UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549




FORM 10-K


(Mark One)


x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For fiscal year ended: December 31, 2010




OR




o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the transition period from _______________ to _______________




Commission file number: 333-140148




Nevada Gold Holdings, Inc.(Exact name of registrant as specified in its charter)




Delaware

20-3724068(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)




800 E. Colorado Blvd., Suite 888 Pasadena, California

91101(Address of principal executive offices)

(Postal Code)




Registrant’s telephone number, including area code: 626-683-7330




Securities registered under Section 12(b) of the Act: None




Securities registered under Section 12(g) of the Act: Common Stock, Par Value of $0.001 Per Share




Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x




Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes o No x




Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o




Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o




Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o




Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a smaller reporting company. See the definitions of the “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):





Large Accelerated Filer o
Accelerated Filer o





Non-Accelerated Filer
Smaller reporting company x





(Donot check if a smaller reporting company)




Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes o No x




On June 30, 2010, the last business day of the registrant’s most recently completed second fiscal quarter, approximately 3,477,000 shares of its Common Stock, $0.001 par value per share (its only class of voting or non-voting common equity) were held by non-affiliates of the registrant. The market value of those shares was approximately $1,043,100, based on the last sale price of $0.30 per share of the Common Stock on that date. For this purpose, shares of Common Stock beneficially owned by each executive officer and director of the registrant and each beneficial owner of 10% or more of the Common Stock outstanding have been excluded because such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.




As of April 14, 2011, there were 43,844,054 shares of the registrant’s common stock, par value $0.001, issued and outstanding.






DOCUMENTS INCORPORATED BY REFERENCE


None










TABLE OF CONTENTS




Item

PageAvailable Information

1Forward-Looking Statements

2PART I

31. Business

31A. Risk Factors

112. Properties

193. Legal Proceedings

254. (Removed and Reserved)

26PART II

265. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

266. Selected Financial Data

297. Management’s Discussion and Analysis of Financial Condition and Results of Operations

298. Financial Statements and Supplemental Data

329. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

329A. Controls and Procedures

33PART III

3410. Directors, Executive Officers, and Corporate Governance

3411. Executive Compensation

3712. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

4113. Certain Relationships and Related Transactions, and Director Independence

4214. Principal Accountant Fees and Services

43PART IV

4415. Exhibits and Financial Statement Schedules

44


i


AVAILABLE INFORMATION




We file annual, quarterly and current reports, proxy statements and other information with the United States Securities and Exchange Commission (“SEC”). You may read and copy any document we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549, U.S.A. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330 (or 1-202-551-8090). The SEC maintains an internet site that contains annual, quarterly and current reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. Our electronic SEC filings are available to the public at http://www.sec.gov.




Our public internet site is http://www.nevadagoldholdings.com. We make available free of charge through our internet site, via a link to the SEC’s internet site at http://www.sec.gov, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically files such material with, or furnish it to, the SEC. We also make available through our internet site, via a link to the SEC’s internet site, statements of beneficial ownership of our equity securities filed by our directors, officers, 10% or greater shareholders and others under Section 16 of the Exchange Act.




These documents are also available in print without charge to any person who requests them by writing or telephoning:




Nevada Gold Holdings, Inc.


c/o Gottbetter & Partners, LLP


488 Madison Avenue


New York, New York 10022-5718


Telephone: 212-400-6900


Facsimile: 212-400-6901





1





FORWARD-LOOKING STATEMENTS




This Annual Report contains forward-looking statements, including, without limitation, in the sections captioned “Description of Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere. Any and all statements contained in this Report that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,” “could,” “project,” “estimate,” “pro forma,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future,” and terms of similar import (including the negative of any of the foregoing) may be intended to identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this Report may include, without limitation, statements regarding (i) the plans and objectives of management for future operations, including plans or objectives relating to exploration programs, (ii) a projection of income (including income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends, capital structure or other financial items, (iii) our future financial performance, including any such statement contained in a discussion and analysis of financial condition by management or in the results of operations included pursuant to the rules and regulations of the SEC, and (iv) the assumptions underlying or relating to any statement described in points (i), (ii) or (iii) above.




The forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence or contribute to the inaccuracy of the forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation, our inability to obtain adequate financing, insufficient cash flows and resulting illiquidity, our inability to expand our business, government regulations, lack of diversification, volatility in the price of gold, increased competition, results of arbitration and litigation, stock volatility and illiquidity, and our failure to implement our business plans or strategies. A description of some of the risks and uncertainties that could cause our actual results to differ materially from those described by the forward-looking statements in this Report appears in the section captioned “Risk Factors” and elsewhere in this Report.




Readers are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them. We disclaim any obligation to update the forward-looking statements contained in this Report to reflect any new information or future events or circumstances or otherwise.




Readers should read this Report in conjunction with the discussion under the caption “Risk Factors,” our financial statements and the related notes thereto in this Report, and other documents which we may file from time to time with the SEC.




2





PART I




ITEM 1. BUSINESS




This Report contains summaries of the material terms of various agreements executed in connection with the transactions described herein. The summaries of these agreements are subject to, and are qualified in their entirety by reference to, these agreements, all of which are incorporated herein by reference.




Historical Development




We were incorporated as Nano Holdings International, Inc., in Delaware on April 16, 2004. Prior to the Merger (as defined below), our business was to sell party and drinking supplies, including gelatin shot mixes, shot glasses, flavored sugar and salts, and various other drinking containers and paraphernalia.




Name Change and Capital Increase




On November 3, 2008, we filed a Certificate of Amendment to our Certificate of Incorporation with the Secretary of State of the State of Delaware, which (i) changed our name from Nano Holdings International, Inc., to Nevada Gold Holdings, Inc., and (ii) increased our authorized capital stock from 75,000,000 shares of common stock, par value $0.001, to 300,000,000 shares of common stock, par value $0.001, and 10,000,000 shares of preferred stock, par value $0.001.




As used in this Report, unless otherwise stated or the context clearly indicates otherwise, the term “Nano Holdings” refers to us before giving effect to the Merger (defined below), the term “NGE” refers to Nevada Gold Enterprises, Inc., a Nevada corporation formed on October 7, 2008, before giving effect to the Merger, the term “NGHI” refers to Nevada Gold Holdings, Inc., after giving effect to the Merger, and the terms “Company,” “we,” “us,” and “our” refer to Nevada Gold Holdings, Inc., and its wholly owned subsidiary, NGE, after giving effect to the Merger.




Stock Splits




Our Board of Directors authorized a 30.30303-for-1 forward split of our common stock, par value $0.001 per share (“Common Stock”), in the form of a stock dividend, which was paid on November 21, 2008, to holders of record on November 19, 2008. Our Board of Directors authorized a 2-for-1 forward split of our Common Stock, in the form of a stock dividend, which was paid on May 12, 2009, to holders of record on May 8, 2009. Our Board of Directors and our stockholders authorized a one-for-fifteen reverse split of our Common Stock, which was effected on September 15, 2010. All share and per share numbers in this Report relating to the Common Stock have been adjusted to give effect to these stock splits, unless otherwise stated.




Merger




On December 31, 2008, pursuant to a Merger Agreement entered into on the same date, Nevada Gold Acquisition Corp., a Nevada corporation formed on December 18, 2008, and a wholly owned subsidiary of Nano Holdings (“Acquisition Sub”), merged with and into NGE, with NGE being the surviving corporation (the “Merger”). As a result of the Merger, NGE became a wholly owned subsidiary of NGHI.




Pursuant to the Merger, we ceased operating as a distributor of party and drinking supplies and acquired the business of NGE to engage in the exploration and eventual development of gold mines, and we have continued NGE’s existing business operations as a publicly traded company under the name Nevada Gold Holdings, Inc. See “Split-Off Agreement” below.




At the closing of the Merger, each of the 200 shares of NGE’s common stock issued and outstanding immediately prior to the closing of the Merger was converted into 4,658,263 shares of our Common Stock. As a result, an aggregate of 2,626,263 shares of our Common Stock were issued to the holders of NGE’s common stock. NGE did not have any stock options or warrants to purchase shares of its capital stock outstanding at the time of the Merger.




3





The Merger Agreement contained a post-closing adjustment to the number of shares of Common Stock issued to the former NGE stockholders, in an amount up to 33,333 shares of Company Common Stock, to be issued to the former NGE stockholders on a pro rata basis for any breach of the Merger Agreement by Nevada Gold Holdings, Inc., discovered during the two-year period following the Closing Date. In order to secure the indemnification obligations of NGE under the Merger Agreement, 5% of the shares of Common Stock to which the principal former NGE stockholder (David Mathewson, who was also subsequent to the Merger our sole director, Chief Executive Officer and President, and who is now still a director of the Company) was entitled in exchange for his shares of NGE in connection with the Merger were held in escrow for a period of two years pursuant to an escrow agreement. These shares have been released from the escrow in full.




The Merger Agreement contained customary representations and warranties and pre- and post-closing covenants of each party and customary closing conditions. Breaches of the representations and warranties were subject to customary indemnification provisions.




The Merger was treated as a recapitalization of the Company for financial accounting purposes. NGE is considered the acquirer for accounting purposes, and the historical financial statements of Nano Holdings before the Merger were replaced with the historical financial statements of NGE before the Merger in all subsequent filings with the Securities and Exchange Commission (the “SEC”).




The parties took all actions necessary to ensure that the Merger was treated as a tax-free exchange under Section 368(a) of the Internal Revenue Code of 1986, as amended.




The issuance of shares of Common Stock to holders of NGE’s capital stock in connection with the Merger was not registered under the Securities Act, in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act and Regulation D promulgated by the SEC under that section, which exempt transactions by an issuer not involving any public offering. These securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirement.




Split-Off Agreement




Upon the closing of the Merger, under the terms of a Split-Off Agreement, the Company transferred all of its pre-Merger operating assets and liabilities to its wholly owned subsidiary, Sunshine Group, Inc., a Delaware corporation (“Sunshine”) formed on December 18, 2008, including, without limitation, the Company’s equity interests in Sunshine Group, LLC, a Florida limited liability company (“Sunshine LLC”). Thereafter, pursuant to the Split-Off Agreement, we transferred all of the outstanding shares of capital stock of Sunshine to Marion R. “Butch” Barnes, William D. Blanchard and Robert Barnes, pre-Merger stockholders of Nano Holdings (the “Split-Off”), in consideration of and in exchange for (i) the surrender and cancellation of an aggregate of 6,666,667 shares of our Common Stock held by those stockholders and (ii) certain representations, covenants and indemnities.




Accounting Treatment; Change of Control




The Merger was accounted for as a “reverse merger,” and NGE was deemed to be the acquirer in the reverse merger. Consequently, the assets and liabilities and the historical operations that are reflected in our financial statements prior to the Merger are those of NGE and have been recorded at the historical cost basis of NGE, and our consolidated financial statements after completion of the Merger include the assets and liabilities of NGE, historical operations of NGE and operations of NGHI and its subsidiary from the closing date of the Merger. As a result of the issuance of the shares of Common Stock pursuant to the Merger, a change in control of the Company occurred as of the date of consummation of the Merger. Except as described in this Report, no arrangements or understandings exist among present or former controlling stockholders with respect to the election of members of our Board of Directors and, to our knowledge, no other arrangements exist that might result in a change of control of the Company.




4





Private Placements




On December 31, 2008, NGHI closed a private placement (the “Bridge PPO”) of (a) 55,200 shares of Common Stock, at a purchase price of $1.30 per share, and (b) $150,000 principal amount of its 10% Secured Convertible Promissory Note (the “2008 Bridge Note”), at a purchase price of par, for aggregate gross proceeds of $253,500, before deducting expenses related to the offerings. Upon the closing of the Merger, the purchaser of the 2008 Bridge Note also received 20,000 shares of Common Stock under the terms of the 2008 Bridge Note. (The 2008 Bridge Note has subsequently been repaid.)




On March 9, 2009, NGHI held a second closing of the Bridge PPO for 20,000 shares of Common Stock, at a purchase price of $2.06 per share.




As an inducement to certain investors to purchase Common Stock in the Bridge PPO, the principal former NGE stockholder (David Mathewson, who was then our Chief Executive Officer, President and sole director and is now our director) agreed to transfer to those investors in private transactions an aggregate of 214,000 shares of the Company Common Stock that he received in the Merger.




On June 24, 2009, we closed a private placement (the “2009 PPO”) of 133,333 units of our securities, at a purchase price of $3.75 per unit, each unit consisting of one share of Common Stock and a warrant to purchase one share of Common Stock for a period of five years, at an exercise price of $7.50 per share, for gross proceeds of $500,000.




On September 18, 2009, we held a second closing of the 2009 PPO for 68,667 of the same units on the same terms, for gross proceeds of $250,000.




On December 10, 2009, we borrowed $100,000 under a bridge loan note (the “2009 Bridge Note”) from a private institution. This note was converted into Common Stock on October 29, 2010. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – 2009 Bridge Note” for more information.




On February 5, 2010, we entered into a financing arrangement with JMJ Financial (the “Investor”), pursuant to which the Investor would lend us up to $3,200,000. We issued convertible promissory notes to the Investor in an aggregate principal amount of $3,200,000 (the “2010 JMJ Notes”). We received $200,000 from the Investor on February 5, 2010. On May 6, 2010, we repaid $200,000 from existing cash resources to the Investor as payment in full and complete satisfaction all of the Company’s obligations pursuant to the financing agreement, and the financing arrangement was cancelled. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – 2010 JMJ Notes” for more information.




On May 24, 2010, we borrowed $50,000 under a convertible bridge loan note from a private institution; in August 2010, we entered into three additional convertible bridge loan notes with an aggregate principal amount of $125,000 with three private investors; and on October 1, 2010, we entered into an additional convertible bridge loan note with a principal balance of $25,000 with a private investor (the “2010 Bridge Notes”). See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – 2010 Bridge Notes” for more information.




On October 29, 2010, November 16, 2010, and November 19, 2010 we held closings of a private placement offering (the “2010 PPO”) for a total of 38,833,356units of our securities, at an offering price of $0.10 per unit, each unit consisting of one share of Common Stock and a warrant to purchase one share of Common Stock for a period of five years, at an exercise price of $0.10 per share. Of the $3,883,337 gross proceeds, $3,450,000 consisted of cash consideration, $313,337 came from the automatic conversion of principal and interest on all the convertible notes, and $120,000 represented the discharge of certain accounts payable. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – 2010 PPO” for more information.




5





Far East Golden Resources Investment Limited, a Hong Kong limited liability company (“Far East Golden Resources”), and a wholly owned subsidiary of Hybrid Kinetic Group Limited, an exempt company incorporated in Bermuda with limited liability, purchased 30,000,000 of the units in the 2010 PPO. We agreed with Far East Golden Resources to increase the size of our Board of Directors to seven members, and Far East Golden Resources is entitled to nominate four candidates to the Board. Immediately following the initial closing of the 2010 PPO, Far East Golden Resources beneficially owned 86.1% of the Company’s outstanding Common Stock (calculated as set forth in Rule 13d-3 under the Securities Exchange Act of 1934, as amended), based on its holding 30,000,000 shares of Common Stock and warrants (that are currently exercisable) to purchase 30,000,000 shares of Common Stock, and based on 37,851,862 shares of Common Stock then outstanding. By the conclusion of the 2010 PPO, additional shares of Common Stock were outstanding, and Far East Golden Resources’ beneficial ownership had declined to approximately 82.3%.




Investor Relations Agreement and Warrants




In the Merger Agreement, we agreed to enter into an agreement with an investor relations firm to be identified (the “IR Consultant”) to provide investor relations services to the Company, pursuant to which we will agree to issue to the IR Consultant warrants to purchase an aggregate of 66,667 shares of Common Stock, exercisable for a period of five years, at an exercise price of $15.00 per share.




2008 Equity Incentive Plan




Our 2008 Equity Incentive Plan (as amended, the “2008 Plan”), provides for the issuance of up to 4,507,371 shares of Common Stock (subject to automatic annual increases based on increases in our capitalization) as incentive awards granted to executive officers, key employees, consultants and directors. See “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Securities Authorized for Issuance under Equity Compensation Plans” for more information.




Overview of Our Business




We are engaged in the highly speculative business of exploring for gold. We currently hold a lease on one property in northern Nevada, on which we have the right to explore, and if warranted, mine for gold. Our current plan is to explore for gold at our one property and to determine if it contains gold deposits which can be mined at a profit. Our property is not known to contain gold which can be mined at a profit. We have commenced initial exploration activities. We also plan to acquire future exploration prospects, but have not identified any specific future prospects at this time. Our exploration staff consists solely of our Geological Advisor, David Mathewson. We plan to engage independent engineers, contractors and consultants on an as-needed basis. We cannot assure you that a commercially exploitable gold deposit will be found on our property.




In Nevada, there are five property categories that can be available for exploration and eventual development and mining: public lands, private fee lands, unpatented mining claims, patented mining claims, and tribal lands. Our property consists of unpatented mining claims on federal lands. The primary sources of land for exploration and mining activities are land owned by the United States federal government through the Bureau of Land Management and the United States Forest Service, land owned by state governments, tribal governments and individuals, or land obtained from entities which currently hold title to or lease government or private lands.




6





We currently have rights to explore for gold on one property, known as Tempo Mineral Prospect, which was acquired prior to Merger, all of which we lease from Gold Standard Royalty Corporation, a subsidiary of Golden Predator Mines Inc., which acquired its rights to this property from the Lyle F. Campbell Trust of Reno, Nevada, which acquired its rights to this property from the Federal Bureau of Land Management by staking. We acquired our interest in the lease from KM Exploration, Ltd., a Nevada limited liability company in which our director and Geological Advisor (and former CEO and President), David Mathewson, had a 50% ownership interest prior to its dissolution. (See “Certain Relationships and Related Transactions, and Director Independence” below.) More details about our property may be found in the section captioned “Properties.” Below is a map indicating the location of our property in Nevada.




Project Location




See Part I, Item 2, “Properties,” below for more detailed information about the Tempo Mineral Prospect and our exploration program.




Although mineral exploration is a time consuming and expensive process with no assurance of success, the process is straightforward. We first acquire the rights to explore for gold. We then explore for gold by examining the soil, the rocks on the surface, and by drilling into the ground to retrieve underground rock samples, which can then be analyzed for their mineral content. This exploration activity is undertaken in phases, with each successive phase built upon the information previously gained in prior phases. If our exploration program discovers what appears to be an area which may be able to be profitably mined for gold, we will focus most of our activities on determining whether that is feasible, including further delineation of the location, size and economic feasibility of any such potential ore body.




7





In the event that we discover gold deposits on our property which can be mined at a profit, we will need to raise substantial additional financing in order for the deposits to be developed. In such event, we may seek to enter into a joint-venture agreement with another entity in order to mine our property or enter into other arrangements. Any gold that is mined from our property will be refined and eventually sold on the open market to dealers.




Competition




We compete with other exploration companies, many of which possess greater financial resources and technical abilities than we do. Our main areas of competition are acquiring exploration rights and engaging qualified personnel. The gold exploration industry is highly fragmented, and we are a very small participant in this sector. Many of our competitors explore for a variety of minerals and control many different properties around the world. Many of them have been in business longer than we have and have probably established more strategic partnerships and relationships and have greater financial accessibility than we do.




There is significant competition for properties suitable for gold exploration. As a result, we may be unable to continue to acquire interests in attractive properties on terms that we consider acceptable.




Market for Gold




In the event that gold is produced from our property, we believe that wholesale purchasers for the gold would be readily available. Readily available wholesale purchasers of gold and other precious metals exist in the United States and throughout the world. Among the largest are Handy & Harman, Engelhard Industries and Johnson Matthey, Ltd. Historically, these markets are liquid and volatile. Wholesale purchase prices for precious metals can be affected by a number of factors, all of which are beyond our control, including but not limited to:





●
fluctuation in the supply of, demand and market price for gold;




●
mining activities of our competitors;




●
sale or purchase of gold by central banks and for investment purposes by individuals and financial institutions;




●
interest rates;




●
currency exchange rates;




●
inflation or deflation;




●
fluctuation in the value of the United States dollar and other currencies; and




●
political and economic conditions of major gold or other mineral-producing countries.




8





10-Year Gold Prices




Gold Chart




If we find gold that is deemed of economic grade and in sufficient quantities to justify removal, we may seek additional capital through equity or debt financing to build a mine and processing facility, or find some other entity to mine our property on our behalf, or sell our rights to mine the gold. Upon mining, the ore would be processed through a series of steps that produces a rough concentrate. This rough concentrate is then sold to refiners and smelters for the value of the minerals that it contains, less the cost of further concentrating, refining and smelting. Refiners and smelters then sell the gold on the open market through brokers who work for wholesalers including the major wholesalers listed above. Based upon the current demand for gold, we believe that we will not have any difficulty in selling any gold that we may recover. However, we have not found any gold as of today, and there is no assurance that we will find any gold in the future.




Hedging Transactions




We do not currently engage in hedging transactions and we have no hedged mineral resources.




Compliance with Government Regulation




Various levels of governmental controls and regulations address, among other things, the environmental impact of mineral exploration and mineral processing operations and establish requirements for decommissioning of mineral exploration properties after operations have ceased. With respect to the regulation of mineral exploration and processing, legislation and regulations in various jurisdictions establish performance standards, air and water quality emission standards and other design or operational requirements for various aspects of the operations, including health and safety standards. Legislation and regulations also establish requirements for decommissioning, reclamation and rehabilitation of mineral exploration properties following the cessation of operations and may require that some former mineral properties be managed for long periods of time after exploration activities have ceased.




Our exploration activities are subject to various levels of federal and state laws and regulations relating to protection of the environment, including requirements for closure and reclamation of mineral exploration properties. Some of the laws and regulations include the Clean Air Act, the Clean Water Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Emergency Planning and Community Right-to-Know Act, the Endangered Species Act, the Federal Land Policy and Management Act, the National Environmental Policy Act, the Resource Conservation and Recovery Act, and all related state laws in Nevada. Additionally, our property is subject to the federal General Mining Law of 1872, which regulates how mineral claims on federal lands are obtained.




9





In 1989, the State of Nevada adopted the Mined Land Reclamation Act (the “Nevada MLR Act”), which established design, operation, monitoring and closure requirements for all mining operations in the state. The Nevada MLR Act has increased the cost of designing, operating, monitoring and closing new mining facilities and could affect the cost of operating, monitoring and closing existing mining facilities. New facilities are also required to provide a reclamation plan and financial assurance to ensure that the reclamation plan is implemented upon completion of operations. The Nevada MLR Act also requires reclamation plans and permits for exploration projects that will result in more than five acres of surface disturbance.




We have secured all necessary permits for our exploration activities planned in 2011 and we will file for additional required permits to conduct our exploration programs as necessary. These permits are usually obtained from either the Bureau of Land Management or the United States Forest Service. Obtaining such permits usually requires the posting of small bonds for subsequent remediation of trenching, drilling and bulk-sampling. Delays in the granting of permits are not uncommon, and any delays in the granting of permits may adversely affect our exploration activities. Additionally, necessary permits may be denied, in which case we will be unable to pursue our exploration activities. It may be possible to appeal any denials of permits, but any such appeal will result in additional delays and expense, which may cause you to lose all or part of your investment.




We do not anticipate discharging water into active streams, creeks, rivers, lakes or any other bodies of water without an appropriate permit. We also do not anticipate disturbing any endangered species or archaeological sites or causing damage to our property. Re-contouring and re-vegetation of disturbed surface areas will be completed pursuant to the applicable permits. The cost of remediation work varies according to the degree of physical disturbance. It is difficult to estimate the cost of compliance with environmental laws since the full nature and extent of our proposed activities cannot be determined at this time.




Employees




We currently have two full-time employees and one part-time employee. In the future, if our activities grow, we may hire personnel on an as-needed basis. For the foreseeable future, we plan to engage freelance geologists, engineers and other consultants as necessary.




Research and Development Expenditures




We are not currently conducting any research and development activities other than those relating to the possible acquisition of new gold properties or projects. As we proceed with our exploration programs we may need to engage additional contractors and consider the possibility of adding permanent employees, as well as the possible purchase or lease of equipment. Our planned exploration activities are described in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”




Subsidiaries




Nevada Gold Enterprises, Inc. (“NGE”) is our only subsidiary. The Company owns 100% of the stock of NGE.




10





Patents/Trademarks/Licenses/Franchises/Concessions/Royalty Agreements or Labor Contracts




We do not own any patents or trademarks. Also, we are not a party to any license or franchise agreements, concessions, or labor contracts. In the event that gold is produced from our property, we will have to pay royalties as disclosed in the section captioned “Properties.”




ITEM 1A. RISK FACTORS




THIS ANNUAL REPORT ON FORM 10-K CONTAINS CERTAIN STATEMENTS RELATING TO FUTURE EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF OUR COMPANY. YOU ARE CAUTIONED THAT SUCH STATEMENTS ARE ONLY PREDICTIONS AND INVOLVE RISKS AND UNCERTAINTIES, AND THAT ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY. IN EVALUATING SUCH STATEMENTS, YOU SHOULD SPECIFICALLY CONSIDER THE VARIOUS FACTORS IDENTIFIED IN THIS ANNUAL REPORT ON FORM 10-K, INCLUDING THE MATTERS SET FORTH BELOW, WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS.




Risks Related to the Business and Financial Condition




Our business is exploring for gold, which is a highly speculative activity. An investment in our securities involves a high degree of risk. You should not invest in our securities if you cannot afford to lose your entire investment. In deciding whether you should invest in our securities, you should carefully consider the following information together with all of the other information contained in this Current Report. Any of the following risk factors can cause our business, prospects, financial condition or results of operations to suffer and you to lose all or part of your investment.




Exploring for gold is an inherently speculative business.




Exploring for gold is a business that by its nature is very speculative. There is a strong possibility that we will not discover any gold which can be mined at a profit. Even if we do discover gold deposits, the deposit may not be of the quality or size necessary for us to make a profit from actually mining it. Few properties that are explored are ultimately developed into producing mines. Unusual or unexpected geological formations, geological formation pressures, fires, power outages, labor disruptions, flooding, explosions, cave-ins, landslides and the inability to obtain suitable or adequate machinery, equipment or labor are just some of the many risks involved in mineral exploration programs and the subsequent development of gold deposits.




We will need to obtain additional financing to fund our exploration program.




Although we have sufficient capital to fund our exploration program as it is currently planned through the end of 2011, we do not have sufficient capital to fund our exploration program as it is currently planned thereafter or to fund the acquisition and exploration of new properties. We estimate that we will need to raise approximately $1.5 million to pay for our exploration program through December 31, 2012, as it is currently planned and described in this Report, and our estimated administrative expenses, lease payments and estimated claim maintenance costs. We will likely require additional funding after that date. We may be unable to secure additional financing on terms acceptable to us, or at all, at times when we need such financing. Our inability to raise additional funds on a timely basis could prevent us from achieving our business objectives and could have a negative impact on our business, financial condition, results of operations and the value of our securities. If we raise additional funds by issuing additional equity or convertible debt securities, the ownership percentages of existing stockholders will be reduced and the securities that we may issue in the future may have rights, preferences or privileges senior to those of the current holders of our Common Stock. Such securities may also be issued at a discount to the market price of our Common Stock, resulting in possible further dilution to the book value per share of Common Stock. If we raise additional funds by issuing debt, we could be subject to debt covenants that could place limitations on our operations and financial flexibility.




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The global financial crisis may have an impact on our business and financial condition in ways that we currently cannot predict.




The continued credit crisis and related turmoil in the global financial system may have an impact on our business and financial position. The recent high costs of fuel and other consumables may negatively impact production costs at our operations. In addition, the financial crisis may limit our ability to raise capital through credit and equity markets. As discussed further below, the prices of the metals that we may produce are affected by a number of factors, and it is unknown how these factors will be impacted by a continuation of the financial crisis.




Our management has conflicts of interest.




One of our directors, David Mathewson, has private mining interests and also may serve as a director of other gold exploration companies. Consequently, his personal interests may come into conflict with our interests. Situations may arise where Mr. Mathewson is presented with business opportunities which may be desirable not only for us, but also to the other companies with which he is affiliated. In addition to competition for suitable business opportunities, we also compete with these other gold exploration companies for investment capital, technical resources, key personnel and other things. You should carefully consider these potential conflicts of interest before deciding whether to invest in our securities.




Mr. Mathewson previously held a 50% ownership interest in KM Exploration, Ltd., a Nevada limited liability company, from which we acquired the lease for our Tempo property. See “Certain Relationships and Related Transactions, and Director Independence” below. The lease agreement relating to our property is described in greater detail in the section captioned “Properties.”




We do not know if our property contains any gold that can be mined at a profit.




The property on which we have the right to explore for gold is not known to have any deposits of gold which can be mined at a profit. Whether a gold deposit can be mined at a profit depends upon many factors. Some but not all of these factors include: the particular attributes of the deposit, such as size, grade and proximity to infrastructure; operating costs and capital expenditures required to start mining a deposit; the availability and cost of financing; the price of gold, which is highly volatile and cyclical; and government regulations, including regulations relating to prices, taxes, royalties, land use, importing and exporting of minerals and environmental protection.




We are an exploration stage company with no mining operations and we may never have any mining operations in the future.




Our business is exploring for gold. In the unlikely event that we discover commercially exploitable gold deposits, we will not be able to make any money from them unless the gold is actually mined. We will need to either mine the gold ourselves, find some other entity to mine our properties on our behalf, or sell our rights to mine the gold. Mining operations in the United States are subject to many different federal, state and local laws and regulations, including stringent environmental, health and safety laws. If we assume any operational responsibility for mining on our property, it is possible that we will be unable to comply with current or future laws and regulations, which can change at any time. It is possible that changes to these laws will be adverse to any potential mining operations. Moreover, compliance with such laws may cause substantial delays and require capital outlays in excess of those anticipated, adversely affecting any potential mining operations. Our future mining operations, if any, may also be subject to liability for pollution or other environmental damage. It is possible that we will choose to not be insured against this risk because of high insurance costs or other reasons.




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We are a new company with a short operating history and have only lost money.




NGE, our sole operating subsidiary, was formed on October 7, 2008. Our operating history consists of starting our preliminary exploration activities. We have no income-producing activities. We have already lost money because of the expenses we have incurred in acquiring the rights to explore on our property, and starting our preliminary exploration activities. Exploring for gold is an inherently speculative activity. There is a strong possibility that we will not find any commercially exploitable gold deposits on our property. Because we are a gold exploration company, we may never achieve any meaningful revenue.




We may not be able to follow our internal procedures relating to the authorization and reporting of our financial transactions, or such procedures may not function as intended.




We are a small company with limited resources. We have two full-time employees and one part-time employee. This may cause us not to comply with our internal procedures designed to assure that our financial information is properly gathered and reported. In the event that we do not follow these internal procedures, or if they do not function as intended, we could publish materially incorrect financial statements. This could cause investors to lose confidence in the accuracy of our reported financial information, impair our ability to secure additional financing, and result in a loss of your investment.




Our business is subject to extensive environmental regulations which may make exploring for or mining gold prohibitively expensive, and which may change at any time.




All of our operations are subject to extensive environmental regulations which can make exploring for gold expensive or prohibit it altogether. We may be subject to potential liabilities associated with the pollution of the environment and the disposal of waste products that may occur as the result of our exploring for gold on our properties. We may have to pay to remedy environmental pollution, which may reduce the amount of money that we have available to use for exploring for gold. This may adversely affect our financial position, which may cause you to lose your investment. If we are unable to fully remedy an environmental problem, we might be required to suspend operations or to enter into interim compliance measures pending the completion of the required remedy. If a decision is made to mine our Tempo property and we retain any operational responsibility for doing so, our potential exposure for remediation may be significant, and this may have a material adverse effect upon our business and financial position. We have not purchased insurance for potential environmental risks (including potential liability for pollution or other hazards associated with the disposal of waste products from our exploration activities) because we currently have no intention of mining our property. However, if we change our business plan to include the mining of our property and assuming that we retain operational responsibility for mining, then such insurance may not be available to us on reasonable terms or at a reasonable price. All of our exploration and, if warranted, development activities may be subject to regulation under one or more local, state and federal environmental impact analyses and public review processes. It is possible that future changes in applicable laws, regulations and permits or changes in their enforcement or regulatory interpretation could have significant impact on some portion of our business, which may require our business to be economically re-evaluated from time to time. These risks include, but are not limited to, the risk that regulatory authorities may increase bonding requirements beyond our financial capability. Inasmuch as posting of bonding in accordance with regulatory determinations is a condition to the right to operate under all material operating permits, increases in bonding requirements could prevent operations even if we are in full compliance with all substantive environmental laws.




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We may be denied the government licenses and permits which we need to explore for gold on our property. In the event that we discover commercially exploitable gold deposits, we may be denied the additional government licenses and permits which we will need to mine gold on our property.




Exploration activities usually require the granting of permits from various governmental agencies. For example, exploration drilling on unpatented mineral claims requires a permit to be obtained from the United States Bureau of Land Management, which may take several months or longer to grant the requested permit. Depending on the size, location and scope of the exploration program, additional permits may also be required before exploration activities can be undertaken. Prehistoric or Indian grave yards, threatened or endangered species, archeological sites or the possibility thereof, difficult access, excessive dust and important nearby water resources may all result in the need for additional permits before exploration activities can commence. As with all permitting processes, there is the risk that unexpected delays and excessive costs may be experienced in obtaining required permits. The needed permits may not be granted at all. Delays in or our inability to obtain necessary permits will result in unanticipated costs, which may result in serious adverse effects upon our business.




The value of our property is subject to volatility in the price of gold.




Our ability to obtain additional and continuing funding, and our profitability should we ever commence mining operations, will be significantly affected by changes in the market price of gold. Gold prices fluctuate widely and are affected by numerous factors, all of which are beyond our control. Some of these factors include the sale or purchase of gold by central banks and financial institutions; interest rates; currency exchange rates; inflation or deflation; fluctuation in the value of the United States dollar and other currencies; speculation; global and regional supply and demand, including investment, industrial and jewelry demand; and the political and economic conditions of major gold or other mineral-producing countries throughout the world, such as Russia and South Africa. The price of gold or other minerals have fluctuated widely in recent years, and a decline in the price of gold could cause a significant decrease in the value of our property, limit our ability to raise money, and render continued exploration and development of our property impracticable. If that happens, then we could lose our rights to our property and be compelled to sell some or all of these rights. Additionally, the future development of our mining property beyond the exploration stage is heavily dependent upon the level of gold prices remaining sufficiently high to make the development of our property economically viable. You may lose your investment if the price of gold decreases. The greater the decrease in the price of gold, the more likely it is that you will lose money.




Our property title may be challenged. We are not insured against any challenges, impairments or defects to our mineral claims or property title. We have not verified title to our property.




Our property is comprised of an unpatented lode claim created and maintained in accordance with the federal General Mining Law of 1872. Unpatented lode claims are unique U.S. property interests and are generally considered to be subject to greater title risk than other real property interests because the validity of unpatented lode claims is often uncertain. This uncertainty arises, in part, out of the complex federal and state laws and regulations under the General Mining Law. We have not conducted a title search on our Tempo Mineral Prospect property. The uncertainty resulting from not having a title search on the property leaves us exposed to potential title suits. Defending any challenges to our property title will be costly, and may divert funds that could otherwise be used for exploration activities and other purposes. In addition, unpatented lode claims are always subject to possible challenges by third parties or contests by the federal government, which, if successful, may prevent us from exploiting our discovery of commercially extractable gold. Challenges to our title may increase our costs of operation or limit our ability to explore on certain portions of our property. We are not insured against challenges, impairments or defects to our property title, nor do we intend to carry title insurance in the future. Potential conflicts to our mineral claims are discussed in detail in the section captioned “Properties.”




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Possible amendments to the General Mining Law could make it more difficult or impossible for us to execute our business plan.




The U.S. Congress has considered proposals to amend the General Mining Law of 1872 that would have, among other things, permanently banned the sale of public land for mining. The proposed amendment would have expanded the environmental regulations to which we are subject and would have given Indian tribes the ability to hinder or prohibit mining operations near tribal lands. The proposed amendment would also have imposed a royalty of 4% of gross revenue on new mining operations located on federal public land, which would have applied to all of our property. The proposed amendment would have made it more expensive or perhaps too expensive to recover any otherwise commercially exploitable gold deposits which we may find on our property. While at this time the proposed amendment is no longer pending, this or similar changes to the law in the future could have a significant impact on our business model.




Market forces or unforeseen developments may prevent us from obtaining the supplies and equipment necessary to explore for gold.




Gold exploration is a very competitive business. Competitive demands for contractors and unforeseen shortages of supplies and/or equipment could result in the disruption of our planned exploration activities. Current demand for exploration drilling services, equipment and supplies is robust and could result in suitable equipment and skilled manpower being unavailable at scheduled times for our exploration program. Fuel prices are extremely volatile as well. We will attempt to locate suitable equipment, materials, manpower and fuel if sufficient funds are available. If we cannot find the equipment and supplies needed for our various exploration programs, we may have to suspend some or all of them until equipment, supplies, funds and/or skilled manpower become available. Any such disruption in our activities may adversely affect our exploration activities and financial condition.




We may not be able to maintain the infrastructure necessary to conduct exploration activities.




Our exploration activities depend upon adequate infrastructure. Reliable roads, bridges, power sources and water supply are important factors which affect capital and operating costs. Unusual or infrequent weather phenomena, sabotage, government or other interference in the maintenance or provision of such infrastructure could adversely affect our exploration activities and financial condition.




Our exploration activities may be adversely affected by the local climate, which prevents us from exploring our property year-round.




The local climate makes it impossible for us to conduct exploration activities on our properties year-round. Because of their rural location and the lack of developed infrastructure in the area, our properties are generally impassible during the muddy season, which lasts roughly from December through May. During this time, it may be difficult or impossible for us to access our property, make repairs, or otherwise conduct exploration activities on them. Earthquakes, heavy rains, snowstorms, and floods could result in serious damage to or the destruction of facilities, equipment or means of access to our property, or may otherwise prevent us from conducting exploration activities on our property.




We do not carry any property or casualty insurance and do not intend to carry such insurance in the future.




Our business is subject to a number of risks and hazards generally, including but not limited to adverse environmental conditions, industrial accidents, unusual or unexpected geological conditions, ground or slope failures, cave-ins, changes in the regulatory environment and natural phenomena such as inclement weather conditions, floods and earthquakes. Such occurrences could result in damage to our property, equipment, infrastructure, personal injury or death, environmental damage, delays, monetary losses and possible legal liability. You could lose all or part of your investment if any such catastrophic event occurs. We do not carry any property or casualty insurance at this time, nor do we intend to carry this type of insurance in the future (except that we will carry all insurance that we are required to by law, such as motor vehicle insurance). Even if we do obtain insurance, it may not cover all of the risks associated with our operations. Insurance against risks such as environmental pollution or other hazards as a result of exploration is generally not available to us or to other companies in our business on acceptable terms. Should any events against which we are not insured actually occur, we may become subject to substantial losses, costs and liabilities which will adversely affect our financial condition.




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We must make annual lease payments and claim maintenance payments or we will lose our rights to our property.




We are required under the terms of our property lease to make annual lease payments. We are also required to make annual claim maintenance payments to Federal Bureau of Land Management and to the county in which our property is located in order to maintain our rights to explore and, if warranted, to develop our property. Our annual claim maintenance payments currently total approximately $32,000. If we fail to meet these obligations, we will lose the right to explore for gold on our property. Our property lease is described in greater detail in the section captioned “Properties.”




There is a limited public market for our securities and they will not be listed on a widely traded market in the foreseeable future.




There is currently a limited public market for shares of our Common Stock and one may never develop. Our Common Stock is quoted on the OTC Bulletin Board operated by FINRA. The OTC Bulletin Board is a thinly traded market and lacks the liquidity of certain other public markets with which some investors may have more experience. We may not ever be able to satisfy the listing requirements for our Common Stock to be listed on an exchange or Nasdaq, which are often more widely-traded and liquid markets. Some, but not all, of the factors which may delay or prevent the listing of our Common Stock on a more widely-traded and liquid market include the following: our stockholders’ equity may be insufficient; the market value of our outstanding securities may be too low; our net income from operations may be too low; our Common Stock may not be sufficiently widely held; we may not be able to secure market makers for our Common Stock, and we may fail to meet the rules and requirements mandated by the several exchanges and markets to have our Common Stock listed.




We cannot assure you that the Common Stock will become liquid or that it will be listed on a securities exchange.




We expect our Common Stock to remain eligible for quotation on the OTC Bulletin Board, or on another over-the-counter quotation system. In those venues, however, an investor may find it difficult to obtain accurate quotations as to the market value of our Common Stock. In addition, if we fail to meet the criteria set forth in SEC regulations, various requirements would be imposed by law on broker-dealers who sell our securities to persons other than established customers and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling our Common Stock, which may further affect the liquidity of our Common Stock. This would also make it more difficult for us to raise additional capital. While we intend eventually to apply to list the Common Stock on the Nasdaq Stock Market, there can be no assurance that such listing will be successful or that the Common Stock will ever be listed on a national securities exchange.




“Penny Stock” rules will initially make buying or selling our Common Stock difficult because the broker-dealers selling our Common Stock will be subject to certain limitations.




Trading in our securities is subject to certain regulations adopted by the Securities Exchange Commission, commonly known as the “penny stock” rules and which generally apply to stocks selling below $5.00 per share. Our shares of Common Stock qualify as “penny stocks” and are covered by Section 15(g) of the Exchange Act, which imposes additional practice requirements on broker-dealers who sell shares of such stocks in the market. “Penny stock” rules govern how broker-dealers can deal with their clients and with “penny stocks.” For sales of our securities, including the sale of any Common Stock by the selling shareholders, the broker-dealer must make a special suitability determination and receive from you a written agreement prior to making a sale of stock to you. The additional burdens imposed upon broker-dealers by the “penny stock” rules may discourage broker-dealers from effecting transactions in our securities, which could severely affect their market price and liquidity. This could prevent you from easily reselling your shares or warrants when they become freely tradable and could cause the price of our securities to decline.




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Compliance with U.S. securities laws, including the Sarbanes-Oxley Act, will be costly and time-consuming.




We are a reporting company under U.S. securities laws, and we are obliged to comply with the provisions of applicable U.S. laws and regulations, including the Securities Act, the Exchange Act and the Sarbanes-Oxley Act of 2002 and the related rules of the SEC, and the rules and regulations of the relevant U.S. market. Preparing and filing annual and quarterly reports and other information with the SEC, furnishing audited reports to stockholders and other compliance with these rules and regulations involves continual and significant regulatory, legal and accounting expenses. There can be no assurance that we will continue to be able to comply with the applicable regulations in a timely manner, if at all.




We do not plan to pay any dividends in the foreseeable future.




We have never paid a dividend and we are unlikely to pay a dividend in the foreseeable future, if ever. Whether any dividends are distributed in the future, as well as the specific details of any such dividends, will be decided by our Board of Directors based upon a number of factors, including but not limited to our earnings, financial requirements and other conditions prevailing at the time. We may never pay dividends. You should carefully consider this before deciding whether to purchase our securities.




Securities analysts may not initiate coverage or continue to cover our Common Stock, and this may have a negative impact on its market price.




The trading market for our Common Stock will depend, in part, on the research and reports that securities analysts publish about our business. We do not have any control over these analysts. There is no guarantee that securities analysts will cover the Common Stock. If securities analysts do not cover the Common Stock, the lack of research coverage may adversely affect its market price. If we are covered by securities analysts, and our stock is the subject of an unfavorable report, our stock price would likely decline. If one or more of these analysts ceases to cover our Company or fails to publish regular reports on us, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline. In addition, because we became public through a “reverse triangular merger,” we may have further difficulty attracting the coverage of securities analysts.




You may experience dilution of your ownership interests because of the future issuance of additional shares of our Common Stock.




Any future issuance of our equity or equity-backed securities may dilute then-current stockholders’ ownership percentages and could also result in a decrease in the fair market value of our equity securities, because our assets would be owned by a larger pool of outstanding equity. As described above, we may need to raise additional capital through public or private offerings of our common or preferred stock or other securities that are convertible into or exercisable for our common or preferred stock. We may also issue such securities in connection with hiring or retaining employees and consultants (including stock options issued under our equity incentive plans), as payment to providers of goods and services, in connection with future acquisitions or for other business purposes. Our Board of Directors may at any time authorize the issuance of additional common or preferred stock without common stockholder approval, subject only to the total number of authorized common and preferred shares set forth in our articles of incorporation. The terms of equity securities issued by us in future transactions may be more favorable to new investors, and may include dividend and/or liquidation preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect. Also, the future issuance of any such additional shares of common or preferred stock or other securities may create downward pressure on the trading price of the common stock. There can be no assurance that any such future issuances will not be at a price (or exercise prices) below the price at which shares of the common stock are then traded.




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Any failure to maintain effective internal control over our financial reporting could materially adversely affect us.




Section 404 of the Sarbanes-Oxley Act of 2002 will require us to include in our annual reports on Form 10-K, beginning with the Form 10-K for the fiscal year ending December 31, 2010, an assessment by management of the effectiveness of our internal control over financial reporting. While we intend to diligently and thoroughly document, review, test and improve our internal control over financial reporting in order to ensure compliance with Section 404, management may not be able to conclude that our internal control over financial reporting is effective. This could result in a loss of investor confidence in the reliability of our financial statements, which in turn could negatively impact the price of our common stock.




In particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, as required by Section 404. Our compliance with Section 404 will require that we incur substantial expense and expend significant management efforts. We currently do not have an internal audit group, and we will need to retain the services of additional accounting and financial staff or consultants with appropriate public company experience and technical accounting knowledge to satisfy the ongoing requirements of Section 404. We intend to review the effectiveness of our internal controls and procedures and make any changes management determines appropriate, including to achieve compliance with Section 404. However, any significant deficiencies in our control systems may affect our ability to comply with SEC reporting requirements and any applicable listing standards or cause our financial statements to contain material misstatements, which could negatively affect the market price and trading liquidity of our common stock and cause investors to lose confidence in our reported financial information, as well as subject us to civil or criminal investigations and penalties.




Our principal stockholders have the power to control the Company because they hold a majority of our outstanding shares of Common Stock.




As of April 14, 2011, our directors, executive officers and principal stockholder beneficially owned approximately 86% of our outstanding Common Stock. As of that date, Far East Golden Resourcesbeneficially owned 82.3% of our outstanding Common Stock, our director David C. Mathewson beneficially owned 3.5% of our outstanding Common Stock and our directors and executive officers as a group beneficially owned 3.7% of our outstanding Common Stock. (See Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” for more information.) Far East Golden Resources has the power to elect all of our directors, to control our business and affairs and to control the vote on substantially all other corporate matters without the approval of other stockholders. Furthermore, such concentration of voting power would enable those stockholders to delay, deferr or prevent a change in control of the company, impede a merger, consolidation, takeover or other business combination involving the Company, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company. This may adversely affect the value of your investment, and you should carefully consider this concentration of ownership before deciding whether to invest in our Company. Each stockholder who beneficially owns more than 5% of our outstanding shares of Common Stock is identified in “Security Ownership of Certain Beneficial Owners and Management.”




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We are a holding company that depends on cash flow from our subsidiary to meet our obligations and pay dividends.




We are a holding company with no material assets other than cash and the stock of our wholly owned subsidiary, NGE. Accordingly, we anticipate that all of our operations will be conducted by NGE (and any additional subsidiaries we may form or acquire). We currently expect that the earnings and cash flow of our subsidiary will primarily be retained and used by it in its operations, including servicing any debt obligations it may have now or in the future. Therefore, our subsidiary may not be able to generate sufficient cash flow to distribute funds to us in order to allow us to pay our obligations as they become due or, although we do not anticipate paying any dividends in the foreseeable future, pay future dividends on, or make any distributions with respect to, our common or other stock. Additionally, our ability to participate as an equity holder in any distribution of assets of any subsidiary upon liquidation is generally subordinate to the claims of creditors of such subsidiary.




ITEM 2. PROPERTIES




Executive Offices




Our business office is located at 800 E. Colorado Blvd., Suite 888, Pasadena, California 91101, in the offices of Far East Golden Resources. It contains office furniture and equipment sufficient to administer our current business. Office services and office space are provided without charge by the primary shareholder of the Company. Such costs are immaterial to the consolidated financial statements and accordingly, have not been reflected therein.




Tempo Mineral Prospect (“Tempo”)




We have the right to explore for gold on a property located in Austin, Nevada, known as Tempo Mineral Prospect. We acquired our original exploration rights to the Tempo Mineral Prospect pursuant to a lease with Gold Standard Royalty Corporation, a subsidiary of Golden Predator Mines Inc. (the “Lessor”), which acquired its rights to this property from the Lyle F. Campbell Trust of Reno, Nevada, an entity with which we are not affiliated and which acquired its rights to Tempo Mineral Prospect from the Federal Bureau of Land Management by staking. The lease covers 206 contiguous unpatented lode claims, totaling 2,920 acres. We may terminate our lease of the Tempo Mineral Prospect at any time. Our property is not known to contain gold that can be mined at a profit, although the area in which our property is located has a history of mining activity by others. Our current property was selected by our director and Geological Advisor, and former CEO and President, David Mathewson.




In October 2009, we located an additional 60 unpatented mining claims, in three groups, as shown on the map below. These claims are contiguous with and lie within the area of interest (AOI) of the Tempo lease.




Property Description, Location and Access




Tempo is located in the southern Ravenswood Mountains 14 miles northwest of Austin, Nevada, within the north-south trending Rabbit Creek Gold Trend. Tempo is a Carlin-style sediment-hosted gold exploration target. The property consists of 206 unpatented mining claimstotaling approximately 4,000 acres, in a contiguous block approximately 6.5 miles north to south and up to 1.8 miles east to west, covering approximately 6.5 square miles.




Tempo is accessible through good roads as well as cross-country. Access is generally available from May through December. Between December and May is the muddy season, during which wet weather and poor road conditions will generally prevent us from accessing the property. We know of no environmental or archeological issues related to this property.






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Map of Tempo Mineral Prospect




Tempo Mineral





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Tempo Geology




Tempo Geology




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Title Report




We have not conducted a title survey on Tempo, and have no immediate plans to do so in the future.




Geology and History




We believe that Tempo’s geology, geochemistry and alteration are typical of those in the Rabbit Creek gold trend. The central target is defined by a gold and arsenic soil anomaly approximately 5,000 feet in strike length. Both upper-plate and permissive lower-plate rocks are present. Rock samples indicate a high of 20 gm/t for gold and 300 gm/t for silver. The central portion of the property covers approximately one square mile of lower plate carbonate rock intruded by Laramide diorites with associated gold-bearing skarn. The northern third of the property includes numerous exposures of lower-plate carbonate rocks within a large expanse of non-permissive upper-plate rocks. Jasperoids are common and contain anomalous to very anomalous gold and arsenic values.




Previous work at Tempo by numerous companies includes geologic mapping; extensive rock chip and soil sampling; IP, resistivity, air and ground magnetic, and gravity geophysical surveys; and close and wide spaced reverse circulation drilling. Results of much of this work are in a digital archive that constitutes an important database for continued evaluation of the property.




Synthesis of mapped faults and structures interpreted from gravity, magnetic, and resistivity geophysical surveys defines four regions of relatively complex structural intersections. These areas are candidates for enhanced flow of potential ore-forming hydrothermal fluids.




Compilation of archive rock chip and soil geochemical data defines seven areas 1,500 to 6,000 feet long of robust, combined anomalous gold, arsenic, antimony, mercury and silver in both rocks and soils. These anomalies coincide with or are adjacent to regions of complex structural intersections and deserve adequate drill tests through the Roberts Mountains Formation.




Based on review of historical drill information, we believe that the targeted Roberts Mountains Formation is poorly tested by past drilling. Of the approximately 123 holes(with known collar coordinates)previously drilled by others in and adjacent to the Tempo claim block, 64 bottom in Tertiary volcanic units or in the upper plate of the Roberts Mountains Thrust and do not reach the potential host rocks. Of the 58 holes that do intersect the Roberts Mountains Formation, only 13 are deeper than 600 feet, and only five, including NGT-01 and NGT-02 drilled by us, test the bottom contact of the Roberts Mountains Formation, an important ore horizon at the Jerritt Canyon mine in the Independence Range, Elko Co., Nevada.




With respect to drill tests of the seven areas of robust geochemical anomalies, only two contain drill holes that intersect the Roberts Mountains Formation, three contain holes that do not reach the target unit, and two have not been drill tested.




The southern-most geochemical anomaly is 6,000 feet long and contains at least seven drill holes with maximum grades between 0.03 and 0.3 gold ounces per ton in a narrow trend 3,500 feet long. Host rock to the drilled mineralization is the Ordovician Vinini Formation of the upper plate of the Roberts Mountains Thrust. No holes in this zone intersect the favored Roberts Mountains Formation.




Two areas of known mineralization are within the claim block. The old Maloy mine consists of an abandoned shaft and prospect diggings developed on a north trending bull quartz vein associated with granodiorite pods intruding the Roberts Mountains Formation. In the south end of the claim block and hosted in upper plate Vinini Formation is a small, shallow, low grade gold resource calculated by Digger Resources (Digger Resources, 1996; Dave Mathewson, pers. comm., 2009) that coincides with the southern multi-element geochemical anomaly. About 2,000 feet northwest of the claim block, an abandoned 100-foot deep open pit developed a barite orebody in upper plate rocks.




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We believe that multiple high-quality gold targets in Tempo remain to be identified, qualified and assessed by drilling.




The exploration model at Tempo is that of the sediment-hosted, fine-grained, disseminated Carlin-type gold deposit. In this setting micron to sub-micron size gold is disseminated in silty calcareous host rocks (silty limestone and dolomite, calcareous and dolomitic siltstone). The gold generally occurs in or on very fine grained pyrite, arsenical pyrite, or fine carbonaceous material in the host rock. The mineralizing fluid also deposits a characteristic suite of “pathfinder” elements with and near the gold. Besides gold, arsenic is most important in this group that also includes antimony, mercury and silver.




Faults, stratigraphic discontinuities and intrinsic host-rock porosity and permeability provide critical channelways for the ore-forming hydrothermal fluids to access the host rocks. These fluids characteristically alter the rock by silicification (jasperoid), decarbonatization, dolomitization, argillization and formation of calcite and barite veins. Decarbonatization can cause collapse breccias that further increase permeability. Except for silicification, the products of alteration are not erosionally resistant and consequently are not well exposed at the surface. Decarbonatization and argillization generally reduce the density of the host rock and this effect may be measurable in gravity surveys.




Deposit shapes are variable and controlled by rock porosity and permeability as affected by faulting, brecciation, and alteration. Deposits range from tabular to pipe-like with attitudes from horizontal to vertical. Changes in gold grades at the margins of deposits can be abrupt or gradational. Ore grades depend on mining economics and can range from about 0.02 oz/ton (~700 parts per billion (ppb)) to +1 oz/ton (+ 34,000 ppb) of gold. Underground mining grades of gold are commonly above 0.2 oz/ton.




Exploration Program to Date




We initiated drilling on the Tempo property in October 2009. Sixteen sites across the property have been permitted and prepared for drilling. The sites were located to test new geophysical and resultant structural and alteration interpretations based largely on additional gravity data collected in 2007. Four widely spaced sites were drilled. The holes are all reverse circulation, range in depth from 545 to 1,330 feet, and total 4,295 feet. The first three holes were drilled in 2009. Hole NGT-01 in the north end of the property drilled through the targeted potential host rocks. NGT-02 and NGT-03 were collared in the central part of the property about 2 1⁄2 miles to the south. The second hole drilled into potential host rocks and was terminated due to poor drilling conditions. The third hole did not reach the depth of the potential host rocks and was terminated because of excessive ground water. In 2010, NGT-04 was drilled to a depth of 545 feet out of a planned depth of 1,500 feet when adverse weather conditions required we terminate the effort for the season.




All three completed holes intersected anomalous gold and the indicator elements arsenic, antimony, and mercury and further confirm that one or more Carlin-style sediment-hosted gold deposits likely remains undiscovered at Tempo.




2011 Exploration Program




At present the Tempo Prospect property is inaccessible due to weather conditions (snow and, more importantly, mud). We anticipate being able to mobilize on the property sometime during the May-June 2011 period and commence our 2011 exploration plan. The partially drilled hole (NGT-04) has been collared and cased and will be re-drilled as part of the 2011 plan. Including the partially drilled hole, there are thirteen drill targets to be tested in 2011. We will commence drilling the target locations as soon as weather permits. We anticipate all planned targets will be drilled no later than the close of August 2011.




23




Environmental and Safety




We are not aware of any specific environmental issues at Tempo; of indicated, threatened or endangered plant or animal species; or of significant archeology sites that would affect exploration or development of the Tempo property. The abandoned Maloy mine shaft could be considered a safety hazard and a candidate for abandoned mine closure. It is not known if bats use the underground workings. Closing of the shaft may have to take bats into consideration.




Tempo Mineral Prospect Lease




Our lease for 206 of the Tempo lode claims is with Gold Standard Royalty Corporation, a subsidiary of Golden Predator Mines Inc., which acquired its rights to this property from the Lyle F. Campbell Trust of Reno, Nevada, an entity with which we are not affiliated and which acquired its rights to this property from the Federal Bureau of Land Management by staking its lode claims.




The Tempo lease was originally between the Lessor and Gold Run, Inc., a Delaware corporation (“Gold Run”) as lessee. The Lease was assigned by Gold Run to KM Exploration Ltd., a Nevada limited liability company (“KM”), on August 14, 2008, and was subsequently assigned to NGE as of December 15, 2008.




NGE acquired its interest in the Tempo lease prior to the Merger pursuant to a reassignment of the lease from KM Exploration, Ltd. In connection with the reassignment, we reimbursed KM Exploration for claim fees ($19,503) and preparation cost ($962), totaling $20,465. Also in connection with the reassignment, Mr. Mathewson, then the sole stockholder of NGE, assigned five shares of NGE (which converted into 400,000 shares each of Company Common Stock upon the Merger) to each of two individuals (one of whom was the owner of the other 50% interest in KM Exploration prior to its dissolution). (See “Certain Relationships and Related Transactions, and Director Independence” below.)




Our lease is for an initial period of ten years from May 2007 and may be extended in five year increments for up to a total term of 99 years. We may terminate this lease at any time. Until production is achieved, our lease payments (deemed “advance minimum royalties”) consist of an initial payment of $5,000, which we made upon the effectiveness of our lease, followed by annual payments according to the following schedule:




Due Date of Advance

Minimum Royalty Payment

Amount of Advance

Minimum Royalty PaymentJanuary 15, 2008 (paid)

$
10,000January 15, 2009 (paid)

$
15,000January 15, 2010 (paid)

$
30,000January 15, 2011 (paid)

$
45,000January 15, 2012 and annually thereafter during the term of the lease

The greater of $60,000 or the dollarequivalent of 90 ounces of gold




In the event that we produce gold or other minerals from the leased Tempo claims, our lease payments will be the greater of (i) the advance minimum royalty payments according to the table above, or (ii) a production royalty equal to 4% of the gross sales price of any gold, silver, platinum or palladium that we recover plus 2% of the gross sales price of any other minerals that we recover. Our lease expressly states that we have no rights to any oil, gas, hydrocarbons and geothermal resources that may be found on the property. Under certain conditions, the Lessor may elect to take its production royalty in cash rather than in kind. In the event that we produce gold or other minerals from Tempo and pay the Lessor a production royalty, then, within any one calendar year, we may use 100% of that year’s advance royalty payment as a credit against our royalties payable for that year. If our royalty payments payable for that year are greater than our advance royalty payment paid for that year, then we can credit all advance minimum royalty payments made in previous years against 50% of the production royalty payable for that year.




24




In the event that we pay the Lessor a production royalty, we have the option to repurchase up to two points of the royalty payable on gold, silver, platinum or palladium, which would have the effect of thereafter permanently reducing the Lessor’s production royalty on gold, silver, platinum or palladium from 4% to 2% of our gross sales price for those minerals. The purchase price for each royalty “point” shall be according to the following schedule:




Royalty Point Purchased

PriceFirst 1%

$
1,500,000Second 1%

$
3,000,000




We cannot purchase the remaining 2% production royalty on gold, silver, platinum or palladium or the 2% production royalty applicable to all other minerals.




Our lease required us to perform $50,000 worth of physical work on the property for 2009. Starting in 2010 and thereafter, we must perform a minimum of $50,000 worth of work annually on the property, of which at least $25,000 is physical work. Work performed in any year in excess of these amounts is carried forward to offset the obligation in future years.




Claim Maintenance Payments




We are required to make annual claim maintenance payments to the Bureau of Land Management and to the counties in which our property is located. If we fail to make these payments, we will lose our rights to our property. As of the date of this Report, our annual maintenance payments are approximately $155 per claim, consisting of payments to the Bureau of Land Management and to the counties in which our properties are located. Our property consists of an aggregate of 206 lode claims. Our aggregate annual claim maintenance costs are currently approximately $32,000.




ITEM 3. LEGAL PROCEEDINGS




From time to time we may be involved in claims arising in connection with our business.




As of the date of this Report, except as described below, there are no material pending legal proceedings to which the Company or any of its subsidiaries is a party or of which any of their property is the subject, nor are there any such proceedings known to be contemplated by governmental authorities.




Viewpoint Securities LLC (“Viewpoint”) filed a complaint on January 6, 2011, against NGHI, its directors and affiliates (including Far East Golden Resources Investment Ltd. and Hybrid Kinetic Group Ltd.) in San Diego County Superior Court, alleging breach of contract, interference with contract, and interference with prospective business relations. The complaint is based on a claim that Viewpoint was not paid a commission/finder’s fee under a Placement Agent Agreement with us. Viewpoint demands a commission of $302,000 and warrants to purchase approximately 3,002,000 shares of our common stock with an exercise price of $0.10 per share, related to our October 29, 2010, private placement offering of units of our securities.




25




The Placement Agent Agreement requires us to (i) pay Viewpoint a cash fee equal to 10% of the gross proceeds raised and actually received by the Company in a convertible note offering from investors first introduced by Viewpoint to the Company during the term of the Agreement; and (ii) issue Viewpoint warrants to purchase shares of common stock (the “Warrants”) equal to 10% of the number of shares of our common stock into which convertible notes purchased in an offering by investors first introduced by Viewpoint to the Company during the term of the Agreement are initially convertible, with an exercise price of $0.10 per share of and a maturity five years after the final closing date of the offering.




We have denied that Viewpoint is entitled to any commission or compensation under the Placement Agent Agreement or otherwise. In March 2011, we obtained a stay of Viewpoint’s Superior Court lawsuit, and the matter was transferred to arbitration with the American Arbitration Association per the terms of the Placement Agent Agreement. An arbitration demand or petition has not yet been filed. The parties are scheduling a mediation to discuss potential settlement and expect to conduct the initial mediation session by the end of May 2011.




While there can be no assurance as to the ultimate outcome of this claim, based on information currently available, we believe the amount, or range, of reasonably possible losses (if any) in connection with this matter could be material to our consolidated financial condition, consolidated operating results or cash flows as of or for any particular period.




ITEM 4. (Removed and Reserved)





PART II




ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES




Since May 8, 2007, our Common Stock is quoted on the OTC Bulletin Board (the “OTCBB”) under the symbol “NGHI.OB”.




The following table sets forth the high and low closing bid prices for our Common Stock for the fiscal quarters indicated as reported on the OTCBB. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. Our Common Stock is very thinly traded, and therefore pricing of our Common Stock on the OTCBB does not necessarily represent its fair market value.




Period

High


LowFiscal Year Ended December 31, 2009:First Quarter (from February 17, 2009)*

$
15.90


$
1.50Second Quarter


7.80



1.50Third Quarter


4.22



1.95Fourth Quarter


2.06



1.07Fiscal Year Ending December 31, 2010:First Quarter

$
1.19


$
0.60Second Quarter


1.90



0.23Third Quarter


0.55



0.23Fourth Quarter


0.49



0.07














Holders




As of April 14, 2011, there were43,844,054shares of our Common Stock issued and outstanding held by 32 shareholders of record.




Dividends




We have never declared any cash dividends with respect to our Common Stock. Future payment of dividends is within the discretion of our board of directors and will depend on our earnings, capital requirements, financial condition and other relevant factors. Although there are no material restrictions limiting, or that are likely to limit, our ability to pay dividends on our Common Stock, we presently intend to retain future earnings, if any, for use in our business and have no present intention to pay cash dividends on our Common Stock.




Recent Sales of Unregistered Securities




Except as previously disclosed in Current Reports on Form 8-K and Quarterly Reports on Form 10-Q that we have filed, we have not sold any of our equity securities during the period covered by this Report that were not registered under the Securities Act.




Purchases of Equity Securities by the Issuer and Affiliated Purchasers




None.




26


Securities Authorized for Issuance under Equity Compensation Plans




The following table sets forth, as of December 31, 2010, information with respect to compensation plans (including individual compensation arrangements) under which equity securities of the Company are authorized for issuance:




Equity Compensation Plan Information




Plan category

Number of securities

to be issued upon

exercise of

outstanding options,

warrants and rights

(a)


Weighted-average

exercise price of

outstanding options,

warrants and rights

(b)


Number of securities

remaining available

for future issuance

under equity

compensation plans

(excluding securities

reflected in column(a))

(c)Equity compensation plans approved by security holders


83,334



2.00



2,916,666Equity compensation plans not approved by security holders


-



-



-Total


83,334







2,916,666




On December 30, 2008, the Board of Directors of the Company adopted the 2008 Equity Incentive Plan (the “2008 Plan”) which provided for incentive award grants of up to 4,000,000 shares of our Common Stock. As a result of the 2010 1-for-15 reverse stock split, the number of shares of common stock reserved under the 2008 Plan were reduced to 266,667. Prior to the reverse split, we had granted non-qualified stock options to purchase an aggregate of 1,250,000 shares of our common stock under the 2008 Plan at a weighted-average exercise price of $0.1334 per share. As a result of the reverse stock split, such options were adjusted so that they are exercisable, in the aggregate, for 83,333 shares of our common stock at a weighted-average exercise price of $2.001 per share.




On September 16, 2010, we amended our 2008 Plan to increase the total number of shares of Common Stock that may be granted pursuant to awards under such 2008 Plan from 266,667 to 3,000,000, and to add a provision for automatic annual increases based on increases in our capitalization (the “Evergreen Clause”). (On September 10, 2010, the amendment to the 2008 Plan was approved by the written consent of stockholders holding a majority of the outstanding shares of our common stock.)




Under the Evergreen Clause, unless otherwise determined by the Board, at the beginning of each fiscal year beginning with the 2011 fiscal year, the number of shares subject to issuance pursuant to awards granted under the 2008 Plan will be automatically increased to an amount equal to 5% of the number of outstanding shares of common stock, together with all shares of common stock issuable upon conversion of convertible debt and equity securities (including interest accrued thereon), and all shares of common stock issuable upon exercise of options, warrants or other rights (excluding options issued under the 2008 Plan) having an exercise price equal to or less than the fair market value (as defined in the 2008 Plan) at the time of measurement on the last day of the immediately preceding fiscal year. Therefore, pursuant to the Evergreen Clause, the number of shares subject to issuance under the terms of the 2008 Plan, as of January 1, 2011, was 4,507,371.




Additional information regarding the 2008 Plan is contained in our definitive Proxy Statement filed with the Securities and Exchange Commission on August 10, 2010.




If an incentive award granted under the 2008 Plan expires, terminates, is unexercised or is forfeited, or if any shares are surrendered to us in connection with an incentive award, the shares subject to such award and the surrendered shares will become available for further awards under the 2008 Plan.




In addition, the number of shares of Common Stock subject to the 2008 Plan, any number of shares subject to any numerical limit in the 2008 Plan, and the number of shares and terms of any incentive award are expected to be adjusted in the event of any change in our outstanding Common Stock by reason of any stock dividend, spin-off, split-up, stock split, reverse stock split, recapitalization, reclassification, merger, consolidation, liquidation, business combination or exchange of shares or similar transaction.




27




Administration




The compensation committee of the Board, or the Board in the absence of such a committee, will administer the 2008 Plan. Subject to the terms of the 2008 Plan, the compensation committee has complete authority and discretion to determine the awards under the 2008 Plan.




Grants




The 2008 Plan authorizes the grant to participants of nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance grants intended to comply with Section 162(m) of the Internal Revenue Code (as amended, the “Code”) and stock appreciation rights, as described below:




●
Options granted under the 2008 Plan entitle the grantee, upon exercise, to purchase a specified number of shares from us at a specified exercise price per share. The exercise price for shares of Common Stock covered by an option cannot be less than the fair market value of the Common Stock on the date of grant unless agreed to otherwise at the time of the grant.




●
Restricted stock awards and restricted stock units may be awarded on terms and conditions established by the compensation committee, which may include performance conditions for restricted stock awards and the lapse of restrictions on the achievement of one or more performance goals for restricted stock units.




●
The compensation committee may make performance grants, each of which will contain performance goals for the award, including the performance criteria, the target and maximum amounts payable, and other terms and conditions.




●
The 2008 Plan authorizes the granting of stock awards. The compensation committee will establish the number of shares of Common Stock to be awarded and the terms applicable to each award, including performance restrictions.




●
Stock appreciation rights (“SARs”) entitle the participant to receive a distribution in an amount not to exceed the number of shares of Common Stock subject to the portion of the SAR exercised multiplied by the difference between the market price of a share of Common Stock on the date of exercise of the SAR and the market price of a share of Common Stock on the date of grant of the SAR.




Duration, Amendment, and Termination




The Board has the power to amend, suspend or terminate the 2008 Plan without stockholder approval or ratification at any time or from time to time. No change may be made that increases the total number of shares of Common Stock reserved for issuance pursuant to incentive awards or reduces the minimum exercise price for options or exchange of options for other incentive awards, unless such change is authorized by our stockholders within one year. Unless sooner terminated, the 2008 Plan will terminate ten years after it was adopted.





28




ITEM 6. SELECTED FINANCIAL DATA




As a smaller reporting company, we are not required to provide the information required by this Item




ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS




The following discussion and analysis of financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. See “Note Regarding Forward-Looking Statements.” Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors discussed in “Risk Factors” and elsewhere in this report.




The following discussion and analysis of the Company’s financial condition and results of operations is based on the preparation of our financial statements in accordance with U.S. generally accepted accounting principles. You should read this discussion and analysis together with such financial statements and the related notes thereto.




Results of Operations




Fiscal Year Ended December 31, 2010, compared to Fiscal Year Ended December 31, 2009




Revenues and Other Income




During the twelve month period ended December 31, 2010, the Company remained in the exploration stage and we did not realize any revenues from operations. Similarly, we did not realize any revenues from operations during the period from inception through December 31, 2009.




Expenses




General and administrative expenses totaled $925,013 in the year ended December 31, 2010, an increase of $309,433 from the $615,580 of general and administrative expenses incurred in the year ended December 31, 2009. For 2010, these expenses were primarily legal, accounting and other professional fees of approximately $384,000, stock based compensation to employees and consultants of approximately $185,000, personnel expenses of approximately $146,000 and other office, and general and administrative expenses of $210,000. Exploration costs totaled $158,886 for the year ended December 31, 2010, a slight decrease of $46,270 from the $205,156 in exploration costs incurred during the year ended December 31, 2009. During the year ended December 31, 2010 the Company also recognized interest expense of $325,521, the bulk of which relates to the intrinsic value of multiple promissory notes converted into common stock and stock purchase warrants during the period.




Net Losses




As a result of the foregoing, the Company incurred a net loss of $1,407,053, or ($0.12) per share, in the year ended December 31, 2010, compared to a net loss of $866,318, or ($0.18) per share, for the year ended December 31, 2009. Our increased net loss in the later period is largely due to the increase of legal and professional expenses and interest expense incurred during the 2010 fiscal year.




29




2009 Bridge Note




In December 2009, we borrowed $100,000 under the 2009 Bridge Note from a private institution. The 2009 Bridge Note was due and payable on June 4, 2010, unless extended by Lender and Borrower in writing, and bore interest at 10% per annum. The 2009 Bridge Note was mandatorily convertible upon the closing of any securities or other financing (a “Contingent Event”). In the event a Contingent Event was consummated, all outstanding principal and interest amounts of the Bridge Note would automatically convert into the Company’s securities being sold in such financing at a conversion price equal to the purchase price paid by investors in such financing. A Contingent Event occurred by virtue of the 2010 PPO described below, and all principal of and accrued interest on the 2009 Bridge note automatically converted into shares of Common stock and warrants to purchase Common Stock as described below.




2010 JMJ Notes




On February 5, 2010, we entered into a financing arrangement with JMJ Financial (the “Investor”), pursuant to which the Investor may lend us up to $3,200,000. We issued convertible promissory notes to the Investor in an aggregate principal amount of $3,200,000 (the “2010 JMJ Notes”). We received $200,000 from the Investor on February 5, 2010. The 2010 JMJ Notes bore a one-time interest of 8% and matured three years from the date of issuance. Prepayment under the 2010 JMJ Notes was not permitted, unless approved by the Investor.




Under the terms of the 2010 JMJ Notes, the Investor was entitled, at its option, to convert all or part of the principal amount and accrued interest into shares of our Common Stock at a conversion price equal to 70% of the lowest trade price of the Common Stock in the twenty (20) trading days immediately prior to the conversion, subject to adjustment in certain circumstances. The 2010 JMJ Notes contained a standard “blocker” provision so that the Investor does not have the right to convert any portion of the 2010 JMJ Notes to the extent that, after giving effect to such conversion, the Investor and its affiliates would beneficially own in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to such conversion.




In consideration of our issuing the 2010 JMJ Notes, the Investor issued to us six secured and collateralized promissory notes in an aggregate principal amount of $3,000,000 (the “Investor Notes”). The Investor Notes bore a one-time interest of 8% and matured in three years from the date of issuance. No interest or principal payments were required until the maturity date, but both principal and interest could be prepaid prior to maturity. The Investor Notes were secured by $3,000,000 worth of money market fund (or similar equivalent) or other assets (the “Collateral”). On each Investor Note, the Investor agreed to pay down the principal in a minimum amount of $100,000 per month, commencing 210 days after the original date of issuance. However, the Investor could adjust the payment schedule within its sole discretion. In the event that the Investor defaulted on the Investor Notes, the Company could take possession of the Collateral.




On May 6, 2010, we repaid $200,000 from existing cash resources to the Investor as payment in full and complete satisfaction all of the Company’s obligations pursuant to the financing agreement, and the financing arrangement was cancelled.




2010 Bridge Notes




On May 24, 2010, we borrowed $50,000 under a convertible bridge loan note from a private institution; in August 2010, we entered into three additional convertible bridge loan notes with an aggregate principal amount of $125,000 with three private investors; and on October 1, 2010, we entered into an additional convertible bridge loan note with a principal balance of $25,000 with a private investor. These 2010 Bridge Notesbore interest at a rate of 10.0% per annum, and were due in full one year from the issue date. The 2010 Bridge Notes were mandatorily convertible upon the closing of any securities or other financing resulting in gross cash proceeds to the Company in excess of $500,000 (a “Contingent Event”). In the event a Contingent Event was consummated, all outstanding principal and interest amounts of the Bridge Notes would automatically convert into the Company’s securities being sold in such financing at a conversion price equal to the purchase price paid by investors in such financing. A Contingent Event occurred by virtue of the 2010 PPO described below, and all principal of and accrued interest on the 2010 Bridge notes automatically converted into shares of Common stock and warrants to purchase Common Stock as described below.




30




2010 PPO




On October 29, 2010, November 16, 2010, and November 19, 2010 we held closings of the 2010 PPO for a total of 38,833,356 units of our securities, at an offering price of $0.10 per unit, each unit consisting of one share of Common Stock and a warrant to purchase one share of Common Stock for a period of five years, at an exercise price of $0.10 per share. Of the $3,883,337 gross proceeds, $3,450,000 consisted of cash consideration, $313,337 came from the automatic conversion of principal of and interest on the convertible notes, and $120,000 represented the discharge of certain accounts payable. We plan to apply the net proceeds of the 2010 PPO to explore for gold at our property in northern Nevada and to determine if it contains gold deposits that can be mined at a profit, as well as possibly to acquire future exploration prospects, and for general working capital purposes. (Our property is not known to contain gold which can be mined at a profit, and there can be no assurance that a commercially exploitable gold deposit will be found on our property. We have not identified any other specific prospects at this time.)




We agreed, pursuant to a Registration Rights Agreement, to use our commercially reasonable efforts to file a registration statement under the Securities Act, covering the shares of Common Stock included in the Units and the shares of Common Stock issuable upon exercise of the warrants included in the Units, within 75 days after the final closing of the Offering and to have such registration statement declared effective within 180 days of such final closing date. We would be required to keep the registration statement effective until the earlier of one year from the date the registration statement is declared effective or until all of the registrable securities may be sold under Rule 144 during any 90 day period. The investors in the 2010 PPO have waived the requirement for us to file this registration statement for the time being.




We have also granted certain “piggyback” registration rights covering the shares of Common Stock included in the Units and the shares of Common Stock issuable upon exercise of the warrants included in the Units.




We entered into agreements to pay placement agents and/or finders (collectively, “Finders”) cash fees of up to 10% of the purchase price of each Unit sold in the Offering to investors introduced to us by the relevant Finder (the “Introduced Investors”), and to issue each such Finder five-year warrants (the “Finder Warrants”) exercisable at $0.10 per share to purchase a number of shares of Common Stock equal to up to 10% of the shares of Common Stock included in the Units sold in the Offering to the Introduced Investors. As a result of the sales of the Units in the 2010 PPO, we have paid and/or become obligated to pay an aggregate of approximately $35,100 of fees to Finders and have issued and/or become obligated to issue Finder Warrants to purchase an aggregate of 351,000 shares of Common Stock.




On January 26, 2011, we made a loan of $200,000 to Hybrid Kinetic Motors Corporation; on February 24, 2011, we made a loan of $400,000 American Compass Inc.; and on March 24, 2011, we made a loan of $400,000 to American Compass Inc. Each of these loans is unsecured, bears interest at 3% per annum, payable at maturity, and matures on December 31, 2011. Each of the borrowers is a wholly owned subsidiary of Hybrid Kinetic Group Ltd., which is also the parent of our controlling stockholder, Far East Golden Resources. Hybrid Kinetic Group Ltd. has guaranteed each of the loans.




31




Liquidity and Capital Resources




At December 31, 2010, we have $2,995,727 of cash on hand. We estimate our general and administrative, and exploration direct costs will require approximately $1,800,000 for the 2011 calendar year exclusive of any new property acquisition costs and required work agreements on any such property.




The Company is positioned to resume drilling operations as soon as conditions permit which may be as early as May but possibly not until June. We have 13 targeted drill sites for the season representing our maximum granted prepared site areas (five acres) per BLM regulations. All drilling activities have been contracted to Envirotech for the 2011 period. All sites are prepped and ready to be drilled. We estimate completing the 13 holes no later than August. All drilling results will be sampled and analyzed as we progress through the season. At the completion of the 13 targeted holes we will commence reclamation operations for the drilled sites so we may eventually apply to the BLM for additional site preparation once they certify our current sites have been fully reclaimed. This will end the drilling season at Tempo for the 2011 period.




At December 31, 2010, we had $2,995,727 of cash on hand. We estimate our general and administrative and exploration direct costs will require approximately $1,800,000 for the balance of the 2011 calendar year, exclusive of any new property acquisition costs and required work agreements on any such new properties. The Company is positioned to resume drilling operations as soon as conditions permit which may be as early as May but possibly not until June. We have 13 targeted drill sites for the season representing our maximum granted prepared site areas (five acres) per BLM regulations. All drilling activities have been contracted to Envirotech Drilling for the 2011 period. All sites are prepped and ready to be drilled. We estimate completing the 13 holes no later than August. All drilling results will be sampled and analyzed as we progress through the season. At the completion of the 13 targeted holes we will commence reclamation operations for the drilled sites so we may eventually apply to the BLM for additional site preparation once they certify our current sites have been fully reclaimed. This will end the drilling season at Tempo for the 2011 period.




We may be unable to secure additional financing on terms acceptable to us, or at all, at times when we need such financing. Our inability to raise additional funds on a timely basis could prevent us from achieving our business objectives and could have a negative impact on our business, financial condition, results of operations and the value of our securities.




If we raise additional funds by issuing additional equity or convertible debt securities, the ownership percentages of existing stockholders will be reduced and the securities that we may issue in the future may have rights, preferences or privileges senior to those of the current holders of our Common Stock. Such securities may also be issued at a discount to the market price of our Common Stock, resulting in possible further dilution to the book value per share of Common Stock. If we raise additional funds by issuing debt, we could be subject to debt covenants that could place limitations on our operations and financial flexibility.




ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA




Our audited financial statements as of, and for the years ended, December 31, 2010 and 2009, are included beginning on page F-1 immediately following the signature page to this Report. See Item 15 for a list of the financial statements included herein.




ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE




None.




32




ITEM 9A. CONTROLS AND PROCEDURES




Evaluation of Our Disclosure Controls and Procedures




Under the supervision and with the participation of our Chief Executive Officer (our principal executive and principal financial officer), we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of December 31, 2010 (the “Evaluation Date”). Based on this evaluation, our Chief Executive Officer concluded as of the Evaluation Date that our disclosure controls and procedures were not effective to ensure that the information relating to us, including our consolidated subsidiaries, required to be disclosed by us in the reports filed or submitted by us under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer, as appropriate to allow timely decisions regarding required disclosure.




We are a small organization with limited personnel during 2010. We were unable to implement an effective system of disclosure controls and procedures as of the Evaluation Date. We expect to create a system of disclosure controls and procedures in 2011 as we expand our business and develop our mining claims. Nevertheless, management believes that this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report.




Management’s Report on Internal Control over Financial Reporting




Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process designed by, or under the supervision of, an issuer’s principal executive and principal financial officers, or persons performing similar functions, and effected by its board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles (GAAP). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projection of any evaluation of effectiveness to future periods is subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.




Management has conducted, with the participation of our Chief Executive Officer (our principal executive and principal financial officer), an assessment, including testing of the effectiveness, of our internal control over financial reporting as of December 31, 2010. In evaluating the effectiveness of our internal control over financial reporting, our management used the criteria set forth in Internal Control over Financial Reporting – Guidance for Smaller Public Companies issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. We have identified the following material weakness: We were unable to implement a system of segregation of duties necessary to establish an effective system of internal controls as of the Evaluation Date.




We are a small organization with limited personnel during 2010. We expect to create a system of internal controls in 2011 as we expand our business and develop our mining claims. To address the material weaknesses, we performed additional analysis and other post-closing procedures in an effort to ensure our consolidated financial statements included in this Report have been prepared in accordance with GAAP. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows as of the dates and for the periods presented.




33




This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting, as smaller reporting companies are exempt from this requirement.




Changes in Internal Control over Financial Reporting




There have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2010, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.




PART III




ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE




Executive Officers and Directors




Below are the names and certain information regarding the Company’s current executive officers and directors:




Name

Age

Title

Date First AppointedYung Yeung


53

Chairman of the Board

November 29, 2010David Rector


64

Director and Chief Executive Officer, President and Treasurer

November 5, 2009John N. Braca


53

Director

November 13, 2009Chunhua Huang


46

Director

November 29, 2010David C. Mathewson


66

Director and Geological Advisor

December 31, 2008Jimmy Wang


45

Director, Controller

January 25, 2011Vincent Wang


37

Secretary and Director

November 29, 2010




Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Officers are elected by the Board of Directors and serve until their successors are appointed by the Board of Directors.




The principal occupation and business experience during the past five years for our current officer and director is as follows:




Yung Yeung, Chairman of the Board, has been Chairman of the Board of Hybrid Kinetic Group Limited since 1998. Dr. Yeung is a well-known, highly successful automotive industrialist and pioneering international financier. He serves as a director of the John Hopkins University Center – Nanjing University Centre for Chinese and American Studies. Dr. Yeung was the chairman, chief executive officer and president of Brilliance China Automotive Holdings Limited from 1992 to 2002 and also the chairman and president of Shenyang Jinbei Passenger Vehicle Manufacture Co., Ltd. from 1992 to 2002. Dr. Yeung holds a Ph.D. Degree in Economics from China’s Southwest University of Finance & Economics.




34




David Rector, Chief Executive Officer, President and Director. Mr. Rector has served as our Chief Executive Officer, President and Director since November 5, 2009. Mr. Rector does not have an employment agreement with us but receives $6,000 per month in compensation for his services to us. Mr. Rector had previously served as our Chief Executive Officer, Chief Financial Officer, President, Secretary, Treasurer and Director from April 19, 2004 through December 31, 2008. He has served as Chief Executive Officer, Chief Financial Officer, President, Secretary, Treasurer and Director of Standard Drilling, Inc. since November 2007 and served as Chief Executive Officer, Chief Financial Officer, President, Secretary, Treasurer and Director of Universal Gold Mining Corp. from September 30, 2008, until November 2010. Mr. Rector previously served as President, Chief Executive Officer and Chief Operating Officer of Nanoscience Technologies, Inc. from June 2004 to December 2006, when he resigned as an officer and director of Nanoscience. Mr. Rector also served as President, Chief Executive Officer, Chief Financial Officer and Treasurer of California Gold Corp. (f/k/a US Uranium, Inc.) from June 15, 2007 to July 11, 2007 and again from August 8, 2007 to November 12, 2007. Since June 1985, Mr. Rector has been the principal of the David Stephen Group, which provides enterprise consulting services to emerging and developing companies in a variety of industries. From January 1995 until June 1995, Mr. Rector served as the General Manager of the Consumer Products Division of Bemis-Jason Corporation. Mr. Rector was employed by Sunset Designs Inc., a manufacturer and marketer of consumer product craft kits from June 1980 until June 1985.




Additionally, Mr. Rector currently serves on the Board of Directors of the following public companies:




Name

Director SinceSenesco Technologies, Inc. (AMEX: SNT)

February 2002Dallas Gold & Silver Exchange (AMEX: DSG)

May 2003California Gold Corp. (OTCBB: CLGL)

June 2007Standard Drilling, Inc. (STDR.PK)

November 2007Li3 Energy, Inc. (OTCBB: LIEG)

June 2008Universal Gold Mining Corp. (OTCBB: UGDM)

September 2008




As a result, the amount of time that Mr. Rector has to devote to our activities may be limited.




Mr. Rector obtained his Bachelor’s Degree in Business Administration from Murray State University in 1969.




John N. Braca, Director. Mr. Braca became a director of the Company on November 13, 2009. Mr. Braca is a licensed Certified Public Accountant in the State of Pennsylvania and is affiliated with the American Institute of Certified Public Accountants and the Pennsylvania Institute of Certified Public Accountants. Mr. Braca currently serves as a director and member of the audit and compensation committees of Senesco Technologies, Inc. He has also served as a director and board observer for other healthcare, technology and biotechnology companies over the course of his career. He continues to work with both investors and management of companies in both exit and business development scenarios. Since April 2006, Mr. Braca has been the managing director of Fountainhead Venture Group, a healthcare information technology venture fund providing investment and business consulting services to evolving businesses. From May 2005 through March 2006, Mr. Braca was a business advisor to GlaxoSmithKline research and development operations. From 1997 to April 2005, Mr. Braca was a general partner and director of business investments for S.R. One, Limited, the venture capital subsidiary of GlaxoSmithKline. From January 2000 to July 2003, Mr. Braca was a general partner of Euclid SR Partners Corporation, an independent venture capital partnership. Prior to joining S.R. One, Mr. Braca held various finance and operating positions of increasing responsibility within several subsidiaries and business units of GlaxoSmithKline. Mr. Braca received a Bachelor of Science in Accounting from Villanova University and a Master of Business Administration in Marketing from Saint Joseph’s University.




35




Chunhua Huang, Director, is Vice Chairman of the Board of Hybrid Kinetic Group Limited, since August 2010. Dr. Huang started his investment banking career as a China equity analyst at James Capel (Asia) (now HSBC Securities) from 1994 to 1996. He was a senior member of the top-ranked China research team of Credit Lyonnais Securities Asia (CLSA) between 1996 and 2000. Dr. Huang joined Brilliance China Automotive Holdings Limited to serve as Chief Financial Officer of Far Eastern Golden Resources between August 2000 and May 2004 and as Deputy Chairman between November 2002 and August 2007. From May 2007 to April 2009, Dr. Huang returned to the brokerage industry to join BNP Paribas as Director of China Equity Research and a China Equity Strategist. He holds a Bachelor of Economics Degree from Wuhan University in China, and an MBA and PhD in Marketing from the University of Strathclyde in Scotland.




David C. Mathewson,Director and Geological Advisor.Mr. Mathewson was the Chief Executive Officer, President, Secretary, Treasurer, Chief Geologist and sole director of NGE from its inception on October 7, 2008, and became Chief Executive Officer, President, Secretary, Treasurer, Chief Geologist and sole direct of the Company upon the Merger. He resigned as Chief Executive Officer, President, Secretary, Treasurer and Chief Geologist on November 5, 2009, but remains as our directorand Geological Advisor. Mr. Mathewson has more than 30 years of hands-on gold exploration experience on the Carlin gold trend in north-central Nevada. Between August 2006 and August 2008, Mr. Mathewson was President, Chief Geologist and director of Gold Run, Inc., a public company. Between June 2002 and June 2006, Mr. Mathewson was the Vice President of Exploration for Tone Resources, Ltd., a Canadian corporation, where he managed that company’s gold exploration program (Mr. Mathewson remained a director of Tone Resources until his resignation on March 23, 2007). Between May 2001 and June 2002, Mr. Mathewson staked claims and evaluated business opportunities both as an individual and through his 50%-owned company, KM Exploration, Ltd (which has since been dissolved). Between January 1995 and May 2001, he was the Regional Manager of Exploration for Newmont Mining Company, where he was responsible for managing that company’s exploration activities in the Great Basin and Carlin gold trends. Prior to that, he was engaged as Newmont Mining Company’s Senior Exploration Geologist from April 1989 through December 1995.




Jimmy Wang, Director, is the Chief Financial Officer of American Compass, Inc., where he has served, initially as Chief Accounting Officer, since 2003. Prior to joining American Compass, Inc., he served as an accounting manager for Planned Parenthood of the Greater Miami Valley from 2000 to 2003. He is a graduate of the City University of New York, where he majored in both Accounting & Information Systems and Economics.




Vincent Wang, Secretary and Director, was appointed as our Secretary in November 2010. Mr. Wang has been Vice President of Hybrid Kinetic Motors Corp. since 2009 and also serves as a director of American Compass, Inc, a wholly-owned subsidiary of Hybrid Kinetic Group Limited, since 2009. Mr Wang has extensive experience in educational and linguistic fields. He holds a masters degree in linguistics from National Taiwan Normal University.




Board Committees




Our Board of Directors has not established an audit committee, a compensation committee, a nominating committee or any other committee. The full Board of Directors currently performs these functions.




Although we do not have an audit committee, the Board of Directors has determined that Mr. Braca meets the definition of an “audit committee financial expert,” as defined in Item 407 of Regulation S-K.




36




Shareholder Recommendations of Nominees to the our Board of Directors




Currently, we do not have a policy with regard to procedures by which security holders may recommend nominees to our Board of Directors.




Code of Ethics




The Company currently has not adopted a written code of ethics.




Section 16(a) Beneficial Ownership Reporting Compliance




Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the Company under Rule 16a-3(e) under the Exchange Act during its most recent fiscal year and Forms 5 and amendments thereto furnished to the Company with respect to its most recent fiscal year, and any written representation to the Company from the reporting person that no Form 5 is required, no person who, at any time during the fiscal year, was a director, officer, beneficial owner of more than ten percent of the Company’s Common Stock, or any other person known to the Company to be subject to section 16 of the Exchange Act with respect to the Company, failed to file on a timely basis, as disclosed in the above Forms, reports required by section 16(a) of the Exchange Act during the most recent fiscal year or prior fiscal years, except as described below:




Name

Number of late reports


Number of transactions that were not reported on a timely basis


Failure to file a required FormYung Yeung


-



-



-David Rector


-



-



-John N. Braca


-



-



-Chunhua Huang


-



-



-David C. Mathewson


-



-



-Jimmy Wang


-



-



-Vincent Wang


-



-



-




ITEM 11. EXECUTIVE COMPENSATION




The following table sets forth information concerning the total compensation paid or accrued by us during the last two fiscal years ended December 31, 2010, to (i) all individuals that served as our principal executive officer or acted in a similar capacity for us at any time during the fiscal year ended December 31, 2010; (ii) all individuals that served as our principal financial officer or acted in a similar capacity for us at any time during the fiscal year ended December 31, 2010; and (iii) all individuals that served as executive officers of ours at any time during the fiscal year ended December 31, 2010, that received annual compensation during the fiscal year ended December 31, 2010, in excess of $100,000.




37




Summary Compensation Table




Name and

Principal Position

Year

Salary

($)


Bonus

($)


Stock

Awards

($)


Option

Awards

($)


Non-

Equity

Incentive

Plan

Compensation
($)


Change in

Pension

Value

and Non-

qualified

Deferred

Compensation

Earnings

($)


All Other

Compensation

($)


Total
($)David Rector

2010

$
12,500



—



—


$
105,747



—



—



—


$
118,247CEO, President, CFO, Secretary, Treasurer, and Director(1)

2009


12,000



—



—



16,231



—



—



—



28,231David Mathewson(2)

2010


—



—



—



—



—



—



—



—Geological Advisor and Director

2009


15,000



—



—



—



—



—



—



15,000





(1)
Mr. Rector was our sole officer and director until December 31, 2008, when he resigned all positions with the Company; on November 5, 2009, he became our Chief Executive Officer, President, Secretary and Director.




(2)
Mr. Mathewson became our sole officer and director on December 31, 2008; he resigned his officer positions on November 5, 2009.




On November 5, 2009, our Board of Directors granted under our 2008 Plan to David Rector, in connection with his appointment as our Chief Executive Officer, President, Secretary and director, incentive stock options to purchase 1,000,000 pre-split (66,667 post-split) shares of Common Stock at a purchase price of $0.135 pre-split per share ($2.10 post-split) (the closing bid price quoted on the OTCBB on the date of grant), vesting 100% on December 31, 2010, and expiring November 4, 2014.




On November 16, 2009, our Board of Directors granted under our 2008 Plan to John N. Braca, in connection with his appointment as our director, non-qualified stock options to purchase 250,000 pre-split (16,667 post-split) shares of Common Stock at a purchase price of $0.127 pre-split per share ($1.95 post-split) (the closing bid price quoted on the OTCBB on the date of grant), vesting 100% on December 31, 2010, and expiring November 15, 2014.




38




Outstanding Equity Awards at Fiscal Year-End




The following table sets forth information regarding equity awards held by the Company’s Named Executive Officers at December 31, 2010.




Option Awards

Stock AwardsName

Number of securities underlying unexercised options exercisable

(#)


Number of securities underlying unexercised options unexercisable

(#)


Equity incentive plan awards: Number of securities underlying unexercised unearned options

(#)


Option plan exercise price

($)

Option
expiration
date

Number of Shares or Units of Stock That Have Not Vested

(#)


Market Value of Shares or Units of Stock That Have Not Vested

($)


Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested

(#)


Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested

(#)David Rector


66,667



-



-


$
2.10

11/4/14


-



-



-



-




Except as described above, we have not issued any stock options, nor have we maintained any stock option or other incentive plans other than our 2008 Plan. (See “Item 5, Market for Common Equity and Related Stockholder Matters – Securities Authorized for Issuance under Equity Compensation Plans” above.) We have no plans in place and have never maintained any plans that provide for the payment of retirement benefits or benefits that will be paid primarily following retirement including, but not limited to, tax qualified deferred benefit plans, supplemental executive retirement plans, tax-qualified deferred contribution plans and nonqualified deferred contribution plans.




Employment Agreements with Executive Officers




The Company entered into an employment agreement effective as of January 1, 2009 (the “Effective Date”) with David Mathewson, pursuant to which Mr. Mathewson served as our Chief Executive Officer, President and Chief Geologist. The term of the employment agreement commenced on the Effective Date and was to end on the first anniversary of the Effective Date, unless sooner terminated as provided in employment agreement (the “Term”); thereafter, the Term would have automatically renewed for successive periods of one year, unless either party gave to the other at least thirty (30) days’ prior written notice of their intention not to renew the employment agreement prior to the end of the Term or the then applicable renewal Term, as the case may be. Pursuant to the employment agreement, Mr. Mathewson’s annual base salary was $120,000; provided, however, that for the first year of the term, the base salary was $105,000 per annum, with $5,000 payable for the months of January, February and March of 2009, and $10,000 payable for the remaining months of 2009. Mr. Mathewson received a total of $15,000 in salary in 2009. The employment agreement contained no provisions relating to a bonus.




The Board of Directors would have determined whether and to what extent Mr. Mathewson would participate in any stock or option plan of the Company. During the Term, Mr. Mathewson was entitled to participate in the Company’s insurance programs and any ERISA benefit plans that may be adopted.




Mr. Mathewson was entitled to receive reimbursement of all expenses reasonably incurred by him in performing his services, including all travel and living expenses while away from home on business or incurred at the specific request or direction of the Company. The Company advanced to Mr. Mathewson, on a fully accountable basis, an allowance for reimbursable expenses of $5,000 per month (or, if reimbursable expenses for the prior month did not equal or exceed $5,000, then an amount equal to $5,000 less the unused portion of the prior month’s advance).




39




The Company was to grant Mr. Mathewson a 1% net smelter return royalty (“NSR”) for all prospects generated by him that were acquired by staking for the Company. The Company was to grant Mr. Mathewson a 1/2% percent NSR for all prospects generated by him that are subsequently leased by the Company, exclusive of the “Tempo” property, provided that (i) such lease carries a total maximum NSR of 4% percent (inclusive of the 1/2% percent NSR to Mr. Mathewson), and (ii) such lease does not adjoin a claim from which Mr. Mathewson is otherwise entitled to receive participation in an NSR. The Company was to have the right to purchase all of such 1/2% percent NSRs respecting leased prospects in the aggregate at any time for $500,000.




On November 5, 2009, the Company and Mathewson agreed to terminate the employment agreement, and Mr. Mathewson resigned as Chief Executive Officer, President, Secretary, Treasurer and Chief Geologist of the Company. Mr. Mathewson waived the right to receive any base salary accrued to the termination date but not yet paid. The Company is not obligated to pay Mr. Mathewson any severance. No NSRs have accrued under the agreement, and the Company is not obligated to grant any NSRs to Mr. Mathewson. Mr. Mathewson agreed that he will not, directly or indirectly, own, manage, operate, finance, control or participate in the ownership, management, operation, financing, or control of, be employed by, associated with, or in any manner connected with, lend any credit to, or render services or advice to any business, firm, corporation, partnership, association, joint venture or other entity that engages in or conducts the business of gold exploration, anywhere within the Tempo property located in Lander County, Nevada, or within two miles of the current outside boundary of the Tempo property, for a period of three years or for as long as the Company maintains ownership control or a participatory involvement in the Tempo property (whichever is longer), or unless otherwise agreed upon by the Company’s Board of Directors. Mr. Mathewson also surrendered to the Company, without payment therefor, two million (2,000,000) shares of the Company’s Common Stock, which were cancelled and returned to authorized but unissued shares.




Director Compensation




Directors are elected by the vote of a majority in interest of the holders of voting stock and hold office until the expiration of the term for which they are elected and until successors are qualified and elected.




A majority of the authorized number of directors constitutes a quorum of the Board of Directors for the transaction of business. The directors must be present at the meeting to constitute a quorum. However, any action required or permitted to be taken by the Board of Directors may be taken without a meeting if all members of the Board of Directors individually or collectively consent in writing to the action.




Effective November 18, 2010, we pay to each non-executive director of the Company a director’s fee of $5,000 for each full fiscal quarter during which he or she serves as a director, prorated for any period of service less than a full fiscal quarter. Prior to that time, directors did not receive compensation for their services.




40




ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS




The following table sets forth information with respect to the beneficial ownership of our common stock known by us as of April 14, 2011:




●
each person or entity known by us to be the beneficial owner of more than 5% of our common stock;




●
each of our directors;




●
each of our executive officers; and




●
all of our directors and executive officers as a group.




Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent such power may be shared with a spouse.




Unless otherwise noted, the address of each person below id c/o Nevada Gold Holdings, Inc., 800 E. Colorado Blvd., Suite 888, Pasadena, California 91101.




Name and Addressof Beneficial Owner

Title of Class

Amount and 
Natureof

Beneficial 
Ownership(1)

Percent of
Class (2)Yung Yeung

Common Stock


0
(3)
-David Rector

Common Stock


66,667
(4)
*John N. Braca

Common Stock


16,667
(5)
*Chunhua Huang

Common Stock


0

-David C. Mathewson

Common Stock


1,485,067

3.5
%Jimmy Wang

Common Stock


0Vincent Wang

Common Stock


0All directors and executive officers as a group (7 persons)

Common Stock


1,568,401

3.7
%Hybrid Kinetic Group Limited

800 E. Colorado Blvd.,

Suite 888,

Pasadena, California 91101

Common Stock


60,000,000
(6)
82.3
%








*
Less than 1%.




41




(1)
Beneficial ownership is determined in accordance with the rules of the SEC. For this purpose, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, has or shares (a) the power to vote, or to direct the voting of, such security and/or (b) the power to dispose, or to direct the disposition of, such security. Shares of common stock subject to options or warrants currently exercisable or convertible, or exercisable or convertible within 60 days of April 14, 2011, are deemed outstanding for computing the percentage of the person holding such option or warrant but are not deemed outstanding for computing the percentage of any other person.




(2)
Percentages based upon 43,844,054 shares of common stock outstanding as of April 14, 2011; percentages are rounded to the nearest 0.1%.




(3)
See Note 6 below. Under the rules of the SEC, Mr. Yeung may be deemed to beneficially own the shares of common stock beneficially owned by Hybrid Kinetic Group Limited. Mt Yeung disclaims beneficial ownership of those shares except to the extent of his pecuniary interest therein.




(4)
Includes 66,667 shares of common stock issuable upon the exercise of options granted under the 2008 Plan, which fully vested on December 31, 2010.




(5)
Includes 16,667 shares of common stock issuable upon the exercise of options granted under the 2008 Plan, which fully vested on December 31, 2010.




(6)
Includes warrants to purchase 30,000,000 shares that are currently exercisable. Far East Golden Resources is the direct beneficial owner of these shares and is a wholly owned subsidiary of Hybrid Kinetic Group Limited. Sun East LLC, a California limited liability company, owns 30.29% of the issued share capital of Hybrid Kinetic Group Limited and may be deemed to be a controlling person thereof and beneficial owner of these shares. Sun East LLC is owned (i) 35% by our director, Yung Yeung, who is Chairman, Chief Executive Officer and director of Hybrid Kinetic Group Limited and (ii) 65% by Manwai Ma and Jimmy Wang, as co-trustees for certain trusts established for the benefit of the children of Mr. Yeung.




ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE




Prior to the Merger, NGE acquired the leasehold interest in the Tempo property from KM Exploration, Ltd., a Nevada limited liability company in which our CEO, President, Chief Geologist and sole director, David Mathewson, had a 50% ownership interest prior to its dissolution. In consideration of the transfer of the lease to NGE, NGE reimbursed KM Exploration for claim fees ($19,503) and preparation cost ($962), totaling $20,465. Also in connection with the reassignment, Mr. Mathewson, then the sole stockholder of NGE, assigned five shares of NGE (which converted into 400,000 shares each of Company Common Stock upon the Merger) to each of two individuals (one of whom was the owner of the other 50% interest in KM Exploration prior to its dissolution).




On December 31, 2008, in connection with the Merger, David Mathewson received 15,200,000 shares of our Common Stock in exchange for 190 shares of NGE common stock owned by Mr. Mathewson. Subsequent to the closing of the Merger, Mr. Mathewson transferred to certain investors in the Bridge PPO, in private transactions, an aggregate of 3,060,000 of his shares. In connection with the Merger, Mr. Mathewson entered into a lock-up agreement, pursuant to which he is prohibited from certain sales or dispositions of any other shares of our Common Stock received in the Merger for a period of two years from December 31, 2008, without the prior written consent of the Company.




42




See “Business—Historical Development—Split-Off Agreement” for a description of certain transactions involving Marion R. “Butch” Barnes in connection with the Merger.




Nano Holdings recorded the value of uncompensated services provided by its officer and director, David Rector, and the President of Sunshine, Marion “Butch” Barnes, as a contribution of capital during the year ended December 31, 2008. However, as a result of the “reverse merger” accounting, with NGE deemed to be the accounting acquirer in the reverse merger, these amounts do not appear on our statements of stockholders’ equity at December 31, 2010 or 2009.




Under the terms of the subscription agreement dated October 29, 2010, under which Far East Golden Resources acquired its Common Stock and warrants, we were required to increase the size of our Board of Directors from three to seven, and Far East Golden Resources was entitled to nominate four reasonably qualified candidates to our Board of Directors to fill the vacancies so created. Far East Golden Resources nominated Yung Yeung, Chunhua Huang, Wei Wang and Vincent Wang to the Board, and they were elected as Directors by the Board on November 29, 2010. (Since that time, Wei Wang resigned as a Director, and the Board elected Jimmy Wang to succeed him.)




On January 26, 2011, we made a loan of $200,000 to Hybrid Kinetic Motors Corporation; on February 24, 2011, we made a loan of $400,000 American Compass Inc.; and March 24, 2011, we made a loan of $400,000 to American Compass Inc. Each of these loans is unsecured, bears interest at 3% per annum, payable at maturity, and matures on December 31, 2011. Each of the borrowers is a wholly owned subsidiary of Hybrid Kinetic Group Ltd., which is also the parent of our controlling stockholder, Far East Golden Resources. Hybrid Kinetic Group Ltd. Has guaranteed each of the loans.




Director Independence




We are not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the board of directors be “independent.” Nevertheless, our Board of Directors has determined that one of our seven directors, John N. Braca, is “independent” within the definition of independence provided in the Marketplace Rules of The Nasdaq Stock Market.




ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES




Audit Fees




The aggregate fees billed to us by our principal accountant for services rendered during the fiscal years ended December 31, 2010 and 2009, are set forth in the table below:




Fee Category

Fiscal year ended

December 31, 2010


Fiscal year ended

December 31, 2009Audit fees (1)

$
41,000


$
19,100Audit-related fees (2)

$
0


$
0Tax fees (3)

$
0


$
0All other fees (4)

$
0


$
0Total fees

$
41,000


$
19,100








(1)
Audit fees consist of fees incurred for professional services rendered for the audit of consolidated financial statements, for reviews of our interim consolidated financial statements included in our quarterly reports on Form 10-Q and for services that are normally provided in connection with statutory or regulatory filings or engagements.




(2)
Audit-related fees consist of fees billed for professional services that are reasonably related to the performance of the audit or review of our consolidated financial statements, but are not reported under “Audit fees.”




(3)
Tax fees consist of fees billed for professional services relating to tax compliance, tax planning, and tax advice.




(4)
All other fees consist of fees billed for all other services.




43




PART IV




ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES




The consolidated financial statements of the Company are listed on the Index to Financial Statements on this annual report on Form 10-K beginning on page F-1.




Report of Independent Registered Public Accounting Firm


F-2Consolidated Balance Sheets as of December 31, 2010 and 2009


F-3Consolidated Statements of Operations for the years ended December 31, 2010 and 2009 andfor the periods from October 2, 2008 (inception) through December 31, 2010


F-4Consolidated Statements of Stockholders’ Equity for the period from October 2, 2008 (inception) through December 31, 2010


F-5Consolidated Statements of Cash Flows for the years ended December 31, 2010 and 2009 andfor the periods from October 2, 2008 (inception) through December 31, 2010


F-6Notes to the Consolidated Financial Statements


F-7




Financial Statement Schedules




All financial statement schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.




Exhibits




The following Exhibits are being filed with this Annual Report on Form 10-K.




In reviewing the agreements included as exhibits to this Form 10-K, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. The agreements may contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the parties to the applicable agreement and:




●
should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;




●
have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;




●
may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and




●
were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.




44




Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Form 10-K and the Company’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov. See “Available Information.”




Exhibit

Number

Description2.1

Agreement and Plan of Merger and Reorganization, dated as of December 31, 2008, by and among Nevada Gold Holdings, Inc., Nevada Gold Acquisition Corp. and Nevada Gold Enterprises, Inc. (incorporated by reference to identically numbered exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on January 7, 2009)2.2

Certificate of Merger (incorporated by reference to identically numbered exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on January 7, 2009)3.1

Certificate of Incorporation of the Registrant (incorporated by reference from Exhibit 3.1 to the Registrant’s Form SB-2 Registration Statement filed with the SEC on August 1, 2006)3.2

Certificate of Amendment to Certificate of Incorporation of the Registrant (incorporated by reference from Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 6, 2008)3.3

Certificate of Amendment to Certificate of Incorporation of the Registrant (incorporated by reference from Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on September 21, 2010)3.3

Bylaws of the Registrant (incorporated by reference from Exhibit 3.1 to the Registrant’s Form SB-2 Registration Statement filed with the Commission on August 1, 2006)10.1

Form of Subscription Agreement by and between Nevada Gold Holdings, Inc., and the investors party thereto  (incorporated by reference to identically numbered exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on January 7, 2009)10.2

Form of Addendum to Subscription Agreement by and between Nevada Gold Holdings, Inc., and the investors party thereto  (incorporated by reference to identically numbered exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on January 7, 2009)  45
  10.3†

Lock-Up Agreement, dated as of December 31, 2008, between Nevada Gold Holdings, Inc., and David Mathewson  (incorporated by reference to identically numbered exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on January 7, 2009)10.4

Split-Off Agreement, dated as of December 31, 2008, by and among Nevada Gold Holdings, Inc., Sunshine Group, Inc., and Marion R. “Butch” Barnes, William D. Blanchard and Robert Barnes  (incorporated by reference to identically numbered exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on January 7, 2009)10.5

General Release Agreement, dated as of December 31, 2008, by and among Nevada Gold Holdings, Inc., Sunshine Group, Inc., and Marion R. “Butch” Barnes, William D. Blanchard and Robert Barnes  (incorporated by reference to identically numbered exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on January 7, 2009)10.6

Form of Agreement and Release between David Mathewson and the subscribers thereto  (incorporated by reference to identically numbered exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on January 7, 2009)10.7

Tempo Mineral Lease dated May 18, 2007, by and between Gold Standard Royalty (Nevada) Inc., successor in interest to Bertha C. Johnson, Trustee of the Lyle F. Campbell Trust, as Lessor, and NGE, as successor to KM Exploration LTD., as successor to Gold Run, Inc. (incorporated by reference to identically numbered exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on January 7, 2009)10.8

Amendment to Tempo Mineral Lease dated January 6, 2009, between Gold Standard Royalty (Nevada) Inc., successor in interest to Bertha C. Johnson, Trustee of the Lyle F. Campbell Trust, as Lessor, and NGE, as successor to KM Exploration LTD., as successor to Gold Run, Inc. (incorporated by reference to identically numbered exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on January 7, 2009)10.9

Form of Securities Purchase Agreement dated December 31, 2008, between Nevada Gold Holdings, Inc., and the Buyers party thereto  (incorporated by reference to identically numbered exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on January 7, 2009)10.10

Form of 10% Secured Convertible Promissory Note  (incorporated by reference to identically numbered exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on January 7, 2009)10.11

Form of Security Agreement dated December 31, 2008, among Nevada Gold Holdings, Inc., Nevada Gold Enterprises, Inc., and the Buyers party thereto  (incorporated by reference to identically numbered exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on January 7, 2009)10.12†

Nevada Gold Holdings, Inc., 2008 Equity Incentive Plan  (incorporated by reference to identically numbered exhibit to the registrant’s Current Report on Form 8-K filed with the SEC on January 7, 2009)10.13

Form of amended Subscription Agreement between Nevada Gold Holdings, Inc., and the investors party thereto (incorporated by reference to Exhibit 10.13 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2008)  46
  10.14†

Employment Agreement dated as of January 1, 2009, between Nevada Gold Holdings, Inc., and David Mathewson (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on March 24, 2009)10.15†

Letter agreement dated November 5, 2009, between Nevada Gold Holdings, Inc., and David Mathewson re resignation and termination of Employment Agreement (incorporated by reference to Exhibit 10.15 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2009)10.16

Form of Subscription Agreement in connection with the Company’s private placement offering of units of securities, each unit consisting of one share of the Company’s Common Stock and a warrant to purchase one share of Common Stock (incorporated by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009)10.17

Form of Warrant to Purchase Common Stock (incorporated by reference to Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009)10.18

Form of Subscription Agreement in connection with the Company’s private placement offering of units of securities, each unit consisting of  one share of the Company’s Common Stock and a warrant to purchase one share of Common Stock (incorporated by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009)10.19

Form of Amendment to Subscription Agreement (incorporated by reference to Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009)10.20

Form of Warrant to Purchase Common Stock (incorporated by reference to Exhibit 10.3 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009)10.21

Amendment to Tempo Mineral Lease dated January 6, 2009, between Gold Standard Royalty (Nevada) Inc., successor in interest to Bertha C. Johnson, Trustee of the Lyle F. Campbell Trust, as Lessor, and NGE, as successor to KM Exploration LTD., as successor to Gold Run, Inc. (incorporated by reference to Exhibit 10.8 to the registrant’s Current Report on Form 8-K filed with the SEC on January 7, 2009)10.22

Securities Purchase Agreement, dated as of May 14, 2010, among the Registrant and the Buyers party thereto(incorporated by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010)10.23

10% Secured Convertible Promissory Note dated May 14, 2010 (incorporated by reference to Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010)10.24

Security Agreement dated as of May 14, 2010, by and among the Registrant, Nevada Gold Enterprises, Inc., and the Buyer party thereto (incorporated by reference to Exhibit 10.3 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010)10.25

Amendment No. 1 to 2008 Equity Incentive Plan of Nevada Gold Holdings, Inc.(incorporated by reference from Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on September 21, 2010)  47
  10.26

Form of Subscription Agreement between the Company and each subscriber in the 2010 PPO (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on November 8, 2010)10.27

Form of Warrant included in the Units sold in the 2010 PPO (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on November 8, 2010)10.28

Form of Registration Rights Agreement between the Company and the subscribers in the 2010 PPO (incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed with the SEC on November 8, 2010)21.1*

Subsidiaries of the Registrant31.1*

Certification of principal executive and principal financial officer pursuant to Rule 13a-14(a) and 15d-14(a)32.1*§

Certification of principal executive and principal financial officer pursuant to 18 U.S.C. Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002








*
Filed herewith




†
Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K pursuant to Item 15(b) of Form 10-K.




§
This certification is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.




48


SIGNATURES




Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.




NEVADA GOLD HOLDINGS, INC.Dated: April 15, 2011
By:
/s/ David RectorDavid RectorChief Executive Officer, President and Treasurer




In accordance with the Exchange Act, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.




SIGNATURE

TITLE

DATE/s/ Yung Yeung

Chairman of the Board

April 15, 2011Yung Yeung/s/ David Rector

Director; Chief Executive Officer, President, and Treasurer

April 15, 2011David Rector/s/ John N. Braca

Director

April 15, 2011John N. Braca/s/Chunhua Huang

Director

April 15, 2011Chunhua Huang/s/ David C. Mathewson

Director

April 15, 2011David C. Mathewson/s/ Jimmy Wang

Director

April 15, 2011Jimmy Wang/s/Vincent Wang

Secretary and Director

April 15, 2011Vincent Wang




49





FINANCIAL STATEMENTS





PageReport of Independent Registered Public Accounting Firm

F-2Consolidated Balance Sheets as of December 31, 2010 and 2009

F-3Consolidated Statements of Operations for the years ended December 31, 2010 and 2009 andfor the periods from October 2, 2008 (inception) through December 31, 2010

F-4Consolidated Statements of Stockholders’ Equity for the period from October 2, 2008 (inception) through December 31, 2010

F-5Consolidated Statements of Cash Flows for the years ended December 31, 2010 and 2009 andfor the periods from October 2, 2008 (inception) through December 31, 2010

F-6Notes to the Consolidated Financial Statements

F-7





F-1




Report of Independent Registered Public Accounting Firm







To the Board of Directors and Stockholders


Nevada Gold Holdings, Inc.


(An Exploration Stage Company)


Walnut Creek, California





We have audited the accompanying consolidated balance sheets of Nevada Gold Holdings, Inc. (the “Company”) (an exploration stage company) as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years ended December 31, 2010 and 2009 and for the period from Inception (October 2, 2008) through December 31, 2010. 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 audits.





We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, audits of its internal control over financial reporting. Our audits 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.





In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Nevada Gold Holdings, Inc. as of December 31, 2010 and 2009 and the consolidated results of their operations and their consolidated cash flows for the years ended December 31, 2010 and 2009, and for the period from Inception (October 2, 2008) through December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.





/s/ GBH CPAs, PC





GBH CPAs, PC


www.gbhcpas.com


Houston, Texas


April 15, 2011




F-2




NEVADA GOLD HOLDINGS, INC.


(An Exploration Stage Company)


Consolidated Balance Sheets





ASSETSDecember 31,

2010


December 31,

2009CURRENT ASSETSCash

$
2,995,727


$
158,398Receivables


8,062



-Total Current Assets


3,003,789



158,398OTHER ASSETSMining claims and reclamation bonds


52,600



15,444Total Other Assets


52,600



15,444TOTAL ASSETS

$
3,056,389


$
173,842LIABILITIES AND STOCKHOLDERS' EQUITYCURRENT LIABILITIESAccounts payable

$
20,489


$
70,480Note payable


-



100,000Total Current Liabilities


20,489



170,480TOTAL LIABILITIES


20,489



170,480STOCKHOLDERS' EQUITYPreferred stock:$0.001 par value, 10,000,000 shares authorized; no shares issued and outstanding


-



-Common stock:$0.001 par value, 300,000,000 shares authorized; 43,844,054 and 4,842,130 shares issued and outstanding, respectively


43,844



4,842Additional paid-in capital


5,286,323



885,734Deficit accumulated during the exploration stage


(2,294,267
)


(887,214
)Total Stockholders' Equity


3,035,900



3,362TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$
3,056,389


$
173,842





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




F-3




NEVADA GOLD HOLDINGS, INC.


(An Exploration Stage Company)


Consolidated Statements of Operations





For the Years Ended 
December 31,


From Inception

on October 2,

2008 Through

December 31,2010


2009


2010REVENUES

$
-


$
-


$
-COSTS AND EXPENSESGeneral and administrative


925,013



615,580



1,541,024Exploration costs


158,886



205,156



384,507Total Costs and Expenses


1,083,899



820,736



1,925,531OTHER INCOME (EXPENSE)Interest expense


(325,521
)


(158,082
)


(483,603
)Other income


2,367



-



2,367Gain on settlement of derivative liability


-



112,500



112,500Total Other Income (Expense)


(323,154
)


(45,582
)


(368,736
)LOSS BEFORE INCOME TAXES


(1,407,053
)


(866,318
)


(2,294,267
)INCOME TAX EXPENSE


-



-



-NET LOSS

$
(1,407,053
)

$
(866,318
)

$
(2,294,267
)BASIC AND DILUTED LOSS    PER COMMON SHARE

$
(0.12
)

$
(0.18
)WEIGHTED AVERAGE NUMBER   OF COMMON SHARES OUTSTANDING,   BASIC AND DILUTED


11,578,417



4,829,684





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





F-4




NEVADA GOLD HOLDINGS, INC.


(An Exploration Stage Company)


Consolidated Statements of Stockholders' Equity





Common Stock


Additional

Paid-In


Deficit

Accumulated

During the

Exploration


Total

Stockholders'Shares


Amount


Capital


Stage


EquityBalance at inception on October 2, 2008


-


$
-


$
-


$
-


$
-Common stock issued to founders for cash   on October 2, 2008


2,032,000



2,032



(2,032
)


-



-Recapitalization pursuant to reverse merger


2,626,263



2,626



(183,604
)


-



(180,978
)Common stock issued for debt issuance costs on December 31, 2008


20,000



20



37,480



-



37,500Common stock issued for cash on December 31, 2008, net of $31,540 of direct issuance costs


55,200



55



71,905



-



71,960Net loss


-



-



-



(20,896
)


(20,896
)Balance, December 31, 2008


4,733,463



4,733



(76,251
)


(20,896
)


(92,414
)Common stock issued for cash, net of $4,130 of direct issuance costs


222,000



222



791,028



-



791,250Common stock issued for services rendered


20,000



20



74,980



-



75,000Common shares cancelled


(133,333
)


(133
)


133



-



-Contributed services


-



-



75,000



-



75,000Stock-based compensation


-



-



20,844



-



20,844Net loss


-



-



-



(866,318
)


(866,318
)Balance, December 31, 2009


4,842,130



4,842



885,734



(887,214
)


3,362Common stock issued for services rendered


168,568



169



74,577



-



74,746Common stock contributed by shareholder for services


-



-



50,000



-



50,000Stock-based compensation to employees


-



-



131,508



-



131,508Common shares and warrants issued for cash pursuant to private placement offering


34,500,000



34,500



3,415,500



-



3,450,000Common shares and warrants issued upon conversion of promissory notes pursuant to private   placement offering


3,133,356



3,133



310,204



-



313,337Common shares and warrants issued for payment of debt pursuant to private placement offering


1,200,000



1,200



118,800



-



120,000Interest expense relating to intrinsic value of converted promissory notes


-



-



300,000



-



300,000Net loss


-



-



-



(1,407,053
)


(1,407,053
)Balance, December 31, 2010


43,844,054


$
43,844


$
5,286,323


$
(2,294,267
)

$
3,035,900





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





F-5





NEVADA GOLD HOLDINGS, INC.


(An Exploration Stage Company)


Consolidated Statements of Cash Flows





For theYears Ended 
December 31,


From Inception on October 2, 2008 Through December 31,2010


2009


2010CASH FLOWS FROM OPERATING ACTIVITIESNet loss

$
(1,407,053
)

$
(866,318
)

$
(2,294,267
)Adjustments to Reconcile Net Loss to Net CashUsed in Operating Activities:Change in derivative liability


-



(112,500
)


(112,500
)Contributed services or common stock contributed for services


50,000



75,000



125,000Common stock issued for services


194,746



95,844



290,590Stock-based compensation


131,508



-



131,508Interest expense related to intrinsic value of converted promissory notes


300,000



-



300,000Changes in Operating Assets and Liabilities:Receivables


(8,062
)


-



(8,062
)Accounts payable


(36,654
)


(162,874
)


(137,152
)Net Cash Used in Operating Activities


(775,515
)


(970,848
)


(1,714,883
)CASH FLOWS FROM INVESTING ACTIVITIESPurchase of mining reclamation bond


(37,156
)


(15,444
)


(52,600
)Change in cash held in trust


-



253,440



-Net Cash Provided by (Used in) Investing Activities


(37,156
)


237,996



(52,600
)CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issuance of common stock, net of issuance costs


3,450,000



791,250



4,313,210Proceeds from notes payable


400,000



100,000



450,000Principal payments on notes payable


(200,000
)


-



(200,000
)Net Cash Provided by Financing Activities


3,650,000



891,250



4,763,210NET INCREASE IN CASH


2,837,329



158,398



2,995,727CASH AT BEGINNING OF PERIOD


158,398



-



-CASH AT END OF PERIOD

$
2,995,727


$
158,398


$
2,995,727SUPPLEMENTAL DISCLOSURES OFCASH FLOW INFORMATIONCASH PAID FOR:Interest

$
-


$
8,082


$
8,082Income Taxes

$
-


$
-


$
-NON CASH INVESTING AND FINANCING ACTIVITIES:Common stock issued for promissory notes

$
313,337


$
-


$
313,337Cancellation of common stock

$
-


$
133


$
133Common stock issued for debt issuance costs

$
-


$
-


$
37,500




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




F-6





NEVADA GOLD HOLDINGS, INC.


(An Exploration Stage Company)


Notes to the Consolidated Financial Statements


December 31, 2010 and 2009






NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS





Nevada Gold Holdings, Inc. (the “Company”) was incorporated under the laws of the State of Delaware on April 16, 2004.  Nevada Gold Enterprises, Inc., a Nevada corporation, was incorporated under the laws of the State of Nevada on October 2, 2008.  On December 31, 2008, Nevada Gold Acquisition Corp., a Nevada corporation formed on December 18, 2008, and a wholly owned subsidiary of Nevada Gold Holdings, Inc., merged with and into Nevada Gold Enterprises, Inc. Nevada Gold Enterprises, Inc. was the surviving corporation in the Merger. As a result of the Merger, Nevada Gold Enterprises, Inc., became a wholly-owned subsidiary of Nevada Gold Holdings, Inc. The Merger was treated as a reverse merger and recapitalization for financial accounting purposes. As a result of the merger, the Company recorded an aggregate stock issuance of 2,626,263 shares of common stock with a net value of $(180,978). The negative recapitalization net value recognized was the result of the Company restating the equity structure of the legal subsidiary using the exchange ratio established in the acquisition agreement to reflect the number of shares of the legal parent issued in the reverse acquisition.  Nevada Gold Enterprises, Inc. was considered the acquirer for accounting purposes, and Nevada Gold Holdings, Inc. is considered the surviving company for legal purposes. Accordingly, the accompanying financial statements present the historical financial statements of Nevada Gold Enterprises, Inc., as the historical financial statements of Nevada Gold Holdings, Inc., i.e. a reverse merger. The Company is engaged in the acquisition, exploration and development of gold mining claims in Nevada.




NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES





Accounting Method




The Company’s financial statements are prepared using the accrual method of accounting.  The Company has elected a December 31 year-end.





Use of Estimates




The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.





Revenue Recognition




The Company has not earned any revenues since inception.  The Company will develop appropriate revenue recognition policies at such time that planned principal operations become feasible.





Income Taxes




The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered.  The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not.





F-7





Cash and Cash Equivalents




The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.





Principles of Consolidation




The accompanying financial statements include the accounts of Nevada Gold Holdings, Inc. and its wholly owned subsidiary Nevada Gold Enterprises, Inc.  All significant intercompany transactions have been eliminated.





Basic and Diluted Earnings (Loss) Per Share




Basic earnings (loss) per share is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. For the year ended December 31, 2010, fully diluted earnings per share excludes the dilutive effect of 39,131,356 common stock equivalents from options and warrants, because their inclusion would be anti-dilutive.  For the year ended December 31, 2009, fully diluted earnings per share excludes the dilutive effect of 298,000 common stock equivalents from options and warrants and 83,333 common stock equivalents from convertible debt, because their inclusion would be anti-dilutive.





The following is a reconciliation of basic and diluted earnings per share for 2010 and 2009:





Year Ended

December 31,2010


2009Numerator:Net income (loss) available to common shareholders

$
(1,407,053
)

$
(866,318
)Denominator:Weighted average shares - basic


11,578,417



4,829,684Net income (loss) per share – basic and diluted

$
(0.12
)

$
(0.18
)




F-8




Common Stock




The holders of the Company’s common stock are entitled to receive dividends out of assets or funds legally available for the payment of dividends of such times and in such amounts as the board from time to time may determine.  Holders of common stock are entitled to one vote for each share held on all matters submitted to a vote of shareholders.  There is no cumulative voting of the election of directors then standing for election.  The common stock is not entitled to pre-emptive rights and is not subject to conversion or redemption.  Upon liquidation, dissolution or winding up of the company, the assets legally available for distribution to stockholders are distributable ratably among the holders of the common stock after payment of liquidation preferences, if any, on any outstanding payment of other claims of creditors.





Preferred Stock




Shares of preferred stock may be issued from time to time in one or more series, each of which shall have such distinctive designation or title as shall be determined by the board of directors of the Company.  Preferred stock shall have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as may be adopted from time to time by the board of directors.





Recent Accounting Pronouncements




The Company has evaluated recent accounting pronouncements and their adoption has not had or is not expected to have a material impact on the Company’s consolidated financial statements.





Income Taxes




Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences.  Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.  Deferred tax assets are reduced by a valuation  allowance when, in the opinion of management,  it is more likely than not that some  portion or all of the deferred tax assets will to be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.





Net deferred tax assets consist of the following components as of December 31, 2010 and 2009:




2010



2009Deferred tax assets:NOL carryover

$
894,764


$
346,013Valuation allowance


(894,764
)


(346,013
)Net deferred tax asset

$
—


$
—





The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rates of 39% to pretax income from continuing operations for the years ended December 31, 2010 and 2009 due to the following:





2010


2009Income tax benefit at statutory rate

$
(548,751
)

$
(337,864
)Valuation allowance


548,751



337,864$
-


$
-




F-9




At December 31, 2010, the Company had net operating loss carryforwards of approximately $2.3 million that may be offset against future taxable income through 2031. No tax benefit has been reported in the December 31, 2010 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount. Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal income tax reporting purposes are subject to annual limitations.




NOTE 3 – NOTES PAYABLE





On December 7, 2009, the Company entered into a Bridge Loan Agreement with Theory Capital Corp., an unrelated third party entity (“Theory”), whereby Theory loaned a total of $100,000 to the Company.  The note issued to evidence such loan (the “Theory Note”) accrued interest at a rate of 10.0% per annum, and was due and payable in full on June 4, 2010.  As of October 29, 2010, the Company had not repaid the Theory Note and was in default thereunder.  The Theory Note was mandatorily convertible into common stock upon the Company’s closing of a private placement offering.   In the event such a financing arrangement was consummated, the note would convert into shares of the Company’s common stock at a conversion price equal to the price per share paid by investors in the financing. The note was converted into common stock on October 29, 2010, pursuant to the Company’s private placement offering (see Note 4 – Equity Transactions).





On February 5, 2010, the Company entered into a financing arrangement with JMJ Financial (“JMJ”), pursuant to which JMJ would lend the Company up to $3,200,000.  The Company received $200,000 from JMJ pursuant to these notes.  The notes bore interest at 8% and had a maturity date of three years from the date of issuance.  Under the terms of the notes, JMJ was entitled, at its option, to convert all or part of the principal amount and accrued interest into shares of the Company’s Common Stock at a conversion price equal to 70% of the lowest trade price of the Common Stock in the twenty (20) trading days immediately prior to the conversion, subject to adjustment in certain circumstances.  On May 6, 2010 the Company repaid the outstanding amount owed of $200,000 and cancelled the financing agreement with JMJ.  No significant gain or loss was recognized on the settlement of the debt.





On May 24, 2010 the Company issued a $50,000 Secured Convertible Promissory Note to MLF Group, LLC, an unrelated third-party entity.  The Note accrued interest at a rate of 10.0% per annum, and was due in full on or before May 14, 2011.  The Note was mandatorily convertible upon the closing of any securities or other financing resulting in gross cash proceeds to the Company in excess of $500,000.  In the event such a financing arrangement was consummated, the note would convert into shares of the Company’s common stock at a conversion price equal to the price per share paid by investors in the financing. The note was converted into common stock on October 29, 2010, pursuant to the Company’s private placement offering (see Note 4 – Equity Transactions).





On October 1, 2010 the Company received proceeds of $25,000 from a Bridge Note to MLF Group, LLC, an unrelated third-party entity. The Bridge Note accrued interest at a rate of 10.0% per annum, and was due in full one year from the issue date.  The Bridge Notes was mandatorily convertible upon the closing of any securities or other financing resulting in gross cash proceeds to the Company in excess of $500,000.  In the event a Contingent Event is consummated, all outstanding principal and interest amounts of the Bridge Notes will automatically convert into the Company’s securities being sold in such financing at a conversion price equal to the purchase price paid by investors in such financing. The note was converted into common stock on October 29, 2010, pursuant to the Company’s private placement offering (see Note 4 – Equity Transactions).




F-10




In August 2010, the Company entered into a Secured Promissory Note Agreement with three unrelated third-party lenders whereby the Company borrowed a total of $125,000 from the lenders.  The notes accrued interest at a rate of 10.0% per annum, and were due in full exactly one year from the note date.  The Note was mandatorily convertible upon the closing of any securities or other financing resulting in gross cash proceeds to the Company in excess of $500,000.  In the event such a financing arrangement was consummated, the note would convert into shares of the Company’s common stock at a conversion price equal to the price per share paid by investors in the financing.  These notes were converted into common stock on October 29, 2010, pursuant to the Company’s private placement offering (see Note 4 – Equity Transactions).




NOTE 4 – EQUITY TRANSACTIONS





Contribution of Capital- On February 17, 2010 a shareholder of the Company transferred 66,667 shares of the Company’s common stock from his personal account to an unrelated entity as a payment for investor relations and corporate communication services for the Company. The Company valued these shares at $0.75 per share based on the quoted market price of the shares, resulting in a total value of the shares transferred of $50,000.  Accordingly, the Company recorded a contribution of capital in the amount of $50,000 during the year ended December 31, 2010.





Private Placement Offering - On October 29, 2010 the Company consummated a private placement offering (“the offering”) whereby the Company issued 38,833,356 units at $0.10 per unit for total proceeds of $3,883,337.  The proceeds consisted of $3,450,000 in cash, conversions of $313,337 in convertible notes payable, and $120,000 as credit on certain of the Company’s trade payables.  Each unit consists of one share of the Company’s common stock and one warrant to purchase one share of the Company’s common stock at $0.10 per share, exercisable for a period of five years from the date of closing.  The offering resulted in the Company undergoing a change in control, with Far East Golden Resources Investment Limited holding 30,000,000 of 43,694,054 (69%) post-offering common shares.  The offering warrants were valued using the Black Scholes model using the following assumptions: stock price at valuation, $0.36; strike price, $0.10; risk free rate 0.97%; 5 year average expected warrant term; and volatility of 113%. The Company attributed $2,969,195 of the offering proceeds associated with the transaction to the warrants based on the fair value of the warrants. The fair value of the warrants were accounted for as both an increase to additional paid in capital and as a decrease to additional paid in capital since the warrants were considered an incremental direct cost of raising capital.





In connection with the private placement offering transaction, the Company analyzed the contingent conversion features of the convertible notes and recorded interest expense totaling approximately $300,000 based on the intrinsic values of the convertible notes at the time of conversion and a market price of $0.36 per share.





Other Issuances - On November 18, 2010 the Company’s Board of Directors resolved to issue 150,000 shares of common stock to an independent third-party investor relations firm, as payment for services rendered during 2010. The Company valued these shares at $0.35 per share based on the quoted market price of the shares, resulting in a total value of the shares transferred of $52,500.





F-11





Stock Option Awards





On November 5, 2009, the Company’s Board of Directors granted to David Rector, in connection with his appointment as the Company’s Chief Executive Officer, President, Secretary and director, incentive stock options to purchase 66,667 shares of Common Stock at a purchase price of $2.10 per share (the closing bid price quoted on the OTCBB on the date of grant), vesting 100% on December 31, 2010, and expiring November 4, 2014.





On November 16, 2009, the Company’s Board of Directors granted to John N. Braca, in connection with his appointment as a director, non-qualified stock options to purchase 16,667 shares of Common Stock at a purchase price of $1.95 per share (the closing bid price quoted on the OTCBB on the date of grant), vesting 100% on December 31, 2010, and expiring November 15, 2014.





On December 30, 2008, the Board of Directors of the Company adopted, and its stockholders approved, the 2008 Equity Incentive Plan (the “Plan”) which initially provided for incentive award grants of up to 266,667 shares of Common Stock.   However, in connection the Company’s 1-for-15 reverse stock split effected in September 2010, with stockholder approval, the Company amended the Plan to increase the total number of shares of Common Stock that may be granted pursuant to awards thereunder from 266,667 to 3,000,000, and to add a provision for automatic annual increases based on increases in the Company’s capitalization (the “Evergreen Clause”).


The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the table below. Expected volatilities are based on implied volatilities from, historical volatility of the Company’s stock, and other factors. The Company uses historical data to estimate option exercise and employee termination within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding; the range given below results from certain groups of employees exhibiting different behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.





2009Expected volatility


193
%Expected dividends


0
%Expected term (in years)


3Risk-free rate


2.3
%





A summary of option activity under the Plan as of December 31, 2010, and changes during the year then ended is presented below:





Options

Shares


Weighted-

Average

Exercise

Price


Weighted-

Average

Remaining

Contractual

Term


Aggregate

Intrinsic

ValueOutstanding at January 1, 2010


83,333


$
2.001



3.9


$
-Granted


-



-



-



-Exercised


-



-



-



-Forfeited or expired


-



-



-



-Outstanding at December 31, 2010


83,333


$
2.001



3.9



-Exercisable at December 31, 2010


83,333


$
2.001



3.9



-





F-12




The weighted-average grant-date fair value of options granted during the years ended December 31, 2010 and 2009, was $0 and $1.8, respectively.





A summary of the status of the Company’s nonvested shares as of December 31, 2010, and changes during the year ended December 31, 2010, is presented below:





Nonvested Shares

Shares


Weighted-Average

Grant-Date

Fair ValueNonvested at January 1, 2010


83,333


$
1.80Granted


-



-Vested


(83,333
)


1.80Forfeited


-



-Nonvested at December 31, 2009


-


$
-




Warrants





A summary of warrant activity as of December 31, 2010, and changes during the year then ended is presented below:





Warrants

Shares


Weighted-

Average

Exercise

Price


Weighted-

Average

Remaining

Contractual

Term


Aggregate

Intrinsic

ValueOutstanding at January 1, 2010


214,667


$
7.5



3.6


$
-Granted


38,833,356


$
0.10



4.8


$
9,708,339Exercised


-



-



-



-Forfeited or expired


-



-



-



-Outstanding at December 31, 2010


39,048,023


$
0.14



4.8



-Exercisable at December 31, 2010


39,048,023


$
0.14



4.8



-





F-13





NOTE 5 – FAIR VALUE MEASUREMENTS





Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and establishes a three level hierarchy for measuring fair value. Fair value measurements are classified and disclosed in one of the following categories:





Level 1:   Quoted prices (unadjusted) in active markets for identical assets and liabilities that we have the ability to access at the measurement date.





Level 2:  Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived from observable market data by correlation or other means. Instruments categorized in Level 2 include non-exchange traded derivatives such as over-the-counter forwards and swaps.





Level 3:  Unobservable inputs for the asset or liability, including situations where there is little, if any, market activity for the asset or liability.





The valuation assumptions utilized to measure the fair value of the Company’s derivatives were observable inputs based on market data obtained from independent sources and are considered Level 2 inputs (quoted prices for similar assets, liabilities (adjusted) and market-corroborated inputs).





The following table presents for each hierarchy level our assets and liabilities, including both current and non-current portions, measured at fair value on a recurring basis, as of December 31, 2010 (no assets are measured at fair value on a recurring basis at December 31, 2010):





Level 1


Level 2


Level 3


TotalAssets — Current:

$
—


$
—


$
—


$
—Liabilities — Current:

$
—


$
—


$
—


$
—





In consideration of credit risk, the Company considers that it is of substantial credit quality and has the financial resources and willingness to meet its potential repayment obligations associated with the derivative transactions.




The estimated fair value of financial instruments is the amount at which the instrument could be exchanged currently between willing parties. The carrying amounts reported in the consolidated balance sheet for cash and cash held in trust, and accounts payable approximate fair value due to the immediate or short-term maturity of these financial instruments. We use available marketing data and valuation methodologies to estimate the fair value of debt. The following disclosure does not impact our financial position, results of operations or cash flows.





December 31, 2009


December 31, 2010Carrying 
Amount


Estimated 
Fair Value


Carrying 
Amount


Estimated 
Fair ValueShort-Term DebtConvertible Debt


100,000



100,000



—



—Long-Term Debt

$
100,000


$
100,000


$
—


$
—




F-14




NOTE 6 – COMMITMENTS AND CONTINGENCIES





The Company is party to various legal actions arising in the ordinary course of business. Matters that are probable of unfavorable outcomes to the Company and which can be reasonably estimated are accrued. Such accruals are based on information known about the matters, the Company’s estimates of the outcomes of such matters and its experience in contesting, litigating and settling similar matters.





As of the date of this report, except as described below, there are no material pending legal proceedings to which the Company or any of its subsidiaries is a party or of which any of their property is the subject, nor are there any such proceedings known to be contemplated by governmental authorities.





Viewpoint Securities LLC (“Viewpoint”) filed a complaint on January 6, 2011, against NGHI, its directors and affiliates (including Far East Golden Resources Investment Ltd. and Hybrid Kinetic Group Ltd.) in San Diego County Superior Court, alleging breach of contract, interference with contract, and interference with prospective business relations.  The complaint is based on a claim that Viewpoint was not paid a commission/finder’s fee under a Placement Agent Agreement with the Company. Viewpoint demands a commission of $302,000 and warrants to purchase approximately 3,002,000 shares of common stock with an exercise price of $0.10 per share, related to the October 29, 2010, private placement offering of units of the Company’s securities.





The Placement Agent Agreement requires the Company to (i) pay Viewpoint a cash fee equal to 10% of the gross proceeds raised and actually received by the Company in a convertible note offering from investors first introduced by Viewpoint to the Company during the term of the Agreement; and (ii) issue Viewpoint warrants to purchase shares of common stock (the “Warrants”) equal to 10% of the number of shares of common stock  into which convertible notes purchased in an offering by investors first introduced by Viewpoint to the Company during the term of the Agreement are initially convertible, with an exercise price of $0.10 per share of and a maturity five years after the final closing date of the offering.





The Company has denied that Viewpoint is entitled to any commission or compensation under the Placement Agent Agreement or otherwise.  In March 2011, the Company obtained a stay of Viewpoint’s Superior Court lawsuit, and the matter was transferred to arbitration with the American Arbitration Association per the terms of the Placement Agent Agreement.  An arbitration demand or petition has not yet been filed.  The parties are scheduling a mediation to discuss potential settlement and expect to conduct the initial mediation session by the end of May 2011.





While there can be no assurance as to the ultimate outcome of this claim, based on information currently available, the Company believes the amount, or range, of reasonably possible losses (if any) in connection with this matter could be material to the Company’s consolidated financial condition, consolidated operating results or cash flows as of or for any particular period.





Mining Lease




The Company is required under the terms of our property lease to make annual lease payments. The Company is also required to make annual claim maintenance payments to Federal Bureau of Land Management and to the county in which its property is located in order to maintain its rights to explore and, if warranted, to develop its property. If the Company fails to meet these obligations, it will lose the right to explore for gold on its property.




F-15




The Company’s property lease is for an initial period of ten years from May 2007 and may be extended in five year increments for up to a total term of 99 years. The Company may terminate this lease at any time. Until production is achieved, the Company’s lease payments (deemed “advance minimum royalties”) consist of an initial payment of $5,000, which was made upon the effectiveness of the lease, followed by annual payments according to the following schedule:





Due Date of Advance

Minimum Royalty Payment

Amount of Advance

Minimum Royalty PaymentJanuary 15, 2008 (paid)

$
10,000January 15, 2009 (paid)

$
15,000January 15, 2010 (paid)

$
30,000January 15, 2011(paid)

$
45,000January 15, 2012 and annually thereafter

during the term of the lease

The greater of $60,000 or the dollarequivalent of 90 ounces of gold





In the event that the Company produces gold or other minerals from the leased Tempo claims, the Company’s lease payments will be the greater of (i) the advance minimum royalty payments according to the table above, or (ii) a production royalty equal to 4% of the gross sales price of any gold, silver, platinum or palladium that we recover plus 2% of the gross sales price of any other minerals that the Company recovers. The Company’s lease expressly states that we have no rights to any oil, gas, hydrocarbons and geothermal resources that may be found on the property. Under certain conditions, the lessor may elect to take its production royalty in cash rather than in kind. In the event that the Company produces gold or other minerals from Tempo and pay the lessor a production royalty, then, within any one calendar year, the Company may use 100% of that year’s advance royalty payment as a credit against the Company’s royalties payable for that year. If the Company’s royalty payments payable for that year are greater than the Company’s advance royalty payment paid for that year, then the Company can credit all advance minimum royalty payments made in previous years against 50% of the production royalty payable for that year.





In the event that the Company pays the lessor a production royalty, the Company has the option to repurchase up to two points of the royalty payable on gold, silver, platinum or palladium, which would have the effect of thereafter permanently reducing the lessor’s production royalty on gold, silver, platinum or palladium from 4% to 2% of the Company’s gross sales price for those minerals. The purchase price for each royalty “point” shall be according to the following schedule:





Royalty Point Purchased

PriceFirst 1%

$
1,500,000Second 1%

$
3,000,000





The Company cannot purchase the remaining 2% production royalty on gold, silver, platinum or palladium or the 2% production royalty applicable to all other minerals.





The Company’s  lease required us to perform $50,000 worth of physical work on the property for 2009. Starting in 2010 and thereafter, the Company must perform a minimum of $50,000 worth of work annually on the property, of which at least $25,000 is physical work.  Work performed in any year in excess of these amounts is carried forward to offset the obligation in future years.  The Company met its commitment for 2010.





The Company is required to make annual claim maintenance payments to the Bureau of Land Management and to the counties in which its property is located. If the Company fails to make these payments, it will lose its rights to the property. As of the date of this Report, the annual maintenance payments are approximately $155 per claim, consisting of payments to the Bureau of Land Management and to the counties in which the Company’s properties are located. The Company’s property consists of an aggregate of 206 lode claims. The aggregate annual claim maintenance costs are currently approximately $32,000.




F-16




NOTE 7 – RELATED PARTY TRANSACTIONS




Office services and office space are provided without charge by the primary shareholder of the Company. Such costs are immaterial to the consolidated financial statements and, accordingly, have not been reflected therein.




NOTE 8 – SUBSEQUENT EVENTS





In accordance with ASC 855-10, Company management reviewed all material events through the date of this report and aside from the event described in the following paragraph, there are no material subsequent events to report.





On January 26, 2011, the Company made a loan of $200,000 to Hybrid Kinetic Motors Corporation; on February 24, 2011, the Company made a loan of $400,000 American Compass Inc.; and on March 24, 2011, the Company made a loan of $400,000 to American Compass Inc.  Each of these loans is unsecured, bears interest at 3% per annum, payable at maturity, and matures on December 31, 2011.  Each of the borrowers is a wholly owned subsidiary of Hybrid Kinetic Group Ltd., which is also the parent of our controlling stockholder, Far East Golden Resources.  Hybrid Kinetic Group Ltd. has guaranteed each of the loans.




F-17