 
Accounting fees
  $ 29,476     $ 8,000     $ 74,387     $ 16,561       88,112  
Legal fees
    13,616       6,185       56,669       20,606       135,176  
Management fees
    71,000       39,000       129,500       118,400       716,982  
Mineral property acquisition costs
                                    87,247  
— common shares
    —       —       —       54,000       54,000  
— claims maintenance
    —       —       —       15,717       15,717  
Rent
    3,750       3,750       11,250       11,250       63,915  
Stock-based compensation
    23,206       24,337       89,516       81,478       574,092  
Share issue costs
    —       —       —       —       74,275  
Secretarial
    3,435       1,798       8,743       8,833       46,739  
                                         
    $ 144,483     $ 83,070     $ 370,065     $ 326,845     $ 1,856,255  
                                         


C-29

Table of Contents

 
TONE RESOURCES LIMITED
(An Exploration Stage Company)

Notes to the Interim Consolidated Financial Statements
(Unaudited) — (Continued)

These charges were measured by the exchange amount, which is the amount agreed upon by the transacting parties.
 
Amounts due to related parties are due to directors and officers of the Company and represent unpaid fees and expenses. These amounts are unsecured, non-interest bearing and have no specific terms of repayment.
 
During the year ended August 31, 2005, the Company issued 151,700 common shares for cash proceeds of $59,850 and 120,000 common shares for mineral property acquisition costs of $54,000 to directors of the Company and to a company with a director in common with the Company. During the nine months ended May 31, 2006, the Company issued 2,806,803 common shares to directors of the Company for cash proceeds of $787,917 pursuant to exercise of share purchase options (629,800 common shares), warrants (336,283 common shares) and a private placement (1,840,000 common shares). The Company issued 730,000 units to a director of the Company at $0.20 per unit pursuant to a private placement agreement for total proceeds of $146,000. Each unit consisted of one common share and one share purchase warrant entitling the holder thereof the right to purchase an additional common share at $0.25 per share until March 3, 2008.
 
Note 6 —  Non-cash Transactions
 
Investing and financing activities that do not have a direct impact on current cash flows are excluded from the statements of cash flows. During the nine months ended May 31, 2005, the Company issued 120,000 common shares at $0.45 totalling $54,000 as a property acquisition cost pursuant to a mining lease and 110,986 common shares at $0.45 to settle a debt of $49,944. These transactions have been excluded from the statements of cash flows.
 
Note 7 —  Subsequent Events — Notes 4 and 5
 
Subsequent to May 31, 2006:
 
a) the Company issued 146,000 common shares (113,500 to directors of the Company) for proceeds of $70,125 ($54,875 from directors of the Company) pursuant to the exercise of share purchase options outstanding at May 31, 2006.
 
b) the Company issued 400,000 common shares for proceeds of $211,250 pursuant to the exercise of share purchase warrants outstanding at May 31, 2006.
 
c) by a letter dated March 5, 2006, the Company received an offer from US Gold Corporation to acquire 100% of the issued securities of the Company. Shareholders of the Company will receive 0.26 of a share of US Gold Corporation (or 0.26 Exchangeable Shares of US Gold Canadian Acquisition Corporation) for each share of the Company. Management of the Company is evaluating the offer. The proposed offer is subject to shareholder and regulatory approval.
 
Note 8 —  Differences Between Canadian and United States Accounting Principles
 
These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Canada which differ in certain respects with those principles and practices that the Company


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TONE RESOURCES LIMITED
(An Exploration Stage Company)

Notes to the Interim Consolidated Financial Statements
(Unaudited) — (Continued)

would have followed had its financial statements been prepared in accordance with accounting principles and practices generally accepted in the United States.
 
a) The Company’s accounting principles generally accepted in Canada differ from accounting principles generally accepted in the United States as follows:
 
Mineral Property Costs and Deferred Exploration Costs
 
Under accounting principles generally accepted in Canada (“Canadian GAAP”) mineral property acquisition and exploration costs may be deferred and amortized to the extent they meet certain criteria. Under accounting principles generally accepted in the United States (“US GAAP”) mineral property acquisition and exploration costs must be expensed as incurred. Therefore an additional expense is required under US GAAP.
 
b) The impact of the above on the consolidated financial statements is as follows:
 
                 
    May 31,
 		    August 31,
 		 
Total Assets and Liabilities
  2006     2005  
 
Total assets per Canadian GAAP
  $ 2,617,238     $ 1,173,017  
Mineral property costs
    (1,254,834 )     (1,124,298 )
                 
Total assets per US GAAP
  $ 1,362,404     $ 48,719  
                 
Total liabilities per Canadian and US GAAP
  $ 133,435     $ 129,065  
                 
Stockholders’ Equity
               
Deficit, end of the year, per Canadian GAAP
  $ (3,303,767 )   $ (2,505,159 )
Mineral property costs
    (1,254,834 )     (1,124,298 )
                 
Deficit, end of the year, per US GAAP
    (4,558,601 )     (3,629,457 )
Capital stock per Canadian and US GAAP
    5,348,694       2,927,262  
Contributed surplus per Canadian and US GAAP
    438,876       621,849  
                 
Stockholders’ equity (deficiency) per US GAAP
  $ 1,228,969     $ (80,346 )
                 
 


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TONE RESOURCES LIMITED
(An Exploration Stage Company)

Notes to the Interim Consolidated Financial Statements
(Unaudited) — (Continued)

                                 
    Three Months Ended
 		    Nine Months Ended
 		 
    May 31,     May 31,  
Net Loss and Loss Per Share
  2006     2005     2006     2005  
 
Net loss for the year per Canadian GAAP
  $ (445,389 )   $ (168,137 )   $ (798,608 )   $ (520,072 )
Mineral property costs
    (6,378 )     (9,134 )     (130,536 )     (234,288 )
                                 
Net loss for the year per US GAAP
  $ (451,767 )   $ (177,271 )   $ (929,144 )   $ (754,360 )
                                 
Basic and diluted loss per share per US GAAP
  $ (0.02 )   $ (0.01 )   $ (0.06 )   $ (0.06 )
                                 
Statements of Cash Flows
                               
Operating Activities per Canadian GAAP
  $ (348,270 )   $ (71,280 )   $ (627,006 )   $ (331,745 )
Mineral property costs
    (6,378 )     (9,134 )     (130,536 )     (234,288 )
                                 
Operating Activities per US GAAP
  $ (354,648 )   $ (80,414 )   $ (757,542 )   $ (566,033 )
                                 
Financing Activities per Canadian and US GAAP
  $ 1,490,587     $ 83,640     $ 2,114,589     $ 283,989  
                                 
Investing Activities per Canadian GAAP
  $ (29,254 )   $ (9,134 )   $ (188,336 )   $ (232,010 )
Mineral property costs
    6,378       9,134       130,536       234,288  
                                 
Investing Activities per US GAAP
  $ (22,876 )   $ —     $ (57,800 )   $ 2,278  
                                 

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APPENDIX D — FINANCIAL STATEMENTS OF NEVADA PACIFIC
 
 
NEVADA PACIFIC GOLD LTD.
June 30, 2006, 2005 and 2004
Consolidated Financial Statements
(Expressed in US Dollars)
 


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MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING
 
The accompanying consolidated financial statements and the information contained in the management discussion and analysis have been prepared by the management of the Company. The financial statements have been prepared in accordance with Canadian generally accepted accounting principles and reconciled to United States generally accepted accounting principles as set out in note 17 and, where appropriate, reflect management’s best estimates based on currently available information. A system of internal accounting control is maintained to provide reasonable assurance that financial information is accurate and reliable.
 
The Company’s independent auditors, PricewaterhouseCoopers LLP, who have been appointed by the shareholders, conduct an audit in accordance with generally accepted auditing standards in Canada to allow them to express an opinion on the financial statements.
 
The Audit Committee of the Board of Directors meets periodically with management and the independent auditors to review the scope and results of the annual audit, and to review the financial statements and related reporting matters prior to submission to the Board.
 
     
/s/ David Hottman
  /s/ W.R. (Bill) Franklin
David Hottman,
  W. R. (Bill) Franklin,
President & Chief Executive Officer
  Chief Financial Officer
September 28, 2006
  September 28, 2006


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Report of Independent Registered Public Accounting Firm
 
To the Shareholders of
Nevada Pacific Gold Ltd.
 
We have audited the consolidated balance sheets of Nevada Pacific Gold Ltd. (the “Company”) as at June 30, 2006 and 2005 and the consolidated statements of operations, deficit, cash flows and mineral property expenditures for each of the three years ended June 30, 2006. 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 Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform an audit to obtain reasonable assurance 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.
 
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at June 30, 2006 and 2005 and the results of its operations and its cash flows for each of the three years ended June 30, 2006 in accordance with Canadian generally accepted accounting principles.
 
/s/ Pricewaterhouse Coopers LLP
Chartered Accountants
Vancouver, British Columbia
September 28, 2006
 
Comments by the Auditors for U.S. Readers on Canadian-U.S. Reporting Conflict
 
In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when the financial statements are affected by significant conditions and events that cast substantial doubt on the Company’s ability to continue as a going concern, such as those described in note 1 to the consolidated financial statements. Reporting standards for auditors in the United States also require the addition of an explanatory paragraph when there is a change in accounting principle that has a material affect on the comparability of the Company’s financial statements, such as the change in accounting for stock based compensation described in note 2 to the financial statements. Our report to the directors dated September 28, 2006 is expressed in accordance with Canadian reporting standards which do not permit a reference to such events and conditions and such changes in accounting policy in the auditors’ report when these are adequately disclosed in the financial statements.
 
/s/ Pricewaterhouse Coopers LLP
Chartered Accountants
Vancouver, British Columbia
September 28, 2006


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NEVADA PACIFIC GOLD LTD.
 
CONSOLIDATED BALANCE SHEETS
As at June 30th
 
                 
    2006     2005  
    (Expressed in US Dollars)  
 
ASSETS
Current assets
               
Cash and cash equivalents
  $ 3,659,738     $ 957,251  
Accounts receivable
    180,697       273,165  
Product inventory and stockpiled ore (Note 4)
    109,074       4,112,633  
Supplies inventory
    285,152       414,366  
Prepaid expenses
    239,424       223,372  
                 
      4,474,085       5,980,787  
Property, plant and equipment (Note 5)
    13,306,314       13,388,954  
Mineral properties (Note 6)
    4,661,805       3,106,357  
Reclamation bonds
    96,363       93,228  
                 
    $ 22,538,567     $ 22,569,326  
                 
 
LIABILITIES
Current liabilities
               
Accounts payable and accrued liabilities
  $ 1,194,495     $ 1,783,277  
                 
      1,194,495       1,783,277  
Other liabilities
    112,397       175,217  
Asset retirement obligation (Note 7)
    1,684,812       1,567,267  
                 
      1,797,209       1,742,484  
 
SHAREHOLDERS’ EQUITY
Share capital (Note 8)
    30,955,143       25,920,223  
Contributed capital (Note 9)
    1,490,594       1,001,674  
Deficit
    (12,898,874 )     (7,878,332 )
                 
      19,546,863       19,043,565  
                 
    $ 22,538,567     $ 22,569,326  
                 
Nature of operations and Going Concern (Note 1)
               
Commitments (Note 15)
               
Subsequent Events (Note 18)
               
 
Approved by the Board:
 
     
/s/ Michael Beley
  /s/ Gary Nordin
 
Michael Beley,
  Gary Nordin,
Director
  Director
 
See accompanying notes to consolidated financial statements


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NEVADA PACIFIC GOLD LTD.
 
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended June 30th
 
                         
    2006     2005     2004  
    (Expressed in US Dollars)  
 
GOLD SALES
  $ 6,649,300     $ 5,175,235     $ —  
                         
COST OF SALES
    7,903,654       3,347,153       —  
DEPRECIATION AND DEPLETION
    734,618       727,815       —  
ROYALTIES
    381,572       262,197       —  
                         
      9,019,844       4,337,165       —  
                         
EARNINGS (LOSS) FROM MINING OPERATIONS
    (2,370,544 )     838,070       —  
                         
EXPENSES AND OTHER INCOME
                       
General and administrative
    1,944,511       2,084,400       1,538,190  
Interest and financing costs
    —       22,378       1,159  
Stock-based compensation
    611,572       559,963       39,120  
Foreign exchange losses
    36,904       115,796       117,226  
Other income
    (57,349 )     (37,942 )     (89,433 )
                         
      2,535,638       2,744,595       1,606,262  
                         
LOSS BEFORE THE UNDERNOTED ITEMS
    4,906,182       1,906,525       1,606,262  
                         
Write-down of mineral properties
    114,360       630,332       330,285  
Gain on disposal of mining equipment
    —       (155,199 )     —  
                      —  
                         
LOSS FOR THE YEAR
  $ 5,020,542     $ 2,381,658     $ 1,936,547  
                         
Basic and diluted loss per share
  $ 0.08     $ 0.05     $ 0.06  
                         
Weighted average number of shares outstanding
    60,304,369       51,295,350       30,305,758  
                         
 
See accompanying notes to consolidated financial statements


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NEVADA PACIFIC GOLD LTD.
 
CONSOLIDATED STATEMENTS OF DEFICIT
For the years ended June 30th
 
                         
    2006     2005     2004  
    (Expressed in US Dollars)  
 
DEFICIT, Beginning of year
                       
As previously reported
  $ 7,878,332     $ 5,209,298     $ 3,272,751  
Change in accounting policy (Note 2 — Stock Compensation)
    —       287,376       —  
                         
As restated
    7,878,332       5,496,674       3,272,751  
Loss for the year
    5,020,542       2,381,658       1,936,547  
                         
DEFICIT, End of year
  $ 12,898,874     $ 7,878,332     $ 5,209,298  
                         
 
See accompanying notes to consolidated financial statements


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NEVADA PACIFIC GOLD LTD.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended June 30th
 
                         
    2006     2005     2004  
    (Expressed in US Dollars)  
 
CASH PROVIDED BY (USED FOR) OPERATIONS
                       
Loss for the period
  $ (5,020,542 )   $ (2,381,658 )   $ (1,936,547 )
Items not affecting cash
                       
Depreciation, depletion & amortization
    758,435       750,867       15,978  
Accretion of asset retirement obligation
    117,545       44,540       —  
Stock based compensation
    611,572       559,963       39,120  
Write-off of mineral properties
    114,360       630,332       330,285  
Gain on disposal of mining equipment
    —       (155,199 )     —  
Severance expense
    (27,820 )     61,106       —  
                         
      (3,446,450 )     (490,049 )     (1,551,164 )
Changes in non-cash working capital items (Note 12)
    2,970,312       (4,357,410 )     720,590  
                         
      (476,138 )     (4,847,459 )     (830,574 )
                         
INVESTING ACTIVITIES
                       
Property, plant and equipment
    (25,700 )     (3,987,643 )     (1,889,409 )
Proceeds from disposal of equipment
    —       200,199       —  
Acquisition of Pangea Resources Inc (Note 3)
    —       —       (4,323,753 )
Reclamation bonds
    (3,135 )     (45,256 )     (47,972 )
Expenditures on mineral properties, net of recoveries
    (1,704,808 )     (1,321,555 )     (1,223,327 )
                         
      (1,733,643 )     (5,154,255 )     (7,484,461 )
                         
FINANCING ACTIVITIES
                       
Common shares issued:
                       
On private placements
    4,541,507       10,262,635       7,871,295  
On warrant conversion
    93,952       591,200       920,243  
On option exercise
    369,826       200,020       343,933  
Share issue costs and finder’s fees
    (93,017 )     (692,741 )     (310,303 )
                         
      4,912,268       10,361,114       8,825,168  
                         
INCREASE IN CASH AND CASH EQUIVALENTS
    2,702,487       359,400       510,133  
CASH AND CASH EQUIVALENTS, Beginning of year
    957,251       597,851       87,718  
                         
CASH AND CASH EQUIVALENTS, End of year
  $ 3,659,738     $ 957,251     $ 597,851  
                         
Supplementary information on non-cash transactions
                       
Shares issued and applied to notes payable (Note 3)
  $ —     $ 500,000     $ —  
Warrants issued to Underwriter (Note 9)
  $ —     $ 131,020     $ —  
 
See accompanying notes to consolidated financial statements


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NEVADA PACIFIC GOLD LTD.
 
CONSOLIDATED STATEMENTS OF MINERAL PROPERTY EXPENDITURES
For the years ended June 30th
 
                                                                         
          South
 		                            Other
 		             
    Limousine
 		    Carlin
 		                      Timber
 		    Nevada
 		    Mexican
 		       
    Butte     Project     Keystone     BMX     Cornerstone     Creek     Properties     Properties     Total  
    (Expressed in US Dollars)  
 
Total as at June 30, 2003
  $ 473,912     $ 756,611     $ 117,277     $ 11,215     $ —     $ 40,061     $ 88,016     $ —     $ 1,487,092  
Exploration salaries & wages
    45,833       2,927       26,025       9,728       1,612       2,255       87,527       18,871       194,778  
Land holding costs
    45,900       7,864       52,434       97,306       10,049       37,547       82,836       86,398       420,334  
Surveying
    —       —       9,480       3,689       —       4,461       18,413       11,572       47,615  
Environmental
    225       —       14       2,847       —       —       16,430       —       19,516  
Geology
    3,952       190       2,119       34,949       23       677       135,474       35,035       212,419  
Surface geochemistry
    1,564       —       643       16,906       —       3,354       3,290       9,506       35,263  
Geophysics
    —       —       15,835       2,000       —       6,000       48,100       —       71,935  
Road work & trenching
    3,788       —       —       3,653       —       —       5,668       —       13,109  
Drilling
    153,386       —       —       126,218       —       —       264,776       —       544,380  
Other
    3,995       —       1,176       6,422       —       403       13,523       6,763       32,282  
                                                                         
Total expenditures
    258,643       10,981       107,726       303,718       11,684       54,697       676,037       168,145       1,591,631  
Cost recoveries
    —       —       —       (293,304 )     —       —       —       —       (293,304 )
Property write-offs
    —       (245,196 )     —       —       —       —       (85,089 )     —       (330,285 )
                                                                         
Total as at June 30, 2004
    732,555       522,396       225,003       21,629       11,684       94,758       678,964       168,145       2,455,134  
Exploration salaries & wages
    10,650       —       14,734       2,855       40,824       14,825       155,136       23,964       262,988  
Land holding costs
    56,678       9,616       68,312       74,662       32,772       37,704       84,217       57,077       421,038  
Surveying
    —       —       4,028       6,145       11,638       7       23,980       6,728       52,526  
Environmental
    —       —       —       —       4       8       8,398       —       8,410  
Geology
    22       —       497       3,450       5,148       2,353       14,181       53,607       79,258  
Surface geochemistry
    —       —       4,446       —       27,893       —       11,666       81,382       125,387  
Geophysics
    —       —       —       —       —       3,350       52,550       57,736       113,636  
Road work & trenching
    —       —       —       —       —       —       23,169       61,627       84,796  
Drilling
    1,020       —       5,460       —       22       —       148,140       150,621       305,263  
Other
    —       —       —       —       —       —       —       40,100       40,100  
                                                                         
Total expenditures
    68,370       9,616       97,477       87,112       118,301       58,247       521,437       532,842       1,493,402  
Cost recoveries
    (56,500 )     —       (78,720 )     (76,627 )     —       —       —       —       (211,847 )
Property write-offs
    —       —       —       —       —       —       (630,332 )     —       (630,332 )
                                                                         
Total as at June 30, 2005
    744,425       532,012       243,760       32,114       129,985       153,005       570,069       700,987       3,106,357  
Exploration salaries & wages
    2,960       —       17,782       15,505       53,181       18,132       93,121       107,129       307,810  
Land holding costs
    —       9,639       20       80,587       43,009       48,151       58,234       207,803       447,443  
Surveying
    —       —       —       —       991       6,716       4,966       1,726       14,399  
Geology
    —       —       —       1,226       212       666       1,453       43,381       46,938  
Surface geochemistry
    —       —       —       —       2,199       —       3,962       55,230       61,391  
Geophysics
    —       —       —       —       —       5,300       18,950       5,524       29,774  
Road work & trenching
    —       —       —       9,110       31,880       7,200       222       21,207       69,619  
Drilling
    —       —       91,724       71,202       248,629       236,916       36,541       —       685,012  
Other
    —       —       —       —       —       —       —       19,042       19,042  
                                                                         
Total expenditures
    2,960       9,639       109,526       177,630       380,101       323,081       217,449       461,042       1,681,428  
Cost recoveries
    —       —       (11,620 )     —       —       —       —       —       (11,620 )
Property write-offs
    —       (23 )     —       —       —       —       (114,337 )     —       (114,360 )
                                                                         
Total as at June 30, 2006
  $ 747,385     $ 541,628     $ 341,666     $ 209,744     $ 510,086     $ 476,086     $ 673,181     $ 1,162,029     $ 4,661,805  
                                                                         
 
See accompanying notes to consolidated financial statements


D-8

Table of Contents

NEVADA PACIFIC GOLD LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the years ended June 30th 2006 and 2005
(expressed in US Dollars)
 
1.   Nature of Operations and Going Concern
 
Nevada Pacific Gold Ltd. (“the Company”) was incorporated under the laws of the Province of British Columbia. Its principal business activities consist of the production of gold and silver in Mexico and exploring for and developing gold and silver properties in Mexico and the western United States, primarily Nevada.
 
These consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assumes the realization of assets and discharge of liabilities in the normal course of business. The Company has recorded losses from operations since its inception. The Company’s ability to continue as a going concern is dependent upon the ability of the Company to obtain additional financing to develop its mineral properties, the future performance of the Magistral Gold Mine, which is currently in a leach only phase, the existence of economically recoverable reserves, and upon its ability to attain profitable operations. Management continues to seek additional financing necessary to permit the Company to continue operations. There can be no assurance that management will be successful in all these activities. Because of this uncertainty, there is substantial doubt about the ability of the Company to continue as a going concern. These consolidated financial statements do not give effect to any adjustments that would be necessary should the Company not be able to continue as a going concern. Such adjustments could be material.
 
2.   Significant Accounting Policies
 
Basis of presentation and principles of consolidation
 
These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“CDN GAAP”). The significant differences between those principles and those that would be applied under U.S. generally accepted accounting principles (“US GAAP”) are disclosed in Note 17.
 
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Nevada Pacific Gold (US), Inc., Pangea Resources Inc. and Compania Minera Pangea, S.A. de C.V. All inter-company transactions and balances have been eliminated.
 
Use of estimates
 
The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in these consolidated financial statements. Significant estimates by management include the carrying value of property, plant and equipment, useful lives of such assets, reserves and resources, the asset retirement provision, future income tax valuation allowance, inventory valuation and stock-based compensation valuation assumptions. These estimates are reviewed and adjusted regularly to ensure that they are reasonable. The estimates may vary from actual results.
 
Property, plant and equipment
 
(a) Plant and equipment
 
Plant and equipment are depreciated over the estimated lives of the assets on a unit-of-production or straight-line basis as appropriate. Amortization of property, plant and equipment at the Magistral Gold Mine commenced upon commercial production on a unit-of-production basis.
 
(b) Mineral properties and deferred costs
 
The acquisition cost of mineral properties and related exploration and development costs, as well as directly attributable general and administrative support costs and salaries, are deferred. When a mineral property is sold,


D-9

Table of Contents

 
NEVADA PACIFIC GOLD LTD.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

abandoned, or deemed not to contain economic reserves, all costs are written-off. The amounts shown for mineral properties represent costs to date and do not necessarily reflect present or future values.
 
Deferred costs include operating costs, net of revenues, prior to the commencement of commercial production of the Magistral Gold Mine. Deferred costs are, upon commencement of commercial production, amortized over the estimated life of the ore body to which they relate, on a unit-of-production basis, or are written off if the property is abandoned or written down if there is considered to be a permanent impairment in value.
 
Asset retirement obligations
 
Effective July 1, 2004, the Company adopted CICA Handbook Section 3110 “Asset Retirement Obligations”. The accounting standard applies to future asset retirement requirements and requires that the fair value of liabilities for asset retirement obligations are recorded in the period in which they occur. The liability is accreted over time through periodic charges to earnings. The asset retirement cost is capitalized as part of the carrying value of the asset and is amortized over the useful life of the asset.
 
Cash and cash equivalents
 
The Company considers cash and cash equivalents to be cash on deposit and highly liquid short-term interest bearing securities with maturities at the date of purchase of three months or less. Interest earned is recognized immediately in operations.
 
Inventories
 
Inventories include gold dore, stockpiled ore and supplies inventories. Gold poured, in transit and at refineries, is recorded at the lower of cost and net realizable value, stockpiled ore is valued at the lower of cost and net realizable value and includes amortization, depreciation and depletion and supplies inventory is carried at the lower of cost and replacement cost.
 
Revenue recognition
 
Revenue from the sale of metals is recognized in the accounts upon delivery of the product to the customer when title transfers and the rights and obligations of ownership pass to the buyer. Revenue from the sale of metals may be subject to adjustment upon final settlement of estimated metal prices, weights and assays.
 
Foreign currency translation
 
The Company and its subsidiaries are considered to be integrated foreign operations. Their financial statements and transaction amounts denominated in foreign currencies are translated into U.S. dollars as follows:
 
  •  monetary items are translated at the rate of exchange in effect at the balance sheet date,
 
  •  non-monetary items are translated at the historical exchange rates,
 
  •  revenue and expense items are translated at the average rate for the period, except for items for which amortization is charged, and
 
  •  foreign currency translation gains and losses are included in operations.
 
Income taxes
 
The Company follows the liability method of accounting for income taxes. Using this method, income tax liabilities and assets are recognized for the estimated tax consequences attributable to differences between the amounts reported in the financial statements of the Company and their respective tax bases, using substantively enacted income tax rates. The effect of a change in income tax rates on future tax liabilities and assets is recognized


D-10

Table of Contents

 
NEVADA PACIFIC GOLD LTD.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

in income in the period in which the change occurs. A future income tax asset is recorded when the probability of the realization is more likely than not.
 
Stock based compensation
 
Effective July 1, 2004, the Company adopted provisions of CICA Handbook Section 3870 on “Stock-Based Compensation and Other Stock-Based Payments”. The Company is required to employ the fair value method of accounting for all stock based awards. The Company has applied the new provisions retroactively, without restatement. The Company recorded a cumulative increase to deficit and a corresponding increase to contributed capital of $287,376 on July 1, 2004 with respect to stock options granted during the years ended June 30, 2003 and 2004.
 
Loss per share
 
Loss per share is calculated using the weighted-average number of shares outstanding during the year. The Company follows the “treasury stock” method in its calculation of diluted earnings per share.
 
Variable interest entities
 
Effective January 1, 2005, the Company has adopted CICA Accounting Guideline 15, “Consolidation of Variable Interest Entities” (AcG-15). The new standard provides guidance on the application of consolidation principles to certain entities that are subject to control on a basis other than ownership of voting rights. The adoption of this guideline did not have any impact on the consolidated financial statements of the Company.
 
3.   Acquisition of Pangea Resources Inc.
 
On February 2, 2004, the Company acquired all of the outstanding shares of Pangea Resources Inc. (“Pangea”) whereby the Company acquired 100% of the Magistral Gold Mine and related assets beneficially owned by Compania Minera Pangea S.A. de C.V. (“Minera Pangea”) in Mexico, a wholly owned subsidiary of Pangea. Under the purchase agreement, the Company acquired Pangea for $4,000,000 cash and 2,000,000 common shares of the Company with an estimated fair value of $1.00 CDN per share with a further $3,000,000 note payable due on or before August 2, 2004. A general security agreement was put in place on the assets of the Company. The Company incurred acquisition costs of $370,699. The acquisition has been accounted for using the purchase method.
 
During the year ended June 30, 2005 the Company’s $3,000,000 note payable was settled by the payment of $2,522,116, including $22,116 in accrued interest, and the issuance of 669,485 shares of the Company, valued at $500,000. All security granted by the Company has been returned to the Company.
 
Management does not consider that the Magistral Gold Mine was operating at commercial levels at the time the mine was acquired. Prior to commercial production, effective January 1, 2005, pre-production expenditures, net of revenue, were capitalized to property. Included in the liabilities assumed on the purchase is an estimated tax liability for the Magistral Gold Mine of $600,000, which is included in accounts payable and accrued liabilities. There is a degree of uncertainty associated with the measurement of this estimated Mexican tax liability. This amount may change as a result of the resolution of certain Mexican tax issues arising from the acquisition.
 
4.   Product inventory and stockpiled ore
 
                 
    June 30
 		    June 30
 		 
    2006     2005  
 
Stockpiled ore
  $ —     $ 3,788,972  
Gold dore
    109,074       323,661  
                 
    $ 109,074     $ 4,112,633  
                 


D-11

Table of Contents

 
NEVADA PACIFIC GOLD LTD.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

5.   Property, plant and equipment

 
                         
    June 30
 		    June 30
 		    June 30
 		 
    2006     2005     2004  
 
Magistral Gold Mine
                       
Plant and equipment
  $ 2,760,526     $ 2,760,526     $ 1,841,972  
Property and deferred costs
    10,245,081       10,240,243       7,172,689  
Asset retirement obligation asset
    1,477,593       1,477,593       1,477,593  
Accumulated amortization and depletion
    (1,220,546 )     (1,136,023 )     —  
                         
      13,262,654       13,342,339       10,492,254  
                         
Other equipment
    136,776       115,914       114,245  
Accumulated amortization
    (93,116 )     (69,299 )     (46,247 )
                         
      43,660       46,615       67,998  
                         
    $ 13,306,314     $ 13,388,954     $ 10,560,252  
                         
 
6.   Mineral Properties
 
Limousine Butte
 
The Limousine Butte property is located northwest of Ely, Nevada in White Pine County, and was staked by the Company such that the Company controls the mineral rights to the property. The property is subject to a sliding scale net smelter return royalty of 1.5% to 2.5% on all production from the property, with an advance payment of $1,000,000 to be made at the commencement of commercial production and to be credited against future royalty payments.
 
On September 7, 2004, the Company signed a binding letter agreement with Placer Dome U.S. Inc. (“Placer Dome”), a wholly owned subsidiary of Placer Dome Inc., whereby Placer Dome had the right to earn a 60% interest in the Company’s Limousine Butte project by spending $4,000,000 on exploration over a five-year period. On April 26, 2006 the Company received notification from Placer Dome of its election to terminate the letter agreement. All rights to the properties and all exploration data relating to the properties have been returned to the Company.
 
South Carlin Project
 
The Company’s principal interest in the South Carlin project is the Woodruff Creek property. The Woodruff Creek property is located within Elko County, Nevada. In January 2001, the Company completed its acquisition of a 100% interest in the property from Kennecott Exploration Company (“Kennecott”) by incurring over $500,000 in exploration expenditures over a four-year period and by paying $50,000 to Kennecott. Kennecott retains an uncapped 1% net smelter return royalty on the project.
 
Keystone
 
The Company acquired the Keystone project in Nevada through staking and the purchase of two patented claims in 1999 and expanded the property in 2002 through the staking of 109 unpatented mining claims.
 
On September 7, 2004, the Company signed a binding letter agreement with Placer Dome, whereby Placer Dome had the right to earn a 60% interest in the Company’s Keystone project by spending $5,000,000 on exploration over a five-year period. On April 26, 2006 the Company received notification from Placer Dome of its election to terminate the letter agreement. All rights to the properties and all exploration data relating to the properties have been returned to the Company.


D-12

Table of Contents

 
NEVADA PACIFIC GOLD LTD.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

BMX
 
During the year ended June 30, 2003, the Company acquired mineral rights to the Battle Mountain (BMX) project. The project has been staked by the Company, through the location of unpatented Federal lode mining claims and is 100% owned by the Company.
 
On November 27, 2002, the Company signed a binding letter of agreement with Placer Dome whereby Placer Dome had the right to earn a 60% interest in the BMX project by paying the Company $200,000 on signing and expending $4,000,000 on exploration on the project over a five-year period. On October 21, 2005, the Company received notification from Placer Dome of its election to terminate the letter agreement. All rights to the properties and all exploration data relating to the properties have been returned to the Company.
 
Bluebird Gold Property
 
The Bluebird property lies within the area of interest of the Company’s BMX project. On April 30, 2003, the Company signed a 10-year mining lease agreement with exploration rights with the owner of the Bluebird property. The lease is renewable in 5-year increments with the owner retaining a 3% net smelter return. The property is located at the northern end of the Battle Mountain Trend, Lander County, Nevada and consists of 10 unpatented mining claims. The Company can purchase 1.5% of the net smelter return at any time for $500,000 per percentage point. Advanced annual royalties are payable to the owners of $10,000 per year for the first nine years and $25,000 per year for subsequent years.
 
Cornerstone (Pat Canyon)
 
In May 2004, the Company signed a 10-year renewable mining lease agreement to acquire the exploration rights to the Cornerstone property, which is located less than three miles east of the Company’s Keystone project in Eureka County, Nevada and consists of 106 mineral claims. The owners retain a 3-4% sliding scale gross production royalty and advanced royalties payable to the owners were $10,000 on signing of the lease. This amount increases annually to a maximum of $50,000 per year over the term of the lease.
 
7.   Asset retirement obligation
 
                         
    2006     2005     2004  
 
Asset retirement obligation — beginning of year
  $ 1,567,267     $ 1,477,593     $ —  
Obligations incurred during the year
    —       —       1,477,593  
Accretion expense
    117,545       89,674       —  
                         
Asset retirement obligation — end of year
  $ 1,684,812     $ 1,567,267     $ 1,477,593  
                         
 
The Company’s asset retirement obligation arises from it obligations for site reclamation and remediation in connection with the Magistral Gold Mine. Under Mexican regulations no deposits are required to secure these obligations.
 
The total undiscounted asset retirement obligation is $2,332,864, which is expected to be expended in 2013. In determining the carrying value of the asset retirement obligation, the Company has assumed a credit-adjusted risk-free rate of 7.5% and an inflation rate of 2.75%.


D-13

Table of Contents

 
NEVADA PACIFIC GOLD LTD.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

8.   Share capital

 
Authorized
 
Unlimited Preferred Shares without par value, with rights to be determined upon issue Unlimited Common Shares without par value
 
                 
Issued and Outstanding
  Number of Shares     Amount  
 
Balance as at June 30, 2003
    20,142,503     $ 4,857,823  
Private Placements
    13,821,352       7,849,847  
On acquisition of Pangea Resources Inc. 
    2,000,000       1,491,333  
On exercise of warrants
    2,394,998       920,243  
On exercise of options
    775,000       343,933  
Finder’s fee
    80,000       21,448  
Share issue costs
    —       (310,303 )
                 
Balance as at June 30, 2004
    39,213,853     $ 15,174,324  
Private Placements
    5,533,655       4,091,285  
Underwritten offering
    7,586,712       6,171,350  
Issued for payment on note payable
    669,485       500,000  
On exercise of warrants
    1,723,801       591,200  
On exercise of options
    715,000       200,020  
Fair value of options exercised
    —       15,805  
Finder’s fee
    —       (681,734 )
Share issue costs
    —       (142,027 )
                 
Balance as at June 30, 2005
    55,442,506     $ 25,920,223  
Private Placement — (i)
    12,500,000       4,431,286  
Private Placement — (ii)
    200,000       110,221  
On exercise of warrants
    89,515       93,952  
On exercise of options
    740,000       369,826  
Fair value of options exercised
    —       122,652  
Share issue costs
    —       (93,017 )
                 
Balance as at June 30, 2006
    68,972,021     $ 30,955,143  
                 
 
 
(i) On December 9, 2005, the Company announced that it had entered into an agreement with Mr. Robert McEwen to issue 12,500,000 units at a price of $0.40 CDN per unit for aggregate proceeds of $5,000,000 CDN. Each unit consisted of one common share and one common share purchase warrant with each warrant exercisable to acquire one common share of the Company at an exercise price of $0.50 CDN for a term of two years. As a result of the private placement, Mr. McEwen holds approximately 18.2% of the outstanding shares of the Company and, in event of the exercise of all the warrants, Mr. McEwen will hold approximately 30.8% of the outstanding common shares of the Company. In accordance with the rules of the TSX Venture Exchange, as this constitutes a “change in control”, the placement closed in two tranches. The first tranche, consisting of 6,921,213 units was completed on December 14, 2005. The second tranche for the balance of the units was conditional upon receiving shareholder approval. The Company called an extraordinary general meeting of the shareholders on January 23, 2006 and the shareholders approved the transaction, which was completed on May 11, 2006. The shares and warrants comprising the units and the shares underlying such warrants are subject to a four-month hold period. No finder’s fees are payable on this placement.


D-14

Table of Contents

 
NEVADA PACIFIC GOLD LTD.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(ii) On January 13, 2006, the Company issued 200,000 units to an officer of the Company. Each unit was issued at a price of $0.64 CDN for gross proceeds of $128,000 CDN. Each unit is comprised of one common share of the Company and one share purchase warrant with each purchase warrant entitling the holder to purchase one common share of the Company at $0.80 CDN until January 13, 2008. The shares and warrants comprising the units and the shares underlying such warrants are subject to a four-month hold period. No finder’s fees were paid on this issue.

 
Stock options
 
The Company has a stock option plan (the “Stock Option Plan”) which provides for equity participation in the Company by its directors, officers, employees and consultants through the acquisition of common shares pursuant to the grant of options to purchase common shares. The maximum aggregate number of common shares to be reserved and authorized, to be issued pursuant to options granted under the Stock Option Plan is 5,496,000 common shares.
 
The exercise price for options granted under the Stock Option Plan is determined by committee upon grant provided the price is not less than the closing trading price on the day immediately preceding the date of grant, less any discounts permitted by the TSX Venture Exchange or such other stock exchange on which the common shares are listed. Options granted under the Stock Option Plan are subject to a minimum one year vesting schedule whereby 25% of each option will vest on each of the three month anniversaries of the date of grant, up to and including the end of the first year after such grant, or such other more restrictive vesting schedule as the administrator of the Stock Option Plan may determine. Options are non-assignable and are exercisable for a period of up to five years from the date the option is granted, or up to ten years from the date of grant if permitted by applicable stock exchanges, subject to earlier termination after certain events such as the optionee’s cessation of service to the Company or death.
 
The Company accounts for its grants in accordance with the fair value method of accounting for stock-based compensation. For the year ended June 30, 2006, the Company recognized $611,572 in stock based compensation for employees, directors and consultants. For the year ended June 30, 2005, the company recognized $559,963 in stock based compensation for employees, directors and consultants. For the year ended June 30, 2004, the company recognized $39,120 in stock based compensation for consultants. As permitted by Canadian generally accepted accounting principles, the Company did not use the fair value method of accounting for stock options granted to employees and directors for the year ended June 30, 2004. Had the Company followed the fair value method of accounting, the Company would have recorded a compensation expense of $278,002 in respect of its employee and director stock options.
 
Pro forma earnings for 2004 determined under the fair value method of accounting for stock options are as follows:
 
         
    2004  
 
Loss for the year as reported
  $ 1,936,547  
Stock option expense
    278,002  
         
Pro forma net loss
  $ 2,214,549  
         
Loss per share — basic and diluted
       
As reported
  $ 0.06  
Pro forma
  $ 0.07  
         


D-15

Table of Contents

 
NEVADA PACIFIC GOLD LTD.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The fair value of the options granted has been calculated using the Black-Scholes option-pricing model, based on the following assumptions:
 
             
    2006   2005   2004
 
Risk free interest rate
  3.4 to 4%   4%   4%
Expected life
  1 to 3 years   1 to 3 years   3 years
Expected volatility
  55% to 77%   55% to 77 %   85% to 97%
Dividend yield rate
  nil   nil   nil
 
Option-pricing models require the input of highly subjective assumptions regarding the expected volatility and expected life. Changes in assumptions can materially affect the fair value estimate, and therefore, the existing models do not necessarily provide a reliable measure of the fair value of the Company’s stock options at the date of grant.
 
A summary of changes to stock options during the period are as follows:
 
                                                 
    June 30, 2006     June 30, 2005     June 30, 2004  
          Weighted-
 		          Weighted-
 		          Weighted-
 		 
    Number
 		    Average
 		    Number
 		    Average
 		    Number
 		    Average
 		 
    of Shares     Exercise Price     of Shares     Exercise Price     of Shares     Exercise Price  
 
Outstanding at beginning of year
    3,328,500     $ 0.86 CDN       2,965,000     $ 0.69 CDN       1,925,000     $ 0.43 CDN  
Granted(i) (ii) (iii)
    1,712,500     $ 1.05 CDN       1,223,500     $ 1.00 CDN       1,825,000     $ 0.91 CDN  
Exercised
    (740,000 )   $ 0.57 CDN       (715,000 )   $ 0.34 CDN       (775,000 )   $ 0.58 CDN  
Forfeited
    (461,000 )   $ 0.94 CDN       (145,000 )   $ 1.01 CDN       (10,000 )   $ 0.61 CDN  
                                                 
Outstanding at end of the year
    3,840,000     $ 0.99 CDN       3,328,500     $ 0.86 CDN       2,965,000     $ 0.69 CDN  
                                                 
Options exercisable at the end of the year
    2,263,750     $ 0.95 CDN       1,782,125     $ 0.74 CDN       1,355,000     $ 0.38 CDN  
                                                 
 
 
(i) On August 30, 2005 the Company granted to consultants 50,000 stock options with an exercise price of $0.80 CDN. These options have a term of one year and vest in equal amounts every three months for 1 year. The fair value of these options was estimated at approximately $0.16 per option at grant date.
 
(ii) On March 2, 2006 the Company granted to directors, employees and consultants 1,462,500 stock options with an exercise price of $0.99 CDN. These options have a term of ten years and vest in equal amounts every three months for 1 year. The fair value of these options was estimated at approximately $0.45 per option at grant date.
 
(iii) On June 1, 2006 the Company granted to a director 200,000 stock options with an exercise price of $1.54 CDN. These options have a term of ten years and vest in equal amounts every three months for 1 year. The fair value of these options was estimated at approximately $0.66 per option at grant date.
 
Stock options outstanding as at June 30, 2006 are as follows:
 
                         
        Weighted-
 		  Weighted-
    Number
 		  Average
 		  Average
    Outstanding
 		  Life Remaining
 		  Exercise Price
Range of Exercise Prices ($)
  at June 30, 2006   (Years)   ($)
 
0.53 - 1.00 CDN
    3,095,000       7.59       0.90 CDN  
1.01 - 1.54 CDN
    745,000       8.28       1.36 CDN  
                         
Total
    3,840,000       7.72       0.99 CDN  
                         


D-16

Table of Contents

 
NEVADA PACIFIC GOLD LTD.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Warrants
 
A summary of changes to warrants during the period are as follows:
 
                                                 
    June 30, 2006     June 30, 2005     June 30, 2004  
          Weighted-
 		          Weighted-
 		          Weighted-
 		 
    Number
 		    Average
 		    Number
 		    Average
 		    Number
 		    Average
 		 
    of Warrants     Exercise Price     of Warrants     Exercise Price     of Warrants     Exercise Price  
 
Outstanding at beginning of the year
    6,420,841     $ 1.19 CDN       5,255,676     $ 1.05 CDN       699,998     $ 0.65 CDN  
Granted
    12,700,000     $ 0.50 CDN       6,420,841     $ 1.19 CDN       6,950,676     $ 0.91 CDN  
Exercised
    (89,515 )   $ 1.20 CDN       (1,723,801 )   $ 0.45 CDN       (2,394,998 )   $ 0.51 CDN  
Expired
    (4,324,426 )   $ 1.18 CDN       (3,531,875 )   $ 1.35 CDN       —       —  
                                                 
Outstanding at end of the year
    14,706,900     $ 0.60 CDN       6,420,841     $ 1.19 CDN       5,255,676     $ 1.05 CDN  
                                                 
 
Share purchase warrants outstanding at June 30, 2006 were as follows:
 
             
Number
 
Exercise Price
 
Expiry Date
 
  1,874,400     $1.20 CDN   August 17, 2006 (iv) 
  132,500     $1.20 CDN   September 22, 2006 (iv) 
  6,921,213     $0.50 CDN   December 14, 2007
  200,000     $0.80 CDN   January 13, 2008
  5,578,787     $0.50 CDN   May 11, 2008
             
  14,706,900          
             
 
 
(iv) On August 9, 2005 these warrants were extended by an additional twelve months. The original expiry date for the 1,936,900 warrants was August 17, 2005 and for the 159,515 was September 22, 2005. (See note 18)
 
9.   Contributed capital
 
                         
    2006     2005     2004  
 
Contributed capital — beginning of year
  $ 1,001,674     $ 39,120     $ —  
Retained earning adjustment (See Note 2)
    —       287,376       —  
Fair value of share purchase options vesting during year
    611,572       559,963       39,120  
Fair value of underwriter’s warrants issued during year
    —       131,020       —  
Fair value of share purchase options exercised during year
    (122,652 )     (15,805 )     —  
                         
Contributed capital — end of year
  $ 1,490,594     $ 1,001,674     $ 39,120  
                         
 
10.   Related party transactions
 
Payments to related parties were made in the normal course of operations and were valued at fair value as determined by management. Amounts due to or from related parties are unsecured, non-interest bearing and due on demand.
 
During the year ended June 30, 2006, a total of $149,730 (2005 — $129,055, 2004 — $129,952) was charged for fees by a legal firm of which the Company’s corporate secretary is a partner. At June 30, 2006, $17,352 (2005 — $5,112, 2004 — $32,345) was owing to this legal firm.
 
In May, 1999, the Company became the leaseholder of the head office premises. During the year ended June 30, 2001, the Company entered into a separate sub-lease agreement with Portal Resources Ltd. of which the Company’s Chairman is a director. During the year ended June 30, 2006, a total of $60,340 (2005 — $47,781, 2004 —


D-17

Table of Contents

 
NEVADA PACIFIC GOLD LTD.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

$14,350) was charged by the Company for rent and common office costs. At June 30, 2006, $Nil (2005 — $4,425, 2004 — $13,804) was receivable from this company.
 
11.   Financial Instruments
 
The Company’s consolidated financial instruments include cash and cash equivalents, accounts receivable, reclamation bonds and accounts payable. The fair values of these financial instruments approximate their carrying values due to their relatively short periods to maturity.
 
12.   Supplemental cash flow information
 
                         
    2006     2005     2004  
 
Changes in non-cash working capital
                       
Accounts receivable
  $ 92,468     $ 238,376     $ 90,069  
Product inventory and stockpiled ore
    3,353,464       (1,452,205 )     (139,417 )
Supplies inventory
    129,214       (218,344 )     (21,709 )
Prepaid expenses
    (16,052 )     2,655       (184,570 )
Accounts payable and accrued liabilities
    (588,782 )     (427,892 )     976,217  
Note payable
    —       (2,500,000 )     —  
                         
    $ 2,970,312     $ (4,357,410 )   $ 720,590  
                         
 
13.   Segmented information
 
The Company has reportable segments in three geographic areas: gold mining operations and exploration in Mexico, exploration and development in the United States and corporate in Canada. Gold mining operations consist of the Magistral Gold Mine in Mexico, acquired on February 2, 2004, which commenced commercial production on January 1, 2005.
 


D-18

Table of Contents

NEVADA PACIFIC GOLD LTD.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

                                 
                Gold Mining
 		       
    Corporate
 		    Exploration
 		    & Exploration
 		       
    (Canada)     (U. S.)     (Mexico)     Total  
    ($)     ($)     ($)     ($)  
 
Property, plant and equipment
                               
June 30, 2006
    29,610       14,050       13,262,654       13,306,314  
June 30, 2005
    38,590       8,025       13,342,339       13,388,954  
June 30, 2004
    56,203       11,795       10,492,254       10,560,252  
Property, plant and equipment:
                               
expenditures
                               
June 30, 2006
    9,492       11,370       4,838       25,700  
June 30, 2005
    769       900       3,985,974       3,987,643  
June 30, 2004
    61,125       11,458       10,492,254       10,564,837  
Mineral Properties
                               
June 30, 2006
    —       3,499,776       1,162,029       4,661,805  
June 30, 2005
    —       2,405,370       700,987       3,106,357  
June 30, 2004
    —       2,286,989       168,145       2,455,134  
Mineral Properties: expenditures
                               
June 30, 2006
    —       1,243,766       461,042       1,704,808  
June 30, 2005
    —       788,713       532,842       1,321,555  
June 30, 2004
    —       1,055,182       168,145       1,223,327  
Net income (loss) for the year ended
                               
June 30, 2006
    (2,327,532 )     (314,215 )     (2,378,795 )     (5,020,542 )
June 30, 2005
    (2,529,225 )     (834,873 )     982,440       (2,381,658 )
June 30, 2004
    (1,475,170 )     (461,377 )     —       (1,936,547 )
Gold revenues for the year ended
                               
June 30, 2006
    —       —       6,649,300       6,649,300  
June 30, 2005
    —       —       5,175,235       5,175,235  
June 30, 2004
    —       —       —       —  
Depreciation, depletion and amortization for the year ended
                               
June 30, 2006
    18,472       5,345       734,618       758,435  
June 30, 2005
    18,382       4,670       1,136,023       1,159,075  
June 30, 2004
    12,633       3,345       —       15,978  

D-19

Table of Contents

 
NEVADA PACIFIC GOLD LTD.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

14.   Income Taxes

 
A reconciliation of income taxes at statutory rates with the reported taxes is as follows:
 
                         
    2006     2005     2004  
 
Loss before income taxes
  $ (5,020,542 )   $ (2,381,658 )   $ (1,936,547 )
Canadian federal and provincial income tax rates
    34.12 %     35.62 %     37.62 %
                         
Expected income taxes (recovery)
    (1,713,009 )     (848,347 )     (728,529 )
Non-deductible (deductible) expenses for tax purposes
    571,904       291,156       20,438  
Foreign exchange
    (32,940 )     109,249       84,417  
Foreign income subject to different tax rates
    6,880       (50,656 )     (12,099 )
Valuation allowance
    1,167,165       498,598       635,773  
                         
Income tax expense
  $ —     $ —     $ —  
                         
 
Future income taxes arise from temporary difference in the recognition of income and expenses for financial reporting and tax purposes. The significant components of the future income tax assets and liabilities are as follows.
 
                         
    2006     2005     2004  
 
Future income tax assets
                       
Tax losses
  $ 8,344,447     $ 6,763,379     $ 4,550,213  
Mineral property expenditures
    240,561       176,871       149,388  
Other temporary differences
    474,112       243,850       65,372  
                         
Future income tax assets before valuation allowance
    8,922,607       7,184,100       4,764,973  
Less: valuation allowance
    (8,922,607 )     (7,184,100 )     (4,764,973 )
                         
Net future income tax assets
  $ —     $ —     $ —  
                         
 
The Company has estimated tax losses available for Canadian income tax purposes of approximately $7,551447, which expire between 2007 and 2026, $6,310,330 for U.S. tax purposes that expire between 2012 and 2021 and $13,065,607 for Mexican tax purposes that expire between 2006 and 2015.
 
15.   Commitments
 
The Company has obligations under operating leases for its corporate offices. Future minimum lease payments for non-cancellable leases with initial or remaining lease terms in excess on one year at June 30, 2006 for the fiscal years ended June 30 are:
 
2007 — $101,822
2008 — $67,881
 
The Magistral Gold Mine production is subject to a net smelter return royalty of 1% for the first 30,000 ounces of gold, 3.5% on the next 350,000 ounces of gold and 1% thereafter. The Company is currently paying net smelter royalties at 3.5%. As at June 30, 2006 the life of mine production is not anticipated to exceed 380,000 ounces.
 
16.   Environmental
 
The Company’s mining and exploration activities are subject to various federal, provincial and state laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally becoming more restrictive. The Company conducts its operations so as to protect public health and the environment and believes its operations are materially in compliance with all applicable laws and regulations. The


D-20

Table of Contents

 
NEVADA PACIFIC GOLD LTD.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Company has made, and expects to make in the future, expenditures to comply with such laws and regulations. The ultimate amount of reclamation and other future site restoration costs to be incurred for existing mining interests is uncertain.
 
17.   Differences Between Canadian and United States Generally Accepted Accounting Principles
 
The Company prepares its consolidated financial statements in accordance with Canadian generally accepted accounting principles (“CDN GAAP”) which differ in certain respects from those principles that the Company would have followed had its consolidated financial statements been prepared in accordance with United States generally accepted accounting principles (“US GAAP”).
 
Applying US GAAP, the consolidated balance sheet at June 30, 2006 would be as follows:
 
                         
    Balance
 		          Balance
 		 
    CDN GAAP     Adjustments     U.S. GAAP  
 
ASSETS
Current assets
                       
Cash and cash equivalents
  $ 3,659,738     $       $ 3,659,738  
Accounts receivable
    180,697               180,697  
Product inventory and stockpiled ore
    109,074               109,074  
Supplies inventory
    285,152               285,152  
Prepaid expenses
    239,424               239,424  
                         
      4,474,085       —       4,474,085  
Property, plant and equipment[a]
    13,306,314       (4,657,846 )     8,648,468  
Mineral properties[a]
    4,661,805       (4,661,805 )     —  
Reclamation bonds
    96,363               96,363  
                         
    $ 22,538,567     $ (9,319,651 )   $ 13,218,916  
                         
 
LIABILITIES
Current liabilities
                       
Accounts payable and accrued liabilities
  $ 1,194,495     $       $ 1,194,495  
                         
      1,194,495               1,194,495  
                         
Other liabilities
    112,397               112,397  
Asset retirement obligation
    1,684,812               1,684,812  
                         
      1,797,209       —       1,797,209  
                         
SHAREHOLDERS’ EQUITY
                       
Share Capital
    30,955,143               30,955,143  
Contributed capital[b]
    1,490,594       (287,376 )     1,203,218  
Deficit[a][b]
    (12,898,874 )     (9,032,275 )     (21,931,149 )
                         
      19,546,863       (9,319,651 )     10,227,212  
                         
    $ 22,538,567     $ (9,319,651 )   $ 13,218,916  
                         


D-21

Table of Contents

 
NEVADA PACIFIC GOLD LTD.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Applying US GAAP, the consolidated balance sheet at June 30, 2005 would be as follows:
 
                         
    Balance
 		          Balance
 		 
    CDN GAAP     Adjustments     U.S. GAAP  
 
ASSETS
Current assets
                       
Cash and cash equivalents
  $ 957,251     $       $ 957,251  
Accounts receivable
    273,165               273,165  
Product inventory and stockpiled ore[a]
    4,112,633       (154,743 )     3,957,890  
Supplies inventory
    414,366               414,366  
Prepaid expenses
    223,372               223,372  
                         
      5,980,787       (154,743 )     5,826,044  
Property, plant and equipment[a]
    13,388,954       (4,684,518 )     8,704,436  
Mineral properties[a]
    3,106,357       (3,106,357 )     —  
Reclamation bonds
    93,228               93,228  
                         
    $ 22,569,326     $ (7,945,618 )   $ 14,623,708  
                         
 
LIABILITIES
Current liabilities
                       
Accounts payable and accrued liabilities
  $ 1,783,277     $       $ 1,783,277  
                         
      1,783,277       —       1,783,277  
                         
Other liabilities
    175,217               175,217  
Asset retirement obligation
    1,567,267               1,567,267  
                         
      1,742,484       —       1,742,484  
                         
SHAREHOLDERS’ EQUITY
                       
Share Capital
    25,920,223               25,920,223  
Contributed capital[b]
    1,001,674       (287,376 )     714,298  
Deficit[a][b]
    (7,878,332 )     (7,658,242 )     (15,536,574 )
                         
      19,043,565       (7,945,618 )     11,097,947  
                         
    $ 22,569,326     $ (7,945,618 )   $ 14,623,708  
                         


D-22

Table of Contents

 
NEVADA PACIFIC GOLD LTD.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The effect of measurement differences between CDN GAAP and US GAAP on the Company’s net loss for the year ended June 30, 2006 is summarized below:
 
                                 
    CDN
 		          US
 		       
    GAAP     Adjustments     GAAP        
 
GOLD SALES[a]
  $ 6,649,300     $ —     $ 6,649,300          
                                 
COST OF SALES[a]
    7,903,654       55,251       7,958,905          
DEPRECIATION AND DEPLETION[a]
    734,618       (236,666 )     497,952          
ROYALTIES[a]
    381,572       —       381,572          
                                 
      9,019,844       (181,415 )     8,838,429          
                                 
LOSS FROM MINING OPERATIONS
    (2,370,544 )     (181,415 )     (2,189,129 )        
                                 
EXPENSES AND OTHER INCOME
                               
General and administrative
    1,944,511               1,944,511          
Interest and financing costs
    —               —          
Stock-based compensation
    611,572               611,572          
Foreign exchange losses
    36,904               36,904          
Other income
    (57,349 )             (57,349 )        
Write-down of mineral properties[a]
    114,360       (114,360 )     —          
Exploration cost[a]
    —       1,669,808       1,669,808          
Gain on disposal of mining equipment
    —               —          
                                 
      2,649,998       1,555,448       4,205,446          
                                 
LOSS FOR THE YEAR
  $ 5,020,542     $ 1,374,033     $ 6,394,575          
                                 
Basic and diluted loss per share
  $ 0.08             $ 0.11          
Weighted average number of common shares outstanding
    60,304,369               60,304,369          


D-23

Table of Contents

 
NEVADA PACIFIC GOLD LTD.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The effect of measurement differences between CDN GAAP and US GAAP on the Company’s net loss for the year ended June 30, 2005 is summarized below:
 
                         
    CDN
 		          US
 		 
    GAAP     Adjustments     GAAP  
 
GOLD SALES[a]
  $ 5,175,235     $ 2,915,992     $ 8,091,227  
                         
COST OF SALES[a]
    3,347,153       6,582,479       9,929,632  
DEPRECIATION AND DEPLETION [a]
    727,815       149,657       877,472  
ROYALTIES[a]
    262,197       264,729       526,926  
                         
      4,337,165       6,996,865       11,334,030  
                         
EARNINGS (LOSS) FROM MINING OPERATIONS
    838,070       (4,080,873 )     (3,242,803 )
                         
EXPENSES AND OTHER INCOME
                       
General and administrative
    2,084,400               2,084,400  
Interest and financing costs
    22,378               22,378  
Stock-based compensation
    559,963               559,963  
Foreign exchange losses
    115,796               115,796  
Other income
    (37,942 )             (37,942 )
Write-down of mineral properties[a]
    630,332       (630,332 )     —  
Exploration cost[a]
    —       1,281,555       1,281,555  
Gain on disposal of mining equipment
    (155,199 )             (155,199 )
                         
      3,219,728       651,223       3,870,951  
                         
LOSS FOR THE YEAR
  $ 2,381,658     $ 4,732,096     $ 7,113,754  
                         
Basic and diluted loss per share
  $ 0.05             $ 0.14  
Weighted average number of common shares outstanding
    51,295,350               51,295,350  


D-24

Table of Contents

 
NEVADA PACIFIC GOLD LTD.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The effect of measurement differences between CDN GAAP and US GAAP on the Company’s net loss for the year ended June 30, 2004 is summarized below.
 
                         
    CDN
 		          US
 		 
    GAAP     Adjustments     GAAP  
 
GOLD SALES[a]
  $ —     $ 2,654,492     $ 2,654,492  
                         
COST OF SALES[a]
    —       3,145,048       3,145,048  
DEPRECIATION AND DEPLETION[a]
    —       202,809       202,809  
ROYALTIES[a]
    —       65,023       65,023  
                         
      —       3,412,880       3,412,880  
                         
LOSS FROM MINING OPERATIONS
    —       (758,388 )     (758,388 )
                         
EXPENSES AND OTHER INCOME
                       
General and administrative
    1,538,190               1,538,190  
Interest and financing costs
    1,159               1,159  
Stock-based compensation
    39,120               39,120  
Foreign exchange losses
    117,226               117,226  
Other income
    (89,433 )             (89,433 )
Write-down of mineral properties[a]
    330,285       (330,285 )     —  
Exploration cost[a]
    —       1,298,327       1,298,327  
                         
      1,936,547       968,042       2,904,589  
                         
LOSS FOR THE YEAR
  $ 1,936,547     $ 1,726,430     $ 3,662,977  
                         
Basic and diluted loss per share
  $ 0.06             $ 0.12  
Weighted average number of common shares outstanding
    30,305,758               30,305,758  


D-25

Table of Contents

 
NEVADA PACIFIC GOLD LTD.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The effect of measurement differences between CDN GAAP and US GAAP on the Company’s cash flow for the year ended June 30, 2006 is summarized below.
 
                         
    CDN
 		          US
 		 
    GAAP     Adjustments     GAAP  
 
CASH PROVIDED BY (USED FOR) OPERATIONS
                       
Loss for the period[a]
  $ (5,020,542 )   $ (1,374,033 )   $ (6,394,575 )
Items not affecting cash
                       
Depreciation, depletion & amortization[a]
    758,435       (236,666 )     521,769  
Accretion of asset retirement obligation[a]
    117,545               117,545  
Stock based compensation
    611,572               611,572  
Write-off of mineral properties[a]
    114,360       (149,360 )     (35,000 )
Gain on disposal of property, plant & equipment
    —               —  
Severance expenses
    (27,820 )             (27,820 )
Changes in non-cash working capital items[a]
    2,970,312       55,251       3,025,563  
                         
      (476,138 )     (1,704,808 )     (2,180,946 )
                         
INVESTING ACTIVITIES
                       
Property, plant and equipment[a]
    (25,700 )     —       (25,700 )
Proceeds from disposal of equipment
    —               —  
Reclamation deposits
    (3,135 )             (3,135 )
Expenditures on mineral properties, net of recoveries[a]
    (1,704,808 )     1,704,808       —  
                         
      (1,733,643 )     1,704,808       (28,835 )
                         
FINANCING ACTIVITIES
                       
Common shares issued:
                       
On private placements
    4,541,507               4,541,507  
On warrant conversion
    93,952               93,952  
On option exercise
    369,826               369,826  
Share issue costs and finder’s fees
    (93,017 )             (93,017 )
                         
      4,912,268       —       4,912,268  
                         
INCREASE IN CASH AND CASH EQUIVALENTS
    2,702,487       —       2,702,487  
                         
CASH AND CASH EQUIVALENTS, beginning of year
    957,251               957,251  
CASH AND CASH EQUIVALENTS, end of year
  $ 3,659,738     $ —     $ 3,659,738  
                         


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NEVADA PACIFIC GOLD LTD.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The effect of measurement differences between CDN GAAP and US GAAP on the Company’s cash flow for the year ended June 30, 2005 is summarized below.
 
                         
    CDN
 		          US
 		 
    GAAP     Adjustments     GAAP  
 
CASH PROVIDED BY (USED FOR) OPERATIONS
                       
Loss for the period[a]
  $ (2,381,658 )   $ (4,732,096 )   $ (7,113,754 )
Items not affecting cash
                       
Depreciation, depletion & amortization[a]
    750,867       149,657       900,524  
Accretion of asset retirement obligation[a]
    44,540       45,134       89,674  
Stock based compensation
    559,963               559,963  
Write-off of mineral properties[a]
    630,332       (670,332 )     (40,000 )
Gain on disposal of property, plant & equipment
    (155,199 )             (155,199 )
Severance expenses
    61,106               61,106  
Changes in non-cash working capital items[a]
    (4,357,410 )     872,580       (3,484,830 )
                         
      (4,847,459 )     (4,335,057 )     (9,182,516 )
                         
INVESTING ACTIVITIES
                       
Property, plant and equipment[a]
    (3,987,643 )     3,013,502       (974,141 )
Proceeds from disposal of equipment
    200,199               200,199  
Reclamation deposits
    (45,256 )             (45,256 )
Expenditures on mineral properties, net of recoveries[a]
    (1,321,555 )     1,321,555       —  
                         
      (5,154,255 )     4,335,057       (819,198 )
                         
FINANCING ACTIVITIES
                       
Common shares issued:
                       
On private placements
    10,262,635               10,262,635  
On warrant conversion
    591,200               591,200  
On option exercise
    200,020               200,020  
Share issue costs and finder’s fees
    (692,741 )             (692,741 )
                         
      10,361,114       —       10,361,114  
                         
INCREASE IN CASH AND CASH EQUIVALENTS
    359,400       —       359,400  
                         
CASH AND CASH EQUIVALENTS, beginning of year
    597,851               597,851  
CASH AND CASH EQUIVALENTS, end of year
  $ 957,251     $ —     $ 957,251  
                         


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NEVADA PACIFIC GOLD LTD.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The effect of measurement differences between CDN GAPP and US GAAP on the Company’s cash flow for the year ended June 30, 2004 is summarized below.
 
                         
    CDN
 		          US
 		 
    GAAP     Adjustments     GAAP  
 
CASH PROVIDED BY (USED FOR) OPERATIONS
                       
Loss for the period[a]
  $ (1,936,547 )   $ (1,726,430 )   $ (3,662,977 )
Items not affecting cash
                       
Depreciation, depletion & amortization[a]
    15,978       202,809       218,787  
Stock based compensation
    39,120               39,120  
Write-off of mineral properties[a]
    330,285       (255,285 )     75,000  
Severance expenses[a]
            17,478       17,478  
Changes in non-cash working capital items[a]
    720,590       (964,479 )     (243,889 )
                         
      (830,574 )     (2,725,907 )     (3,556,481 )
                         
INVESTING ACTIVITIES
                       
Property, plant and equipment[a]
    (1,889,409 )     1,502,580       (386,829 )
Acquisition of Pangea Resources Inc. 
    (4,323,753 )             (4,323,753 )
Reclamation deposits
    (47,972 )             (47,972 )
Expenditures on mineral properties, net of recoveries[a]
    (1,223,327 )     1,223,327       —  
                         
      (7,484,461 )     2,725,907       (4,758,554 )
                         
FINANCING ACTIVITIES
                       
Common shares issued:
                       
On private placements
    7,871,295               7,871,295  
On warrant conversion
    920,243               920,243  
On option exercise
    343,933               343,933  
Share issue costs and finder’s fees
    (310,303 )             (310,303 )
                         
      8,825,168       —       8,825,168  
                         
INCREASE IN CASH AND CASH EQUIVALENTS
    510,133       —       510,133  
                         
CASH AND CASH EQUIVALENTS, beginning of year
    87,718               87,718  
CASH AND CASH EQUIVALENTS, end of year
  $ 597,851     $ —     $ 597,851  
                         
 
[a] Property, plant and equipment/Mineral properties
 
(i) Under US GAAP, mineral properties and exploration costs related to mineral properties for which commercial feasibility has not yet been established are expensed as incurred. Under CDN GAAP, exploration expenditures may be capitalized as incurred.
 
(ii) For mineral properties where commercial feasibility has been established, under US GAAP, start-up costs are expensed as incurred in accordance with AICPA Statement of Position 98-5, Reporting on the Cost of Start-up Activities.
 
Under CDN GAAP, these start-up costs are deferred and amortized over the estimated life of the property following the commencement of the commercial production, or written off if the property is sold, allowed to lapse,


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NEVADA PACIFIC GOLD LTD.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

abandoned or impaired. Under CDN GAAP, deferred start-up costs include operating costs, net of revenue, prior to the commencement of commercial production.
 
Under CDN GAAP the Magistral Gold Mine began commercial production on January 1, 2005 and therefore from acquisition on February 2, 2004 to January 1, 2005 all operating costs, net of revenue for the Magistral Gold Mine were deferred to property, plant and equipment.
 
Accordingly, gold sales, cost of sales, depreciation and depletion and royalties are included in the loss for the year for US GAAP and were deferred to property plant and equipment for CDN GAAP.
 
The differences in the amounts deferred to pad inventory and property, plant and equipment are cumulative and affect the opening balances for each period following June 30, 2004.
 
[b] Stock based compensation
 
Under US GAAP, accounting for stock-based compensation plan is recognized and measured in accordance with FASB Statement No 123, Accounting for Stock-based Compensation (SFAS 123). The statement recommends companies to follow a fair market value based method of accounting for stock-based compensation plan. SFAS 123 also allows companies to continue to measure compensation cost using intrinsic value based method of accounting prescribed by APB Opinion No. 25, Accounting for stock Issued to Employees. Under the fair value based method, compensation cost is measured at the grant date based on value of the award and recognized over the service period, which is usually the vesting period. Under the intrinsic method, cost of stock options is measured as the excess, if any, of the quoted market price of the Company’s stock at the date of grant over the option price.
 
Under CDN GAAP, CICA 3870, Stock-Based Compensation and Other Stock — Based Payments, recommends companies to adopt the fair valued base method of accounting for all stock-based compensation. The section permitted companies to continue to measure stock-based compensation using intrinsic value method of accounting but requires pro-forma disclosure of earnings and earnings per share as if the fair value method had been adopted.
 
Effective July 1, 2004, the Company adopted the fair value method of accounting for stock-based compensation in accordance with CICA 3870. This change in accounting policy was applied retroactively without restatement of prior years’ financial statements. The Company recorded a cumulative increase of $287,376 to opening deficit and contributed capital.
 
For US GAAP purposes, the Company has chosen to adopt the fair value based method on a modified prospective basis from July 1, 2004 as permitted by SFAS 148, Accounting for Stock-Based Compensation — Transition and Disclosure, an amendment of SFAS 123. The balance sheet difference between US GAAP and CDN GAAP occurs as a result of the modified prospective adoption of the fair value method under SFAS 148.
 
[c] Comprehensive Income
 
Under US GAAP, comprehensive income is recognized and measured in accordance with Financial Accounting Standards Board (“FASB”) Statement No. 130 Reporting Comprehensive Income. Comprehensive income includes all changes in equity other than those resulting from investment by owners and distributions to owners. Comprehensive income includes two components, net income and other comprehensive income. Other comprehensive income includes amounts that are recorded as an element of shareholders’ equity but are excluded from net income as these transactions or events are attributable to changes from non-owner sources. These items include holding gains and losses on certain investments, gains and losses on certain derivative instruments and foreign exchange gains and losses related to self-sustaining foreign operations (cumulative translation adjustment). A standard for comprehensive income and other comprehensive income is not yet effective under Canadian GAAP. Under US GAAP comprehensive income is equal to net income for the Company for the years presented.


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NEVADA PACIFIC GOLD LTD.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

[d] Recent accounting pronouncements
 
In June 2005, the AcSB issued CICA 3831, Non-monetary Transactions, replacing the former CICA 3830. This statement will be effective for fiscal periods beginning after January 1, 2006. Earlier application is permitted for non-monetary asset exchanges executed in periods beginning on or after July 1, 2005. Retroactive application is prohibited. The new Canadian standard is, in all material respects, consistent with the related US standard.
 
In April 2005, the AcSB issued CICA 1530, Comprehensive Income, which introduces new rules for reporting and display of comprehensive income. Comprehensive income, which is currently reported under US GAAP, is the change in shareholders’ equity of an enterprise during a reporting period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investment by owners and distributions to owners. These items include holding gains and losses on certain investments, gain and losses on certain derivative instruments and foreign currency gains and losses related to self — sustaining foreign operations (cumulative translation adjustment). CICA 1530 is effective for fiscal years beginning on or after October 1, 2006.
 
In April 2005, the AcSB issued CICA 3865, Hedges, which is applicable when a company chooses to designate a hedging relationship for accounting purposes. It builds on the existing Accounting Guideline AcG-13, Hedging Relationships, and Section 1650 Foreign Currency Translation, by specifying how hedge accounting is applied and what disclosures are necessary when it is applied.
 
In April 2005, the CICA issued Handbook Sections 3855, Financial Instruments — Recognition and Measurement. This standard prescribes when a financial asset, financial liability, or non-financial derivative is to be recognized on the balance sheet and whether fair value or cost-based measures are used. It also specifies how financial instrument gains and losses are to be presented.
 
On March 30, 2005, the FASB ratified the Emerging Issues Task Force (EITF) consensus in Issue 04-06 that post-production stripping costs are a component of mineral inventory costs subject to provisions of AICPA Accounting Research Bulletin No. 43, Restatement and Revision of Accounting Research Bulletins, Chapter 4, Inventory Pricing (ARB43). In the mining industry, the costs of removing overburden and waste materials to access mineral deposits are referred to as “stripping costs”. It is the accounting for costs incurred during the production stage of the mine, or the post-production stripping costs, that are addressed in Issue 04-06. Based upon this consensus, post production stripping costs should be considered costs of extracted minerals under a full absorption costing system and recognized as a component of inventory to be recognized in costs of sales in the same period as the revenue from the sale of the inventory. Additionally, capitalization of such costs would be appropriate only to the extent inventory exists at the end of the reporting period. The guidance in this consensus will be effective for financial statements issued for fiscal years beginning after December 15, 2005 with early adoption permitted. The consensus can be adopted either prospectively through a cumulative effect adjustment through opening retained earning or retrospectively by restating prior periods. On March 2, 2005, AcSB issued EIC 160, which addresses the accounting treatment of stripping costs. EIC 160 is applicable to fiscal years beginning on or after July 1, 2006. The Company has not determined the method of adoption or the impact of EITF 04-06 or EIC 160, if any, on the Company’s financial position or results from operation. The Company currently has no deferred stripping costs.
 
On June 1, 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS 154 requires retrospective application to prior periods’ financial statements of a change in accounting principles unless it is impracticable to do so. This is a change from the existing practice that requires most accounting changes to be accounted for by including in net income in the period of the change the cumulative effect of changing to the new accounting principle. SFAS 154 will be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005.
 
In July 2006, the Financial Accounting Standards Board (“FASB”) released FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, and interpretation of FASB Statement No. 108 (FIN 48). FIN 48


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NEVADA PACIFIC GOLD LTD.
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return (including a decision whether to file or not file a return in a particular jurisdiction). Under the Interpretation, the financial statements will reflect expected future tax consequences of such positions presuming the taxing authorities’ full knowledge of the position and all relevant facts, but without considering time values. The Interpretation also revises disclosure requirements and introduces a prescriptive, annual, tabular roll-forward of the unrecognized tax benefits. It is effective for fiscal years beginning after December 15, 2006.
 
18.   Subsequent Events
 
Subsequent to June 30, 2006, there were 1,418,150 warrants exercised at $1.20 CDN for gross proceeds of $1,701,780 CDN and 175,000 stock options exercised at an average price of $0.64 CDN for gross proceeds of $111,500 CDN.


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APPENDIX E — FINANCIAL STATEMENTS OF WHITE KNIGHT
 
 
WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)

JUNE 30, 2006
 


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(LOGO)
 
INDEPENDENT AUDITORS’ REPORT
 
To the Shareholders of
White Knight Resources Ltd.
 
We have audited the consolidated balance sheets of White Knight Resources Ltd. as at June 30, 2006 and 2005 and the consolidated statements of operations, shareholders’ equity and cash flows for the years ended June 30, 2006, 2005 and 2004 and the cumulative amounts from inception on December 18, 1986 to June 30, 2006. 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 Canadian generally accepted auditing standards and with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance 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.
 
In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at June 30, 2006 and 2005 and the results of its operations and its cash flows for the years ended June 30, 2006, 2005 and 2004 and the cumulative amounts from inception on December 18, 1986 to June 30, 2006 in accordance with Canadian generally accepted accounting principles.
 
/s/ DAVIDSON & COMPANY LLP
 
Chartered Accountants
 
Vancouver, Canada
August 22, 2006
 
COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA
-U.S. REPORTING DIFFERENCE
 
In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) to identify circumstances when the financial statements are affected by conditions and events that cast substantial doubt on the Company’s ability to continue as a going concern, such as those described in Note 1 to the financial statements. Our report to the shareholders dated August 22, 2006 is expressed in accordance with Canadian reporting standards which do not permit a reference to such events and conditions in the auditors’ report when these are adequately disclosed in the financial statements.
 
/s/ DAVIDSON & COMPANY LLP
 
Chartered Accountants
 
Vancouver, Canada
August 22, 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


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Table of Contents

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

CONSOLIDATED BALANCE SHEETS
 
                 
    As at June 30  
    2006     2005  
    (Expressed in Canadian Dollars)  
 
ASSETS
Current
               
Cash
  $ 11,397,885     $ 282,459  
Temporary investments (Note 3)
    2,107,699       10,895,443  
Receivables (net of allowance — $NIL; 2005 — $NIL)
    117,490       176,164  
Prepaid expenses
    49,370       41,974  
                 
Total current assets
    13,672,444       11,396,040  
Mineral property interests (Note 4)
    2,799,619       2,456,147  
Deferred exploration costs (Note 5)
    3,864,359       1,508,878  
Equipment (Note 6)
    930,853       139,118  
Restricted reclamation bonds (Note 12)
    234,783       196,692  
                 
Total assets
  $ 21,502,058     $ 15,696,875  
                 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current
               
Accounts payable and accrued liabilities
  $ 315,515     $ 161,831  
Due to related parties (Note 7)
    118,002       17,754  
                 
Total current liabilities
    433,517       179,585  
Asset retirement obligation (Note 8)
    165,985          
                 
Total Liabilities
    599,502       179,585  
                 
Shareholders’ equity
               
Capital stock (Note 9) 
               
Authorized: unlimited common shares without par value
               
Issued and outstanding 59,384,972 (2005 — 54,089,386)
    33,630,385       26,844,701  
Contributed surplus
    3,153,572       1,246,525  
Deficit accumulated during the exploration stage
    (15,881,401 )     (12,573,936 )
                 
Total shareholders’ equity
    20,902,556       15,517,290  
                 
Total liabilities and shareholders’ equity
  $ 21,502,058     $ 15,696,875  
                 
Nature and continuance of operations (Note 1)
               
Commitments (Note 14)
               
         
On behalf of the Board:
               
 
             
    Director       Director
/s/ John M. Leask       /s/ Megan Cameron-Jones    
     
   
John M. Leask
      Megan Cameron-Jones    
 
The accompanying notes are an integral part of these consolidated financial statements


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Table of Contents

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS
 
                                 
    Year Ended June 30  
    Cumulative
 		                   
    Amounts from
 		                   
    Inception on
 		                   
    December 18, 1986
 		                   
    to June 30, 2006     2006     2005     2004  
    (Expressed in Canadian Dollars)  
 
ADMINISTRATION COSTS
                               
Amortization
  $ 220,145     $ 34,051     $ 30,546     $ 13,893  
Audit
    255,423       116,362       48,696       10,950  
Bank charges and interest
    26,349       7,464       5,762       1,520  
Consulting
    1,283,627       123,809       116,588       82,540  
Consulting — stock-based compensation (Note 9)
    3,263,846       2,275,298       148,543       840,005  
Investor relations and shareholder information
    665,974       175,427       123,189       52,889  
Legal
    641,631       120,155       26,958       23,196  
Management fees — related party (Note 7)
    1,437,910       264,000       264,000       210,000  
Office and miscellaneous
    753,670       96,089       85,068       56,201  
Rent
    338,199       56,497       54,873       28,300  
Telephone
    204,215       21,183       16,444       8,898  
Transfer agent and listing fees
    305,597       43,589       31,029       55,506  
Travel and entertainment
    505,337       108,044       69,132       52,569  
Wages and benefits
    831,071       130,998       79,918       31,863  
                                 
Loss before other items
    (10,732,994 )     (3,572,966 )     (1,100,746 )     (1,468,330 )
                                 
OTHER ITEMS
                               
Write-off of deferred exploration costs (Note 5)
    (3,560,589 )     (143,783 )     (194,598 )     (241,549 )
Interest income
    1,295,734       442,036       261,600       97,920  
Option payments received (net)
    633,519                          
Write-off of mineral property interests
    (3,814,257 )                        
Gain (loss) on foreign exchange
    125,574       (11,574 )     (60,377 )     (9,299 )
Gain (loss) on disposal of temporary investments
    166,591       (23,927 )                
Unrealized recovery (loss) on temporary investments (Note 3)
    (8,846 )     2,749       31,404       (42,999 )
Gain (loss) on disposal of equipment
    13,867               (757 )        
                                 
      (5,148,407 )     265,501       37,272       (195,927 )
                                 
Loss for the period
  $ (15,881,401 )   $ (3,307,465 )   $ (1,063,474 )   $ (1,664,257 )
                                 
Basic and diluted loss per common share
          $ (0.06 )   $ (0.02 )   $ (0.04 )
                                 
Weighted average number of common shares outstanding
            58,855,176       53,091,304       39,038,472  
                                 
 
The accompanying notes are an integral part of these consolidated financial statements.


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Table of Contents

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)
 
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
 
                                                 
                            Deficit
 		       
                            Accumulated
 		       
                            During the
 		       
    Number of
 		                Contributed
 		    Exploration
 		       
    Shares     Price     Amount     Surplus     Stage     Total  
    (Expressed in Canadian Dollars)  
 
Balance, June 30, 1986
          $       $       $       $       $    
Shares issued for:
                                               
Incorporation
    1                                          
Initial offering
    201,200       0.13       26,300                       26,300  
Loss for the period
                                    (17,325 )     (17,325 )
                                                 
Balance, June 30, 1987
    201,201               26,300               (17,325 )     8,975  
Shares issued for:
                                               
Initial offering
    1,176,400       0.12       138,100                       138,100  
Loss for the year
                                    (49,793 )     (49,793 )
                                                 
Balance, June 30, 1988
    1,377,601               164,400               (67,118 )     97,282  
Loss for the year
                                    (44,166 )     (44,166 )
                                                 
Balance, June 30, 1989
    1,377,601               164,400               (111,284 )     53,116  
Shares issued for:
                                               
Mineral property interests
    150,000       0.46       68,499                       68,499  
Exercise of stock options
    332,680       0.40       133,072                       133,072  
Private placement
    350,000       0.40       140,000                       140,000  
Private placement
    250,000       0.50       125,000                       125,000  
Flow-through private placement
    279,905       0.54       150,100                       150,100  
Exercise of agent’s warrants
    105,000       0.40       42,000                       42,000  
Private placement expenses
                    (30,000 )                     (30,000 )
Loss for the year
                                    (282,410 )     (282,410 )
                                                 
Balance, June 30, 1990
    2,845,186               793,071               (393,694 )     399,377  
Shares issued for:
                                               
Exercise of stock options
    50,000       0.90       45,000                       45,000  
Exercise of stock options
    262,250       0.28       73,430                       73,430  
Private placement
    600,000       0.15       90,000                       90,000  
Private placement
    263,158       0.95       250,000                       250,000  
Flow-through private placement
    286,666       0.15       43,000                       43,000  
Loss for the year
                                    (119,275 )     (119,275 )
                                                 
Balance, June 30, 1991
    4,307,260             $ 1,294,501     $       $ (512,969 )   $ 781,532  
                                                 


E-5

Table of Contents

 
WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)
 
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY — (Continued)

                                                 
                            Deficit
 		       
                            Accumulated
 		       
                            During the
 		       
    Number of
 		                Contributed
 		    Exploration
 		       
    Shares     Price     Amount     Surplus     Stage     Total  
    (Expressed in Canadian Dollars)  
 
Balance, June 30, 1991
    4,307,260     $       $ 1,294,501     $       $ (512,969 )   $ 781,532  
Shares issued for:
                                               
Mineral property interests
    100,000       0.29       29,000                       29,000  
Exercise of stock options
    245,000       0.15       36,750                       36,750  
Debt settlement
    114,308       0.53       60,869                       60,869  
Private placement
    55,555       0.18       10,000                       10,000  
Finder’s fee
    9,000       0.33       2,970                       2,970  
Private placement
    300,000       0.33       99,000                       99,000  
Private placement
    122,222       0.45       55,000                       55,000  
Exercise of warrants
    460,000       0.20       92,000                       92,000  
Exercise of warrants
    75,000       0.33       24,750                       24,750  
Loss for the year
                                    (164,398 )     (164,398 )
                                                 
Balance, June 30, 1992
    5,788,345               1,704,840               (677,367 )     1,027,473  
Shares issued for:
                                               
Mineral property interests
    250,000       0.20       50,000                       50,000  
Exercise of stock options
    189,999       0.15       28,500                       28,500  
Exercise of stock options
    395,000       0.20       79,000                       79,000  
Private placement
    500,000       0.40       200,000                       200,000  
Private placement
    20,000       0.45       9,000                       9,000  
Private placement
    28,000       0.50       14,000                       14,000  
Loss for the year
                                    (115,290 )     (115,290 )
                                                 
Balance, June 30, 1993
    7,171,344               2,085,340               (792,657 )     1,292,683  
Shares issued for:
                                               
Mineral property interests
    190,000       0.24       46,000                       46,000  
Exercise of stock options
    15,000       0.15       2,250                       2,250  
Exercise of stock options
    132,000       0.21       27,720                       27,720  
Private placement
    600,000       0.15       90,000                       90,000  
Private placement
    300,000       0.23       67,500                       67,500  
Loss for the year
                                    (1,051,873 )     (1,051,873 )
                                                 
Balance, June 30, 1994
    8,408,344               2,318,810               (1,844,530 )     474,280  


E-6

Table of Contents

 
WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)
 
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY — (Continued)

                                                 
                            Deficit
 		       
                            Accumulated
 		       
                            During the
 		       
    Number of
 		                Contributed
 		    Exploration
 		       
    Shares     Price     Amount     Surplus     Stage     Total  
    (Expressed in Canadian Dollars)  
 
Shares issued for:
                                               
Mineral property interests
    70,000     $ 0.17     $ 11,900     $       $       $ 11,900  
Loss for the year
                                    (84,711 )     (84,711 )
                                                 
Balance, June 30, 1995
    8,478,344               2,330,710               (1,929,241 )     401,469  
                                                 
Balance, June 30, 1995
    8,478,344               2,330,710               (1,929,241 )     401,469  
Shares issued for:
                                               
Mineral property interests
    130,000       0.50       65,000                       65,000  
Exercise of stock options
    4,000       0.62       2,480                       2,480  
Exercise of stock options
    580,000       0.22       127,600                       127,600  
Exercise of stock options
    265,000       0.30       79,500                       79,500  
Private placement
    650,000       0.30       195,000                       195,000  
Private placement
    1,800,000       0.15       270,000                       270,000  
Private placement
    500,000       0.46       230,000                       230,000  
Private placement
    2,000,000       0.68       1,360,000                       1,360,000  
Exercise of warrants
    10,000       0.30       3,000                       3,000  
Exercise of warrants
    600,000       0.17       102,000                       102,000  
Exercise of warrants
    300,000       0.26       78,000                       78,000  
Loss for the year
                                    (288,538 )     (288,538 )
                                                 
Balance, June 30, 1996
    15,317,344               4,843,290               (2,217,779 )     2,625,511  
Shares issued for:
                                               
Exercise of stock options
    205,000       0.78       159,900                       159,900  
Exercise of stock options
    9,500       0.62       5,890                       5,890  
Private placement
    100,000       1.40       140,000                       140,000  
Private placement
    3,600,000       1.00       3,600,000                       3,600,000  
Exercise of warrants
    470,000       0.30       141,000                       141,000  
Exercise of warrants
    225,000       0.15       33,750                       33,750  
Exercise of warrants
    500,000       0.46       230,000                       230,000  
Loss for the year
                                    (477,124 )     (477,124 )
                                                 
Balance, June 30, 1997
    20,426,844               9,153,830               (2,694,903 )     6,458,927  
Shares issued for:
                                               
Mineral property interests
    70,000       1.32       92,700                       92,700  
Exercise of warrants
    1,575,000       0.17       267,750                       267,750  
Loss for the year
                                    (1,063,932 )     (1,063,932 )
                                                 
Balance, June 30, 1998
    22,071,844               9,514,280               (3,758,835 )     5,755,445  


E-7

Table of Contents

 
WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)
 
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY — (Continued)

                                                 
                            Deficit
 		       
                            Accumulated
 		       
                            During the
 		       
    Number of
 		                Contributed
 		    Exploration
 		       
    Shares     Price     Amount     Surplus     Stage     Total  
    (Expressed in Canadian Dollars)  
 
Shares issued for:
                                               
Private placement
    3,708,132     $ 0.38     $ 1,409,090     $       $       $ 1,409,090  
Mineral property interests
    70,000       0.41       28,500                       28,500  
Management bonus
    500,000       0.30       150,000                       150,000  
Loss for the year
                                    (2,173,417 )     (2,173,417 )
                                                 
Balance, June 30, 1999
    26,349,976               11,101,870               (5,932,252 )     5,169,618  
                                                 
Balance, June 30, 1999
    26,349,976               11,101,870               (5,932,252 )     5,169,618  
Shares issued for:
                                               
Mineral property interests
    170,000       0.27       46,300                       46,300  
Loss for the year
                                    (1,234,438 )     (1,234,438 )
                                                 
Balance, June 30, 2000
    26,519,976               11,148,170               (7,166,690 )     3,981,480  
Loss for the year
                                    (642,586 )     (642,586 )
                                                 
Balance, June 30, 2001
    26,519,976               11,148,170               (7,809,276 )     3,338,894  
Shares issued for:
                                               
Mineral property interests
    20,000       0.20       4,000                       4,000  
Exercise of stock options
    300,000       0.10       30,000                       30,000  
Private placement
    1,764,706       0.17       300,000                       300,000  
Finder’s fee
    176,470                                          
Loss for the year
                                    (1,679,183 )     (1,679,183 )
                                                 
Balance, June 30, 2002
    28,781,152               11,482,170               (9,488,459 )     1,993,711  
Shares issued for:
                                               
Mineral property interests
    40,000       0.20       8,000                       8,000  
Exercise of stock options
    337,500       0.10       33,750                       33,750  
Loss for the year
                                    (357,746 )     (357,746 )
                                                 
Balance, June 30, 2003
    29,158,652               11,523,920               (9,846,205 )     1,677,715  


E-8

Table of Contents

 
WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)
 
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY — (Continued)

                                                 
                            Deficit
 		       
                            Accumulated
 		       
                            During the
 		       
    Number of
 		                Contributed
 		    Exploration
 		       
    Shares     Price     Amount     Surplus     Stage     Total  
    (Expressed in Canadian Dollars)  
 
Shares issued for:
                                               
Mineral property interests
    40,000     $ 0.78     $ 31,200     $       $       $ 31,200  
Exercise of stock options
    1,712,500       0.10       171,250                       171,250  
Exercise of stock options
    422,000       0.23       97,060                       97,060  
Private placement
    2,500,000       0.40       1,000,000                       1,000,000  
Finder’s fee
    125,000                                          
Private placement
    7,764,704       0.85       6,599,998                       6,599,998  
Private placement
    2,222,222       0.90       2,000,000                       2,000,000  
Exercise of warrants
    3,708,132       0.44       1,631,578                       1,631,578  
Exercise of warrants
    1,941,176       0.25       485,294                       485,294  
Exercise of warrants
    435,000       0.60       261,000                       261,000  
Private placement expenses
                    (896,428 )     355,906               (540,522 )
Stock-based compensation
                            840,005               840,005  
Loss for the year
                                    (1,664,257 )     (1,664,257 )
                                                 
Balance, June 30, 2004
    50,029,386               22,904,872       1,195,911       (11,510,462 )     12,590,321  
                                                 
Balance, June 30, 2004
    50,029,386               22,904,872       1,195,911       (11,510,462 )     12,590,321  
Shares issued for:
                                               
Mineral property interests
    40,000       0.71       28,400                       28,400  
Exercise of stock options (Note 9)
    230,000       0.30       120,125                       120,125  
Exercise of warrants (Note 9)
    1,965,000       0.60       1,179,000                       1,179,000  
Exercise of broker’s warrants (Note 9)
    325,000       0.60       242,304                       242,304  
Private placement
    1,500,000       1.58       2,370,000                       2,370,000  
Stock-based compensation
                            148,543               148,543  
Less: Fair market value of stock options and broker’s warrants exercised
                            (97,929 )             (97,929 )
Loss for the year
                                    (1,063,474 )     (1,063,474 )
                                                 
Balance, June 30, 2005
    54,089,386               26,844,701       1,246,525       (12,573,936 )     15,517,290  


E-9

Table of Contents

 
WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)
 
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY — (Continued)

                                                 
                            Deficit
 		       
                            Accumulated
 		       
                            During the
 		       
    Number of
 		                Contributed
 		    Exploration
 		       
    Shares     Price     Amount     Surplus     Stage     Total  
    (Expressed in Canadian Dollars)  
 
Shares issued for:
                                               
Mineral property interests
    40,000     $ 1.80     $ 72,000     $       $       $ 72,000  
Exercise of stock options (Note 9)
    315,000       0.54       298,384                       298,384  
Exercise of warrants (Note 9)
    4,397,057       1.25       5,496,321                       5,496,321  
Exercise of broker’s warrants (Note 9)
    543,529       1.25       918,979                       918,979  
Stock-based compensation
                            2,275,298               2,275,298  
Less: Fair market value of stock options and broker’s warrants exercised
                            (368,251 )             (368,251 )
Loss for the year
                                    (3,307,465 )     (3,307,465 )
                                                 
Balance, June 30, 2006
    59,384,972             $ 33,630,385     $ 3,153,572     $ (15,881,401 )   $ 20,902,556  
                                                 

 
The accompanying notes are an integral part of these consolidated financial statements.


E-10

Table of Contents

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                                 
    Year Ended June 30  
    Cumulative
 		                   
    Amounts from
 		                   
    Inception on
 		                   
    December 18,
 		                   
    1986 to
 		                   
    June 30,
 		                   
    2006     2006     2005     2004  
    (Expressed in Canadian Dollars)  
 
CASH FLOWS FROM OPERATING ACTIVITIES
                               
Loss for the period
  $ (15,881,401 )   $ (3,307,465 )   $ (1,063,474 )   $ (1,664,257 )
Items not affecting cash:
                               
Amortization
    220,145       34,051       30,546       13,893  
Write-off of mineral property interests
    3,814,257                          
Write-off of deferred exploration costs
    3,560,589       143,783       194,598       241,549  
Loss (gain) on disposal of equipment
    (13,867 )             757          
Stock-based compensation
    3,263,846       2,275,298       148,543       840,005  
Unrealized loss (recovery) on temporary investments
    8,846       (2,749 )     (31,404 )     42,999  
Loss (gain) on disposal of investments
    (166,591 )     23,927                  
Shares issued for management bonus
    150,000                          
Changes in non-cash working capital items:
                               
Decrease (increase) in receivables
    (117,490 )     58,674       (103,457 )     (70,608 )
Increase in prepaid expenses
    (49,370 )     (7,396 )     (26,214 )     (4,374 )
Increase (decrease) in accounts payable and accrued liabilities
    298,409       75,709       (51,640 )     12,714  
Increase (decrease) in due to related parties
    118,002       100,248       (52,616 )     (153,168 )
                                 
Net cash used in operating activities
    (4,794,625 )     (605,920 )     (954,361 )     (741,247 )
                                 
CASH FLOWS FROM FINANCING ACTIVITIES
                               
Issuance of capital stock
    32,724,773       6,345,433       3,813,500       11,705,658  
                                 
Net cash provided by financing activities
    32,724,773       6,345,433       3,813,500       11,705,658  
                                 
CASH FLOWS FROM INVESTING ACTIVITIES
                               
Acquisition of mineral property interests
    (6,046,712 )     (288,777 )     (673,373 )     (611,213 )
Deferred exploration costs
    (7,339,341 )     (2,413,657 )     (816,648 )     (442,661 )
Restricted reclamation bond refunded (posted)
    (228,453 )     (31,761 )     15,547       (65,252 )
Acquisition (disposal) of temporary investments (net)
    (1,909,954 )     8,806,566       (3,413,215 )     (7,493,823 )
Proceeds from disposal of equipment
    58,141               1,968          
Acquisition of equipment
    (1,065,944 )     (696,458 )     (86,486 )     (89,321 )
                                 
Net cash provided by (used in) investing activities
    (16,532,263 )     5,375,913       (4,972,207 )     (8,702,270 )
                                 
Increase (decrease) in cash during the period
    11,397,885       11,115,426       (2,113,068 )     2,262,141  
Cash, beginning of period
            282,459       2,395,527       133,386  
                                 
Cash, end of period
  $ 11,397,885     $ 11,397,885     $ 282,459     $ 2,395,527  
                                 
 
Supplemental disclosures with respect to cash flows (Note 13)
 
The accompanying notes are an integral part of these consolidated financial statements.


E-11

Table of Contents

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
JUNE 30, 2006
 
1.   NATURE AND CONTINUANCE OF OPERATIONS
 
White Knight Resources Ltd. (the “Company”) is a Canadian company incorporated in British Columbia. The Company is primarily engaged in the acquisition and exploration of mineral property interests.
 
At the date of these consolidated financial statements, the Company has not been able to identify a known body of commercial grade ore on any of its mineral property interests. The ability of the Company to realize the costs it has incurred to date on these mineral property interests is dependent upon the Company being able to lever its property interests and cash, by way of exploration activities and option/joint ventures, into assets of greater value or to identify a commercial ore body, to finance its exploration costs and to resolve any environmental, regulatory or other constraints which may hinder the successful development of the mineral property interest. To date, the Company has not earned revenues and is considered to be in the exploration stage.
 
These consolidated financial statements have been prepared assuming the Company will continue on a going concern basis. The Company has incurred losses since inception and the ability of the Company to continue as a going-concern depends upon its ability to develop profitable operations and to continue to raise adequate financing. Management is actively targeting sources of additional financing through alliances with financial, exploration and mining entities, or other business and financial transactions which would assure continuation of the Company’s operations and exploration programs. In order for the Company to meet its liabilities as they come due and to continue its operations, the Company is solely dependent upon its ability to generate such financing. The Company has sufficient resources to meet its obligations for the foreseeable future at its current level of activity.
 
There can be no assurance that the Company will be able to continue to raise funds in which case the Company may be unable to meet its obligations. Should the Company be unable to realize on its assets and discharge its liabilities in the normal course of business, the net realizable value of its assets may be materially less than the amounts recorded on the consolidated balance sheets.
 
All amounts are in Canadian dollars unless otherwise stated.
 
                 
    2006     2005  
 
Working capital
  $ 13,238,927     $ 11,216,455  
Deficit
    (15,881,401 )     (12,573,936 )
 
2.   SIGNIFICANT ACCOUNTING POLICIES
 
These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”). The significant accounting policies adopted by the Company are as follows:
 
Use of estimates
 
The preparation of financial statements in accordance with Canadian 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 amount of revenues and expenses during the year. Actual results could differ from these estimates.


E-12

Table of Contents

 
WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Principles of consolidation
 
These consolidated financial statements include the accounts of the Company and the following subsidiaries, all of which are 100% owned:
 
White Knight Gold (U.S.) Inc.
CUN Minerals Inc.
Quito Gold Corp.
 
All material inter-company transactions have been eliminated upon consolidation.
 
Cash
 
Cash consists of cash on hand and highly liquid investments with original maturities of three months or less. At June 30, 2006 and 2005, cash consisted of cash and guaranteed investment certificates held in financial institutions.
 
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash. The Company places its cash with high quality financial institutions, thereby minimizing exposure for deposits in excess of federally insured amounts. The Company believes that credit risk associated with cash is remote.
 
Temporary investments
 
Temporary investments are recorded at the lower of cost or market on an aggregate basis. For temporary investments in which unrealized losses had been recognized in a previous year, any subsequent recoveries in market value are recorded up to original cost. This occurred during fiscal 2006 and 2005.
 
Mineral property interests and deferred exploration costs
 
The Company records mineral property interests, which consist of the right to explore for mineral deposits, at cost. The Company records deferred exploration costs, which consist of costs attributable to the exploration of mineral property interests, at cost. All direct and indirect costs relating to the acquisition and exploration of these mineral property interests are capitalized on the basis of specific claim blocks until the mineral property interests to which they relate are placed into production, the mineral property interests are disposed of through sale or where management has determined there to be an impairment. If a mineral property interest is abandoned, the mineral property interest and deferred exploration costs will be written off to operations in the period of abandonment.
 
On an ongoing basis, the capitalized costs are reviewed on a property-by-property basis to consider if there is any impairment on the subject mineral property interest. Management’s determination for impairment is based on: i) whether the Company’s exploration programs on the mineral property interests have significantly changed, such that previously identified resource targets are no longer being pursued; ii) whether exploration results to date are promising and whether additional exploration work is being planned in the foreseeable future or iii) whether remaining lease terms are insufficient to conduct necessary studies or exploration work. As at June 30, 2006 and 2005, management believes that no impairment relating to the mineral property interests and deferred exploration costs was required.
 
The recorded cost of mineral property interests and deferred exploration costs is based on cash paid and the assigned value of share consideration issued for mineral property interest acquisitions and exploration costs incurred. The recorded amount may not reflect recoverable value as this will be dependent on future development programs, the nature of the mineral deposit, commodity prices, adequate funding and the ability of the Company to bring its projects into production.


E-13

Table of Contents

 
WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Canadian GAAP Conflict in Accounting for Mineral Property Interests and Deferred Exploration Costs
 
In March 2000, the Accounting Standards Board of the Canadian Institute of Chartered Accountants (“CICA”) issued Accounting Guideline No. 11 “Enterprises in the Development Stage” (“AcG 11”). AcG 11 addresses three distinct issues: i) the capitalization of costs/expenditures; ii) impairment; and iii) disclosure. Prior to its issuance, development stage entities were exempt from following certain aspects of Canadian GAAP. AcG 11 requires that all companies account for transactions based on the underlying characteristics of the transaction rather than the maturity of the enterprise. In addition, AcG 11 requires specific disclosure of information by development stage companies.
 
In March 2002, the Emerging Issues Committee (“EIC”) of the CICA issued EIC-126 “Accounting by Mining Enterprises for Exploration Costs” (“EIC-126”) which interprets how AcG 11 affects mining companies with respect to the deferral of exploration costs. EIC-126 refers to CICA Handbook Section 3061 “Property, Plant and Equipment” (“HB 3061”), paragraph .21, which states that for a mineral property interest, the cost of the asset includes exploration costs if the enterprise considers that such costs have the characteristics of property, plant and equipment.
 
EIC-126 then states that a mining enterprise that has not established mineral reserves objectively, and therefore does not have a basis for preparing a projection of the estimated cash flow from the mineral property interest, is not precluded from considering the exploration costs to have the characteristics of property, plant and equipment. EIC-126 also sets forth the EIC’s consensus that a mining enterprise in the development stage is not required to consider the conditions in AcG 11 regarding impairment in determining whether exploration costs may be initially capitalized. With respect to impairment of capitalized exploration costs, EIC-126 sets forth the EIC’s consensus that a mining enterprise in the development stage that has not established mineral reserves objectively, and, therefore, does not have a basis for preparing a projection of the estimated cash flow from the property, is not obliged to conclude that capitalized costs have been impaired. However, such an enterprise should consider the conditions set forth in AcG 11 and HB 3061 in determining whether a subsequent write-down of capitalized exploration costs related to mineral property interests is required.
 
As disclosed above, the Company considers that its mineral property interests and deferred exploration costs have the characteristics of property, plant and equipment, and, accordingly, the Company has chosen to classify its mineral property interests and deferred exploration costs as tangible assets in accordance with its interpretation of Canadian GAAP.
 
Although the Company believes its accounting policy is appropriate and consistent with Canadian GAAP, there is an alternative interpretation of Canadian GAAP that would consider them to be intangible assets as a result of the issuance of CICA Handbook Section 1581 “Business Combinations” (“HB 1581”) and CICA Handbook Section 3062 “Goodwill and Other Intangible Assets” (“HB 3062”).
 
This alternative interpretation under HB 1581 and HB 3062 would provide for the capitalization of a contract based mining asset as an intangible asset at its fair value at the time it was acquired, either as an individual asset purchase or as part of a business combination. For exploration stage mineral property interests and deferred exploration costs such as those owned by the Company, the excess of the carrying value over the residual value of the intangible assets would be amortized on a straight-line basis over the period in which the Company expected to complete its exploration process or convert, develop or further explore the underlying properties. For the Company, a reasonable estimate of this amortization period would be 5 years.
 
In September, 2004, the CICA amended the guidance in HB 3062 to remove the example of mineral rights as this reference may have implied that mineral rights are necessarily an intangible asset. This amendment confirmed the Company’s current method of accounting for mineral property interests. Unless alternative guidance is provided, the Company expects to continue accounting for these assets as tangible assets.


E-14

Table of Contents

 
WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Asset retirement obligations
 
Effective July 1, 2004, the Company recognizes the fair value of a liability for an asset retirement obligation in the year in which it is incurred when a reasonable estimate of fair value can be made. The carrying amount of the related long-lived asset is increased by the same amount as the liability. Changes in the liability for an asset retirement obligation due to the passage of time will be measured by applying an interest method of allocation. The amount will be recognized as an increase in the liability and an accretion expense in the statement of operations. Changes resulting from revisions to the timing or the amount of the original estimate of undiscounted cash flows are recognized as an increase or a decrease in the carrying amount of the liability for an asset retirement obligation and the cost of the related long-lived asset.
 
Impairment of long-lived assets and long-lived assets to be disposed of
 
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount and the fair value less costs to sell.
 
Risk management
 
The Company’s largest non-monetary assets are its mineral property interests in the United States of America. The Company could accordingly be at risk for foreign currency fluctuations and developing legal and political environments.
 
The Company does not maintain significant cash or other monetary assets or liabilities in the United States.
 
The Company relies on local consultants for the management of its exploration activities and for legal and accounting matters.
 
Equipment and amortization
 
Equipment is recorded at cost and amortization is calculated at the following rates per annum using the declining-balance method:
 
         
Vehicles and technical equipment
    30 %
Office equipment
    20 %
 
Foreign currency translation
 
The Company’s subsidiaries are integrated foreign operations and its operating results are translated into Canadian dollar equivalents using the temporal method. Monetary items are translated at the exchange rate in effect at the balance sheet date; non-monetary items are translated at historical exchange rates. Income and expense items are translated at the average exchange rate for the period. Translation gains and losses are reflected in loss for the year.
 
Stock-based compensation
 
The Company has an employee stock option plan. The Company recognizes an expense arising from stock options granted to both employees and non-employees using the fair value method. The fair value of option grants is generally established at the date of grant using the Black Scholes option pricing model and the compensation amount, equal to the option’s fair value, is then recognized over the options vesting periods.


E-15

Table of Contents

 
WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Future income taxes
 
Future income taxes are recorded using the asset and liability method. Under the asset and liability method, future 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. Future tax assets and liabilities are measured using the enacted or substantively enacted tax rates expected to apply when the asset is realized or the liability settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that substantive enactment or enactment occurs. To the extent that the Company does not consider it more likely than not that a future tax asset will be recovered, it provides a valuation allowance against the excess.
 
Loss per share
 
The Company uses the treasury stock method to compute the dilutive effect of options, warrants and similar instruments. Under this method, the dilutive effect on earnings per share is recognized on the use of the proceeds that could be obtained upon exercise of options, warrants and similar instruments. It assumes that the proceeds would be used to purchase common shares at the average market price during the year. The weighted average number of common shares outstanding at June 30, 2006 of 58,855,176 (2005 — 53,091,304; 2004 — 39,038,472) does not include the 1,500,000 (2005 — 9,808,233; 2004 — 11,964,899) warrants outstanding and the 5,120,000 (2005 — 3,385,000; 2004 — 3,665,000) stock options outstanding.
 
Basic loss per share is calculated using the weighted-average number of shares outstanding during the year.
 
Comprehensive income (loss)
 
SFAS No. 130 “Reporting Comprehensive Income” establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at June 30, 2006, the Company has no items that represent comprehensive loss, and therefore has not included a schedule of comprehensive loss in the financial statements.
 
Comparative figures
 
Certain comparative figures have been reclassified to conform with the current year’s presentation.
 
3.   TEMPORARY INVESTMENTS
 
Temporary investments consist of highly liquid bonds with a carrying value at June 30, 2006 of $2,107,699 and a fair value of $2,155,981. The recovery reported in the consolidated financial statements of $2,749 (2005 — $31,404) related to temporary investments is a partial recovery of the unrealized loss on temporary investments reported in fiscal 2004 of $42,999.


E-16

Table of Contents

 
WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

4.   MINERAL PROPERTY INTERESTS

 
                                 
    Balance at
 		                Balance at
 		 
    June 30,
 		                June 30,
 		 
    2005     Additions     Recovery     2006  
 
Nevada Properties
                               
Benmark
  $ 61,163     $ 19,955     $       $ 81,118  
Celt
    283,867       1,052               284,919  
Cottonwood
    93,403       66,811               160,214  
Fye Canyon
    173,778       47               173,825  
Gold Bar Horst
    120,828       28,409               149,237  
Gold Pick
    19,555       5,001               24,556  
Goldstone
    22,684       9,625               32,309  
Hunter
    88,788       48,103               136,891  
Ian
    18,930       12,387               31,317  
Knolls
    58,154       27,948               86,102  
McClusky Pass
    96,737       37,723               134,460  
New Pass
    419,727       1,062       (1,057 )     419,732  
Pat Canyon
    81,163       27,634               108,797  
Patty (formerly Indian Ranch)
    108,402                       108,402  
Slaven Canyon
    254,556       110,871               365,427  
South Cabin Creek
    34,349       13,040               47,389  
Squaw Creek
    377,471       1,498       (108,708 )     270,261  
Tonkin Summit
    100,788       28,875               129,663  
Other
    41,804       13,196               55,000  
                                 
Total Nevada Properties
  $ 2,456,147     $ 453,237     $ (109,765 )   $ 2,799,619  
                                 
 


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Table of Contents

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

                                 
    Balance at
 		                Balance at
 		 
    June 30,
 		                June 30,
 		 
    2004     Additions     Recovery     2005  
 
Nevada Properties
                               
Benmark
  $ 24,922     $ 36,241     $       $ 61,163  
Celt
    106,057       194,427       (16,617 )     283,867  
Cottonwood
    58,016       35,387               93,403  
Fye Canyon
    119,889       57,559       (3,670 )     173,778  
Gold Bar Horst
    82,543       38,285               120,828  
Gold Pick
    10,811       8,744               19,555  
Goldstone
    19,846       2,838               22,684  
Hunter
    62,830       25,958               88,788  
Ian
            18,930               18,930  
Knolls
            58,154               58,154  
McClusky Pass
    56,194       40,543               96,737  
New Pass
    402,981       17,888       (1,142 )     419,727  
Pat Canyon
    34,965       46,198               81,163  
Patty (formerly Indian Ranch)
    108,402                       108,402  
Slaven Canyon
    163,314       91,242               254,556  
South Cabin Creek
    17,426       16,923               34,349  
Squaw Creek
    426,563       25,511       (74,603 )     377,471  
Tonkin Summit
    59,615       41,173               100,788  
Other
            41,804               41,804  
                                 
Total Nevada Properties
  $ 1,754,374     $ 797,805     $ (96,032 )   $ 2,456,147  
                                 

 

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Table of Contents

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

                                 
    Balance at
 		                Balance at
 		 
    June 30,
 		                June 30,
 		 
    2003     Additions     Recovery     2004  
 
Nevada Properties
                               
Benmark
  $       $ 24,922     $           $ 24,922  
Celt
            106,057               106,057  
Cottonwood
    30,692       27,324               58,016  
Fye Canyon
            119,889               119,889  
Gold Bar Horst
    61,700       20,843               82,543  
Gold Pick
    8,202       2,609               10,811  
Goldstone
            19,846               19,846  
Hunter
    36,203       26,627               62,830  
McClusky Pass
    400       55,794               56,194  
New Pass
    387,381       15,600               402,981  
Pat Canyon
            34,965               34,965  
Patty (formerly Indian Ranch)
    108,402                       108,402  
Slaven Canyon
    54,177       109,137               163,314  
South Cabin Creek
    13,052       4,374               17,426  
Squaw Creek
    404,550       22,013               426,563  
Tonkin Summit
            59,615               59,615  
                                 
Total Nevada Properties
  $ 1,104,759     $ 649,615     $       $ 1,754,374  
                                 

 
Title to mineral property interests involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyancing history characteristic of many mineral claims. The Company has investigated title to all of its mineral property interests and, to the best of its knowledge, expects title to all of its interests to be in good standing. The mineral property interests in which the Company has committed to earn an interest are located in the United States and the Company is therefore relying on advice by legal counsel who are basing such advice on the laws of the United States.
 
Celt, Eureka County, Nevada
 
In fiscal 2004, the Company acquired the property by staking. During the 2005 fiscal year, the Company entered into a Financing and Acquisition Agreement with Teck Cominco American Incorporated (“TCAI”) whereby TCAI was granted the option to earn an initial 51% interest in the property. The terms of the agreement provide for exploration expenditures of US$4,000,000 and cash payments of US$750,000 (US$50,000 paid) which must be incurred and paid to the Company’s U.S. subsidiary in annual increments prior to December 31, 2008. TCAI has made a firm commitment to incur US$500,000 in exploration expenditures by December 31, 2005 (completed). Upon TCAI vesting its 51% interest, TCAI and the Company will form a joint venture to further develop the property. When the joint venture completes the earlier of US$8.0 million in expenditures or a preliminary feasibility study, TCAI will have a one-time option to elect to earn an additional 9% interest in the property by funding and completing a feasibility study. Upon TCAI earning its additional interest and the approval of a production plan, the Company will have the option to request that TCAI arrange financing for the Company’s share of the capital costs required to develop the property. If the Company exercises this option TCAI shall commit to use its best efforts to arrange or provide project debt financing for not less than 60% of projected capital costs on a limited recourse basis after technical completion. If project costs exceed the amount available for debt financing

E-19

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WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

and the parties elect nonetheless to put the property into production then at the Company’s election TCAI shall also arrange or provide the Company’s share of equity financing on a subordinate loan basis at LIBOR plus 4%. The property is comprised of 608 claims.
 
Cottonwood, Eureka County, Nevada
 
In fiscal 2002, the Company staked 56 claims and executed a mining lease agreement to acquire six adjacent claims. Under the terms of the agreement, the Company has made lease payments totalling US$9,000 and has issued 80,000 common shares of the Company at a value of $69,800. The Company is required to make further annual lease payments of US$5,000. The Company has staked an additional 57 claims in the surrounding area.
 
Fye Canyon, Eureka County, Nevada
 
In fiscal 2004, the Company executed a mining lease agreement to acquire 114 claims (the “Underlying Fye Agreement”). Under the terms of the agreement, the Company has made an initial lease payment of US$5,000 which will increase by US$5,000 per year to a maximum of US$50,000 per year. The underlying royalty retained by the owner is 2% of net smelter returns up to a maximum of US$1,000,000 after which it is reduced to 1% of net smelter returns to a maximum of US$5,000,000. During the 2005 fiscal year, the Company entered into a Financing and Acquisition Agreement with TCAI whereby TCAI was granted the option to earn an initial 51% interest in the property. The terms of the agreement provide for exploration expenditures of US$4,000,000, cash payments of US$750,000 (US$50,000 paid) which must be incurred and paid to the Company’s U.S. subsidiary in annual increments prior to December 31, 2008, and the assumption of all obligations under the Underlying Fye Agreement. TCAI completed a firm commitment to incur US$500,000 in exploration expenditures by December 31, 2005. Upon TCAI vesting its 51% interest, TCAI and the Company will form a joint venture to further develop the property. When the joint venture completes the earlier of US$8.0 million in expenditures or a preliminary feasibility study, TCAI will have a one-time option to elect to earn an additional 9% interest in the property by funding and completing a feasibility study. Upon TCAI earning its additional interest and the approval of a production plan, the Company will have the option to request that TCAI arrange financing for the Company’s share of the capital costs required to develop the property. If the Company exercises this option TCAI shall commit to use its best efforts to arrange or provide project debt financing for not less than 60% of projected capital costs on a limited recourse basis after technical completion. If project costs exceed the amount available for debt financing and the parties elect nonetheless to put the property into production then at the Company’s election TCAI shall also arrange or provide the Company’s share of equity financing on a subordinate loan basis at LIBOR plus 4%. An additional 231 claims have been staked in the area of interest.
 
Hunter, Eureka County, Nevada
 
In fiscal 2002, the Company staked 46 claims and executed a mining lease agreement to acquire two adjacent claims. Under the terms of the agreement, the Company has made lease payments totalling US$14,000 and issued 100,000 common shares of the Company at a value of $73,800. The Company is required to make further annual lease payments of US$7,000.
 
Patty (formerly Indian Ranch), Eureka County, Nevada
 
In fiscal 1994, the Company entered into a lease agreement for a 100% interest in 48 claims by issuing 100,000 common shares of the Company. The agreement is subject to a 6% net smelter return royalty payable to the lessee. The agreement was amended during a prior year whereby the Company secured the ability to buy down the 6% net smelter return royalty to 3% by making a payment of US$500,000 and extending the lease term to 2014. The Company holds an additional 496 claims within the area of interest.


E-20

Table of Contents

 
WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In fiscal 1997, the Company entered into an option agreement with Chapleau Resources Ltd. (“Chapleau”). Pursuant to the terms of the agreement and the subsequent amendment, Chapleau was vested a 40% undivided interest in the property in 2001.
 
In fiscal 2001, the Company and Chapleau entered into an option agreement with Kennecott Exploration Company (“Kennecott”) whereby Kennecott could earn a 60% interest in the property by making certain option payments and incurring certain exploration expenditures. After paying the Company certain option payments, Kennecott terminated the agreement in November 2001. Upon termination of the Kennecott agreement, Chapleau’s interest in the property was reduced to a 25% undivided interest, leaving the Company with a 75% undivided interest in the property.
 
In fiscal 2003, the Company and Chapleau entered into an option-joint venture agreement with Placer Dome U.S. Inc. (“PDUS”). Under the terms of the agreement, PDUS may earn a 60% interest in the property by incurring minimum work expenditures of US$2.0 million over a four year period and reimbursing the companies for their 2002 claim filing costs. During fiscal 2005, PDUS provided notice that it had completed the work expenditure requirement and was exercising its right to vest its 60% ownership. The Company now owns an undivided 30% interest.
 
New Pass, Churchill County, Nevada
 
In fiscal 1998, the Company purchased a 100% interest in the property from Quest USA Resources Inc. by making payments totalling US$165,000, subject to a 2.75% net smelter return royalty. In fiscal 2000, the Company purchased the 2.75% net smelter return royalty by issuing 100,000 common shares of its capital stock to the vendor. In fiscal 2005, the Company granted Consolidated Odyssey Exploration Inc. (“ODE”) an option to earn an initial 50% interest in the property. The Company paid a finders fee of $10,000 with respect to the ODE agreement. In February 2005, ODE assigned all of its rights under the agreement to Bonaventure Enterprises Inc. (“Bonaventure”). Under the terms of the agreement, Bonaventure must incur US$2,000,000 in exploration expenditures, issue 500,000 shares and make option payments totalling US$500,000 over a 4-year period (US$125,000 and 200,000 shares valued at $44,617 received). Upon vesting a 50% interest, Bonaventure may elect to earn an additional 10% interest by financing the completion of a feasibility study. The property is comprised of 107 claims.
 
Slaven Canyon, Lander County, Nevada
 
In fiscal 2002, the Company acquired 51 claims by staking. In fiscal 2003, the Company acquired 17 claims by staking and acquired an additional 642 acres of land contiguous to the Company’s claims by executing three lease agreements which provide for escalating lease payments. In fiscal 2004, the Company acquired an additional 190 claims by staking and acquired an additional 350 acres of land contiguous to the Company’s claims by executing seven lease agreements which provide for cash payments totalling US$7,400 on signing and escalating lease payments thereafter. The underlying royalty retained by the owners ranges from 1/2% of net smelter returns to 31/2% of net smelter returns with a buy-down provision allowing the Company to reduce the underlying royalty to a 2% net smelter return by paying US$1,500,000. In July, 2005, the Company acquired an additional 320 acres of land contiguous to the Company’s claims by executing a lease agreement which provides for a cash payment of US$7,619 and re-imbursement of fees of US$15,000 upon signing (both payments made), and escalating lease payments thereafter. The underlying royalty retained by the owner is 2.75%.
 
Squaw Creek, Elko County, Nevada
 
Since 1996, the Company has held a 100% interest in 151 claims located in Elko County which were acquired by staking. During the 2005 fiscal year, the Company granted ODE an option to earn an initial 50% interest in the property. The Company paid a finders fee of $10,000 with respect to the ODE agreement. In February 2005, ODE assigned all of its rights under the agreement to Bonaventure. Under the terms of the agreement, Bonaventure must


E-21

Table of Contents

 
WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

incur US$2,000,000 in exploration expenditures, issue 500,000 shares and make option payments totaling US$500,000 over a 4-year period (US$125,000 and 200,000 shares at a value of $44,617 received). Upon vesting a 50% interest, Bonaventure may elect to earn an additional 10% interest by financing the completion of a feasibility study.
 
Other Nevada Properties
 
In fiscal 2002, the Company acquired a 100% interest by staking the South Cabin Creek and Gold Bar Horst properties. In fiscal 2003, the Company acquired a 100% interest in the Gold Pick property by staking. In fiscal 2004, the Company acquired the McClusky Pass, Pat Canyon, Tonkin Summit, Benmark, and Goldstone properties. During the 2005 fiscal year, the Company acquired the Ian and Knolls properties.
 
5.   DEFERRED EXPLORATION COSTS
 
                         
    Balance at
 		          Balance at
 		 
    June 30,
 		          June 30,
 		 
By Type of Cost
  2005     Additions     2006  
 
Assays
  $ 713,694     $ 170,016     $ 883,710  
Consulting
    2,875,000       573,571       3,448,571  
Drafting and report preparation
    431,177       12,385       443,562  
Drilling
    3,103,814       1,474,859       4,578,673  
Field operations
    847,547       151,922       999,469  
Reclamation
    191,795       176,375       368,170  
Recording
    80,079               80,079  
Supervision
    374,039       17,668       391,707  
Surveys
    740,154       70,595       810,749  
Trenching and site preparation
    397,332       75,376       472,708  
Recovery
    (4,998,875 )     (223,503 )     (5,222,378 )
Write-off
    (3,246,878 )     (143,783 )     (3,390,661 )
                         
Total
  $ 1,508,878     $ 2,355,481     $ 3,864,359  
                         
 


E-22

Table of Contents

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

                         
    Balance at
 		          Balance at
 		 
    June 30,
 		          June 30,
 		 
By Type of Cost
  2004     Additions     2005  
 
Assays
  $ 681,131     $ 32,563     $ 713,694  
Consulting
    2,577,377       297,623       2,875,000  
Drafting and report preparation
    416,202       14,975       431,177  
Drilling
    2,753,845       349,969       3,103,814  
Field operations
    771,641       75,906       847,547  
Reclamation
    179,489       12,306       191,795  
Recording
    80,079               80,079  
Supervision
    356,723       17,316       374,039  
Surveys
    497,305       242,849       740,154  
Trenching and site preparation
    368,921       28,411       397,332  
Recovery
    (4,897,361 )     (101,514 )     (4,998,875 )
Write-off
    (3,052,280 )     (194,598 )     (3,246,878 )
                         
Total
  $ 733,072     $ 775,806     $ 1,508,878  
                         

 
                         
    Balance at
 		          Balance at
 		 
    June 30,
 		          June 30,
 		 
By Type of Cost
  2003     Additions     2004  
 
Assays
  $ 680,604     $ 527     $ 681,131  
Consulting
    2,342,159       235,218       2,577,377  
Drafting and report preparation
    393,336       22,866       416,202  
Drilling
    2,753,845               2,753,845  
Field operations
    739,812       31,829       771,641  
Reclamation
    178,609       880       179,489  
Recording
    80,079               80,079  
Supervision
    356,177       546       356,723  
Surveys
    320,921       176,384       497,305  
Trenching and site preparation
    368,921               368,921  
Recovery
    (4,897,361 )             (4,897,361 )
Write-off
    (2,810,731 )     (241,549 )     (3,052,280 )
                         
Total
  $ 506,371     $ 226,701     $ 733,072  
                         
 

E-23

Table of Contents

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

                                         
    Balance at
 		                      Balance at
 		 
    June 30,
 		                      June 30,
 		 
By Property
  2005     Additions     Recoveries     Write-offs     2006  
 
Nevada Properties
                                       
Benmark
  $ 6,743     $ 25,388     $       $       $ 32,131  
Celt
    70,920       4,729       (58,144 )             17,505  
Cottonwood
    105,702       351,546                       457,248  
Fye Canyon
    78,139       816       (58,144 )             20,811  
Gold Bar Horst
    54,943       92,504                       147,447  
Gold Pick
    75,290       389,571                       464,861  
Goldstone
    3,864                               3,864  
Hunter
    24,926       9,260                       34,186  
Ian
    625                               625  
Knolls
    9,636       11,723                       21,359  
McClusky Pass
    71,157       458,007                       529,164  
New Pass
    162,063       9,301       (107,215 )             64,149  
Pat Canyon
    22,846                               22,846  
Patty (formerly Indian Ranch)
    24,223       92,487                       116,710  
Slaven Canyon
    730,729       1,075,530                       1,806,259  
South Cabin Creek
    34,106       4,539                       38,645  
Tonkin Summit
    32,966       53,583                       86,549  
General exploration
            143,783               (143,783 )        
                                         
Total Nevada Properties
  $ 1,508,878     $ 2,722,767     $ (223,503 )   $ (143,783 )   $ 3,864,359  
                                         

 

E-24

Table of Contents

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

                                         
    Balance at
 		                      Balance at
 		 
    June 30,
 		                      June 30,
 		 
By Property
  2004     Additions     Recoveries     Write-offs     2005  
 
Nevada Properties
                                       
Benmark
  $ 2,091     $ 4,652     $       $       $ 6,743  
Celt
    24,295       46,625                       70,920  
Cottonwood
    30,807       74,895                       105,702  
Fye Canyon
    31,495       46,644                       78,139  
Gold Bar Horst
    40,975       13,968                       54,943  
Gold Pick
    60,933       14,357                       75,290  
Goldstone
    2,920       944                       3,864  
Hunter
    23,028       1,898                       24,926  
Ian
            625                       625  
Knolls
            9,636                       9,636  
McClusky Pass
    21,506       49,651                       71,157  
New Pass
    237,246       11,919       (87,102 )             162,063  
Pat Canyon
    13,007       9,839                       22,846  
Patty (formerly Indian Ranch)
    12,395       11,828                       24,223  
Slaven Canyon
    199,521       531,208                       730,729  
South Cabin Creek
    26,322       7,784                       34,106  
Squaw Creek
    2,227       12,185       (14,412 )                
Tonkin Summit
    4,304       28,662                       32,966  
General exploration
            194,598               (194,598 )        
                                         
Total Nevada Properties
  $ 733,072     $ 1,071,918     $ (101,514 )   $ (194,598 )   $ 1,508,878  
                                         

 

E-25

Table of Contents

WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

                                 
    Balance at
 		                Balance at
 		 
    June 30,
 		                June 30,
 		 
By Property
  2003     Additions     Write-offs     2004  
 
Nevada Properties
                               
Benmark
  $       $ 2,091     $       $ 2,091  
Celt
            24,295               24,295  
Cottonwood
    30,807                       30,807  
Fye Canyon
            31,495               31,495  
Gold Bar Horst
    40,975                       40,975  
Gold Pick
    47,939       12,994               60,933  
Goldstone
            2,920               2,920  
Hunter
    23,028                       23,028  
McClusky Pass
    7,266       14,240               21,506  
New Pass
    229,959       7,287               237,246  
Pat Canyon
            13,007               13,007  
Patty (formerly Indian Ranch)
    10,099       2,296               12,395  
Slaven Canyon
    88,532       110,989               199,521  
South Cabin Creek
    26,322                       26,322  
Squaw Creek
    1,444       783               2,227  
Tonkin Summit
            4,304               4,304  
General exploration
            241,549       (241,549 )        
                                 
Total Nevada Properties
  $ 506,371     $ 468,250     $ (241,549 )   $ 733,072  
                                 

 
6.   EQUIPMENT
 
                                                 
    2006     2005  
          Accumulated
 		    Net Book
 		          Accumulated
 		    Net Book
 		 
    Cost     Amortization     Value     Cost     Amortization     Value  
 
Vehicles
  $ 93,552     $ 40,476     $ 53,076     $ 76,745     $ 24,156     $ 52,589  
Technical equipment
    847,526       20,602       826,924       41,041       14,221       26,820  
Office equipment
    79,378       28,525       50,853       76,884       17,175       59,709  
                                                 
    $ 1,020,456     $ 89,603     $ 930,853     $ 194,670     $ 55,552     $ 139,118  
                                                 
 
7.   RELATED PARTY TRANSACTIONS
 
During the year ended June 30, 2006, the Company entered into the following transactions with related parties:
 
a) Paid or accrued $264,000 (2005 — $264,000; 2004 — $210,000) in management fees to directors and officers of the Company and to companies controlled by directors of the Company.
 
b) Paid or accrued $127,504 (2005 — $111,223; 2004 — $115,879) in consulting fees to directors and officers of the Company and to companies controlled by directors of the Company, of which $111,636 (2005 — $111,223; 2004 — $115,879) is included in or written-off to deferred exploration costs.
 
c) Paid or accrued $117,770 (2005 — $8,815; 2004 — $NIL) in administrative fees to officers and a company controlled by a director of the Company.

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Table of Contents

 
WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

At June 30, 2006, there is $118,002 (2005 — $17,754) payable to directors and officers of the Company and to companies controlled by directors of the Company. The amounts are unsecured and non-interest bearing.
 
The Company entered into consulting agreements with directors and officers of the Company and to companies controlled by directors of the Company. The annual consulting fee commitments are as follows:
 
         
2007
  $ 324,000  
2008
    162,000  
         
    $ 486,000  
         
 
The amounts charged to the Company for the services provided have been determined by negotiation among the parties and are covered by signed agreements. 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.
 
8.   ASSET RETIREMENT OBLIGATION
 
The following table presents the aggregate carrying amount of the obligation associated with the retirement of the properties:
 
                 
    2006     2005  
 
Asset retirement obligation
  $ 165,985     $        
                 
 
The undiscounted amount of cash flows, required over the estimated reserve life of the underyling assets, to settle the obligation, adjusted for inflation, is estimated at $196,768 (2005 — $NIL). The obligation was calculated using a credit-adjusted risk free discount rate of 4% and an inflation rate of 4.1%. It is expected that this obligation will be funded from general Company resources at the time the costs are incurred with the majority of costs expected to occur when the properties are disposed of.
 
9.   CAPITAL STOCK
 
Share issuances
 
During the 2006 fiscal year the Company had no share issuances other than those issued for mineral property interests, exercise of warrants and stock options.
 
During the 2005 fiscal year the Company completed a private placement of 1,500,000 units at $1.58, each unit consisting of one common share and one non-transferable share purchase warrant, each warrant entitling the holder to purchase an additional share at $2.50 for one year.
 
During the 2004 fiscal year the Company completed three private placements:
 
a) 2,500,000 units at $0.40, each unit consisting of one common share and one non-transferable share purchase warrant, each warrant entitling the holder to purchase an additional share at $0.60 for two years (435,000 warrants exercised during the year) with an additional provision that if the closing price of the Company’s shares exceeds $0.95 for a period of more than 20 business days, the warrants must be exercised within two weeks of notice (triggered subsequent to year end). A finder’s fee of 125,000 units were issued as well as finder’s warrants valued at $47,304 entitling the holder to acquire 200,000 shares of the Company at a price of $0.60 for one year; subject to the same additional provision as for the placees (triggered subsequent to year end);
 
b) 7,764,704 units at $0.85, each unit consisting of one common share and one non-transferable share purchase warrant, each warrant entitling the holder to purchase an additional share at $1.25 for 18 months.


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Table of Contents

 
WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Brokers’ warrants valued at $239,567 were issued entitling the holder to acquire 543,529 shares of the Company at a price of $1.25, exercisable for 18 months; and
 
c) 2,222,222 units at $0.90, each unit consisting of one common share and one-half non-transferable share purchase warrant, each one warrant entitling the holder to purchase an additional share at $1.25 for one year. Brokers’ warrants valued at $69,035 were issued entitling the holder to acquire 155,555 shares of the Company at a price of $1.25, exercisable for 1 year.
 
d) Share issuance costs related to private placements during the year totalled $540,522.
 
Stock options
 
Under the Company’s stock option plan effective November 4, 2002 and amended December 12, 2003, the Company may grant options for up to 7,072,935 common shares to directors, employees and consultants at exercise prices to be determined by the market value on the date of grant. Vesting of options is made at the discretion of the Board of Directors at the time the options are granted with the exception of options granted in relation to investor relations. Options granted to consultants engaged in investor relations activities vest no earlier than as to one-quarter upon the grant date and a further one-quarter after each of the following three three-month periods. The options can be granted for a maximum term of 10 years.
 
At June 30, 2006, the following incentive stock options were outstanding:
 
                 
Number
 		  Exercise
 		   
of Options
  Price  
Expiry Date
 
  755,500     $ 0.23     January 23, 2008
  2,074,500       0.41     September 23, 2008
  150,000       0.75     March 1, 2009
  50,000       0.85     March 21, 2010
  40,000       0.67     April 6, 2010
  50,000       1.50     October 19, 2010
  2,000,000       1.91     January 10, 2011
                 
  5,120,000              
                 


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Table of Contents

 
WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Stock option transactions and the number of stock options outstanding are summarized as follows:
 
                 
          Weighted
 		 
          Average
 		 
    Number
 		    Exercise
 		 
    of Options     Price  
 
Balance, June 30, 2003
    3,075,000     $ 0.15  
Options granted
    2,724,500       0.51  
Options exercised
    (2,134,500 )     0.13  
                 
Balance, June 30, 2004
    3,665,000       0.43  
Options granted
    150,000       0.73  
Options expired/cancelled
    (200,000 )     1.25  
Options exercised
    (230,000 )     0.30  
                 
Balance, June 30, 2005
    3,385,000       0.41  
Options granted
    2,050,000       1.90  
Options exercised
    (315,000 )     0.54  
                 
Balance, June 30, 2006
    5,120,000     $ 1.00  
                 
Number of options currently exercisable
    4,920,000     $ 0.96  
                 
Weighted average fair value of options granted during the year
    2004     $ 0.39  
      2005       0.56  
      2006       1.16  
                 
 
Stock-based compensation
 
The following assumptions were used in the Black-Scholes valuation of stock options and warrants granted during the years presented:
 
             
    2006   2005   2004
 
Weighted average risk-free interest rate
  3.9%   3.7%   4.2%
Expected life of options and warrants
  5 years   5 years   1 year-5 years
Weighted average annualized volatility
  71%   101%   118%
Dividend
  0.00%   0.00%   0.00%


E-29

Table of Contents

 
WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Warrants
 
Warrant transactions are summarized as follows:
 
                         
    Number
 		    Exercise
 		       
    of Warrants     Price     Expiry Date  
 
Balance, June 30, 2003
    5,649,308                  
Warrants exercised
    (3,708,132 )   $ 0.44       November 18, 2003  
Warrants exercised
    (1,941,176 )     0.25       June 27, 2004  
Warrants granted
    200,000       0.60       October 24, 2004  
Warrants granted
    2,625,000       0.60       August 3, 2004  
Warrants exercised
    (435,000 )     0.60       August 3, 2004  
Warrants granted
    7,719,998       1.25       July 29, 2005  
Warrants granted
    588,235       1.25       August 3, 2005  
Warrants granted
    1,266,666       1.25       June 25, 2005  
                         
Balance, June 30, 2004
    11,964,899                  
Warrants exercised
    (2,290,000 )     0.60       August 3, 2004  
Warrants expired
    (100,000 )     0.60       August 3, 2004  
Warrants expired
    (1,266,666 )     1.25       June 25, 2005  
Warrants granted
    1,500,000       2.50       December 20, 2006  
                         
Balance, June 30, 2005
    9,808,233                  
Warrants exercised
    (4,352,351 )     1.25       July 29, 2005  
Warrants exercised
    (588,235 )     1.25       August 3, 2005  
Warrants expired
    (3,367,647 )     1.25       July 29, 2005  
                         
Balance, June 30, 2006
    1,500,000                  
                         
 
The number of warrants outstanding at June 30, 2006 is summarized as follows:
 
                 
Number
 		  Exercise
 		   
of Warrants
  Price   Expiry Date
 
  1,500,000     $ 2.50     December 20, 2006
 
10.   INCOME TAXES
 
A reconciliation of income tax recovery at statutory rates with the reported income tax recovery is as follows:
 
                         
    2006     2005     2004  
 
Loss before income tax recovery
  $ (3,307,465 )   $ (1,063,474 )   $ (1,664,257 )
                         
Expected income tax recovery
  $ (1,227,731 )   $ (378,597 )   $ (618,241 )
Non-deductible expenses
    1,144,086       14,884       315,842  
Differences in foreign tax rates
    13,135       32,371       1,810  
Tax loss benefit not recognized for book purposes
    70,510       331,342       300,589  
                         
Actual income tax recovery
  $ NIL     $ NIL     $ NIL  
                         


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Table of Contents

 
WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The significant components of the Company’s future tax assets are as follows:
 
                         
    2006     2005     2004  
 
Net operating loss carry forwards
  $ 2,413,320     $ 2,338,680     $ 2,517,008  
Mineral properties and other assets
    681,280       590,427       618,517  
Share issuance costs
    80,257       117,590       158,213  
                         
      3,174,857       3,046,697       3,293,738  
Less: valuation allowances
    (3,174,857 )     (3,046,697 )     (3,293,738 )
                         
Net future tax assets
  $ NIL     $ NIL     $ NIL  
                         
 
The Company has non-capital losses of approximately $6,853,000 which may be carried forward and applied against taxable income in future years. These losses, if unutilized, will begin to expire in 2007. Subject to certain restrictions, the Company has further resource development and exploration expenditures totalling approximately $1,709,000 available to reduce taxable income of future years. Future tax benefits which may arise as a result of these non-capital losses and resource deductions have not been recognized in these financial statements and have been offset by a valuation allowance.
 
11.   SEGMENTED INFORMATION
 
The Company’s one reportable operating segment is the exploration and development of mineral properties. Geographic information is as follows:
 
                                 
                Mineral
 		       
                Property
 		       
                Interests and
 		       
                Deferred
 		       
    Total
 		          Exploration
 		    Other
 		 
    Assets     Equipment     Costs     Assets  
 
June 30, 2006
                               
Canada
  $ 13,637,654     $ 24,639     $       $ 13,613,015  
United States
    7,864,404       906,214       6,663,978       294,212  
                                 
    $ 21,502,058     $ 930,853     $ 6,663,978     $ 13,907,227  
                                 
June 30, 2005
                               
Canada
  $ 11,377,473     $ 30,799     $       $ 11,346,674  
United States
    4,319,402       108,319       3,965,025       246,058  
                                 
    $ 15,696,875     $ 139,118     $ 3,965,025     $ 11,592,732  
                                 
 
                         
    2006     2005     2004  
 
Loss before other items:
                       
Canada
  $ 3,338,256     $ 893,992     $ 1,366,939  
United States
    234,710       206,754       101,391  
                         
    $ 3,572,966     $ 1,100,746     $ 1,468,330  
                         
 
12.   RESTRICTED RECLAMATION BONDS
 
The Company has secure funds in place with the United States government, a Canadian bank and a United States bank as security for reclamation bonds on its mineral properties. These restricted reclamation


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WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

bonds were required by the local jurisdictions at the time exploration activities commenced on the properties and do not represent an asset retirement obligation (Note 2). Interest on the certificates of deposit with Canadian and United States banks is paid on a periodic basis to the Company.
 
13.   SUPPLEMENTAL DISCLOSURES WITH RESPECT TO CASH FLOWS
 
Significant non-cash transactions during the years ended June 30, 2006, June 30, 2005 and June 30, 2004 include the Company issuing 40,000 common shares each year at a value in the current year of $72,000 (2005 — $28,400; 2004 — $31,200) for the acquisition of mineral property interests. In the year ended June 30, 2004, the Company issued 125,000 units as a finder’s fee related to a private placement. Included in accounts payable are $93,378 (2005 — $153,756) relating to deferred exploration costs, $129,328 (2005 — $NIL) relating to equipment, $6,330 (2005 — $NIL) relating to restricted reclamation bonds and $2,695 (2005 — $NIL) relating to mineral property interests.
 
14.   COMMITMENTS
 
The Company has entered into lease agreements for its premises in Canada and the United States. The annual lease commitments are as follows:
 
         
2007
  $ 38,295  
2008
    22,500  
         
    $ 60,795  
         
 
15.   FINANCIAL INSTRUMENTS
 
The Company’s financial instruments consist of cash, temporary investments, receivables, restricted reclamation bonds, accounts payable and accrued liabilities, and due to related parties. 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, unless otherwise noted.
 
The Company has its cash primarily in one commercial bank in Vancouver, British Columbia, Canada and one commercial bank in Reno, Nevada, United States.
 
16.   DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
 
These financial statements have been prepared in accordance with Canadian GAAP. Material variations in the accounting principles, practices and methods used in preparing these financial statements from principles, practices and methods accepted in the United States (“United States GAAP”) are described and quantified below.


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Table of Contents

 
WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The impact of the differences between Canadian GAAP and United States GAAP on the consolidated balance sheets would be as follows:
 
                                                 
    2006     2005  
    Balance,
 		          Balance,
 		    Balance,
 		          Balance,
 		 
    Canadian
 		          United States
 		    Canadian
 		          United States
 		 
    GAAP     Adjustments     GAAP     GAAP     Adjustments     GAAP  
 
Temporary investments
  $ 2,107,699     $ 48,282     $ 2,155,981     $ 10,895,443     $ 36,224     $ 10,931,667  
Other current assets
    11,564,745               11,564,745       500,597               500,597  
Mineral property interests
    2,799,619       (2,032,127 )     767,492       2,456,147       (1,839,607 )     616,540  
Deferred exploration costs
    3,864,359       (3,864,359 )             1,508,878       (1,508,878 )        
Equipment
    930,853               930,853       139,118               139,118  
Restricted reclamation bonds
    234,783               234,783       196,692               196,692  
                                                 
    $ 21,502,058     $ (5,848,204 )   $ 15,653,854     $ 15,696,875     $ (3,312,261 )   $ 12,384,614  
                                                 
Current liabilities
  $ 433,517     $       $ 433,517     $ 179,585     $       $ 179,585  
Asset retirement obligation
    165,985               165,985                          
Shareholders’ equity
    20,902,556       (5,848,204 )     15,054,352       15,517,290       (3,312,261 )     12,205,029  
                                                 
    $ 21,502,058     $ (5,848,204 )   $ 15,653,854     $ 15,696,875     $ (3,312,261 )   $ 12,384,614  
                                                 
 
The impact of the differences between Canadian GAAP and United States GAAP on the consolidated statements of operations would be as follows:
 
                                 
    Cumulative
 		                   
    Amounts from
 		                   
    Inception on
 		                   
    December 18, 1986
 		                   
    to June 30, 2006     2006     2005     2004  
 
Loss for the period, Canadian GAAP
  $ (15,881,401 )   $ (3,307,465 )   $ (1,063,474 )   $ (1,664,257 )
Adjustments:
                               
Mineral property interests
    (2,032,127 )     (192,520 )     (619,497 )     (556,945 )
Deferred exploration costs
    (3,864,359 )     (2,355,481 )     (775,806 )     (226,701 )
Increase in temporary investments
    48,282       22,634       36,224          
                                 
Loss for the period, United States GAAP
  $ (21,723,605 )   $ (5,832,832 )   $ (2,422,553 )   $ (2,447,903 )
                                 
Basic and diluted loss per share, United States GAAP
          $ (0.10 )   $ (0.05 )   $ (0.06 )
                                 
Weighted average number of common shares outstanding, United States GAAP
            58,855,176       53,091,304       39,038,472  
                                 


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Table of Contents

 
WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The impact of the differences between Canadian GAAP and United States GAAP on the consolidated statements of cash flows would be as follows:
 
                                 
    Cumulative Amounts
 		                   
    from Inception on
 		                   
    December 18, 1986
 		                   
    to June 30, 2006     2006     2005     2004  
 
Cash flows used in operating activities, Canadian GAAP
  $ (4,794,625 )   $ (605,920 )   $ (954,361 )   $ (741,247 )
Acquisition of mineral property interests
    (5,449,802 )     (209,852 )     (619,497 )     (556,945 )
Deferred exploration costs
    (7,339,941 )     (2,413,657 )     (816,648 )     (442,661 )
Acquisition (disposal) of temporary investments (net)
    (1,909,954 )     8,806,566       (3,413,215 )     (7,493,823 )
                                 
Cash flows provided by (used in) operating activities, United States GAAP
    (19,494,322 )     5,577,137       (5,803,721 )     (9,234,676 )
                                 
Cash flows provided by financing activities, Canadian GAAP and United States GAAP
    32,724,773       6,345,433       3,813,500       11,705,658  
                                 
Cash flows provided by (used in) investing activities, Canadian GAAP
    (16,532,263 )     5,375,913       (4,972,207 )     (8,702,270 )
Acquisition of mineral property interests
    5,449,802       209,852       619,497       556,945  
Deferred exploration costs
    7,339,941       2,413,657       816,648       442,661  
Acquisition (disposal) of temporary investments (net)
    1,909,954       (8,806,566 )     3,413,215       7,493,823  
                                 
Cash flows used in investing activities, United States GAAP
    (1,832,566 )     (807,144 )     (122,847 )     (208,841 )
                                 
Increase (decrease) in cash during the period
    11,397,885       11,115,426       (2,113,068 )     2,262,141  
Cash, beginning of period
            282,459       2,395,527       133,386  
                                 
Cash, end of period
  $ 11,397,885     $ 11,397,885     $ 282,459     $ 2,395,527  
                                 
 
Mineral property interests and deferred exploration costs
 
In accordance with EITF 04-02, the Company classifies the costs of acquiring its mineral interests as tangible assets resulting in no difference between Canadian and United States GAAP.
 
Under United States GAAP exploration costs on mineral properties, other than acquisition costs, prior to the establishment of proven or probable reserves are expensed as incurred. Under Canadian GAAP these costs may be deferred.
 
Under United States GAAP, the Company performs evaluations of its investment in mineral properties to assess the recoverability and the residual value of its investments in these assets. All mineral properties are reviewed


E-34

Table of Contents

 
WHITE KNIGHT RESOURCES LTD.
(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

for impairment whenever events or circumstances change which indicates the carrying amount of an asset may not be recoverable, utilizing established guidelines based on undiscounted future net cash flows from the asset or upon the determination that certain exploration properties do not have sufficient potential for economic mineralization.
 
Asset retirement obligations
 
The Company adopted new accounting and disclosure standards under Canadian GAAP (Note 2) since the 2005 fiscal year. Accordingly there were no differences between Canadian GAAP and United States GAAP as at June 30, 2006 and 2005.
 
Under Canadian GAAP, the Company was not required to record asset retirement obligations as at June 30, 2005. The Company determined there were no asset retirement obligations as at June 30, 2005.
 
Temporary Investments
 
Under Canadian GAAP, temporary investments are carried at the lower of aggregate cost or current market value, with any unrealized gain or loss included in the statement of operations. Long-term investments are carried on the cost or equity basis and are only written down when there is evidence of a decline in value that is other than temporary.
 
Under United States GAAP, SFAS 115 requires that certain debt and equity investments must be classified into available-for-sale or trading securities and stated at fair market values. Any unrealized holding gains or losses are reported as a separate component of shareholders’ equity until realized for available-for-sale securities, and included in earnings for trading securities. For United States GAAP purposes, the Company’s investment in debt securities have been classified as trading securities. Under SFAS 115, for the 2004 fiscal year there was no difference under Canadian GAAP or United States GAAP as these debt securities have been written down to their fair market value, with an unrealized loss of $42,999 included in the consolidated statement of operations. For the 2006 fiscal year, an excess holding gain of $48,282 (2005 — $36,224) would be recognized under United States GAAP.
 
New accounting pronouncements
 
In May 2005, the Financial Accounting Standards Board (FASB) issued SFAS No. 154, “Accounting Changes and Error Corrections — A Replacement of APB Opinion No. 20 and SFAS No. 3”. SFAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle and applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. SFAS 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. The provisions of SFAS No. 154 are effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.
 
The FASB has also issued SFAS No. 155 “Accounting for Certain Hybrid Financial Instruments” and SFAS No. 156 “Accounting for Servicing of Financial Assets”, but they will not have any relationship to the operations of the Company. Therefore a description and its impact for each on the Company’s operations and financial position have not been disclosed.
 
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.


E-35

Table of Contents

Table of Contents

UNAUDITED FINANCIAL STATEMENTS OF
US GOLD CANADIAN ACQUISITION CORPORATION
 
INDEX
 
         
Balance Sheet as of April 30, 2006
    F-3  
Notes to Balance Sheet
    F-4  


F-2

Table of Contents

US GOLD CANADIAN ACQUISITION CORPORATION
 
UNAUDITED BALANCE SHEET
 
         
    As of
 		 
    April 30, 2006  
 
Assets
Current Assets:
       
Cash
  $ 1.00  
Total current assets
  $ 1.00  
         
Liabilities and Shareholder’s Equity
Liabilities
  $ —  
         
Shareholder’s equity Common shares, authorized — unlimited, issued and outstanding — 1 share
  $ 1.00  
         
Total shareholder’s equity
  $ 1.00  
         
 
The accompanying notes are an integral part of this unaudited balance sheet.


F-3

Table of Contents

US GOLD CANADIAN ACQUISITION CORPORATION
 
NOTES TO UNAUDITED BALANCE SHEET
 
Note 1 — Nature of Business:
 
US Gold Canadian Acquisition Corporation was incorporated on April 18, 2006 for the purpose of making an offer to purchase the outstanding common shares in the capital of each of Coral Gold Resources Ltd., Nevada Pacific Gold Ltd., Tone Resources Limited and White Knight Resources Ltd.
 
US Gold Canadian Acquisition Corporation is a wholly-owned subsidiary of U.S. Gold Corporation and has no material assets or liabilities and no operating history.
 
Note 2 — Basis of Reporting:
 
The balance sheet of US Gold Canadian Acquisition Corporation is prepared in accordance with accounting principles generally accepted in the United States of America under the accrual method of accounting.
 
The presentation of a statement of income, a statement of changes in shareholder’s equity and a statement of cash flows is not included as there has been no activity, except for the sale of one common share to U.S. Gold Corporation on April 18, 2006 for $1.00.


F-4

Table of Contents

 
APPENDIX G — UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF U.S. GOLD
 
U.S. Gold Corporation
 
Unaudited Pro Forma Consolidated Balance Sheet
June 30, 2006
 
                                                                 
          Coral Gold
 		                Coral Gold
 		                Pro Forma
 		 
          Resources
 		                Resources
 		                Consolidated
 		 
    U.S. Gold
 		    Ltd. (Cdn
 		    US GAAP
 		          Ltd. (US
 		    Transaction
 		          U.S. Gold
 		 
    Corporation     GAAP)     Adjustments     Notes     GAAP)     Adjustments     Notes     Corporation  
    (Expressed in United States dollars unless otherwise stated)  
 
ASSETS
Current                                                                
Cash and cash equivalents
  $ 30,065,618     $ 4,152,402                     $ 4,152,402                     $ 34,218,020  
Accounts receivable
    133,743       47,414                       47,414                       181,157  
Other current assets — prepaid expenses
    74,793       70,242                       70,242                       145,035  
                                                                 
Total current assets
    30,274,154       4,270,058                       4,270,058                       34,544,212  
                                                                 
Property and equipment, net
    101,629       3,108                       3,108                       104,737  
Mineral property interests
    —       9,197,107     $ (8,262,481 )     2 (i)     934,626                       934,626  
Acquired mineral property interests
    —       —                       —     $ 32,682,236       3&4 (a)     32,682,236  
Offering costs, net
    2,991,684       —                       —                       2,991,684  
Restrictive time deposits for reclamation bonding
    3,102,454       234,878                       234,878                       3,337,332  
Escrow funding
    38,009,105       —                       —                       38,009,105  
Long-lived asset retirement
    1,068,353       —                       —                       1,068,353  
Other assets:
                                                               
Inactive milling equipment
    777,819       —                       —                       777,819  
Other assets
    2,125       207,367       141,688       2 (ii)     349,055                       351,180  
                                                                 
Total other assets
    779,944       207,367       141,688               349,055       —               1,128,999  
                                                                 
TOTAL ASSETS
  $ 76,327,323     $ 13,912,518     $ (8,120,793 )           $ 5,791,725     $ 32,682,236             $ 114,801,284  
                                                                 
 
LIABILITIES
Current                                                                
Accounts payable and accrued liabilities
  $ 1,961,514     $ 336,252                     $ 336,252     $ 1,407,053       3&4 (b)   $ 3,704,819  
Installment purchase contracts
    48,164       —                       —                       48,164  
Advances payable
    —       72,656                       72,656                       72,656  
Retirement obligation (reclamation activities)
    1,235,776       —                       —                       1,235,776  
                                                                 
Total current liabilities
    3,245,454       408,908                       408,908       1,407,053               5,061,415  
                                                                 
Installment purchase contracts, long-term
    10,444       —                       —                       10,444  
Retirement obligation
    1,389,107       —                       —                       1,389,107  
Future income tax liability
    —       1,303,796                       1,303,796       7,189,456       3&4 (c)     8,493,252  
Other permit obligations
    72,511       —                       —                       72,511  
Escrow account
    38,009,105       —                       —                       38,009,105  
Derivative liabilities
    96,601,884       —                       —                       96,601,884  
Other liabilities
    —       23,685                       23,685                       23,685  
                                                                 
Total liabilities
    139,328,505       1,736,389                       1,736,389       8,596,509               149,661,403  
                                                                 
 
SHAREHOLDERS’ EQUITY (DEFICIENCY)
Capital stock
    41,339,239       30,836,785                       30,836,785       (30,836,785 )     4 (d)     66,157,565  
                                              24,818,326       3          
Options and warrants
    —       —                       —       3,322,737       3       3,322,737  
Other equity accounts
    —       1,872,348     $ 141,688       2 (iii)     2,014,036       (2,014,036 )     4 (d)     —  
Deficit
    (104,340,421 )     (20,533,004 )     (8,262,481 )     2 (iii)     (28,795,485 )     28,795,485       4 (d)     (104,340,421 )
                                                                 
Total shareholders’ equity (deficiency)
    (63,001,182 )     12,176,129       (8,120,793 )             4,055,336       24,085,727               (34,860,119 )
                                                                 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
  $ 76,327,323     $ 13,912,518     $ (8,120,793 )           $ 5,791,725     $ 32,682,236             $ 114,801,284  
                                                                 
 
See accompanying notes to unaudited pro forma consolidated financial statements.


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U.S. Gold Corporation
 
Unaudited Pro Forma Consolidated Statement of Operations
For the six months ended June 30, 2006
 
                                                 
          Coral Gold
 		                Coral Gold
 		    Pro Forma
 		 
          Resources
 		                Resources
 		    Consolidated
 		 
    U.S. Gold
 		    Ltd. (Cdn
 		    US GAAP
 		          Ltd. (US
 		    U.S. Gold
 		 
    Corporation     GAAP)     Adjustments     Notes     GAAP)     Corporation  
    (Expressed in United States dollars unless otherwise stated)  
 
Interest and other items
  $ 488,378     $ 43,853                     $ 43,853     $ 532,231  
Gain (loss) on foreign exchange
    —       12,768                       12,768       12,768  
                                                 
Total other revenue
    488,378       56,621                       56,621       544,999  
                                                 
COSTS AND EXPENSES
                                               
General and administrative
    1,449,070       911,743                       911,743       2,360,813  
Proposed acquisitions
    3,384,378       —                       —       3,384,378  
Property holding costs
    781,853       —                       —       781,853  
Exploration costs
    1,000,423       —                       —       1,000,423  
Stock compensation expense
    —       876,942                       876,942       876,942  
Interest
    3,442       —                       —       3,442  
Stock option expense
    536,000       —                       —       536,000  
Accretion of asset retirement obligation
    135,989       —                       —       135,989  
Change in value of derivatives
    59,026,884       —                       —       59,026,884  
Write-off of mineral property costs
    —       —     $ 141,802       2 (i)     141,802       141,802  
Amortization of offering cost
    228,066       —                       —       228,066  
Depreciation
    12,594       380                       380       12,974  
                                                 
Total costs and expenses
    66,558,699       1,789,065       141,802               1,930,867       68,489,566  
                                                 
Loss before income taxes
    (66,070,321 )     (1,732,444 )     (141,802 )             (1,874,246 )     (67,944,567 )
Provision for future income taxes
    —       669,080                       669,080       669,080  
Provision for income taxes
    —       —       —               —       —  
                                                 
NET LOSS
  $ (66,070,321 )   $ (2,401,524 )   $ (141,802 )           $ (2,543,326 )   $ (68,613,647 )
                                                 
Basic and diluted net loss per share (Note 6)
  $ (1.98 )                                   $ (1.83 )
                                                 
Weighted average number of shares outstanding — basic and diluted (Note 6)
    33,296,755                                       37,503,251  
                                                 
 
See accompanying notes to unaudited pro forma consolidated financial statements.


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U.S. Gold Corporation
 
Unaudited Pro Forma Consolidated Statement of Operations
For the twelve months ended December 31, 2005
 
                                                 
          Coral Gold
 		                Coral Gold
 		    Pro Forma
 		 
          Resources
 		                Resources
 		    Consolidated
 		 
    U.S. Gold
 		    Ltd. (Cdn
 		    US GAAP
 		          Ltd. (US
 		    U.S. Gold
 		 
    Corporation     GAAP)     Adjustments     Notes     GAAP)     Corporation  
    (Expressed in United States dollars unless otherwise stated)  
 
OTHER REVENUE
                                               
Earnest money forfeited
  $ 200,000                                     $ 200,000  
Interest and other items
    32,032     $ 15,270                     $ 15,270       47,302  
Management fee
    330,000       —                       —       330,000  
Realized gain from disposition of shares
    520,428       —                       —       520,428  
Gain (loss) on sale of assets
    (29,982 )     (3,296 )                     (3,296 )     (33,278 )
Gain (loss) on foreign exchange
    —       (15,576 )                     (15,576 )     (15,576 )
                                                 
Total other revenue
    1,052,478       (3,602 )                     (3,602 )     1,048,876  
                                                 
COSTS AND EXPENSES
                                               
General and administrative
    1,027,194       480,660                       480,660       1,507,854  
Write-off of purchase price receivable
    182,748       —                       —       182,748  
Property holding costs
    761,081       —                       —       761,081  
Employment termination payments
    1,423,824       —                       —       1,423,824  
Stock compensation expense
    294,400       311,545                       311,545       605,945  
Equity share of subsidiary loss
    58,888       —                       —       58,888  
Realization reserve — stock
    168,960       —                       —       168,960  
Interest
    3,011       —                       —       3,011  
Accretion of asset retirement obligation
    110,243       —                       —       110,243  
Write-off of mineral property costs
    —       —     $ 642,993       2 (i)     642,993       642,993  
Depreciation
    12,850       764                       764       13,614  
                                                 
Total costs and expenses
    4,043,199       792,969       642,993               1,435,962       5,479,161  
                                                 
Loss before income taxes
    (2,990,721 )     (796,571 )     (642,993 )             (1,439,564 )     (4,430,285 )
Provision for income taxes
    —       —       —               —       —  
                                                 
NET LOSS
  $ (2,990,721 )   $ (796,571 )   $ (642,993 )           $ (1,439,564 )   $ (4,430,285 )
                                                 
Basic and diluted net loss per share (Note 6)
  $ (0.12 )                                   $ (0.15 )
                                                 
Weighted average number of shares outstanding — basic and diluted (Note 6)
    25,931,172                                       30,137,668  
                                                 
 
See accompanying notes to unaudited pro forma consolidated financial statements.


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U.S. GOLD CORPORATION
 
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in United States dollars unless otherwise stated)
June 30, 2006 and December 31, 2005
(Unaudited)
 
1.   Basis of presentation
 
On March 5, 2006 U.S. Gold Corporation (“U.S. Gold” or the “Company”) announced that it intends to acquire, in stock transactions, all of the outstanding common shares of White Knight Resources Ltd., Nevada Pacific Gold Ltd., Coral Gold Resources Ltd. and Tone Resources Limited. This proposal was made in letters sent on the same day by Mr. Robert R. McEwen, Chairman and Chief Executive Officer of U.S. Gold, to the chief executive officers of each of the subject companies.
 
These unaudited pro forma consolidated financial statements have been prepared to give effect to the Company’s acquisition of Coral Gold (the “Acquisition”). These unaudited pro forma consolidated financial statements have been prepared on the basis that each shareholder will receive shares of common stock of U.S. Gold in exchange for their Coral Gold common shares. The combined effects of the proposed transactions with each of the four companies have been presented separately under “Unaudited Pro Forma Consolidated Supplementary Financial Statements”, included elsewhere in this document. Each of these acquisitions is not conditional on the other three and the Company may or may not be successful in acquiring all of the target companies.
 
These unaudited pro forma consolidated financial statements have been compiled from and include:
 
(a) An unaudited pro forma consolidated balance sheet combining the unaudited balance sheet of U.S. Gold as at June 30, 2006 with the unaudited balance sheet of Coral Gold as at April 30, 2006 giving effect to the transaction as if it occurred on June 30, 2006.
 
(b) An unaudited pro forma consolidated statement of operations combining the audited statement of operations of the Company for the year ended December 31, 2005 with the unaudited constructed statement of operations of Coral Gold for the twelve months ended October 31, 2005, giving effect to the transaction as if it occurred on January 1, 2005. The Coral Gold’s statement of operations for the twelve months ended October 31, 2005 has been constructed by adding together (a) the results for the three months ended January 31, 2005 (derived from Coral Gold’s audited financial statements for the year ended January 31, 2005 and the unaudited interim results for the nine months ended October 31, 2004) and (b) the unaudited interim results for the nine months ended October 31, 2005.
 
(c) An unaudited pro forma consolidated statement of operations combining the unaudited statement of operations of the Company for the six months ended June 30, 2006 with the unaudited constructed statement of operations of Coral Gold for the six months ended April 30, 2006 (derived from Coral Gold’s audited financial statements for the year ended January 31, 2006, the unaudited interim results for the nine months ended October 31, 2005 and the unaudited interim results for the three months ended April 30, 2006), giving effect to the transaction as if it occurred on January 1, 2005.
 
The unaudited pro forma consolidated balance sheet and statements of operations have been presented on the above basis to ensure that the unaudited pro forma consolidated financial statements reflect the acquired business financial statements for a period that is no more than 93 days from U.S. Gold’s year-end, as required pursuant to pro forma presentation requirements contained in the securities rules.
 
The unaudited pro forma consolidated financial statements have been compiled using the significant accounting policies as set out in the audited financial statements of U.S. Gold for the year ended December 31, 2005 which are included elsewhere in this document. The unaudited pro forma consolidated financial statements should be read in conjunction with the historical financial statements and notes thereto of the Company and Coral Gold described above.
 
Management of U.S. Gold has consolidated certain line items from Coral Gold’s financial statements in an attempt to conform to the presentation of the Company’s financial statements. It is management’s opinion that these


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U.S. GOLD CORPORATION
 
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

unaudited pro forma consolidated financial statements include all adjustments necessary for the fair presentation of the transactions described in Note 3 in accordance with United States generally accepted accounting principles.
 
Coral Gold prepares its financial statements in accordance with Canadian GAAP and in Canadian dollars. These financial statements have been translated to United States GAAP, as more fully described in note 2. The conversion from Canadian dollars to U.S. dollars has been reflected at the rates described in the following table.
 
         
As at April 30, 2006
    0.90  
Average for the six months ended April 30, 2006
    0.86  
Average for the twelve months ended October 31, 2005
    0.82  
 
For restatement in U.S. dollars, the Company followed the method suggested by the Emerging Issues Committee (“EIC”) in release number EIC-130 which conforms in all material respects with Statement of Financial Accounting Standards No. 52 Foreign Currency Translation. The consensus of the EIC was that financial statements for all prior years should be translated using the current rate method.
 
The unaudited pro forma consolidated financial statements are not intended to reflect the results of operations or the financial position of the Company which would have actually resulted had the proposed transactions been effected on the dates indicated. Further, the unaudited pro forma financial information is not necessarily indicative of the results of operations that may be obtained in the future. The pro forma adjustments and allocations of the purchase price for Coral Gold are based in part on estimates of the fair value of the assets acquired and liabilities assumed. The final purchase price allocation will be completed after asset and liability valuations are finalized. The final valuation will be based on the actual net tangible and intangible assets of Coral Gold that exist as of the date of the completion of the acquisition. Any final adjustments may change the allocation of purchase price which could affect the fair value assigned to the assets and liabilities and could result in a change to the unaudited pro forma consolidated financial statements. In addition, the impact of integration activities, the timing of completion of the acquisition and other changes in Coral Gold’s net tangible and intangible assets prior to the completion of the acquisition, which have not been incorporated into these unaudited pro forma consolidated financial statements, could cause material differences in the information presented.
 
2.   Reconciliation to United States Generally Accepted Accounting Principles
 
  (i)   Deferred exploration expenditures
 
Under Canadian GAAP, all acquisition and exploration costs relating to the mineral properties held are deferred. Under US GAAP, the deferred exploration expenditures would have been expensed in the year they were incurred.
 
The effects of the foregoing differences are summarized as follows:
 
Pro forma balance sheet at June 30, 2006
The US GAAP statement reflects $934,626 balance for Mineral Property Interests ($9,197,107 under Canadian GAAP).
 
Pro forma statements of operations
Mining and Exploration Expenditures amounts to $141,802 and $642,993 under US GAAP for the 6 months ended June 30, 2006 and 12 months ended December 31, 2005 respectively. These expenditures are capitalized for Canadian GAAP purposes but are expensed under US GAAP.


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U.S. GOLD CORPORATION
 
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(ii)  Temporary Investments
 
Under US GAAP (FAS 115), temporary investments are re-measured at fair value, with changes in fair value recorded in net income or Other Comprehensive Income. Under Canadian GAAP, these assets are recorded at the lower of cost and market value and are not re-measured to fair value prior to the date they are realized or settled.
 
The effects of the foregoing differences are summarized as follows:
 
The US GAAP pro forma balance sheet at June 30, 2006 reflects $274,355 balance for temporary investments ($132,667 under Canadian GAAP), included in item Other assets.
 
(iii)  Deficit and Other Equity Accounts
 
The US GAAP pro forma balance sheet reflects increase in deficit of $8,262,481 due to a write-off of deferred mining and exploration expenses described above and an increase in other equity accounts of $141,688 due to changes in the fair value of temporary investments described above.
 
3.   Business acquisition
 
The business combination will be accounted for as a purchase transaction, with U.S. Gold as the acquirer of Coral Gold.
 
In consideration for the acquisition of Coral Gold, the Company will issue 0.63 shares of U.S. Gold common stock for each outstanding common share of Coral Gold totaling approximately 4,206,496 common shares to shareholders of Coral Gold, representing approximately $24.8 million total value based on the closing price of U.S. Gold’s common stock. For accounting purposes, the measurement of the purchase consideration in the unaudited pro forma consolidated financial statement information is based on the market prices of U.S. Gold common shares over a 2-day period before and after the announcement date and is estimated at $5.90 per each U.S. Gold share.
 
Each Coral Gold warrant or stock option which gives the holder the right to acquire shares in the common stock of Coral Gold when presented for execution will be exchanged for a warrant or stock option which will give the holder the right to acquire shares in the common stock of U.S. Gold on the same basis as the exchange of Coral Gold common shares for U.S. Gold common shares. The initial exchange will not include the Coral Gold options and warrants. However, they have been included as part of the purchase price consideration as U.S. Gold intends to acquire these in a subsequent transaction. These options and warrants have been included in the purchase consideration at their fair value of approximately $3.3 million based on the Black-Scholes pricing model.
 
The principal assumptions used in applying the Black-Scholes option-pricing model were as follows:
 
         
Risk-free interest rate
    4.82 %
Dividend yield
    N/A  
Volatility factor
    102 %
Expected life — options
    4 years  
Remaining period to expiry date — warrants (weighted average)
    9 months  
 
The value of the purchase consideration for accounting purposes may differ from the amount assumed in the unaudited pro forma consolidated financial statement information due to any future changes in the negotiation process.
 
After reflecting the pro forma purchase adjustments, the excess of the purchase consideration over the adjusted book values of Coral Gold’s assets and liabilities has been allocated in full to Acquired Mineral Property Interests. Upon consummation of the proposed acquisition of Coral Gold, the fair value of all identifiable assets and liabilities


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U.S. GOLD CORPORATION
 
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

acquired will be determined. On completion of valuations, with a corresponding adjustment to the historic carrying amounts of property, plant and equipment, or on recording of any finite life intangible assets on acquisition, these adjustments will impact the measurement of amortization recorded in consolidated income statements of U.S. Gold for periods after the date of acquisition. Typically, any increase in the values assigned by U.S. Gold to Coral Gold’s capital assets would result in increased amortization charges. The fair value of the net assets of Coral Gold to be acquired will ultimately be determined after the closing of the transaction. Therefore, it is likely that the fair values of assets and liabilities acquired will vary from those shown below and the differences may be material. The preliminary purchase price allocation is subject to change and is summarized as follows:
 
         
Purchase price:
       
Shares issued on acquisition
  $ 24,818,326  
Options
    1,980,924  
Warrants
    1,341,813  
Acquisition costs (estimated at 5% of purchase price)
    1,407,053  
         
    $ 29,548,116  
         
Net assets acquired:
       
Cash and cash equivalents
  $ 4,152,402  
Accounts receivable
    47,414  
Other current assets — prepaid expenses
    70,242  
Property and equipment, net
    3,108  
Mineral property interests
    934,626  
Restrictive time deposits for reclamation bonding
    234,878  
Other assets
    349,055  
Accounts payable and accrued liabilities
    (336,252 )
Advances payable
    (72,656 )
Future income tax liability
    (1,303,796 )
Other liabilities
    (23,685 )
Future income tax payable on acquisition
    (7,189,456 )
Acquired mineral property interests
    32,682,236  
         
    $ 29,548,116  
         
 
4.   Pro forma assumptions and adjustments
 
The unaudited pro forma consolidated financial statements incorporate the following pro forma assumptions:
 
(a) The purchase price for the Acquisition has been allocated to the acquired assets and liabilities on a proforma basis as described in Note 3.
 
(b) Transaction costs have been assumed to be $1,407,053 representing 5 per cent of the total fair value of the purchase price of the Acquisition.
 
(c) Future income taxes have been taken into consideration in connection with the purchase price allocation where assumed fair values are not the same as the carry forward book values.
 
(d) Represents elimination of acquired business capital stock, equity accounts and accumulated deficit.


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U.S. GOLD CORPORATION
 
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 
5.   Pro forma share capital
 
Pro forma share capital as at June 30, 2006 has been determined as follows:
 
                 
    Number of
 		       
    Shares     Amount  
 
Issued common shares of U.S. Gold
    33,296,755     $ 41,339,239  
Shares issued for acquisition of Coral Gold
    4,206,496       24,818,326  
                 
Pro forma balance
    37,503,251     $ 66,157,565  
                 
 
6.   Pro forma loss per share
 
Pro forma basic loss per share for the six months ended June 30, 2006 and the year ended December 31, 2005 has been calculated based on actual weighted average number of U.S. Gold common shares outstanding for the respective periods and the assumed number of U.S. Gold common shares issued to Coral Gold shareholders being effective on January 1, 2006 and January 1, 2005 respectively.
 
                 
    Six Months Ended
 		    Year Ended
 		 
    June 30,
 		    December 31,
 		 
    2006     2005  
    (Shares or US dollars)  
 
Actual weighted average number of U.S. Gold common shares outstanding
    33,296,755       25,931,172  
Assumed number of U.S. Gold common shares issued to Coral Gold shareholders
    4,206,496       4,206,496  
                 
Pro forma weighted average number of U.S. Gold common shares outstanding
    37,503,251       30,137,668  
                 
Pro forma net loss
  $ (68,613,647 )   $ (4,430,285 )
Pro forma adjusted basic loss per share
  $ (1.83 )   $ (0.15 )


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APPENDIX H — UNAUDITED PRO FORMA CONSOLIDATED SUPPLEMENTARY FINANCIAL STATEMENTS OF U.S. GOLD
 
U.S. Gold Corporation
Unaudited Pro Forma Consolidated Supplementary Balance Sheet
June 30, 2006
 
                                                                         
                                  Pro
 		                Pro
 		 
          U.S. GAAP     Forma
 		                Forma
 		 
          White
 		    Nevada
 		    Coral
 		          Consolidated
 		                Consolidated
 		 
    As Reported     Knight
 		    Pacific
 		    Gold
 		    Tone
 		    (before
 		                U.S.
 		 
    U.S. Gold
 		    Resources
 		    Gold
 		    Resources
 		    Resources
 		    transaction
 		    Transaction
 		          Gold
 		 
    Corporation     Ltd.     Ltd.     Ltd.     Limited     adjustments)     Adjustments     Notes     Corporation  
    (Expressed in United States dollars unless otherwise stated)  
 
ASSETS
Current
                                                                       
Cash and cash equivalents
  $ 30,065,618     $ 10,258,097     $ 3,659,738     $ 4,152,402     $ 1,186,927     $ 49,322,782                     $ 49,322,782  
Temporary investments
    —       1,940,383       —       —       —       1,940,383                       1,940,383  
Accounts receivable
    133,743       105,741       180,697       47,414       13,392       480,987                       480,987  
Product inventory and stockpiled ore
    —       —       109,074       —       —       109,074                       109,074  
Supplies inventory
    —       —       285,152       —       —       285,152                       285,152  
Other current assets — prepaid expenses
    74,793       44,433       239,424       70,242       9,673       438,565                       438,565  
                                                                         
Total current assets
    30,274,154       12,348,654       4,474,085       4,270,058       1,209,992       52,576,943                       52,576,943  
                                                                         
Property and equipment, net
    101,629       837,768       8,648,468       3,108       —       9,590,973                       9,590,973  
Mineral property interests
    —       690,743       —       934,626       —       1,625,369                       1,625,369  
Acquired mineral property interests
    —       —       —       —       —       —     $ 377,902,746       3&4       377,902,746  
Offering costs, net
    2,991,684       —       —       —       —       2,991,684                       2,991,684  
Restrictive time deposits for reclamation bonding
    3,102,454       211,305       96,363       234,878       29,795       3,674,795                       3,674,795  
Escrow funding
    38,009,105       —       —       —       —       38,009,105                       38,009,105  
Long-lived asset — asset retirement
    1,068,353       —       —       —       —       1,068,353                       1,068,353  
Other assets:
                                                                       
Inactive milling equipment
    777,819       —       —       —       —       777,819                       777,819  
Other assets
    2,125       —       —       349,055       —       351,180                       351,180  
                                                                         
Total other assets
    779,944       —       —       349,055       —       1,128,999       —               1,128,999  
                                                                         
TOTAL ASSETS
  $ 76,327,323     $ 14,088,470     $ 13,218,916     $ 5,791,725     $ 1,239,787     $ 110,666,221     $ 377,902,746             $ 488,568,967  
                                                                         
 
LIABILITIES
Current
                                                                       
Accounts payable and accrued liabilities
  $ 1,961,514     $ 283,964     $ 1,194,495     $ 336,252     $ 105,444     $ 3,881,669     $ 15,415,301       4     $ 19,296,970  
Installment purchase contracts
    48,164       —       —       —       —       48,164                       48,164  
Due to related parties
    —       106,202       —       —       15,981       122,183                       122,183  
Advances payable
    —       —       —       72,656       —       72,656                       72,656  
Retirement obligation (reclamation activities)
    1,235,776       —       —       —       —       1,235,776                       1,235,776  
                                                                         
Total current liabilities
    3,245,454       390,166       1,194,495       408,908       121,425       5,360,448       15,415,301               20,775,749  
                                                                         
Installment purchase contracts, long-term
    10,444       —       —       —       —       10,444                       10,444  
Retirement obligation
    1,389,107       149,387       1,684,812       —       —       3,223,306                       3,223,306  
Future income tax liability
    —       —       —       1,303,796       —       1,303,796       83,131,251       4       84,435,047  
Other permit obligations
    72,511       —       —       —       —       72,511                       72,511  
Escrow account
    38,009,105       —       —       —       —       38,009,105                       38,009,105  
Derivative liabilities
    96,601,884       —       —       —       —       96,601,884                       96,601,884  
Other liabilities
    —       —       112,397       23,685       —       136,082                       136,082  
                                                                         
Total liabilities
    139,328,505       539,553       2,991,704       1,736,389       121,425       144,717,576       98,546,552               243,264,128  
                                                                         
SHAREHOLDERS’ EQUITY
                                                                       
Capital stock
    41,339,239       28,926,147       30,955,143       30,836,785       4,594,291       136,651,605       (95,312,366 )     4       312,308,215  
                                                      270,968,976       3          
Options and warrants
    —       —       —       —       —       —       37,337,045       3       37,337,045  
Other equity accounts
    —       3,600,678       1,203,218       2,014,036       487,445       7,305,377       (7,305,377 )     4       —  
Deficit
    (104,340,421 )     (18,977,908 )     (21,931,149 )     (28,795,485 )     (3,963,374 )     (178,008,337 )     73,667,916       4       (104,340,421 )
                                                                         
Total shareholders’ equity
    (63,001,182 )     13,548,917       10,227,212       4,055,336       1,118,362       (34,051,355 )     279,356,194               245,304,839  
                                                                         
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
  $ 76,327,323     $ 14,088,470     $ 13,218,916     $ 5,791,725     $ 1,239,787     $ 110,666,221     $ 377,902,746             $ 488,568,967  
                                                                         
 
See accompanying notes to unaudited pro forma consolidated supplementary financial statements.


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U.S. Gold Corporation
Unaudited Pro Forma Consolidated Supplementary Statement of Operations
For the six months ended June 30, 2006
 
                                                 
          U.S. GAAP        
          White
 		                      Pro Forma
 		 
    As Reported     Knight
 		    Nevada
 		    Coral Gold
 		    Tone
 		    Consolidated
 		 
    U.S. Gold
 		    Resources
 		    Pacific Gold
 		    Resources
 		    Resources
 		    U.S. Gold
 		 
    Corporation     Ltd.     Ltd.     Ltd.     Limited     Corporation  
    (Expressed in United States dollars unless otherwise stated)  
 
SALES
                  $ 2,943,367                     $ 2,943,367  
                                                 
COST OF SALES
                    3,347,211                       3,347,211  
DEPRECIATION AND DEPLETION
                    175,797                       175,797  
ROYALTIES
                    171,026                       171,026  
                                                 
                      3,694,034                       3,694,034  
                                                 
EARNINGS (LOSS) FROM MINING OPERATIONS
                    (750,667 )                     (750,667 )
                                                 
OTHER REVENUE
                                               
Interest and other items
  $ 488,378     $ 207,567       51,326     $ 43,853               791,124  
Gain (loss) on foreign exchange
    —       (13,868 )     (37,154 )     12,768     $ (9,416 )     (47,670 )
                                                 
Total other revenue
    488,378       193,699       14,172       56,621       (9,416 )     743,454  
                                                 
COSTS AND EXPENSES
                                               
General and administrative
    1,449,070       624,458       1,149,356       911,743       497,519       4,632,146  
Proposed acquisitions
    3,384,378       —       —       —       —       3,384,378  
Property holding costs
    781,853       —       —       —       —       781,853  
Exploration costs
    1,000,423       —       —       —       —       1,000,423  
Stock compensation expense
    —       1,947,693       494,015       876,942       70,468       3,389,118  
Interest
    3,442       3,695       —       —       —       7,137  
Stock option expense
    536,000       —       —       —       —       536,000  
Accretion of asset retirement obligation
    135,989       —       —       —       —       135,989  
Change in value of derivatives
    59,026,884       —       —       —       —       59,026,884  
Write-off of deferred exploration costs
    —       582,883       —       —       —       582,883  
Write-off of mineral property costs
    —       (13,046 )     948,500       141,802       102,011       1,179,267  
Amortization of offering cost
    228,066       —       —       —       —       228,066  
Depreciation
    12,594       14,817       —       380       —       27,791  
                                                 
Total costs and expenses
    66,558,699       3,160,500       2,591,871       1,930,867       669,998       74,911,935  
                                                 
Loss before income taxes
    (66,070,321 )     (2,966,801 )     (3,328,366 )     (1,874,246 )     (679,414 )     (74,919,148 )
Provision for future income taxes
    —       —       —       669,080       —       669,080  
Provision for income taxes
    —       —       —       —       —       —  
                                                 
NET LOSS
  $ (66,070,321 )   $ (2,966,801 )   $ (3,328,366 )   $ (2,543,326 )   $ (679,414 )   $ (75,588,228 )
                                                 
Basic and diluted net loss per share (Note 6)
  $ (1.98 )                                   $ (0.95 )
                                                 
Weighted average number of shares outstanding — basic and diluted (Note 6)
    33,296,755                                       79,223,700  
                                                 
 
See accompanying notes to unaudited pro forma consolidated supplementary financial statements.


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U.S. Gold Corporation
Unaudited Pro Forma Consolidated Supplementary Statement of Operations
For the twelve months ended December 31, 2005
 
                                                 
          U.S. GAAP        
          White
 		                      Pro Forma
 		 
    As Reported     Knight
 		    Nevada
 		    Coral Gold
 		    Tone
 		    Consolidated
 		 
    U.S. Gold
 		    Resources
 		    Pacific Gold
 		    Resources
 		    Resources
 		    U.S. Gold
 		 
    Corporation     Ltd.     Ltd.     Ltd.     Limited     Corporation  
    (Expressed in United States dollars unless otherwise stated)  
 
SALES
                  $ 8,881,168                     $ 8,881,168  
                                                 
COST OF SALES
                    8,420,437                       8,420,437  
DEPRECIATION AND DEPLETION
                    804,215                       804,215  
ROYALTIES
                    472,743                       472,743  
                                                 
                      9,697,395                       9,697,395  
                                                 
EARNINGS (LOSS) FROM MINING OPERATIONS
                    (816,227 )                     (816,227 )
                                                 
OTHER REVENUE
                                               
Earnest money forfeited
  $ 200,000               —                       200,000  
Interest and other items
    32,032     $ 346,162       27,205     $ 15,270     $ 439       421,108  
Management fee
    330,000       —       —       —       —       330,000  
Realized gain from disposition of shares
    520,428       —       —       —       —       520,428  
Gain (loss) on sale of assets
    (29,982 )     —       155,199       (3,296 )     —       121,921  
Gain (loss) on foreign exchange
    —       1,634       (67,043 )     (15,576 )     (1,723 )     (82,708 )
                                                 
Total other revenue
    1,052,478       347,796       115,361       (3,602 )     (1,284 )     1,510,749  
                                                 
COSTS AND EXPENSES
                                               
General and administrative
    1,027,194       808,304       1,800,234       480,660       374,644       4,491,036  
Write-off of purchase price receivable
    182,748       —       —       —       —       182,748  
Property holding costs
    761,081       —       —       —       —       761,081  
Employment termination payments
    1,423,824       —       —       —       —       1,423,824  
Stock compensation expense
    294,400       174,760       472,707       311,545       233,415       1,486,827  
Equity share of subsidiary loss
    58,888       —       —       —       —       58,888  
Realization reserve — stock
    168,960       —       —       —       —       168,960  
Interest
    3,011       5,016       246       —       —       8,273  
Accretion of asset retirement obligation
    110,243       —       —       —       —       110,243  
Write-off of deferred exploration costs
    —       1,800,035       —       —       —       1,800,035  
Write-off of mineral
                                            —  
property costs
    —       189,718       1,642,479       642,993       93,206       2,568,396  
Depreciation
    12,850       27,329       —       764       —       40,943  
                                                 
Total costs and expenses
    4,043,199       3,005,162       3,915,666       1,435,962       701,265       13,101,254  
                                                 
Loss before income taxes
    (2,990,721 )     (2,657,366 )     (4,616,532 )     (1,439,564 )     (702,549 )     (12,406,732 )
Provision for income taxes
    —       —       —       —       —       —  
                                                 
NET LOSS
  $ (2,990,721 )   $ (2,657,366 )   $ (4,616,532 )   $ (1,439,564 )   $ (702,549 )   $ (12,406,732 )
                                                 
Basic and diluted net loss per share (Note 6)
  $ (0.12 )                                   $ (0.17 )
                                                 
Weighted average number of shares outstanding — basic and diluted (Note 6)
    25,931,172                                       71,858,117  
                                                 
 
See accompanying notes to unaudited pro forma consolidated supplementary financial statements.


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NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED SUPPLEMENTARY
FINANCIAL STATEMENTS
(Expressed in United States dollars unless otherwise stated)
June 30, 2006 and December 31, 2005
(Unaudited)
 
1.   Basis of presentation
 
On March 5, 2006 U.S. Gold Corporation (“U.S. Gold” or the “Company”) announced that it intends to acquire, in stock transactions, all of the outstanding common shares of White Knight Resources Ltd. (“White Knight”), Nevada Pacific Gold Ltd. (“Nevada Pacific”), Coral Gold Resources Ltd. (“Coral Gold”) and Tone Resources Limited (“Tone Resources”) (together, the “Target Companies” or “Targets”). This proposal was made in letters sent on the same day by Mr. Robert R. McEwen, Chairman and Chief Executive Officer of U.S. Gold, to the chief executive officers of each of the subject companies.
 
The combined effects of the proposed transactions with each of the Target Companies have been presented in these Unaudited Pro Forma Consolidated Supplementary Financial Statements. The unaudited pro forma consolidated financial statements giving effect to the Company’s acquisition of each of Coral Gold, Nevada Pacific, Tone Resources and White Knight have been presented separately in the document. These unaudited pro forma consolidated supplementary financial statements have been prepared on the basis that each shareholder of the target Companies will receive shares of common stock of U.S. Gold Corporation in exchange for their Target Companies common shares.
 
These unaudited pro forma consolidated supplementary financial statements have been compiled from and include:
 
(a) An unaudited pro forma consolidated supplementary balance sheet combining the unaudited balance sheet of U.S. Gold as at June 30, 2006 with the unaudited consolidated balance sheet of Coral Gold as at April 30, 2006, the audited consolidated balance sheet of Nevada Pacific as at June 30, 2006, the unaudited consolidated balance sheet of Tone Resources as at May 31, 2006 and the audited consolidated balance sheet of White Knight as at June 30, 2006, giving effect to the transactions as if they occurred on June 30, 2006.
 
(b) An unaudited pro forma consolidated supplementary statement of operations combining the audited statement of operations of the Company for the year ended December 31, 2005 with unaudited constructed statement of operations of Coral Gold for the twelve months ended October 31, 2005, the unaudited constructed statement of operations of Nevada Pacific for the twelve months ended December 31, 2005, the unaudited constructed statement of operations of Tone Resources for the twelve months ended November 30, 2005 and the unaudited constructed statement of operations of White Knight for the twelve months ended December 31, 2005, giving effect to the transactions as if they occurred on January 1, 2005.
 
(c) An unaudited pro forma consolidated statement of operations combining the unaudited statement of operations of the Company for the six months ended June 30, 2006 with unaudited constructed statement of operations of Coral Gold for the six months ended April 30, 2006, the unaudited constructed statement of operations of Nevada Pacific for the six months ended June 30, 2006, the unaudited constructed statement of operations of Tone Resources for the six months ended May 31, 2006 and the unaudited constructed statement of operations of White Knight for the six months ended June 30, 2006, giving effect to the transactions as if they occurred on January 1, 2005.
 
The unaudited pro forma consolidated supplementary balance sheet and statements of operations have been presented on the above basis to ensure that the unaudited pro forma consolidated supplementary financial statements reflect the acquired business financial statements for a period that is no more than 93 days from U.S. Gold’s year-end, as required pursuant to pro forma presentation requirements contained in the securities rules.
 
The unaudited pro forma consolidated supplementary financial statements should be read in conjunction with the historical financial statements and notes thereto of the Company and the financial statements of the Target Companies. Management of U.S. Gold has consolidated certain line items from the Target Companies financial


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NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED SUPPLEMENTARY
FINANCIAL STATEMENTS — (Continued)

statements in an attempt to conform to presentation of the Company’s financial statements, and also to conform the Target’s accounting policies to United States generally accepted accounting principles.
 
It is management’s opinion that these unaudited pro forma consolidated supplementary financial statements include all adjustments necessary for the fair presentation of the transactions described in Note 3 in accordance with United States generally accepted accounting principles.
 
The unaudited pro forma consolidated supplementary financial statements are not intended to reflect the results of operations or the financial position of the Company which would have actually resulted had the proposed transactions been effected on the dates indicated. Further, the unaudited pro forma consolidated supplementary financial information is not necessarily indicative of the results of operations that may be obtained in the future. The pro forma adjustments and allocations of the purchase price for the Target Companies are based in part on estimates of the fair value of the assets acquired and liabilities assumed. The final purchase price allocation will be completed after asset and liability valuations are finalized. The final valuation will be based on the actual net tangible and intangible assets of the Target Companies that exist as of the date of the completion of the acquisition. Any final adjustments may change the allocation of purchase price which could affect the fair value assigned to the assets and liabilities and could result in a change to the unaudited pro forma consolidated supplementary financial statements. In addition, the impact of integration activities, the timing of completion of the acquisitions and other changes in the Target Companies net tangible and intangible assets prior to the completion of the acquisitions, which have not been incorporated in these unaudited pro forma consolidated supplementary financial statements, could cause material differences in the information presented.
 
2.   Summary of significant accounting policies
 
The unaudited pro forma consolidated supplementary financial statements have been compiled using the significant accounting policies as set out in the audited financial statements of U.S. Gold for the year ended December 31, 2005 which are included elsewhere in this prospectus.
 
3.   Business acquisitions
 
The business combination will be accounted for as a purchase transaction, with U.S. Gold as the acquirer of the Target Companies.
 
In consideration for the acquisition of Coral Gold, the Company will issue 0.63 shares of U.S. Gold common stock for each outstanding common share of Coral Gold totaling approximately 4,206,496 common shares to shareholders of Coral Gold, representing approximately US$24.8 million. In addition, the options and warrants to be issued by U.S. Gold will amount to approximately $3.3 million.
 
In consideration for the acquisition of White Knight, the Company will issue 0.35 shares of U.S. Gold common stock for each outstanding common share of White Knight totaling approximately 20,784,740 common shares to shareholders of White Knight, representing approximately US$122.6 million. In addition, the options and warrants to be issued by U.S. Gold will amount to approximately $9.3 million.
 
In consideration for the acquisition of Nevada Pacific, the Company will issue 0.23 shares of U.S. Gold common stock for each outstanding common share of Nevada Pacific totaling approximately 15,863,565 common shares to shareholders of Nevada Pacific, representing approximately US$93.6 million. In addition, the options and warrants to be issued by U.S. Gold will amount to approximately $17.7 million.
 
In consideration for the acquisition of Tone Resources the Company will issue 0.26 shares of U.S. Gold common stock for each outstanding common share of Tone Resources totaling approximately 5,072,144 common shares to shareholders of Tone Resources, representing approximately US$29.9 million. In addition, the options and warrants to be issued by U.S. Gold will amount to approximately $7 million.


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NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED SUPPLEMENTARY
FINANCIAL STATEMENTS — (Continued)

The measurement of the purchase consideration in the unaudited pro forma consolidated supplementary financial statement information is based on the market prices of U.S. Gold common shares over a 2-day period before and after the announcement date. The value of the purchase consideration for accounting purposes may differ from the amount assumed in the unaudited pro forma consolidated supplementary financial statement information due to any future changes in the negotiation process.
 
Each Target warrant or stock option which gives the holder the right to acquire shares in the common stock of the Target when presented for execution will be exchanged for a warrant or stock option which will give the holder the right to acquire shares in the common stock of U.S. Gold on the same basis as the exchange of the Target common shares for U.S. Gold common shares. The initial exchange will not include the Target options and warrants. However, they have been included as part of the purchase price consideration as U.S. Gold intends to acquire these in a subsequent transaction. These options and warrants have been included in the purchase consideration at their fair value of approximately $37.3 million based on the Black-Scholes pricing model.
 
The principal assumptions used in applying the Black-Scholes option pricing model were as follows:
 
         
Risk-free interest rate
    4.82 %
Dividend yield
    N/A  
Volatility factor
    102 %
Expected life — options
    2-4 years  
Remaining periods to expiration dates — warrants (weighted average)
    6-19 months  
 
After reflecting the pro forma purchase adjustments, the excess of the purchase consideration over the adjusted book values of the Targets’ assets and liabilities has been allocated in full to Acquired Mineral Property Interests. Upon consummation of the proposed acquisitions of the Targets, the fair value of all identifiable assets and liabilities acquired will be determined. On completion of valuations, with a corresponding adjustment to the historic carrying amounts of property, plant and equipment, or on recording of any finite life intangible assets on acquisition, these adjustments will impact the measurement of amortization recorded in consolidated income statements of U.S. Gold for periods after the date of acquisition. Typically, any increase in the values assigned by U.S. Gold to the Targets’ capital assets would result in increased amortization charges. The fair value of the net assets of the Targets to be acquired will ultimately be determined after the closing of the transaction. Therefore, it is likely that the fair values of assets and liabilities acquired will vary from the preliminary purchase allocation and the differences may be material.
 
4.   Pro forma assumptions and adjustments
 
The unaudited pro forma consolidated supplementary financial statements incorporate the following pro forma assumptions:
 
(a) After reflecting the pro forma purchase adjustments, the excess of the purchase consideration over the adjusted book values of the Targets’ assets and liabilities has been allocated in full to Acquired Mineral Property Interests, together with the related future income tax liability.
 
(b) Transaction costs have been assumed to be 5 per cent of the total fair value of the purchase price of the acquisition of the Targets.
 
(c) Represents elimination of acquired business capital stock, other equity accounts and accumulated deficit.


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NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED SUPPLEMENTARY
FINANCIAL STATEMENTS — (Continued)

A breakdown of the transaction related adjustments has been provided in the following table:
 
                                         
    White Knight
 		    Nevada Pacific
 		    Coral Gold
 		    Tone Resources
 		       
    Resources Ltd.     Gold Ltd.     Resources Ltd.     Limited     Total  
 
Acquired mineral property interests
  $ 160,273,810     $ 136,711,293     $ 32,682,236     $ 48,235,406     $ 377,902,746  
                                         
Accounts payable and accrued liabilities
  $ 6,598,362     $ 5,564,985     $ 1,407,053     $ 1,844,901     $ 15,415,301  
Future income tax liability
    35,257,120       30,073,825       7,189,456       10,610,850       83,131,251  
Capital stock reversal
    (28,926,147 )     (30,955,143 )     (30,836,785 )     (4,594,291 )     (95,312,366 )
USG shares issued
    122,629,966       93,595,034       24,818,326       29,925,650       270,968,976  
Options and warrants issued
    9,337,279       17,704,661       3,322,737       6,972,367       37,337,045  
Other equity accounts reversal
    (3,600,678 )     (1,203,218 )     (2,014,036 )     (487,445 )     (7,305,377 )
Deficit reversal
    18,977,908       21,931,149       28,795,485       3,963,374       73,667,916  
                                         
    $ 160,273,810     $ 136,711,293     $ 32,682,236     $ 48,235,406     $ 377,902,746  
                                         
 
5.   Pro forma share capital
 
Supplementary pro forma share capital as at June 30, 2006 has been compiled as follows:
 
                 
    Number of
 		       
    Shares     Amount  
 
Issued common shares of U.S. Gold
    33,296,755     $ 41,339,239  
Shares issued for acquisitions of Targets
    45,926,945       270,968,976  
                 
Pro forma balance
    79,223,700     $ 312,308,215  
                 
 
6.   Pro forma loss per share
 
Supplementary pro forma basic loss per share for the six months ended June 30, 2006 and the year ended December 31, 2005 have been calculated based on actual weighted average number of U.S. Gold common shares outstanding for the respective periods and the assumed number of U.S. Gold common shares issued to the Target shareholders being effective on January 1, 2006 and January 1, 2005 respectively.
 
                 
    Six Months Ended
 		    Year Ended
 		 
    June 30, 2006     December 31, 2005  
    (Shares or US dollars)  
 
Actual weighted average number of U.S. Gold common shares outstanding
    33,296,755       25,931,172  
Assumed number of U.S. Gold common shares issued to Targets
    45,926,945       45,926,945  
                 
Pro forma weighted average number of U.S. Gold common shares outstanding
    79,223,700       71,858,117  
                 
Pro forma net loss
  $ (75,588,228 )   $ (12,406,732 )
Pro forma adjusted basic loss per share
  $ (0.95 )   $ (0.17 )
                 


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APPENDIX I
 
RIGHTS, PRIVILEGES, RESTRICTIONS AND CONDITIONS ATTACHING TO THE
EXCHANGEABLE SHARES OF US GOLD CANADIAN ACQUISITION CORPORATION
 
Exchangeable Shares
 
The rights, privileges, restrictions and conditions attaching to the Exchangeable Shares are as follows:
 
ARTICLE 1
 
INTERPRETATION
 
1.1   Definitions
 
For the purposes of these share provisions, unless something in the subject matter or context is inconsistent therewith:
 
“ABCA” means the Business Corporations Act (Alberta), as amended from time to time.
 
“AMEX” means the American Stock Exchange.
 
“Alberta ULC” means US Gold Alberta ULC, an unlimited liability corporation existing and governed by the laws of the Province of Alberta.
 
“Board of Directors” means the board of directors of the Corporation.
 
“Business Day” means any day other than a Saturday, Sunday, a public holiday or a day on which commercial banks are not open for business in Toronto, Ontario or Denver, Colorado under applicable law.
 
“Canadian Dollar Equivalent” means in respect of an amount expressed in a currency other than Canadian dollars (the “Foreign Currency Amount”) at any date the product obtained by multiplying:
 
(a) the Foreign Currency Amount; by
 
(b) the noon spot exchange rate on such date for such foreign currency expressed in Canadian dollars as reported by the Bank of Canada or, in the event such spot exchange rate is not available, such spot exchange rate on such date for such foreign currency expressed in Canadian dollars as may be deemed by the Board of Directors to be appropriate for such purpose.
 
“Common Shares” means the common shares in the capital of the Corporation.
 
“Corporation” means US Gold Canadian Acquisition Corporation a company incorporated under the Business Corporations Act (Alberta).
 
“Current Market Price” means, in respect of a share of US Gold Common Stock on any date, the Canadian Dollar Equivalent of the average closing sales price (computed and rounded to the third decimal point) on the TSX or the AMEX during a period of 20 consecutive trading days ending not more than five trading days prior to such date or, if the shares of US Gold Common Stock are not then listed on the TSX or the AMEX, on such other stock exchange or automated quotation system on which the shares of US Gold Common Stock are listed or quoted, as the case may be, as may be selected by the Board of Directors for such purpose; provided, however, that if in the opinion of the Board of Directors the public distribution or trading activity of shares of US Gold Common stock during such period is inadequate to create a market that reflects the fair market value of a share of US Gold Common Stock, then the Current Market Price of a share of US Gold Common Stock shall be determined by the Board of Directors based upon the advice of such qualified independent financial advisors as the Board of Director may deem to be appropriate, and provided further that any such selection, opinion or determination by the Board of Directors shall be conclusive and binding.
 
“Dividend Amount” means an amount equal to the full amount of all dividends and distributions declared and unpaid on each Exchangeable Share and all dividends and distributions declared on a share of US Gold Common


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Stock that have not been declared on each Exchangeable Share in accordance with Section 3.1, in each case with a record date prior to the effective date of the purchase, redemption or other acquisition of such Exchangeable Share pursuant to ARTICLE 5, ARTICLE 6 or ARTICLE 7.
 
“Exchangeable Shares” means the exchangeable shares in the capital of the Corporation, having the rights, privileges, restrictions and conditions set forth in these Share Provisions.
 
“LCR Exercising Party” has the meaning set out in Section 5.2(1).
 
“Liquidation Amount” has the meaning ascribed thereto Section 5.1(1).
 
“Liquidation Call Purchase Price” has the meaning set out in Section 5.2(1).
 
“Liquidation Call Right” has the meaning ascribed thereto in Section 5.2(1).
 
“Liquidation Date” has the meaning ascribed thereto in Section 5.1(1).
 
“Person” includes any individual, firm, partnership, limited partnership, joint venture, venture capital fund, limited liability company, unlimited liability company, association, trust, trustee, executor, administrator, legal personal representative, estate, group, body corporate, corporation, unincorporated association or organization, governmental entity, syndicate or other entity, whether or not having legal status.
 
“RCR Exercising Party” has the meaning set out in Section 6.2(1).
 
“Redemption Call Purchase Price” has the meaning set out in Section 7.2(1).
 
“Redemption Call Right” has the meaning ascribed thereto in Section 7.2(1).
 
“Redemption CR Exercising Party” has the meaning set out in Section 7.2(1).
 
“Redemption Date” means the earlier of (i) the seventh anniversary of the date on which Exchangeable Shares are first issued; and (ii) the date established by the Board of Directors for the redemption by the Corporation of all but not less than all of the outstanding Exchangeable Shares on which there are outstanding fewer than that number of Exchangeable Shares equal to 10% of the total number of Exchangeable Shares issued in connection with the offers to purchase all of the outstanding common shares of Coral Gold Resources Ltd., Nevada Pacific Gold Ltd., Tone Resources Limited and White Knight Resources Ltd. outstanding (other than Exchangeable Shares held by US Gold or its Subsidiaries), and as such number of shares may be adjusted as deemed appropriate by the Board of Directors to give effect to any subdivision, combination or consolidation of or stock dividend on the Exchangeable Shares, any issue or distribution of rights to acquire Exchangeable Shares or securities exchangeable for or convertible into Exchangeable Shares, any issue or distribution of other securities or rights or evidences of indebtedness or assets, or any other capital reorganization or other transaction affecting the Exchangeable Shares.
 
“Redemption Price” has the meaning ascribed thereto in Section 7.1(1).
 
“Retracted Shares” has the meaning ascribed thereto in Section 6.1(1).
 
“Retraction Call Purchase Price” has the meaning set out in Section 6.2(1).
 
“Retraction Call Right” has the meaning ascribed thereto in Section 6.2(1).
 
“Retraction Date” has the meaning ascribed thereto in Section 6.1(1).
 
“Retraction Price” has the meaning ascribed thereto in Section 6.1(1).
 
“Retraction Request” has the meaning ascribed thereto in Section 6.1(1).
 
“Share Provisions” means the rights, privileges, restrictions and conditions set out herein.
 
“Subsidiary” means, when used with reference to US Gold, any corporation more than 50% of the outstanding stock of which is owned, directly or indirectly, by US Gold, by one or more other Subsidiaries of US Gold, or by US Gold and one or more other Subsidiaries of US Gold.
 
“Support Agreement” means a support agreement to be entered into prior to the issuance by the Corporation of any Exchangeable Shares among US Gold, Alberta ULC and the Corporation, the purpose of which will be for


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US Gold (for itself and on behalf of Alberta ULC) and the Corporation to covenant to do all things reasonably necessary and desirable to enable and permit the Corporation or Alberta ULC to perform its obligations hereunder.
 
“Transfer Agent” means any Person as may from time to time be appointed by the Corporation as the registrar and transfer agent for the Exchangeable Shares.
 
“Trustee” means the trustee chosen by US Gold to act as trustee under the Voting and Exchange Trust Agreement, being a corporation organized and existing under the laws of Canada or any Province thereof and authorized to carry on the business of a trust company in all the provinces of Canada, and any successor trustee appointed under the Voting and Exchange Trust Agreement.
 
“TSX” means the Toronto Stock Exchange.
 
“US Gold Call Notice” has the meaning ascribed thereto in Section 6.2(2).
 
“US Gold Common Stock” means the shares of common stock of US Gold, no par value, having voting rights of one vote per share, and any other securities into which such shares may be changed or for which such shares may be exchanged (whether or not US Gold shall be the issuer of such securities) or any other consideration which may be received by the holders of such shares pursuant to a recapitalization, reconstruction, reorganization or reclassification of, or amalgamation, merger, liquidation or similar transaction affecting, such shares.
 
“US Gold Dividend Declaration Date” means the date on which the board of directors of US Gold declares any dividend or other distribution on the shares of US Gold Common Stock.
 
“US Gold” means U.S. Gold Corporation, a corporation existing under the laws of Colorado.
 
“Voting and Exchange Trust Agreement” means the agreement to be entered into prior to the issuance by the Corporation of any Exchangeable Shares made between US Gold, Alberta ULC, the Corporation and the Trustee, the purpose of which will be to create a trust for the benefit of the registered holders of Exchangeable Shares that will enable the Trustee to exercise voting rights on behalf of the holders of Exchangeable Shares similar to those of holders of US Gold Common Stock.
 
1.2   Sections and Headings
 
The division of these Share Provisions into articles and sections and the insertion of headings are for reference purposes only and shall not affect the interpretation of these Share Provisions. Unless otherwise indicated, any reference in these Share Provisions to an article or section refers to the specified article or section of these Share Provisions.
 
1.3   Number Gender and Persons
 
In these Share Provisions, unless the context otherwise requires, words importing the singular number include the plural and vice versa, words importing any gender include all genders and words importing persons include individuals, corporations, partnerships, companies, associations, trusts, unincorporated organizations, governmental bodies and other legal or business entities of any kind.
 
1.4   Payments
 
All payments to be made hereunder shall be made without interest and less any tax required by Canadian law to be deducted and withheld.
 
1.5   Currency
 
In these Share Provisions, unless stated otherwise, all dollar amounts are in Canadian dollars.


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ARTICLE 2
 
RANKING OF EXCHANGEABLE SHARES
 
2.1   Ranking
 
The Exchangeable Shares shall be entitled to a preference over the Common Shares, and any other shares ranking junior to the Exchangeable Shares with respect to the payment of dividends as and to the extent provided in ARTICLE 3 and with respect to the distribution of assets in the event of the liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, or any other distribution of the assets of the Corporation among its shareholders for the purpose of winding up its affairs as and to the extent provided in ARTICLE 5.
 
ARTICLE 3
 
DIVIDENDS
 
3.1   Dividends
 
A holder of an Exchangeable Share shall be entitled to receive and the Board of Directors shall, subject to applicable law, on each US Gold Dividend Declaration Date, declare a dividend on each Exchangeable Share:
 
(a) in the case of a cash dividend or distribution declared on the shares of US Gold Common Stock, in an amount in cash for each Exchangeable Share equal to the Canadian Dollar Equivalent of the cash dividend or distribution declared on each share of US Gold Common Stock on the US Gold Dividend Declaration Date;
 
(b) in the case of a stock dividend or distribution declared on the shares of US Gold Common Stock to be paid in shares of US Gold Common Stock, by the issue or transfer by the Corporation of such number of Exchangeable Shares for each Exchangeable Share as is equal to the number of shares of US Gold Common Stock to be paid on each share of US Gold Common Stock; or
 
(c) in the case of a dividend or distribution declared on the shares of US Gold Common Stock in property other than cash or shares of US Gold Common Stock, in such type and amount of property for each Exchangeable Share as is the same as or economically equivalent to (to be determined by the Board of Directors as contemplated by Section 3.5 hereof) the type and amount of property declared as a dividend or distribution on each share of US Gold Common Stock.
 
Such dividends shall be paid out of the assets of the Corporation properly applicable to the payment of dividends, or out of authorized but unissued shares or other securities of the Corporation, as applicable. The holders of Exchangeable Shares shall not be entitled to any dividends other than or in excess of the dividends referred to in this Section 3.1.
 
3.2   Payment of Dividends
 
Cheques of the Corporation payable at par at any branch of the bankers of the Corporation shall be issued in respect of any cash dividends or distributions contemplated by Section 3.1(a) hereof and the sending of such cheque to each holder of an Exchangeable Share shall satisfy the cash dividend represented thereby unless the cheque is not paid on presentation. Certificates registered in the name of the registered holder of Exchangeable Shares shall be issued or transferred in respect of any stock dividends or other distributions contemplated by Section 3.1(b) hereof and the sending of such a certificate to each holder of an Exchangeable Share shall satisfy the stock dividend or other distribution represented thereby. Such other type and amount of property in respect of any dividends or distributions contemplated by Section 3.1(c) hereof shall be issued, distributed or transferred by the Corporation in such manner as it shall determine and the issuance, distribution or transfer thereof by the Corporation to each holder of an Exchangeable Share shall satisfy the dividend or other distribution represented thereby. No holder of an Exchangeable Share shall be entitled to recover by action or other legal process against the Corporation any dividend that is represented by a cheque that has not been duly presented to the Corporation’s bankers for payment or that otherwise remains unclaimed for a period of six years from the date on which such dividend was payable.


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3.3   Record and Payment Dates
 
The record date for the determination of the holders of Exchangeable Shares entitled to receive payment of, and the payment date for, any dividend or distribution declared on the Exchangeable Shares under Section 3.1 hereof shall be the same dates as the record date and payment date, respectively, for the corresponding dividend or distribution declared on the shares of US Gold Common Stock.
 
3.4   Partial Payment
 
If on any payment date for any dividends or distributions declared on the Exchangeable Shares under Section 3.1 hereof the dividends or distributions are not paid in full on all of the Exchangeable Shares then outstanding, any such dividends that remain unpaid shall be paid on a subsequent date or dates determined by the Board of Directors on which the Corporation shall have sufficient moneys or other assets properly applicable to the payment of such dividends or distributions.
 
3.5   Economic Equivalence
 
For the purposes of Section 3.1 hereof, the Board of Directors shall determine, acting in good faith and in its sole discretion (with the assistance of such reputable and qualified independent financial advisors and/or other experts as the board may require), economic equivalence and each such determination shall be conclusive and binding on the Corporation and its shareholders. In making each such determination, the following factors shall, without excluding other factors determined by the Board of Directors to be relevant, be considered by the Board of Directors:
 
(a) in the case of any stock dividend or other distribution payable in shares of US Gold Common Stock, the number of such shares issued in proportion to the number of shares of US Gold Common Stock previously outstanding;
 
(b) in the case of the issuance or distribution of any rights, options or warrants to subscribe for or purchase shares of US Gold Common Stock (or securities exchangeable for or convertible into or carrying rights to acquire shares of US Gold Common Stock), the relationship between the exercise price of each such right, option or warrant and the Current Market Price of a share of US Gold Common Stock;
 
(c) in the case of the issuance or distribution of any other form of property (including, without limitation, any shares or securities of US Gold of any class other than US Gold Common Stock, any rights, options or warrants other than those referred to in Section 3.5(b), any evidences of indebtedness of US Gold or any assets of US Gold), the relationship between the fair market value (as determined by the Board of Directors in the manner above contemplated) of such property to be issued or distributed with respect to each outstanding share of US Gold Common Stock and the Current Market Price of a share of US Gold Common Stock;
 
(d) in the case of any subdivision, redivision or change of the then outstanding shares of US Gold Common Stock into a greater number of shares of US Gold Common Stock or the reduction, combination, consolidation or change of the then outstanding shares of US Gold Common Stock into a lesser number of shares of US Gold Common Stock or any amalgamation, merger, reorganization or other transaction affecting the US Gold Common Stock, the effect thereof upon the then outstanding shares of US Gold Common Stock; and
 
(e) in all such cases, the general taxation consequences of the relevant event to holders of Exchangeable Shares to the extent that such consequences may differ from the taxation consequences to holders of shares of US Gold Common Stock as a result of differences between taxation laws of Canada and the United States (except for any differing consequences arising as a result of differing marginal taxation rates and without regard to the individual circumstances of holders of Exchangeable Shares).


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ARTICLE 4
 
CERTAIN RESTRICTIONS
 
4.1   Certain Restrictions
 
(1) Except as provided in Section 4.1(2), so long as any of the Exchangeable Shares are outstanding, the Corporation shall not at any time without, but may at any time with, the approval of the holders of the Exchangeable Shares given as specified in Section 9.2 hereof:
 
(a) pay any dividends on the Common Shares or any other shares ranking junior to the Exchangeable Shares with respect to the payment of dividends, other than stock dividends payable in Common Shares or in any such other shares ranking junior to the Exchangeable Shares, as the case may be;
 
(b) redeem or purchase or make any capital distribution in respect of Common Shares or any other shares ranking junior to the Exchangeable Shares with respect to the distribution of the assets in the event of the liquidation, dissolution or winding up of the Corporation;
 
(c) redeem or purchase any other shares of the Corporation ranking equally with the Exchangeable Shares with respect to the payment of dividends or the distribution of assets in the event of the liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, or any other distribution of the assets of the Corporation among its shareholders for the purpose of winding up its affairs; or
 
(d) issue any shares other than (i) Exchangeable Shares, (ii) Common Shares, and (iii) any other shares not ranking superior to the Exchangeable Shares.
 
(2) The restrictions in Sections 4.1(1)(a), 4.1(1)(b) and 4.1(1)(c) hereof shall not apply if all dividends and distributions on the outstanding Exchangeable Shares corresponding to dividends and distributions declared and paid to date on the shares of US Gold Common Stock shall have been declared and paid in full on the Exchangeable Shares.
 
ARTICLE 5
 
LIQUIDATION
 
5.1   Participation Upon Liquidation, Dissolution or Winding Up of the Corporation
 
(1) Subject to applicable law and the due exercise by US Gold or Alberta ULC of a Liquidation Call Right, in the event of the liquidation, dissolution or winding up of the Corporation or any other distribution of the assets of the Corporation among its shareholders for the purpose of winding up its affairs, a holder of Exchangeable Shares shall be entitled to receive from the assets of the Corporation in respect of each Exchangeable Share held by such holder on the effective date of such liquidation, dissolution or winding up or other distribution (the “Liquidation Date”), before any distribution of any part of the assets of the Corporation among the holders of the Common Shares or any other shares ranking junior to the Exchangeable Shares, an amount per share equal to (a) the Current Market Price of a share of US Gold Common Stock on the last Business Day prior to the Liquidation Date, which shall be satisfied in full by the Corporation causing to be delivered to such holder one share of US Gold Common Stock, plus (b) the Dividend Amount, if any (collectively, the “Liquidation Amount”).
 
(2) In the case of a distribution on Exchangeable Shares under this Section 5.1 and provided the Liquidation Call Right has not been exercised, on or promptly after the Liquidation Date, the Corporation shall cause to be delivered to the holders of the Exchangeable Shares the Liquidation Amount for each such Exchangeable Share upon presentation and surrender of the certificates representing such Exchangeable Shares, together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the ABCA and the Articles of the Corporation and such additional documents and instruments as the Transfer Agent and the Corporation may reasonably require, at the registered office of the Corporation or at any office of the Transfer Agent as may be specified by the Corporation by notice to the holders of the Exchangeable Shares. Payment of the aggregate Liquidation Amount for such Exchangeable Shares shall be made by causing to be delivered to each


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holder, at the address of the holder recorded in the securities register of the Corporation for the Exchangeable Shares or by holding for pick-up by the holder at the registered office of the Corporation or at any office of the Transfer Agent as may be specified by the Corporation by notice to the holders of Exchangeable Shares, certificates representing the aggregate number of shares of US Gold Common Stock deliverable by the Corporation to such holder (which shares shall be duly issued as fully paid and non-assessable and shall be free and clear of any lien, claim, encumbrance, security interest or adverse claim) and a cheque of the Corporation payable at par at any branch of the bankers of the Corporation in payment of the Dividend Amount, if any, payable to such holder, without interest (less any amounts withheld on account of tax required to be deducted and withheld therefrom). On and after the Liquidation Date, the holders of the Exchangeable Shares shall cease to be holders of such Exchangeable Shares and shall not be entitled to exercise any of the rights of holders in respect thereof (including any rights under the Voting and Exchange Trust Agreement), other than the right to receive the Liquidation Amount, unless payment of the total Liquidation Amount for such Exchangeable Shares shall not be made upon presentation and surrender of share certificates in accordance with the foregoing provisions, in which case the rights of the holders shall remain unaffected until the Liquidation Amount has been paid in the manner hereinbefore provided. The Corporation shall have the right at any time after the Liquidation Date to transfer or cause to be issued or transferred, and deposited in a custodial account with any chartered bank or trust company in Canada named in such notice, the Liquidation Amount in respect of the Exchangeable Shares represented by certificates that have not at the Liquidation Date been surrendered by the holders thereof, such Liquidation Amount to be held by such bank or trust company as trustee for and on behalf of, and for the use and benefit of, such holders. Upon such deposit being made, the rights of a holder of Exchangeable Shares after such deposit shall be limited to receiving its proportionate part of the Liquidation Amount for such Exchangeable Shares so deposited, without interest, and when received by such bank or trust company, all dividends and other distributions with respect to the shares of US Gold Common Stock to which such holder is entitled with a record date after the date of such deposit and before the date of transfer of such shares of US Gold Common Stock to such holder (in each case less any amounts withheld on account of tax required to be deducted and withheld therefrom) against presentation and surrender of the certificates for the Exchangeable Shares held by them in accordance with the foregoing provisions. Upon such payment or deposit of the total Liquidation Amount (less any amounts withheld on account of tax required to be deducted and withheld therefrom), the holders of the Exchangeable Shares shall thereafter be considered and deemed for all purposes to be holders of the US Gold Common Stock delivered to them or the custodian on their behalf.
 
(3) After the Corporation has satisfied its obligations to pay the holders of the Exchangeable Shares the total Liquidation Amount pursuant to this Section 5.1, such holders shall not be entitled to share in any further distribution of the assets of the Corporation.
 
5.2   Liquidation Call Rights
 
(1) Subject to the limitations set forth in Section 5.2(2), including that Alberta ULC shall only be entitled to exercise its Liquidation Call Right with respect to those holders of Exchangeable Shares, if any, in respect of which US Gold has not exercised its Liquidation Call Right, US Gold and Alberta ULC shall each have the overriding right (a “Liquidation Call Right”), in the event of and notwithstanding the proposed liquidation, dissolution or winding up of the Corporation pursuant to Section 5.1 hereof, to purchase from all but not less than all of the holders of Exchangeable Shares on the Liquidation Date (other than US Gold and its Subsidiaries) all but not less than all of the Exchangeable Shares held by each such holder on payment by whichever of US Gold or Alberta ULC is exercising such right (the “LCR Exercising Party”) of an amount per share equal to (a) the Current Market Price of a share of US Gold Common Stock on the last Business Day prior to the Liquidation Date, which shall be satisfied in full by delivery to such holder of one share of US Gold Common Stock, plus (b) the Dividend Amount, if any (collectively, the “Liquidation Call Purchase Price”). In the event of the exercise of a Liquidation Call Right, each holder of Exchangeable Shares (other than Alberta ULC and its Subsidiaries) shall be obligated to sell all the Exchangeable Shares held by such holder to the LCR Exercising Party on the Liquidation Date on payment by the LCR Exercising Party to the holder of the Liquidation Call Purchase Price for each such share and the Corporation shall have no obligation to pay any Liquidation Amount to the holders of such shares so purchased by the LCR Exercising Party.


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(2) Alberta ULC shall only be entitled to exercise its Liquidation Call Right with respect to those holders of Exchangeable Shares, if any, in respect of which US Gold has not exercised its Liquidation Call Right. In order to exercise its Liquidation Call Right, an LCR Exercising Party must notify in writing the Transfer Agent, as agent for the holders of Exchangeable Shares, the Trustee and the Corporation of its intention to exercise such right at least 55 days before the Liquidation Date in the case of a voluntary liquidation, dissolution or winding up of the Corporation and at least five Business Days before the Liquidation Date in the case of an involuntary liquidation, dissolution or winding up of the Corporation. The Transfer Agent will notify the holders of Exchangeable Shares as to whether or not a Liquidation Call Right has been exercised (such notice to specify the LCR Exercising Party) forthwith after the expiry of the date by which the same may be exercised, such form of notice to be provided by US Gold to the Transfer Agent. If an LCR Exercising Party exercises its Liquidation Call Right in accordance with this Section 5.2, all obligations of the Corporation under Section 5.1 shall terminate and on the Liquidation Date such LCR Exercising Party will purchase and the holders of Exchangeable Shares (other than US Gold and its Subsidiaries) will sell all of their Exchangeable Shares then outstanding for a price per share equal to the Liquidation Call Purchase Price.
 
(3) For the purposes of completing a purchase of the Exchangeable Shares pursuant to the exercise of a Liquidation Call Right, the LCR Exercising Party shall deposit with the Transfer Agent, on or before the Liquidation Date, certificates representing the total number of shares of US Gold Common Stock deliverable by the LCR Exercising Party (which shares shall be duly issued as fully paid and non-assessable and shall be free and clear of any lien, claim, encumbrance, security interest or adverse claim) in payment of the total Liquidation Call Purchase Price and a cheque in the amount of the remaining portion, if any, of the total Liquidation Call Purchase Price and any interest allowed on such deposit shall belong to the LCR Exercising Party. Provided that the total Liquidation Call Purchase Price has been so deposited with the Transfer Agent, on and after the Liquidation Date the rights of each holder of Exchangeable Shares (other than US Gold and its Subsidiaries) will be limited to receiving such holder’s proportionate part of the total Liquidation Call Purchase Price payable by the LCR Exercising Party, without interest, and when received by the Transfer Agent, all dividends and other distributions with respect to the shares of US Gold Common Stock to which such holder is entitled with a record date after the date of such deposit and before the date of transfer of such shares of US Gold Common Stock to such holder (in each case less any amounts withheld on account of tax required to be deducted and withheld therefrom) against presentation and surrender of the certificates for the Exchangeable Shares held by them in accordance with the following provisions. Upon surrender to the Transfer Agent of a certificate representing Exchangeable Shares, together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the ABCA and such additional documents and instruments as the Transfer Agent and the Corporation may reasonably require, the holder of such surrendered certificate shall be entitled to receive in exchange therefor, and the Transfer Agent on behalf of the LCR Exercising Party shall deliver to such holder, a certificate representing the shares of US Gold Common Stock to which such holder is entitled and a cheque in payment of the Dividend Amount, if any, without interest (less any amounts withheld on account of tax required to be deducted and withheld therefrom). If neither US Gold nor Alberta ULC exercises its Liquidation Call Right in the manner described above, on the Liquidation Date the holders of Exchangeable Shares shall be entitled to receive in exchange therefor the Liquidation Amount otherwise payable by the Corporation in connection with the liquidation, dissolution or winding up of the Corporation pursuant to Section 5.1 hereof.
 
ARTICLE 6
 
RETRACTION AT OPTION OF HOLDER
 
6.1   Retraction at Option of Holder
 
(1) Subject to applicable law and the due exercise by either US Gold or Alberta ULC of a Retraction Call Right, a holder of Exchangeable Shares shall be entitled at any time to require the Corporation to redeem, on the fifth Business Day after the date on which the Retraction Request is received by the Corporation (the “Retraction Date”), any or all of the Exchangeable Shares registered in the name of such holder for an amount per share equal to (a) the Current Market Price of a share of US Gold Common Stock on the last Business Day prior to the Retraction Date, which shall be satisfied in full by the Corporation causing to be delivered to such holder one share of US Gold


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Common Stock, plus (b) the Dividend Amount, if any (collectively, the “Retraction Price”). The holder must give notice of a requirement to redeem by presenting and surrendering at the registered office of the Corporation or at any office of the Transfer Agent as may be specified by the Corporation by notice to the holders of Exchangeable Shares the certificate representing the Exchangeable Shares that the holder desires to have the Corporation redeem, together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the ABCA and such additional documents and instruments as the Transfer Agent and the Corporation may reasonably require, together with a duly executed statement (the “Retraction Request”) in the form of Schedule A hereto or in such other form as may be acceptable to the Corporation specifying that the holder desires to have all or any number specified therein of the Exchangeable Shares represented by such certificate (the “Retracted Shares”) redeemed by the Corporation.
 
(2) In the case of a redemption of Exchangeable Shares under this Section 6.1, upon receipt by the Corporation or the Transfer Agent in the manner specified in Section 6.1(1) hereof of a certificate representing the number of Exchangeable Shares which the holder desires to have the Corporation redeem, together with a Retraction Request, and provided that the Retraction Request is not revoked by the holder in the manner specified in Section 6.1(5) and that neither US Gold or Alberta ULC has exercised a Retraction Call Right, the Corporation shall redeem the Retracted Shares effective at the close of business on the Retraction Date. On the Retraction Date, the Corporation shall deliver or cause to be delivered to the relevant holder, at the address of the holder recorded in the securities register of the Corporation for the Exchangeable Shares or at the address specified in the holder’s Retraction Request or by holding for pick-up by the holder at the registered office of the Corporation or at any office of the Transfer Agent, as may be specified by the Corporation by notice to the holders of Exchangeable Shares, a certificate representing the number of shares of US Gold Common Stock to which such holder is entitled (which shares shall be duly issued as fully paid and non-assessable and shall be free and clear of any lien, claim, encumbrance, security interest or adverse claim) registered in the name of the holder or in such other name as the holder may request in payment of the Retraction Price and a cheque of the Corporation payable at par at any branch of the bankers of the Corporation in payment of the remaining portion, if any, of the aggregate Retraction Price to which such holder is entitled (less any amounts withheld on account of tax required to be deducted and withheld therefrom) and such delivery of such certificate and cheque by or on behalf of the Corporation by the Transfer Agent shall be deemed to be payment of and shall satisfy and discharge all liability for the Retraction Price to the extent that the same is represented by such share certificates and cheque, unless such cheque is not paid on due presentation. If only a part of the Exchangeable Shares represented by any certificate is redeemed, a new certificate for the balance of such Exchangeable Shares shall be issued to the holder at the expense of the Corporation.
 
(3) On and after the close of business on the Retraction Date, the holder of the Retracted Shares shall cease to be a holder of such Retracted Shares and shall not be entitled to exercise any of the rights of a holder in respect thereof, other than the right to receive its proportionate part of the total Retraction Price, unless upon presentation and surrender of certificates in accordance with the foregoing provisions, payment of the aggregate Retraction Price payable to such holder shall not be made, in which case the rights of such holder shall remain unaffected until such aggregate Retraction Price has been paid in the manner hereinbefore provided. On and after the close of business on the Retraction Date, provided that presentation and surrender of certificates and payment of such aggregate Retraction Price has been made in accordance with the foregoing provisions, the holder of the Retracted Shares so redeemed by the Corporation shall thereafter be considered and deemed for all purposes to be a holder of the shares of US Gold Common Stock delivered to such holder.
 
(4) Notwithstanding any other provision of this Section 6.1, the Corporation shall not be obligated to redeem Retracted Shares specified by a holder in a Retraction Request to the extent that such redemption of Retracted Shares would be contrary to solvency requirements or other provisions of applicable law. If the Corporation believes that on any Retraction Date it would not be permitted by any of such provisions to redeem the Retracted Shares tendered for redemption on such date, and neither US Gold nor Alberta ULC shall have exercised its Retraction Call Right with respect to the Retracted Shares, the Corporation shall only be obligated to redeem Retracted Shares specified by a holder in a Retraction Request to the extent of the maximum number that may be so redeemed (rounded down to a whole number of shares) as would not be contrary to such provisions and shall notify the holder at least two Business Days prior to the Retraction Date as to the number of Retracted Shares which will not be redeemed by the Corporation. In any case in which the redemption by the Corporation of Retracted Shares would be


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contrary to solvency requirements or other provisions of applicable law and more than one holder has delivered a Retraction Request, the Corporation shall redeem Retracted Shares in accordance with Section 6.1(2) on a pro rata basis and shall issue to each such holder of Retracted Shares a new certificate, at the expense of the Corporation, representing the Retracted Shares not redeemed by the Corporation pursuant to Section 6.1(2) hereof. If the Retraction Request is not revoked by the holder in the manner specified in Section 6.1(5) and neither US Gold nor Alberta ULC shall have exercised its Retraction Call Right in respect of any such Retracted Shares, an Insolvency Event (as defined in the Voting and Exchange Trust Agreement) shall, to the extent it has not theretofore occurred, be deemed thereupon to have occurred and the holder of any such Retracted Shares not redeemed by the Corporation pursuant to Section 6.1(2) as a result of solvency requirements or other provisions of applicable law shall be deemed by giving the Retraction Request to have exercised its Exchange Right (as defined in the Voting and Exchange Trust Agreement) so as to require US Gold or, at the option of US Gold, Alberta ULC to purchase the unredeemed Retracted Shares from such holder on the Retraction Date or as soon as practicable thereafter on payment by US Gold or, at the option of US Gold, Alberta ULC to such holder of the Retraction Price, all as more specifically provided in the Voting and Exchange Trust Agreement.
 
(5) A holder of Retracted Shares may, by notice in writing given by the holder to the Corporation before the close of business on the Business Day immediately preceding the Retraction Date, withdraw its Retraction Request in which event such Retraction Request shall be null and void and, for greater certainty, the revocable offer constituted by the Retraction Request to sell the Retracted Shares to US Gold or Alberta ULC shall be deemed to have been revoked.
 
(6) Notwithstanding any other provision of this ARTICLE 6, if:
 
(a) exercise of the rights of the holders of the Exchangeable Shares, or any of them, to require the Corporation to redeem any Exchangeable Shares pursuant to this ARTICLE 6 on any Retraction Date would require listing particulars or any similar document to be issued in order to obtain the approval of AMEX or TSX to the listing and trading (subject to official notice of issuance) of, the shares of US Gold Common Stock that would be required to be delivered to such holders of Exchangeable Shares in connection with the exercise of such rights; and
 
(b) as a result of (a) above, it would not be practicable (notwithstanding the reasonable endeavours of US Gold) to obtain such approvals in time to enable all or any of such shares of US Gold Common Stock to be admitted to listing and trading by AMEX or TSX (subject to official notice of issuance) when so delivered, that Retraction Date shall, notwithstanding any other date specified or otherwise deemed to be specified in any relevant Retraction Request, be deemed for all purposes to be the earlier of (i) the second business day immediately following the date the approvals referred to in Section 6.1(6)(a) are obtained, and (ii) the date which is 30 Business Days after the date on which the relevant Retraction Request is received by the Corporation, and references in these share provisions to such Retraction Date shall be construed accordingly.
 
6.2   Retraction Call Rights
 
(1) In the event that a holder of Exchangeable Shares delivers a Retraction Request pursuant to Section 6.1 and subject to the limitations set forth in Section 6.2(2), including that Alberta ULC shall only be entitled to exercise its Retraction Call Right with respect to those holders of Exchangeable Shares, if any, in respect of which US Gold has not exercised its Retraction Call Right, US Gold and Alberta ULC shall each have the overriding right (a “Retraction Call Right”), notwithstanding the proposed redemption of the Exchangeable Shares by the Corporation pursuant to Section 6.1 hereof, to purchase from such holder on the Retraction Date all but not less than all of the Retracted Shares held by such holder on payment by whichever of US Gold or Alberta ULC is exercising such right (the “RCR Exercising Party”) of an amount per share equal to (a) the Current Market Price of a share of US Gold Common Stock on the last Business Day prior to the Retraction Date, which shall be satisfied in full by the RCR Exercising Party causing to be delivered to such holder one share of US Gold Common Stock, plus (b) the Dividend Amount, if any (the “Retraction Call Purchase Price”). In the event of the exercise of a Retraction Call Right, a holder of Exchangeable Shares who has delivered a Retraction Request shall be obligated to sell all the Retracted Shares to the RCR Exercising Party on the Retraction Date on payment by the RCR Exercising Party of an amount per share equal to the Retraction Call Purchase Price for each such share.


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(2) Upon receipt by the Corporation of a Retraction Request, the Corporation shall promptly notify US Gold and Alberta ULC thereof. Alberta ULC shall only be entitled to exercise its Retraction Call Right with respect to those holders of Exchangeable Shares, if any, in respect of which US Gold has not exercised its Retraction Call Right. In order to exercise its Retraction Call Right, the RCR Exercising Party must notify the Corporation in writing of its determination to do so (a “US Gold Call Notice”) within five Business Days of notification to such RCR Exercising Party by the Corporation of the receipt by the Corporation of the Retraction Request. If either US Gold or Alberta ULC does not so notify the Corporation within such five Business Day period, the Corporation shall notify the holder as soon as possible thereafter that neither will exercise the Retraction Call Right. If either US Gold or Alberta ULC delivers a US Gold Call Notice within such five Business Day period and duly exercises its Retraction Call Right in accordance with this Section 6.2, the obligation of the Corporation to redeem the Retracted Shares shall terminate and, provided that the Retraction Request is not revoked by the holder in the manner specified in Section 6.1(5), the RCR Exercising Party shall purchase from such holder and such holder shall sell to the RCR Exercising Party on the Retraction Date the Retracted Shares for the Retraction Call Purchase Price. Provided that the aggregate Retraction Call Purchase Price has been so deposited with the Transfer Agent as provided in Section 6.2(3), the closing of the purchase and sale of the Retracted Shares pursuant to the Retraction Call Right shall be deemed to have occurred as at the close of business on the Retraction Date and, for greater certainty, no redemption by the Corporation of such Retracted Shares shall take place on the Retraction Date. In the event that neither US Gold nor Alberta ULC delivers a US Gold Call Notice within such five Business Day period, and provided that the Retraction Request is not revoked by the holder in the manner specified in Section 6.1(5), the Corporation shall redeem the Retracted Shares on the Retraction Date and in the manner otherwise contemplated in Section 6.1.
 
(3) For the purpose of completing a purchase of Exchangeable Shares pursuant to the exercise of a Retraction Call Right, the RCR Exercising Party shall deliver or cause to be delivered to the relevant holder, at the address of the holder recorded in the securities register of the Corporation for the Exchangeable Shares or at the address specified in the holder’s Retraction Request or by holding for pick-up by the holder at the registered office of the Corporation or at any office of the Transfer Agent as may be specified by the Corporation by notice to the holders of Exchangeable Shares, a certificate representing the number of shares of US Gold Common Stock to which such holder is entitled (which shares shall be duly issued as fully paid and non-assessable and shall be free and clear of any lien, claim, encumbrance, security interest or adverse claim) registered in the name of the holder or in such other name as the holder may request in payment of the Retraction Call Purchase Price and a cheque of the RCR Exercising Party payable at par and in Canadian dollars at any branch of the bankers of US Gold, Alberta ULC or of the Corporation in Canada in payment of the remaining portion, if any, of such aggregate Retraction Call Purchase Price (less any amounts withheld on account of tax required to be deducted and withheld therefrom) and such delivery of such certificate and cheque on behalf of the RCR Exercising Party by the Transfer Agent shall be deemed to be payment of and shall satisfy and discharge all liability for the Retraction Call Purchase Price to the extent that the same is represented by such share certificates and cheque, unless such cheque is not paid on due presentation.
 
(4) On and after the close of business on the Retraction Date, the holder of the Retracted Shares shall not be entitled to exercise any of the rights of a holder in respect thereof, other than the right to receive its proportionate part of the total Retraction Call Purchase Price unless upon presentation and surrender of certificates in accordance with the foregoing provisions, payment of the aggregate Retraction Call Purchase Price payable to such holder shall not be made, in which case the rights of such holder shall remain unaffected until such aggregate Retraction Call Purchase Price has been paid in the manner hereinbefore provided. On and after the close of business on the Retraction Date, provided that presentation and surrender of certificates and payment of such aggregate Retraction Call Purchase Price has been made in accordance with the foregoing provisions, the holder of the Retracted Shares so purchased by the RCR Exercising Party shall thereafter be considered and deemed for all purposes to be a holder of the shares of US Gold Common Stock delivered to such holder.


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ARTICLE 7
 
REDEMPTION BY THE CORPORATION
 
7.1   Redemption by the Corporation
 
(1) Subject to applicable law and the due exercise by either US Gold or Alberta ULC of a Redemption Call Right, the Corporation shall on the Redemption Date redeem all of the then outstanding Exchangeable Shares for an amount per share equal to (a) the Current Market Price of a share of US Gold Common Stock on the last Business Day prior to such Redemption Date, which shall be satisfied in full by the Corporation causing to be delivered one share of US Gold Common Stock, plus (b) the Dividend Amount, if any (collectively, the “Redemption Price”).
 
(2) In any case of a redemption of Exchangeable Shares under this Section 7.1, the Corporation shall, at least 60 days before the Redemption Date, send or cause to be sent to each holder of Exchangeable Shares a notice in writing of the redemption by the Corporation or the purchase by US Gold or Alberta ULC under its Redemption Call Right, as the case may be, of the Exchangeable Shares held by such holder (other than US Gold and its Subsidiaries in the case of a purchase by US Gold or Alberta ULC). Such notice shall set out the formula for determining the Redemption Price or the Redemption Call Purchase Price, as the case may be, such Redemption Date and, if applicable, particulars of the Redemption Call Right.
 
(3) On or after the Redemption Date and subject to the exercise by US Gold or Alberta ULC of a Redemption Call Right, the Corporation shall cause to be delivered to the holders of the Exchangeable Shares to be redeemed the Redemption Price for each such Exchangeable Share upon presentation and surrender at the registered office of the Corporation or at any office of the Transfer Agent as may be specified by the Corporation in such notice of the certificates representing such Exchangeable Shares, together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the ABCA and such additional documents and instruments as the Transfer Agent and the Corporation may reasonably require. Payment of the aggregate Redemption Price for Exchangeable Shares held by a holder shall be made by delivery to such holder, at the address of such holder recorded in the securities register of the Corporation or by holding for pick-up by the holder at the registered office of the Corporation or at any office of the Transfer Agent as may be specified by the Corporation in such notice, of a certificate representing the aggregate number of shares of US Gold Common Stock deliverable by the Corporation to such holder (which shares shall be duly issued as fully paid and non- assessable and shall be free and clear of any lien, claim, encumbrance, security interest or adverse claim) and a cheque of the Corporation payable at par at any branch of the bankers of the Corporation in respect of the remaining portion, if any, of such aggregate Redemption Price (less any amounts withheld on account of tax required to be deducted and withheld therefrom). On and after the Redemption Date, the holders of the Exchangeable Shares called for redemption shall not be entitled to exercise any of the rights of holders in respect thereof, other than the right to receive their proportionate part of the total Redemption Price, unless payment of the aggregate Redemption Price deliverable to a holder for Exchangeable Shares shall not be made upon presentation and surrender of share certificates in accordance with the foregoing provisions, in which case the rights of the holder shall remain unaffected until the aggregate Redemption Price deliverable to such holder has been paid in the manner hereinbefore provided.
 
(4) The Corporation shall have the right at any time after the sending of notice of its intention to redeem the Exchangeable Shares as aforesaid to deposit or cause to be deposited the total Redemption Price of the Exchangeable Shares so called for redemption, or of such of the said Exchangeable Shares represented by certificates that have not at the date of such deposit been surrendered by the holders thereof in connection with such redemption, in a custodial account with any chartered bank or trust company in Canada named in such notice and any interest allowed on such deposit shall belong to the Corporation. Provided that such total Redemption Price has been so deposited prior to the Redemption Date, on and after the Redemption Date, the Exchangeable Shares shall be redeemed and the Rights of the holders thereof after the Redemption Date shall be limited to receiving their proportionate part of the total Redemption Price for such Exchangeable Shares so deposited, against presentation and surrender of the said certificates held by them, respectively, in accordance with the foregoing provisions. Upon such payment or deposit of the total Redemption Price, the holders of the Exchangeable Shares shall thereafter be considered and deemed for all purposes to be holders of the shares of US Gold Common Stock delivered to them.


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7.2   Redemption Call Rights
 
(1) Subject to the limitations set forth in Section 7.2(2), including that Alberta ULC shall only be entitled to exercise its Redemption Call Right with respect to those holders of Exchangeable Shares, if any, in respect of which US Gold has not exercised its Redemption Call Right, US Gold and Alberta ULC shall each have the overriding right (a “Redemption Call Right”), notwithstanding the proposed redemption of the Exchangeable Shares by the Corporation pursuant to Section 7.1 hereof, to purchase from all but not less than all of the holders of Exchangeable Shares (other than US Gold and its Subsidiaries) on the last Business Day prior to the Redemption Date in respect of which the Redemption Call Right is exercised all but not less than all of the Exchangeable Shares held by each such holder on payment by whichever of US Gold or Alberta ULC is exercising such right (the “Redemption CR Exercising Party”) of an amount per share equal to (a) the Current Market Price of a share of US Gold Common Stock on the last Business Day prior to such Redemption Date, which shall be satisfied in full by causing to be delivered to such holder one share of US Gold Common Stock plus (b) the Dividend Amount, if any (collectively, the “Redemption Call Purchase Price”). In the event of the exercise of a Redemption Call Right, each holder of Exchangeable Shares (other than US Gold and its Subsidiaries) shall be obligated to sell all the Exchangeable Shares held by such holder to the Redemption CR Exercising Party on the last Business Day prior to such Redemption Date on payment by the Redemption CR Exercising Party to such holder of the Redemption Call Purchase Price for each such share.
 
(2) Alberta ULC shall only be entitled to exercise its Redemption Call Right with respect to those holders of Exchangeable Shares, if any, in respect of which US Gold has not exercised its Redemption Call Right. In order to exercise its Redemption Call Right, a Redemption CR Exercising Party must notify in writing the Transfer Agent, as agent for the holders of Exchangeable Shares and the Corporation of its intention to exercise such right at least 30 days before the Redemption Date. The Transfer Agent will notify the holders of Exchangeable Shares as to whether or not a Redemption Call Right has been exercised (such notice to specify the Redemption CR Exercising Party) forthwith after the expiry of the date by which the same may be exercised, such form of notice to be provided by US Gold to the Transfer Agent. If a Redemption CR Exercising Party duly exercises its Redemption Call Right in accordance with this Section 7.2, the right of the Corporation to redeem any Exchangeable Shares pursuant to Section 7.1 on the Redemption Date shall terminate at such time and on the last Business Day prior to such Redemption Date such Redemption CR Exercising Party will purchase and the holders of Exchangeable Shares (other than US Gold and its Subsidiaries) will sell all of their Exchangeable Shares then outstanding for a price per share equal to the Redemption Call Purchase Price.
 
(3) For the purposes of completing a purchase of the Exchangeable Shares pursuant to the exercise of a Redemption Call Right, the Redemption CR Exercising Party shall deposit with the Transfer Agent, on or before the last Business Day prior to the Redemption Date, certificates representing the total number of shares of US Gold Common Stock deliverable by the Redemption CR Exercising Party (which shares shall be duly issued as fully paid and non-assessable and shall be free and clear of any lien, claim, encumbrance, security interest or adverse claim) in payment of the total Redemption Call Purchase Price and a cheque in the amount of the remaining portion, if any, of the total Redemption Call Purchase Price, without interest (less any amounts withheld on account of tax required to be deducted and withheld therefrom) and any interest allowed on such deposit shall belong to the Redemption CR Exercising Party. Provided that the total Redemption Call Purchase Price has been so deposited with the Transfer Agent, on and after the last Business Day prior to the Redemption Date the rights of each holder of Exchangeable Shares (other than US Gold and its Subsidiaries) will be limited to receiving such holder’s proportionate part of the total Redemption Call Purchase Price payable by the Redemption CR Exercising Party upon presentation and surrender by such holder of certificates representing the Exchangeable Shares held by such holder in accordance with the following provisions and such holder shall on and after the last Business Day prior to such Redemption Date be considered and deemed for all purposes to be the holder of the shares of US Gold Common Stock delivered to such holder. Upon surrender to the Transfer Agent of a certificate representing Exchangeable Shares, together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the ABCA and such additional documents and instruments as the Transfer Agent and the Corporation may reasonably require, the holder of such surrendered certificate shall be entitled to receive in exchange therefor, and the Transfer Agent on behalf of the Redemption CR Exercising Party shall deliver to such holder, a certificate representing the shares of US Gold Common Stock to which such holder is entitled and a cheque in payment of the remaining


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portion, if any, of the holder’s proportionate part of the total Redemption Call Purchase Price, without interest (less any amounts withheld on account of tax required to be deducted and withheld therefrom). If neither US Gold nor Alberta ULC exercises the Redemption Call Right in the manner described above, on the Redemption Date a holder of Exchangeable Shares shall be entitled to receive in exchange therefor the Redemption Price otherwise payable by the Corporation in connection with the redemption of the Exchangeable Shares pursuant to Section 7.1 hereof.
 
ARTICLE 8
 
VOTING RIGHTS
 
8.1   Voting Rights
 
Except as required by applicable law and by the provisions of Sections 8.2, 9.1, 10.1 and 11.2 hereof, the holders of the Exchangeable Shares shall not be entitled as such to receive notice of or to attend any meeting of the shareholders of the Corporation or to vote at any such meeting.
 
8.2   Election or Appointment of Single Director
 
With respect to the rights of the shareholders to elect or appoint directors as outlined in the ABCA, the rights attaching to the Exchangeable Shares provided by these Share Provisions shall give the holders of the Exchangeable Shares the limited right to vote (and each holder thereof shall be entitled to one (1) vote per share in person or by proxy) on the election or appointment of one (1) out of the three (3) directors of the Corporation, and, for clarification, the holders of the Exchangeable Shares shall have no right to vote on the election or appointment of the remaining two (2) directors of the Corporation, which is a right attaching to the Class A Shares.
 
ARTICLE 9
 
AMENDMENT AND APPROVAL
 
9.1   Amendment
 
The rights, privileges, restrictions and conditions attaching to the Exchangeable Shares may be added to, changed or removed only with the approval of the holders of the Exchangeable Shares given as hereinafter specified.
 
9.2   Approval
 
Any approval given by the holders of the Exchangeable Shares to add to, change or remove any right, privilege, restriction or condition attaching to the Exchangeable Shares or any other matter requiring the approval or consent of the holders of the Exchangeable Shares shall be deemed to have been sufficiently given if it shall have been given in accordance with applicable law, subject to a minimum requirement that such approval be evidenced by resolution passed by not less than two-thirds of the votes cast on such resolution at a meeting of holders of Exchangeable Shares duly called and held at which the holders of at least 10% of the outstanding Exchangeable Shares at that time are present or represented by proxy; provided that such approval must be given also by the affirmative vote of holders of more than two-thirds of the Exchangeable Shares represented in person or by proxy at the meeting excluding Exchangeable Shares beneficially owned by US Gold or any of its Subsidiaries. If at any such meeting the holders of at least 10% of the outstanding Exchangeable Shares at that time are not present or represented by proxy within one-half hour after the time appointed for such meeting, then the meeting shall be adjourned to such date not less than five days thereafter and to such time and place as may be designated by the Chairman of such meeting. At such adjourned meeting the holders of Exchangeable Shares present or represented by proxy thereat may transact the business for which the meeting was originally called and a resolution passed thereat by the affirmative vote of not less than two-thirds of the votes cast on such resolution at such meeting excluding Exchangeable Shares beneficially owned by US Gold or any of its Subsidiaries shall constitute the approval or consent of the holders of the Exchangeable Shares.


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ARTICLE 10
 
RECIPROCAL CHANGES, ETC. IN RESPECT OF US GOLD COMMON STOCK
 
10.1   Reciprocal Changes
 
(1) Each holder of an Exchangeable Share acknowledges that the Support Agreement provides, in part, that US Gold will not, except as provided in the Support Agreement, without the prior approval of the Corporation and the prior approval of the holders of the Exchangeable Shares given in accordance with Section 9.2 hereof:
 
(a) issue or distribute shares of US Gold Common Stock (or securities exchangeable for or convertible into or carrying rights to acquire US Gold Common Stock) to the holders of all or substantially all of the then outstanding shares of US Gold Common Stock, by way of stock dividend or other distribution, other than an issue of shares of US Gold Common Stock (or securities exchangeable for or convertible into or carrying rights to acquire US Gold Common Stock) to holders of shares of US Gold Common Stock who exercise an option to receive dividends in shares of US Gold Common Stock (or securities exchangeable for or convertible into or carrying rights to acquire US Gold Common Stock) in lieu of receiving cash dividends;
 
(b) issue or distribute rights, options or warrants to the holders of all or substantially all of the then outstanding shares of US Gold Common Stock entitling them to subscribe for or to purchase shares of US Gold Common Stock (or securities exchangeable for or convertible into or carrying rights to acquire shares of US Gold Common Stock); or
 
(c) issue or distribute to the holders of all or substantially all of the then outstanding shares of US Gold Common Stock:
 
(i) shares or securities (including evidence of indebtedness) of US Gold of any class other than US Gold Common Stock (other than shares convertible into or exchangeable for or carrying rights to acquire US Gold Common Stock);
 
(ii) rights, options or warrants other than those referred to in Section 10.1(1)(b) above; or
 
(iii) assets of US Gold,
 
unless the economic equivalent on a per share basis of such rights, options, securities, shares, evidences of indebtedness or other assets is issued or distributed simultaneously to holders of the Exchangeable Shares.
 
(2) Each holder of an Exchangeable Share acknowledges that the Support Agreement further provides, in part, that US Gold will not, except as provided in the Support Agreement, without the prior approval of the Corporation and the prior approval of the holders of the Exchangeable Shares given in accordance with Section 9.2 hereof:
 
(a) subdivide, redivide or change the then outstanding US Gold Common Stock into a greater number of shares of US Gold Common Stock;
 
(b) reduce, combine, consolidate or change the then outstanding shares of US Gold Common Stock into a lesser number of shares of US Gold Common Stock; or
 
(c) reclassify or otherwise change the shares of US Gold Common Stock or effect an amalgamation, merger, reorganization or other transaction affecting the US Gold Common Stock,
 
unless the same or an economically equivalent change shall simultaneously be made to, or in, the rights of the holders of the Exchangeable Shares.
 
The Support Agreement further provides, in part, that the aforesaid provisions of the Support Agreement shall not be changed without the approval of the holders of the Exchangeable Shares given in accordance with Section 9.2 hereof.


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ARTICLE 11
 
ACTIONS BY THE CORPORATION UNDER SUPPORT AGREEMENT
 
11.1   Actions by the Corporation
 
The Corporation will take all such actions and do all such things as shall be necessary or advisable to perform and comply with and to facilitate performance and compliance by US Gold and Alberta ULC with all provisions of the Support Agreement applicable to US Gold, Alberta ULC and the Corporation, respectively, in accordance with the terms thereof including, without limitation, taking all such actions and doing all such things as shall be necessary or advisable to enforce to the fullest extent possible for the direct benefit of the Corporation all rights and benefits in favour of the Corporation under or pursuant to such agreement.
 
11.2   Changes to Support Agreement
 
The Corporation shall not agree to or otherwise give effect to any amendment to, or waiver or forgiveness of its rights or obligations under, the Support Agreement without the approval of the holders of the Exchangeable Shares given in accordance with Section 9.2 hereof other than such amendments, waivers and/or forgiveness as may be necessary or advisable for the purposes of:
 
(a) adding to the covenants of the other parties to such agreement for the protection of the Corporation or the holders of the Exchangeable Shares;
 
(b) making such provisions or modifications not inconsistent with such agreement as may be necessary or desirable with respect to matters or questions arising thereunder which, in the opinion of the Board of Directors, it may be expedient to make, provided that the Board of Directors shall be of the good faith opinion, after consultation with counsel, that such provisions and modifications will not be prejudicial to the interests of the holders of the Exchangeable Shares; or
 
(c) making such changes in or corrections to such agreement which, on the advice of counsel to the Corporation, are required for the purpose of curing or correcting any ambiguity or defect or inconsistent provision or clerical omission or mistake or manifest error contained therein, provided that the Board of Directors shall be of the good faith opinion, after consultation with counsel, that such provisions and modifications will not be prejudicial to the interests of the holders of the Exchangeable Shares.
 
ARTICLE 12
 
LEGEND; CALL RIGHTS; WITHHOLDING RIGHTS
 
12.1   Legend
 
The certificates evidencing the Exchangeable Shares shall contain or have affixed thereto a legend in form and on terms approved by the Board of Directors, with respect to the Support Agreement and the Voting and Exchange Trust Agreement (including, but not limited to the provisions with respect to the call rights, voting rights and exchange rights thereunder).
 
12.2   Call Rights
 
Each holder of an Exchangeable Share, whether of record or beneficial, by virtue of becoming and being such a holder shall be deemed to acknowledge each of the Liquidation Call Right, the Retraction Call Right and the Redemption Call Right, in each case, in favour of US Gold and Alberta ULC, and the overriding nature thereof in connection with the liquidation, dissolution or winding-up of the Corporation or any other distribution of the assets of the Corporation among its shareholders for the purpose of winding up its affairs, or the retraction or redemption of Exchangeable Shares, as the case may be, and to be bound thereby in favour of US Gold or Alberta ULC, as the case may be, as herein provided.


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12.3   Withholding Rights
 
US Gold, Alberta ULC, the Corporation and the Transfer Agent shall be entitled to deduct and withhold from any consideration otherwise payable under to any holder of Exchangeable Shares such amounts as US Gold, Alberta ULC, the Corporation or the Transfer Agent is required to deduct and withhold with respect to such payment under the Income Tax Act (Canada) or United States tax laws or any provision of provincial, state, federal, local or foreign tax law, in each case as amended or succeeded. The Transfer Agent may act and rely on the advice of counsel with respect to such matters. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes as having been paid to the holder of the Exchangeable Shares in respect of which such deduction and withholding was made, provided that such withheld amounts are actually remitted to the appropriate taxing authority. To the extent that the amount so required to be deducted or withheld from any payment to a holder exceeds the cash portion of the consideration otherwise payable to the holder, US Gold, Alberta ULC, the Corporation and the Transfer Agent are hereby authorized to sell or otherwise dispose of such portion of the consideration as is necessary to provide sufficient funds to US Gold, Alberta ULC, the Corporation or the Transfer Agent, as the case may be, to enable it to comply with such deduction or withholding requirement and US Gold, Alberta ULC, the Corporation or the Transfer Agent shall notify the holder thereof and remit to such holder any unapplied balance of the net proceeds of such sale.
 
ARTICLE 13
 
NOTICES
 
13.1   Notices
 
Subject to applicable law, any notice, request or other communication to be given to the Corporation by a holder of Exchangeable Shares shall be in writing and shall be valid and effective if given by mail (postage prepaid) or by telecopy or by delivery to the registered office of the Corporation and addressed to the attention of the Secretary of the Corporation. Any such notice, request or other communication, if given by mail, telecopy or delivery, shall only be deemed to have been given and received upon actual receipt thereof by the Corporation.
 
13.2   Certificates
 
Any presentation and surrender by a holder of Exchangeable Shares to the Corporation or the Transfer Agent of certificates representing Exchangeable Shares in connection with the liquidation, dissolution or winding-up of the Corporation or the retraction or redemption of Exchangeable Shares shall be made by registered mail (postage prepaid) or by delivery to the registered office of the Corporation or to such office of the Transfer Agent as may be specified by the Corporation, in each case, addressed to the attention of the Secretary of the Corporation. Any such presentation and surrender of certificates shall only be deemed to have been made and to be effective upon actual receipt thereof by the Corporation or the Transfer Agent, as the case may be. Any such presentation and surrender of certificates made by registered mail (postage prepaid) shall be at the sole risk of the holder mailing the same.
 
13.3   Notices to Shareholders
 
Subject to applicable law, any notice, request or other communication to be given to a holder of Exchangeable Shares by or on behalf of the Corporation shall be in writing and shall be valid and effective if given by mail (postage prepaid) or by delivery to the address of the holder recorded in the resister of shareholders of the Corporation or, in the event of the address of any such holder not being so recorded, then at the last known address of such holder. Any such notice, request or other communication, if given by mail, shall be deemed to have been given and received on the fifth Business Day following the date of mailing and, if given by delivery, shall be deemed to have been given and received on the date of delivery. Accidental failure or omission to give any notice, request or other communication to one or more holders of Exchangeable Shares, or any defect in such notice, shall not invalidate or otherwise alter or affect any action or proceeding to be taken by the Corporation pursuant thereto.
 
In the event of any interruption of mail service immediately prior to a scheduled mailing or in the period following a mailing during which delivery normally would be expected to occur, the Corporation will make reasonable efforts to disseminate any notice by other means, such as publication. Except as otherwise required or permitted by law, if post offices in Canada or the United States are not open for the deposit of mail, any notice which


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the Corporation or the Transfer Agent may give or cause to be given will be deemed to have been properly given and to have been received by holders of Exchangeable Shares if (i) it is given to the TSX for dissemination or (ii) it is published once in the National Edition of The Globe and Mail and in the daily newspapers of general circulation in each of the French and English languages in the City of Montreal, provided that if the National Edition of The Globe and Mail is not being generally circulated, publication thereof will be made in any other daily newspaper of general circulation published in the City of Toronto.
 
Notwithstanding any other provisions of these share provisions, notices, other communications and deliveries need not be mailed if the Corporation determines that delivery thereof by mail may be delayed. Persons entitled to any deliveries (including certificates and cheques) which are not mailed for the foregoing reason may take delivery thereof at the office of the Transfer Agent to which the deliveries were made, upon application to the Transfer Agent, until such time as the Corporation has determined that delivery by mail will no longer be delayed. The Corporation will provide notice of any such determination not to mail made hereunder as soon as reasonably practicable after the making of such determination and in accordance with this Section 13.3. Such deliveries in such circumstances will constitute delivery to the persons entitled thereto.


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SCHEDULE A
 
RETRACTION REQUEST
 
To: U.S. Gold Corporation, US Gold Alberta ULC and US Gold Canadian Acquisition
Corporation, c/o the Trustee
 
This notice is given pursuant to ARTICLE 6 of the provisions (the “Share Provisions”) attaching to the share(s) represented by this certificate and all capitalized words and expressions used in this notice that are defined in the Share Provisions have the meanings ascribed to such words and expressions in such Share Provisions.
 
The undersigned hereby notifies the Corporation that, subject to the Retraction Call Right referred to below, the undersigned desires to have the Corporation redeem in accordance with ARTICLE 6 of the Share Provisions:
 
o all share(s) represented by this certificate; or
 
o           share(s) only represented by this certificate.
 
The undersigned acknowledges the Retraction Call Right of US Gold and Alberta ULC to purchase all but not less than all the Retracted Shares from the undersigned and that this notice is and shall be deemed to be a revocable offer by the undersigned to sell the Retracted Shares to US Gold or Alberta ULC in accordance with the Retraction Call Right on the Retraction Date for the Retraction Call Purchase Price and on the other terms and conditions set out in Section 6.2 of the Share Provisions. If neither US Gold or Alberta ULC determines to exercise its Retraction Call Right, the Corporation will notify the undersigned of such fact as soon as possible. This Retraction Request, and this offer to sell the Retracted Shares to US Gold or Alberta ULC, may be revoked and withdrawn by the undersigned only by notice in writing given to the Corporation at any time before the close of business on the Business Day immediately preceding the Retraction Date.
 
The undersigned acknowledges that if, as a result of solvency provisions of applicable law, the Corporation is unable to redeem all Retracted Shares and provided that neither US Gold nor Alberta ULC has exercised the Retraction Call Right with respect to the Retracted Shares, the undersigned will be deemed to have exercised the Exchange Right (as defined in the Voting and Exchange Trust Agreement) so as to require US Gold or, at the option of US Gold, Alberta ULC to purchase the unredeemed Retracted Shares.
 
The undersigned hereby represents and warrants to the Corporation, US Gold and Alberta ULC that the undersigned has good title to, and owns, the share(s) represented by this certificate to be acquired by the Corporation, US Gold or Alberta ULC, as the case may be, free and clear of all liens, claims, encumbrances, security interests and adverse claims.
 
         
 
 
(Date)   (Signature of Shareholder)   (Guarantee of Signature)
 
o  Please check box if the securities and any cheque(s) resulting from the retraction or purchase of the Retracted Shares are to be held for pick-up by the shareholder at the principal transfer office of the Transfer Agent in Toronto, failing which such securities and any cheque will be mailed to the last address of the shareholder as it appears on the register.
 
NOTE:  This panel must be completed and this certificate, together with such additional documents as the Transfer Agent and the Corporation may require, must be deposited with the Transfer Agent at its principal transfer office in Toronto. The securities and any cheque resulting from the retraction or purchase of the Retracted Shares will be issued and registered in, and made payable to respectively, the name of the shareholder as it appears on the register of the Corporation and the securities and cheque resulting from such retraction or purchase will be delivered to such shareholder as indicated above, unless the form appearing immediately below is duly completed, all exigible transfer taxes are paid and the signature of the registered holder is guaranteed by a Canadian chartered bank or trust company, member of a recognized stock exchange in Canada or a member of the Securities Transfer Association Medallion (STAMP) Program.
 
Date:          


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Name of Person in Whose Name Securities or Cheque(s)
Are to be Registered, Issued or Delivered (please print)
 
     
Street Address or P.O. Box 		 
Signature of Shareholder
     
City, Province and Postal Code 		 
Signature Guaranteed by
 
NOTE:  If this Retraction Request is for less than all of the share(s) represented by this certificate, a certificate representing the remaining share of the Corporation will be issued and registered in the name of the shareholder as it appears on the register of the Corporation, unless the Share Transfer Power on the share certificate is duly completed in respect of such share(s).


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APPENDIX J
 
FORM OF VOTING AND EXCHANGE TRUST AGREEMENT
 
AGREEMENT made as of          , 2006, among U.S. Gold Corporation (“US Gold”), a corporation existing under the laws of Colorado, US Gold Alberta ULC (“Alberta ULC”), an unlimited liability corporation existing under the laws of Alberta, US Gold Canadian Acquisition Corporation (“Canadian Exchange Co.”), a corporation existing under the laws of Alberta, and          , a trust company incorporated under the laws of Canada (hereinafter referred to as “Trustee”).
 
RECITALS:
 
WHEREAS US Gold, together with Canadian Exchange Co., has offered, each by way of a public take-over bid, to acquire all of the outstanding common shares of each of White Knight Resources Ltd., Coral Gold Resources Ltd., Nevada Pacific Gold Ltd. and Tone Resources Ltd. in consideration for exchangeable shares (“Exchangeable Shares”) of Canadian Exchange Co.;
 
AND WHEREAS holders of Exchangeable Shares will be entitled to require Canadian Exchange Co. to redeem such Exchangeable Shares and upon such redemption each Exchangeable Share shall be exchanged for one share of common stock of US Gold (“US Gold Common Stock”);
 
AND WHEREAS the parties desire to make appropriate provision and to establish a procedure whereby (i) voting rights in US Gold shall be exercisable by Beneficiaries (as hereinafter defined) from time to time by and through the Trustee, which will hold legal title to the Special Voting Share (as hereinafter defined) to which voting rights attach for the benefit of Beneficiaries, and (ii) the rights to require US Gold or, at the option of US Gold, Alberta ULC, to purchase Exchangeable Shares from the Beneficiaries shall be exercisable by Beneficiaries from time to time of Exchangeable Shares by and through the Trustee, which will hold legal title to such rights for the benefit of the Beneficiaries;
 
AND WHEREAS these recitals and any statements of fact in this agreement are made by US Gold, Alberta ULC and Canadian Exchange Co. and not by the Trustee;
 
NOW THEREFORE, in consideration of the respective covenants and agreements provided in this agreement and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties agree as follows:
 
ARTICLE 1
 
DEFINITIONS AND INTERPRETATION
 
1.1   Definitions
 
In this agreement, each initially capitalized term and the terms used and not otherwise defined herein shall have the meaning ascribed thereto in the rights, privileges, restrictions and conditions (collectively, the “Share Provisions”) attaching to the Exchangeable Shares as set out in the articles of Canadian Exchange Co. and the following terms shall have the following meanings:
 
“Automatic Exchange Right” has the meaning ascribed thereto in Section 5.11(2).
 
“Beneficiaries” mean the registered holders from time to time of Exchangeable Shares, other than US Gold and its Subsidiaries.
 
“Beneficiary Votes” has the meaning ascribed thereto in Section 4.2.
 
“Exchange Right” has the meaning ascribed thereto in Section 5.1.
 
“including” means “including without limitation” and “includes” means “includes without limitation”.
 
“Indemnified Parties” has the meaning ascribed thereto in Section 8.1.


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“Insolvency Event” means (i) the institution by Canadian Exchange Co. of any proceeding to be adjudicated a bankrupt or insolvent or to be dissolved or wound up, or the consent of Canadian Exchange Co. to the institution of bankruptcy, insolvency, dissolution or winding-up proceedings against it, or (ii) the filing by Canadian Exchange Co. of a petition, answer or consent seeking dissolution or winding-up under any bankruptcy, insolvency or analogous laws, including, without limitation, the Companies Creditors’ Arrangement Act (Canada) and the Bankruptcy and Insolvency Act (Canada), and the failure by Canadian Exchange Co. within 15 days of becoming aware thereof, or the consent by Canadian Exchange Co. to the filing of any such petition or to the appointment of a receiver, or (iii) the making by Canadian Exchange Co. of a general assignment for the benefit of creditors, or the admission in writing by Canadian Exchange Co. of its inability to pay its debts generally as they become due, or (iv) Canadian Exchange Co. not being permitted, pursuant to solvency requirements of applicable law, to redeem any Retracted Shares pursuant to Section 6.1(4) of the Share Provisions specified in a retraction request delivered to Canadian Exchange Co. in accordance with Article 6 of the Share Provisions.
 
“List” has the meaning ascribed thereto in Section 4.6.
 
“Officer’s Certificate” means, with respect to US Gold, Alberta ULC or Canadian Exchange Co., as the case may be, a certificate signed by any one of the Chairman of the Board, the President, any Vice-President or any other senior officer of US Gold, Alberta ULC or Canadian Exchange Co., as the case may be.
 
“Retracted Shares” has the meaning ascribed thereto in Section 5.7.
 
“Special Voting Share” means the one share of special voting preference stock with no par value, issued by US Gold to and deposited with the Trustee, which entitles the holder of record to a number of votes at meetings of holders of US Gold Common Stock equal to the number of Exchangeable Shares outstanding from time to time that are held by Beneficiaries.
 
“Trust” means the trust created by this agreement.
 
“Trust Estate” means the Special Voting Share, any other securities, the Exchange Right and any money or other rights or assets that may be held by the Trustee from time to time pursuant to this agreement.
 
“Trustee” means <> and, subject to the provisions of Article 9, includes any successor trustee.
 
“US Gold Consent” has the meaning ascribed thereto in Section 4.2.
 
“US Gold Liquidation Event” has the meaning ascribed thereto in Section 5.11(1).
 
“US Gold Liquidation Event Effective Date” has the meaning ascribed thereto in Section 5.11(3).
 
“US Gold Meeting” has the meaning ascribed thereto in Section 4.2.
 
“Voting Rights” means the voting rights attached to the Special Voting Share.
 
1.2   Interpretation Not Affected by Headings, etc.
 
The division of this agreement into articles and sections and the insertion of headings are for reference purposes only and shall not affect the interpretation of this agreement. Unless otherwise indicated, any reference in this agreement to an “Article” or “Section” refers to the specified Article or Section of this agreement.
 
1.3   Number, Gender, etc.
 
In this agreement, unless the context otherwise requires words importing the singular number include the plural and vice versa. Words importing any gender shall include all genders and words importing persons include individuals, corporations, partnerships, companies, associations, trusts, unincorporated organizations, governmental bodies and other legal or business entities of any kind.


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1.4   Date for any Action
 
If any date on which any action is required to be taken under this agreement is not a Business Day, such action shall be required to be taken on the next succeeding Business Day.
 
1.5   Payments
 
All payments to be made hereunder will be made without interest and less any tax required by Canadian law to be deducted and withheld.
 
ARTICLE 2
 
TRUST
 
2.1   Establishment of Trust
 
The purpose of this agreement is to create the Trust for the benefit of the Beneficiaries, as herein provided. The Trustee will hold the Special Voting Share in order to enable the Trustee to exercise the Voting Rights and will hold the Exchange Right in order to enable the Trustee to exercise such right and will hold the other rights granted in or resulting from the Trustee being a party to this agreement in order to enable the Trustee to exercise or enforce such rights, in each case as trustee for and on behalf of the Beneficiaries as provided in this agreement.
 
ARTICLE 3
 
SPECIAL VOTING SHARE
 
3.1   Issue and Ownership of the Special Voting Share
 
Simultaneously with the execution and delivery of this agreement, US Gold will issue to and deposit with the Trustee the Special Voting Share to be hereafter held of record by the Trustee as trustee for and on behalf of, and for the use and benefit of, the Beneficiaries and in accordance with the provisions of this agreement. US Gold hereby acknowledges receipt from the Trustee as trustee for and on behalf of the Beneficiaries of good and valuable consideration (and the adequacy thereof) for the issuance of the Special Voting Share by US Gold to the Trustee. During the term of the Trust and subject to the terms and conditions of this agreement, the Trustee shall possess and be vested with full legal ownership of the Special Voting Share and shall be entitled to exercise all of the rights and powers of an owner with respect to the Special Voting Share provided that the Trustee shall: (a) hold the Special Voting Share and the legal title thereto as trustee solely for the use and benefit of the Beneficiaries in accordance with the provisions of this agreement; and (b) except as specifically authorized by this agreement, have no power or authority to sell, transfer, vote or otherwise deal in or with the Special Voting Share and the Special Voting Share shall not be used or disposed of by the Trustee for any purpose other than the purposes for which this Trust is created pursuant to this agreement.
 
3.2   Legended Share Certificates
 
Canadian Exchange Co. will cause each certificate representing Exchangeable Shares to bear an appropriate legend notifying the Beneficiaries of their right to instruct the Trustee with respect to the exercise of the Voting Rights in respect of the Exchangeable Shares of the Beneficiaries.
 
3.3   Safe Keeping of Certificate
 
The certificate representing the Special Voting Share shall at all times be held in safe keeping by the Trustee or its agent.


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ARTICLE 4
 
EXERCISE OF VOTING RIGHTS
 
4.1   Voting Rights
 
The Trustee, as the holder of record of the Special Voting Share, shall be entitled to all of the Voting Rights, including the right to consent to or vote in person or by proxy the Special Voting Share, on any matter, question, proposal or proposition whatsoever that may properly come before the stockholders of US Gold at a US Gold Meeting or in connection with a US Gold Consent. The Voting Rights shall be and remain vested in and exercised by the Trustee. Subject to Section 6.15 hereof, the Trustee shall exercise the Voting Rights only on the basis of instructions received pursuant to this Article 4 from Beneficiaries entitled to instruct the Trustee as to the voting thereof at the time at which the US Gold Consent is sought or the US Gold Meeting is held. To the extent that no instructions are received from a Beneficiary with respect to the Voting Rights to which such Beneficiary is entitled, the Trustee shall not exercise or permit the exercise of such Voting Rights.
 
4.2   Number of Votes
 
With respect to all meetings of stockholders of US Gold at which holders of shares of US Gold Common Stock are entitled to vote (each, a “US Gold Meeting”) and with respect to all written consents sought from the holders of shares of US Gold Common Stock (a “US Gold Consent”), each Beneficiary shall be entitled to instruct the Trustee to cast and exercise, in the manner instructed, one vote for each Exchangeable Share owned of record by such Beneficiary on the record date established by US Gold or by applicable law for such US Gold Meeting or US Gold Consent, as the case may be (the “Beneficiary Votes”), in respect of each matter, question, proposal or proposition to be voted on at such US Gold Meeting or to be consented to in connection with such US Gold Consent.
 
4.3   Mailings to Shareholders
 
(1) With respect to each US Gold Meeting and US Gold Consent, the Trustee will mail or cause to be mailed (or otherwise communicate in the same manner as US Gold utilizes in communications to holders of US Gold Common Stock, subject to the Trustee being advised in writing of such manner and provided that such manner of communications is reasonably available to the Trustee) to each of the Beneficiaries named in the List at the Beneficiaries’ respective addresses as set forth in the List, on the same day as the initial mailing or notice (or other communication) with respect thereto is given by US Gold to its stockholders:
 
(a) a copy of such notice, together with any related materials, including any circular or information statement or listing particulars, to be provided to shareholders of US Gold but excluding proxies to vote US Gold Common Stock;
 
(b) a statement that such Beneficiary is entitled to instruct the Trustee as to the exercise of the Beneficiary Votes with respect to such US Gold Meeting or US Gold Consent, as the case may be, or, pursuant and subject to Section 4.7, to attend such US Gold Meeting and to exercise personally the Beneficiary Votes thereat;
 
(c) a statement as to the manner in which such instructions may be given to the Trustee, including an express indication that instructions may be given to the Trustee to give:
 
(i) a proxy to such Beneficiary or his, her or its designee to exercise personally such holder’s Beneficiary Votes; or
 
(ii) a proxy to a designated agent or other representative of the management of US Gold to exercise such Beneficiary Votes;
 
(d) a statement that if no such instructions are received from the Beneficiary, the Beneficiary Votes to which such Beneficiary is entitled will not be exercised;
 
(e) a form of direction whereby the Beneficiary may so direct and instruct the Trustee as contemplated herein; and


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(f) a statement of (i) the time and date by which such instructions must be received by the Trustee in order to be binding upon it, which in the case of a US Gold Meeting shall not be later than the close of business on the second Business Day prior to such meeting, and (ii) the method for revoking or amending such instructions.
 
(2) The materials referred to in this Section 4.3 are to be provided to the Trustee by US Gold, and the materials referred to in Sections 4.3(1)(c), 4.3(1)(e) and 4.3(1)(f) shall (if reasonably practicable to do so) be subject to reasonable comment by the Trustee in a timely manner; provided, however, that the Trustee shall have no obligation to review such materials. Subject to the foregoing, US Gold shall ensure that the materials to be provided to the Trustee are provided in sufficient time to permit the Trustee to comment as aforesaid and to send all materials to each Beneficiary at the same time as such materials are first sent to holders of US Gold Common Stock. US Gold agrees not to communicate with holders of US Gold Common Stock with respect to the materials referred to in this Section 4.3 otherwise than by mail unless such method of communication is also reasonably available to the Trustee for communication with the Beneficiaries.
 
(3) For the purpose of determining Beneficiary Votes to which a Beneficiary is entitled in respect of any US Gold Meeting or US Gold Consent, the number of Exchangeable Shares owned of record by the Beneficiary shall be determined at the close of business on the record date established by US Gold or by applicable law for purposes of determining stockholders entitled to vote at such US Gold Meeting or to give written consent in connection with such US Gold Consent. US Gold will notify the Trustee of any decision of the board of directors of US Gold with respect to the calling of any US Gold Meeting or the seeking of any US Gold Consent and shall provide all necessary information and materials to the Trustee in each case promptly and in any event in sufficient time to enable the Trustee to perform its obligations contemplated by this Section 4.3.
 
4.4   Copies of Shareholder Information
 
US Gold will deliver to the Trustee copies of all proxy materials (including notices of US Gold Meetings but excluding proxies to vote US Gold Common Stock), information statements, reports (including all interim and annual financial statements) and other written communications that, in each case, are to be distributed by US Gold from time to time to holders of US Gold Common Stock in sufficient quantities and in sufficient time so as to enable the Trustee to send or cause to be sent those materials to each Beneficiary at the same time as such materials are first sent to holders of US Gold Common Stock. The Trustee will mail or otherwise send, or cause to be mailed or otherwise sent, to each Beneficiary, at the expense of US Gold, copies of all such materials (and all materials specifically directed to the Beneficiaries or to the Trustee for the benefit of the Beneficiaries by US Gold) received by the Trustee from US Gold contemporaneously with the sending of such materials to holders of US Gold Common Stock. The Trustee will also make available for inspection by any Beneficiary at the Trustee’s principal office in Toronto, Ontario all proxy materials, information statements, reports and other written communications that are:
 
(a) received by the Trustee as the registered holder of the Special Voting Share and made available by US Gold generally to the holders of US Gold Common Stock; or
 
(b) specifically directed to the Beneficiaries or to the Trustee for the benefit of the Beneficiaries by US Gold.
 
4.5   Other Materials
 
Immediately after receipt by US Gold or stockholders of US Gold of any material sent or given by or on behalf of a third party to holders of US Gold Common Stock generally, including, without limitation, dissident proxy and information circulars (and related information and material) and take-over bid and securities exchange take-over bid circulars (and related information and material), US Gold shall use its reasonable efforts to obtain and deliver to the Trustee copies thereof in sufficient quantities so as to enable the Trustee to forward or cause to be forwarded such material (unless the same has been provided directly to Beneficiaries by such third party) to each Beneficiary as soon as possible thereafter. As soon as reasonably practicable after receipt thereof, the Trustee will mail or otherwise send, or cause to be mailed or otherwise sent, to each Beneficiary, at the expense of US Gold, copies of all such materials received by the Trustee from US Gold. The Trustee will also make available for inspection by any Beneficiary at the Trustee’s principal office in Toronto, Ontario copies of all such materials.


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4.6   List of Persons Entitled To Vote
 
Canadian Exchange Co. shall, (a) prior to each annual, general and special US Gold Meeting or the seeking of any US Gold Consent and (b) forthwith upon each request made at any time by the Trustee in writing, prepare or cause to be prepared a list (a “List”) of the names and addresses of the Beneficiaries arranged in alphabetical order and showing the number of Exchangeable Shares held of record by each such Beneficiary, in each case at the close of business on the date specified by the Trustee in such request or, in the case of a List prepared in connection with a US Gold Meeting or a US Gold Consent, at the close of business on the record date established by US Gold or pursuant to applicable law for determining the holders of US Gold Common Stock entitled to receive notice of and/or to vote at such US Gold Meeting or to give consent in connection with a US Gold Consent. Each such List shall be delivered to the Trustee promptly after receipt by Canadian Exchange Co. of such request or the record date for such meeting or seeking of consent, as the case may be, and, in any event, within sufficient time as to enable the Trustee to perform its obligations under this agreement. US Gold agrees to give Canadian Exchange Co. written notice (with a copy to the Trustee) of the calling of any US Gold Meeting or the seeking of any US Gold Consent, together with the record date therefor, sufficiently prior to the date of the calling of such meeting or seeking such consent so as to enable Canadian Exchange Co. to perform its obligations under this Section 4.6.
 
4.7   Entitlement To Direct Votes
 
Any Beneficiary named in a List prepared in connection with any US Gold Meeting or any US Gold Consent will be entitled (a) to instruct the Trustee in the manner described in Section 4.3 hereof with respect to the exercise of the Beneficiary Votes to which such Beneficiary is entitled or (b) to attend such meeting and personally to exercise thereat (or to exercise with respect to any written consent), as the proxy of the Trustee, the Beneficiary Votes to which such Beneficiary is entitled or (c) to appoint a third party as the proxy of the Trustee to attend such meeting and exercise thereat the Beneficiary’s voting rights to which such Beneficiary is entitled except, in each case, to the extent that such Beneficiary has transferred the ownership of any Exchangeable Shares in respect of which such Beneficiary is entitled to Beneficiary Votes after the close of business on the record date for such meeting or seeking of consent.
 
4.8   Voting By Trustee and Attendance of Trustee Representative at Meeting
 
(1) In connection with each US Gold Meeting and US Gold Consent, the Trustee shall exercise, either in person or by proxy, in accordance with the instructions received from a Beneficiary pursuant to Section 4.3 hereof, the Beneficiary Votes as to which such Beneficiary is entitled to direct the vote (or any lesser number thereof as may be set forth in the instructions); provided, however, that such written instructions are received by the Trustee from the Beneficiary prior to the time and date fixed by the Trustee for receipt of such instruction in the notice sent or caused to be sent by the Trustee to the Beneficiary pursuant to Section 4.3.
 
(2) The Trustee shall cause such representatives who are empowered by it to sign and deliver, on behalf of the Trustee, proxies for Voting Rights enabling a Beneficiary to attend each US Gold Meeting. Upon submission by a Beneficiary (or its designee) named in the List prepared in connection with the relevant meeting of identification satisfactory to the Trustee’s representative, and at the Beneficiary’s request, such representative shall sign and deliver to such Beneficiary (or its designee) a proxy to exercise personally the Beneficiary Votes as to which such Beneficiary is otherwise entitled hereunder to direct the vote, if such Beneficiary either (i) has not previously given the Trustee instructions pursuant to Section 4.3 in respect of such meeting or (ii) submits to such representative written revocation of any such previous instructions. At such meeting, the Beneficiary (or its designee) exercising such Beneficiary Votes shall have the same rights in respect of such Beneficiary Votes as the Trustee to speak at the meeting in respect of any matter, question, proposal or proposition, to vote by way of ballot at the meeting in respect of any matter, question, proposal or proposition, and to vote at such meeting by way of a show of hands in respect of any matter, question or proposition.
 
4.9   Distribution of Written Materials
 
Any written materials distributed by the Trustee to the Beneficiaries pursuant to this agreement shall be sent by mail (or otherwise communicated in the same manner as US Gold utilizes in communications to holders of US Gold


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Common Stock subject to the Trustee being advised in writing of such manner and provided such manner of communications is reasonably available to the Trustee) to each Beneficiary at its address as shown on the register of holders of Exchangeable Shares maintained by the registrar of the Exchangeable Shares. Canadian Exchange Co. shall provide or cause to be provided to the Trustee for purposes of communication, on a timely basis and without charge or other expense:
 
(a) a current List; and
 
(b) upon the request of the Trustee, mailing labels to enable the Trustee to carry out its duties under this agreement.
 
4.10   Termination of Voting Rights
 
Except as otherwise provided in the Share Provisions, all of the rights of a Beneficiary with respect to the Beneficiary Votes exercisable in respect of the Exchangeable Shares held by such Beneficiary, including the right to instruct the Trustee as to the voting of or to vote personally such Beneficiary Votes, shall be deemed to be surrendered by the Beneficiary to US Gold or Alberta ULC, as the case may be, and such Beneficiary Votes and the Voting Rights represented thereby shall cease immediately upon the delivery by such holder to the Trustee of the certificates representing such Exchangeable Shares in connection with the exercise by the Beneficiary of the Exchange Right or the occurrence of the automatic exchange of Exchangeable Shares for US Gold Common Stock, as specified in Article 5 hereof, or upon the retraction or redemption of Exchangeable Shares pursuant to Article 6 or Article 7 of the Share Provisions, or upon the effective date of the liquidation, dissolution or winding-up of Canadian Exchange Co. or any other distribution of the assets of Canadian Exchange Co. among its shareholders for the purpose of winding up its affairs pursuant to Article 5 of the Share Provisions, or upon the purchase of Exchangeable Shares from the holder thereof by US Gold or Alberta ULC pursuant to the exercise by US Gold or Alberta ULC of the Retraction Call Right, the Redemption Call Right or the Liquidation Call Right (unless US Gold shall not have delivered the requisite US Gold Common Stock and cheque, if any, delivered in exchange therefor to the Trustee pending delivery to the Beneficiaries).
 
ARTICLE 5
 
EXCHANGE RIGHT, AUTOMATIC EXCHANGE RIGHT AND US GOLD SUPPORT
 
5.1   Grant and Ownership of the Automatic Exchange Right and the Exchange Right
 
US Gold, and Alberta ULC, in the case of the Exchange Right, hereby grant to the Trustee as trustee for and on behalf of, and for the use and benefit of, the Beneficiaries: (i) the Automatic Exchange Right, and (ii) the right (the “Exchange Right”), upon the occurrence and during the continuance of an Insolvency Event, to require US Gold or Alberta ULC to purchase from each or any Beneficiary all or any part of the Exchangeable Shares held by the Beneficiary, all in accordance with the provisions of this agreement. US Gold hereby acknowledges receipt from the Trustee, as trustee for and on behalf of the Beneficiaries, of good and valuable consideration (and the adequacy thereof) for the grant of the Automatic Exchange Right and the Exchange Right by US Gold to the Trustee. Alberta ULC hereby acknowledges receipt from the Trustee, as trustee for and on behalf of the Beneficiaries, of good and valuable consideration (and the adequacy thereof) for the grant of the Exchange Right by Alberta ULC to the Trustee. During the term of the Trust and subject to the terms and conditions of this agreement, the Trustee shall possess and be vested with full legal ownership of the Automatic Exchange Right and the Exchange Right and shall be entitled to exercise all of the rights and powers of an owner with respect to the Automatic Exchange Right and the Exchange Right, provided that the Trustee shall:
 
(a) hold the Automatic Exchange Right and the Exchange Right and the legal title thereto as trustee solely for the use and benefit of the Beneficiaries in accordance with the provisions of this agreement; and
 
(b) except as specifically authorized by this agreement, have no power or authority to exercise or otherwise deal in or with the Automatic Exchange Right and the Exchange Right, and the Trustee shall not exercise such right for any purpose other than the purposes for which this Trust is created pursuant to this agreement.


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5.2   Legended Share Certificates
 
Canadian Exchange Co. will cause each certificate representing Exchangeable Shares to bear an appropriate legend notifying the Beneficiaries of the Automatic Exchange Right, the Exchange Right and of their right to instruct the Trustee with respect to the exercise of the Exchange Right in respect of the Exchangeable Shares held by a Beneficiary.
 
5.3   Exercise of Exchange Right
 
The Exchange Right shall be and remain vested in and exercisable by the Trustee. Subject to Section 6.15 hereof, the Trustee shall exercise the Exchange Right only on the basis of instructions received pursuant to this Article 5 from Beneficiaries entitled to instruct the Trustee as to the exercise thereof. To the extent that no instructions are received from a Beneficiary with respect to the Exchange Right, the Trustee shall not exercise or permit the exercise of the Exchange Right.
 
5.4   Purchase Price
 
The purchase price payable by US Gold or Alberta ULC for each Exchangeable Share to be purchased by US Gold or Alberta ULC under the Exchange Right shall be an amount per share equal to (a) the Current Market Price of a share of US Gold Common Stock on the last Business Day prior to the day of closing of the purchase and sale of such Exchangeable Share under the Exchange Right, which shall be satisfied in full by causing to be delivered to such holder one share of US Gold Common Stock, plus (b) the Dividend Amount, if any. The purchase price for each such Exchangeable Share so purchased may be satisfied only by US Gold or Alberta ULC delivering or causing to be delivered to the Trustee, on behalf of the relevant Beneficiary, one share of US Gold Common Stock and a cheque for the balance, if any, of the purchase price without interest (less any amount required to be withheld under the Income Tax Act (Canada) or United States tax laws, or any provision of any federal, provincial, state, local or foreign tax laws).
 
5.5   Exercise Instructions
 
Subject to the terms and conditions herein set forth, a Beneficiary shall be entitled, upon the occurrence and during the continuance of an Insolvency Event, to instruct the Trustee to exercise the Exchange Right with respect to all or any part of the Exchangeable Shares registered in the name of such Beneficiary on the books of Canadian Exchange Co. To cause the exercise of the Exchange Right by the Trustee, the Beneficiary shall deliver to the Trustee, in person or by certified or registered mail, at its principal office in Toronto, Ontario or at such other places in Canada as the Trustee may from time to time designate by written notice to the Beneficiaries, the certificates representing the Exchangeable Shares which such Beneficiary desires US Gold or Alberta ULC to purchase, duly endorsed in blank, and accompanied by such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the Business Corporations Act (Alberta), other applicable laws, if any, and the by-laws of Canadian Exchange Co. and such additional documents and instruments as the Trustee or Canadian Exchange Co. may reasonably require together with (a) a duly completed form of notice of exercise of the Exchange Right, contained on the reverse of or attached to the Exchangeable Share certificates, stating (i) that the Beneficiary thereby instructs the Trustee to exercise the Exchange Right so as to require US Gold or Alberta ULC to purchase from the Beneficiary the number of Exchangeable Shares specified therein, (ii) that such Beneficiary has good title to and owns all such Exchangeable Shares to be acquired by US Gold or Alberta ULC free and clear of all liens, claims and encumbrances, (iii) the names in which the certificates representing US Gold Common Stock issuable in connection with the exercise of the Exchange Right are to be issued and (iv) the names and addresses of the persons to whom such new certificates should be delivered and (b) payment (or evidence satisfactory to the Trustee, Canadian Exchange Co. and US Gold of payment) of the taxes (if any) payable as contemplated by Section 5.8 of this agreement. If only a portion of the Exchangeable Shares represented by any certificate delivered to the Trustee are to be purchased by US Gold or Alberta ULC under the Exchange Right, a new certificate for the balance of such Exchangeable Shares shall be issued to the holder at the expense of Canadian Exchange Co.


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5.6   Delivery of US Gold Common Stock; Effect of Exercise
 
Promptly after receipt of the certificates representing the Exchangeable Shares that a Beneficiary desires US Gold or Alberta ULC to purchase under the Exchange Right (together with such documents and instruments of transfer and a duly completed form of notice of exercise of the Exchange Right) duly endorsed for transfer to US Gold or Alberta ULC, the Trustee shall notify US Gold, Alberta ULC and Canadian Exchange Co. of its receipt of the same, which notice to US Gold, Alberta ULC and Canadian Exchange Co. shall constitute exercise of the Exchange Right by the Trustee on behalf of the holder of such Exchangeable Shares, and US Gold or Alberta ULC shall immediately thereafter deliver to the Trustee, for delivery to the Beneficiary of such Exchangeable Shares (or to such other persons, if any, properly designated by such Beneficiary), a certificate for the number of shares of US Gold Common Stock deliverable in connection with such exercise of the Exchange Right (which shares shall be duly issued as fully paid and non-assessable and shall be free and clear of any lien, claim or encumbrance, security interest or adverse claim) and a cheque for the balance, if any, of the purchase price therefor; provided, however, that no such delivery shall be made unless and until the Beneficiary requesting the same shall have paid (or provided evidence satisfactory to the Trustee, Canadian Exchange Co., Alberta ULC and US Gold of the payment of) the taxes (if any) payable as contemplated by Section 5.8 of this agreement. Immediately upon the giving of notice by the Trustee to US Gold, Alberta ULC and Canadian Exchange Co. of the exercise of the Exchange Right, as provided in this Section 5.6, the closing of the transaction of purchase and sale contemplated by the Exchange Right shall be deemed to have occurred, and the Beneficiary of such Exchangeable Shares shall be deemed to have transferred to US Gold (or, at US Gold’s option, to Alberta ULC) all of its right, title and interest in and to such Exchangeable Shares and the related interest in the Trust Estate and shall not be entitled to exercise any of the rights of a holder in respect thereof, other than the right to receive its proportionate part of the total purchase price therefor, unless the requisite number of shares of US Gold Common Stock (together with a cheque for the balance, if any, of the total purchase price therefor) is not delivered by US Gold or Alberta ULC to the Trustee, for delivery to such Beneficiary (or to such other persons, if any, properly designated by such Beneficiary), within five Business Days of the date of the giving of such notice by the Trustee, in which case the rights of the Beneficiary shall remain unaffected until such shares of US Gold Common Stock are so delivered and any such cheque is so delivered and paid. Concurrently with the closing of the transaction of purchase and sale contemplated by the Exchange Right, such Beneficiary shall be considered and deemed for all purposes to be the holder of the shares of US Gold Common Stock delivered to it pursuant to the Exchange Right. Notwithstanding the foregoing until the requisite number of shares of Common Stock of US Gold and the cheque for the balance, if any, of the total purchase price therefore, is delivered to a Beneficiary, the Beneficiary shall be deemed to still be a holder of the sold Exchangeable Shares for purposes of voting rights with respect thereto under this agreement.
 
5.7   Exercise of Exchange Right Subsequent to Retraction
 
In the event that a Beneficiary has exercised its retraction right under Article 6 of the Share Provisions to require Canadian Exchange Co. to redeem any or all of the Exchangeable Shares held by the Beneficiary (the “Retracted Shares”) and is notified by Canadian Exchange Co. pursuant to Section 6.1(4) of the Share Provisions that Canadian Exchange Co. will not be permitted as a result of solvency requirements of applicable law to redeem all such Retracted Shares, subject to receipt by the Trustee of written notice to that effect from Canadian Exchange Co. and provided that neither US Gold nor Alberta ULC shall have exercised its Retraction Call Right with respect to the Retracted Shares and that the Beneficiary shall not have revoked the retraction request delivered by the Beneficiary to Canadian Exchange Co. pursuant to Section 6.1(5) of the Share Provisions, the retraction request will constitute and will be deemed to constitute notice from the Beneficiary to the Trustee instructing the Trustee to exercise the Exchange Right with respect to those Retracted Shares that Canadian Exchange Co. is unable to redeem. In any such event, Canadian Exchange Co. hereby agrees with the Trustee and in favour of the Beneficiary immediately to notify the Trustee of such prohibition against Canadian Exchange Co. redeeming all of the Retracted Shares and immediately to forward or cause to be forwarded to the Trustee all relevant materials delivered by the Beneficiary to Canadian Exchange Co. or to the Transfer Agent (including without limitation a copy of the retraction request delivered pursuant to Section 6.1(1) of the Share Provisions) in connection with such proposed redemption of the Retracted Shares and the Trustee will thereupon exercise the Exchange Right with respect to the Retracted Shares that Canadian Exchange Co. is not permitted to redeem and will require US Gold or, at US Gold’s option, Alberta ULC, to purchase such shares in accordance with the provisions of this Article 5.


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5.8   Stamp or Other Transfer Taxes
 
Upon any sale of Exchangeable Shares to US Gold or Alberta ULC pursuant to the Exchange Right or the Automatic Exchange Right, the share certificate or certificates representing US Gold Common Stock to be delivered in connection with the payment of the total purchase price therefor shall be issued in the name of the Beneficiary of the Exchangeable Shares so sold or in such names as such Beneficiary may otherwise direct in writing without charge to the holder of the Exchangeable Shares so sold, provided, however, that such Beneficiary (a) shall pay (and none of US Gold, Alberta ULC, Canadian Exchange Co. or the Trustee shall be required to pay) any documentary, stamp, transfer or other similar taxes that may be payable in respect of any transfer involved in the issuance or delivery of such shares to a person other than such Beneficiary or (b) shall have established to the satisfaction of the Trustee, US Gold, Alberta ULC and Canadian Exchange Co. that such taxes, if any, have been paid.
 
5.9   Notice of Insolvency Event
 
Immediately upon the occurrence of an Insolvency Event or any event that with the giving of notice or the passage of time or both would be an Insolvency Event, Canadian Exchange Co. and US Gold shall give written notice thereof to the Trustee. As soon as practicable after receiving notice from Canadian Exchange Co. or US Gold or from any other person of the occurrence of an Insolvency Event, the Trustee will mail to each Beneficiary, at the expense of US Gold, a notice of such Insolvency Event in the form provided by US Gold, which notice shall contain a brief statement of the right of the Beneficiaries with respect to the Exchange Right.
 
5.10   Call Rights
 
The Liquidation Call Right, the Redemption Call Right, the Retraction Call Right, the Automatic Exchange Right and the Exchange Right are hereby agreed, acknowledged, consented to and confirmed, and it is agreed and acknowledged that such rights are granted as part of the consideration for the obligations of US Gold under this agreement.
 
5.11   Automatic Exchange Right
 
(1) US Gold shall give the Trustee written notice of each of the following events (each a “US Gold Liquidation Event”) at the time set forth below:
 
(a) in the event of any determination by the board of directors of US Gold to institute voluntary liquidation, dissolution or winding up proceedings with respect to US Gold or to effect any other distribution of assets of US Gold among its stockholders for the purpose of winding up its affairs, at least 60 days prior to the proposed effective date of such liquidation, dissolution, winding up or other distribution; and
 
(b) immediately, upon the earlier of (i) receipt by US Gold of notice of and (ii) US Gold otherwise becoming aware of any threatened or instituted claim, suit, petition or other proceeding with respect to the involuntary liquidation, dissolution or winding up of US Gold or to effect any other distribution of assets of US Gold among its stockholders for the purpose of winding up its affairs.
 
(2) Immediately following receipt by the Trustee from US Gold of notice of any US Gold Liquidation Event contemplated by Section 5.11(1)(a) or 5.11(1)(b), the Trustee will give notice thereof to the Beneficiaries. Such notice shall be provided by US Gold to the Trustee and shall include a brief description of the automatic exchange of Exchangeable Shares for shares of US Gold Common Stock provided for in Section 5.11(4) below (the “Automatic Exchange Right”).
 
(3) In order that the Beneficiaries will be able to participate on a pro rata basis with the holders of US Gold Common Stock in the distribution of assets of US Gold in connection with a US Gold Liquidation Event, immediately prior to the effective date (the “US Gold Liquidation Event Effective Date”) of a US Gold Liquidation Event all of the then outstanding Exchangeable Shares (other than Exchangeable Shares held by US Gold or its Subsidiaries) shall be automatically exchanged for shares of US Gold Common Stock. To effect such automatic exchange, US Gold shall purchase each Exchangeable Share outstanding on the immediately prior to the US Gold Liquidation Event Effective Date and held by a Beneficiary, and each such Beneficiary shall sell the


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Exchangeable Shares held by it at such time, for a purchase price per share equal to (a) the Current Market Price of a share of US Gold Common Stock on the immediately prior to the US Gold Liquidation Event Effective Date, which shall be satisfied in full by US Gold delivering to such holder one share of US Gold Common Stock, plus (b) the Dividend Amount, if any.
 
(4) On the immediately prior to the US Gold Liquidation Event Effective Date, the closing of the transaction of purchase and sale contemplated by the automatic exchange of Exchangeable Shares for US Gold Common Stock shall be deemed to have occurred, and each Beneficiary shall be deemed to have transferred to US Gold all of such Beneficiary’s right, title and interest in and to such Exchangeable Shares and shall cease to be a holder of such Exchangeable Shares and US Gold shall deliver or cause to be delivered to the Trustee, for delivery to such holders, the certificates for the number of shares of US Gold Common Stock deliverable upon the automatic exchange of Exchangeable Shares for US Gold Common Stock (which shares shall be duly issued as fully paid and non-assessable and shall be free and clear of any lien, claim or encumbrance, security interest or adverse claim) and a cheque for the balance, if any, of the total purchase price for such Exchangeable Shares and any interest on such deposit shall belong to US Gold. Concurrently with each such Beneficiary ceasing to be a holder of Exchangeable Shares, such Beneficiary shall be considered and deemed for all purposes to be the holder of the shares of US Gold Common Stock delivered to it, or to the Trustee on its behalf, pursuant to the automatic exchange of Exchangeable Shares for shares of US Gold Common Stock and the certificates held by such Beneficiary previously representing the Exchangeable Shares exchanged by such Beneficiary with US Gold pursuant to such automatic exchange shall thereafter be deemed to represent the shares of US Gold Common Stock delivered to such Beneficiary by US Gold pursuant to such automatic exchange. Upon the request of any Beneficiary and the surrender by such Beneficiary of Exchangeable Share certificates deemed to represent shares of US Gold Common Stock, duly endorsed in blank and accompanied by such instruments of transfer as US Gold may reasonably require, the Trustee shall deliver or cause to be delivered to such Beneficiary certificates representing the shares of US Gold Common Stock of which such Beneficiary is the holder and a cheque in payment of the remaining portion, if any, of the purchase price (less any amount required to be withheld under the Income Tax Act (Canada) or United States tax laws, or any provision of any federal, provincial, state, local or foreign tax laws). Notwithstanding the foregoing until each Beneficiary is actually entered on the register of holders of US Gold Common Stock, such Beneficiary shall be deemed to still be a holder of the transferred Exchangeable Shares for purposes of all voting rights with respect thereto under this agreement.
 
5.12   US Gold Common Stock
 
The obligations of US Gold to issue shares of US Gold Common Stock pursuant to the Automatic Exchange Right or the Exchange Right are subject to all applicable laws and regulatory or stock exchange requirements.
 
5.13   Withholding Rights
 
US Gold, Alberta ULC, Canadian Exchange Co. and the Trustee shall be entitled to deduct and withhold from any consideration otherwise payable under this agreement to any holder of Exchangeable Shares or US Gold Common Stock such amounts as US Gold, Alberta ULC, Canadian Exchange Co. or the Trustee is required to deduct and withhold with respect to such payment under the Income Tax Act (Canada) or United States tax laws or any provision of provincial, state, local or foreign tax law, in each case as amended or succeeded. The Trustee may act and rely on the advice of counsel with respect to such matters. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes as having been paid to the holder of the shares in respect of which such deduction and withholding was made, provided that such withheld amounts are actually remitted to the appropriate taxing authority. To the extent that the amount so required to be deducted or withheld from any payment to a holder exceeds the cash portion of the consideration otherwise payable to the holder, US Gold, Alberta ULC, Canadian Exchange Co. and the Trustee are hereby authorized to sell or otherwise dispose of such portion of the consideration as is necessary to provide sufficient funds to US Gold, Alberta ULC, Canadian Exchange Co. or the Trustee, as the case may be, to enable it to comply with such deduction or withholding requirement and US Gold, Alberta ULC, Canadian Exchange Co. or the Trustee shall notify the holder thereof and remit to such holder any unapplied balance of the net proceeds of such sale.


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ARTICLE 6
 
CONCERNING THE TRUSTEE
 
6.1   Powers and Duties of the Trustee
 
(1) The rights, powers, duties and authorities of the Trustee under this agreement, in its capacity as trustee of the Trust, shall include: (a) receipt and deposit of the Special Voting Share from US Gold as trustee for and on behalf of the Beneficiaries in accordance with the provisions of this agreement;
 
(a) granting proxies and distributing materials to Beneficiaries as provided in this agreement;
 
(b) voting the Beneficiary Votes in accordance with the provisions of this agreement;
 
(c) receiving the grant of the Exchange Right and the Automatic Exchange Right from US Gold and, in the case of the Exchange Right, Alberta ULC, as trustee for and on behalf of the Beneficiaries in accordance with the provisions of this agreement;
 
(d) exercising the Exchange Right and enforcing the benefit of the Automatic Exchange Right, in each case in accordance with the provisions of this agreement, and in connection therewith receiving from Beneficiaries any requisite documents and distributing to such Beneficiaries shares of US Gold Common Stock and cheques, if any, to which such Beneficiaries are entitled pursuant to the exercise of the Exchange Right or the Automatic Exchange Right, as the case may be;
 
(e) holding title to the Trust Estate;
 
(f) investing any moneys forming, from time to time, a part of the Trust Estate as provided in this agreement;
 
(g) taking action at the direction of a Beneficiary or Beneficiaries to enforce the obligations of US Gold, Alberta ULC and Canadian Exchange Co. under this agreement and under the Share Provisions; and
 
(h) taking such other actions and doing such other things as are specifically provided in this agreement.
 
(2) In the exercise of such rights, powers, duties and authorities the Trustee shall have (and is granted) such incidental and additional rights, powers and authority not in conflict with any of the provisions of this agreement as the Trustee, acting in good faith and in the reasonable exercise of its discretion, may deem necessary, appropriate or desirable to effect the purpose of the Trust. Any exercise of duties or of discretionary rights, powers and authorities by the Trustee shall be final, conclusive and binding upon all persons. For greater certainty, the Trustee shall have only those duties as set out specifically in this agreement.
 
(3) The Trustee in exercising its rights, powers, duties and authorities hereunder shall act honestly and in good faith and with a view to the best interests of the Beneficiaries and shall exercise the care, diligence and skill that a reasonably prudent trustee would exercise in comparable circumstances.
 
(4) The Trustee shall not be bound to give notice or do or take any act, action or proceeding by virtue of the powers conferred on it hereby unless and until it shall be specifically required to do so under the terms hereof; nor shall the Trustee be required to take any notice of, or to do or to take any act, action or proceeding as a result of any default or breach of any provision hereunder, unless and until notified in writing of such default, which notice shall distinctly specify the default or breach desired to be brought to the attention of the Trustee, and in the absence of such notice the Trustee may for all purposes of this agreement conclusively assume that no default or breach has been made in the observance or performance of any of the representations, warranties, covenants, agreements or conditions contained herein.
 
6.2   No Conflict of Interest
 
The Trustee represents to US Gold, Alberta ULC and Canadian Exchange Co. that at the date of execution and delivery of this agreement there exists no material conflict of interest in the role of the Trustee as a fiduciary hereunder and the role of the Trustee in any other capacity. The Trustee shall, within 90 days after it becomes aware that such material conflict of interest exists, either eliminate such material conflict of interest or resign in the manner


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and with the effect specified in Article 9. If, notwithstanding the foregoing provisions of this Section 6.2, the Trustee has such a material conflict of interest, the validity and enforceability of this agreement shall not be affected in any manner whatsoever by reason only of the existence of such material conflict of interest. If the Trustee contravenes the foregoing provisions of this Section 6.2, any interested party may apply to the Superior Court of Justice (Ontario) for an order that the Trustee be replaced as trustee hereunder.
 
6.3   Dealings With Transfer Agents, Registrars, Etc.
 
(1) Each of US Gold, Alberta ULC and Canadian Exchange Co. irrevocably authorizes the Trustee, from time to time, to:
 
(a) consult, communicate and otherwise deal with the respective registrars and transfer agents, and with any such subsequent registrar or transfer agent, of the Exchangeable Shares and US Gold Common Stock; and
 
(b) requisition, from time to time, from any such registrar or transfer agent any information readily available from the records maintained by it, which the Trustee may reasonably require for the discharge of its duties and responsibilities under this agreement.
 
(2) Each of US Gold and Alberta ULC covenant that it will supply the Trustee or the Transfer Agent, as the case may be, in a timely manner with duly executed share certificates for the purpose of completing the exercise from time to time of all rights to acquire US Gold Common Stock hereunder, under the Share Provisions and under any other security or commitment given to the Beneficiaries pursuant thereto, in each case pursuant to the provisions hereof or of the Share Provisions or otherwise.
 
6.4   Books and Records
 
The Trustee shall keep available for inspection by US Gold, Alberta ULC and Canadian Exchange Co. at the Trustee’s principal office in Toronto, Ontario correct and complete books and records of account relating to the Trustee’s actions under this agreement, including, without limitation, all information relating to mailings and instructions to and from Beneficiaries and all transactions pursuant to the Voting Rights and the Exchange Right, for the term of this agreement. On or before February 15, 2007, and on or before February 15 in every year thereafter, so long as the Special Voting Share is registered in the name of the Trustee, the Trustee shall transmit to US Gold, Alberta ULC and Canadian Exchange Co. a brief report, dated as of the preceding December 31st, with respect to:
 
(a) the property and funds comprising the Trust Estate as of that date;
 
(b) the number of exercises of the Exchange Right, if any, and the aggregate number of Exchangeable Shares received by the Trustee on behalf of Beneficiaries in consideration of the issuance and delivery by US Gold or Alberta ULC of shares of US Gold Common Stock in connection with the Exchange Right, during the calendar year ended on such December 31st; and
 
(c) all other actions taken by the Trustee in the performance of its duties under this agreement that it had not previously reported.
 
6.5   Income Tax Returns and Reports
 
The Trustee shall, to the extent necessary and as advised by counsel, prepare and file, or cause to be prepared and filed, on behalf of the Trust appropriate United States and Canadian income tax returns and any other returns or reports as may be required by applicable law or pursuant to the rules and regulations of any securities exchange or other trading system through which the Exchangeable Shares are traded. In connection therewith, the Trustee may obtain the advice and assistance of such experts or advisors as the Trustee considers necessary or advisable. US Gold shall retain qualified experts or advisors for the purpose of providing such tax advice or assistance.
 
6.6   Indemnification Prior To Certain Actions By Trustee
 
(1) The Trustee shall exercise any or all of the rights, duties, powers or authorities vested in it by this agreement at the request, order or direction of any Beneficiary upon such Beneficiary furnishing to the Trustee reasonable funding, security and indemnity against the costs, expenses and liabilities which may be incurred by the


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Trustee therein or thereby, provided that no Beneficiary shall be obligated to furnish to the Trustee any such funding, security or indemnity in connection with the exercise by the Trustee of any of its rights, duties, powers and authorities with respect to the Special Voting Share pursuant to Article 4, subject to Section 6.15 and with respect to the Exchange Right pursuant to Article 5, subject to Section 6.15, and with respect to the Automatic Exchange Right pursuant to Article 5.
 
(2) None of the provisions contained in this agreement shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the exercise of any of its rights, powers, duties, or authorities unless funded, given security and indemnified as aforesaid.
 
6.7   Action of Beneficiaries
 
No Beneficiary shall have the right to institute any action, suit or proceeding or to exercise any other remedy authorized by this agreement for the purpose of enforcing any of its rights or for the execution of any trust or power hereunder unless the Beneficiary has requested the Trustee to take or institute such action, suit or proceeding and furnished the Trustee with the funding, security and indemnity referred to in Section 6.6 and the Trustee shall have failed to act within a reasonable time thereafter. In such case, but not otherwise, the Beneficiary shall be entitled to take proceedings in any court of competent jurisdiction such as the Trustee might have taken; it being understood and intended that no one or more Beneficiaries shall have any right in any manner whatsoever to affect, disturb or prejudice the rights hereby created by any such action, or to enforce any right hereunder, including, without limitation, under the Voting Rights, the Exchange Right or the Automatic Exchange Right, except subject to the conditions and in the manner herein provided, and that all powers and trusts hereunder shall be exercised and all proceedings at law shall be instituted, had and maintained by the Trustee, except only as herein provided, and in any event for the equal benefit of all Beneficiaries.
 
6.8   Reliance By Trustee Upon Declarations
 
The Trustee shall not be considered to be in contravention of any of its rights, powers, duties and authorities hereunder if, when required, it acts and relies in good faith upon lists (including any Lists), notices, statutory declarations, certificates, (including share certificate and officers certificates), opinions or reports or other papers or documents furnished pursuant to the provisions hereof or required by the Trustee to be furnished to it in the exercise of its rights, powers, duties and authorities hereunder if such lists (including any Lists), notices, statutory declarations, certificates, opinions or reports comply with the provisions of Section 6.9, if applicable, and with any other applicable provisions of this agreement.
 
6.9   Evidence and Authority To Trustee
 
(1) US Gold, Alberta ULC and/or Canadian Exchange Co. shall furnish to the Trustee evidence of compliance with the conditions provided for in this agreement relating to any action or step required or permitted to be taken by US Gold, Alberta ULC and/or Canadian Exchange Co. or the Trustee under this agreement or as a result of any obligation imposed under this agreement, including, without limitation, in respect of the Voting Rights or the Exchange Right and the taking of any other action to be taken by the Trustee at the request of or on the application of US Gold, Alberta ULC and/or Canadian Exchange Co. forthwith if and when:
 
(a) such evidence is required by any other section of this agreement to be furnished to the Trustee in accordance with the terms of this Section 6.9; or
 
(b) the Trustee, in the exercise of its rights, powers, duties and authorities under this agreement, gives US Gold, Alberta ULC and/or Canadian Exchange Co. written notice requiring it to furnish such evidence in relation to any particular action or obligation or matter specified in such notice.
 
(2) Such evidence shall consist of an Officer’s Certificate of US Gold, Alberta ULC and/or Canadian Exchange Co. or a statutory declaration or a certificate made by persons entitled to sign an Officer’s Certificate stating that any such condition has been complied with in accordance with the terms of this agreement.
 
(3) Whenever such evidence relates to a matter other than the Voting Rights or the Exchange Right or the Automatic Exchange Right and except as otherwise specifically provided herein, such evidence may consist of a


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report or opinion of any solicitor, attorney, auditor, accountant, appraiser, valuer or other expert or any other person whose qualifications give authority to a statement made by such person, provided that if such report or opinion is furnished by a director, officer or employee of US Gold, Alberta ULC and/or Canadian Exchange Co. it shall be in the form of an Officer’s Certificate or a statutory declaration.
 
(4) Each statutory declaration, Officer’s Certificate, opinion or report furnished to the Trustee as evidence of compliance with a condition provided for in this agreement shall include a statement by the person giving the evidence:
 
(a) declaring that such person has read and understands the provisions of this agreement relating to the condition in question;
 
(b) describing the nature and scope of the examination or investigation upon which such person based the statutory declaration, certificate, statement or opinion; and
 
(c) declaring that such person has made such examination or investigation as such person believes is necessary to enable them to make the statements or give the opinions contained or expressed therein.
 
6.10   Experts, Advisers and Agents
 
The Trustee may:
 
(a) in relation to these presents act and rely on the opinion or advice of or information obtained from any solicitor, attorney, auditor, accountant, appraiser, valuer or other expert, whether retained by the Trustee or by US Gold, Alberta ULC and/or Canadian Exchange Co. or otherwise, and may retain or employ such assistance as may be necessary to the proper determination and discharge of its powers and duties and determination of its rights or duties hereunder and may pay proper and reasonable compensation for all such legal and other advice or assistance as aforesaid;
 
(b) employ such agents and other assistance as it may reasonably require for the proper determination and/or discharge of its powers and duties hereunder; and
 
(c) pay reasonable remuneration for all services performed for it (and shall be entitled to receive reasonable remuneration for all services performed by it) in the discharge of the trusts hereof and compensation for all reasonable disbursements, costs and expenses made or incurred by it in the discharge of its duties hereunder and in the management of the Trust.
 
6.11   Investment of Moneys Held By Trustee
 
Unless otherwise provided in this agreement, any moneys held by or on behalf of the Trustee which under the terms of this agreement may or ought to be invested or which may be on deposit with the Trustee or which may be in the hands of the Trustee may be invested or reinvested in the name or under the control of the Trustee in securities in which, under the laws of the Province of Ontario, trustees are authorized to invest trust moneys, provided that such securities are stated to mature within two years after their purchase by the Trustee and the Trustee shall so invest such money on the written direction of Canadian Exchange Co. Pending the investment of any money as herein provided such moneys may be deposited in the name of the Trustee in any chartered bank in Canada or, with the consent of Canadian Exchange Co., in the deposit department of the Trustee or any other loan or trust company authorized to accept deposits under the laws of Canada or any province thereof at the rate of interest then current on similar deposits.
 
6.12   Trustee Not Required to Give Security
 
The Trustee shall not be required to give any bond or security in respect of the execution of the trusts, rights, duties, powers and authorities of this agreement or otherwise in respect of the premises.


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6.13   Trustee Not Bound to Act on Request
 
Except as in this agreement otherwise specifically provided, the Trustee shall not be bound to act in accordance with any direction or request of US Gold, Alberta ULC and/or Canadian Exchange Co. or of the respective directors thereof until a duly authenticated copy of the instrument or resolution containing such direction or request shall have been delivered to the Trustee, and the Trustee shall be empowered to act upon any such copy purporting to be authenticated and believed by the Trustee to be genuine.
 
6.14   Authority to Carry on Business
 
The Trustee represents to US Gold, Alberta ULC and Canadian Exchange Co. that at the date of execution and delivery by it of this agreement it is authorized to carry on the business of a trust company in each of the provinces and territories of Canada but if, notwithstanding the provisions of this Section 6.14, it ceases to be so authorized to carry on business, the validity and enforceability of this agreement and the Voting Rights, the Exchange Right, the Automatic Exchange Right and the other rights granted in or resulting from the Trustee being a party to this agreement shall not be affected in any manner whatsoever by reason only of such event but the Trustee shall, within 90 days after ceasing to be authorized to carry on the business of a trust company in any province or territory of Canada, either become so authorized or resign in the manner and with the effect specified in Article 9.
 
6.15   Conflicting Claims
 
(1) If conflicting claims or demands are made or asserted with respect to any interest of any Beneficiary in any Exchangeable Shares, including any disagreement between the heirs, representatives, successors or assigns succeeding to all or any part of the interest of any Beneficiary in any Exchangeable Shares, resulting in conflicting claims or demands being made in connection with such interest, then the Trustee shall be entitled, in its sole discretion, to refuse to recognize or to comply with any such claims or demands. In so refusing, the Trustee may elect not to exercise any Voting Rights, Exchange Right, Automatic Exchange Right or other rights subject to such conflicting claims or demands and, in so doing, the Trustee shall not be or become liable to any person on account of such election or its failure or refusal to comply with any such conflicting claims or demands. The Trustee shall be entitled to continue to refrain from acting and to refuse to act until:
 
(a) the rights of all adverse claimants with respect to the Voting Rights, Exchange Right, Automatic Exchange Right or other rights subject to such conflicting claims or demands have been adjudicated by a final judgement of a court of competent jurisdiction; or
 
(b) all differences with respect to the Voting Rights, Exchange Right or other rights subject to such conflicting claims or demands have been conclusively settled by a valid written agreement binding on all such adverse claimants, and the Trustee shall have been furnished with an executed copy of such agreement.
 
(2) If the Trustee elects to recognize any claim or comply with any demand made by any such adverse claimant, it may in its discretion require such claimant to furnish such surety bond or other security satisfactory to the Trustee as it shall deem appropriate to fully indemnify it as between all conflicting claims or demands.
 
6.16   Acceptance of Trust
 
The Trustee hereby accepts the Trust created and provided for, by and in this agreement and agrees to perform the same upon the terms and conditions herein set forth and to hold all rights, privileges and benefits conferred hereby and by law in trust for the various persons who shall from time to time be Beneficiaries, subject to all the terms and conditions herein set forth.


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ARTICLE 7
 
COMPENSATION
 
7.1   Fees and Expenses of the Trustee
 
The Trustee will invoice US Gold for its fees and expenses under this agreement. US Gold, Alberta ULC and Canadian Exchange Co. jointly and severally agree to pay the Trustee reasonable compensation for all of the services rendered by it under this agreement and will reimburse the Trustee for all reasonable expenses (including, but not limited to, taxes other than taxes based on the net income or capital of the Trustee, fees paid and disbursements reimbursed to legal counsel and other experts and advisors and agents and assistants, and travel expenses) and disbursements, including the cost and expense of any suit or litigation of any character and any proceedings before any governmental agency, and including fees and expenses for attendance at any US Gold Meeting, reasonably incurred by the Trustee in connection with its duties under this agreement; provided that US Gold, Alberta ULC and Canadian Exchange Co. shall have no obligation to reimburse the Trustee for any expenses or disbursements paid, incurred or suffered by the Trustee in any suit or litigation or any such proceedings in which the Trustee is determined to have acted in bad faith or with fraud, negligence, recklessness or wilful misconduct.
 
ARTICLE 8
 
INDEMNIFICATION AND LIMITATION OF LIABILITY
 
8.1   Indemnification of the Trustee
 
(1) US Gold, Alberta ULC and Canadian Exchange Co. jointly and severally agree to indemnify and hold harmless the Trustee and each of its directors, officers, employees and agents appointed and acting in accordance with this agreement (collectively, the “Indemnified Parties”) against all claims, losses, damages, reasonable costs, penalties, fines and reasonable expenses (including reasonable expenses of the Trustee’s legal counsel) which, without fraud, negligence, recklessness, wilful misconduct or bad faith on the part of such Indemnified Party, may be paid, incurred or suffered by the Indemnified Party by reason or as a result of the Trustee’s acceptance or administration of the Trust, its compliance with its duties set forth in this agreement, or any written or oral instruction delivered to the Trustee by US Gold, Alberta ULC or Canadian Exchange Co. pursuant hereto. Notwithstanding the foregoing, in no case will the Trustee be indemnified for consequential damages.
 
(2) In no case shall US Gold, Alberta ULC or Canadian Exchange Co. be liable under this indemnity for any claim against any of the Indemnified Parties unless US Gold, Alberta ULC and Canadian Exchange Co. shall be notified by the Trustee of the written assertion of a claim or of any action commenced against the Indemnified Parties, promptly after any of the Indemnified Parties shall have received any such written assertion of a claim or shall have been served with a summons or other first legal process giving information as to the nature and basis of the claim. Subject to (ii) below, US Gold, Alberta ULC and Canadian Exchange Co. shall be entitled to participate at their own expense in the defence and, if US Gold, Alberta ULC and Canadian Exchange Co. so elect at any time after receipt of such notice, either of them may assume the defence of any suit brought to enforce any such claim. The Trustee shall have the right to employ separate counsel in any such suit and participate in the defence thereof, but the fees and expenses of such counsel shall be at the expense of the Trustee unless: (i) the employment of such counsel has been authorized by US Gold, Alberta ULC or Canadian Exchange Co.; or (ii) the named parties to any such suit include both the Trustee and US Gold, Alberta ULC or Canadian Exchange Co. and the Trustee shall have been advised by counsel acceptable to US Gold, Alberta ULC or Canadian Exchange Co. that there may be one or more legal defences available to the Trustee that are different from or in addition to those available to US Gold, Alberta ULC or Canadian Exchange Co. and that, in the judgement of such counsel, would present a conflict of interest were a joint representation to be undertaken (in which case US Gold, Alberta ULC and Canadian Exchange Co. shall not have the right to assume the defence of such suit on behalf of the Trustee but shall be liable to pay the reasonable fees and expenses of counsel for the Trustee). The indemnities contained in this Article 8 shall survive the termination of the Trust and the resignation or removal of the Trustee.


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8.2   Limitation of Liability
 
The Trustee shall not be held liable for any loss which may occur by reason of depreciation of the value of any part of the Trust Estate or any loss incurred on any investment of funds pursuant to this agreement, except to the extent that such loss is attributable to the fraud, negligence, recklessness, wilful misconduct or bad faith on the part of the Trustee.
 
ARTICLE 9
 
CHANGE OF TRUSTEE
 
9.1   Resignation
 
The Trustee, or any trustee hereafter appointed, may at any time resign by giving written notice of such resignation to US Gold, Alberta ULC and Canadian Exchange Co. specifying the date on which it desires to resign, provided that such notice shall not be given less than sixty (60) days before such desired resignation date unless US Gold, Alberta ULC and Canadian Exchange Co. otherwise agree and provided further that such resignation shall not take effect until the date of the appointment of a successor trustee and the acceptance of such appointment by the successor trustee. Upon receiving such notice of resignation, Canadian Exchange Co. shall promptly appoint a successor trustee, which shall be a corporation organized and existing under the laws of Canada and authorized to carry on the business of a trust company in all provinces and territories of Canada, by written instrument in duplicate, one copy of which shall be delivered to the resigning trustee and one copy to the successor trustee. Failing the appointment and acceptance of a successor trustee, a successor trustee may be appointed by order of a court of competent jurisdiction upon application of one or more of the parties to this agreement. If the retiring trustee is the party initiating an application for the appointment of a successor trustee by order of a court of competent jurisdiction, US Gold, Alberta ULC and Canadian Exchange Co. shall be jointly and severally liable to reimburse the retiring trustee for its legal costs and expenses in connection with same.
 
9.2   Removal
 
The Trustee, or any trustee hereafter appointed, may (provided a successor trustee is appointed) be removed at any time on not less than sixty (60) days’ prior notice by written instrument executed by US Gold, Alberta ULC and Canadian Exchange Co., in duplicate, one copy of which shall be delivered to the trustee so removed and one copy to the successor trustee, provided that such removal shall not take effect until the date of acceptance of appointment by the successor trustee.
 
9.3   Successor Trustee
 
Any successor trustee appointed as provided under this agreement shall execute, acknowledge and deliver to US Gold, Alberta ULC and Canadian Exchange Co. and to its predecessor trustee an instrument accepting such appointment. Thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations of its predecessor under this agreement, with the like effect as if originally named as trustee in this agreement. However, on the written request of US Gold, Alberta ULC and Canadian Exchange Co. or of the successor trustee, the trustee ceasing to act shall, upon payment of any amounts then due to it pursuant to the provisions of this agreement, execute and deliver an instrument transferring to such successor trustee all the rights and powers of the trustee so ceasing to act. Upon the request of any such successor trustee, US Gold, Alberta ULC, Canadian Exchange Co. and such predecessor trustee shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers.
 
9.4   Notice of Successor Trustee
 
Upon acceptance of appointment by a successor trustee as provided herein, US Gold, Alberta ULC and Canadian Exchange Co. shall cause to be mailed notice of the succession of such trustee hereunder to each Beneficiary specified in a List. If US Gold, Alberta ULC or Canadian Exchange Co. shall fail to cause such notice to


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be mailed within 10 days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be mailed at the expense of US Gold, Alberta ULC and Canadian Exchange Co.
 
ARTICLE 10
 
AMENDMENTS AND SUPPLEMENTAL TRUST AGREEMENTS
 
10.1   Amendments, Modifications, etc.
 
Subject to Section 10.2 thereof, this agreement may not be amended or modified except by an agreement in writing executed by US Gold, Alberta ULC, Canadian Exchange Co. and the Trustee and approved by the Beneficiaries in accordance with Section 9.2 of the Share Provisions.
 
10.2   Ministerial Amendments
 
Notwithstanding the provisions of Section 10.1, the parties to this agreement may in writing, at any time and from time to time, without the approval of the Beneficiaries, amend or modify this agreement for the purposes of:
 
(a) adding to the covenants of any or all parties hereto for the protection of the Beneficiaries hereunder provided that the board of directors of each of Canadian Exchange Co., Alberta ULC and US Gold shall be of the good faith opinion (confirmed in writing by each to the Trustee) that such additions will not be prejudicial to the rights or interests of the Beneficiaries;
 
(b) making such amendments or modifications not inconsistent with this agreement (as confirmed in writing by Canadian Exchange Co. which may be relied upon by the Trustee), as may be necessary or desirable with respect to matters or questions which, in the good faith opinion of the board of directors of each of US Gold, Alberta ULC and Canadian Exchange Co. (confirmed in writing by each to the Trustee) and in the opinion of the Trustee, in reliance upon a certificate of Canadian Exchange Co., having in mind the best interests of the Beneficiaries, it may be expedient to make, provided that such boards of directors (confirmed in writing by each to the Trustee) and the Trustee, acting in reliance upon a certificate of Canadian Exchange Co., shall be of the opinion that such amendments and modifications will not be prejudicial to the rights or interests of the Beneficiaries as a whole; or
 
(c) making such changes or corrections which, on the advice of counsel to US Gold, Alberta ULC, Canadian Exchange Co. and the Trustee, are required for the purpose of curing or correcting any ambiguity or defect or inconsistent provision or clerical omission or mistake or manifest error.
 
10.3   Meeting To Consider Amendments
 
Canadian Exchange Co., at the request of US Gold, shall call a meeting or meetings of the Beneficiaries for the purpose of considering any proposed amendment or modification requiring approval pursuant hereto. Any such meeting or meetings shall be called and held in accordance with the by-laws of Canadian Exchange Co., the Share Provisions and all applicable laws.
 
10.4   Changes in Capital of US Gold and Canadian Exchange Co.
 
At all times after the occurrence of any event contemplated pursuant to Section 2.7 or 2.8 of the Support Agreement or otherwise, as a result of which either US Gold Common Stock or the Exchangeable Shares or both are in any way changed, this agreement shall forthwith be amended and modified as necessary in order that it shall apply with full force and effect, mutatis mutandis, to all new securities into which US Gold Common Stock or the Exchangeable Shares or both are so changed and the parties hereto shall execute and deliver a supplemental trust agreement giving effect to and evidencing such necessary amendments and modifications.
 
10.5   Execution of Supplemental Trust Agreements
 
Notwithstanding Section 10.1, from time to time Canadian Exchange Co. (when authorized by a resolution of its Board of Directors), US Gold (when authorized by a resolution of its board of directors) and the Trustee may,


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subject to the provisions of these presents, and they shall, when so directed by these presents, execute and deliver by their proper officers, trust agreements or other instruments supplemental hereto, which thereafter shall form part hereof. In executing or accepting the supplemental trusts created by any supplemental indenture permitted by this Article 10, the Trustee will be entitled to receive and (subject to Article 6) will be fully protected in relying upon an Officer’s Certificate and opinions of counsel stating that the execution of such supplemental indenture is authorized or permitted in this agreement.
 
ARTICLE 11
 
TERMINATION
 
11.1   Term
 
The Trust created by this agreement shall continue until the earliest to occur of the following events:
 
(a) no outstanding Exchangeable Shares are held by a Beneficiary;
 
(b) each of US Gold, Alberta ULC and Canadian Exchange Co. elects in writing to terminate the Trust and such termination is approved by the Beneficiaries in accordance with Section 9.2 of the Share Provisions; and
 
(c) 21 years after the death of the last survivor of the descendants of His Majesty King George VI of Canada and the United Kingdom of Great Britain and Northern Ireland living on the date of the creation of the Trust.
 
11.2   Survival of Agreement
 
This agreement shall survive any termination of the Trust and shall continue until there are no Exchangeable Shares outstanding held by a Beneficiary; provided, however, that the provisions of Article 7 and Article 8 shall survive any termination of this agreement.
 
ARTICLE 12
 
GENERAL
 
12.1   Severability
 
If any term or other provision of this agreement is invalid, illegal or incapable of being enforced by reason of any rule or law, or public policy, all other conditions and provisions of this agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the fullest extent possible.
 
12.2   Enurement
 
This agreement shall be binding upon and enure to the benefit of the parties hereto and their respective successors and permitted assigns and, subject to the terms hereof, to the benefit of the Beneficiaries.


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12.3   Notices to Parties
 
Any notice and other communications required or permitted to be given pursuant to this agreement shall be in writing and shall be deemed sufficiently given if delivered in person or if sent by facsimile transmission (provided such transmission is recorded as being transmitted successfully) at or to the address or facsimile telephone number set forth beneath the name of such party below:
 
If to Canadian Exchange Co. or Alberta ULC:
 
2900 Manulife Place
10180-101 Street
Edmonton, Alberta
T5J 3V5
 
Facsimile No.: (780) 423-7276
Attention: Corporate Secretary
 
If to US Gold:
 
2201 Kipling Street
Suite 100
Lakewood, Colorado
80215
 
Facsimile No.: (303) 238-1438
Attention: William F. Pass
 
In the case of Canadian Exchange Co., Alberta ULC and US Gold, with copy to:
 
Fraser Milner Casgrain LLP
1 First Canadian Place
100 King Street West, Suite 3900
Toronto, Ontario
M5X 1B2
 
Attention: Michael Melanson
Fax: (416) 863-4592
 
If to the Trustee:
 
[<>]
 
Attention: [<>]
Fax: [<>]
 
or at such other address as the party to which such notice or other communication is to be given has last notified the party giving the same in the manner provided in this section. Any notice given shall be deemed to have been received on the date of such delivery or sending. Provided that if any notice or other communication to which this section applies is given or delivered by facsimile transmission and is recorded as having been transmitted successfully after 5:00 pm (local time of recipient) on a business day or at any time on a day that is not a business day, such notice or other communication shall be deemed to have been given or delivered and received on the following business day.
 
12.4   Notice to Beneficiaries
 
Any notice, request or other communication to be given to a Beneficiary shall be in writing and shall be valid and effective if given by mail (postage pre-paid or by delivery, to the address of the holder recorded in the securities register of Canadian Exchange Co. or, in the event of the address of any such holder not being so recorded, then at the last known address of such holder. Any such notice, request or other communication, if given by mail, shall be deemed to have been given and received on the fifth day following the date of mailing and, if given by delivery, shall


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be deemed to have been given and received on the date of delivery. Accidental failure or omission to give any notice, request or other communication to one or more holders of Exchangeable Shares, or any defect in such notice, shall not invalidate or otherwise alter or affect any action or proceeding to be taken pursuant thereto.
 
12.5   Risk of Payments By Post
 
Whenever payments are to be made or certificates or documents are to be sent to any Beneficiary by the Trustee or by Canadian Exchange Co., Alberta ULC, US Gold or by such Beneficiary to the Trustee or to US Gold or Alberta ULC or Canadian Exchange Co., the making of such payment or sending of such certificate or document sent through the post shall be at the risk of Canadian Exchange Co., in the case of payments made or documents by the Trustee or Canadian Exchange Co. or Alberta ULC or US Gold and the Beneficiary, in the case of payments made or documents by the Beneficiary.
 
12.6   Counterparts
 
This agreement may be executed in counterparts (by facsimile or otherwise), each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.
 
12.7   Jurisdiction
 
This agreement shall be construed and enforced in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein.
 
12.8   Attornment
 
Each of the Trustee, US Gold, Alberta ULC and Canadian Exchange Co. agrees that any action or proceeding arising out of or relating to this agreement or any of the transactions contemplated by this agreement may be instituted in the courts of Ontario, waives any objection which it may have now or hereafter to the venue of any such action or proceeding, irrevocably submits to the non-exclusive jurisdiction of the said courts in any such action or proceeding, agrees to be bound by any judgement of the said courts and not to seek, and hereby waives, any review of the merits of any such judgement by the courts of any other jurisdiction, and each of US Gold and Alberta ULC hereby appoint Canadian Exchange Co. at its registered office in the Province of Alberta as attorney for service of process.


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IN WITNESS WHEREOF the parties hereto have caused this agreement to be duly executed as of the date first above written.
 
U.S. GOLD CORPORATION
 
  By: 
    
Name:
  Title:
 
US GOLD ALBERTA ULC
 
  By: 
    
Name:
  Title:
 
US GOLD CANADIAN ACQUISITION
CORPORATION
 
  By: 
    
Name:
  Title:
 
[<>] (Trustee)
 
  By: 
    
Name:
  Title:
 
 
  By: 
    
Name:
  Title:


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APPENDIX K
 
FORM OF SUPPORT AGREEMENT
 
AGREEMENT made as of          , 2006, between U.S. Gold Corporation, a corporation existing under the laws of Colorado (“US Gold”), US Gold Alberta ULC, a corporation existing under the laws of Alberta (“Alberta ULC”) and US Gold Canadian Acquisition Corporation, a corporation existing under the laws of Alberta (“Canadian Exchange Co.”).
 
WHEREAS US Gold, together with Canadian Exchange Co. has offered, by way of a public take-over bid, to acquire all of the outstanding common shares of each of White Knight Resources Ltd., Coral Gold Resources Ltd., Nevada Pacific Gold Ltd. and Tone Resources Ltd. in consideration for exchangeable shares (“Exchangeable Shares”) of Canadian Exchange Co.;
 
AND WHEREAS holders of Exchangeable Shares will be entitled to require Canadian Exchange Co. to redeem such Exchangeable Shares and upon such redemption each Exchangeable Share shall be exchanged by Canadian Exchange Co. for one share of common stock of US Gold (“US Gold Common Stock”);
 
AND WHEREAS US Gold intends to grant to and in favour of Non-Affiliated Holders (as hereinafter defined) from time to time of Exchangeable Shares the right to require US Gold or, at the option of US Gold, Alberta ULC, to purchase from each Non-Affiliated Holder all or any part of the Exchangeable Shares held by the Non-Affiliated Holder;
 
AND WHEREAS the parties desire to make appropriate provision and to establish a procedure whereby US Gold will take certain actions and make certain payments and deliveries necessary to ensure that Canadian Exchange Co. and Alberta ULC will be able to make certain payments and to deliver or cause to be delivered shares of US Gold Common Stock in satisfaction of the obligations of Canadian Exchange Co. and/or Alberta ULC under the Share Provisions (as hereinafter defined) and this agreement;
 
NOW THEREFORE, in consideration of the respective covenants and agreements provided in this agreement and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged),the parties agree as follows:
 
ARTICLE 1
 
DEFINITIONS AND INTERPRETATION
 
1.1   Defined Terms
 
In this agreement, each initially capitalized term and the terms used and not otherwise defined herein shall have the meaning ascribed thereto in the rights, privileges, restrictions and conditions (collectively, the “Share Provisions”) attaching to the Exchangeable Shares as set out in the articles of Canadian Exchange Co. and the following terms shall have the following meanings:
 
“Effective Date” means the earliest date on which Canadian Exchange Co. first takes up shares of White Knight Resources Ltd., Coral Gold Resources Ltd., Nevada Pacific Gold Ltd. or Tone Resources Ltd. under the offers to purchase pursuant to the take-over bids referred to in the Recitals hereto.
 
“including” means “including without limitation” and “includes” means “includes without limitation”.
 
“Non-Affiliated Holders” means the registered holders of Exchangeable Shares other than US Gold and its Subsidiaries.
 
“Special Voting Share” means the one share of special voting preference stock par value US$1.00, issued by US Gold to and deposited with the Trustee, which entitles the holder of record to a number of votes at meetings of holders of US Gold Common Stock equal to the number of Exchangeable Shares outstanding from time to time that are held by Non-Affiliated Holders.


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“Trustee” means           and, subject to the provisions of the Voting and Exchange Trust Agreement, includes any successor trustee or permitted assigns.
 
1.2   Interpretation Not Affected By Headings
 
The division of this agreement into articles, sections and other portions and the insertion of headings are for convenience of reference only and do not affect the construction or interpretation of this agreement. Unless otherwise specified, references to an “Article” or “Section” refer to the specified Article or Section of this agreement.
 
1.3   Number, Gender, etc.
 
In this agreement, unless the context otherwise requires words importing the singular number include the plural and vice versa. Words importing any gender shall include all genders and words importing persons include individuals, corporations, partnerships, companies, associations, trusts, unincorporated organizations, governmental bodies and other legal or business entities of any kind.
 
1.4   Date for any Action
 
If any date on which any action is required to be taken under this agreement is not a Business Day, such action shall be required to be taken on the next succeeding Business Day.
 
1.5   Payments
 
All payments to be made hereunder will be made without interest and less any tax required by Canadian law to be deducted and withheld.
 
ARTICLE 2
 
COVENANTS OF US GOLD AND CANADIAN EXCHANGE CO.
 
2.1   Covenants Regarding Exchangeable Shares
 
So long as any Exchangeable Shares owned by Non-Affiliated Holders are outstanding, US Gold will:
 
(a) not declare or pay any dividend on the US Gold Common Stock unless Canadian Exchange Co. shall (i) simultaneously declare or pay, as the case may be, an equivalent dividend on the Exchangeable Shares (an “Equivalent Dividend”), and (ii) have sufficient money or other assets or authorized but unissued securities available to enable the due declaration and the due and punctual payment, in accordance with applicable law, of any such Equivalent Dividend;
 
(b) advise Canadian Exchange Co. sufficiently in advance of the declaration by US Gold of any dividend on the US Gold Common Stock and take all such other actions as are reasonably necessary, in co-operation with Canadian Exchange Co., to ensure that the respective declaration date, record date and payment date for an Equivalent Dividend on the Exchangeable Shares shall be the same as the declaration date, record date and payment date for the corresponding dividend on the US Gold Common Stock and that such dividend on the Exchangeable Shares shall comply with any requirements of the stock exchange on which the Exchangeable Shares are listed;
 
(c) ensure that the record date for determining shareholders entitled to receive any dividend declared on the US Gold Common Stock is not less than 10 Business Days after the declaration date for such dividend or such shorter period as may be permitted under applicable law;
 
(d) take all such actions and do all such things as are reasonably necessary or desirable to enable and permit Canadian Exchange Co., in accordance with applicable law, to pay and otherwise perform its obligations with respect to the satisfaction of the Liquidation Amount, in respect of each issued and outstanding Exchangeable Share upon the liquidation, dissolution or winding-up of Canadian Exchange


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Co. or any other distribution of the assets of Canadian Exchange Co. among its shareholders for the purpose of winding up its affairs including, without limitation, all such actions and all such things as are necessary or desirable to enable and permit Canadian Exchange Co. to cause to be delivered shares of US Gold Common Stock to the holders of Exchangeable Shares in accordance with the provisions of Article 5 of the Share Provisions;
 
(e) take all such actions and do all such things as are reasonably necessary or desirable to enable and permit Canadian Exchange Co., in accordance with applicable law, to pay and otherwise perform its obligations with respect to the satisfaction of the Retraction Price and the Redemption Price, including, without limitation, all such actions and all such things as are necessary or desirable to enable and permit Canadian Exchange Co. to cause to be delivered shares of US Gold Common Stock to the holders of Exchangeable Shares, upon the retraction or redemption of Exchangeable Shares in accordance with the provisions of Article 6 or Article 7 of the Share Provisions, as the case may be;
 
(f) take all such actions and do all such things as are reasonably necessary or desirable to enable and permit Alberta ULC or US Gold, in accordance with applicable law, to perform its obligations arising upon the exercise by it of the Liquidation Call Right, the Retraction Call Right or the Redemption Call Right, including all such actions and all such things as are necessary or desirable to enable and permit Alberta ULC or US Gold to cause to be delivered shares of US Gold Common Stock to the holders of Exchangeable Shares in accordance with the provisions of the Liquidation Call Right, the Retraction Call Right or the Redemption Call Right, as the case may be; and
 
(g) not exercise its vote as a shareholder to initiate the voluntary liquidation, dissolution or winding up of Canadian Exchange Co. or any other distribution of the assets of Canadian Exchange Co. among its shareholders for the purpose of winding up its affairs, nor take any action or omit to take any action that is designed to result in the liquidation, dissolution or winding up of Canadian Exchange Co. or any other distribution of the assets of Canadian Exchange Co. among its shareholders for the purpose of winding up its affairs.
 
2.2   Segregation of Funds
 
US Gold will cause Canadian Exchange Co. to deposit a sufficient amount of funds in a separate account of Canadian Exchange Co. and segregate a sufficient amount of such other assets and property as is necessary to enable Canadian Exchange Co. to pay or otherwise satisfy the applicable dividends, Liquidation Amount, Retraction Price or Redemption Price, once such amounts become payable under the terms of this agreement or the Share Provisions, in each case for the benefit of Non-Affiliated Holders from time to time of the Exchangeable Shares, and to use such funds and other assets so segregated exclusively for the payment of dividends and the payment or other satisfaction of the Liquidation Amount, the Retraction Price or the Redemption Price, as applicable net of any corresponding withholding tax obligations and for the remittance of such withholding tax obligations.
 
2.3   Reservation of US Gold Common Stock
 
US Gold hereby represents, warrants and covenants in favour of Canadian Exchange Co. and Alberta ULC that US Gold has reserved for issuance and will, at all times while any Exchangeable Shares are outstanding, keep available, free from pre-emptive and other rights, out of its authorized and unissued capital stock such number of shares of US Gold Common Stock (or other shares or securities into which US Gold Common Stock may be reclassified or changed as contemplated by Section 2.7): (a) as is equal to the sum of (i) the number of Exchangeable Shares issued and outstanding from time to time and (ii) the number of Exchangeable Shares issuable upon the exercise of all rights to acquire Exchangeable Shares outstanding from time to time; and (b) as are now and may hereafter be required to enable and permit each of US Gold, Alberta ULC and Canadian Exchange Co. to meet its obligations under the Voting and Exchange Trust Agreement, under the Share Provisions and under any other security or commitment pursuant to which US Gold, Alberta ULC and Canadian Exchange Co. may now or hereafter be required to issue and/or deliver shares of US Gold Common Stock to the Non-Affiliated Holders.


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2.4   Notification of Certain Events
 
In order to assist US Gold to comply with its obligations hereunder and to permit Alberta ULC to exercise the Liquidation Call Right, Retraction Call Right and Redemption Call Right, Canadian Exchange Co. will notify US Gold of each of the following events at the time set forth below:
 
(a) in the event of any determination by the board of directors of Canadian Exchange Co. to institute voluntary liquidation, dissolution or winding-up proceedings with respect to Canadian Exchange Co. or to effect any other distribution of the assets of Canadian Exchange Co. among its shareholders for the purpose of winding up its affairs, at least 60 days prior to the proposed effective date of such liquidation, dissolution, winding-up or other distribution;
 
(b) immediately, upon the earlier of (i) receipt by Canadian Exchange Co. of notice of, and (ii) Canadian Exchange Co. otherwise becoming aware of, any threatened or instituted claim, suit, petition or other proceedings with respect to the involuntary liquidation, dissolution or winding-up of Canadian Exchange Co. or to effect any other distribution of the assets of Canadian Exchange Co. among its shareholders for the purpose of winding up its affairs;
 
(c) immediately, upon receipt by Canadian Exchange Co. of a Retraction Request;
 
(d) at least 30 days prior to any Redemption Date determined by the board of directors of Canadian Exchange Co. in accordance with the Share Provisions; and
 
(e) as soon as practicable upon the issuance by Canadian Exchange Co. of any Exchangeable Shares or rights to acquire Exchangeable Shares.
 
2.5   Delivery of US Gold Common Stock
 
Upon notice of any event that requires Canadian Exchange Co. or Alberta ULC to cause to be delivered US Gold Common Stock to any holder of Exchangeable Shares, US Gold shall, in any manner deemed appropriate by it, provide such shares or cause such shares to be provided to Canadian Exchange Co. or Alberta ULC, as appropriate, which shall forthwith deliver or cause to be delivered the requisite number of US Gold Common Stock to or for the benefit of the former holder of the surrendered Exchangeable Shares. All such shares of US Gold Common Stock shall be duly authorized and validly issued as fully paid, non-assessable, free of pre-emptive rights and shall be free and clear of any lien, claim, encumbrance, security interest or adverse claim. In consideration for the issuance and delivery of each such share of US Gold Common Stock, Canadian Exchange Co. or Alberta ULC, as the case may be, shall subscribe a cash amount or pay a purchase price equal to the fair market value of the shares of US Gold Common Stock.
 
2.6   Qualification of US Gold Common Stock
 
US Gold covenants that it will make such filings and seek such regulatory consents and approvals as are necessary so that the shares of US Gold Common Stock to be issued to holders of Exchangeable Shares pursuant to the terms of the Share Provisions, the Voting and Exchange Trust Agreement and this agreement will be issued in compliance with the applicable securities laws in Canada and the United States and may be freely traded thereafter (other than by reason of a holder being a “control person” of US Gold for purposes of Canadian securities laws or by holders who are Affiliates of US Gold within the meaning of U.S. securities laws). US Gold will in good faith expeditiously take all such actions and do all such things as are reasonably necessary or desirable to cause all shares of US Gold Common Stock to be delivered hereunder to be listed, quoted or posted for trading on all stock exchanges and quotation systems on which outstanding shares of US Gold Common Stock have been listed by US Gold and remain listed and are quoted or posted for trading at such time.


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2.7   Economic Equivalence
 
(a) US Gold will not without prior approval of Canadian Exchange Co. and the prior approval of the holders of the Exchangeable Shares given in accordance with Section 9.2 of the Share Provisions:
 
(i) issue or distribute shares of US Gold Common Stock (or securities exchangeable for or convertible into or carrying rights to acquire shares of US Gold Common Stock) to the holders of all or substantially all of the then outstanding US Gold Common Stock by way of stock dividend or other distribution, other than an issue of shares of US Gold Common Stock (or securities exchangeable for or convertible into or carrying rights to acquire shares of US Gold Common Stock) to holders of shares of US Gold Common Stock who exercise an option to receive dividends in US Gold Common Stock (or securities exchangeable for or convertible into or carrying rights to acquire US Gold Common Stock) in lieu of receiving cash dividends; or
 
(ii) issue or distribute rights, options or warrants to the holders of all or substantially all of the then outstanding shares of US Gold Common Stock entitling them to subscribe for or to purchase shares of US Gold Common Stock (or securities exchangeable for or convertible into or carrying rights to acquire shares of US Gold Common Stock); or
 
(iii) issue or distribute to the holders of all or substantially all of the then outstanding shares of US Gold Common Stock (A) shares or securities (including evidences of indebtedness) of US Gold of any class other than US Gold Common Stock (or securities convertible into or exchangeable for or carrying rights to acquire shares of US Gold Common Stock), or (B) rights, options or warrants other than those referred to in Section 2.7(a)(ii) above, or (C) assets of US Gold;
 
unless (x) Canadian Exchange Co. is permitted under applicable law to issue or distribute the economic equivalent on a per share basis of such rights, options, securities, shares, evidences of indebtedness or other assets to holders of the Exchangeable Shares and (y) Canadian Exchange Co. shall issue or distribute such rights, options, securities, shares, evidences of indebtedness or other assets simultaneously to holders of the Exchangeable Shares.
 
(b) US Gold will not without the prior approval of Canadian Exchange Co. and the prior approval of the holders of the Exchangeable Shares given in accordance with Section 9.2 of the Share Provisions:
 
(i) subdivide, redivide or change the then outstanding shares of US Gold Common Stock into a greater number of shares of US Gold Common Stock; or
 
(ii) reduce, combine, consolidate or change the then outstanding shares of US Gold Common Stock into a lesser number of shares of US Gold Common Stock; or
 
(iii) reclassify or otherwise change the shares of US Gold Common Stock or effect an amalgamation, merger, reorganization or other transaction affecting the shares of US Gold Common Stock;
 
unless (x) Canadian Exchange Co. is permitted under applicable law simultaneously to make the same or an economically equivalent change to, or in the rights of holders of, the Exchangeable Shares, and (y) the same or an economically equivalent change is made to, or in the rights of the holders of, the Exchangeable Shares.
 
(c) US Gold will ensure that the record date for any event referred to in Section 2.7(a) or Section 2.7(b), or (if no record date is applicable for such event) the effective date for any such event, is not less than ten Business Days after the date on which such event is declared or announced by US Gold (with simultaneous notification thereof by US Gold to Canadian Exchange Co.).
 
(d) The board of directors of Canadian Exchange Co. shall determine, acting in good faith and in its sole discretion (with the assistance of such reputable and qualified independent financial advisors and/or other experts as the board may require), economic equivalence for the purposes of any event referred to in Section 2.7(a) or Section 2.7(b) and each such determination shall be conclusive and binding on US Gold. In making each such


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determination, the following factors shall, without excluding other factors determined by the board of directors of Canadian Exchange Co. to be relevant, be considered by the board of directors of Canadian Exchange Co.:
 
(i) in the case of any stock dividend or other distribution payable in shares of US Gold Common Stock, the number of such shares issued in proportion to the number of shares of US Gold Common Stock previously outstanding;
 
(ii) in the case of the issuance or distribution of any rights, options or warrants to subscribe for or purchase shares of US Gold Common Stock (or securities exchangeable for or convertible into or carrying rights to acquire shares of US Gold Common Stock), the relationship between the exercise price of each such right, option or warrant and the Current Market Price of a share of US Gold Common Stock;
 
(iii) in the case of the issuance or distribution of any other form of property (including, without limitation, any shares or securities of US Gold of any class other than US Gold Common Stock, any rights, options or warrants other than those referred to in Section 2.7(d)(ii), any evidences of indebtedness of US Gold or any assets of US Gold), the relationship between the fair market value (as determined by the board of directors of Canadian Exchange Co. in the manner above contemplated) of such property to be issued or distributed with respect to each outstanding share of US Gold Common Stock and the Current Market Price of a share of US Gold Common Stock;
 
(iv) in the case of any subdivision, redivision or change of the then outstanding shares of US Gold Common Stock into a greater number of shares of US Gold Common Stock or the reduction, combination, consolidation or change of the then outstanding shares of US Gold Common Stock into a lesser number of shares of US Gold Common Stock or any amalgamation, merger, reorganization or other transaction affecting the US Gold Common Stock, the effect thereof upon the then outstanding shares of US Gold Common Stock; and
 
(v) in all such cases, the general taxation consequences of the relevant event to holders of Exchangeable Shares to the extent that such consequences may differ from the taxation consequences to holders of shares of US Gold Common Stock as a result of differences between taxation laws of Canada and the United States (except for any differing consequences arising as a result of differing marginal taxation rates and without regard to the individual circumstances of holders of Exchangeable Shares).
 
2.8   Tender Offers
 
In the event that a cash offer, share exchange offer, issuer bid, take-over bid or similar transaction with respect to US Gold Common Stock (an “Offer”) is proposed by US Gold or is proposed to US Gold or its shareholders and is recommended by the board of directors of US Gold, or is otherwise effected or to be effected with the consent or approval of the board of directors of US Gold, US Gold will use reasonable efforts (to the extent, in the case of an Offer by a third party, within its control) expeditiously and in good faith to take all such actions and do all such things as are necessary or desirable to enable and permit holders of Exchangeable Shares to participate in such Offer to the same extent and on an economically equivalent basis as the holders of shares of US Gold Common Stock, without discrimination. Without limiting the generality of the foregoing, US Gold will use reasonable efforts expeditiously and in good faith to ensure that holders of Exchangeable Shares may participate in each such Offer without being required to retract Exchangeable Shares as against Canadian Exchange Co. (or, if so required, to ensure that any such retraction, shall be effective only upon, and shall be conditional upon, the closing of such Offer and only to the extent necessary to tender or deposit to the Offer). Nothing herein shall affect the right of Canadian Exchange Co. to redeem, or US Gold or Alberta ULC to purchase pursuant to the Redemption Call Right, Exchangeable Shares.
 
2.9   US Gold and Affiliates Not To Vote Exchangeable Shares
 
US Gold covenants and agrees that it will appoint and cause to be appointed proxyholders with respect to all Exchangeable Shares held by it and its Subsidiaries for the sole purpose of attending each meeting of holders of Exchangeable Shares in order to be counted as part of the quorum for each such meeting. US Gold further covenants and agrees that it will not, and will cause its Subsidiaries not to, exercise any voting rights that may be exercisable by


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holders of Exchangeable Shares from time to time pursuant to the Share Provisions or pursuant to the provisions of the (or any successor or other corporate statute by which Canadian Exchange Co. may in the future be governed) with respect to any Exchangeable Shares held by it or by its Subsidiaries in respect of any matter considered at any meeting of holders of Exchangeable Shares.
 
2.10   Stock Exchange Listing
 
US Gold covenants and agrees in favour of Canadian Exchange Co. that US Gold will use its best efforts to maintain a listing of the Exchangeable Shares on the Toronto Stock Exchange or another stock exchange in Canada prescribed under the Income Tax Act (Canada).
 
2.11   Due Performance
 
On and after the Effective Date, US Gold shall, and shall cause Alberta ULC to, duly and timely perform all of its obligations provided for herein and that may arise under the Share Provisions, and US Gold shall be responsible for the due performance of all of such obligations hereunder and under the Share Provisions.
 
2.12   Issue of Additional Shares
 
During the term of this agreement, US Gold will not issue any Special Voting Shares other than the one Special Voting Share to be issued to the Trustee.
 
2.13   Ownership of Outstanding Shares
 
Without the prior approval of Canadian Exchange Co. and the prior approval of the holders of the Exchangeable Shares given in accordance with Section 11.2 of the Share Provisions, US Gold covenants and agrees in favour of Canadian Exchange Co. that, as long as any outstanding Exchangeable Shares are owned by Non-Affiliated Holders, US Gold will be and remain the direct or indirect beneficial owner of all issued and outstanding common shares in the capital of Canadian Exchange Co. and all of the issued and outstanding common shares in the capital of all of the issued and outstanding voting shares in the capital of Alberta ULC.
 
ARTICLE 3
 
US GOLD SUCCESSORS
 
3.1   Certain Requirements in Respect of Combination, etc.
 
US Gold shall not enter into any transaction (whether by way of reconstruction, reorganization, consolidation, arrangement, merger, transfer, sale, lease or otherwise) whereby all or substantially all of its undertaking, property and assets would become the property of any other person or, in the case of a merger, of the continuing corporation resulting therefrom unless, but may do so if:
 
(a) such other person or continuing corporation (the “US Gold Successor”) by operation of law, becomes, without more, bound by the terms and provisions of this agreement or, if not so bound, executes, prior to or contemporaneously with the consummation of such transaction, an agreement supplemental hereto and such other instruments (if any) as are necessary or advisable to evidence the assumption by the US Gold Successor of liability for all moneys payable and property deliverable hereunder and the covenant of such US Gold Successor to pay and deliver or cause to be delivered the same and its agreement to observe and perform all the covenants and obligations of US Gold under this agreement; and
 
(b) such transaction shall be upon such terms and conditions as substantially to preserve and not to impair in any material respect any of the rights, duties, powers and authorities of the other parties hereunder or the holders of the Exchangeable Shares.


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3.2   Vesting of Powers in Successor
 
Whenever the conditions of Section 3.1 have been duly observed and performed, the parties, if required by Section 3.1, shall execute and deliver the supplemental agreement provided for in Section 3.1(a) and thereupon the US Gold Successor and such other person that may then be the issuer of the US Gold Common Stock shall possess and from time to time may exercise each and every right and power of US Gold under this agreement in the name of US Gold or otherwise and any act or proceeding by any provision of this agreement required to be done or performed by the board of directors of US Gold or any officers of US Gold may be done and performed with like force and effect by the directors or officers of such US Gold Successor.
 
3.3   Wholly-Owned Subsidiaries
 
Nothing herein shall be construed as preventing the amalgamation or merger of any wholly-owned Subsidiary of US Gold with or into US Gold or the winding-up, liquidation or dissolution of any wholly-owned Subsidiary of US Gold, provided that all of the assets of such Subsidiary are transferred to US Gold or another wholly-owned Subsidiary of US Gold, and any such transactions are expressly permitted by this Article 3.
 
ARTICLE 4
 
GENERAL
 
4.1   Term
 
This agreement shall come into force and be effective as of the date hereof and shall terminate and be of no further force and effect at such time as no Exchangeable Shares (or securities or rights convertible into or exchangeable for or carrying rights to acquire Exchangeable Shares) are held by Non-Affiliated Holders.
 
4.2   Changes in Capital of US Gold and Canadian Exchange Co.
 
Notwithstanding the provisions of Section 4.4 hereof, at all times after the occurrence of any event contemplated pursuant to Section 2.7 and Section 2.8 hereof or otherwise, as a result of which either the US Gold Common Stock or the Exchangeable Shares or both are in any way changed, this agreement shall forthwith be amended and modified as necessary in order that it shall apply with full force and effect, mutatis mutandis, to all new securities into which the US Gold Common Stock or the Exchangeable Shares or both are so changed and the parties hereto shall execute and deliver a supplemental agreement in writing giving effect to and evidencing such necessary amendments and modifications.
 
4.3   Severability
 
Notwithstanding the provisions of Section 4.4 hereof, if any term or other provision of this agreement is invalid, illegal or incapable of being enforced by any rule or law, or public policy, all other conditions and provisions of this agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the fullest extent possible.
 
4.4   Amendments, Modifications
 
(a) Subject to Section 4.2, Section 4.3, and Section 4.5 of this agreement may not be amended or modified except by an agreement in writing executed by Canadian Exchange Co., Alberta ULC and US Gold and approved by the holders of the Exchangeable Shares in accordance with Section 9.2 of the Share Provisions.


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(b) No amendment or modification or waiver of any of the provisions of this agreement otherwise permitted hereunder shall be effective unless made in writing and signed by all of the parties hereto.
 
4.5   Ministerial Amendments
 
Notwithstanding the provisions of Section 4.4 hereof, the parties to this agreement may in writing at any time and from time to time, without the approval of the holders of the Exchangeable Shares, amend or modify this agreement for the purposes of:
 
(a) adding to the covenants of any or all of the parties hereto for the protection of the Non-Affiliated Holders;
 
(b) evidencing the succession of US Gold Successors and the covenants of and obligations assumed by each such US Gold Successor in accordance with the provisions of Article 3;
 
(c) making such amendments or modifications not inconsistent with this agreement as may be necessary or desirable with respect to matters or questions which, in the opinion of the board of directors of each of Canadian Exchange Co., Alberta ULC and US Gold, having in mind the best interests of the Non-Affiliated Holders as a whole, it may be expedient to make, provided that each such board of directors shall be of the opinion that such amendments or modifications will not be prejudicial in any material respect to the rights or interests of the Non-Affiliated Holders as a whole of the Exchangeable Shares; or
 
(d) making such changes or corrections which, on the advice of counsel to Canadian Exchange Co., Alberta ULC and US Gold, are required for the purpose of curing or correcting any ambiguity or defect or inconsistent provision or clerical omission or mistake or manifest error, provided that the boards of directors of each of Canadian Exchange Co., Alberta ULC and US Gold shall be of the opinion that such changes or corrections will not be prejudicial in any material respect to the rights or interests of the Non-Affiliated Holders.
 
4.6   Meeting to Consider Amendments
 
Canadian Exchange Co., at the request of US Gold, shall call a meeting or meetings of the holders of Exchangeable Shares for the purpose of considering any proposed amendment or modification requiring approval pursuant to Section 4.4 hereof. Any such meeting or meetings shall be called and held in accordance with the bylaws of Canadian Exchange Co., the Share Provisions and all applicable laws.
 
4.7   Enurement
 
This agreement shall be binding upon and enure to the benefit of the parties hereto and their respective successors and assigns.
 
4.8   Notices to Parties
 
Any notice and other communications required or permitted to be given pursuant to this agreement shall be sufficiently given if delivered in person or if sent by facsimile transmission (provided such transmission is recorded as being transmitted successfully) to the parties at the following addresses:
 
(a) in the case of US Gold, to the following address:
 
2201 Kipling Street
Suite 100
Lakewood, Colorado
80215
Facsimile No.: (303) 238-1438
Attention: William F. Pass


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with a copy to:
 
Fraser Milner Casgrain LLP
1 First Canadian Place
100 King Street West, Suite 3900
Toronto, Ontario
M5X 1B2
Attention: Michael Melanson
Fax: (416) 863-4592
 
(b) in the case of Alberta ULC, to the following address:
 
2900 Manulife Place
10180-101 Street
Edmonton, Alberta
T5J 3V5
Facsimile No.: (780) 423-7276
Attention: Corporate Secretary
 
with a copy to:
 
Fraser Milner Casgrain LLP
1 First Canadian Place
100 King Street West, Suite 3900
Toronto, Ontario
M5X 1B2
Attention: Michael Melanson
Fax: (416) 863-4592
 
(c) in the case of Canadian Exchange Co., to the following address:
 
2900 Manulife Place
10180-101 Street
Edmonton, Alberta
T5J 3V5
Facsimile No.: (780) 423-7276
Attention: Corporate Secretary
 
with a copy to:
 
U.S. Gold Corporation
2201 Kipling Street
Suite 100
Lakewood, Colorado
80215
Facsimile No.: (303) 238-1438
Attention: William F. Pass
 
or at such other address as the party to which such notice or other communication is to be given has last notified the party given the same in the manner provided in this Section, and if not given the same shall be deemed to have been received on the date of such delivery or sending.
 
4.9   Counterparts
 
This agreement may be executed in counterparts (by facsimile or otherwise), each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument.


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4.10   Jurisdiction
 
This agreement shall be construed and enforced in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. Each party hereto irrevocably submits to the non-exclusive jurisdiction of the courts of the Province of Ontario with respect to any matter arising hereunder or related hereto.
 
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be duly executed as of the date first above written.
 
U.S. GOLD CORPORATION
 
  Per: 
    
Name: 
  Title: 
 
US GOLD ALBERTA ULC
 
  Per: 
    
Name: 
  Title: 
 
US GOLD CANADIAN ACQUISITION
CORPORATION
 
  Per: 
    
Name: 
  Title: 


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The depositary for the offer is
 
KINGSDALE SHAREHOLDER SERVICES INC.
 
     
For Delivery by Mail:   For Delivery by Courier or by Hand:
     
The Exchange Tower   The Exchange Tower
130 King Street West   130 King Street
Suite 2950, P.O. Box 361   West Suite 2950
Toronto, Ontario   Toronto, Ontario
M5X 1E2   M5X 1C7
 
 
The dealer manager for the offer is
 
GMP SECURITIES L.P. (Canada)

GRIFFITHS MCBURNEY CORP. (United States)

145 King Street West
Suite 300
Toronto, Ontario
M5H 1J8
Telephone: (416) 367-8600
Toll Free: 1-888-301-3244
Fax: (416) 367-8164
 
 
The information agent for the offer is:
 
(KINGSDALE SHAREHOLDERS SERVICES INC LOGO)
 
The Exchange Tower
130 King Street
West Suite 2950, P.O. Box 361
Toronto, Ontario
M5X 1E2
 
 
Any questions and requests for assistance may be directed to Kingsdale Shareholder Services Inc. at the telephone numbers set out below:
 
North America Toll Free Telephone:
 
1-866-639-8026
Fax: (416) 867-2271
Toll Free Fax: 1-866-545-5580
Bankers and Brokers call collect: (416) 867-2272
E-Mail: shareholder@kingsdalecapital.com

Table of Contents

PART II
 
INFORMATION NOT REQUIRED IN THE PROSPECTUS
 
ITEM 20.  INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
US Gold Canadian Acquisition Corporation
 
US Gold Canadian Acquisition Corporation, or Canadian Exchange Co., is a corporation incorporated under the Business Corporation Act (Alberta) or the ABCA. Under the ABCA, Canadian Exchange Co. may indemnify a present or former director or officer or a person who acts or acted at Canadian Exchange Co.’s request as a director or officer of a body corporate of which Canadian Exchange Co. is or was a shareholder or creditor, and his heirs and legal representatives, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by him in respect of any civil, criminal or administrative action or proceeding to which he is made a party by reason of being or having been a director or officer of Canadian Exchange Co. or that body corporate, if the director or officer acted honestly and in good faith with a view to the best interests of Canadian Exchange Co., and, in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, had reasonable grounds for believing that his conduct was lawful. Such indemnification may be in connection with a derivative action only with court approval. A director or officer is entitled to indemnification from Canadian Exchange Co. as a matter of right if he or she was substantially successful on the merits, fulfilled the condition set forth above, and is fairly and reasonably entitled to indemnity.
 
The articles of Canadian Exchange Co. provide that Canadian Exchange Co. shall, in all circumstances and to the fullest extent permitted by the ABCA, indemnify a director or officer of Canadian Exchange Co., a former director or officer of Canadian Exchange Co., or a person who acts or acted at Canadian Exchange Co.’s request as a director or officer of a body corporate of which Canadian Exchange Co. is or was a shareholder or creditor, and his heirs and legal representatives.
 
U.S. Gold Corporation and its Subsidiaries (including US Gold Canadian Acquisition Corporation)
 
Section 7-108-402 of the Colorado Business Corporation Act, or the Act, provides, generally, that the articles of incorporation of a Colorado corporation may contain a provision eliminating or limiting the personal liability of a director to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director; except that any such provision may not eliminate or limit the liability of a director (i) for any breach of the director’s duty of loyalty to the corporation or its shareholders, (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) acts specified in Section 7-108-403 (concerning unlawful distribution), or (iv) any transaction from which a director directly or indirectly derived an improper personal benefit. Such provision may not eliminate or limit the liability of a director for any act or omission occurring prior to the date on which such provision becomes effective. Article XII of U.S. Gold’s bylaws contain a provision eliminating liability as permitted by the statute.
 
Section 7-109-103 of the Act provides that a Colorado corporation must indemnify a person (i) who is or was a director of the corporation or an individual who, while serving as a director of the corporation, is or was serving at the corporation’s request as a director, officer, partner, trustee, employee or fiduciary or agent of another corporation or other entity or of any employee benefit plan, or a director, or officer of the corporation and (ii) who was wholly successful, on the merits or otherwise, in defense of any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative and whether formal or informal, or a proceeding, in which he was a party, against reasonable expenses incurred by him in connection with the proceeding unless such indemnity is limited by the corporation’s articles of incorporation. U.S. Gold’s articles of incorporation do not contain any such limitation.
 
Section 7-109-102 of the Act provides, generally, that a Colorado corporation may indemnify a person made a party to a proceeding because the person is or was a director against any obligation incurred with respect to a proceeding to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employee benefit plan) or reasonable expenses incurred in the proceeding if the person conducted himself or herself in good faith and the person reasonably believed, in the case of conduct in an official capacity with the corporation,


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that the person’s conduct was in the corporation’s best interests and, in all other cases, his conduct was at least not opposed to the corporation’s best interests and, with respect to any criminal proceedings, the person had no reasonable cause to believe that his conduct was unlawful. U.S. Gold’s articles of incorporation and its bylaws provide for such indemnification. A corporation may not indemnify a director in connection with any proceeding by or in the right of the corporation in which the director was adjudged liable to the corporation or, in connection with any other proceeding charging the director derived an improper personal benefit, whether or not involving actions in an official capacity, in which proceeding the director was judged liable on the basis that he derived an improper personal benefit. Any indemnification permitted in connection with a proceeding by or in the right of the corporation is limited to reasonable expenses incurred in connection with such proceeding.
 
Under Section 7-109-107 of the Act, unless otherwise provided in the articles of incorporation, a Colorado corporation may indemnify an officer, employee, fiduciary, or agent of the corporation to the same extent as a director and may indemnify such a person who is not a director to a greater extent, if not inconsistent with public policy and if provided for by its bylaws, general or specific action of its board of directors or shareholders, or contract. U.S. Gold’s bylaws provide for indemnification of officers, employees and agents of U.S. Gold to the same extent as its directors.
 
The foregoing discussion of U.S. Gold’s articles of incorporation, bylaws and of the Act is not intended to be exhaustive and is qualified in its entirety by such articles of incorporation; bylaws and the Act.
 
See the section entitled “Comparison of Shareholder Rights — Indemnification of Directors and Officers” on page 85 of this prospectus.
 
Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the “Securities Act”) may be permitted to directors, officers and controlling persons of the small business issuers pursuant to the foregoing provisions, or otherwise, the small business issuers have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
 
ITEM 21.   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
(a) Exhibits.
 
The following exhibits are included as exhibits to this registration statement:
 
         
Item No.
 
Description
 
  3 .1   Articles of Incorporation of U.S. Gold (f/k/a Silver State Mining Corporation) filed with the Secretary of State of Colorado on June 24, 1979 (incorporated by reference from the Report on Form 10-KSB dated March 27, 1996, Exhibit 3.1, File No. 000-09137).
  3 .2   Articles of Amendment to the Articles of Incorporation of U.S. Gold filed with the Secretary of State of Colorado on June 22, 1988 (incorporated by reference from Report on Form 10-K for the year ended December 31, 1988, Exhibit 3.1, File No. 000-09137).
  3 .3   Articles of Amendment to the Articles of Incorporation of U.S. Gold filed with the Secretary of State of Colorado on July 5, 1988 (incorporated by reference from Report on Form 10-K for the year ended December 31, 1988, Exhibit 3.2, File No. 000-09137).
  3 .4   Articles of Amendment to the Articles of Incorporation of U.S. Gold filed with the Secretary of State of Colorado on December 20, 1991 (incorporated by reference from Report on Form 10-K for the year ended December 31, 1991, Exhibit 3.3, File No. 000-09137).
  3 .5   Articles of Amendment to the Articles of Incorporation of U.S. Gold filed with the Secretary of State of Colorado on November 15, 2005 (incorporated by reference filed with U.S. Gold’s Annual Report for the fiscal year ended December 31, 2005, Exhibit 3.1.5, File No. 000-9137).
  3 .6   Bylaws of U.S. Gold, as amended June 22, 1988 (incorporated by reference from the Report on Form 10-KSB for the year ended December 31, 1996 Exhibit 3.1, File No. 000-09137).
  3 .7   Amendment to the Bylaws of U.S. Gold effective as of October 3, 2005 (incorporated by reference filed with U.S. Gold’s Annual Report for the fiscal year ended December 31, 2005, Exhibit 3.2.1, File No. 000-09137).


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Item No.
 
Description
 
  *3 .8   Articles of Incorporation of US Gold Canadian Acquisition Corporation.
  *3 .9   Form of Articles of Amendment to US Gold Canadian Acquisition Corporation.
  *3 .10   Bylaws of US Gold Canadian Acquisition Corporation.
  **5 .1   Opinion of Dufford & Brown, P.C.
  *5 .2   Opinion of Fraser Milner Casgrain LLP.
  *8 .1   Opinion of Hogan & Hartson L.L.P. as to certain tax matters.
  *23 .1   Consent of Stark Winter Schenkein & Co., LLP.
  23 .2   Consent of Dufford & Brown, P.C. (to be included in Exhibit 5.1).
  23 .3   Consent of Fraser Milner Casgrain LLP (included in Exhibit 5.2).
  23 .4   Consent of Hogan & Hartson L.L.P. (included in Exhibit 8.1).
  **23 .5   Consent of Davidson & Company LLP.
  *23 .6   Consent of Ernst & Young LLP.
  **23 .7   Consent of Pricewaterhouse Coopers LLP.
  **23 .8   Consent of Amisano Hanson, Chartered Accountants.
  *23 .9   Consent of Robert T. McCusker, P. Geol.
  24 .1   Power of Attorney (included on signature page).
  *99 .1   Form of Letter of Acceptance and Transmittal.
  *99 .2   Form of Notice of Guaranteed Delivery.
 
 
* Filed herewith.
 
** To be filed by amendment.
 
(b) Financial Statement Schedules.
 
Schedules are omitted because they are not required or are not applicable, or the required information is shown in the financial statements or notes thereto.
 
ITEM 22.   UNDERTAKINGS
 
(a) Each of the undersigned registrants hereby undertakes:
 
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
 
(i) To include any prospectus required by section 10(a)(3) of the Securities Act;
 
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information in the registration statement. 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 prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in 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) To include any additional or changed material information on the plan of distribution;
 
(2) That, for the purpose of determining any liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of such securities at that to be deemed to be the initial bona fide offering thereof.

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(3) To file a post-effective amendment to remove from registration any of the securities being registered which remain unsold at the end of the offering.
 
(b) For determining liability of the registrants under the Securities Act to any purchaser in the initial distribution of the securities, the registrants 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 registrants 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 registrants 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 registrants or used or referred to by the registrants;
 
(iii) the portion of any other free writing prospectus relating to the offering containing material information about the registrants or its securities provided by or on behalf of the registrants; and
 
(iv) any other communication that is an offer in the offering made by the Registrant to the purchaser.
 
(c) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrants pursuant to the foregoing provisions, or otherwise, the registrants have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrants of expenses incurred or paid by a director, officer or controlling person of the registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrants will, unless in the opinion of their 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 Securities Act and will be governed by the final adjudication of such issue.
 
(d) Each of the undersigned registrants hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.
 
(e) Each of the undersigned registrants hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.


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SIGNATURES
 
Pursuant to the requirements of the Securities Act, each of the co-registrants has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Lakewood, State of Colorado, on November 13, 2006.
 
U.S. GOLD CORPORATION
(Registrant)
 
  By: 
/s/  William F. Pass
William F. Pass, Vice President,
Secretary and Treasurer
 
US GOLD CANADIAN ACQUISITION
CORPORATION
(Registrant)
 
  By: 
/s/  Robert R. McEwen
Robert R. McEwen, Chief
Executive Officer


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POWER OF ATTORNEY
 
We, the undersigned officers and directors of U.S. Gold Corporation and US Gold Canadian Acquisition Corporation, do hereby constitute and appoint William F. Pass to be our true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for each of us and in our name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith and about the premises, as fully to all intents and purposes as each of us might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or any of them or their or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof.
 
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement was signed by the following persons in the capacities and on the dates stated:
 
U.S. Gold Corporation Officers and Directors:
 
             
/s/  Robert R. McEwen

Robert R. McEwen 		  Chief Executive Officer and Chairman (Principal Executive Officer)   November 13, 2006
         
/s/  Ann S. Carpenter

Ann S. Carpenter 		  President, Chief Operating Officer and Director   November 13, 2006
         
/s/  William F. Pass

William F. Pass 		  Vice President, Chief Financial Officer and Secretary (Principal Financial and
Accounting Officer) 		  November 13, 2006
         
/s/  Michele L. Ashby

Michele L. Ashby 		  Director   November 13, 2006
         
/s/  Leanne M. Baker

Leanne M. Baker 		  Director   November 13, 2006
         
/s/  Declan J. Costelloe

Declan J. Costelloe 		  Director   November 13, 2006
         
/s/  Peter Bojtos

Peter Bojtos 		  Director   November 13, 2006
 
US Gold Canadian Acquisition Corporation Officers and Directors:
 
             
/s/  Robert R. McEwen

Robert R. McEwen 		  Chief Executive Officer and Director (Principal Executive Officer)   November 13, 2006
         
/s/  Ann S. Carpenter

Ann S. Carpenter 		  President and Director   November 13, 2006
         
/s/  William F. Pass

William F. Pass 		  Vice President, Secretary, Treasurer and Director
(Principal Accounting Officer) 		  November 13, 2006


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EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
         
Item No.
 
Description
 
  3 .1   Articles of Incorporation of U.S. Gold (f/k/a Silver State Mining Corporation) filed with the Secretary of State of Colorado on June 24, 1979 (incorporated by reference from the Report on Form 10-KSB dated March 27, 1996, Exhibit 3.1, File No. 000-09137).
  3 .2   Articles of Amendment to the Articles of Incorporation of U.S. Gold filed with the Secretary of State of Colorado on June 22, 1988 (incorporated by reference from Report on Form 10-K for the year ended December 31, 1988, Exhibit 3.1, File No. 000-09137).
  3 .3   Articles of Amendment to the Articles of Incorporation of U.S. Gold filed with the Secretary of State of Colorado on July 5, 1988 (incorporated by reference from Report on Form 10-K for the year ended December 31, 1988, Exhibit 3.2, File No. 000-09137).
  3 .4   Articles of Amendment to the Articles of Incorporation of U.S. Gold filed with the Secretary of State of Colorado on December 20, 1991 (incorporated by reference from Report on Form 10-K for the year ended December 31, 1991, Exhibit 3.3, File No. 000-09137).
  3 .5   Articles of Amendment to the Articles of Incorporation of U.S. Gold filed with the Secretary of State of Colorado on November 15, 2005 (incorporated by reference filed with U.S. Gold’s Annual Report for the fiscal year ended December 31, 2005, Exhibit 3.1.5, File No. 000-9137).
  3 .6   Bylaws of U.S. Gold, as amended June 22, 1988 (incorporated by reference from the Report on Form 10-KSB for the year ended December 31, 1996 Exhibit 3.1, File No. 000-09137).
  3 .7   Amendment to the Bylaws of U.S. Gold effective as of October 3, 2005 (incorporated by reference filed with U.S. Gold’s Annual Report for the fiscal year ended December 31, 2005, Exhibit 3.2.1, File No. 000-09137).
  *3 .8   Articles of Incorporation of US Gold Canadian Acquisition Corporation.
  *3 .9   Form of Articles of Amendment to US Gold Canadian Acquisition Corporation.
  *3 .10   Bylaws of US Gold Canadian Acquisition Corporation.
  **5 .1   Opinion of Dufford & Brown, P.C.
  *5 .2   Opinion of Fraser Milner Casgrain LLP.
  *8 .1   Opinion of Hogan & Hartson L.L.P. as to certain tax matters.
  *23 .1   Consent of Stark Winter Schenkein & Co., LLP.
  23 .2   Consent of Dufford & Brown, P.C. (to be included in Exhibit 5.1).
  23 .3   Consent of Fraser Milner Casgrain LLP (included in Exhibit 5.2).
  23 .4   Consent of Hogan & Hartson L.L.P. (included in Exhibit 8.1).
  **23 .5   Consent of Davidson & Company LLP.
  *23 .6   Consent of Ernst & Young LLP.
  **23 .7   Consent of Pricewaterhouse Coopers LLP.
  **23 .8   Consent of Amisano Hanson, Chartered Accountants.
  *23 .9   Consent of Robert T. McCusker, P. Geol.
  24 .1   Power of Attorney (included on signature page).
  *99 .1   Form of Letter of Acceptance and Transmittal.
  *99 .2   Form of Notice of Guaranteed Delivery.
 
 
* Filed herewith.
 
** To be filed by amendment.

EX-3.8 2 d40357exv3w8.htm ARTICLES OF INCORPORATION exv3w8
 

Exhibit 3.8
ARTICLES OF INCORPORATION
Business Corporations Act

1.   Name of Corporation:
US GOLD CANADIAN ACQUISITION CORPORATION
 
2.   The classes of shares, and any maximum number of shares that the corporation is authorized to issue:
See the attachment which is incorporated into this form.
 
3.   Restrictions on share transfers (if any):
None.
 
4.   Number, or minimum and maximum number, of directors that the corporation may have:
Not less than one (1) and not more than nine (9).
 
5.   If the corporation is restricted from carrying on a certain business, or restricted to carrying on a certain business, specify the restriction(s):
None.
 
6.   Other Rules or Provisions (if any):
See the attachment which is applicable to this section and which is incorporated into this form.
 
7.   Date:
April 18, 2006
             
 
Incorporators Names:     Address (including postal code):     Signature:
             
 
    
2900-10180 101 St		    
 
Colleen Cebuliak
     Edmonton AB T5J 3V5     Colleen M. Cebuliak
 
            

 

AUTHORIZED CAPITAL
1.   Authorized Capital
 
    The corporation is authorized to issue:
  (a)   An unlimited number of Class A Shares,
 
  (b)   An unlimited number of Class B Shares,
 
  (c)   An unlimited number of Class C Shares,
 
  (d)   An unlimited number of Class D Shares,
 
  (e)   An unlimited number of Class E Shares, and
 
  (f)   An unlimited number of Class F Shares.
2.   Acquired Assets
 
    Where shares of any class are issued by the corporation in exchange for
  (a)   property, other than a promissory note or promise to pay, or
 
  (b)   issued shares of the corporation of a different class,
such property or such issued shares of a different class shall herein be called the “Acquired Assets”.
3.   Rights, Privileges, Restrictions and Conditions
There shall be attached to the authorized shares of the respective classes, the following rights, privileges, restrictions and conditions:
  (a)   Voting
  (i)   The holders of the Class A and Class E Shares shall be entitled to one (1) vote for each Class A and Class E Share held at all meetings of the shareholders.
 
  (ii)   The holders of the Class B, Class C, Class D and Class F Shares shall have no right to vote at any meeting of the shareholders by virtue of their holding of any Class B, Class C, Class D or Class F Shares.
  (b)   Dividends
  (i)   The holders of the Class E Shares shall not be entitled to any dividends by virtue of their holding of any Class E Shares and the Board shall not declare any dividends on the Class E Shares.

 

 

  (ii)   The holders of the Class C Shares shall only be entitled to receive and the corporation shall only be obligated to pay such dividends as the Board may declare, provided that such dividends shall not exceed in any one fiscal year SIXTEEN (16%) PERCENT per annum of the Redemption Amount (as herein defined) of each Class C Share held.
 
      If the Board has declared a dividend on the Class C Shares for any fiscal year, no dividend shall be declared or paid or set aside for payment for any class of shares ranking junior to the Class C Shares for that fiscal year until the dividend declared on the Class C Shares is paid or set apart for payment.
 
      The holders of the Class C Shares shall not be entitled to any dividends other than or in excess of the dividends herein provided for, and if the Board does not declare a dividend for that fiscal year for the Class C Shares, then the rights of the holders of the Class C Shares to any dividend for such fiscal year shall be forever extinguished.
 
  (iii)   The holders of the Class D Shares shall only be entitled to receive and the corporation shall only be obligated to pay such dividends as the Board may declare, provided that such dividends shall not exceed in any one fiscal year SIXTEEN (16%) PERCENT per annum of the Redemption Amount (as herein defined) of each Class D Share held.
 
      If the Board has declared a dividend on the Class D Shares for any fiscal year, no dividend shall be declared or paid or set aside for payment for any class of shares ranking junior to the Class D Shares for that fiscal year until the dividend declared on the Class D Shares is paid or set apart for payment.
 
      The holders of the Class D Shares shall not be entitled to any dividends other than or in excess of the dividends herein provided for, and if the Board does not declare a dividend for that fiscal year for the Class D Shares, then the rights of the holders of the Class D Shares to any dividend for such fiscal year shall be forever extinguished.
 
  (iv)   The holders of the Class F Shares shall only be entitled to receive and the corporation shall only be obligated to pay such dividends as the Board may declare, provided that such dividends shall not exceed in any one fiscal year SIXTEEN (16%) PERCENT per annum of the Redemption Amount (as herein defined) of each Class F Share held.
 
      If the Board has declared a dividend on the Class F Shares for any fiscal year, no dividend shall be declared or paid or set aside for payment for any class of shares ranking junior to the Class F Shares for that fiscal year until the dividend declared on the Class F Shares is paid or set apart for payment.

 

 

      The holders of the Class F Shares shall not be entitled to any dividends other than or in excess of the dividends herein provided for, and if the Board does not declare a dividend for that fiscal year for the Class F Shares, then the rights of the holders of the Class F Shares to any dividend for such fiscal year shall be forever extinguished.
 
  (v)   The Board may at any time declare a dividend on the issued and outstanding Class C, Class D or Class F Shares without declaring any dividend or a dividend in the same amount on the issued and outstanding shares of any other class of shares.
 
  (vi)   Subject to subsections 3(b)(ii), (iii) and (iv) the Board may at any time declare a dividend on the issued and outstanding Class A or Class B Shares without declaring any dividend or a dividend in the same amount on the issued and outstanding shares of the other class. No declaration or payment of any dividend shall be made to the holders of any Class A or Class B Shares if there are reasonable grounds for the Board to believe that:
  (A)   the corporation is, or would after the payment be, unable to pay its liabilities as they become due, or
 
  (B)   the declaration or payment of such dividend would result in the realizable value of the assets of the corporation being reduced to less than the aggregate of
  (1)   the liabilities of the corporation,
 
  (2)   the Redemption Amounts of all issued and outstanding Class C, Class D and Class F Shares, and
 
  (3)   the stated capital of the Class A, Class B and Class E Shares.
  (c)   Redemption
  (i)   Any holder of Class C, Class D, Class E or Class F Shares shall be entitled to require the corporation to redeem all or any part of the Class C, Class D, Class E or Class F Shares registered in the name of such holder on the books of the corporation by tendering to the corporation, at its registered office, the share certificate or certificates representing the Class C, Class D, Class E or Class F Shares which the registered holder desires to have the corporation redeem, properly endorsed in blank for transfer or accompanied by an appropriate form of transfer properly executed in blank and in either case, if required by the Board, with the signature guaranteed by a Canadian chartered bank together with a request in writing (herein called the “Redemption Notice”) specifying

 

 

  (A)   that the registered holder desires to have all or a specified number of the Class C, Class D, Class E or Class F Shares represented by such certificate or certificates redeemed by the corporation, and
 
  (B)   the business day (herein called the “Redemption Date”) on which the holder desires to have the corporation redeem such Class C, Class D, Class E or Class F Shares.
      If the Redemption Notice is signed by an attorney, it shall be accompanied by evidence of the authority of such attorney satisfactory to the Board.
 
  (ii)   Upon receipt of the share certificate or certificates representing the Class C, Class D, Class E or Class F Shares which the registered holder desires to have the corporation redeem, together with the Redemption Notice, the corporation shall on the Redemption Date redeem such Class C, Class D, Class E or Class F Shares by paying to such registered holder, by cheque payable at any branch of the corporation’s bankers in Canada, for each Class C, Class D, Class E or Class F Share redeemed:
  (A)   for each Class C Share to be redeemed, the Redemption Amount together with all discretionary dividends declared thereon but unpaid,
 
  (B)   for each Class D Share to be redeemed, an amount equal to the Redemption Amount together with all discretionary dividends declared thereon but unpaid,
 
  (C)   for each Class E Share to be redeemed, an amount equal to the Redemption Amount, and
 
  (D)   for each Class F Share to be redeemed, the Redemption Amount together with all discretionary dividends declared thereon but unpaid.
      The Class C, Class D, Class E or Class F Shares shall be redeemed on the Redemption Date. The rights of the holders of such Class C, Class D, Class E or Class F Shares shall remain unaffected until the amount payable on redemption has been paid. Subsequent to payment of the amount payable on redemption, the holders of such Class C, Class D, Class E or Class F Shares shall not be entitled to any rights in respect thereof.
 
  (iii)   The Redemption Amount payable for each Class C Share shall be equal to the proportion of the difference between

 

 

  (A)   the fair market value of the Acquired Assets for which the Class C Shares were issued, as at the date of purchase by the corporation, as determined by the Board (in this paragraph and paragraph (iv) called the “Acquired Assets Value”), and
 
  (B)   the aggregate of the values of any non-share consideration given or assumed by the corporation as partial consideration for the Acquired Assets (in this paragraph and paragraph (iv) called the “Non-Share Consideration Value”),
      that one (l) bears to the total number of Class C Shares issued in exchange for the Acquired Assets and shall be fixed by the Board upon issuance of any Class C Shares.
 
  (iv)   If subsequent to the issuance of Class C Shares issued in exchange for any Acquired Assets it is determined by agreement between the Board and representatives of the Minister of National Revenue, or any other competent authority, or otherwise to the satisfaction of the Board that the Acquired Assets Value should have been a greater or lesser amount than the amount determined upon issuance (such greater or lesser amount shall in this paragraph be called the “Adjusted Acquired Assets Value”), or the Non-Share Consideration Value should have been a greater or lesser amount than the amount determined upon issuance (such greater or lesser amount shall in this paragraph be called the “Adjusted Non-Share Consideration Value”), the Redemption Amount payable for each Class C Share issued in exchange for those Acquired Assets and remaining outstanding at that time shall be equal to the proportion of the difference between
  (A)   the Adjusted Acquired Assets Value, or if there has been no adjustment, the Acquired Assets Value, and
 
  (B)   the aggregate of:
  (1)   the Adjusted Non-Share Consideration Value, or if there has been no adjustment, the Non-Share Consideration Value, and
 
  (2)   the Redemption Amounts of all Class C Shares issued in exchange for those Acquired Assets and purchased or redeemed by the corporation at or before that time that one (1) bears to the total number of Class C Shares issued in exchange for those Acquired Assets and remaining outstanding at that time.

 

 

If the corporation has purchased or redeemed all of the Class C Shares issued in exchange for any Acquired Assets at or before the time that the Adjusted Acquired Assets Value or the Adjusted Non-Share Consideration Value is determined and the agreement (the “Acquisition Agreement”) pursuant to which the corporation originally acquired the Acquired Assets requires the issuance of an additional share upon such adjustment being made when all of the Class C Shares originally issued have been purchased or redeemed, then the corporation shall issue one (1) additional Class C Share which shall be deemed to have been issued in exchange for those Acquired Assets, the Board shall fix the stated capital of that Class C Share in accordance with the Acquisition Agreement and the Redemption Amount of that Class C Share shall be equal to the difference between
  (C)   the Adjusted Acquired Assets Value, or if there has been no adjustment, the Acquired Assets Value, and
 
  (D)   the aggregate of:
  (1)   the Adjusted Non-Share Consideration Value, or if there has been no adjustment, the Non-Share Consideration Value, and
 
  (2)   the Redemption Amounts of all Class C Shares issued in exchange for those Acquired Assets and purchased or redeemed by the corporation.
  (v)   The Redemption Amount payable for each Class D Share shall be equal to the proportion of the stated capital account maintained for the Class D Shares that one (1) bears to the total number of Class D Shares issued and outstanding.
 
  (vi)   The Redemption Amount payable for each Class E Share shall be equal to the proportion of the stated capital account maintained for the Class E Shares that one (1) bears to the total number of Class E Shares issued and outstanding.
 
  (vii)   The Redemption Amount payable for each Class F Share shall be equal to the proportion of the difference between
  (A)    the fair market value of the Acquired Assets for which the Class F Shares were issued, as at the date of purchase by the corporation, as determined by the Board (in this paragraph and paragraph (viii) called the “Acquired Assets Value”), and

 

 

  (B)   the aggregate of the values of any non-share consideration given or assumed by the corporation as partial consideration for the Acquired Assets (in this paragraph and paragraph (viii) called the “Non-Share Consideration Value”),
      that one (l) bears to the total number of Class F Shares issued in exchange for the Acquired Assets and shall be fixed by the Board upon issuance of any Class F Shares.
 
  (viii)   If subsequent to the issuance of Class F Shares issued in exchange for any Acquired Assets it is determined by agreement between the Board and representatives of the Minister of National Revenue, or any other competent authority, or otherwise to the satisfaction of the Board that the Acquired Assets Value should have been a greater or lesser amount than the amount determined upon issuance (such greater or lesser amount shall in this paragraph be called the “Adjusted Acquired Assets Value”), or the Non-Share Consideration Value should have been a greater or lesser amount than the amount determined upon issuance (such greater or lesser amount shall in this paragraph be called the “Adjusted Non-Share Consideration Value”), the Redemption Amount payable for each Class F Share issued in exchange for those Acquired Assets and remaining outstanding at that time shall be equal to the proportion of the difference between
  (A)   the Adjusted Acquired Assets Value, or if there has been no adjustment, the Acquired Assets Value, and
 
  (B)   the aggregate of:
  (1)   the Adjusted Non-Share Consideration Value, or if there has been no adjustment, the Non-Share Consideration Value, and
 
  (2)   the Redemption Amounts of all Class F Shares issued in exchange for those Acquired Assets and purchased or redeemed by the corporation at or before that time that one (1) bears to the total number of Class F Shares issued in exchange for those Acquired Assets and remaining outstanding at that time.
If the corporation has purchased or redeemed all of the Class F Shares issued in exchange for any Acquired Assets at or before the time that the Adjusted Acquired Assets Value or the Adjusted Non-Share Consideration Value is determined and the agreement (the “Acquisition Agreement”) pursuant to which the corporation originally acquired the Acquired Assets requires the issuance of an additional share upon such adjustment being made when all of the Class F Shares originally issued have been purchased or redeemed, then the corporation shall issue one (1) additional Class F Share which shall be deemed to have been issued in exchange for those Acquired Assets, the Board shall fix the stated capital of that Class F Share in accordance with the Acquisition Agreement and the Redemption Amount of that Class F Share shall be equal to the difference between

 

 

  (C)   the Adjusted Acquired Assets Value, or if there has been no adjustment, the Acquired Assets Value, and
 
  (D)   the aggregate of:
  (1)   the Adjusted Non-Share Consideration Value, or if there has been no adjustment, the Non-Share Consideration Value, and
 
  (2)   the Redemption Amounts of all Class F Shares issued in exchange for those Acquired Assets and purchased or redeemed by the corporation.
  (ix)   If the redemption of all the issued and outstanding Class C, Class D, Class E or Class F Shares in respect of which the corporation has received Redemption Notices would cause the corporation to be in contravention of the Business Corporations Act (Alberta), the corporation shall at that time redeem, on a pro rata basis, disregarding fractions, only such number of Class C, Class D, Class E or Class F Shares as can be redeemed without causing such contravention and the corporation shall redeem the balance of the issued and outstanding Class C, Class D, Class E or Class F Shares in respect of which the corporation has received Redemption Notices on a pro rata basis, disregarding fractions, at such time as redemption can be made without causing the corporation to be in contravention of the Business Corporations Act (Alberta).
 
  (x)   Upon giving notice as herein provided, the Board may redeem the whole or any part of the issued and outstanding Class C, Class D, Class E or Class F Shares upon payment,
  (A)   for each Class C, Class D or Class F Share to be redeemed, of an amount equal to the Redemption Amount together with all discretionary dividends declared thereon but unpaid, and
 
  (B)   for each Class E Share to be redeemed, of an amount equal to the Redemption Amount.
Unless waived by the registered holder of the shares to be redeemed, at least ten (l0) days notice in writing of such redemption shall be given by mailing to the registered holder of the Class C, Class D, Class E or Class F Shares to be redeemed a notice specifying the date and place of redemption, which may be a chartered bank. If notice of any such redemption is given by the corporation in such manner and amounts sufficient to redeem the Class C, Class D, Class E or Class F Shares to be redeemed is deposited to a special account at any chartered bank specified in such notice, the Class C, Class D, Class E or Class F Shares in respect of which such deposit has been made shall be redeemed and the holder of such Class C, Class D, Class E or Class F Shares shall thereafter have no rights against the corporation in respect thereof except upon surrender of the certificates for such Class C, Class D, Class E or Class F Shares to receive payment therefor, without interest, out of the monies so deposited.

 

 

  (d)   Corporate Purchase
 
      Except where the corporation redeems shares pursuant to subsection 3(c) hereof, the corporation shall not make any payment to purchase or otherwise acquire any shares issued by it if there are reasonable grounds for the Board to believe that:
  (i)   The corporation is, or would after the payment be, unable to pay its liabilities as they become due, or
 
  (ii)   The realizable value of the corporation’s assets would after the payment be less than the aggregate of
  (A)   the liabilities of the corporation,
 
  (B)   the Redemption Amounts of all issued and outstanding Class C and Class F Shares, and
 
  (C)   the stated capital of the Class A, Class B, Class D and Class E Shares.
  (e)   Liquidation
 
      In the event of the voluntary or involuntary liquidation, dissolution or winding up of the corporation, or other distribution of assets of the corporation among shareholders for the purpose of winding up its affairs:
  (i)   The holders of the Class C, Class D and Class F Shares shall be entitled to receive ratably at the same time, before any distribution of any part of the assets of the corporation among the holders of the other classes of shares, from the assets of the corporation, an amount equal to the Redemption Amount for each Class C, Class D or Class F Share held by them, together with any dividends declared thereon but unpaid, and no more;

 

 

  (ii)   After distribution to the holders of the Class C, Class D and Class F Shares, but before any distribution of the assets of the corporation between the holders of the Class A and Class B Shares, the holders of the Class E Shares shall be entitled to receive ratably at the same time, from the assets of the corporation, an amount equal to the Redemption Amount for each Class E Share held by them, and no more; and
 
  (iii)   The holders of the issued and outstanding Class A and Class B Shares shall be entitled to participate ratably at the same time in any further distribution of the assets of the corporation.
StandA.ans

 

 

OTHER PROVISIONS
1.   Lien On Shares
 
    The corporation shall have a first and paramount lien on a share registered in the name of a shareholder or his legal representative, whether registered solely or jointly with any other person, for a debt of that shareholder to the corporation, including an amount unpaid in respect of a share issued by the corporation on the date it was incorporated under The Business Corporations Act (Alberta), whether the period for payment, fulfilment or discharge of that debt shall have actually arrived or not. The lien shall extend to all dividends and distributions of capital declared or otherwise payable on such shares.
 
2.   Private Company
  (a)   The number of shareholders of the corporation, exclusive of
  (i)   persons who are in its employment or that of an affiliate and are shareholders of the corporation, and
 
  (ii)   persons who, having been formerly in the employment of the corporation, were, while in that employment, shareholders of the corporation and have continued to be shareholders of the corporation after termination of that employment,
is limited to not more than fifty (50) persons, two (2) or more persons who are the joint registered owners of one (1) or more shares being counted as one (1) shareholder.
  (b)   Any invitation by the corporation to the public to subscribe for its securities is prohibited.
3.   Appointment of Directors
 
    The directors may, between annual general meetings, appoint one (1) or more additional directors of the corporation to serve until the next annual general meeting, provided that the number of additional directors shall not at any time exceed one-third (1/3) of the number of directors who held office at the expiration of the last annual meeting of the corporation.
 
4.   Borrowing
 
    The directors may
  (a)   borrow money on the credit of the corporation,
 
  (b)   issue, reissue, sell or pledge debt obligations of the corporation,
 
  (c)   give a guarantee on behalf of the corporation to secure performance of an obligation of any person, and
 
  (d)   mortgage, hypothecate, pledge or otherwise create a security interest in all or any property of the corporation, owned or subsequently acquired, to secure any obligation of the corporation.
StandC.ans

 

EX-3.9 3 d40357exv3w9.htm FORM OF ARTICLES OF INCORPORATION exv3w9
 

Exhibit 3.9
AUTHORIZED CAPITAL
US Gold Canadian Acquisition Corporation
The authorized capital of the corporation is amended:
  1.   pursuant to paragraph 173(1)(e) of the Business Corporations Act (Alberta) (the “ABCA”) by changing the rights, privileges, restrictions and conditions of the Class A Shares;
 
  2.   pursuant to paragraph 173(1)(h) of the ABCA by canceling the authorized but unissued Class B Shares, Class C Shares, Class D Shares, Class E Shares and Class F Shares in the capital stock of the Corporation; and
 
  3.   pursuant to paragraph 173(1)(d) of the ABCA by creating an unlimited number of Exchangeable Shares;
all as more fully set out below.
By reason of these amendments, the maximum number of shares of each class that the corporation is authorized to issue and the designation, rights, privileges, restrictions and conditions of each class of shares are set out below.
A.   CLASS A SHARES
The Corporation is authorized to issue an unlimited number of Class A Shares (which for convenience of reference in these Articles are categorized as Common Shares), which constitute a separate and distinct class of shares. The Class A Shares shall carry and be subject to the following rights, privileges, restrictions and conditions, namely:
  1.   Subject to the specific restriction with respect to the election or appointment of directors outlined in Section 2 below, the holders of Class A Shares are entitled to receive notice of any meeting of the shareholders of the Corporation and to attend and vote thereat except those meetings where only holders of a specified class or particular series of shares are entitled to vote and each holder thereof shall be entitled to one (1) vote per share in person or by proxy.
 
  2.   With respect to the rights of the shareholders to elect or appoint directors as outlined in the ABCA, the voting rights attaching to the Class A Shares provided by these Articles shall give the holders of the Class A Shares the right to vote on the election or appointment of two (2) out of the three (3) directors of the Corporation, and, for clarification, the holders of the Class A Shares shall have no right to vote on the election or appointment of the remaining director of the Corporation, which is a right attaching to the Exchangeable Shares.

 

 

  3.   Subject to the rights, privileges, restrictions and conditions attaching to any other shares of the Corporation, the holders of the Class A Shares are entitled to receive any dividend declared and paid by the Corporation.
 
  4.   Subject to the rights, privileges, restrictions and conditions attaching to any other shares of the Corporation in the event of the liquidation, dissolution or winding-up of the Corporation, the holders of the Class A Shares are entitled to receive the remaining property of the Corporation after payment of all of the Corporation’s liabilities.
B.   EXCHANGEABLE SHARES
 
    The Corporation is authorized to issue an unlimited number of Exchangeable Shares, which constitute a separate and distinct class of shares. The Exchangeable Shares shall carry and be subject to the following rights, privileges, restrictions and conditions, namely:
  1.   INTERPRETATION
 
  1.1   Definitions
For the purposes of these share provisions, unless something in the subject matter or context is inconsistent therewith:
“ABCA” means the Business Corporations Act (Alberta), as amended from time to time.
“AMEX” means the American Stock Exchange.
“Alberta ULC” means US Gold Alberta ULC, an unlimited liability corporation existing and governed by the laws of the Province of Alberta.
“Board of Directors” means the board of directors of the Corporation.
“Business Day” means any day other than a Saturday, Sunday, a public holiday or a day on which commercial banks are not open for business in Toronto, Ontario or Denver, Colorado under applicable law.
“Canadian Dollar Equivalent” means in respect of an amount expressed in a currency other than Canadian dollars (the “Foreign Currency Amount”) at any date the product obtained by multiplying:
  (a)   the Foreign Currency Amount; by
 
  (b)   the noon spot exchange rate on such date for such foreign currency expressed in Canadian dollars as reported by the Bank of Canada or, in the event such spot exchange rate is not available, such spot exchange rate on such date for such foreign currency expressed in

 

 

      Canadian dollars as may be deemed by the Board of Directors to be appropriate for such purpose.
“Common Shares” means the common shares in the capital of the Corporation.
“Corporation” means US Gold Canadian Acquisition Corporation, a company incorporated under the Business Corporations Act (Alberta).
“Current Market Price” means, in respect of a share of US Gold Common Stock on any date, the Canadian Dollar Equivalent of the average closing sales price (computed and rounded to the third decimal point) on the TSX or the AMEX during a period of 20 consecutive trading days ending not more than five trading days prior to such date or, if the shares of US Gold Common Stock are not then listed on the TSX or the AMEX, on such other stock exchange or automated quotation system on which the shares of US Gold Common Stock are listed or quoted, as the case may be, as may be selected by the Board of Directors for such purpose; provided, however, that if in the opinion of the Board of Directors the public distribution or trading activity of shares of US Gold Common stock during such period is inadequate to create a market that reflects the fair market value of a share of US Gold Common Stock, then the Current Market Price of a share of US Gold Common Stock shall be determined by the Board of Directors based upon the advice of such qualified independent financial advisors as the Board of Director may deem to be appropriate, and provided further that any such selection, opinion or determination by the Board of Directors shall be conclusive and binding.
“Dividend Amount” means an amount equal to the full amount of all dividends and distributions declared and unpaid on each Exchangeable Share and all dividends and distributions declared on a share of US Gold Common Stock that have not been declared on each Exchangeable Share in accordance with Section 3.1, in each case with a record date prior to the effective date of the purchase, redemption or other acquisition of such Exchangeable Share pursuant to ARTICLE 5, ARTICLE 6 or ARTICLE 7.
“Exchangeable Shares” means the exchangeable shares in the capital of the Corporation, having the rights, privileges, restrictions and conditions set forth in these Share Provisions.
“LCR Exercising Party” has the meaning set out in Section 5.2(1).
“Liquidation Amount” has the meaning ascribed thereto Section 5.1(1).
“Liquidation Call Purchase Price” has the meaning set out in Section 5.2(1).
“Liquidation Call Right” has the meaning ascribed thereto in Section 5.2(1).

 

 

“Liquidation Date” has the meaning ascribed thereto in Section 5.1(1).
“Person” includes any individual, firm, partnership, limited partnership, joint venture, venture capital fund, limited liability company, unlimited liability company, association, trust, trustee, executor, administrator, legal personal representative, estate, group, body corporate, corporation, unincorporated association or organization, governmental entity, syndicate or other entity, whether or not having legal status.
“RCR Exercising Party” has the meaning set out in Section 6.2(1).
“Redemption Call Purchase Price” has the meaning set out in Section 7.2(1).
“Redemption Call Right” has the meaning ascribed thereto in Section 7.2(1).
“Redemption CR Exercising Party” has the meaning set out in Section 7.2(1).
“Redemption Date” means the earlier of (i) the seventh anniversary of the date on which Exchangeable Shares are first issued; and (ii) the date established by the Board of Directors for the redemption by the Corporation of all but not less than all of the outstanding Exchangeable Shares on which there are outstanding fewer than that number of Exchangeable Shares equal to 10% of the total number of Exchangeable Shares issued in connection with the offers to purchase all of the outstanding common shares of Coral Gold Resources Ltd., Nevada Pacific Gold Ltd., Tone Resources Limited and White Knight Resources Ltd. outstanding (other than Exchangeable Shares held by US Gold or its Subsidiaries), and as such number of shares may be adjusted as deemed appropriate by the Board of Directors to give effect to any subdivision, combination or consolidation of or stock dividend on the Exchangeable Shares, any issue or distribution of rights to acquire Exchangeable Shares or securities exchangeable for or convertible into Exchangeable Shares, any issue or distribution of other securities or rights or evidences of indebtedness or assets, or any other capital reorganization or other transaction affecting the Exchangeable Shares.
“Redemption Price” has the meaning ascribed thereto in Section 7.1(1).
“Retracted Shares” has the meaning ascribed thereto in Section 6.1(1).
“Retraction Call Purchase Price” has the meaning set out in Section 6.2(1).
“Retraction Call Right” has the meaning ascribed thereto in Section 6.2(1).
“Retraction Date” has the meaning ascribed thereto in Section 6.1(1).

 

 

“Retraction Price” has the meaning ascribed thereto in Section 6.1(1).
“Retraction Request” has the meaning ascribed thereto in Section 6.1(1).
“Share Provisions” means the rights, privileges, restrictions and conditions set out herein.
“Subsidiary” means, when used with reference to US Gold, any corporation more than 50% of the outstanding stock of which is owned, directly or indirectly, by US Gold, by one or more other Subsidiaries of US Gold, or by US Gold and one or more other Subsidiaries of US Gold.
“Support Agreement” means a support agreement to be entered into prior to the issuance by the Corporation of any Exchangeable Shares among US Gold, Alberta ULC and the Corporation, the purpose of which will be for US Gold (for itself and on behalf of Alberta ULC) and the Corporation to covenant to do all things reasonably necessary and desirable to enable and permit the Corporation or Alberta ULC to perform its obligations hereunder.
“Transfer Agent” means any Person as may from time to time be appointed by the Corporation as the registrar and transfer agent for the Exchangeable Shares.
“Trustee” means the trustee chosen by US Gold to act as trustee under the Voting and Exchange Trust Agreement, being a corporation organized and existing under the laws of Canada or any Province thereof and authorized to carry on the business of a trust company in all the provinces of Canada, and any successor trustee appointed under the Voting and Exchange Trust Agreement.
“TSX” means the Toronto Stock Exchange.
“US Gold” means U.S. Gold Corporation, a corporation existing under the laws of Colorado.
“US Gold Call Notice” has the meaning ascribed thereto in Section 6.2(2).
“US Gold Common Stock” means the shares of common stock of US Gold, par value US$1.00 per share, having voting rights of one vote per share, and any other securities into which such shares may be changed or for which such shares may be exchanged (whether or not US Gold shall be the issuer of such securities) or any other consideration which may be received by the holders of such shares pursuant to a recapitalization, reconstruction, reorganization or reclassification of, or amalgamation, merger, liquidation or similar transaction affecting, such shares.

 

 

“US Gold Dividend Declaration Date” means the date on which the board of directors of US Gold declares any dividend or other distribution on the shares of US Gold Common Stock.
“Voting and Exchange Trust Agreement” means the agreement to be entered into prior to the issuance by the Corporation of any Exchangeable Shares made between US Gold, Alberta ULC, the Corporation and the Trustee, the purpose of which will be to create a trust for the benefit of the registered holders of Exchangeable Shares that will enable the Trustee to exercise voting rights on behalf of the holders of Exchangeable Shares similar to those of holders of US Gold Common Stock.
1.2 Sections and Headings
The division of these Share Provisions into articles and sections and the insertion of headings are for reference purposes only and shall not affect the interpretation of these Share Provisions. Unless otherwise indicated, any reference in these Share Provisions to an article or section refers to the specified article or section of these Share Provisions.
1.3 Number Gender and Persons
In these Share Provisions, unless the context otherwise requires, words importing the singular number include the plural and vice versa, words importing any gender include all genders and words importing persons include individuals, corporations, partnerships, companies, associations, trusts, unincorporated organizations, governmental bodies and other legal or business entities of any kind.
1.4 Payments
All payments to be made hereunder shall be made without interest and less any tax required by Canadian law to be deducted and withheld.
1.5 Currency
In these Share Provisions, unless stated otherwise, all dollar amounts are in Canadian dollars.
2. RANKING OF EXCHANGEABLE SHARES
2.1 Ranking
The Exchangeable Shares shall be entitled to a preference over the Common Shares, and any other shares ranking junior to the Exchangeable Shares with respect to the payment of dividends as and to the extent provided in ARTICLE 3 and with respect to the distribution of assets in the event of the liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary,

 

 

or any other distribution of the assets of the Corporation among its shareholders for the purpose of winding up its affairs as and to the extent provided in ARTICLE 5.
3. DIVIDENDS
3.1 Dividends
A holder of an Exchangeable Share shall be entitled to receive and the Board of Directors shall, subject to applicable law, on each US Gold Dividend Declaration Date, declare a dividend on each Exchangeable Share:
  (a)   in the case of a cash dividend or distribution declared on the shares of US Gold Common Stock, in an amount in cash for each Exchangeable Share equal to the Canadian Dollar Equivalent of the cash dividend or distribution declared on each share of US Gold Common Stock on the US Gold Dividend Declaration Date;
 
  (b)   in the case of a stock dividend or distribution declared on the shares of US Gold Common Stock to be paid in shares of US Gold Common Stock, by the issue or transfer by the Corporation of such number of Exchangeable Shares for each Exchangeable Share as is equal to the number of shares of US Gold Common Stock to be paid on each share of US Gold Common Stock; or
 
  (c)   in the case of a dividend or distribution declared on the shares of US Gold Common Stock in property other than cash or shares of US Gold Common Stock, in such type and amount of property for each Exchangeable Share as is the same as or economically equivalent to (to be determined by the Board of Directors as contemplated by Section 3.5 hereof) the type and amount of property declared as a dividend or distribution on each share of US Gold Common Stock.
Such dividends shall be paid out of the assets of the Corporation properly applicable to the payment of dividends, or out of authorized but unissued shares or other securities of the Corporation, as applicable. The holders of Exchangeable Shares shall not be entitled to any dividends other than or in excess of the dividends referred to in this Section 3.1.
3.2 Payment of Dividends
Cheques of the Corporation payable at par at any branch of the bankers of the Corporation shall be issued in respect of any cash dividends or distributions contemplated by Section 3.1(a) hereof and the sending of such cheque to each holder of an Exchangeable Share shall satisfy the cash dividend represented thereby unless the cheque is not paid on presentation. Certificates registered in the name of the registered holder of Exchangeable Shares shall be issued or

 

 

transferred in respect of any stock dividends or other distributions contemplated by Section 3.1(b) hereof and the sending of such a certificate to each holder of an Exchangeable Share shall satisfy the stock dividend or other distribution represented thereby. Such other type and amount of property in respect of any dividends or distributions contemplated by Section 3.1(c) hereof shall be issued, distributed or transferred by the Corporation in such manner as it shall determine and the issuance, distribution or transfer thereof by the Corporation to each holder of an Exchangeable Share shall satisfy the dividend or other distribution represented thereby. No holder of an Exchangeable Share shall be entitled to recover by action or other legal process against the Corporation any dividend that is represented by a cheque that has not been duly presented to the Corporation’s bankers for payment or that otherwise remains unclaimed for a period of six years from the date on which such dividend was payable.
3.3 Record and Payment Dates
The record date for the determination of the holders of Exchangeable Shares entitled to receive payment of, and the payment date for, any dividend or distribution declared on the Exchangeable Shares under Section 3.1 hereof shall be the same dates as the record date and payment date, respectively, for the corresponding dividend or distribution declared on the shares of US Gold Common Stock.
3.4 Partial Payment
If on any payment date for any dividends or distributions declared on the Exchangeable Shares under Section 3.1 hereof the dividends or distributions are not paid in full on all of the Exchangeable Shares then outstanding, any such dividends that remain unpaid shall be paid on a subsequent date or dates determined by the Board of Directors on which the Corporation shall have sufficient moneys or other assets properly applicable to the payment of such dividends or distributions.
3.5 Economic Equivalence
For the purposes of Section 3.1 hereof, the Board of Directors shall determine, acting in good faith and in its sole discretion (with the assistance of such reputable and qualified independent financial advisors and/or other experts as the board may require), economic equivalence and each such determination shall be conclusive and binding on the Corporation and its shareholders. In making each such determination, the following factors shall, without excluding other factors determined by the Board of Directors to be relevant, be considered by the Board of Directors:
  (a)   in the case of any stock dividend or other distribution payable in shares of US Gold Common Stock, the number of such shares

 

 

      issued in proportion to the number of shares of US Gold Common Stock previously outstanding;
 
  (b)   in the case of the issuance or distribution of any rights, options or warrants to subscribe for or purchase shares of US Gold Common Stock (or securities exchangeable for or convertible into or carrying rights to acquire shares of US Gold Common Stock), the relationship between the exercise price of each such right, option or warrant and the Current Market Price of a share of US Gold Common Stock;
 
  (c)   in the case of the issuance or distribution of any other form of property (including, without limitation, any shares or securities of US Gold of any class other than US Gold Common Stock, any rights, options or warrants other than those referred to in Section 3.5(b), any evidences of indebtedness of US Gold or any assets of US Gold), the relationship between the fair market value (as determined by the Board of Directors in the manner above contemplated) of such property to be issued or distributed with respect to each outstanding share of US Gold Common Stock and the Current Market Price of a share of US Gold Common Stock;
 
  (d)   in the case of any subdivision, redivision or change of the then outstanding shares of US Gold Common Stock into a greater number of shares of US Gold Common Stock or the reduction, combination, consolidation or change of the then outstanding shares of US Gold Common Stock into a lesser number of shares of US Gold Common Stock or any amalgamation, merger, reorganization or other transaction affecting the US Gold Common Stock, the effect thereof upon the then outstanding shares of US Gold Common Stock; and
 
  (e)   in all such cases, the general taxation consequences of the relevant event to holders of Exchangeable Shares to the extent that such consequences may differ from the taxation consequences to holders of shares of US Gold Common Stock as a result of differences between taxation laws of Canada and the United States (except for any differing consequences arising as a result of differing marginal taxation rates and without regard to the individual circumstances of holders of Exchangeable Shares).
  4.   CERTAIN RESTRICTIONS
 
  4.1   Certain Restrictions
 
  (1)   Except as provided in Section 4.1(2), so long as any of the Exchangeable Shares are outstanding, the Corporation shall not at any time without, but

 

 

      may at any time with, the approval of the holders of the Exchangeable Shares given as specified in Section 9.2 hereof:
  (a)   pay any dividends on the Common Shares or any other shares ranking junior to the Exchangeable Shares with respect to the payment of dividends, other than stock dividends payable in Common Shares or in any such other shares ranking junior to the Exchangeable Shares, as the case may be;
 
  (b)   redeem or purchase or make any capital distribution in respect of Common Shares or any other shares ranking junior to the Exchangeable Shares with respect to the distribution of the assets in the event of the liquidation, dissolution or winding up of the Corporation;
 
  (c)   redeem or purchase any other shares of the Corporation ranking equally with the Exchangeable Shares with respect to the payment of dividends or the distribution of assets in the event of the liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, or any other distribution of the assets of the Corporation among its shareholders for the purpose of winding up its affairs; or
 
  (d)   issue any shares other than (i) Exchangeable Shares, (ii) Common Shares, and (iii) any other shares not ranking superior to the Exchangeable Shares.
  (2)   The restrictions in Sections 4.1(1)(a), 4.1(1)(b) and 4.1(1)(c) hereof shall not apply if all dividends and distributions on the outstanding Exchangeable Shares corresponding to dividends and distributions declared and paid to date on the shares of US Gold Common Stock shall have been declared and paid in full on the Exchangeable Shares.
 
  5.   LIQUIDATION
5.1 Participation Upon Liquidation, Dissolution or Winding Up of the Corporation
  (1)   Subject to applicable law and the due exercise by US Gold or Alberta ULC of a Liquidation Call Right, in the event of the liquidation, dissolution or winding up of the Corporation or any other distribution of the assets of the Corporation among its shareholders for the purpose of winding up its affairs, a holder of Exchangeable Shares shall be entitled to receive from the assets of the Corporation in respect of each Exchangeable Share held by such holder on the effective date of such liquidation, dissolution or winding up or other distribution (the “Liquidation Date”), before any distribution of any part of the assets of the Corporation among the holders of the Common Shares or any other shares ranking junior to

 

 

      the Exchangeable Shares, an amount per share equal to (a) the Current Market Price of a share of US Gold Common Stock on the last Business Day prior to the Liquidation Date, which shall be satisfied in full by the Corporation causing to be delivered to such holder one share of US Gold Common Stock, plus (b) the Dividend Amount, if any (collectively, the “Liquidation Amount”).
 
  (2)   In the case of a distribution on Exchangeable Shares under this Section 5.1 and provided the Liquidation Call Right has not been exercised, on or promptly after the Liquidation Date, the Corporation shall cause to be delivered to the holders of the Exchangeable Shares the Liquidation Amount for each such Exchangeable Share upon presentation and surrender of the certificates representing such Exchangeable Shares, together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the ABCA and the Articles of the Corporation and such additional documents and instruments as the Transfer Agent and the Corporation may reasonably require, at the registered office of the Corporation or at any office of the Transfer Agent as may be specified by the Corporation by notice to the holders of the Exchangeable Shares. Payment of the aggregate Liquidation Amount for such Exchangeable Shares shall be made by causing to be delivered to each holder, at the address of the holder recorded in the securities register of the Corporation for the Exchangeable Shares or by holding for pick-up by the holder at the registered office of the Corporation or at any office of the Transfer Agent as may be specified by the Corporation by notice to the holders of Exchangeable Shares, certificates representing the aggregate number of shares of US Gold Common Stock deliverable by the Corporation to such holder (which shares shall be duly issued as fully paid and non-assessable and shall be free and clear of any lien, claim, encumbrance, security interest or adverse claim) and a cheque of the Corporation payable at par at any branch of the bankers of the Corporation in payment of the Dividend Amount, if any, payable to such holder, without interest (less any amounts withheld on account of tax required to be deducted and withheld therefrom). On and after the Liquidation Date, the holders of the Exchangeable Shares shall cease to be holders of such Exchangeable Shares and shall not be entitled to exercise any of the rights of holders in respect thereof (including any rights under the Voting and Exchange Trust Agreement), other than the right to receive the Liquidation Amount, unless payment of the total Liquidation Amount for such Exchangeable Shares shall not be made upon presentation and surrender of share certificates in accordance with the foregoing provisions, in which case the rights of the holders shall remain unaffected until the Liquidation Amount has been paid in the manner hereinbefore provided. The Corporation shall have the right at any time after the Liquidation Date to transfer or cause to be issued or transferred, and deposited in a custodial account with any chartered bank or trust company in Canada named in such notice, the Liquidation Amount in respect of the Exchangeable

 

 

      Shares represented by certificates that have not at the Liquidation Date been surrendered by the holders thereof, such Liquidation Amount to be held by such bank or trust company as trustee for and on behalf of, and for the use and benefit of, such holders. Upon such deposit being made, the rights of a holder of Exchangeable Shares after such deposit shall be limited to receiving its proportionate part of the Liquidation Amount for such Exchangeable Shares so deposited, without interest, and when received by such bank or trust company, all dividends and other distributions with respect to the shares of US Gold Common Stock to which such holder is entitled with a record date after the date of such deposit and before the date of transfer of such shares of US Gold Common Stock to such holder (in each case less any amounts withheld on account of tax required to be deducted and withheld therefrom) against presentation and surrender of the certificates for the Exchangeable Shares held by them in accordance with the foregoing provisions. Upon such payment or deposit of the total Liquidation Amount (less any amounts withheld on account of tax required to be deducted and withheld therefrom), the holders of the Exchangeable Shares shall thereafter be considered and deemed for all purposes to be holders of the US Gold Common Stock delivered to them or the custodian on their behalf.
 
  (3)   After the Corporation has satisfied its obligations to pay the holders of the Exchangeable Shares the total Liquidation Amount pursuant to this Section 5.1, such holders shall not be entitled to share in any further distribution of the assets of the Corporation.
 
  5.2   Liquidation Call Rights
 
  (1)   Subject to the limitations set forth in Section 5.2(2), including that Alberta ULC shall only be entitled to exercise its Liquidation Call Right with respect to those holders of Exchangeable Shares, if any, in respect of which US Gold has not exercised its Liquidation Call Right, US Gold and Alberta ULC shall each have the overriding right (a “Liquidation Call Right”), in the event of and notwithstanding the proposed liquidation, dissolution or winding up of the Corporation pursuant to Section 5.1 hereof, to purchase from all but not less than all of the holders of Exchangeable Shares on the Liquidation Date (other than US Gold and its Subsidiaries) all but not less than all of the Exchangeable Shares held by each such holder on payment by whichever of US Gold or Alberta ULC is exercising such right (the “LCR Exercising Party”) of an amount per share equal to (a) the Current Market Price of a share of US Gold Common Stock on the last Business Day prior to the Liquidation Date, which shall be satisfied in full by delivery to such holder of one share of US Gold Common Stock, plus (b) the Dividend Amount, if any (collectively, the “Liquidation Call Purchase Price”). In the event of the exercise of a Liquidation Call Right, each holder of Exchangeable Shares (other than Alberta ULC and its Subsidiaries) shall be obligated to sell all the

 

 

      Exchangeable Shares held by such holder to the LCR Exercising Party on the Liquidation Date on payment by the LCR Exercising Party to the holder of the Liquidation Call Purchase Price for each such share and the Corporation shall have no obligation to pay any Liquidation Amount to the holders of such shares so purchased by the LCR Exercising Party.
 
  (2)   Alberta ULC shall only be entitled to exercise its Liquidation Call Right with respect to those holders of Exchangeable Shares, if any, in respect of which US Gold has not exercised its Liquidation Call Right. In order to exercise its Liquidation Call Right, an LCR Exercising Party must notify in writing the Transfer Agent, as agent for the holders of Exchangeable Shares, the Trustee and the Corporation of its intention to exercise such right at least 55 days before the Liquidation Date in the case of a voluntary liquidation, dissolution or winding up of the Corporation and at least five Business Days before the Liquidation Date in the case of an involuntary liquidation, dissolution or winding up of the Corporation. The Transfer Agent will notify the holders of Exchangeable Shares as to whether or not a Liquidation Call Right has been exercised (such notice to specify the LCR Exercising Party) forthwith after the expiry of the date by which the same may be exercised, such form of notice to be provided by US Gold to the Transfer Agent. If an LCR Exercising Party exercises its Liquidation Call Right in accordance with this Section 5.2, all obligations of the Corporation under Section 5.1 shall terminate and on the Liquidation Date such LCR Exercising Party will purchase and the holders of Exchangeable Shares (other than US Gold and its Subsidiaries) will sell all of their Exchangeable Shares then outstanding for a price per share equal to the Liquidation Call Purchase Price.
 
  (3)   For the purposes of completing a purchase of the Exchangeable Shares pursuant to the exercise of a Liquidation Call Right, the LCR Exercising Party shall deposit with the Transfer Agent, on or before the Liquidation Date, certificates representing the total number of shares of US Gold Common Stock deliverable by the LCR Exercising Party (which shares shall be duly issued as fully paid and non-assessable and shall be free and clear of any lien, claim, encumbrance, security interest or adverse claim) in payment of the total Liquidation Call Purchase Price and a cheque in the amount of the remaining portion, if any, of the total Liquidation Call Purchase Price and any interest allowed on such deposit shall belong to the LCR Exercising Party. Provided that the total Liquidation Call Purchase Price has been so deposited with the Transfer Agent, on and after the Liquidation Date the rights of each holder of Exchangeable Shares (other than US Gold and its Subsidiaries) will be limited to receiving such holder’s proportionate part of the total Liquidation Call Purchase Price payable by the LCR Exercising Party, without interest, and when received by the Transfer Agent, all dividends and other distributions with respect to the shares of US Gold Common Stock to which such holder is entitled with a record date after the date of such deposit and before the date of

 

 

      transfer of such shares of US Gold Common Stock to such holder (in each case less any amounts withheld on account of tax required to be deducted and withheld therefrom) against presentation and surrender of the certificates for the Exchangeable Shares held by them in accordance with the following provisions. Upon surrender to the Transfer Agent of a certificate representing Exchangeable Shares, together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the ABCA and such additional documents and instruments as the Transfer Agent and the Corporation may reasonably require, the holder of such surrendered certificate shall be entitled to receive in exchange therefor, and the Transfer Agent on behalf of the LCR Exercising Party shall deliver to such holder, a certificate representing the shares of US Gold Common Stock to which such holder is entitled and a cheque in payment of the Dividend Amount, if any, without interest (less any amounts withheld on account of tax required to be deducted and withheld therefrom). If neither US Gold nor Alberta ULC exercises its Liquidation Call Right in the manner described above, on the Liquidation Date the holders of Exchangeable Shares shall be entitled to receive in exchange therefor the Liquidation Amount otherwise payable by the Corporation in connection with the liquidation, dissolution or winding up of the Corporation pursuant to Section 5.1 hereof.
 
  6.   RETRACTION AT OPTION OF HOLDER
 
  6.1   Retraction at Option of Holder
 
  (1)   Subject to applicable law and the due exercise by either US Gold or Alberta ULC of a Retraction Call Right, a holder of Exchangeable Shares shall be entitled at any time to require the Corporation to redeem, on the fifth Business Day after the date on which the Retraction Request is received by the Corporation (the “Retraction Date”), any or all of the Exchangeable Shares registered in the name of such holder for an amount per share equal to (a) the Current Market Price of a share of US Gold Common Stock on the last Business Day prior to the Retraction Date, which shall be satisfied in full by the Corporation causing to be delivered to such holder one share of US Gold Common Stock, plus (b) the Dividend Amount, if any (collectively, the “Retraction Price”). The holder must give notice of a requirement to redeem by presenting and surrendering at the registered office of the Corporation or at any office of the Transfer Agent as may be specified by the Corporation by notice to the holders of Exchangeable Shares the certificate representing the Exchangeable Shares that the holder desires to have the Corporation redeem, together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the ABCA and such additional documents and instruments as the Transfer Agent and the Corporation may reasonably require, together with a duly executed statement (the “Retraction Request”) in the form of Schedule A hereto or

 

 

      in such other form as may be acceptable to the Corporation specifying that the holder desires to have all or any number specified therein of the Exchangeable Shares represented by such certificate (the “Retracted Shares”) redeemed by the Corporation.
 
  (2)   In the case of a redemption of Exchangeable Shares under this Section 6.1, upon receipt by the Corporation or the Transfer Agent in the manner specified in Section 6.1(1) hereof of a certificate representing the number of Exchangeable Shares which the holder desires to have the Corporation redeem, together with a Retraction Request, and provided that the Retraction Request is not revoked by the holder in the manner specified in Section 6.1(5) and that neither US Gold or Alberta ULC has exercised a Retraction Call Right, the Corporation shall redeem the Retracted Shares effective at the close of business on the Retraction Date. On the Retraction Date, the Corporation shall deliver or cause to be delivered to the relevant holder, at the address of the holder recorded in the securities register of the Corporation for the Exchangeable Shares or at the address specified in the holder’s Retraction Request or by holding for pick-up by the holder at the registered office of the Corporation or at any office of the Transfer Agent, as may be specified by the Corporation by notice to the holders of Exchangeable Shares, a certificate representing the number of shares of US Gold Common Stock to which such holder is entitled (which shares shall be duly issued as fully paid and non-assessable and shall be free and clear of any lien, claim, encumbrance, security interest or adverse claim) registered in the name of the holder or in such other name as the holder may request in payment of the Retraction Price and a cheque of the Corporation payable at par at any branch of the bankers of the Corporation in payment of the remaining portion, if any, of the aggregate Retraction Price to which such holder is entitled (less any amounts withheld on account of tax required to be deducted and withheld therefrom) and such delivery of such certificate and cheque by or on behalf of the Corporation by the Transfer Agent shall be deemed to be payment of and shall satisfy and discharge all liability for the Retraction Price to the extent that the same is represented by such share certificates and cheque, unless such cheque is not paid on due presentation. If only a part of the Exchangeable Shares represented by any certificate is redeemed, a new certificate for the balance of such Exchangeable Shares shall be issued to the holder at the expense of the Corporation.
 
  (3)   On and after the close of business on the Retraction Date, the holder of the Retracted Shares shall cease to be a holder of such Retracted Shares and shall not be entitled to exercise any of the rights of a holder in respect thereof, other than the right to receive its proportionate part of the total Retraction Price, unless upon presentation and surrender of certificates in accordance with the foregoing provisions, payment of the aggregate Retraction Price payable to such holder shall not be made, in which case the rights of such holder shall remain unaffected until such aggregate

 

 

      Retraction Price has been paid in the manner hereinbefore provided. On and after the close of business on the Retraction Date, provided that presentation and surrender of certificates and payment of such aggregate Retraction Price has been made in accordance with the foregoing provisions, the holder of the Retracted Shares so redeemed by the Corporation shall thereafter be considered and deemed for all purposes to be a holder of the shares of US Gold Common Stock delivered to such holder.
 
  (4)   Notwithstanding any other provision of this Section 6.1, the Corporation shall not be obligated to redeem Retracted Shares specified by a holder in a Retraction Request to the extent that such redemption of Retracted Shares would be contrary to solvency requirements or other provisions of applicable law. If the Corporation believes that on any Retraction Date it would not be permitted by any of such provisions to redeem the Retracted Shares tendered for redemption on such date, and neither US Gold nor Alberta ULC shall have exercised its Retraction Call Right with respect to the Retracted Shares, the Corporation shall only be obligated to redeem Retracted Shares specified by a holder in a Retraction Request to the extent of the maximum number that may be so redeemed (rounded down to a whole number of shares) as would not be contrary to such provisions and shall notify the holder at least two Business Days prior to the Retraction Date as to the number of Retracted Shares which will not be redeemed by the Corporation. In any case in which the redemption by the Corporation of Retracted Shares would be contrary to solvency requirements or other provisions of applicable law and more than one holder has delivered a Retraction Request, the Corporation shall redeem Retracted Shares in accordance with Section 6.1(2) on a pro rata basis and shall issue to each such holder of Retracted Shares a new certificate, at the expense of the Corporation, representing the Retracted Shares not redeemed by the Corporation pursuant to Section 6.1(2) hereof. If the Retraction Request is not revoked by the holder in the manner specified in Section 6.1(5) and neither US Gold nor Alberta ULC shall have exercised its Retraction Call Right in respect of any such Retracted Shares, an Insolvency Event (as defined in the Voting and Exchange Trust Agreement) shall, to the extent it has not theretofore occurred, be deemed thereupon to have occurred and the holder of any such Retracted Shares not redeemed by the Corporation pursuant to Section 6.1(2) as a result of solvency requirements or other provisions of applicable law shall be deemed by giving the Retraction Request to have exercised its Exchange Right (as defined in the Voting and Exchange Trust Agreement) so as to require US Gold or, at the option of US Gold, Alberta ULC to purchase the unredeemed Retracted Shares from such holder on the Retraction Date or as soon as practicable thereafter on payment by US Gold or, at the option of US Gold, Alberta ULC to such holder of the Retraction Price, all as more specifically provided in the Voting and Exchange Trust Agreement.

 

 

  (5)   A holder of Retracted Shares may, by notice in writing given by the holder to the Corporation before the close of business on the Business Day immediately preceding the Retraction Date, withdraw its Retraction Request in which event such Retraction Request shall be null and void and, for greater certainty, the revocable offer constituted by the Retraction Request to sell the Retracted Shares to US Gold or Alberta ULC shall be deemed to have been revoked.
 
  (6)   Notwithstanding any other provision of this ARTICLE 6, if:
  (a)   exercise of the rights of the holders of the Exchangeable Shares, or any of them, to require the Corporation to redeem any Exchangeable Shares pursuant to this ARTICLE 6 on any Retraction Date would require listing particulars or any similar document to be issued in order to obtain the approval of AMEX or TSX to the listing and trading (subject to official notice of issuance) of, the shares of US Gold Common Stock that would be required to be delivered to such holders of Exchangeable Shares in connection with the exercise of such rights; and
 
  (b)   as a result of (a) above, it would not be practicable (notwithstanding the reasonable endeavours of US Gold) to obtain such approvals in time to enable all or any of such shares of US Gold Common Stock to be admitted to listing and trading by AMEX or TSX (subject to official notice of issuance) when so delivered, that Retraction Date shall, notwithstanding any other date specified or otherwise deemed to be specified in any relevant Retraction Request, be deemed for all purposes to be the earlier of (i) the second business day immediately following the date the approvals referred to in Section 6.1(6)(a) are obtained, and (ii) the date which is 30 Business Days after the date on which the relevant Retraction Request is received by the Corporation, and references in these share provisions to such Retraction Date shall be construed accordingly.
  6.2   Retraction Call Rights
 
  (1)   In the event that a holder of Exchangeable Shares delivers a Retraction Request pursuant to Section 6.1 and subject to the limitations set forth in Section 6.2(2), including that Alberta ULC shall only be entitled to exercise its Retraction Call Right with respect to those holders of Exchangeable Shares, if any, in respect of which US Gold has not exercised its Retraction Call Right, US Gold and Alberta ULC shall each have the overriding right (a “Retraction Call Right”), notwithstanding the proposed redemption of the Exchangeable Shares by the Corporation pursuant to Section 6.1 hereof, to purchase from such holder on the Retraction Date all but not less than all of the Retracted Shares held by

 

 

      such holder on payment by whichever of US Gold or Alberta ULC is exercising such right (the “RCR Exercising Party”) of an amount per share equal to (a) the Current Market Price of a share of US Gold Common Stock on the last Business Day prior to the Retraction Date, which shall be satisfied in full by the RCR Exercising Party causing to be delivered to such holder one share of US Gold Common Stock, plus (b) the Dividend Amount, if any (the “Retraction Call Purchase Price”). In the event of the exercise of a Retraction Call Right, a holder of Exchangeable Shares who has delivered a Retraction Request shall be obligated to sell all the Retracted Shares to the RCR Exercising Party on the Retraction Date on payment by the RCR Exercising Party of an amount per share equal to the Retraction Call Purchase Price for each such share.
 
  (2)   Upon receipt by the Corporation of a Retraction Request, the Corporation shall promptly notify US Gold and Alberta ULC thereof. Alberta ULC shall only be entitled to exercise its Retraction Call Right with respect to those holders of Exchangeable Shares, if any, in respect of which US Gold has not exercised its Retraction Call Right. In order to exercise its Retraction Call Right, the RCR Exercising Party must notify the Corporation in writing of its determination to do so (a “US Gold Call Notice”) within five Business Days of notification to such RCR Exercising Party by the Corporation of the receipt by the Corporation of the Retraction Request. If either US Gold or Alberta ULC does not so notify the Corporation within such five Business Day period, the Corporation shall notify the holder as soon as possible thereafter that neither will exercise the Retraction Call Right. If either US Gold or Alberta ULC delivers a US Gold Call Notice within such five Business Day period and duly exercises its Retraction Call Right in accordance with this Section 6.2, the obligation of the Corporation to redeem the Retracted Shares shall terminate and, provided that the Retraction Request is not revoked by the holder in the manner specified in Section 6.1(5), the RCR Exercising Party shall purchase from such holder and such holder shall sell to the RCR Exercising Party on the Retraction Date the Retracted Shares for the Retraction Call Purchase Price. Provided that the aggregate Retraction Call Purchase Price has been so deposited with the Transfer Agent as provided in Section 6.2(3), the closing of the purchase and sale of the Retracted Shares pursuant to the Retraction Call Right shall be deemed to have occurred as at the close of business on the Retraction Date and, for greater certainty, no redemption by the Corporation of such Retracted Shares shall take place on the Retraction Date. In the event that neither US Gold nor Alberta ULC delivers a US Gold Call Notice within such five Business Day period, and provided that the Retraction Request is not revoked by the holder in the manner specified in Section 6.1(5), the Corporation shall redeem the Retracted Shares on the Retraction Date and in the manner otherwise contemplated in Section 6.1.

 

 

  (3)   For the purpose of completing a purchase of Exchangeable Shares pursuant to the exercise of a Retraction Call Right, the RCR Exercising Party shall deliver or cause to be delivered to the relevant holder, at the address of the holder recorded in the securities register of the Corporation for the Exchangeable Shares or at the address specified in the holder’s Retraction Request or by holding for pick-up by the holder at the registered office of the Corporation or at any office of the Transfer Agent as may be specified by the Corporation by notice to the holders of Exchangeable Shares, a certificate representing the number of shares of US Gold Common Stock to which such holder is entitled (which shares shall be duly issued as fully paid and non-assessable and shall be free and clear of any lien, claim, encumbrance, security interest or adverse claim) registered in the name of the holder or in such other name as the holder may request in payment of the Retraction Call Purchase Price and a cheque of the RCR Exercising Party payable at par and in Canadian dollars at any branch of the bankers of US Gold, Alberta ULC or of the Corporation in Canada in payment of the remaining portion, if any, of such aggregate Retraction Call Purchase Price (less any amounts withheld on account of tax required to be deducted and withheld therefrom) and such delivery of such certificate and cheque on behalf of the RCR Exercising Party by the Transfer Agent shall be deemed to be payment of and shall satisfy and discharge all liability for the Retraction Call Purchase Price to the extent that the same is represented by such share certificates and cheque, unless such cheque is not paid on due presentation.
 
  (4)   On and after the close of business on the Retraction Date, the holder of the Retracted Shares shall not be entitled to exercise any of the rights of a holder in respect thereof, other than the right to receive its proportionate part of the total Retraction Call Purchase Price unless upon presentation and surrender of certificates in accordance with the foregoing provisions, payment of the aggregate Retraction Call Purchase Price payable to such holder shall not be made, in which case the rights of such holder shall remain unaffected until such aggregate Retraction Call Purchase Price has been paid in the manner hereinbefore provided. On and after the close of business on the Retraction Date, provided that presentation and surrender of certificates and payment of such aggregate Retraction Call Purchase Price has been made in accordance with the foregoing provisions, the holder of the Retracted Shares so purchased by the RCR Exercising Party shall thereafter be considered and deemed for all purposes to be a holder of the shares of US Gold Common Stock delivered to such holder.
 
  7.   REDEMPTION BY THE CORPORATION
 
  7.1   Redemption by the Corporation
 
  (1)   Subject to applicable law and the due exercise by either US Gold or Alberta ULC of a Redemption Call Right, the Corporation shall on the

 

 

      Redemption Date redeem all of the then outstanding Exchangeable Shares for an amount per share equal to (a) the Current Market Price of a share of US Gold Common Stock on the last Business Day prior to such Redemption Date, which shall be satisfied in full by the Corporation causing to be delivered one share of US Gold Common Stock, plus (b) the Dividend Amount, if any (collectively, the “Redemption Price”).
 
  (2)   In any case of a redemption of Exchangeable Shares under this Section 7.1, the Corporation shall, at least 60 days before the Redemption Date, send or cause to be sent to each holder of Exchangeable Shares a notice in writing of the redemption by the Corporation or the purchase by US Gold or Alberta ULC under its Redemption Call Right, as the case may be, of the Exchangeable Shares held by such holder (other than US Gold and its Subsidiaries in the case of a purchase by US Gold or Alberta ULC). Such notice shall set out the formula for determining the Redemption Price or the Redemption Call Purchase Price, as the case may be, such Redemption Date and, if applicable, particulars of the Redemption Call Right.
 
  (3)   On or after the Redemption Date and subject to the exercise by US Gold or Alberta ULC of a Redemption Call Right, the Corporation shall cause to be delivered to the holders of the Exchangeable Shares to be redeemed the Redemption Price for each such Exchangeable Share upon presentation and surrender at the registered office of the Corporation or at any office of the Transfer Agent as may be specified by the Corporation in such notice of the certificates representing such Exchangeable Shares, together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the ABCA and such additional documents and instruments as the Transfer Agent and the Corporation may reasonably require. Payment of the aggregate Redemption Price for Exchangeable Shares held by a holder shall be made by delivery to such holder, at the address of such holder recorded in the securities register of the Corporation or by holding for pick-up by the holder at the registered office of the Corporation or at any office of the Transfer Agent as may be specified by the Corporation in such notice, of a certificate representing the aggregate number of shares of US Gold Common Stock deliverable by the Corporation to such holder (which shares shall be duly issued as fully paid and non-assessable and shall be free and clear of any lien, claim, encumbrance, security interest or adverse claim) and a cheque of the Corporation payable at par at any branch of the bankers of the Corporation in respect of the remaining portion, if any, of such aggregate Redemption Price (less any amounts withheld on account of tax required to be deducted and withheld therefrom). On and after the Redemption Date, the holders of the Exchangeable Shares called for redemption shall not be entitled to exercise any of the rights of holders in respect thereof, other than the right to receive their proportionate part of the total Redemption Price, unless payment of the aggregate Redemption Price deliverable to a holder for Exchangeable Shares shall not be made

 

 

      upon presentation and surrender of share certificates in accordance with the foregoing provisions, in which case the rights of the holder shall remain unaffected until the aggregate Redemption Price deliverable to such holder has been paid in the manner hereinbefore provided.
 
  (4)   The Corporation shall have the right at any time after the sending of notice of its intention to redeem the Exchangeable Shares as aforesaid to deposit or cause to be deposited the total Redemption Price of the Exchangeable Shares so called for redemption, or of such of the said Exchangeable Shares represented by certificates that have not at the date of such deposit been surrendered by the holders thereof in connection with such redemption, in a custodial account with any chartered bank or trust company in Canada named in such notice and any interest allowed on such deposit shall belong to the Corporation. Provided that such total Redemption Price has been so deposited prior to the Redemption Date, on and after the Redemption Date, the Exchangeable Shares shall be redeemed and the Rights of the holders thereof after the Redemption Date shall be limited to receiving their proportionate part of the total Redemption Price for such Exchangeable Shares so deposited, against presentation and surrender of the said certificates held by them, respectively, in accordance with the foregoing provisions. Upon such payment or deposit of the total Redemption Price, the holders of the Exchangeable Shares shall thereafter be considered and deemed for all purposes to be holders of the shares of US Gold Common Stock delivered to them.
 
  7.2   Redemption Call Rights
 
  (1)   Subject to the limitations set forth in Section 7.2(2), including that Alberta ULC shall only be entitled to exercise its Redemption Call Right with respect to those holders of Exchangeable Shares, if any, in respect of which US Gold has not exercised its Redemption Call Right, US Gold and Alberta ULC shall each have the overriding right (a “Redemption Call Right”), notwithstanding the proposed redemption of the Exchangeable Shares by the Corporation pursuant to Section 7.1 hereof, to purchase from all but not less than all of the holders of Exchangeable Shares (other than US Gold and its Subsidiaries) on the last Business Day prior to the Redemption Date in respect of which the Redemption Call Right is exercised all but not less than all of the Exchangeable Shares held by each such holder on payment by whichever of US Gold or Alberta ULC is exercising such right (the “Redemption CR Exercising Party”) of an amount per share equal to (a) the Current Market Price of a share of US Gold Common Stock on the last Business Day prior to such Redemption Date, which shall be satisfied in full by causing to be delivered to such holder one share of US Gold Common Stock plus (b) the Dividend Amount, if any (collectively, the “Redemption Call Purchase Price”). In the event of the exercise of a Redemption Call Right, each holder of

 

 

      Exchangeable Shares (other than US Gold and its Subsidiaries) shall be obligated to sell all the Exchangeable Shares held by such holder to the Redemption CR Exercising Party on the last Business Day prior to such Redemption Date on payment by the Redemption CR Exercising Party to such holder of the Redemption Call Purchase Price for each such share.
 
  (2)   Alberta ULC shall only be entitled to exercise its Redemption Call Right with respect to those holders of Exchangeable Shares, if any, in respect of which US Gold has not exercised its Redemption Call Right. In order to exercise its Redemption Call Right, a Redemption CR Exercising Party must notify in writing the Transfer Agent, as agent for the holders of Exchangeable Shares and the Corporation of its intention to exercise such right at least 30 days before the Redemption Date. The Transfer Agent will notify the holders of Exchangeable Shares as to whether or not a Redemption Call Right has been exercised (such notice to specify the Redemption CR Exercising Party) forthwith after the expiry of the date by which the same may be exercised, such form of notice to be provided by US Gold to the Transfer Agent. If a Redemption CR Exercising Party duly exercises its Redemption Call Right in accordance with this Section 7.2, the right of the Corporation to redeem any Exchangeable Shares pursuant to Section 7.1 on the Redemption Date shall terminate at such time and on the last Business Day prior to such Redemption Date such Redemption CR Exercising Party will purchase and the holders of Exchangeable Shares (other than US Gold and its Subsidiaries) will sell all of their Exchangeable Shares then outstanding for a price per share equal to the Redemption Call Purchase Price.
 
  (3)   For the purposes of completing a purchase of the Exchangeable Shares pursuant to the exercise of a Redemption Call Right, the Redemption CR Exercising Party shall deposit with the Transfer Agent, on or before the last Business Day prior to the Redemption Date, certificates representing the total number of shares of US Gold Common Stock deliverable by the Redemption CR Exercising Party (which shares shall be duly issued as fully paid and non-assessable and shall be free and clear of any lien, claim, encumbrance, security interest or adverse claim) in payment of the total Redemption Call Purchase Price and a cheque in the amount of the remaining portion, if any, of the total Redemption Call Purchase Price, without interest (less any amounts withheld on account of tax required to be deducted and withheld therefrom) and any interest allowed on such deposit shall belong to the Redemption CR Exercising Party. Provided that the total Redemption Call Purchase Price has been so deposited with the Transfer Agent, on and after the last Business Day prior to the Redemption Date the rights of each holder of Exchangeable Shares (other than US Gold and its Subsidiaries) will be limited to receiving such holder’s proportionate part of the total Redemption Call Purchase Price payable by the Redemption CR Exercising Party upon presentation and surrender by such holder of certificates representing the Exchangeable

 

 

      Shares held by such holder in accordance with the following provisions and such holder shall on and after the last Business Day prior to such Redemption Date be considered and deemed for all purposes to be the holder of the shares of US Gold Common Stock delivered to such holder. Upon surrender to the Transfer Agent of a certificate representing Exchangeable Shares, together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the ABCA and such additional documents and instruments as the Transfer Agent and the Corporation may reasonably require, the holder of such surrendered certificate shall be entitled to receive in exchange therefor, and the Transfer Agent on behalf of the Redemption CR Exercising Party shall deliver to such holder, a certificate representing the shares of US Gold Common Stock to which such holder is entitled and a cheque in payment of the remaining portion, if any, of the holder’s proportionate part of the total Redemption Call Purchase Price, without interest (less any amounts withheld on account of tax required to be deducted and withheld therefrom). If neither US Gold nor Alberta ULC exercises the Redemption Call Right in the manner described above, on the Redemption Date a holder of Exchangeable Shares shall be entitled to receive in exchange therefor the Redemption Price otherwise payable by the Corporation in connection with the redemption of the Exchangeable Shares pursuant to Section 7.1 hereof.
 
  8.   VOTING RIGHTS
 
  8.1   Voting Rights
Except as required by applicable law and by the provisions of Sections 8.2, 9.1, 10.1 and 11.2 hereof, the holders of the Exchangeable Shares shall not be entitled as such to receive notice of or to attend any meeting of the shareholders of the Corporation or to vote at any such meeting.
8.2 Election or Appointment of Single Director
With respect to the rights of the shareholders to elect or appoint directors as outlined in the ABCA, the rights attaching to the Exchangeable Shares provided by these Share Provisions shall give the holders of the Exchangeable Shares the limited right to vote (and each holder thereof shall be entitled to one (1) vote per share in person or by proxy) on the election or appointment of one (1) out of the three (3) directors of the Corporation, and, for clarification, the holders of the Exchangeable Shares shall have no right to vote on the election or appointment of the remaining two (2) directors of the Corporation, which is a right attaching to the Class A Shares.
9. AMENDMENT AND APPROVAL
9.1 Amendment

 

 

The rights, privileges, restrictions and conditions attaching to the Exchangeable Shares may be added to, changed or removed only with the approval of the holders of the Exchangeable Shares given as hereinafter specified.
9.2 Approval
Any approval given by the holders of the Exchangeable Shares to add to, change or remove any right, privilege, restriction or condition attaching to the Exchangeable Shares or any other matter requiring the approval or consent of the holders of the Exchangeable Shares shall be deemed to have been sufficiently given if it shall have been given in accordance with applicable law, subject to a minimum requirement that such approval be evidenced by resolution passed by not less than two-thirds of the votes cast on such resolution at a meeting of holders of Exchangeable Shares duly called and held at which the holders of at least 10% of the outstanding Exchangeable Shares at that time are present or represented by proxy; provided that such approval must be given also by the affirmative vote of holders of more than two-thirds of the Exchangeable Shares represented in person or by proxy at the meeting excluding Exchangeable Shares beneficially owned by US Gold or any of its Subsidiaries. If at any such meeting the holders of at least 10% of the outstanding Exchangeable Shares at that time are not present or represented by proxy within one-half hour after the time appointed for such meeting, then the meeting shall be adjourned to such date not less than five days thereafter and to such time and place as may be designated by the Chairman of such meeting. At such adjourned meeting the holders of Exchangeable Shares present or represented by proxy thereat may transact the business for which the meeting was originally called and a resolution passed thereat by the affirmative vote of not less than two-thirds of the votes cast on such resolution at such meeting excluding Exchangeable Shares beneficially owned by US Gold or any of its Subsidiaries shall constitute the approval or consent of the holders of the Exchangeable Shares.
10. RECIPROCAL CHANGES, ETC. IN RESPECT OF US GOLD COMMON STOCK
10.1 Reciprocal Changes
  (1)   Each holder of an Exchangeable Share acknowledges that the Support Agreement provides, in part, that US Gold will not, except as provided in the Support Agreement, without the prior approval of the Corporation and the prior approval of the holders of the Exchangeable Shares given in accordance with Section 9.2 hereof:
  (a)   issue or distribute shares of US Gold Common Stock (or securities exchangeable for or convertible into or carrying rights to acquire US Gold Common Stock) to the holders of all or substantially all of the then outstanding shares of US Gold Common Stock, by way

 

 

      of stock dividend or other distribution, other than an issue of shares of US Gold Common Stock (or securities exchangeable for or convertible into or carrying rights to acquire US Gold Common Stock) to holders of shares of US Gold Common Stock who exercise an option to receive dividends in shares of US Gold Common Stock (or securities exchangeable for or convertible into or carrying rights to acquire US Gold Common Stock) in lieu of receiving cash dividends;
 
  (b)   issue or distribute rights, options or warrants to the holders of all or substantially all of the then outstanding shares of US Gold Common Stock entitling them to subscribe for or to purchase shares of US Gold Common Stock (or securities exchangeable for or convertible into or carrying rights to acquire shares of US Gold Common Stock); or
 
  (c)   issue or distribute to the holders of all or substantially all of the then outstanding shares of US Gold Common Stock:
  (i)   shares or securities (including evidence of indebtedness) of US Gold of any class other than US Gold Common Stock (other than shares convertible into or exchangeable for or carrying rights to acquire US Gold Common Stock);
 
  (ii)   rights, options or warrants other than those referred to in Section 10.1(1)(b) above; or
 
  (iii)   assets of US Gold,
unless the economic equivalent on a per share basis of such rights, options, securities, shares, evidences of indebtedness or other assets is issued or distributed simultaneously to holders of the Exchangeable Shares.
  (2)   Each holder of an Exchangeable Share acknowledges that the Support Agreement further provides, in part, that US Gold will not, except as provided in the Support Agreement, without the prior approval of the Corporation and the prior approval of the holders of the Exchangeable Shares given in accordance with Section 9.2 hereof:
  (a)   subdivide, redivide or change the then outstanding US Gold Common Stock into a greater number of shares of US Gold Common Stock;
 
  (b)   reduce, combine, consolidate or change the then outstanding shares of US Gold Common Stock into a lesser number of shares of US Gold Common Stock; or

 

 

  (c)   reclassify or otherwise change the shares of US Gold Common Stock or effect an amalgamation, merger, reorganization or other transaction affecting the US Gold Common Stock,
unless the same or an economically equivalent change shall simultaneously be made to, or in, the rights of the holders of the Exchangeable Shares.
The Support Agreement further provides, in part, that the aforesaid provisions of the Support Agreement shall not be changed without the approval of the holders of the Exchangeable Shares given in accordance with Section 9.2 hereof.
11. ACTIONS BY THE CORPORATION UNDER SUPPORT AGREEMENT
11.1 Actions by the Corporation
The Corporation will take all such actions and do all such things as shall be necessary or advisable to perform and comply with and to facilitate performance and compliance by US Gold and Alberta ULC with all provisions of the Support Agreement applicable to US Gold, Alberta ULC and the Corporation, respectively, in accordance with the terms thereof including, without limitation, taking all such actions and doing all such things as shall be necessary or advisable to enforce to the fullest extent possible for the direct benefit of the Corporation all rights and benefits in favour of the Corporation under or pursuant to such agreement.
11.2 Changes to Support Agreement
The Corporation shall not agree to or otherwise give effect to any amendment to, or waiver or forgiveness of its rights or obligations under, the Support Agreement without the approval of the holders of the Exchangeable Shares given in accordance with Section 9.2 hereof other than such amendments, waivers and/or forgiveness as may be necessary or advisable for the purposes of:
  (a)   adding to the covenants of the other parties to such agreement for the protection of the Corporation or the holders of the Exchangeable Shares;
 
  (b)   making such provisions or modifications not inconsistent with such agreement as may be necessary or desirable with respect to matters or questions arising thereunder which, in the opinion of the Board of Directors, it may be expedient to make, provided that the Board of Directors shall be of the good faith opinion, after consultation with counsel, that such provisions and modifications will not be prejudicial to the interests of the holders of the Exchangeable Shares; or

 

 

  (c)   making such changes in or corrections to such agreement which, on the advice of counsel to the Corporation, are required for the purpose of curing or correcting any ambiguity or defect or inconsistent provision or clerical omission or mistake or manifest error contained therein, provided that the Board of Directors shall be of the good faith opinion, after consultation with counsel, that such provisions and modifications will not be prejudicial to the interests of the holders of the Exchangeable Shares.
12. LEGEND; CALL RIGHTS; WITHHOLDING RIGHTS
12.1 Legend
The certificates evidencing the Exchangeable Shares shall contain or have affixed thereto a legend in form and on terms approved by the Board of Directors, with respect to the Support Agreement and the Voting and Exchange Trust Agreement (including, but not limited to the provisions with respect to the call rights, voting rights and exchange rights thereunder).
12.2 Call Rights
Each holder of an Exchangeable Share, whether of record or beneficial, by virtue of becoming and being such a holder shall be deemed to acknowledge each of the Liquidation Call Right, the Retraction Call Right and the Redemption Call Right, in each case, in favour of US Gold and Alberta ULC, and the overriding nature thereof in connection with the liquidation, dissolution or winding-up of the Corporation or any other distribution of the assets of the Corporation among its shareholders for the purpose of winding up its affairs, or the retraction or redemption of Exchangeable Shares, as the case may be, and to be bound thereby in favour of US Gold or Alberta ULC, as the case may be, as herein provided.
12.3 Withholding Rights
US Gold, Alberta ULC, the Corporation and the Transfer Agent shall be entitled to deduct and withhold from any consideration otherwise payable under to any holder of Exchangeable Shares such amounts as US Gold, Alberta ULC, the Corporation or the Transfer Agent is required to deduct and withhold with respect to such payment under the Income Tax Act (Canada) or United States tax laws or any provision of provincial, state, federal, local or foreign tax law, in each case as amended or succeeded. The Transfer Agent may act and rely on the advice of counsel with respect to such matters. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes as having been paid to the holder of the Exchangeable Shares in respect of which such deduction and withholding was made, provided that such withheld amounts are actually remitted to the appropriate taxing authority. To the extent that the amount so required to be deducted or withheld from any payment to a holder exceeds the cash portion of the consideration otherwise payable to the holder, US Gold, Alberta ULC, the

 

 

Corporation and the Transfer Agent are hereby authorized to sell or otherwise dispose of such portion of the consideration as is necessary to provide sufficient funds to US Gold, Alberta ULC, the Corporation or the Transfer Agent, as the case may be, to enable it to comply with such deduction or withholding requirement and US Gold, Alberta ULC, the Corporation or the Transfer Agent shall notify the holder thereof and remit to such holder any unapplied balance of the net proceeds of such sale.
13. NOTICES
13.1 Notices
Subject to applicable law, any notice, request or other communication to be given to the Corporation by a holder of Exchangeable Shares shall be in writing and shall be valid and effective if given by mail (postage prepaid) or by telecopy or by delivery to the registered office of the Corporation and addressed to the attention of the Secretary of the Corporation. Any such notice, request or other communication, if given by mail, telecopy or delivery, shall only be deemed to have been given and received upon actual receipt thereof by the Corporation.
13.2 Certificates
Any presentation and surrender by a holder of Exchangeable Shares to the Corporation or the Transfer Agent of certificates representing Exchangeable Shares in connection with the liquidation, dissolution or winding-up of the Corporation or the retraction or redemption of Exchangeable Shares shall be made by registered mail (postage prepaid) or by delivery to the registered office of the Corporation or to such office of the Transfer Agent as may be specified by the Corporation, in each case, addressed to the attention of the Secretary of the Corporation. Any such presentation and surrender of certificates shall only be deemed to have been made and to be effective upon actual receipt thereof by the Corporation or the Transfer Agent, as the case may be. Any such presentation and surrender of certificates made by registered mail (postage prepaid) shall be at the sole risk of the holder mailing the same.
13.3 Notices to Shareholders
Subject to applicable law, any notice, request or other communication to be given to a holder of Exchangeable Shares by or on behalf of the Corporation shall be in writing and shall be valid and effective if given by mail (postage prepaid) or by delivery to the address of the holder recorded in the resister of shareholders of the Corporation or, in the event of the address of any such holder not being so recorded, then at the last known address of such holder. Any such notice, request or other communication, if given by mail, shall be deemed to have been given and received on the fifth Business Day following the date of mailing and, if given by delivery, shall be deemed to have been given and received on the date of delivery. Accidental failure or omission to give any notice, request or other communication

 

 

to one or more holders of Exchangeable Shares, or any defect in such notice, shall not invalidate or otherwise alter or affect any action or proceeding to be taken by the Corporation pursuant thereto.
In the event of any interruption of mail service immediately prior to a scheduled mailing or in the period following a mailing during which delivery normally would be expected to occur, the Corporation will make reasonable efforts to disseminate any notice by other means, such as publication. Except as otherwise required or permitted by law, if post offices in Canada or the United States are not open for the deposit of mail, any notice which the Corporation or the Transfer Agent may give or cause to be given will be deemed to have been properly given and to have been received by holders of Exchangeable Shares if (i) it is given to the TSX for dissemination or (ii) it is published once in the National Edition of The Globe and Mail and in the daily newspapers of general circulation in each of the French and English languages in the City of Montreal, provided that if the National Edition of The Globe and Mail is not being generally circulated, publication thereof will be made in any other daily newspaper of general circulation published in the City of Toronto.
Notwithstanding any other provisions of these share provisions, notices, other communications and deliveries need not be mailed if the Corporation determines that delivery thereof by mail may be delayed. Persons entitled to any deliveries (including certificates and cheques) which are not mailed for the foregoing reason may take delivery thereof at the office of the Transfer Agent to which the deliveries were made, upon application to the Transfer Agent, until such time as the Corporation has determined that delivery by mail will no longer be delayed. The Corporation will provide notice of any such determination not to mail made hereunder as soon as reasonably practicable after the making of such determination and in accordance with this Section 13.3. Such deliveries in such circumstances will constitute delivery to the persons entitled thereto.

 

 

SCHEDULE A
RETRACTION REQUEST
To: U.S. Gold Corporation, US Gold Alberta ULC and US Gold Canadian Acquisition Corporation, c/of the Trustee
This notice is given pursuant to ARTICLE 6 of the provisions (the “Share Provisions”) attaching to the share(s) represented by this certificate and all capitalized words and expressions used in this notice that are defined in the Share Provisions have the meanings ascribed to such words and expressions in such Share Provisions.
The undersigned hereby notifies the Corporation that, subject to the Retraction Call Right referred to below, the undersigned desires to have the Corporation redeem in accordance with ARTICLE 6 of the Share Provisions:
o      all share(s) represented by this certificate; or
o      _______ share(s) only represented by this certificate.
The undersigned acknowledges the Retraction Call Right of US Gold and Alberta ULC to purchase all but not less than all the Retracted Shares from the undersigned and that this notice is and shall be deemed to be a revocable offer by the undersigned to sell the Retracted Shares to US Gold or Alberta ULC in accordance with the Retraction Call Right on the Retraction Date for the Retraction Call Purchase Price and on the other terms and conditions set out in Section 6.2 of the Share Provisions. If neither US Gold nor Alberta ULC determines to exercise its Retraction Call Right, the Corporation will notify the undersigned of such fact as soon as possible. This Retraction Request, and this offer to sell the Retracted Shares to US Gold or Alberta ULC, may be revoked and withdrawn by the undersigned only by notice in writing given to the Corporation at any time before the close of business on the Business Day immediately preceding the Retraction Date.
The undersigned acknowledges that if, as a result of solvency provisions of applicable law, the Corporation is unable to redeem all Retracted Shares and provided that neither US Gold nor Alberta ULC has exercised the Retraction Call Right with respect to the Retracted Shares, the undersigned will be deemed to have exercised the Exchange Right (as defined in the Voting and Exchange Trust Agreement) so as to require US Gold or, at the option of US Gold, Alberta ULC to purchase the unredeemed Retracted Shares.
The undersigned hereby represents and warrants to the Corporation, US Gold and Alberta ULC that the undersigned has good title to, and owns, the share(s) represented by this certificate to be acquired by the Corporation, US Gold or Alberta ULC, as the case may be, free and clear of all liens, claims, encumbrances, security interests and adverse claims.
         
 
       
(Date)
    (Signature of Shareholder)     (Guarantee of Signature)

 

 

     
o
  Please check box if the securities and any cheque(s) resulting from the retraction or purchase of the Retracted Shares are to be held for pick-up by the shareholder at the principal transfer office of the Transfer Agent in Toronto, failing which such securities and any cheque will be mailed to the last address of the shareholder as it appears on the register.
 
    
NOTE:
  This panel must be completed and this certificate, together with such additional documents as the Transfer Agent and the Corporation may require, must be deposited with the Transfer Agent at its principal transfer office in Toronto. The securities and any cheque resulting from the retraction or purchase of the Retracted Shares will be issued and registered in, and made payable to respectively, the name of the shareholder as it appears on the register of the Corporation and the securities and cheque resulting from such retraction or purchase will be delivered to such shareholder as indicated above, unless the form appearing immediately below is duly completed, all exigible transfer taxes are paid and the signature of the registered holder is guaranteed by a Canadian chartered bank or trust company, member of a recognized stock exchange in Canada or a member of the Securities Transfer Association Medallion (STAMP) Program.
         
Date:
        
 
 
 
    
     
 
Name of Person in Whose Name Securities or Cheque(s)
   
Are to be Registered, Issued or Delivered (please print)
    
     
 
   
Street Address or P.O. Box
       Signature of Shareholder
 
    
 
   
City, Province and Postal Code
       Signature Guaranteed by
NOTE: If this Retraction Request is for less than all of the share(s) represented by this certificate, a certificate representing the remaining share of the Corporation will be issued and registered in the name of the shareholder as it appears on the register of the Corporation, unless the Share Transfer Power on the share certificate is duly completed in respect of such share(s).

 

EX-3.10 4 d40357exv3w10.htm BYLAWS exv3w10
 

Exhibit 3.10
BY-LAW NO. 1
A by-law relating generally to
the transaction of the business
and affairs of
US GOLD CANADIAN ACQUISITION CORPORATION
FRASER MILNER CASGRAIN llp
2900-10180 101 St
Edmonton AB T5J 3V5

 

 

I N D E X
             
        PAGE NO.
ARTICLE
  DESCRIPTION        
 
            
ARTICLE 1
  INTERPRETATION     1  
1.1
  Definitions     1  
 
            
ARTICLE 2
  LIEN ON SHARES     2  
 
            
ARTICLE 3
  DIRECTORS     3  
3.1
  Calling Meetings     3  
3.2
  Place of Meetings     3  
3.3
  Chairman     3  
3.4
  Secretary     3  
3.5
  Voting     3  
3.6
  Telecommunication Meetings     4  
 
            
ARTICLE 4
  OFFICERS     4  
4.1
  Appointment     4  
4.2
  Chairman of the Board     4  
4.3
  President     4  
4.4
  Secretary     5  
4.5
  Treasurer     5  
4.6
  Powers and Duties     5  
 
            
ARTICLE 5
  INDEMNITY TO DIRECTORS, OFFICERS AND OTHERS     5  
 
            
ARTICLE 6
  SHAREHOLDERS     6  
6.1
  Chairman     6  
6.2
  Secretary     6  
6.3
  Telecommunication Meetings     6  

 

 

BY-LAW NO. 1
A by-law relating generally to
the transaction of the business
and affairs of
US GOLD CANADIAN ACQUISITION CORPORATION
ARTICLE 1. INTERPRETATION
1.1   Definitions
 
    In the By-laws, unless the context requires a different meaning:
   (a)   “Act” shall mean the Business Corporations Act, RSA 2000, c. B-9, as amended, and any statute that may be substituted therefor;
 
   (b)   “appoint” shall include “elect” and vice versa;
 
   (c)   “Board” shall mean the board of directors or sole director of the Corporation;
 
   (d)   “By-laws” shall mean all by-laws of the Corporation which are in force;
 
   (e)   “Corporation” shall mean US Gold Canadian Acquisition Corporation, a body corporate incorporated under the Act;
 
   (f)   “President” shall mean the person appointed as president of the Corporation; and
 
   (g)   “Secretary” shall mean the person appointed as secretary of the Corporation.
1.2 Unless defined in section 1.1, words and phrases in the By-laws shall have the meaning set forth in the Act. Words importing the singular shall include the plural, and the converse shall also apply. Words importing gender shall include the masculine, feminine and neuter. Words importing persons shall include individuals, partnerships, associations, bodies corporate, trustees, executors, administrators, associations and legal representatives.

 

 

- 2 - 

ARTICLE 2. LIEN ON SHARES
2.1 A lien on shares (the “Subject Shares”) registered in the name of a shareholder (the “Subject Shareholder”) for a debt of the Subject Shareholder to the Corporation (including an amount unpaid in respect of a share already issued by the Corporation on the date it was continued under the Act), together with interest accrued thereon and any expenses incurred by the Corporation in respect of such debt (the sum of all three amounts shall herein be called the “Debt”), may be enforced by the Corporation by the sale of the Subject Shares, or by the sale of such of the Subject Shares as are required to satisfy the Debt, or by any other action, suit, remedy or proceeding authorized or permitted at law or in equity, provided that prior to selling the Subject Shares the Corporation shall give the Subject Shareholder 7 days’ written notice (the “Notice”) as follows:
  (a)   stating the amount of the Debt;
 
  (b)   demanding immediate payment of the Debt;
 
  (c)   setting forth the matters contained in section 2.2; and
 
  (d)   setting forth the Corporation’s intention to sell the Subject Shares, or such of the Subject Shares as are required to satisfy the Debt, if the Debt remains in default for 7 days after receipt of the Notice by the Subject Shareholder.
2.2 Immediately upon receipt of the Notice by the Subject Shareholder,
  (a)   the Subject Shareholder shall deliver the security certificate representing the Subject Shares to the Corporation;
 
  (b)   until the Debt is satisfied in full, the president shall be constituted
  (i)   as the Subject Shareholder’s proxy to vote for and on his behalf in respect of the Subject Shares and as the Subject Shareholder’s attorney with full power and authority to assent to and adopt in writing any resolutions of the shareholders,
 
  (ii)   as the Subject Shareholder’s attorney with full power and authority to transfer the Subject Shares, and
 
  (iii)   as the Subject Shareholder’s agent with authority to receive and apply any dividends paid on the Subject Shares against the Debt.
2.3 If the Corporation sells the Subject Shares, or such of the Subject Shares as are required to satisfy the Debt, the proceeds shall be applied in the following order:
  (a)   in payment of any expenses incurred by reason of the Subject Shareholder’s default, including the cost of selling the Subject Shares;

 

- 3 - 

  (b)   in satisfaction of the remainder of the Debt; and
 
  (c)   the residue, if any, shall be paid to the Subject Shareholder.
2.4 If all of the Subject Shares are not sold to satisfy the Debt, the Corporation shall issue a security certificate to the Subject Shareholder in respect of the Subject Shares which are not sold.
ARTICLE 3. DIRECTORS
3.1 Calling Meetings
     Upon the written request of a director, the Secretary shall call a meeting of the Board. If the Secretary is unavailable or fails to call a meeting within 24 hours of receipt of such request, any director may call a meeting of the Board in accordance with the provisions of section 3.2.
     A meeting of the Board shall be called on 72 hours notice to each director, verbally or in writing, by means of any communication facilities available.
3.2 Place of Meetings
     Meetings of the Board shall be held at the place described in the Notice of Meeting.
3.3 Chairman
     The President shall act as chairman of a meeting of the Board, or if he is not present within fifteen minutes of the time fixed for holding the meeting, the directors present shall choose one of their number to act as chairman.
3.4 Secretary
     If the Secretary is absent from a meeting of the Board, the chairman of the meeting shall appoint some person, who need not be a director, to act as secretary of the meeting.
3.5 Voting
     Questions arising at a meeting of the Board shall be decided by a majority of the votes cast, excluding abstentions; and in the case of an equality of votes, the chairman of the meeting shall not be entitled to a second or casting vote.

 

- 4 - 

3.6 Telecommunication Meetings
     A director may participate in a meeting of the Board, or of a committee of the Board, by means of telephone or other communication facilities that permit all persons participating in the meeting to hear each other.
ARTICLE 4. OFFICERS
4.1 Appointment
     The Board may appoint
  (a)   a chairman of the Board;
 
  (b)   a president;
 
  (c)   one or more vice presidents (to whose title may be added words indicating seniority or function);
 
  (d)   a secretary;
 
  (e)   a treasurer; and
 
  (f)   such other officers as the Board may determine, including one or more assistants to any of the officers appointed.
4.2 Chairman of the Board
     The chairman of the Board shall be a director and shall have such powers and duties as are called for by the terms of his engagement or as the Board may specify.
4.3 President
     The president shall:
  (a)   have general supervision of the officers and the business of the Corporation; and
 
  (b)   have such other powers and duties as are called for by the terms of his or her engagement or as the Board may specify.

 

- 5 - 

4.4 Secretary
     The secretary shall:
  (a)   record the proceedings at all meetings of the Board and shareholders;
 
  (b)   prepare and keep minutes of all such meetings in a book kept for that purpose;
 
  (c)   give, or cause to be given, as and when instructed, all notices to shareholders, directors, officers, auditors and members of committees of the Board; and
 
  (d)   have such other powers and duties as are called for by the terms of his engagement or as the Board or the president may specify.
4.5 Treasurer
     The treasurer shall:
  (a)   keep, or cause to be kept, proper accounting records in compliance with the Act;
 
  (b)   be responsible for the deposit of money, the safekeeping of securities and the disbursement of the Corporation’s funds;
 
  (c)   whenever required, render to the Board an account of all transactions and of the financial position of the Corporation; and
 
  (d)   have such other powers and duties as are called for by the terms of his engagement or as the Board or the president may specify.
4.6 Powers and Duties
     The powers and duties of all the officers of the corporation shall be such as the terms of their engagement call for or as the Board of Directors may determine. The powers and duties of an officer to whom an assistant has been appointed may be exercised and performed by such assistant, unless the Board directs otherwise.
ARTICLE 5. INDEMNITY TO DIRECTORS, OFFICERS AND OTHERS
5.1 In all circumstances and to the fullest extent permitted by the Act, the Corporation shall indemnify a director or officer of the Corporation, a former director or officer of the Corporation, or a person who acts or acted at the Corporation’s request as a director or officer of a body

 

- 6 - 

corporate of which the Corporation is or was a shareholder or creditor, and his heirs and legal representatives. Nothing in this by-law shall limit the right of any person entitled to indemnity to claim indemnity apart from the provisions of this by-law.
ARTICLE 6. SHAREHOLDERS
6.1 Chairman
     The President shall act as chairman of a meeting of shareholders or if the President is not present within fifteen (15) minutes of the time fixed for holding the meeting, the shareholders present and entitled to vote shall choose one of their number to act as chairman.
6.2 Secretary
     The Secretary shall act as secretary of a meeting of shareholders or if the Secretary is absent from a shareholders meeting, the chairman of the meeting shall appoint some person, who need not be a shareholder, to act as secretary of the meeting.
6.3 Telecommunication Meetings
     A shareholder or any other person entitled to attend a meeting of shareholders may participate in a meeting of shareholders by means of telephone or other communication facilities that permit all persons participating in the meeting to hear each other.
Enacted by the Board on April 18, 2006.
Confirmed by the sole Shareholder on April 18, 2006.

 

BY-LAW NO. 2
A BY-LAW AUTHORIZING THE DIRECTORS TO BORROW
AND GIVE SECURITY ON BEHALF OF
US GOLD CANADIAN ACQUISITION CORPORATION
 
The directors of the corporation may:
(a)   borrow money on the credit of the corporation;
 
(b)   issue, reissue, sell or pledge debt obligations of the corporation;
 
(c)   give a guarantee on behalf of the corporation to secure performance of an obligation of any person; and
 
(d)   mortgage, hypothecate, pledge or otherwise create a security interest in all or any property of the corporation, owned or subsequently acquired, to secure any obligation of the corporation.
Enacted by the Board on April 18, 2006.
Confirmed by the sole Shareholder on April 18, 2006.

EX-5.2 5 d40357exv5w2.htm OPINION OF FRASER MILNER CASGRAIN LLP exv5w2
 

Exhibit 5.2
(FRASER MILNER CASGRAIN LLP LETTERHEAD)
Brian R. Carr
Direct Line: 416-863-4366
brian.carr@fmc-law.com
November 13, 2006
U.S. Gold Corporation
2201 Kipling Street,
Suite 100
Lakewood, Colorado
80215-1545
Ladies and Gentlemen:
This firm has acted as counsel to U.S. Gold Corporation, a Colorado corporation (the “Company”), in connection with its registration statement on Form S-4 (the “Registration Statement”), to be filed with the Securities and Exchange Commission on the date hereof relating to the proposed offer (the “Exchange Offer”) by the Company and its wholly-owned subsidiary, U.S. Gold Canadian Acquisition Corp., an Alberta corporation (“Canadian Exchange Co.” and, together with the Company, the “Offerors”), to acquire the outstanding common stock of Coral Gold Resources Ltd., a British Columbia corporation, in exchange for exchangeable shares of Canadian Exchange Co. This opinion letter is furnished to you at your request to enable you to fulfill the requirements of Item 601(b)(8) of Regulation S-K, 17 C.F.R. §229.601(b)(8), in connection with the Registration Statement. Capitalized terms used in this letter and not otherwise defined herein shall have the meanings set forth in the prospectus (the “Prospectus”) included as part of the Registration Statement.
This opinion letter is based on the current provisions of the Income Tax Act (Canada) (the “Tax Act”), the regulations thereunder and counsel’s understanding of the current published administrative policies and assessment practices of the Canada Revenue Agency, or the CRA. This summary also takes into account all proposed amendments to the Tax Act and the regulations thereunder publicly announced by or on behalf of the Minister of Finance (Canada) before the date hereof (“Tax Proposals”). There can be no assurance that any such Tax Proposals will be implemented in their current form or at all. Except as mentioned above, this opinion letter does not take into account or anticipate changes in the law, whether by judicial, governmental or legislative action or decision, or changes in the administrative policies or assessment practices of the CRA, nor does it take into account provincial, territorial or foreign

 

 

Fraser Milner Casgrain llp
Page 2
 
income tax legislation or considerations, which may differ from the Canadian federal income tax considerations described herein. These provisions and interpretations are subject to changes, which may or may not be retroactive in effect, that might result in material modifications of our opinion. Our opinion does not foreclose the possibility of a contrary determination by the Canada Revenue Agency (the “CRA”) or a court of competent jurisdiction, or of a contrary position by the CRA in rulings issued in the future. In this regard, although we believe that our opinion set forth herein will be sustained if challenged, an opinion of counsel with respect to an issue is not binding on the CRA or the courts, and is not a guarantee that the CRA will not assert a contrary position with respect to such issue or that a court will not sustain such a position asserted by the CRA.
In rendering the following opinion, we have examined such statutes, regulations, records, certificates and other documents as we have considered necessary or appropriate as a basis for such opinion, including (but not limited to) the Registration Statement.
In our review, we have assumed that (i) all of the representations and statements set forth in such documents are true and correct (and representations and statements made “to the knowledge of,” or based on the belief of, the Offerors or similarly qualified are true and correct without such qualification), (ii) the Offerors will take such actions as the Prospectus states they “intend” or “expect” to take, and (iii) all of the obligations imposed by any such documents on the parties thereto have been and will continue to be performed or satisfied in accordance with their terms. We also have assumed the genuineness of all signatures, the proper execution of all documents, the accuracy and completeness of all documents submitted to us, the authenticity of all original documents, and the conformity to authentic original documents of all documents submitted to us as copies (including telecopies). This opinion letter is given, and all statements herein are made, in the context of the foregoing.
For purposes of rendering our opinion, we have not made an independent investigation of the facts set forth in any of the above-referenced documents, including the Prospectus. We have consequently relied upon representations and information presented in such documents.
Based upon, and subject to, the foregoing, we are of the opinion that the discussion in the Prospectus under the heading “Material Canadian Federal Income Tax Considerations,” to the extent that it describes provisions of Canada federal income tax law, is correct in all material respects as of the date hereof.
We assume no obligation to advise you of any changes in the foregoing subsequent to the effective date of the Registration Statement. This opinion letter has been prepared solely for your use in connection with the filing of the Registration Statement on the date of this opinion letter and should not be quoted in whole or in part or otherwise referred to, nor filed with or furnished to, any other governmental agency or other person or entity without the prior written consent of this firm.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. In giving such consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended.
Yours very truly,
FRASER MILNER CASGRAIN LLP
/s/ FRASER MILNER CASGRAIN LLP
BRC/ew

 

EX-8.1 6 d40357exv8w1.htm OPINION AND CONSENT OF HOGAN & HARTSON L.L.P. exv8w1
 

Exhibit 8.1
     
(HOGAN & HARTSON LOGO)
  (ADDRESS)
November 13, 2006
U.S. Gold Corporation
2201 Kipling Street, Suite 100
Lakewood, Colorado 80215-1545
Ladies and Gentlemen:
      This firm has acted as special counsel to U.S. Gold Corporation, a Colorado corporation (the “Company”), in connection with its registration statement on Form S-4 (the “Registration Statement”), to be filed with the Securities and Exchange Commission on the date hereof relating to the proposed offer (the “Exchange Offer”) by the Company and its wholly-owned subsidiary, U.S. Gold Canadian Acquisition Corp., an Alberta corporation (“Canadian Exchange Co.” and, together with the Company, the “Offerors”), to acquire the outstanding common stock of Coral Gold Resources Ltd., a British Columbia corporation, in exchange for exchangeable shares of Canadian Exchange Co. This opinion letter is furnished to you at your request to enable you to fulfill the requirements of Item 601(b)(8) of Regulation S-B, 17 C.F.R. §228.601(b)(8), in connection with the Registration Statement. Capitalized terms used in this letter and not otherwise defined herein shall have the meanings set forth in the prospectus (the “Prospectus”) included as part of the Registration Statement.
      This opinion letter is based as to matters of law solely on the United States Internal Revenue Code of 1986, as amended, its legislative history, judicial authority, current administrative rulings and practice, and existing and proposed Treasury Regulations, all as in effect and existing on the date hereof (collectively, “federal income tax law”). These provisions and interpretations are subject to changes, which may or may not be retroactive in effect, that might result in material modifications of our opinion. We express no opinion herein as to any other laws, statutes, regulations, or ordinances. Our opinion does not foreclose the possibility of a contrary determination by the Internal Revenue Service (the “IRS”) or a court of competent jurisdiction, or of a contrary position by the IRS or the Treasury Department in regulations or rulings issued in the future. In this regard, although we believe that our opinion set forth herein will be sustained if challenged, an opinion of counsel with respect to an issue is not binding on the IRS or the courts, and is not a guarantee that the IRS will not assert a contrary position with respect to such issue or that a court will not sustain such a position asserted by the IRS.

 

 

U.S. Gold Corporation
November 13, 2006
Page 2
      In rendering the following opinion, we have examined such statutes, regulations, records, certificates and other documents as we have considered necessary or appropriate as a basis for such opinion, including (but not limited to) the Registration Statement.
      In our review, we have assumed that (i) all of the representations and statements set forth in such documents are true and correct (and representations and statements made “to the knowledge of,” or based on the belief of, the Offerors or similarly qualified are true and correct without such qualification), (ii) the Offerors will take such actions as the Prospectus states they “intend” or “expect” to take, and (iii) all of the obligations imposed by any such documents on the parties thereto have been and will continue to be performed or satisfied in accordance with their terms. We also have assumed the genuineness of all signatures, the proper execution of all documents, the accuracy and completeness of all documents submitted to us, the authenticity of all original documents, and the conformity to authentic original documents of all documents submitted to us as copies (including telecopies). This opinion letter is given, and all statements herein are made, in the context of the foregoing.
      For purposes of rendering our opinion, we have not made an independent investigation of the facts set forth in any of the above-referenced documents, including the Prospectus. We have consequently relied upon representations and information presented in such documents.
      Based upon, and subject to, the foregoing, we are of the opinion that the discussion in the Prospectus under the heading “Material U.S. Federal Income Tax Considerations,” to the extent that it describes provisions of United States federal income tax law, is correct in all material respects as of the date hereof.
      We assume no obligation to advise you of any changes in the foregoing subsequent to the effective date of the Registration Statement. This opinion letter has been prepared solely for your use in connection with the filing of the Registration Statement on the date of this opinion letter and should not be quoted in whole or in part or otherwise referred to, nor filed with or furnished to, any other governmental agency or other person or entity without the prior written consent of this firm.
      We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. In giving such consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended.
     
 
  Very truly yours,
 
    
 
    
 
  /s/ HOGAN & HARTSON L.L.P.
HOGAN & HARTSON L.L.P.

 

EX-23.1 7 d40357exv23w1.htm CONSENT OF STARK WINTER SCHENKEIN & CO., LLP. exv23w1
 

EXHIBIT 23.1
CONSENT OF STARK WINTER SCHENKEIN & CO. LLP
     We hereby consent to the use of our report dated March 20, 2006 relating to U.S. Gold Corporation, which appears in the Registration Statement on Form S-4 and the related prospectuses for U.S. Gold Corporation and US Gold Canadian Acquisition Corporation and the Definitive Proxy Statement on Schedule 14A for U.S. Gold Corporation (collectively, the “SEC Filings”), for the registration of shares of U.S. Gold Common Stock and exchangeable shares of US Gold Canadian Acquisition Corporation. We also consent to the reference to us under the heading “Experts” in such SEC Filings.
/s/ Stark Winter Schenkein & Co. LLP                
Denver, Colorado
November 10, 2006

 

EX-23.6 8 d40357exv23w6.htm CONSENT OF ERNST & YOUNG LLP exv23w6
 

EXHIBIT 23.6
CONSENT OF ERNST & YOUNG LLP
     We have read the Registration Statements on form S-4 and the related prospectus for U.S. Gold Corporation and US Gold Canadian Acquisition Corporation relating to the registration of shares of U.S. Gold Common Stock and exchangeable shares of US Gold Canadian Acquisition Corporation in connection with the offer to purchase all of the outstanding common shares of Coral Gold Resources Ltd. (the “SEC Filing”). We have complied with Canadian generally accepted standards for an auditor’s involvement with offering documents.
     We hereby consent to the use in the SEC Filing of our report to the directors and shareholders of Coral Gold Resources Ltd. on the consolidated balance sheet of Coral Gold Resources Ltd. as at January 31, 2006, and the consolidated statement of operations, retained earnings and cash flows for the year ended January 31, 2006. Our report is dated May 31, 2006. We also consent to the reference to us under the heading “Experts” in the SEC Filing.
         
     
  /s/ Ernst & Young LLP    
  Ernst & Young LLP   
  Chartered Accountants   
 
Vancouver, Canada
November 10, 2006

 

EX-23.9 9 d40357exv23w9.htm CONSENT OF ROBERT T. MCCUSKER exv23w9
 

EXHIBIT 23.9
CONSENT OF ROBERT T. McCUSKER
Board of Directors of Coral Gold Resources Ltd.:
     I hereby consent to the use of information from the technical reports dated January 15, 2004 and April 25, 2006 relating to the Robertson Property of Coral Gold Resources Ltd., which appears in the Registration Statement on Form S-4 and the related prospectus for U.S. Gold Corporation and US Gold Canadian Acquisition Corporation and the Definitive Proxy Statement on Schedule 14A for U.S. Gold Corporation (collectively, the “SEC Filings”), for the registration of shares of U.S. Gold Common Stock and exchangeable shares of US Gold Canadian Acquisition Corporation. I also consent to the reference to me under the heading “Experts” in such SEC Filings.
Dated: November 10, 2006
/s/ Robert T. McCusker
Robert T. McCusker, P. Geol.

 

EX-99.1 10 d40357exv99w1.htm FORM OF LETTER OF ACCEPTANCE AND TRANSMITTAL exv99w1
 

 
Exhibit 99.1
 
The instructions accompanying this Letter of Acceptance and Transmittal should be read carefully before completing this Letter of Acceptance and Transmittal. The Dealer Manager or the Depositary and Information Agent (see the back page of this document for addresses and telephone numbers) or your broker or other financial advisor will assist you in completing this Letter of Acceptance and Transmittal.
 
LETTER OF ACCEPTANCE AND TRANSMITTAL
 
To accompany certificates for
Common Shares
of
 
CORAL GOLD RESOURCES LTD.
 
To be deposited pursuant to the Offer dated    l    , 2006 of
 
U.S. GOLD CORPORATION
AND
US GOLD CANADIAN ACQUISITION CORPORATION
 
THE OFFER WILL BE OPEN FOR ACCEPTANCE UNTIL
5:00 P.M. (VANCOUVER TIME)
ON    l    , 2006 UNLESS THE OFFER IS
WITHDRAWN OR EXTENDED (THE “EXPIRY TIME”).
 
 
This Letter of Acceptance and Transmittal or a facsimile hereof, properly completed and duly executed in accordance with the instructions set out below, together with all other required documents, must accompany certificates representing common shares of Coral Gold Resources Ltd. (“Common Shares”) deposited pursuant to the Offer (in Canada) and the Prospectus (in the United States). Shareholders whose certificates are not immediately available or who cannot deliver certificates and all other required documents to the Depositary at or prior to the Expiry Time may deposit such Common Shares according to the procedure for guaranteed delivery set forth in the Offer and the Prospectus in the section entitled “Offer — Manner of Acceptance — Procedure for Guaranteed Delivery” and Instruction 2 to this Letter of Acceptance and Transmittal. The terms and conditions of the Offer and the Prospectus are incorporated by reference in this Letter of Acceptance and Transmittal. Capitalized terms used but not defined in this Letter of Acceptance and Transmittal shall have the respective meanings set out in the Offer and the Prospectus.
 
SHAREHOLDERS SHOULD CAREFULLY COMPLETE THE
CONSIDERATION ELECTION IN ITEM 4.
 
The Exchangeable Shares may permit Shareholders to take advantage of a full or partial tax deferral available under the Income Tax Act (Canada). Shareholders are encouraged to consult their own advisors regarding the tax consequences of the proposed transactions.

 

TO: U.S. GOLD CORPORATION US GOLD CANADIAN ACQUISITION CORPORATION (the “Offerors”)
 
AND TO: KINGSDALE SHAREHOLDER SERVICES INC., AS DEPOSITARY
 
The undersigned delivers to you the enclosed certificate(s) for Common Shares and, subject only to the provisions of the Offer and the Prospectus regarding withdrawal, irrevocably accepts the offer upon the terms and conditions contained in the Offer and the Prospectus. The following are the details of the enclosed certificate(s):
 
                                       

DESCRIPTION OF COMMON SHARES DEPOSITED
Common Share Certificate(s)
 		    Name(s) and address(es) of registered holder(s) (Please fill in
and Common Share(s) deposited (attach additional list if necessary)     exactly as name(s) appear(s) on Common Share Certificate(s))
        Total Number
 		                     
        of Common
 		                     
        Shares
 		      Number of
 		             
Common Share
 		      Represented
 		      Common
 		      Cost of
 		     
Certificate
 		      by
 		      Share(s)
 		      Common
 		     
Number(s)*       Certificate(s)       Deposited**       Shares***      
                                       
                                       
                                       
                                       
  Total Common Shares                                    
* Need not be completed by Shareholder delivering by book-entry transfer.
** Unless otherwise indicated it will be assumed that all Common Shares evidenced by any certificates delivered to the Depositary are being deposited. See Instruction 6.
*** This information is necessary because our tax basis in your Common Shares for United States Federal income tax purposes may be determined by reference to your tax basis in such Common Shares (which is generally the price that you paid for such Common Shares).
                                       
 
(Please print or type. If space is insufficient, please attach a list to this Letter of Acceptance and Transmittal in the above form.)
 
The undersigned Shareholder:
 
1. acknowledges receipt of the Offer or the Prospectus (as applicable) dated    l    , 2006;
 
2. delivers the enclosed certificate representing Common Shares and, subject only to the rights of withdrawal set out in the Offer and the Prospectus, irrevocably accepts the offer for and in respect of those Common Shares that are being deposited under the offer as indicated in the above “Description of Common Shares Deposited” box of this Letter of Acceptance and Transmittal represented by such certificate(s) (the “Deposited Securities”) and, on and subject to the terms and conditions of the Offer and the Prospectus, deposits, sells, assigns and transfers to the Offerors or the Offeror’s designees all rights, title and interest in and to the Deposited Securities, including other securities referred to in the section entitled “Acceptance for Purchase of, and Payment for, Deposited Coral Gold Common Shares — Power of Attorney” (“Other Securities”) of the Offer and the Prospectus, effective on and after the Effective Date;
 
3. represents and warrants that: (a) the undersigned has full power and authority to deposit, sell, assign and transfer the Deposited Securities (and any Other Securities) being deposited and has not sold, assigned or transferred or agreed to sell, assign or transfer any of such Deposited Securities and/or Other Securities to any other person; (b) the undersigned owns the Deposited Securities and any Other Securities being deposited within the meaning of applicable securities laws; (c) the deposit of those Deposited Securities (and any Other Securities) complies with applicable securities laws; and


2

 

(d) when those Deposited Securities and any Other Securities are taken up and paid for under the offer the Offerors will acquire good title thereto free and clear of all liens, restrictions, charges, encumbrances, claims;
 
4. directs the Offerors and the Depositary, upon taking up the Deposited Securities: (a) to issue or cause to be issued certificates representing Exchangeable Shares to which the undersigned is entitled for the Deposited Securities under the offer in the name indicated below and to send such certificates representing certificates representing Exchangeable Shares by first class insured mail, postage prepaid, to the address indicated below; and (b) to return any certificates for shares not deposited to or purchased under the offer to the address indicated below (and, in the case of both (a) and (b) above, if no name, address or delivery instructions are indicated, to the undersigned at the address of the undersigned as shown on the books of Coral Gold);
 
5. in the event that the undersigned has indicated under “Tax Election Package” that he or she wishes to receive a tax election package, the undersigned hereby:
 
(i) requests that a tax election package be forwarded to the undersigned at the address specified herein; (ii) acknowledges that it is the undersigned’s responsibility to prepare the appropriate document(s) that will be included in the tax election package and to send such documents to the Depositary on or before the date that is 90 days after the Effective Date; (iii) acknowledges that none of the Offerors or the Depositary are responsible for the proper completion of any tax election and that the undersigned will be solely responsible for the payment of any interest and late filing penalty; (iv) acknowledges that the Offerors agree only to execute and file with the applicable tax authorities any properly completed tax election form submitted to the Depositary in duplicate and return them by mail to such Shareholder; (v) acknowledges that with the exception of the execution and filing of the tax election forms by the Offerors, compliance with the requirements for a valid tax election will be the sole responsibility of the undersigned and that none of the Offerors or the Depositary are responsible or liable for taxes, interest, penalties, damages or expenses resulting from the failure by anyone to properly complete or file any tax election in the form and manner prescribed under the Tax Act (or the corresponding provisions of any applicable provincial legislation); and (vi) acknowledges that a full or partial deferral may be available only to the extent the undersigned receives Exchangeable Shares as full or partial consideration for the disposition of his, her or its Common Shares and to the extent permitted under the Tax Act. See “Material Canadian Federal Income Tax Considerations” in the Offer and the Prospectus.
 
6. irrevocably appoints the Offerors or their designees as the true and lawful agent, attorney and attorney in fact of that Shareholder with respect to the Deposited Securities deposited and with respect to any and all stock dividends, securities, rights, warrants or other interests or distributions accrued, declared, paid, issued, transferred, made or distributed on or in respect of the Deposited Securities on or after l, 2006, effective on and after the Effective Date, and affords full power of substitution (such power of attorney being coupled with an interest being irrevocable), in the name and on behalf of the undersigned to (a) register, record, transfer and enter the transfer of Deposited Securities and any Other Securities on the books of Coral Gold; and (b) vote, execute and deliver any instruments of proxy, authorizations and consents in form and on terms satisfactory to the Offerors in respect of any Deposited Securities and any or all Other Securities, revoke any such instrument, authorization or consent given prior to or after the Effective Date, designate in any such instruments of proxy any person(s) as the proxy or the proxy nominee(s) of the Shareholder in respect of those Deposited Securities and those Other Securities for all purposes; and (c) execute, endorse and negotiate, any cheques or other instruments, respecting any distribution payable to or to the holder; and (d) exercise any and all other rights of a holder of Deposited Securities and any Other Securities;
 
7. agrees, from and after the Effective Date, not to vote any of the Deposited Securities or Other Securities at any meeting of holders of securities not to exercise any other rights or privileges attached to those securities, and to deliver to the Offerors any and all instruments of proxy, authorizations or consents in respect of the those securities;
 
8. agrees that if Coral Gold should declare or pay any cash dividend, stock dividend or make any other distribution on or issue any rights with respect to any of the Deposited Securities which is or are payable or distributable to the Shareholders of record on a record date which is prior to the date of transfer into the name of the Offerors or their nominees or transferees on the books of Coral Gold of such Deposited Securities following acceptance thereof for purchase pursuant to the Offer and the Prospectus, then (i) in the case of any cash dividend or distribution that does not exceed the value of the consideration Deposited Security, the consideration per Deposited Security payable by the Offerors pursuant to the Offer and the Prospectus will be reduced by the number of Exchangeable Shares having a value equal to any such dividend or distribution paid or payable per Deposited Security in respect of which the dividend or distribution is made; and (ii) in the


3

 

case of any such cash dividend or cash distribution in an amount that exceeds the value of the consideration per Deposited Security in respect of which the dividend or distribution is made, or in the case of any other dividend, distribution or right, the whole of any such dividend, distribution or right will be received and held by the depositing Shareholder for the account of the Offeror and shall be promptly remitted and transferred by the undersigned to the Depositary for the account of the Offerors, accompanied by appropriate documentation of transfer. Pending such remittance, the Offerors will be entitled to all rights and privileges as the owner of any such dividend, distribution or right, and may withhold the entire consideration payable by the Offerors pursuant to the Offer and the Prospectus or deduct from the consideration payable by the Offerors pursuant to the Offer and the Prospectus the amount or value thereof, as determined by the Offerors in their sole discretion;
 
9. covenants to execute, upon request, any additional documents, transfers and other assurances as may be necessary or desirable to complete the sale, assignment and transfer of the Deposited Securities and Other Securities to the Offerors;
 
10. acknowledges that all authority conferred or agreed to be conferred by the undersigned herein is irrevocable and may be exercised during any subsequent legal incapacity of the undersigned and shall survive the death or incapacity, bankruptcy or insolvency of the undersigned and all obligations of the undersigned herein shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned; and
 
11. by virtue of the execution of this Letter of Acceptance and Transmittal, shall be deemed to have agreed that all questions as to validity, form, eligibility (including timely receipt) and acceptance of any Common Shares deposited pursuant to the Offer and the Prospectus will be determined by the Offerors in their sole discretion and that such determination shall be final and binding, and acknowledges that the Offerors reserve the absolute right to reject any and all deposits that they determine not to be in proper form or that may be unlawful to accept under the laws of any jurisdiction and to waive any defects or irregularities in the deposit of any Common Shares but there shall be no duty or obligation on the Offerors or the Depositary or any other person to give notice of any defects or irregularities in any deposit and no liability shall be incurred by any of them for failure to give such notice.


4

 

 
By reason of the use by the undersigned of an English language form of Letter of Acceptance and Transmittal, the undersigned shall be deemed to have required that any contract evidenced by the Offer as accepted through this Letter of Acceptance and Transmittal, as well as all documents related thereto, be drawn exclusively in the English language. En raison de l’usage d’une version anglaise de la préesente lettre de transmission par le soussigné, ce dernier et les destinataires sont réputés avoir demandé que tout contrat attesté par l’offre, telle qu’elle est acceptée au moyen de cette lettre de transmission, de même que tous les documents qui s’y rapportent, soient rédigés exclusivement en anglais.
 
       
       
BOX A

ISSUE FOR EXCHANGEABLE SHARES IN THE NAME OF:

(please print or type)
_ _(Name)
(Street Address and Number)
(City and Province or State)
(Country and Postal (Zip) Code)
(Telephone — Home)
(Telephone — Business)
(e-mail address)
(Canadian Social Insurance Number)(U.S. Resident/Citizen must
provide their Taxpayer
Identification Number)
   
BOX B

SEND CERTIFICATES FOR EXCHANGEABLE SHARES TO:
(please print or type):
o Same address as Box A or to:
(Name)
(Street Address and Number)
(City and Province or State)
(Country and Postal (Zip) Code)
(Telephone — Business)
       
 
 
BOX C
 
SPECIAL PICK-UP INSTRUCTIONS
 
o   HOLD CERTIFICATES FOR EXCHANGEABLE SHARES FOR PICK-UP AT THE OFFICES OF THE DEPOSITARY (Check box).


5

 

BOX D
 
o  CHECK HERE IF COMMON SHARES ARE BEING DEPOSITED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO KINGSDALE SHAREHOLDER SERVICES INC. AND COMPLETE THE FOLLOWING (please print or type):
 
Name of Registered Holder: 
 
Date of Execution of Notice of Guaranteed Delivery: 
 
Name of Institution which Guaranteed Delivery: 
 
     
Signature guaranteed by   Date: _ _, 2006
(if required under Instruction 4):
   
     
 
Authorized Signature   Signature of Shareholder or Authorized
Representative (See Instruction 3)
     
 
Name of Guarantor (please print or type)   Name of Shareholder (please print or type)
     
 
Address (please print or type)   Name of Authorized Representative, if applicable
please print or type)
 
BOX E
 
INVESTMENT DEALER OR BROKER SOLICITING ACCEPTANCE OF THE OFFER
See Instruction 7
(please print or type)
 
     
 
(Firm)
  (Telephone Number)/(Fax Number)
     
 
(Registered Representative)
  (Address)
     
   
FINS Number
   
 
o  CHECK HERE IF LIST OF BENEFICIAL HOLDERS IS ATTACHED.
 
o  CHECK HERE IF DISKETTE TO FOLLOW
 
TAX ELECTION PACKAGE
 
To be completed ONLY by holders of Common Shares who wish to avail themselves of the joint tax election provision described in the Offer under “Material Canadian Federal Income Tax Considerations”.
 
o  Check here if you wish to receive the tax election package
 
o  Check here if Shareholder is a partnership
 
o  Check here if the Shareholder is required to file in Québec


6

 

INSTRUCTIONS AND RULES
 
1.   Use of Letter of Acceptance and Transmittal
 
(a) This Letter of Acceptance and Transmittal (or manually signed facsimile hereof) properly completed and duly executed as required by the instructions set forth below, together with the certificate(s) representing the Deposited Securities in respect of which the offer is being accepted and any other document required by the instructions set forth below must be received by the Depositary by the Expiry Time.
 
(b) The method of delivery of this Letter of Acceptance and Transmittal, certificates representing the Common Shares and all other required documents is at the option and risk of the person depositing the same. The Offerors recommend that such documents be delivered by hand to the Depositary and a receipt obtained, or, if mailed, that registered mail, with return receipt requested be used and that proper insurance be obtained. Shareholders whose Common Shares are registered in the name of a nominee should contact their broker, investment dealer, bank, trust company or other nominee for assistance in depositing their Common Shares under the offer.
 
2.   Procedures for Guaranteed Delivery
 
If a Shareholder wishes to deposit shares pursuant to the Offer and the Prospectus and the certificate(s) representing the Common Shares are not immediately available, or that Shareholder cannot deliver such certificate(s) and all other required documents to the Depositary at or prior to the Expiry Time, those Common Shares may nevertheless be deposited if all of the following conditions are met:
 
(a) the deposit is made by or through an Eligible Institution;
 
(b) a Notice of Guaranteed Delivery (printed on GREEN paper) in the form accompanying the Offer and the Prospectus or a facsimile thereof properly completed and duly executed including a guarantee by an Eligible Institution in the form specified in the Notice of Guaranteed Delivery, is received by the Depositary at the office set out in the Notice of Guaranteed Delivery at or prior the Expiry Time; and
 
(c) the certificate(s) representing the deposited Common Shares in proper form for transfer, together with this Letter of Acceptance and Transmittal or facsimile thereof, properly completed and duly executed, with any required signature guarantees and all other documents required by this Letter of Acceptance and Transmittal, are received by the Depositary at the office set out in the Notice of Guaranteed Delivery at or prior to 5:00 p.m. (Vancouver time) on the third trading day on the TSX-V after the Expiry Time.
 
The Notice of Guaranteed Delivery may be delivered by hand or courier, transmitted by facsimile or mailed to the Depositary at the office set out in the Notice of Guaranteed Delivery and must include a guarantee by an Eligible Institution in the form set forth in the Notice of Guaranteed Delivery.
 
An “Eligible Institution” means a Canadian Schedule I chartered bank, a major trust company in Canada, a member of the Securities Transfer Agents Medallion Program (STAMP), a member of the Stock Exchanges Medallion Program (SEMP) or a member of the New York Stock Exchange, Inc. Medallion Signature Program (MSP).
 
3.   Signatures
 
This Letter of Acceptance and Transmittal must be completed and signed by the holder of Common Shares accepting the offer or by such holder’s duly authorized representative (in accordance with Instruction 5 below).
 
(a) If this Letter of Acceptance and Transmittal is signed by the registered owner(s) of the accompanying certificate(s), such signature(s) on this Letter of Acceptance and Transmittal must correspond with the name(s) as registered or as written on the face of such certificate(s) without any change whatsoever, and the certificate(s) need not be endorsed. If such transmitted certificate(s) is held of record by two or more joint owners, all such owners must sign this Letter of Acceptance and Transmittal.


7

 

(b) If this Letter of Acceptance and Transmittal is executed by a person other than the registered owner(s) of the accompanying certificate(s) of Exchangeable Shares are to be issued to a person other than the registered owner(s):
 
(i) such deposited certificate(s) must be endorsed or be accompanied by an appropriate share transfer power of attorney duly and properly completed by the registered owner(s); and
 
(ii) the signature(s) on such endorsement or power of attorney must correspond exactly to the name(s) of the registered owner(s) as registered or as appearing on the certificate(s) and must be guaranteed as noted in Instruction 4 below.
 
4.   Guarantee of Signatures
 
If this Letter of Acceptance and Transmittal is executed by a person other than the registered owner(s) of the Deposited Securities, or if certificates representing Common Shares not deposited to or purchased under the offer are to be returned to a person other than such registered owner(s) or sent to an address other than the address of the registered owner(s) as shown on the books of Coral Gold, such signature must be guaranteed by an Eligible Institution, or in some other manner satisfactory to the Depositary (except that no guarantee is required if the signature is that of an Eligible Institution).
 
5.   Fiduciaries, Representatives and Authorizations
 
Where this Letter of Acceptance and Transmittal or any certificate or share transfer or power of attorney is executed by a person on behalf of an executor, administrator, trustee, guardian, attorney-in-fact, agent, corporation, partnership or association, or is executed by any other person acting in a fiduciary or representative capacity, such person should so indicate when signing and this Letter of Acceptance and Transmittal must be accompanied by satisfactory evidence of the authority to act. Either of the Offerors or the Depositary, at their discretion, may require additional evidence of authority or additional documentation.
 
6.   Partial Tenders
 
If less than the total number of Common Shares evidenced by any certificate submitted is to be deposited under the Offer, fill in the number of Common Shares to be deposited in the appropriate space on this Letter of Acceptance and Transmittal. In such case, new certificate(s) for the number of shares not deposited will be sent to the registered holder as soon as practicable following the Expiry Time. The total number of Common Shares evidenced by all certificates delivered will be deemed to have been deposited unless otherwise indicated. If certificate(s) representing Common Shares not deposited to or purchased under the Offer are to be returned other than in the name of, and to the address, as shown on the books of Coral Gold, complete the appropriate box on this Letter of Acceptance and Transmittal.
 
7.   Solicitation
 
Identify the investment dealer or broker, if any, who solicited acceptance of the offer by completing the appropriate box on this Letter of Acceptance and Transmittal and present a list of beneficial holders if applicable in electronic format.
 
8.   Backup Withholding
 
Under U.S. federal income tax law, a Shareholder whose Deposited Securities are accepted for payment pursuant to the Offer may be subject to backup withholding at a rate of 28%.
 
U.S. Residents
 
To prevent backup withholding, a Shareholder that is a resident of the United States for United States federal income tax purposes is required to notify the Depositary of the Shareholder’s current taxpayer identification number (“TIN”) by completing the enclosed Substitute Form W-9, certifying that the TIN provided on that form is correct (or that such Shareholder is awaiting receipt of a TIN), and that (i) the Shareholder has not been notified by the Internal Revenue Service that the Shareholder is subject to backup withholding as a result of failure to report all interest or dividends or (ii) after being so notified, the Internal Revenue Service has notified the Shareholder that the Shareholder is no longer subject to backup withholding. If the Depositary is not provided with the correct TIN, such Shareholder may be subject to a $50 penalty imposed by the Internal Revenue Service and payments that are made to such Shareholder pursuant to the Offer and the Prospectus may be subject to backup withholding (see below).


8

 

Each Shareholder is required to give the Depositary the TIN (e.g., Social Security number or employer identification number) of the record holder of the Common Shares. If the Common Shares are registered in more than one name or are not registered in the name of the actual owner, consult the enclosed “Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9” for additional guidance on which number to report. A Shareholder who does not have a TIN may check the box in Part 3 of the Substitute Form W-9 if such Shareholder has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked, the Shareholder must also complete the information in the box entitled “Certificate of Awaiting Taxpayer Identification Number” below in order to avoid backup withholding. If the box in Part 3 is checked, payments made will be subject to backup withholding unless the Shareholder has furnished the Depositary with his or her TIN by the time payment is made. A Shareholder who checks the box in Part 3 in lieu of furnishing a TIN should furnish the Depositary with the Shareholder’s TIN as soon as it is received.
 
Certain Shareholders are not subject to these backup withholding requirements. To avoid possible erroneous backup withholding, a Shareholder who is a resident of the United States for United States federal income tax purposes and is exempt from backup withholding should complete the Substitute Form W-9 by providing his or her correct TIN, signing and dating the form, and writing “exempt” on the face of the form.
 
Non-U.S. Residents
 
A Shareholder who is not a resident of the United States for United States federal income tax purposes should submit to the Depositary the appropriate Form W-8. Generally, a foreign individual or a foreign corporation that is not a pass-through entity for U.S. federal income tax purposes and is not engaged in a trade or business within the United States would provide a Form W-8BEN. A foreign entity that is a pass-through entity for U.S. federal income tax purposes and is not engaged in a trade or business within the United States would generally provide a Form W-8IMY (which may require an additional Form W-8BEN for its beneficial owners). A foreign individual or a foreign entity that is engaged in a trade or business within the United States may be required to provide a Form W-8ECI. Form W-8BEN is enclosed herein. Forms W-8IMY and W-8ECI will be provided to you by the Depositary upon request.
 
All Shareholders are urged to consult their own tax advisors to determine whether they are exempt from these backup withholding and reporting requirements and to determine which form should be used to avoid backup withholding.
 
If backup withholding applies, the Depositary is required to withhold 28% of any payments to be made to the Shareholder. Backup withholding is not an additional tax. Rather, the U.S. tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained by filing a tax return with the Internal Revenue Service. The Depositary cannot refund amounts withheld by reason of backup withholding.
 
9.   Miscellaneous
 
(a) If the space on this Letter of Acceptance and Transmittal is insufficient to list all certificates for Deposited Securities, additional certificate numbers and numbers of Deposited Securities may be included in a separate signed list affixed to this Letter of Acceptance and Transmittal.
 
(b) If Deposited Securities are registered in different forms (e.g. “Joe Doe” and “J. Doe”), a separate Letter of Acceptance and Transmittal should be signed for each different registration.
 
(c) No alternative, conditional or contingent deposits will be accepted. All depositing Shareholders by execution of this Letter of Acceptance and Transmittal (or a manually signed facsimile thereof) waive any right to receive any notice of acceptance of Deposited Securities for payment.
 
(d) The offer and any agreement resulting from the acceptance of the offer will be construed in accordance with and governed by the laws of the Province of Ontario and the laws of Canada applicable therein. The Shareholder covered by this Letter of Acceptance and Transmittal hereby unconditionally and irrevocably attorns to the jurisdiction of the courts of the Province of Ontario and the courts of appeal therefrom.
 
(e) Additional copies of the Offer and the Prospectus, this Letter of Acceptance and Transmittal and the Notice of Guaranteed Delivery may be obtained from the Dealer Manager or the Information Agent at the addresses listed below.


9

 

10.   Lost Certificates
 
If a share certificate has been lost, destroyed or stolen, the Shareholder should promptly notify Coral Gold’s transfer agent. The Shareholder then will be instructed as to the steps that must be taken in order to replace such share certificate(s). This Letter of Acceptance and Transmittal and related documents cannot be processed until the procedures for replacing lost or destroyed share certificates have been followed.


10

 

             
             
Form W-9
(Rev. November 2005)
Department of the Treasury
Internal Revenue Service
 		    Request for Taxpayer
Identification Number and Certification 		   
 Give form to the
requester. Do not
send to the IRS.
 
             
 
   Name (as shown on your income tax return)        
   
             
     Business name, if different from above.        
   
 
     Check appropriate box:  o Individual/Sole proprietor     o Corporation     o Partnership     o Other ► ............  
o Exempt from backup
withholding
   
   
     Address (number, street, and apt. or suite no.)    Requester’s name and address (optional)
   
       
     City, state, and ZIP code        
             
             
   
 
     List account number(s) here (optional)        

Print or type
See Specific
Instructions
on page 2.
           
             
             
 Part I     Taxpayer Identification Number (TIN)
 
 
                                     
Enter your TIN in the appropriate box. The TIN provided must match the name given on Line 1 to avoid backup withholding. For individuals, this is your social security number (SSN). However, for a resident alien, sole proprietor, or disregarded entity, see the Part I instructions on page 3. For other entities, it is your employer identification number (EIN). If you do not have a number, see How to get a TIN on page 3.  
 Social security number

               —        —

or
Note: If the account is in more than one name, see the chart on page 4 for guidelines on whose number to enter.  
 Employer identification number

          —
 Part II     Certification
 
 
Under penalties of perjury, I certify that:
 
1.   The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me), and
2.   I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding, and
 
3.   I am a U.S. person (including a U.S. resident alien).
 
Certification Instructions. You must cross out item 2 above if you have been notified by the IRS that you are currently subject to backup withholding because you have failed to report all interest and dividends on your tax return. For real estate transactions, item 2 does not apply. For mortgage interest paid, acquisition or abandonment of secured property, cancellation of debt, contributions to an individual retirement arrangement (IRA), and generally, payments other than interest and dividends, you are not required to sign the Certification, but you must provide your correct TIN. (See the instructions on page 4.)
           
Sign
Here 		    Signature of
U.S. person ►                                                                          Date ►
 
 
Purpose of Form
 
A person who is required to file an information return with the IRS, must obtain your correct taxpayer identification number (TIN) to report, for example, income paid to you, real estate transactions, mortgage interest you paid, acquisition or abandonment of secured property, cancellation of debt, or contributions you made to an IRA.U.S. person. Use Form W-9 only if you are a U.S. person (including a resident alien), to provide your correct TIN to the person requesting it (the requester) and, when applicable, to:
 
  1. Certify that the TIN you are giving is correct (or you are waiting for a number to be issued),
 
  2. Certify that you are not subject to backup withholding, or
 
  3. Claim exemption from backup withholding if you are a U.S. exempt payee.
 
In 3 above, if applicable, you are also certifying that as a U.S. person, your allocable share of any partnership income from a U.S. trade or business is not subject to the withholding tax on foreign partners’ share of effectively connected income.
 
Note: If a requester gives you a form other than Form W-9 to request your TIN, you must use the requester’s form if it is substantially similar to this Form W-9.
 
  For federal tax purposes you are considered a person if you are:
 
• An individual who is a citizen or resident of the United States,
• A partnership, corporation, company, or association created or organized in the United States or under the laws of the United States, or
• Any estate (other than a foreign estate) or trust. See Regulations sections 301.7701-6(a) and 7(a) for additional information.
 
Special rules for partnerships. Partnerships that conduct a trade or business in the United States are generally required to pay a withholding tax on any foreign partners’ share of income from such business. Further, in certain cases where a Form W-9 has not been received, a partnership is required to presume that a partner is a foreign person, and pay the withholding tax. Therefore, if you are a U.S. person that is a partner in a partnership conducting a trade or business in the United States, provide Form W-9 to the partnership to establish your U.S. status and avoid withholding on your share of partnership income. The person who gives Form W-9 to the partnership for purposes of establishing its U.S. status and avoiding withholding on its allocable share of net income from the partnership conducting a trade or business in the United States is in the following cases:
 
• The U.S. owner of a disregarded entity and not the entity,
 
• The U.S. grantor or other owner of a grantor trust and not the trust, and
 
• The U.S. trust (other than a grantor trust) and not the beneficiaries of the trust.
 
Foreign person. If you are a foreign person, do not use Form W-9. Instead, use the appropriate Form W-8 (see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities).
Nonresident alien who becomes a resident alien. Generally, only a nonresident alien individual may use the terms of a tax treaty to reduce or eliminate U.S. tax on certain types of income. However, most tax treaties contain a provision known as a “saving clause.” Exceptions specified in the saving clause may permit an exemption from tax to continue for certain types of income even after the recipient has otherwise become a U.S. resident alien for tax purposes.
 
  If you are a U.S. resident alien who is relying on an exception contained in the saving clause of a tax treaty to claim an exemption from U.S. tax on certain types of income, you must attach a statement to Form W-9 that specifies the following five items:
 
  1. The treaty country. Generally, this must be the same treaty under which you claimed exemption from tax as a nonresident alien.
 
  2. The treaty article addressing the income.
 
  3. The article number (or location) in the tax treaty that contains the saving clause and its exceptions.
 
  4. The type and amount of income that qualifies for the exemption from tax.
 
  5. Sufficient facts to justify the exemption from tax under the terms of the treaty article.
 
Cat. No. 10231X Form W-9 (Rev. 1-2005)


11

 

Form W-9 (Rev. 11-2005) Page 2
 
Example. Article 20 of the U.S.-China income tax treaty allows an exemption from tax for scholarship income received by a Chinese student temporarily present in the United States. Under U.S. law, this student will become a resident alien for tax purposes if his or her stay in the United States exceeds 5 calendar years. However, paragraph 2 of the first Protocol to the U.S.-China treaty (dated April 30, 1984) allows the provisions of Article 20 to continue to apply even after the Chinese student becomes a resident alien of the United States. A Chinese student who qualifies for this exception (under paragraph 2 of the first protocol) and is relying on this exception to claim an exemption from tax on his or her scholarship or fellowship income would attach to Form W-9 a statement that includes the information described above to support that exemption.
 
If you are a nonresident alien or a foreign entity not subject to backup withholding, give the requester the appropriate completed Form W-8.
 
What is backup withholding? Persons making certain payments to you must under certain conditions withhold and pay to the IRS 28% of such payments (after December 31, 2002). This is called “backup withholding.” Payments that may be subject to backup withholding include interest, dividends, broker and barter exchange transactions, rents, royalties, nonemployee pay, and certain payments from fishing boat operators. Real estate transactions are not subject to backup withholding.
 
You will not be subject to backup withholding on payments you receive if you give the requester your correct TIN, make the proper certifications, and report all your taxable interest and dividends on your tax return.
 
Payments you receive will be subject to backup withholding if:
 
1. You do not furnish your TIN to the requester,
 
2. You do not certify your TIN when required (see the Part II instructions on page 4 for details),
 
3. The IRS tells the requester that you furnished an incorrect TIN,
 
4. The IRS tells you that you are subject to backup withholding because you did not report all your interest and dividends on your tax return (for reportable interest and dividends only), or
 
5. You do not certify to the requester that you are not subject to backup withholding under 4 above (for reportable interest and dividend accounts opened after 1983 only).
 
Certain payees and payments are except from backup withholding. See the instructions below and the separate Instructions for the Requester of Form W-9.
 
Also see Special rules regarding partnerships on page 1.
 
Penalties
 
Failure to furnish TIN. If you fail to furnish your correct TIN to a requester, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect.
 
Civil penalty for false information with respect to withholding. If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a $500 penalty.
 
Criminal penalty for falsifying information. Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment.
 
Misuse of TINS. If the requester discloses or uses TINs in violation of federal law, the requester may be subject to civil and criminal penalties.
 
Specific Instructions
 
Name
 
If you are an individual, you must generally enter the name shown on your income tax return. However, if you have changed your last name, for instance, due to marriage without informing the Social Security Administration of the name change, enter your first name, the last name shown on your social security card, and your new last name.
 
If the account is in joint names, list first, and then circle, the name of the person or entity whose number you entered in Part I of the form.
 
Sole proprietor. Enter your individual name as shown on your social security card on the “Name” line. You may enter your business, trade, or “doing business as (DBA)” name on the “Business name” line.
 
Limited liability company (LLC). If you are a single-member LLC (including a foreign LLC with a domestic owner) that is disregarded as an entity separate from its owner under Treasury regulations section 301.7701-3, enter the owner’s name on the “Name” line. Enter the LLC’s name on the “Business name” line. Check the appropriate box for your filing status (sole proprietor, corporation, etc.), then check the box for “Other” and enter “LLC” in the space provided.
 
Other entities. Enter your business name as shown on required Federal tax documents on the “Name” line. This name should match the name shown on the charter or other legal document creating the entity. You may enter any business, trade, or DBA name on the “Business name” line.
 
Note: You are requested to check the appropriate box for your status (individual/sole proprietor, corporation, etc.).
 
Exempt From Backup Withholding
 
If you are exempt, enter your name as described above and check the appropriate box for your status, then check the “Exempt from backup withholding” box in the line following the business name, sign and date the form.
 
Generally, individuals (including sole proprietors) are not exempt from backup withholding. Corporations are exempt from backup withholding for certain payments, such as interest and dividends.
 
Note: If you are exempt from backup withholding, you should still complete this form to avoid possible erroneous backup withholding.
 
Exempt payees. Backup withholding is not required on any payments made to the following payees:
 
1. An organization exempt from tax under section 501(a), any IRA, or a custodial account under section 403(b)(7) if the account satisfies the requirements of section 401(f)(2),
 
2. The United States or any of its agencies or instrumentalities,
 
3. A state, the District of Columbia, a possession of the United States, or any of their political subdivisions or instrumentalities,
 
4. A foreign government or any of its political subdivisions, agencies, or instrumentalities, or
 
5. An international organization or any of its agencies or instrumentalities.
 
Other payees that may be exempt from backup withholding include:
 
6. A corporation,
 
7. A foreign central bank of issue,
 
8. A dealer in securities or commodities required to register in the United States, the District of Columbia, or a possession of the United States,


12

 

Form W-9 (Rev. 11-2005) Page 3
 
 
9. A futures commission merchant registered with the Commodity Futures Trading Commission,
 
10. A real estate investment trust,
 
11. An entity registered at all times during the tax year under the Investment Company Act of 1940,
 
12. A common trust fund operated by a bank under section 584(a),
 
13. A financial institution,
 
14. A middleman known in the investment community as a nominee or custodian, or
 
15. A trust exempt from tax under section 664 or described in section 4947.
 
The chart below shows types of payments that may be exempt from backup withholding. The chart applies to the exempt recipients listed above, 1 through 15.
 
       
IF the payment is for . . .     THEN the payment is exempt for . . .
Interest and dividend payments
    All exempt recipients except for 9
Broker transactions
    Exempt recipients 1 through 13. Also, a person registered under the Investment Advisers Act of 1940 who regularly acts as a broker
Barter exchange transactions and patronage dividends
    Exempt recipients 1 through 5
Payments over $600 required to be reported and direct sales over $5,000.1
    Generally, exempt recipients 1 through 72
 
 
1 See Form 1099-MISC. Miscellaneous Income, and its instructions.
 
2 However, the following payments made to a corporation (including gross proceeds paid to an attorney under section 6045(f), even if the attorney is a corporation) and reportable on Form 1099-MISC are not exempt from backup withholding; medical and health care payments, attorneys’ fees, and payments for services paid by a Federal executive agency.
 
Part I. Taxpayer Identification Number (TIN)
 
Enter your TIN in the appropriate box. If you are a resident alien and you do not have and are not eligible to get an SSN, your TIN is your IRS individual taxpayer identification number (ITIN). Enter it in the social security number box. If you do not have an ITIN, see How to get a TIN below.
 
If you are a sole proprietor and you have an EIN, you may enter either your SSN or EIN. However, the IRS prefers that you use your SSN.
 
If you are a single-owner LLC that is disregarded as an entity separate from its owner (see Limited liability company (LLC) on page 2), enter your SSN (or EIN, if you have one). If the LLC is a corporation, partnership, etc., enter the entity’s EIN.
 
Note: See the chart on page 4 for further clarification of name and TIN combinations.
 
How to get a TIN. If you do not have a TIN, apply for one immediately. To apply for an SSN, get Form SS-5, Application for a Social Security Card, from your local Social Security Administration office or get this form on-line at www.socialsecurity.gov. You may also get this form by calling 1-800-772-1213. Use Form W-7, Application for IRS Individual Taxpayer Identification Number, to Apply For an ITIN, or Form SS-4, Application for Employer Identification Number, to apply for an EIN. You can apply for an EIN online by accessing the IRS website at www.irs.gov/businesses and clicking on Employer ID Numbers under Related Topics. You can get Forms W-7 and SS-4 from the IRS by visiting www.irs.gov or by calling 1-800-TAX-FORM (1-800-829-3676).
 
If you are asked to complete Form W-9 but do not have a TIN, write “Applied For” in the space for the TIN, sign and date the form, and give it to the requester. For interest and dividend payments, and certain payments made with respect to readily tradable instruments, generally you will have 60 days to get a TIN and give it to the requester before you are subject to backup withholding on payments. The 60-day rule does not apply to other types of payments. You will be subject to backup withholding on all such payments until you provide your TIN to the requester.
 
Note: Writing “Applied For” means that you have already applied for a TIN or that you intend to apply for one soon.
 
Caution: A disregarded domestic entity that has a foreign owner must use the appropriate Form W-8.


13

 

Form W-9 (Rev. 11-2005) Page 4
 
Part II.  Certification
 
To establish to the withholding agent that you are a U.S. person, or resident alien, sign Form W-9. You may be requested to sign by the withholding agent even if items 1, 4, and 5 below indicate otherwise.
 
  For a joint account, only the person whose TIN is shown in Part I should sign (when required). Exempt recipients, see Exempt From Backup Withholding on page 2.
 
     Signature requirements. Complete the certification as indicated in 1 through 5 below.
 
  1. Interest, dividend, and barter exchange accounts opened before 1984 and broker accounts considered active during 1983. You must give your correct TIN, but you do not have to sign the certification.
 
  2. Interest, dividend, broker, and barter exchange accounts opened after 1983 and broker accounts considered inactive during 1983. You must sign the certification or backup withholding will apply. If you are subject to backup withholding and you are merely providing your correct TIN to the requester, you must cross out item 2 in the certification before signing the form.
 
  3. Real estate transactions. You must sign the certification. You may cross out item 2 of the certification.
 
  4. Other payments. You must give your correct TIN, but you do not have to sign the certification unless you have been notified that you have previously given an incorrect TIN. “Other payments” include payments made in the course of the requester’s trade or business for rents, royalties, goods (other than bills for merchandise), medical and health care services (including payments to corporations), payments to a nonemployee for services, payments to certain fishing boat crew members and fishermen, and gross proceeds paid to attorneys (including payments to corporations).
 
  5. Mortgage interest paid by you, acquisition or abandonment of secured property, cancellation of debt, qualified tuition program payments (under section 529), IRA, Coverdell ESA, Archer MSA or HSA contributions or distributions, and pension distributions. You must give your correct TIN, but you do not have to sign the certification.
What Name and Number To Give the Requester
 
           
 
For this type of account:     Give name and SSN of:
1.
  Individual     The individual
           
2.
  Two or more individuals (joint account)     The actual owner of the account or, if combined funds, the first individual on the account 1
           
3.
  Custodian account of a minor (Uniform Gift to Minors Act)     The minor 2
           
4.
 
a. The usual revocable savings trust (grantor is also trustee)
    The grantor-trustee 1
           
   
b. So-called trust account that is not a legal or valid trust under state law
    The actual owner 1
           
5.
  Sole proprietorship or single-owner LLC     The owner 3
For this type of account:
    Give name and EIN of:
6.
  Sole proprietorship or single-owner LLC     The owner 3
           
7.
  A valid trust, estate, or pension trust     Legal entity 4
           
8.
  Corporate or LLC electing corporate status on Form 8832     The corporation
           
9.
  Association, club, religious, charitable, educational, or other tax-exempt organization     The organization
           
10.
  Partnership or multi-member LLC     The partnership
           
11.
  A broker or registered nominee     The broker or nominee
           
12.
  Account with the Department of Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments     The public entity
 
 
1 List first and circle the name of the person whose number you furnish. If only one person on a joint account has an SSN, that person’s number must be furnished.
 
2 Circle the minor’s name and furnish the minor’s SSN.
 
3 You must show your individual name and you may also enter your business or “DBA” name on the second name line. You may use either your SSN or EIN (if you have one). If you are a sole proprietor, IRS encourages you to use your SSN.
 
4 List first and circle the name of the legal trust, estate, or pension trust. (Do not furnish the TIN of the personal representative or trustee unless the legal entity itself is not designated in the account title.) Also see Special rules regarding partnerships on page 1.
 
Note. If no name is circled when more than one name is listed, the number will be considered to be that of the first name listed.
Privacy Act Notice
 
Section 6109 of the Internal Revenue Code requires you to provide your correct TIN to persons who must file information returns with the IRS to report interest, dividends, and certain other income paid to you, mortgage interest you paid, the acquisition or abandonment of secured property, cancellation of debt, or contributions you made to an IRA, or Archer MSA or HSA. The IRS uses the numbers for identification purposes and to help verify the accuracy of your tax return. The IRS may also provide this information to the Department of Justice for civil and criminal litigation, and to cities, states, and the District of Columbia and U.S. possessions to carry out their tax laws. We may also disclose this information to other countries under a tax treaty, to federal and state agencies to enforce federal nontax criminal laws, or to federal law enforcement and intelligence agencies to combat terrorism.
 
  You must provide your TIN whether or not you are required to file a tax return. Payers must generally withhold 28% of taxable interest, dividend, and certain other payments to a payee who does not give a TIN to a payer. Certain penalties may also apply.


14

 

             
             
Form W-8BEN
(Rev. December 2000)
Department of the Treasury
Internal Revenue Service 		    Certificate of Foreign Status of Beneficial Owner
for United States Tax Withholding
► Section references are to the Internal Revenue Code.
► See separate instructions.
► Give this form to the withholding agent or payer. Do not send to the IRS. 		    OMB No. 1545-1621
 
Do not use this form for: Instead, use Form:
 
         
• A U.S. citizen or other U.S. person, including a resident alien individualW-9
• A person claiming an exemption from U.S. withholding on income effectively connected with the conduct of a trade or business in the United StatesW-8ECI
• A foreign partnership, a foreign simple trust, or a foreign grantor trust (see instructions for exceptions)W-8ECI or W-8IMY
• A foreign government, international organization, foreign central bank of issue, foreign tax-exempt organization, foreign private foundation, or government of a U.S. possession that received effectively connected income or that is claiming the applicability of section(s) 115(2), 501(c), 892, 895, or 1443(b) (see instructions)W-8ECI or W-8EXP
Note: These entities should use Form W-8BEN if they are claiming treaty benefits or are providing the form only to claim they are a foreign person exempt from backup withholding.
• A person acting as an intermediaryW-8IMY
 
Note: See instructions for additional exceptions.
 Part I
     Identification of Beneficial Owner (See instructions.)
           
 
         
1
  Name of individual or organization that is the beneficial owner     2  Country of incorporation or organization
           
 
                         
3
  Type of beneficial owner:   o Individual   o Corporation   o Disregarded entity   o Partnership   o Simple trust
                     
    o Grantor trust   o Complex trust   o Estate   o Government   o International organization
                         
    o Central bank of issue   o Tax-exempt organization   o Private foundation            
 
           
4
  Permanent resident address (street, apt. or suite no., or rural route). Do not use a P.O. box or in-care-of address.
           
    City or town, state or province. Include postal code where appropriate.     Country (do not abbreviate)
           
 
5
  Mailing address (if different from above)      
           
    City or town, state or province. Include postal code where appropriate.     Country (do not abbreviate)
           
 
           
6
  U.S. taxpayer identification number, if required (see instructions)     7 Foreign tax identifying number, if any (optional)
    o SSN or ITIN  o EIN      
 
8
  Reference number(s) (see instructions)      
           
 Part II
     Claim of Tax Treaty Benefits (if applicable)
         
     
 9
  I certify that (check all that apply):
         
  a
  o   The beneficial owner is a resident of _ _ within the meaning of the income tax treaty between the United States and that country.
         
  b
  o   If required, the U.S. taxpayer identification number is stated on line 6 (see instructions).
         
  c
  o   The beneficial owner is not an individual, derives the item (or items) of income for which the treaty benefits are claimed, and, if applicable, meets the requirements of the treaty provision dealing with limitation on benefits (see instructions).
         
  d
  o   The beneficial owner is not an individual, is claiming treaty benefits for dividends received from a foreign corporation or interest from a U.S. trade or business of a foreign corporation, and meets qualified resident status (see instructions).
         
  e
  o   The beneficial owner is related to the person obligated to pay the income within the meaning of section 267(b) or 707(b), and will file Form 8833 if the amount subject to withholding received during a calendar year exceeds, in the aggregate, $500,000.
     
10
  Special rates and conditions (if applicable — see instructions): The beneficial owner is claiming the provisions of Article _ _ of the treaty identified on line 9a above to claim a _ _% rate of withholding on (specify type of income): 
     
    Explain the reasons the beneficial owner meets the terms of the treaty article: 
 Part III
     Notional Principal Contracts
         
         
11
  o   I have provided or will provide a statement that identifies those notional principal contracts from which the income is not effectively connected with the conduct of a trade or business in the United States. I agree to update this statement as required.
 Part IV
     Certification
Under penalties of perjury, I declare that I have examined the information on this form and to the best of my knowledge and belief it is true, correct, and complete. I further certify under penalties of perjury that:
•  I am the beneficial owner (or am authorized to sign for the beneficial owner) of all the income to which this form relates,
•  The beneficial owner is not a U.S. person,
•  The income to which this form relates is not effectively connected with the conduct of a trade or business in the United States or is effectively connected but is not subject to tax under an income tax treaty, and
• For broker transactions or barter exchanges, the beneficial owner is an exempt foreign person as defined in the instructions.
Furthermore, I authorize this form to be provided to any withholding agent that has control, receipt, or custody of the income of which I am the beneficial owner or any withholding agent that can disburse or make payments of the income of which I am the beneficial owner.
             
             
Sign Here    -
 
 
 
    Signature of beneficial owner (or individual authorized to sign for beneficial owner)   Date (MM-DD-YYYY)   Capacity in which acting
 
For Paperwork Reduction Act Notice, see separate instructions. Cat. No. 25047Z Form W-8BEN (Rev. 12-2000)

 

The Depositary for the Offer is
 
KINGSDALE SHAREHOLDER SERVICES INC.
 
     
For Delivery by Mail:   For Delivery by Courier or by Hand:
The Exchange Tower
130 King Street West
Suite 2950, P.O. Box 361
Toronto, Ontario
M5X 1E2 		  The Exchange Tower
130 King Street West
Suite 2950
Toronto, Ontario
M5X 1C7
 
The Dealer Manager for the Offer is
 
GMP SECURITIES L.P. (Canada)
GRIFFITHS McBURNEY CORP. (United States)
145 King Street West
Suite 300
Toronto, Ontario
M5H 1J8
Telephone: (416) 367-8600
Toll Free: 1-888-301-3244
Fax: (416) 367-8164
 
The Information Agent for the Offer is:
 
(KINGSDALE SHAREHOLDERS SERVICES INC LOGO)
 
The Exchange Tower
130 King Street West
Suite 2950, P.O. Box 361
Toronto, Ontario
M5X 1E2
 
Any questions and requests for assistance may be directed to
Kingsdale Shareholder Services Inc. at the telephone numbers set out below:
 
North America Toll Free Telephone:
 
1-866-639-8026
Fax: (416) 867-2271
Toll Free Fax: 1-866-545-5580
Bankers and Brokers call collect: (416) 867-2272
E-Mail: shareholder@kingsdalecapital.com
 

 EX-99.2 11 d40357exv99w2.htm FORM OF NOTICE OF GUARANTEED DELIVERY exv99w2
 

 
Exhibit 99.2
 
The Dealer Manager or the Depositary and Information Agent (see the back page of the Letter of Acceptance and Transmittal for addresses and telephone numbers) or your broker or other financial advisor will assist you in completing this Notice of Guaranteed Delivery.
 
THIS IS NOT A LETTER OF ACCEPTANCE AND TRANSMITTAL
 
NOTICE OF GUARANTEED DELIVERY
 
for
Common Shares
of
 
CORAL GOLD RESOURCES LTD.
 
To be deposited pursuant to the Offer dated    l    , 2006 of
 
U.S. GOLD CORPORATION
AND
US GOLD CANADIAN ACQUISITION CORPORATION
 
The terms and conditions of the Offer (in Canada) and the Prospectus (in the United States) are incorporated by reference in this Notice of Guaranteed Delivery. Capitalized terms used, but not defined, in this Notice of Guaranteed Delivery which are defined in the Offer the Prospectus shall have the respective meanings set out in the Offer.
 
If a Shareholder wishes to deposit common shares of Coral Gold Resources Ltd. (“Common Shares”) pursuant to the Offer/Prospectus and (i) the certificate(s) representing the Common Shares are not immediately available, or (ii) such Shareholder cannot deliver the certificate(s) and all other required documents to the Depositary at or prior to the Expiry Time, those Common Shares may nevertheless be deposited pursuant to the Offer/Prospectus by utilizing the procedures contemplated by this Notice of Guaranteed Delivery provided that all of the following conditions are met:
 
1. the deposit is made by or through an Eligible Institution;
 
2. a properly completed and duly executed copy of this Notice of Guaranteed Delivery, or a facsimile hereof, including a guarantee by an Eligible Institution as specified herein is received by the Depositary at the office set out below, at or prior to the Expiry Time; and
 
3. the certificate(s) representing the deposited Common Shares in proper form for transfer, together with a properly completed and duly executed Letter of Acceptance and Transmittal, or a facsimile thereof, with any required signature guarantees and all other documents required by the Letter of Acceptance and Transmittal, are received by the Depositary at the office set out below at or prior to 5:00 p.m. (Vancouver Time) on the third trading day on the TSX-V after the Expiry Time.
 
This Notice of Guaranteed Delivery may be delivered by hand or courier or transmitted by facsimile or mailed to the Depositary at the office set out below and must be guaranteed by an Eligible Institution in the form set out below.

 

 
This form is not to be used to guarantee signatures. If a signature on the Letter of Acceptance and Transmittal is required to be guaranteed by an Eligible Institution, such signature guarantee must appear in the applicable space provided in the Letter of Acceptance and Transmittal.
 
 
TO: U.S. GOLD CORPORATION US GOLD CANADIAN ACQUISITION CORPORATION
(the “Offerors”)
 
AND TO: KINGSDALE SHAREHOLDER SERVICES INC., AS DEPOSITARY
 
     
By Mail:

The Exchange Tower
130 King Street West
Suite 2950, P.O. Box 361
Toronto, Ontario
M5X 1E2
 
By Courier or By Hand:

The Exchange Tower
130 King Street West
Suite 2950
Toronto, Ontario
M5X 1C7
 
Delivery of this Notice of Guaranteed Delivery to an address or transmission of this Notice of Guaranteed Delivery via facsimile to a number other than set forth above does not constitute a valid delivery.
 
The undersigned hereby deposits with the Offerors, upon the terms and subject to the conditions set forth in the Offer/Prospectus, and the Letter of Acceptance and Transmittal, receipt of which is hereby acknowledged, the Common Shares described below, pursuant to the guaranteed delivery procedures set forth in the section entitled “Offer — Manner of Acceptance — Procedure for Guaranteed Delivery” of the Offer/Prospectus and Instruction 2 to the Letter of Acceptance and Transmittal.
 
                     
Name and address of Shareholder of Record
 		    Certificate Number
 		    Number of
(please print)     (if available)     Common Shares Deposited
                     
                     
                     
        Total            
 * Unless otherwise indicated, all shares evidenced by any certificate(s) submitted to the Depositary will be deemed to have been deposited under the Offer.
                     
 
Area Code and Telephone Number during Business Hours:
 
(    )
 
  Date: 
 
Signature
 
 
NOTE:  DO NOT SEND CERTIFICATES FOR COMMON SHARES WITH THIS NOTICE OF GUARANTEED DELIVERY. CERTIFICATES FOR COMMON SHARES SHOULD BE SENT WITH YOUR LETTER OF ACCEPTANCE AND TRANSMITTAL.


2

 

GUARANTEE
 
(Not to be used for signature guarantee)
 
The undersigned, an Eligible Institution, hereby guarantees delivery to the Depositary (at its address set forth herein) of the certificate or certificates representing Common Shares deposited hereby, in proper form for transfer, together with a properly completed and duly executed Letter of Acceptance and Transmittal in proper form (or a facsimile thereof) and all other documents required by such Letter of Acceptance and Transmittal, on or prior to 5:00 p.m. (Vancouver time) on the third trading day on the TSX-V after the Expiry Time.
 
An “Eligible Institution” means a Canadian Schedule I chartered bank, a major trust company in Canada, a member of the Securities Transfer Agents Medallion Program (STAMP), a member of the Stock Exchange Medallion Program (SEMP) or a member of the New York Stock Exchange, Inc. Medallion Signature Program (MSP).
 
     
Name of Firm: _ _
  Authorized Signature: _ _
     
Address of Firm: _ _
  Name: _ _
     
  Title: _ _
     
Telephone No.: _ _
  Date: _ _


3

 

The Depositary for the Offer is
 
KINGSDALE SHAREHOLDER SERVICES INC.
 
     
For Delivery by Mail:   For Delivery by Courier or by Hand:
The Exchange Tower
130 King Street West
Suite 2950, P.O. Box 361
Toronto, Ontario
M5X 1E2 		  The Exchange Tower
130 King Street West
Suite 2950
Toronto, Ontario
M5X 1C7
 
The Dealer Manager for the Offer is
 
GMP SECURITIES L.P. (Canada)
GRIFFITHS MCBURNEY CORP. (United States)
 

145 King Street West
Suite 300
Toronto, Ontario
M5H 1J8
Telephone: (416) 367-8600
Toll Free: 888-301-3244
Fax: (416) 367-8164
 
The Information Agent for the Offer is:
 
(KINGSDALE SHAREHOLDERS SERVICES INC LOGO)
 
The Exchange Tower
130 King Street West
Suite 2950, P.O. Box 361
Toronto, Ontario
M5X 1E2
 
Any questions and requests for assistance may be directed to
KingsdaleShareholder Services Inc. at the telephone numbers set out below:
 
North America Toll Free Telephone:
 
1-866-639-8026
 
Fax: (416) 867-2271
Toll Free Fax: 1-866-545-5580
Bankers and Brokers call collect: (416) 867-2272
E-Mail: shareholder@kingsdalecapital.com
 


4

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