ANNUAL CONSOLIDATED FINANCIAL
STATEMENTS
 
 December
31, 2008
 (Expressed
in Canadian Dollars, except where noted)
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 14142
Denver West Parkway, Suite 250, Golden, Colorado 80401
 Telephone:
303.278.8464    Facsimile:
303.278.8464    Toll Free:
1.877.692.8182     email:
atna@atna.com     www.atna.com
  
  INDEX
TO
 FINANCIAL
STATEMENTS
 
 Financial
Statements
 
 The
following consolidated financial statements have been prepared by Atna Resources
Ltd. (the “Company") pursuant to Canadian generally accepted accounting
principals. The consolidated financial statements have been prepared in Canadian
dollars, except for certain footnote disclosures that are reported in United
States dollars (“USD” or “US$”).
  Report
      of Independent Registered Public Accounting Firms
                  Page
      2-3Consolidated
      Balance Sheets
                  Page
      4Consolidated
      Statements of Operations
                  Page
      5Consolidated
      Statement of Changes in Shareholders’ Equity
                  Page
      6Consolidated
      Statements of Cash Flows
                  Pages
      7-8Notes
      to Consolidated Financial Statements
                  Pages
      9-30
  1
  REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 
 
 To the
Board of Directors and Shareholders of
 Atna
Resources Ltd.
 Golden,
Colorado
 
 We have
audited the consolidated balance sheet of Atna Resources Ltd. (“the Company”) as
of December 31, 2008 and the related consolidated statements of operations, cash
flows and stockholders’ equity for the year then ended.  These
consolidated financial statements are the responsibility of the Company’s
management.  Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
  We
conducted our audits in accordance with generally accepted auditing standards in
Canada and the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement.  The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting.  Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting.  Accordingly, we express no such
opinion.  An audit 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 audit provides a reasonable basis
for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial condition of the Company and
Subsidiaries, as of December 31, 2008 and the results of their operations and
their cash flows for the year then ended, in conformity with Canadian generally
accepted accounting principles.
   /s/
      Ehrhardt Keefe Steiner & Hottman
PC
  March 31,
2009
 Denver,
Colorado
 
 2
 D
E  V I S S E R  G R A Y  L L P
 CHARTERED
ACCOUNTANTS
 
 401
- 905 West Pender Street
 Vancouver,
BC Canada
 V6C
1L6
  
 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Shareholders of Atna Resources Ltd.
 
 We have
audited the consolidated balance sheet of Atna Resources Ltd. as at December 31,
2007 and the consolidated statements of operations, changes in shareholders’
equity, and cash flows for each of the years in the two year period then ended.
These financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
 We conducted our audits in accordance
with generally accepted auditing standards in Canada andthe standards of
the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform an audit to obtain reasonable assurance whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements.  An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.
 
 In our
opinion, these consolidated financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 2007 and the
results of its operations and cash flows for each of the years in the two year
period then ended in accordance with Canadian generally accepted accounting
principles
 
 
 “De Visser
Gray LLP”
 
 CHARTERED
ACCOUNTANTS
 
 Vancouver,
British Columbia
 March 27,
2008
 3
 ATNA RESOURCES
LTD. AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
 As
      of December 31,Restated2008
              
              
              2007ASSETSCurrent
      assetsCash
      and cash equivalents
              
              $
              20,349,700
              
              
              $
              3,516,800Short
      term trading investments
              
              
              286,100
              
              
              
              7,040,700Market
      securities available for sale
              
              
              65,000
              
              
              
              487,000Accounts
      receivable
              
              
              420,300
              
              
              
              159,000Metal
      inventories
              
              
              25,600
              
              
              
              -Prepaids
      and other current assets
              
              
              653,700
              
              
              
              63,000Total
      current assets
              
              
              21,800,400
              
              
              
              11,266,500Non-current
      assetsProperty,
      plant, mine development, and mineral interests net
              
              
              53,419,000
              
              
              
              1,399,300Restricted
      cash
              
              
              4,892,700
              
              
              
              67,100Other
      noncurrent assets
              
              
              805,700
              
              
              
              -Deferred
      acquisition costs
              
              
              -
              
              
              
              754,800Deferred
      income tax assets
              
              
              1,164,400
              
              
              
              -Total
      assets
              
              $
              82,082,200
              
              
              $
              13,487,700LIABILITIES
      AND SHAREHOLDERS' EQUITYCurrent
      liabilitiesAccounts
      payable
              
              $
              2,426,600
              
              
              $
              695,800Asset
      retirement obligations
              
              
              753,200
              
              
              
              -Payroll
      liabilities
              
              
              162,200
              
              
              
              -Legal
      settlement accrual
              
              
              251,200
              
              
              
              -Other
      current liabilities
              
              
              75,900
              
              
              
              -Total
      current liabilities
              
              
              3,669,100
              
              
              
              695,800Non-current
      liabilitiesNotes
      payable
              
              
              1,004,900
              
              
              
              -Asset
      retirement obligations
              
              
              5,238,900
              
              
              
              379,700Total
      liabilities
              
              
              9,912,900
              
              
              
              1,075,500Shareholders'
      equityShare
      capital (no par value) unlimited shares authorized;issued
      and outstanding:  83,291,100 at December 31,
    2008,and
      64,722,600 at December 31, 2007
              
              
              92,093,800
              
              
              
              61,217,300Contributed
      surplus
              
              
              2,682,300
              
              
              
              2,295,600Retained
      deficit
              
              
              (30,561,700
              )
              
              
              (50,877,300
              )Accumulated
      other comprehensive gain (loss)
              
              
              7,954,900
              
              
              
              (223,400
              )Total
      shareholders' equity
              
              
              72,169,300
              
              
              
              12,412,200Total
      liabilities and shareholders' equity
              
              $
              82,082,200
              
              
              $
              13,487,700
  On
      behalf of the Board of Directors:/s/ David K. Fagin
              
              /s/ David H. WatkinsDavid
      K. Fagin, Independent Director
              
              David
      H. Watkins, Chairman
  The
accompanying notes are an integral part of these consolidated financial
statements.
  4
 ATNA RESOURCES
LTD. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 For the Years
Ended December 31
 Restated
              
              
              Restated2008
              
              
              2007
              
              
              2006REVENUESales
              
              $
              156,800
              
              
              $
              -
              
              
              $
              -EXPENSES
      (GAINS)Cost
      of sales
              
              
              150,000
              
              
              
              -
              
              
              
              -Depreciation,
      depletion and amortization
              
              
              133,800
              
              
              
              117,200
              
              
              
              119,500General
      and administrative
              
              
              4,319,800
              
              
              
              1,928,700
              
              
              
              2,457,900Exploration
              
              
              574,200
              
              
              
              1,912,000
              
              
              
              2,210,600Accretion
      expense
              
              
              380,100
              
              
              
              -
              
              
              
              -Provision
      for final site restoration
              
              
              1,482,600
              
              
              
              -
              
              
              
              -Write
      off accounts receivable
              
              
              -
              
              
              
              187,800
              
              
              
              -Write
      down of properties
              
              
              553,200
              
              
              
              -
              
              
              
              -7,593,700
              
              
              
              4,145,700
              
              
              
              4,788,000Operating
      loss
              
              
              (7,436,900
              )
              
              
              (4,145,700
              )
              
              
              (4,788,000
              )OTHER
      INCOME (EXPENSE)Interest
      income
              
              
              363,300
              
              
              
              511,200
              
              
              
              543,100Interest
      expense
              
              
              (53,800
              )
              
              
              -
              
              
              
              -Gain
      on sale of short term investments
              
              
              25,700
              
              
              
              -
              
              
              
              -Gain
      on sale of marketable securities
              
              
              -
              
              
              
              276,700
              
              
              
              1,683,200Gain
      on asset disposals
              
              
              21,011,200
              
              
              
              135,000
              
              
              
              -Write
      off of marketable securities
              
              
              (422,000
              )
              
              
              -
              
              
              
              -Unrealized
      loss on short term investments
              
              
              (28,300
              )
              
              
              -
              
              
              
              -Gain
      (loss) on foreign exchange
              
              
              3,114,100
              
              
              
              (125,500
              )
              
              
              (4,100
              )Other
              
              
              83,300
              
              
              
              -
              
              
              
              -24,093,500
              
              
              
              797,400
              
              
              
              2,222,20016,656,600
              
              
              
              (3,348,300
              )
              
              
              (2,565,800
              )Income
      tax benefit
              
              
              3,659,000
              
              
              
              -
              
              
              
              -Net
      income (loss)
              
              
              20,315,600
              
              
              
              (3,348,300
              )
              
              
              (2,565,800
              )Other
      comprehensive income (loss)Unrealized
      gains and losses on translating the financialsof
      self sustaining foreign operations
              
              
              8,178,300
              
              
              
              -
              
              
              
              -Unrealized
      loss on available for sale securities
              
              
              -
              
              
              
              (121,500
              )
              
              
              -Realized
      gain on available for sale securitiesrecognized
      in net loss
              
              
              -
              
              
              
              (276,700
              )
              
              
              -Unrealized
      loss on short term investments
              
              
              -
              
              
              
              (95,900
              )
              
              
              -Other
      comprehensive income (loss)
              
              
              8,178,300
              
              
              
              (494,100
              )
              
              
              -Comprehensive
      income (loss)
              
              
              24,834,900
              
              
              
              (3,842,400
              )
              
              
              (2,565,800
              )Earnings
      Per Share:Basic
      income (loss) per share
              
              $
              0.26
              
              
              $
              (0.05
              )
              
              $
              (0.04
              )Diluted
      income (loss) per share
              
              $
              0.26
              
              
              $
              (0.05
              )
              
              $
              (0.04
              )Basic
      weighted-averageshares
      outstanding
              
              
              79,166,725
              
              
              
              64,581,804
              
              
              
              63,112,895Effect
      of Dilutive Securities:Stock
      options
              
              
              -
              
              
              
              -
              
              
              
              -Convertible
      Debentures
              
              
              -
              
              
              
              -
              
              
              
              -Warrants
              
              
              -
              
              
              
              -
              
              
              
              -Diluted
      weighted-averageshares
      outstanding
              
              
              79,166,725
              
              
              
              64,581,804
              
              
              
              63,112,895
  The
accompanying notes are an integral part of these consolidated financial
statements.
  5
 ATNA RESOURCES
LTD. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
 For the Years
Ended December 31
 AccumulatedShare
      Capital
              
              
              
              
              
              
              
              
              Other
              
              
              TotalNumber
      of
              
              
              
              
              
              
              
              
              Contributed
              
              
              Comprehensive
              
              
              Shareholders'Shares
              
              
              Amount
              
              
              Deficit
              
              
              Surplus
              
              
              Gain
      (Loss)
              
              
              EquityBalances,
      January 1, 2006
              
              
              55,429,000
              
              
              $
              51,286,100
              
              
              $
              (44,963,200
              )
              
              $
              860,600
              
              
              $
              -
              
              
              $
              7,183,500Adjustment
      to opening balance,change
      in accounting policy
              
              
              -
              
              
              
              -
              
              
              
              (1,838,300
              )
              
              
              -
              
              
              
              -
              
              
              
              (1,838,300
              )Exercise
      of stock options
              
              
              795,000
              
              
              
              459,800
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              459,800Stock
      issued for cash, net ofissuance
      cost
              
              
              7,450,000
              
              
              
              8,730,600
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              8,730,600Exercise
      of warrants
              
              
              502,800
              
              
              
              362,800
              
              
              
              -
              
              
              
              (76,700
              )
              
              
              -
              
              
              
              286,100Share-based
      compensation
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,018,500
              
              
              
              -
              
              
              
              1,018,500Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              (727,500
              )
              
              
              -
              
              
              
              -
              
              
              
              (727,500
              )Balances,
      December 31, 2006
              
              
              64,176,800
              
              
              $
              60,839,300
              
              
              $
              (47,529,000
              )
              
              $
              1,802,400
              
              
              $
              -
              
              
              $
              15,112,700Adjustment
      to opening balance,change
      in accounting policy
              
              
              -
              
              
              
              -
              
              
              
              1,929,100
              
              
              
              -
              
              
              
              270,700
              
              
              
              2,199,800Exercise
      of stock options
              
              
              545,800
              
              
              
              378,000
              
              
              
              -
              
              
              
              (94,400
              )
              
              
              -
              
              
              
              283,600Share-based
      compensation
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              587,600
              
              
              
              -
              
              
              
              587,600Unrealized
      loss on availablefor
      sale securities
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (121,500
              )
              
              
              (121,500
              )Realized
      gain on availablefor
      sale securities
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (276,700
              )
              
              
              (276,700
              )Unrealized
      loss on temporaryinvestments
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (95,900
              )
              
              
              (95,900
              )Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              (5,277,400
              )
              
              
              -
              
              
              
              -
              
              
              
              (5,277,400
              )Balances,
      December 31, 2007
              
              
              64,722,600
              
              
              $
              61,217,300
              
              
              $
              (50,877,300
              )
              
              $
              2,295,600
              
              
              $
              (223,400
              )
              
              $
              12,412,200Exercise
      of stock options
              
              
              850,000
              
              
              
              826,500
              
              
              
              -
              
              
              
              (248,000
              )
              
              
              -
              
              
              
              578,500Issuance
      cost of stock options
              
              
              -
              
              
              
              (59,600
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (59,600
              )Issuance
      for merger
              
              
              17,114,200
              
              
              
              29,612,900
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              29,612,900Issuance
      for property purchase
              
              
              604,300
              
              
              
              496,700
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              496,700Share-based
      compensation
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              634,700
              
              
              
              -
              
              
              
              634,700Unrealized
      loss on availablefor
      sale securities
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Foreign
      exchange gain
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              8,178,300
              
              
              
              8,178,300Net
      gain
              
              
              -
              
              
              
              -
              
              
              
              20,315,600
              
              
              
              -
              
              
              
              -
              
              
              
              20,315,600Balances,
      December 31, 2008
              
              
              83,291,100
              
              
              $
              92,093,800
              
              
              $
              (30,561,700
              )
              
              $
              2,682,300
              
              
              $
              7,954,900
              
              
              $
              72,169,300
  The
accompanying notes are an integral part of these consolidated financial
statements.
  6
 ATNA RESOURCES
LTD. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 For the Years
Ended December 31
 Restated
              
              
              Restated2008
              
              
              2007
              
              
              2006Cash
      flows from operating activities:Net
      income (loss)
              
              $
              20,315,600
              
              
              $
              (3,348,300
              )
              
              $
              (2,565,800
              )Adjustments
      to reconcile net loss to net cash used inoperating
      activities:Depreciation,
      depletion and amortization
              
              
              133,800
              
              
              
              117,200
              
              
              
              119,500Account
      receivable write off
              
              
              -
              
              
              
              187,800
              
              
              
              -Gain
      on sale of short term investments
              
              
              (23,600
              )
              
              
              (276,700
              )
              
              
              (1,683,300
              )Temporary
      investment income
              
              
              -
              
              
              
              (349,500
              )
              
              
              (331,600
              )Gain
      on asset disposals
              
              
              (21,011,200
              )
              
              
              (135,000
              )
              
              
              -Non-cash
      option proceeds
              
              
              -
              
              
              
              -
              
              
              
              (128,000
              )Reserve
      against asset sale
              
              
              -
              
              
              
              -
              
              
              
              185,000Income
      tax benefit
              
              
              (3,659,000
              )
              
              
              -
              
              
              
              -Write
      down properties
              
              
              553,200
              
              
              
              -
              
              
              
              -Purchase
      short term investments
              
              
              (116,400
              )
              
              
              (980,400
              )
              
              
              (3,562,800
              )Write
      off of marketable securities
              
              
              422,000
              
              
              
              -
              
              
              
              -Share
      based compensation expense
              
              
              634,700
              
              
              
              587,600
              
              
              
              1,018,600Provision
      for asset retirement obligation
              
              
              1,482,600
              
              
              
              -
              
              
              
              -Accretion
      of asset retirement obligation
              
              
              380,100
              
              
              
              -
              
              
              
              -Changes
      in operating assets and liabilities:Increase
      in accounts receivable
              
              
              (256,000
              )
              
              
              (29,700
              )
              
              
              (305,200
              )Decrease
      in inventories
              
              
              158,800
              
              
              
              -
              
              
              
              -(Increase)
      decrease in prepaid and other assets
              
              
              (1,178,100
              )
              
              
              18,600
              
              
              
              (21,600
              )(Decrease)
      increase in accounts payable and accrued liabilities
              
              
              576,900
              
              
              
              126,000
              
              
              
              (1,129,400
              )Decrease
      in asset retirement obligations
              
              
              (1,972,100
              )
              
              
              -
              
              
              
              -Increase
      in restricted cash
              
              
              (347,800
              )
              
              
              (3,800
              )
              
              
              -Total
      adjustments
              
              
              (24,222,100
              )
              
              
              (737,900
              )
              
              
              (5,838,800
              )Net
      cash used in operating activities
              
              
              (3,906,500
              )
              
              
              (4,086,200
              )
              
              
              (8,404,600
              )Cash
      flows from investing activities:Purchases
      and development of property and equipment
              
              
              (9,975,800
              )
              
              
              (664,500
              )
              
              
              (847,300
              )Merger
      transaction costs
              
              
              (723,300
              )
              
              
              (754,800
              )
              
              
              -Cash
      received in merger
              
              
              862,200
              
              
              
              -
              
              
              
              -Purchase
      of marketable securities
              
              
              -
              
              
              
              -
              
              
              
              (1,600,000
              )Proceeds
      from sale of short term investments
              
              
              6,894,600
              
              
              
              4,555,500
              
              
              
              -Proceeds
      from sale of marketable securities
              
              
              -
              
              
              
              376,700
              
              
              
              3,445,600Proceeds
      from sale of property and equipment
              
              
              21,610,000
              
              
              
              271,700
              
              
              
              -Net
      cash provided by (used in) investing activities
              
              
              18,667,700
              
              
              
              3,784,600
              
              
              
              998,300Cash
      flows from financing activities:Issuance
      of stock - exercise of options
              
              
              578,500
              
              
              
              283,600
              
              
              
              739,700Issuance
      costs for merger
              
              
              (59,600
              )
              
              
              -
              
              
              
              -Payments
      on capital lease obligations
              
              
              (17,500
              )
              
              
              -
              
              
              
              -Net
      cash provided by financing activities
              
              
              501,400
              
              
              
              283,600
              
              
              
              739,700Effect
      of exchange rate changes on cash
              
              
              1,570,300
              
              
              
              -
              
              
              
              -Net
      increase (decrease) in cash and cash equivalents
              
              
              16,832,900
              
              
              
              (18,000
              )
              
              
              (6,666,600
              )Cash
      and cash equivalents, beginning of period
              
              
              3,516,800
              
              
              
              3,534,800
              
              
              
              10,201,400Cash
      and cash equivalents, end of period
              
              $
              20,349,700
              
              
              $
              3,516,800
              
              
              $
              3,534,800
   The
accompanying notes are an integral part of these consolidated financial
statements.
  7
 ATNA RESOURCES
LTD. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS, continued
 For the Years
Ended December 31
 Restated
                  
                  
                  Restated2008
                  
                  
                  2007
                  
                  
                  2006Supplemental
      disclosures of cash flow information:1.
                  Interest
      paid
                  
                  $
                  54,000
                  
                  
                  $
                  -
                  
                  
                  $
                  -Supplemental
      disclosures on noncash investing activity:1.
                  Capitalized
      asset retirement obligation for Briggs leach pad
                  
                  $
                  419,400
                  
                  
                  $
                  -
                  
                  
                  $
                  -(See
      Note 8)2.
                  Marketable
      securities received for option payments
                  
                  $
                  -
                  
                  
                  $
                  168,000
                  
                  
                  $
                  128,000Reclassification
      of building & equipment costs from
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  827,0873.
                  deferred
      costsReclassification
      of reclamation bonds to temporary4.
                  investments
                  
                  $
                  -
                  
                  
                  $
                  132,700
                  
                  
                  $
                  -Supplemental
      disclosures on noncash financing activities:1.
                  Issued
      17,114,200 shares for merger
                  
                  $
                  29,612,900
                  
                  
                  $
                  -
                  
                  
                  $
                  -(See
      Note 2)2.
                  Issued
      604,300 shares for purchase of mineral property
                  
                  
                  496,700
                  
                  
                  
                  -
                  
                  
                  
                  -
  The
accompanying notes are an integral part of these consolidated financial
statements.
  8
  ATNA
RESOURCES LTD.
 NOTES
TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
 1.           Nature of Operations and
Liquidity:
 
 Atna
Resources Ltd. is incorporated in British Columbia and the corporate office is
located in Golden, Colorado. References to “Atna Resources”, “Atna”, and the
“Company”, all mean Atna Resources Ltd. and all of the wholly-owned and
majority-owned subsidiaries of Atna Resources Ltd., or any one or more of them,
as the context requires. Atna was originally organized in 1984 to explore for,
acquire, and develop precious metals.
 
 The
Company is involved in all phases of the mining business from exploration,
development drilling, feasibility studies, permitting, construction, operation
and final closure of mining properties. Atna’s ongoing exploration and
development efforts are focused primarily on precious metals in the Western
United States (“US”). The Company has conducted a portion of its mineral
exploration and development activities through joint ventures with other
companies.
 
 On March
18, 2008, the Company completed a merger (the “Canyon Merger”) with Canyon
Resources Corporation (“Canyon”). Atna acquired the right to convert all of
Canyon’s issued and outstanding shares of common stock to Atna common shares at
an exchange ratio of 0.32 shares of Atna for each share of Canyon. Atna assumed
the obligations of Canyon’s outstanding warrants and debentures. Canyon is now a
wholly-owned US subsidiary of Atna.
 
 The
Company’s primary focus following the merger is to increase the value of its
four core properties of Briggs, Pinson, Reward and Columbia. The Briggs Mine,
located in southeastern California, successfully began re-start mining
operations in January 2009. Crushing of stockpiled ore is expected to commence
in early March and the first gold production is expected in the second quarter
of 2009. An updated Briggs reserve report and life-of-mine plan was released in
February 2009, which increased proven and probable gold reserves by 77 percent
to 267,000 ounces.  Atna received notice from Pinson Mining Company
(“PMC”), a subsidiary of Barrick Gold, that PMC has completed the required $30
million expenditure to earn a 70 interest in the Pinson property. The Reward
technical study was completed in early 2008, which established proven and
probable gold reserves of 157,000 ounces. After consolidating the Columbia
property the Company is in the process of preparing an updated technical report
on the property.
 
 The
Company’s other significant assets include exploration joint venture agreements
with Yamana Gold Inc. on the Clover property and with Golden Predator Mines Inc.
on the Adelaide and Tuscarora properties.. At the Kendall Mine, located near
Lewistown, Montana, the Company continued with reclamation and closure
activities, principally relating to leach pad capping, top soil placement and
water management.
 
 In
September 2008, the Company sold its portfolio of royalty interests for US$20
million. The royalty portfolio included a significant royalty position on the
Wolverine Property located in the Yukon and other miscellaneous
royalties.
 
 In June
2008, the Company acquired additional claims at the Columbia gold property in
order to consolidate the land package containing the known body of
mineralization. A historic estimate of mineralized material for Columbia,
including the acquired claims, was completed by Phelps Dodge Corporation in 1991
and 1993. The historical mineralized material estimate is considered to be
noncompliant with Canadian NI43-101 technical reporting standards. This estimate
totaled 23.7 million tons grading 0.035 ounces of per ton gold (“opt”) and
containing 837,000 ounces gold at a 0.02 opt gold cutoff grade. Approximately 28
percent of this total is attributed to the newly acquired claims. The aggregate
claim acquisition cost was US$500,000 in cash and 604,308 common shares of Atna.
The Seller retained a four percent net smelter return royalty on the claims
purchased.
 
 Going Concern:These financial statements have been prepared on a going concern basis,
which assumes the realization of assets and liquidation of liabilities in the
normal course of business. The Company believes that its cash requirements over
the year can be funded through a combination of existing cash, cash flows from
operations, asset sales, debt arrangements and,  if necessary, equity
financing. These consolidated financial statements do not include any
adjustments that might result from the outcome of these
uncertainties.
 
 9
 2.           Accounting
Policies:
 
 Consolidation
Principles: The Company’s consolidated financial statements include the
accounts of Atna and its significant active wholly-owned subsidiaries: Canyon
Resources Corporation; Atna Resources, Inc.; CR Briggs Corporation; CR Reward
Corporation; CR Kendall Corporation and CR Montana Corporation. All intercompany
balances and transactions have been eliminated in the consolidated financial
statements. The consolidated financial statements are prepared in accordance
with Canadian generally accepted accounting principles (“GAAP”), which differs
from US GAAP as described in Note 20. The consolidated financial statements have
been prepared in Canadian dollars, except for certain footnote disclosures that
are reported in United States dollars (“USD” or “US$”).
 
 Management
Estimates and Assumptions:Certain amounts included in
or affecting the Company’s consolidated financial statements and related
disclosures must be estimated, requiring that certain assumptions be made with
respect to values or conditions that cannot be made with certainty at the time
the consolidated financial statements are prepared. Therefore, the reported
amounts of the Company’s assets and liabilities, revenues and expenses, and
associated disclosures with respect to contingent assets and obligations are
necessarily affected by these estimates. The Company evaluates these estimates
on an ongoing basis, utilizing historical experience, consultation with experts,
and other methods considered reasonable in the particular circumstances.
Nevertheless, actual results may differ significantly from the Company’s
estimates. The more significant areas requiring the use of management estimates
and assumptions relate to purchase accounting,  mineral reserves that
are the basis for future cash flow estimates and units-of-production
amortization determination; completion of technical and feasibility studies,
recoverability and timing of gold production from the heap leaching process;
environmental, reclamation and closure obligations; asset impairments (including
estimates of future cash flows); fair value of share-based compensation; fair
value of financial instruments and nonmonetary transactions; valuation
allowances for future tax assets; and contingencies and litigation.
 
 Short
term investments are primarily bonds and bond funds that are classified as
trading securities with purchases and sales reflected in the consolidated
statements of cash flows as operating activities and fair value adjustments
reflected in the consolidated statements of operations. Purchase and sales of
marketable securities available for sale are reflected in the consolidated
statements of cash flows as investing activities and fair value adjustments
reflected in equity as other comprehensive income or loss.
 
 Foreign currency
translation:The Company operates
primarily in the US and Canada. The functional and reporting currency of Atna is
Canadian dollars. The functional currency of the Company’s US subsidiaries is
the US dollar.
 
 Transactions
in the US subsidiary Atna Resources, Inc. are initially recorded in their
functional currency. The Company translates this US subsidiary on the following
basis: monetary assets and liabilities are translated at the rate of exchange in
effect as of the balance sheet date and non-monetary assets and liabilities are
translated at their applicable historical rates. Revenues and expenses are
translated at the average rates prevailing for the period reported, except for
amortization that is translated at the historical rates associated with the
assets being amortized. Foreign exchange gains and losses from the translation
of Atna Resources Inc. are recognized in the current period.
 
 Transactions
in US subsidiary Canyon are initially recorded in their functional currency. The
Company translates this US subsidiary on the following basis: monetary assets
and liabilities are translated at the rate of exchange in effect as at the
balance sheet date, equity accounts at historic rates and income at the average
rate for the period reported. Under this method, any gains or losses are
recorded in other comprehensive income.
 
 Merger with
Canyon:The merger with Canyon was accounted for as a business
combination under the purchase method of accounting. There were no outstanding
contingencies related to the allocation of the initial purchase price. The
calculation of the purchase price and the allocation of the purchase price are
summarized in the following table:
 
 10
  Purchase price
      as of March 18, 2008:Canyon
      common shares
              
              $
              27,887,700Estimated
      Atna transaction costs
              
              
              1,472,300Severance
      payments
              
              
              142,400Estimated
      fair value of options, warrants and debentures issued
              
              
              1,533,800$
              31,036,200Purchase price
      allocation:Cash
      and cash equivalents
              
              $
              862,200Accounts
      receivable
              
              
              4,500Metal
      inventories
              
              
              150,400Prepaid
      insurance
              
              
              56,500Other
      current assets
              
              
              99,800Property,
      plant, mine development, and mineral interests net
              
              
              34,086,500Restricted
      cash
              
              
              3,653,600Other
      noncurrent assets
              
              
              21,800Accounts
      payable
              
              
              (440,800
              )Short
      term asset retirement obligations
              
              
              (995,900
              )Payroll
      liabilities
              
              
              (195,800
              )Legal
      settlement accrual
              
              
              (204,900
              )Other
      current liabilities
              
              
              (34,800
              )Notes
      payable - long term
              
              
              (819,900
              )Capital
      leases - long term
              
              
              (29,200
              )Asset
      retirement obligations - long term
              
              
              (3,142,400
              )Future
      income taxes - long term
              
              
              (2,035,400
              )$
              31,036,200
  Property,
plant, mine development and mineral interest are based on fair market valuation
by a third party.  All other categories were based on Canyon carrying
values which approximate fair value.
 
 3.           Changes in Accounting
Policies:
 
 Mineral Property
- Exploration Costs: Effective January 1, 2008, the Company changed its
accounting policy for mineral properties from deferring exploration costs
incurred during the exploration stage to expensing such costs in the year
incurred. The company believes the information is more reliable if expensed when
incurred. This change has been applied retroactively and the comparative figures
in the consolidated financial statements have been restated, making the periods
easier to compare. The effect of this change on the restated consolidated
balance sheet as of December 31, 2007 and 2006, is to decrease mineral
properties and increase accumulated deficit by $16.0 million and $17.9 million,
respectively. The effect of this change on the restated consolidated statements
of operations for the year ended December 31, 2007 and 2006, is to (decrease)
increase net loss by ($1.9) million and $1.8 million, respectively; and the
restated net loss per share (decreased) increased by ($.02) and $0.03,
respectively.
 
 4.           Restricted
Cash:
 
 Restricted
cash consisted of the following at December 31:
  11
   2008
                
                
                2007Kendall
      reclamation property
                
                $
                3,023,800
                
                
                $
                -Briggs
      Mine
                
                
                1,680,300
                
                
                
                -Columbia
      property
                
                
                78,700
                
                
                
                -Reward
      Project
                
                
                41,100
                
                
                
                -Other
      properties
                
                
                68,800
                
                
                
                67,1004,892,700
                
                
                
                67,100Current
      portion
                
                
                -
                
                
                
                -Noncurrent
      portion
                
                $
                4,892,700
                
                
                $
                67,100
 The
increase in restricted cash during the period was due to the merger with Canyon
$3,653,600; payment to Smith Barney related to the Briggs mine $304,500;
interest earned $84,000; return of bonds for Tuscarora and Adelaide ($40,700)
and the effect of foreign rate change on the balance acquired in the merger with
Canyon $824,200.
 
 Restricted
cash related to the Kendall reclamation project consisted of (i) $2.8 million
held directly by the Montana Department of Environmental Quality (“DEQ”); and
(ii) $0.2 million is sequestered by court order in connection with the sale
proceeds of a portion of the Kendall property.
 
 Restricted
cash related to the reclamation bonds at the Briggs Mine and nearby satellite
properties consisted of cash held in bank accounts benefiting the surety and
cash on deposit with Inyo County, California.
 
 Restricted
cash related to the Columbia property consists of cash held directly by the
Montana DEQ for reclamation of exploration activities.
 
 Restricted
cash related to the Reward Project consists of a cash bond held by the US Bureau
of Land Management (“BLM”) for environmental reclamation regarding exploration
activities.
 
 5.           Short Term Investments and
Marketable Securities:
 
 The
Company has invested excess cash in short term investments with a fair value of
$0.3 million and $7.0 million at December 31, 2008 and 2007, respectively. Short
term investments are considered to be trading securities and are comprised of
short term bonds. Changes in market value are recorded in current operations and
reported in operating activities in cash flows.
 
 Marketable
securities are considered to be available for sale and are marked to market each
reporting period. Changes in market value are recorded in equity as other
comprehensive income or loss and reported as investing activities in cash flows.
As of December 31, 2008 and 2007, the fair value was $.1 million and $.5
million; the change in value for the years ended was a decrease of $.4 million
and an increase of nil, respectively, which has been recorded in equity until
realized.
 
 6.           Financial
Instruments:
 
 Under
CICA Section 3862 Financial
Instruments – Disclosures,the Company is required to provide disclosures
regarding its financial instruments. Financial instruments are either measured
at amortized cost or fair value.  Held-to-maturity investments, loans
and receivables and other financial liabilities are measured at amortized
cost.  Held for trading financial assets and liabilities and
available-for-sale financial assets are measured on the balance sheet at fair
value. Derivative financial instruments are classified as held for trading and
are recorded on the balance sheet at fair value unless exempted as a normal
purchase and sale arrangement. Changes in fair value of derivative financial
instruments are recorded in earnings unless the instruments are designated as
cash flow hedges.
 
 12
 The
Company has determined the estimated fair values of its financial instruments
based on appropriate valuation methodologies; however, considerable judgment is
required to develop these estimates. The carrying value of current monetary
assets and liabilities approximates their fair value due to their relatively
short periods to maturity. The fair value of long term restricted cash and long
term notes payable approximate their carrying amounts as the terms and
conditions are similar to current market conditions. All of the Company’s
financial assets and liabilities are carried at their approximate fair
value.
 
 7.           Property, Plant, Mine
Development, and Mineral Interests:
  As
      of December 31, 2008Depreciation
              
              Asset
      Value
              
              
              Accumulated
              
              
              Net
      BookMethod
              
              at
      Cost
              
              
              Depreciation
              
              
              ValueBuildings
      and equipment
              
              1 -
      5 Years SL
              
              $
              6,335,000
              
              
              $
              486,700
              
              
              $
              5,848,300Mine
      development
              
              UOP
      (a)
              
              
              12,355,100
              
              
              
              -
              
              
              
              12,355,100Mineral
      interest
              
              UOP
              
              
              34,553,500
              
              
              
              -
              
              
              
              34,553,500Asset
      retirement cost
              
              UOP
              
              
              662,100
              
              
              
              -
              
              
              
              662,100$
              53,905,700
              
              
              $
              486,700
              
              
              $
              53,419,000
  The
yearended increase in property, plant and mine development was due primarily to
the merger with Canyon.
  As
      of December 31, 2007Depreciation
                
                Asset
      Value
                
                
                Accumulated
                
                
                Net
      BookMethod
                
                at
      Cost
                
                
                Depreciation
                
                
                ValueBuildings
      and equipment
                
                1 -
      5 Years SL
                
                $
                1,098,500
                
                
                $
                351,000
                
                
                $
                747,500Mine
      development
                
                UOP
      (a)
                
                
                -
                
                
                
                -
                
                
                
                -Mineral
      interest
                
                UOP
                
                
                651,800
                
                
                
                -
                
                
                
                651,800Asset
      retirement cost
                
                UOP
                
                
                -
                
                
                
                -
                
                
                
                -$
                1,750,300
                
                
                $
                351,000
                
                
                $
                1,399,300
 (a)
                UOP
      is a depreciation method that calculates depreciation expense over the
      estimated proven and probable reserves of the related
      property.
  13
  A
rollforward of capitalized mine development and mineral interests as of December
31, 2008 is as follows:
  OtherPinson
      (b)
                
                
                Ecstall
      (c)
                
                
                US
      (d)Beginning
      balance at January 1, 2008 (a)
                
                
                
                
                $
                -
                
                
                $
                301,300
                
                
                $
                350,500Purchase
      price allocation
                
                
                
                
                
                -
                
                
                
                -
                
                
                
                5,496,700Acquisition/development
      capitalized
                
                
                
                
                
                -
                
                
                
                -
                
                
                
                (18,300
                )Property
      sales
                
                
                
                
                
                
                
                
                
                
                
                
                
                (514,200
                )-
                
                
                
                -
                
                
                
                4,964,200Effect
      of foreign rate change
                
                
                
                
                
                -
                
                
                
                -
                
                
                
                1,157,500Write-offs
                
                
                
                
                
                -
                
                
                
                (281,300
                )
                
                
                (271,900
                )-
                
                
                
                (281,300
                )
                
                
                885,600Balance
      at December 31, 2008
                
                
                
                
                $
                -
                
                
                $
                20,000
                
                
                $
                6,200,300Briggs
      (e)
                
                
                Columbia
      (f)
                
                
                Reward
      (g)
                
                
                TotalBeginning
      balance at January 1, 2008 (a)
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                651,800Purchase
      price allocation
                
                
                7,947,800
                
                
                
                7,981,500
                
                
                
                8,235,200
                
                
                
                29,661,200Acquisition/development
      capitalized
                
                
                9,632,900
                
                
                
                1,218,100
                
                
                
                221,400
                
                
                
                11,054,100Property
      sales
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (514,200
                )17,580,700
                
                
                
                9,199,600
                
                
                
                8,456,600
                
                
                
                40,201,100Effect
      of foreign rate change
                
                
                1,793,000
                
                
                
                1,800,600
                
                
                
                1,857,800
                
                
                
                6,608,900Write-offs
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (553,200
                )1,793,000
                
                
                
                1,800,600
                
                
                
                1,857,800
                
                
                
                6,055,700Balance
      at December 31, 2008
                
                $
                19,373,700
                
                
                $
                11,000,200
                
                
                $
                10,314,400
                
                
                $
                46,908,600
 (a)
                Beginning
      balance has been restated to reflect the change in accounting principles
      as described in Note 3.
 
 (b)
              Pinson Property,
      Nevada:
 
 The
Company entered into an Exploration Agreement (“the agreement”), effective
August 12, 2004, with PMC. Pursuant to the terms of the agreement, the Company
completed its obligations to earn a 70 percent interest in the Pinson Mine
Property and provided notice of its earn-in to PMC in January 2006. The Company
has spent as of December 31, 2008 a total of $16.0 million on the project, which
was expensed effective January 1, 2008 when the Company changed its accounting
policy.
 
 The
Company’s earn-in triggered an election by PMC to back-in to the project by
spending an additional US$30 million to advance exploration and development of
the project over a 3-year period. In January 2009, PMC notified the company that
it had reached its back-in requirement, which would result in the formation of a
70:30 joint venture with PMC holding a 70 percent interest. The property is
subject to net smelter return (“NSR”) royalties varying from 3.5 percent to 7.5
percent on various claim groups within the property.
 
 (c)
              Ecstall Property,
      British Columbia:
 
 The
Company has a 100 percent interest in 23 Crown Granted Mineral claims (21 claims
with mining rights and two claims with surface rights), subject to a 3%
(reducible to 2.5 percent) NSR royalty. Ecstall has a massive sulphine
mineralized resource of some low grade that will never be
economic.  The land value of the 35 acres is currently assessed at
approx. $20 thousand. Therefore, the property has been written-down by $0.3
million to its current estimated residual fair value.
  14
  (d)
              Other US
      Properties:
 
 Searchlight, Nevada:The
property was abandoned during the third quarter of 2008 and the full balance of
$0.3 million was written off in the fourth quarter of 2008.
 
 Clover Property, Nevada:The
Clover property has a capitalized balance of $0.1 million. In an agreement dated
March 11, 2003, the Company obtained an option to acquire a 100% interest in 22
claims known as the Clover property. The claims are subject to a 3% NSR royalty,
which can be purchased for US$1.0 million per percentage point. Terms of the
agreement include cumulative total payments to the vendor of US$0.3 million of
which US$0.2 million has been paid as of year-end. The Clover property is
subject to a finder’s fee capped at US$0.5 million of which US$0.1 million has
been paid with annual payments of US$30,000.
 
 On
November 28, 2006, the Company signed an Earn-in Agreement with Meridian Gold
Incorporated, now a subsidiary of Yamana Gold Inc. (“Yamana”) whereby Yamana can
earn a 51% working interest in the Clover property. Yamana may elect to increase
its interest to 70% by completing a prefeasibility study within 30 months of
vesting its initial 51% interest in the project. To earn 51% Yamana must make
payments totaling US$0.6 million to the Company and complete exploration work
totaling US$3.3 million over a 4 year period. Atna received a payment of
US$150,000 in January 2009 and there remains US$250,000 to be paid by January
2010. Exploration work commitments for the period ending on November 28, 2009
and 2010 amount to US$1.0 and US$1.5 million, respectively.
 
 Triple Junction and Dixie Fork
Properties, Nevada:The Company acquired a 100% interest on October 7,
2002, subject to a 3% NSR royalty (uncapped), in the 36 Triple Junction lode
claims and the 31 Dixie Fork lode claims located in Elko County,
Nevada.
 
 In an
agreement originally dated September 7, 2004 and subsequently amended, the
Company granted an option to Sage Gold Inc. (“Sage”) to earn up to a 70 percent
interest in the Company’s Triple Junction/Dixie Fork gold project. Sage has
informed the Company of its decision to terminate its option agreement effective
November 5, 2008. These properties have no book value.
 
 Mineral Rights, Montana: Atna
acquired approximately 900,000 acres of mineral rights in the state of Montana
in the Canyon Merger. These mineral rights were initially allocated a value of
$2.5 million in purchase accounting. A contract to sell the mineral rights for
US$6.0 million was entered into during 2008, but failed to close as of the date
of this report.
 
 Adelaide and Tuscarora Properties,
Nevada: Atna acquired these mineral exploration properties plus other
less significant exploration and royalty properties in the Canyon Merger. The
properties were initially allocated a value of $1.0 million in purchase
accounting. Refer to Note 12 (e) for more information on these
properties.
 
 Judith Gold Lands, Montana:
Atna acquired approximately 1,100 acres of fee simple lands in the state of
Montana in the Canyon Merger. This land is valued at $1.0 million in purchase
accounting.
 
 Uranium  Joint Ventures,
Wyoming: Effective February 2, 2009, Atna’s subsidiary, Canyon, entered
into an Agreement with New Horizon Uranium Corporation (“New Horizon”)
(TSXV:NHU) to terminate the Converse Uranium Project Exploration, Development
and Mine Operating Agreement dated January 23, 2006. New Horizon failed to meet
the spending and work requirements to earn a participating interest in the
project. As part of this Agreement, all of the shares of Horizon Wyoming Uranium
Inc. (“Horizon Wyoming”) have been transferred to Canyon and Horizon Wyoming
shall become a wholly owned subsidiary. Horizon Wyoming holds properties,
reclamation bonds and permits related to the Sand Creek joint venture with
Uranium One Exploration USA Inc. a subsidiary of Uranium One Inc. (TSX:UUU). In
addition, New Horizon has also resigned as manager of the Sand Creek joint
venture. Horizon Wyoming shall be the new manager.  Ownership of the
Sand Creek Uranium Joint Venture now becomes 70 percent Atna, through Horizon
Wyoming, and 30% Uranium One Exploration USA Inc. Atna will work with Uranium
One Exploration USA Inc. to determine the future program for this
project.
  15
  The
uranium joint ventures were initially allocated $1.0 million in purchase
accounting of the $34,086,500 allocated to property, plant, mine development,
and mineral interests net. The failure of New Horizon to earn an interest in the
Converse Joint Venture did not result in an impairment of these
properties.
 
 (e)
              Briggs Mine,
      California:
 
 Atna
acquired the Briggs Mine in the Canyon Merger and initially allocated a value of
$7.9 million in purchase accounting. Canyon acquired the Briggs Mine in 1990,
which is located on the west side of the Panamint Range near Death Valley,
California. CR Briggs Corporation, a wholly-owned subsidiary, has mineral rights
over approximately 4,800 acres in the area of the mine. CR Briggs owns or
controls approximately 269 unpatented claims, including 18 mill site claims and
3 patented claims on BLM administered land. The Company owns or controls,
through leasehold interests, 100 percent of the Briggs Mine. In addition to the
Briggs Mine, there are four satellite properties located approximately four
miles north of Briggs. These satellite properties are known as the Cecil R,
Jackson, Mineral Hill and Suitcase properties. The Company currently holds or
leases a total of 22 unpatented claims and 3 patented claims associated with
these satellite properties. All of our mining claims are located on land
prescribed for multiple use management by the BLM.
 
 In
February 2009, Atna completed a study that has significantly increased open pit
ore reserves at the Briggs Mine. The study estimates that the project has open
pit proven and probable reserves containing 267,000 ounces of gold grading
0.021oz/ton, a 77 percent increase over the previous reserve estimate, dated May
8, 2008. Open pit mining is underway and construction of the leach pad expansion
has been completed. Crushing of stockpiled ore is expected to commence in early
March, with first gold production expected in the second quarter of
2009.
 
 (f)
              Columbia Property,
      Montana:
 
 Atna
acquired control of the Columbia gold property, formerly known as Seven-Up Pete,
in the Canyon Merger and initially allocated a value of $8.0 million in purchase
accounting. Columbia is located seven miles east of Lincoln and 45 miles
northwest of Helena, in Lewis and Clark County, Montana. Access to the property
is by dirt road from a paved highway. The property consists of approximately 24
patented and 68 unpatented mining claims totaling approximately 1,800 acres. The
patented claims not already owned by the Company are subject to NSR royalties
that range from 2.5 percent to 6 percent.
 
 In June
2008, the Company acquired certain claims at Columbia in order to consolidate
the land package containing the known body of mineralization. The aggregate
acquisition cost is US$0.5million in cash and 604,308 common shares of Atna with
a value of approximately US$0.5 million. The Seller retained a four percent net
smelter return royalty on the claims purchased.
 
 (g)
              Reward Project,
      Nevada:
 
 Atna
acquired the Reward Project in the Canyon Merger and initially allocated a value
of $8.3 million in purchase accounting. The Company controls approximately 2,200
acres in the form of 119 unpatented claims and 6 patented claims in southwestern
Nye County about 5.5 miles south-southeast of Beatty, NV. Most of the property
is subject to a 3 percent NSR royalty.
 
 Atna
completed a technical report at Reward during the first quarter of 2008,
establishing proven and probable reserves of 157,000 ounces of gold; the project
is at an advanced stage of mine permitting. Reward is designed to produce at an
annual rate of about 35,000 ounces per year and has the potential to be in
production by the end of 2009, subject to completion of permitting and
financing. The feasibility study envisions development of a conventional open
pit mining, ore crushing, and heap leach gold production operation. The study
recommends development of the project.
  16
  8.           Asset Retirement
Obligations:
 
 The
following provides a reconciliation of the Company’s beginning and ending
carrying values for its asset retirement obligations in the current
period:
  Balance,
      December 31, 2007
                
                $
                379,700Additions
      as result of merger with Canyon
                
                
                4,138,300Spending
                
                
                (1,972,100
                )Change
      in Estimate
                
                
                2,085,600Accretion
      expense
                
                
                380,100Balance,
      December 31, 2008
                
                
                5,011,600Effective
      of Exchange Rate on Activity
                
                
                980,500Balance,
      December 31, 2008
                
                
                5,992,100Current
      portion
                
                
                753,200Noncurrent
      portion
                
                $
                5,238,900Anticipated
      spending per year:2009
                
                $
                753,2002010
                
                
                3,959,4002011
                
                
                679,9002012
                
                
                114,3002013
                
                
                24,700Thereafter
                
                
                460,600Total
                
                $
                5,992,100Asset
      Retirement Obligations Capitalized as of December 31,
2008:Briggs
      Mine:Crusher
                
                $
                216,500Leach
      Pad
                
                
                419,400Reward
                
                
                26,200Total
                
                $
                662,100Summary
      of Asset Retirement Obligations as of December 31, 2008:Briggs
      Mine (a)
                
                
                2,961,800Kendall
      Mine (b)
                
                
                2,572,800Pinson
      Project (c)
                
                
                312,700Jarbidge
      and Beowawe Properties (d)
                
                
                67,000Columbia
      Project (e)
                
                
                44,700Reward
      Project (f)
                
                
                33,100Total
                
                $
                5,992,100
 (a)
              Briggs
      – estimated costs for seeding and fertilizing of waste dumps; facility
      dismantling; contouring and seeding of leach pads and plant
      site.
 (b)
              Kendall
      – estimated costs for capping and seeding; construction and maintenance of
      water treatment system and costs to maintain property during reclamation
      period.
 (c)
              Pinson
      – estimated costs to reclaim exploration and development activity to
      date.
 (d)
              Jarbidge
      and Beowawe – estimated costs to reclaim exploration activity to
      date.
  17
  (e)
              Columbia
      – estimated costs to reclaim drill
holes.
 (f)
              Reward
      – estimated costs to reclaim drill
holes.
 
 Change in
estimate: Kendall – increase due to higher diesel and bentonite costs than
projected for 2008 contouring and capping work and addition of one more year of
costs to maintain property – $1,666,200 and Briggs – addition of costs to
reclaim leach pad constructed in 2008 - $419,400. Key factors used in
calculation were inflation rate 4.1 percent, risk free libor rate 2.0 percent,
and credit adjustment 6.4 percent.
 
 9.           Notes
Payable:
 
 The
following provides a reconciliation of the Company’s beginning and ending
carrying values for its notes payable in the current period:
  Balance,
      December 31, 2007
                
                $
                -Additions
      as result of merger with Canyon
                
                
                819,900Conversions
      / retirements
                
                
                -Balance,
      December 31, 2008
                
                
                819,900Effective
      Exchange Rate on Activity
                
                
                185,000Balance,
      December 31, 2008
                
                
                1,004,900Current
      portion
                
                
                -Noncurrent
      portion
                
                $
                1,004,900
 The
uncollateralized debentures require quarterly interest payments at the rate of
6% per year, and the holders have the right to convert principal to common
shares of the Company, subject to adjustments for share splits, reverse splits,
and changes of control, at any time at a conversion rate of US$4.31 per common
share based on a balance of US$825,000 as of December 31, 2008. The balance is
due in March 2011.
 
 Interest
expense for the debentures was approximately $46 thousand 0, nil and nil for
2008, 2007 and 2006, respectively, none of which was capitalized.
 
 10.           Outstanding
Warrants:
 
 The
following is a summary of the outstanding warrants as of December 31, 2008,
which were assumed as a result of the merger with Canyon:
  Range
      of Exercise
                
                Shares
      Underlying
                
                
                Weighted
      Average
                
                
                Weighted
      AveragePrices
      (USD)
                
                Warrants
      Outstanding
                
                
                Remaining
      Contractual Life
                
                
                Exercise
      Price (USD)$2.00-$3.00
                
                
                2,435,294
                
                
                
                2.4
                
                
                $
                2.20$3.01-$4.00
                
                
                -
                
                
                
                -
                
                
                
                -$4.01-$5.00
                
                
                987,360
                
                
                
                0.4
                
                
                
                4.69Total/average
                
                
                3,422,654
                
                
                1.8
      years
                
                
                $
                2.92
 The
warrants were fair valued during purchase accounting and US$1.3 million was
included in the purchase price, which was allocated to the fair value of the
acquired assets and as equity.
 
 11.           Equity
Transactions:
 
 During
the year ended December 31, 2008 there were 850,000 shares issued related to the
exercise of stock options that resulted in cash proceeds to the Company of $0.6
million.
 
 18
 On March
18, 2008, the Company completed the merger with Canyon. Atna has acquired all of
Canyon’s issued and outstanding shares of common stock, warrants, and
debentures. As a result of the merger, Atna’s issued and outstanding common
shares increased by approximately 17.1 million and Canyon is now a wholly-owned
US subsidiary of Atna.
 
 12.           Commitments and
Contingencies:
 
 (a)
              Kendall Mine
      Reclamation:
 
 The
Kendall Mine is subject to permits granted by the Montana DEQ. In February 2002,
the DEQ issued a decision that a comprehensive Environmental Impact Statement
(“EIS”) was needed for completion of remaining reclamation at Kendall. The
Montana DEQ has yet to complete its work on this EIS. The Company’s estimate to
achieve mine closure could be impacted by the outcome of an agency decision
following an EIS. The Company has deposited US$2.3 million in an interest
bearing account with the DEQ for reclamation at the Kendall Mine.
 
 (b)
                Briggs Mine Surety
      Bonds:
 
 The
Briggs Mine operates under permits granted by various agencies including the
BLM, Inyo County, California, the California Department of Conservation, and the
Lahontan Regional Water Quality Control Board (“Lahontan”). The Company has
posted cash and reclamation bonds with these agencies in the amount of US$4.4
million of which US$4.2 million are reclamation bonds supported by a surety. All
surety bonds are subject to annual review and adjustment.
 
 In
September 2007, Canyon settled a complaint of default with the surety company
supporting the above reclamation bonds. As of March 23, 2009, US$0.5 million
remains to be funded to the collateral account. The surety’s request for monies
as collateral represents a reimbursable deposit that is included in restricted
cash to support required future reclamation of the Briggs Mine site and
therefore no liability has been accrued for unfunded collateral.
 
 (c)
              McDonald Gold
      Project:
 
 A lawsuit
was filed against the State of Montana to recover value lost due to changes in
the Montana mining law and the cancellation of mineral leases related to the
McDonald Gold Project. On April 21, 2008, the Company’s complaint under the
takings lawsuit was dismissed by the US Court of Appeals for the Ninth
Circuit.
 
 In
October, 2008, the petition for writ of certiorari with US Supreme Court in the
case Seven-Up Pete Venture, et al. v Brian Schweitzer, et al. was denied.
Consequently, there are no further options to pursue the case and no additional
actions are anticipated.
 
 (d)           Kendall Mine
Lawsuits:
 
 In
      October 2001, a plaintiff group filed suit in the State of Montana
      District Court against Canyon and its wholly-owned subsidiary, CR Kendall
      Corporation.
 
 In
      February 2007, Canyon entered into a settlement and release agreement with
      eight of the twelve plaintiffs in this suit. Canyon’s share of the
      settlement was US$0.1 million and the Company maintains a balance of
      US$0.2 million recorded as a legal settlement accrual on the consolidated
      balance sheet as of December 31, 2008. In January 2009, the final
      outstanding lawsuit was dismissed with prejudice and the US$0.2 million
      held by the Court was released to the
Company.
 
 In order
to finalize the settlement, the Company funded US$0.6 million of the settlement
on behalf of one of the insurance companies and recorded the amount as a
long-term receivable as of December 31, 2008.
 
 (e)
              Asset Exchange
      Agreement:
  19
  The
Adelaide and Tuscarora properties were originally optioned as part of the
December 2006 Asset Exchange Agreement with Newmont Capital Limited and Newmont
Mining Corporation. Under this agreement, the Company is required to spend a
total of US$3.0 million on both projects over five years to earn the Company’s
interest in the properties. The Company has the right to sublease either
property to third parties to meet its obligations under the
agreement.
 
 On
February 15, 2008, the Company entered an option agreement whereby Golden
Predator Mines US Inc. (“Golden Predator”) a wholly-owned subsidiary of Golden
Predator Mines Inc. of Vancouver British Columbia, assumed the Company’s
interest and all related commitments under the Asset Exchange Agreement in the
advanced stage Adelaide and Tuscarora gold exploration properties located in
Humboldt and Elko Counties in Nevada.  The Company received an initial
payment of approximately US$0.5 million on closing of the transaction and Golden
Predator has guaranteed the US$0.4 million commitment for 2008.
 
 Pursuant
to the Golden Predator agreement, Atna received 2.1 million common shares of
Golden Predator in lieu of a US$250,000 option payment on January 6, 2009. Atna
may earn additional option payments through 2011 in either cash or stock until
Golden Predator has met its spending commitments under the assigned Newmont
agreement or until notice of cancellation.
 
 (f)
              Lease
      Commitments:
 
 The
Company has entered into various operating leases for office space and
equipment. At December 31, 2008, future minimum lease payments extending beyond
one year under noncancellable leases average approximately $9,000 per month over
the following 19 months.
 
 The
Company has also entered into various mining lease arrangements for purposes of
exploring, and if warranted, developing and producing minerals from the
underlying leasehold interests. The lease arrangements typically require advance
royalty payments during the pre-production phase and a production royalty upon
commencement of production, with previously advanced payments credited against
the production royalties otherwise payable. Advance royalty commitments will
vary each year as the Company adds or deletes properties. Minimum advance
royalty payments expensed total approximately $.1 million annually.
 
 The
Company is also required to pay an annual rental fee to the federal government
for any unpatented mining claims, mill or tunnel site claims on federally owned
lands at the rate of $125 per claim. The Company’s present inventory of claims
would require approximately $.2 million in annual rental fees, however, this
amount will vary as claims are added or dropped. The Company is also subject to
lease payments to various other owners or lessors of property. Currently,
payments to these parties total approximately nil annually.
 
 Lease
costs included in cost of goods sold for the years ended December 31, 2008,
2007, and 2006 were nil for all periods.
 
 Rent
expense included in selling, general and administrative expense for the years
ended December 31, 2008, 2007, and 2006, was $.1 million, nil, and nil,
respectively.
 
 13.           Certain Concentrations of
Credit Risk:
 
 The
Company is subject to concentrations of credit risk in connection with
maintaining its cash primarily in two financial institutions in amounts in
excess of levels insured by the Federal Deposit Insurance Corporation. The
Company considers the institutions to be financially strong and does not
consider the underlying risk to be significant. To date, these concentrations of
credit risk have not had any effect on the Company’s financial position or
results of operations.
 
 20
 The
Company sold its gold and silver production predominantly to one or two
customers during the past three years. Given the marketability and liquidity of
the precious metals being sold and because of the large pool of qualified buyers
for gold and silver, the Company believes that upon the loss of either of its
customers they could be quickly replaced without any adverse
affect.
 
 The
profitability of the Company’s operations is dependent upon the market price of
certain precious and base metals.  The price of such metals or interest
related thereto has fluctuated widely and is affected by numerous factors beyond
the control of the Company.  These factors include international economic
and political conditions, expectations of inflation, international currency
exchange rates, interest rates, global or regional consumptive patterns,
speculative activities, levels of supply and demand, increased production due to
new mine developments and improved mining and production methods, availability
and costs of metal substitutes, metal stock levels maintained by producers and
others and inventory carrying costs.  The exact effect of these factors
cannot be accurately predicted, but the combination of these factors may result
in the Company not receiving an adequate return on invested capital or the
investment not retaining its value.
 
 14.           Fair Value of Financial
Instruments:
 
 The
estimated fair  values  of  the
Company’s  financial  instruments  approximate  carrying  values  at  December
31, 2008, and December 31, 2007. The following methods and assumptions were used
to estimate the fair value of each class of financial instruments:
 
 Cash and Cash
Equivalents, Receivables, Short-term Investments and Restricted Cash:
Carrying amounts approximate fair value based on the short-term maturity of
those instruments. Cash equivalents are those instruments that mature in 90 days
or less.
 
 Long-term
Debt: Carrying values approximate fair values based on discounted cash
flows using the Company’s current rate of borrowing for a similar
liability.
 
 Hedging
Activities: As of December 31, 2008 there were no derivatives
outstanding. As of March 23, 2009 the Company has the following gold derivatives
outstanding:
  Expiry
      DateHedging
      Contract
                
                Strike
      Price
                
                
                2009
                
                
                2010
                
                
                Total
                
                
                Fair
      ValueOwned
      Put Options
                
                $
                800
                
                
                
                3,000
                
                
                
                -
                
                
                
                3,000
                
                
                $
                134,000Sold
      Call Options
                
                $
                1,300
                
                
                
                3,000
                
                
                
                -
                
                
                
                3,000
                
                
                $
                (84,000
                )Forward
      Gold Sales
                
                $
                955
                
                
                
                3,000
                
                
                
                -
                
                
                
                3,000
                
                
                $
                3,000$
                53,000
 The
Company has entered in to a zero cost gold collar and gold forward sales
contracts in early 2009 that all expire in 2009. The purpose of these hedge
positions is to protect the cash flows from decreasing gold prices during the
second half of 2009. The put and call option contracts are European style
options that are settled net at the expiry date. The options have expiry dates
from July to December at the rate of 500 ounces per month during 2009. The
forward gold sales have a fixed delivery price of US$955 per ounce and expire at
a rate of 1,000 ounces per month during the fourth quarter of 2009. All
derivative contracts have counterparty risk and all of the gold derivatives have
been placed with a single counterparty. The Company believes that these
outstanding contracts will be settled in the normal course of business. The
Company’s policy is to not hedge more than 50 percent of the projected
production and retain a 25 percent production reserve tail.
 
 Under the
terms of the zero cost collar hedging contracts, Atna will pay the counterparty
on a contract expiry date if the gold price is above the sold call option strike
price of US$1,300 per ounce. The counterparty will pay the Company on a contract
expiry date if the gold price is below the owned put option strike price of
US$800 per ounce. If the gold price on the contract expiry date falls between
US$800 and US$1,300 per ounce there are no settlement payments required by
either party. Under the terms of the forward gold sale hedging contracts, Atna
will pay the counterparty if the gold price is above the forward price of US$955
per ounce and the counterparty will pay the Company if the gold price is below
US$955 per ounce.
 
 21
 The fair
market value was estimated based on the gold price per once from the London PM
Fix on March 20, 2009 of US$954. The net fair value of the hedge position will
be positive to the Company when gold prices fall and be negative when gold
prices rise relative to the gold price on the date of the previous fair value
calculation. Beginning in the first quarter of 2009, the Company will recognize
fair value these derivative positions.
 
 15.           Managing
Capital:
 
 The
Company is not currently subject to externally imposed capital requirements. The
Company currently has no net debt (debt less available cash). Past operating
cash requirements were met through the use of a combination of asset sales and
equity financings. As a mining company, the Company’s prime object in managing
capital is to use its scarce cash resources to purchase or develop mineral
resources and related cash flows utilizing the least dilutive method available
to the Company. The Company closely monitors its capital structure related to
the number of shares outstanding as a result of equity financings and stock
based compensation to minimize the level of dilution while providing increased
shareholder value.
 
 The
Company issued 17.1 million common shares as a result of the merger with Canyon.
The merger greatly increased the Company’s mineral property portfolio. In the
future, the Company may sell assets, issue project debt or equity to finance new
mines. The Company will develop debt monitoring systems when and if debt becomes
a significant source of capital.
  22
  16.           Income
Taxes:
 
 The
Company recognizes future assets and liabilities based on the difference between
the financial reporting and tax bases of assets and liabilities using the
enacted tax rates expected to be in effect when the taxes are paid or
recovered.  The Company provides a valuation allowance against future
tax assets for which the Company does not consider realization of such assets to
meet the required “more likely than not” standard.
 
 Our
future tax assets and liabilities at December 31, 2008 and 2007 include the
following components:
  2008
              
              
              2007Future
      tax assets:Noncapital
      loss carryfowards, Canada
              
              $
              90,700
              
              
              $
              1,963,900Net
      operating loss carryforwards, US
              
              
              50,369,000
              
              
              
              7,453,500Capital
      loss carryforwards, Canada
              
              
              260,900
              
              
              
              -Mineral
      properties
              
              
              6,398,600
              
              
              
              5,230,400Reclamation
      costs
              
              
              2,164,700
              
              
              
              -Equipment
              
              
              -
              
              
              
              65,200Share
      issuance costs
              
              
              204,400
              
              
              
              492,000Marketable
      equity securities
              
              
              86,900
              
              
              
              -Capital
      assets
              
              
              36,200
              
              
              
              -Other
              
              
              123,700Valuation
      allowance
              
              
              (53,354,000
              )
              
              
              (15,205,000
              )Future
      tax assets
              
              
              6,381,100
              
              
              
              -Future
      tax liabilities:Plant,
      property and equipment
              
              
              5,120,500
              
              
              
              -Other
              
              
              96,200
              
              
              
              -Deferred
      tax liabilities
              
              
              5,216,700
              
              
              
              -Net
      future tax asset/(liability)
              
              $
              1,164,400
              
              
              $
              -
 The
composition of our valuation allowance by tax jurisdiction is summarized as
follows:
  2008
                
                
                2007Canada
                
                $
                1,537,800
                
                
                $
                35,700USA
                
                
                51,816,200
                
                
                
                100Total
      valuation allowance
                
                $
                53,354,000
                
                
                $
                35,800
   23
  The
provision for income taxes includes the following components:
  2008
              
              
              2007
              
              
              2006CurrentCanada
              
              $
              -
              
              
              $
              -
              
              
              $
              -Foreign
              
              
              -
              
              
              
              -
              
              
              
              --
              
              
              
              -
              
              
              
              -DeferredCanada
              
              
              -
              
              
              
              -
              
              
              
              4,900Foreign
              
              
              (3,659,000
              )
              
              
              5,200
              
              
              
              1,100(3,659,000
              )
              
              
              5,200
              
              
              
              6,000Income
      tax expense (recovery)
              
              $
              (3,659,000
              )
              
              $
              5,200
              
              
              $
              6,000
  A
reconciliation or expected income tax on net income before minority interest at
statutory rates with the actual expense (recovery) for income taxes is as
follows:
  2008
              
              
              2007
              
              
              2006Net
      income (loss)
              
              $
              16,656,600
              
              
              $
              (5,277,400
              )
              
              $
              (742,500
              )Statutory
      tax rate
              
              
              0.3100
              
              
              
              0.3412
              
              
              
              0.3412Tax
      expense (recovery) at statutory rate
              
              
              5,163,500
              
              
              
              (1,800,700
              )
              
              
              (253,300
              )Foreign
      tax rates
              
              
              234,400
              
              
              
              -
              
              
              
              -Temporary
      differences recognized
              
              
              -
              
              
              
              (255,500
              )
              
              
              (134,600
              )Stock
      based compensation
              
              
              196,800
              
              
              
              -
              
              
              
              -Nondeductible
      expenses
              
              
              3,400
              
              
              
              155,400
              
              
              
              56,000Change
      in future tax assets due to exchange rates
              
              
              2,461,300
              
              
              
              -
              
              
              
              -Change
      in valuation allowance
              
              
              (10,981,700
              )
              
              
              1,966,000
              
              
              
              331,900Other
              
              
              (736,700
              )
              
              
              (65,200
              )
              
              
              -Income
      tax expense (recovery)
              
              $
              (3,659,000
              )
              
              $
              -
              
              
              $
              -
  At
December 31, 2008, the Company had tax pool and loss carryovers expiring as
follows:
  Canada
                
                
                US2009
                
                $
                -
                
                
                $
                -2010
                
                
                -
                
                
                
                -2011
                
                
                -
                
                
                
                -2012
                
                
                -
                
                
                
                -2013
                
                
                -
                
                
                
                -2014
                
                
                -
                
                
                
                -2015
                
                
                -
                
                
                
                -2026
                
                
                -
                
                
                
                -2027
                
                
                349,000
                
                
                
                -2028
                
                
                -
                
                
                
                -Indefinite
                
                
                -
                
                
                
                -Total
                
                $
                349,000
                
                
                $
                -
 At
      December 31, 2008, the Company had Canadian noncapital loss carryforwards
      of $349,000 which expire in 2027 and Canadian capital loss carryforwards
      of $2,007,000 with no expiry.  Also, the Company has US net
      operating loss carryforwards (NOL’s) of $130,403,000 which expire from
      2009 through 2028.  Due to a change in ownership resulting from
      the merger, utilization of approximately $116,000,000 million of our US
      NOL’s are subject to an IRC Section 382 annual limitation amount of
      $955,000.  A $44,000,000 valuation allowance has been recorded
      against the tax effected US NOL’s due to the Section 382
      limitation.  A full valuation allowance has been provided
      against the Canadian net deferred tax
assets.
  24
  17.           Share-Based
Compensation:
 
 The
Company recorded $0.6 million of share-based compensation expense during the
year ended December 31, 2008, none of which was capitalized. All of the
share-based compensation expense was recorded as general and administrative
costs in the consolidated statements of operations.
 
 On April
26, 2007, the Company’s shareholders approved the Atna Resources Ltd. Stock
Option Plan (the “2007 Plan”) to provide more flexibility in the compensation of
key personnel. All outstanding stock options under the Amended Atna Resources
Ltd. Employee Incentive Plan, which was established in 1996 and most recently
amended on April 20, 2006 (the “1996 Plan”), will remain active until all the
options under the 1996 Plan either expire or are exercised; however, no new
options may be granted under the 1996 Plan. As of December 31, 2008, there were
1.3 million and 4.0 million underlying shares outstanding under the 1996 Plan
and the 2007 Plan, respectively.
 
 The 2007
Plan is administered by the Compensation Committee of the Board of Directors
consisting entirely of independent directors. The maximum number of option
shares issuable at any time is equal to 10 percent of the number of issued and
outstanding shares. If any shares covered by an award are not purchased or are
forfeited, the shares will again be available for future awards under the 2007
Plan. As of December 31, 2008 there was a maximum of 8.3 million and 4.5 million
underlying shares issuable and available for future option issuances under the
2007 Plan, respectively. Directors and employees of, or consultants to, the
Company or any of its affiliates are eligible to participate in the 2007 Plan.
The Board of Directors may terminate or amend the 2007 Plan at any time and for
any reason. The 2007 Plan does not have a termination date but according to TSX
requirements all available and unreserved securities must be approved every
three years by the directors and shareholders.
  The
exercise price of each stock option is based on, and may not be less than, 100%
of the fair market value of its common shares on the date of grant. The fair
market value is generally determined as the closing price of its common shares
on the date of the grant. The term of each stock option is fixed by the
Compensation Committee and may not exceed 5 years from the date of grant. The
Compensation Committee also determines the vesting requirements of the grant
which may be accelerated by the Compensation Committee.
  The fair
value of each option award is estimated on the date of grant using a
Black-Scholes-Merton option valuation model that uses the assumptions noted in
the following table. Expected market volatility is based on a number of factors
including historical volatility of the Company’s common shares, the Company’s
market capitalization, future outlook of the Company, and other fair value
related factors. The Company uses historical information in estimating the
expected term. The forfeiture rate ranged from nil and 5%. Vesting periods have
ranged from immediately to two years. The risk-free rate is based on the
yields of Canadian benchmark bonds which approximate the expected life of the
option. The Company has never paid a dividend and does not plan to in the future
and therefore the expected dividend yield is nil.
 
 The
following table summarizes the weighted-average assumptions used in determining
fair values during the years ended December 31, 2008 and 2007:
  2008
              
              
              2007Expected
      volatility
              
              
              56
              %
              
              
              67
              %Expected
      option term
              
              3.1
      years
              
              
              3.0
      yearsRisk-free
      interest rate
              
              
              2.2
              %
              
              
              2.9
              %Forfeiture
      rate
              
              
              2.8
              %
              
              
              -
  Stock
Options
 
 The
following table summarizes the stock option activity during the years ended
December 31, 2008 and 2007:
  25
  
 2008
              
              
              2007Weighted
              
              
              
              
              
              WeightedAverage
              
              
              
              
              
              AverageExercise
              
              
              
              
              
              ExerciseNumber
              
              
              Price
              
              
              Number
              
              
              PriceOutstanding
      - beginning of the year
              
              
              2,437,300
              
              
              $
              1.31
              
              
              
              2,140,000
              
              
              $
              1.11Grants
              
              
              4,025,140
              
              
              
              0.83
              
              
              
              963,800
              
              
              
              1.36Exercises
              
              
              (850,000
              )
              
              
              0.68
              
              
              
              (545,750
              )
              
              
              0.52Forfeitures
              
              
              (341,400
              )
              
              
              1.59
              
              
              
              (120,750
              )
              
              
              1.76Outstanding
      - end of the period
              
              
              5,271,040
              
              
              $
              1.03
              
              
              
              2,437,300
              
              
              $
              1.31Exercisable
      - end of the period
              
              
              3,333,470
              
              
              $
              1.15
              
              
              
              2,001,150
              
              
              $
              1.29
  The
following table summarizes the stock options outstanding and exercisable at
December 31, 2008:
  Exercise Price
                
                
                Options Outstanding
                
                
                
                
                
                Options ExercisableLow
                
                High
                
                
                Quantity
                
                
                Weighted Average Remaining
                  Contractual Life
                
                
                Weighted Average Exercise
    Price
                
                
                Quantity
                
                
                Weighted Average Remaining
                  Contractual Life
                
                
                Weighted Average Exercise
    Price$    0.45
                
                
                $  
      0.82
                
                
                
                2,292,500
                
                
                
                5.0
                
                
                $
                0.45
                
                
                
                1,146,250
                
                
                
                5.0
                
                
                $
                0.45$    0.83
                
                
                $  
      1.32
                
                
                
                857,640
                
                
                
                3.1
                
                
                $
                1.32
                
                
                
                441,320
                
                
                
                3.1
                
                
                $
                1.32$    1.33
                
                
                $  
      1.36
                
                
                
                1,550,900
                
                
                
                1.5
                
                
                $
                1.36
                
                
                
                1,175,900
                
                
                
                1.4
                
                
                $
                1.36$    1.37
                
                
                $  
      2.01
                
                
                
                570,000
                
                
                
                0.1
                
                
                $
                2.01
                
                
                
                570,000
                
                
                
                0.1
                
                
                $
                2.01$    0.45
                
                
                $  
      2.01
                
                
                
                5,271,040
                
                
                
                3.1
                
                
                $
                1.03
                
                
                
                3,333,470
                
                
                
                2.6
                
                
                $
                1.15
 The
aggregate intrinsic values of the outstanding and exercisable options as of
December 31, 2008 and 2007 were $0.3 million and $0.2 million, respectively,
based on a $0.59 market price per share. The weighted-average grant-date fair
value of stock options granted during the years ended December 31, 2008 and 2007
were $0.31 and $0.63 per option or total fair value of $1.2 million and $0.6
million, respectively. As of December 31, 2008, there was $0.2 million of total
unrecognized compensation cost.
 
 18.           Earnings per
Share:
 
 The
Company computes earnings per share (“EPS”) by applying the provisions of CICA
Handbook Section 3500, Earnings per Share. Because
the Company reported net losses for the years ended December 31, 2007 and 2006,
inclusion of common share equivalents would have an antidilutive effect on per
share amounts. Accordingly, the Company’s basic and diluted EPS computations are
the same for year 2007 periods presented. Common share equivalents, which
include share options, warrants to purchase common shares, share grants and
convertible debentures, in 2008, 2007 and 2006 that were not included in the
computation of diluted EPS because the effect would be antidilutive were 8.5
million, 2.6 million and 2.5 million, respectively.
 
 19.           Recently
Issued Financial Accounting Standards:
 
 This note
describes any recently issued accounting standard relevant to our Company and
business that may impact the Company in the future. It includes standards that
have been recently adopted or ones that have been issued and not yet
adopted.
 
 26
 Canadian
Standards
 
 Section
1582 – Business Combinations – In January 2009, the CICA issued Section 1582,
which replaces Section 1581 and establishes standards for the accounting for a
business combination.  Section 1581 has been re-filed under
“Superseded Accounting Recommendations” with a Supplement added setting out the
previous wording of paragraphs in other Handbook material that has been amended
substantially as a consequence of approving new Section 1582.  The
superseded Section 1581 will be withdrawn from the Handbook when it is no longer
effective.  Section 1582 applies prospectively to business
combinations for which the acquisition date is on or after January 1,
2011.  Earlier application is permitted.  If an entity
applies this Section before January 1, 2011, it shall disclose that fact and
apply Consolidated Financial Statements, Section 1601, and Non-controlling
Interests, Section 1602, at the same time.  The Company will evaluate
the impact of Section 1582 to the financial statements beginning on January 1,
2010.
 
 Section
1601 – Consolidated Financial Statements – In January 2009, the CICA issued
Section 1601, which, together with new Section 1602, replaces Section 1600 and
establishes standards for the preparation of consolidated financial
statements.   Section 1600 has been re-filed under “Superseded
Accounting Recommendations”.  The superseded Section 1600 will be
withdrawn from the Handbook when it is no longer effective.  Section
1601 applies to interim and annual consolidated financial statements relating to
fiscal years beginning on or after January 1, 2011.  Earlier adoption
is permitted as of the beginning of a fiscal year.  An entity adopting
this Section for a fiscal year beginning before January 1, 2011 also adopts
Business Combinations, Section 1582, and Non-controlling Interests, Section
1602.   The Company will evaluate the impact of Section 1601 to
the financial statements beginning on January 1, 2010.
 
 Section
1602 – Non-Controlling Interests – In January 2009, the CICA issued Section
1602, which, together with new Section 1601, replaces Section 1600 and
establishes standards for accounting for a non-controlling interest in a
subsidiary in consolidated financial statements subsequent to a business
combination.   Section 1600 has been re-filed under “Superseded
Accounting Recommendations”.  The superseded Section 1600 will be
withdrawn from the Handbook when it is no longer effective.  Section
1602 applies to interim and annual consolidated financial statements relating to
fiscal years beginning on or after January 1, 2011.  Earlier adoption
is permitted as of the beginning of a fiscal year.  An entity adopting
this Section for a fiscal year beginning before January 1, 2011 also adopts
Business Combinations, Section 1582, and Consolidated Financial Statements,
Section 1601.  The company presently has no reporting entities that contain
minority interest ownership.
 
 Section
3064 - Goodwill and Intangibles - In January 2008, the CICA issued Section 3064.
This section establishes standards for the recognition, measurement,
presentation and disclosure of goodwill, subsequent to the initial recognition,
and intangible assets by profit-oriented enterprises. This section applies to
annual and interim financial statements relating to fiscal years beginning on or
after October 1, 2008. Earlier adoption is encouraged.The Company does not
believe this new standard will have an effect on its financial position, results
of operations or cash flows.
 
 Section
3031 – Inventories – In June 2007, the CICA issued Section 3031 replacing
Section 3030. The section provides guidance with respect to the determination of
cost and requires inventories to be measured at the lower of cost and net
realizable value. The reversal of previous write-downs to net realizable value
when there is a subsequent increase in the value of inventories is now required.
The cost of the inventories should be based on a first-in, first-out or a
weighted average cost formula. Techniques used for the measurement of cost of
inventories, such as the standard cost method, may be used for convenience if
the results approximate cost. The new standard also requires additional
disclosures including the accounting policies used in measuring inventories, the
carrying amount of the inventories, amounts recognized as an expense during the
period, write-downs and the amount of any reversal of any write-downs recognized
as a reduction in expenses. The adoption of this section had no material impact
on the Company’s consolidated financial statements.
 
 Section
1535 - Capital Disclosures - In February 2007, the CICA issued Handbook Sections
1535, “Capital Disclosures”, which requires the disclosure of both qualitative
and quantitative information that provides users of financial statements with
information to evaluate the entity’s objectives, policies and processes for
managing capital. The new section is effective for years beginning on or after
October 1, 2007. The Company has implemented the new disclosures in footnote
number 15.
 
 27
 Section
3862 - Financial Instruments - In February 2007, the CICA issued two new
standards, Section 3862 “Financial Instruments Disclosures” and Section 3863
“Financial Instruments Presentation” These sections will replace the existing
Section 3861 “Financial Instruments Disclosure and Presentation.” Section 3862
provides users with information to evaluate the significance of the financial
instruments of the entity’s financial position and performances, nature and
extent of risks arising from financial instrument, and how the entity manages
those risks. Section 3863 deals with the classification of financial
instruments, related interest, dividends, losses and gains, and the
circumstances in which financial assets and financial liabilities are offset.
The new sections are effective for years beginning on or after October 1, 2007.
The Company has implemented this requirement in its consolidated financial
statements and footnotes.
 
 International
Financial Reporting Standards (“IFRS”) - In 2006, the Canadian Accounting
Standards Board (“AcSB”) published a new strategic plan that will significantly
affect financial reporting requirements for Canadian companies. The AcSB
strategic plan outlines the convergence of Canadian GAAP with IFRS over an
expected five year transitional period. In February 2008 the AcSB announced that
2011 is the changeover date for publicly-listed companies to use IFRS, replacing
Canada’s own GAAP. The date is for interim and annual financial statements
relating to fiscal years beginning on or after January 1, 2011.
 
 US
Standards
 
 The FASB
has issued FASB Statement No. 162, “The Hierarchy of Generally Accepted
Accounting Principles”.  Statement 162 is effective November 15, 2008
and is intended to improve financial reporting by identifying a consistent
framework, or hierarchy, for selecting accounting principles to be used in
preparing financial statements that are presented in conformity with U.S. GAAP
for nongovernmental entities.
 
 In
February 2007, the Financial Accounting Standards Board (“FASB”) issued
Statement No. 159, “The Fair Value Option for Financial Assets and Financial
Liabilities”(“SFAS 159”). This Statement is effective as of the beginning of an
entity’s first fiscal year that begins after November 15, 2007. Early adoption
is permitted as of the beginning of a fiscal year that begins on or before
November 15, 2007, provided the entity also elects to apply the provisions of
FASB Statement No. 157, Fair
Value Measurements.This Statement permits entities to choose to measure
many financial instruments and certain other items at fair value. The objective
is to improve financial reporting by providing entities with the opportunity to
mitigate volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions. This Statement is expected to expand the use of fair value
measurement, which is consistent with the Board’s long-term measurement
objectives for accounting for financial instruments. The Company adopted SFAS
No. 159 on January 1, 2008 and the adoption did not have an impact on the
reconciliation to US GAAP.
 
 In
September 2006, FASB issued Statement No. 157, “Fair Value Measurements (“SFAS
157”). This standard provides guidance for using fair value to measure assets
and liabilities.  SFAS 157 applies whenever other standards require
(or permit) assets or liabilities to be measured at fair value but does not
expand the use of fair value in any new circumstances.  The standard
clarifies that for items that are not actively traded, fair value should reflect
the price in a transaction with a markets participant, including an adjustment
for risk.  Under SFAS 157, fair value refers to the price that would
be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants in the market which the reporting entity
transacts.  This Statement is effective for financial statements
issued for fiscal years beginning after November 15, 2007, and interim periods
within those fiscal years. Earlier application is encouraged, provided that the
reporting entity has not yet issued financial statements for that fiscal year,
including financial statements for an interim period within that fiscal year.
The Company adopted SFAS 157 on January 1, 2008 and the adoption did not have an
impact on the reconciliation to US GAAP.
 
 In
December 2007, the FASB issued Statement No. 141 (revised 2007), “Business
Combinations” (“SFAS 141R”), which significantly changes the ways companies
account for business combinations and will generally require more assets
acquired and liabilities assumed to be measured at their acquisition date fair
value. Under SFAS 141R, legal fees and other transaction-related costs are
expensed as incurred and are no longer included in goodwill as a cost of
acquiring the business. SFAS 141R also requires, among other things, acquirers
to estimate the acquisition date fair value of any contingent consideration and
to recognize any subsequent changes in the fair value of contingent
consideration in earnings. In addition, restructuring costs the acquirer
expected, but was not obligated to incur, will be recognized separately from the
business acquisition. SFAS 141R is effective for the Company’s fiscal year
beginning July 1, 2009, and is to be applied prospectively. The Company will
evaluate the impact of SFAS 141R to the reconciliation to US GAAP beginning on
January 1, 2010.
 
 28
 In
December 2007, the FASB issued Statement No. 160, “Non-controlling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51” (“SFAS 160”).
SFAS 160 requires all entities to report non-controlling interests in
subsidiaries as a separate component of equity in the consolidated financial
statements. SFAS 160 establishes a single method of accounting for changes in a
parent’s ownership interest in a subsidiary that do not result in
deconsolidation. Companies will no longer recognize a gain or loss on partial
disposals of a subsidiary where control is retained. In addition, in partial
acquisitions, where control is obtained, the acquiring company will recognize
and measure at fair value 100 percent of the assets and liabilities, including
goodwill, as if the entire target company had been acquired. SFAS 160 is
effective for the Company’s fiscal year beginning July 1, 2009, and is to be
applied prospectively. The Company will evaluate the impact of SFAS 160 to the
reconciliation to US GAAP beginning on January 1, 2010.
 
 In March
2008, the FASB issued Statement No. 161, “Disclosures about Derivative
Instruments and Hedging Activities—an amendment of FASB Statement No. 133”
(“SFAS 161”). SFAS 161 intends to improve financial reporting about derivative
instruments and hedging activities by requiring enhanced disclosures to enable
investors to better understand their effects on an entity’s financial position,
financial performance and cash flows. SFAS 161 also requires disclosure about an
entity’s strategy and objectives for using derivatives, the fair values of
derivative instruments and their related gains and losses. SFAS 161 is effective
for fiscal years and interim periods beginning after November 15, 2008, and will
be applicable to the Company’s fiscal year beginning July 1, 2009. The Company
will evaluate the impact of SFAS 161 to the reconciliation to US GAAP beginning
on January 1, 2010.
 
 In May
2008, the FASB issued Statement No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“SFAS 162”). SFAS 162 is intended to improve financial
reporting by identifying a consistent framework, or hierarchy, for selecting
accounting principles to be used in preparing financial statements that are
presented in conformity with US generally accepted accounting principles for
nongovernmental entities. SFAS 162 is effective 60 days following the approval
of the Public Company Accounting Oversight Board amendments to AU Section 411,
“The Meaning of Present Fairly in Conformity with Generally Accepted Accounting
Principles”. The Company does not expect a significant impact on the
reconciliation to US GAAP due to SFAS 162.
 
 In June
2008, the FASB ratified EITF 07-5, “Determining Whether an Instrument (or
Embedded Feature) is Indexed to an Entity’s Own Stock” EITF 07-5 provides
guidance in determining whether or not derivative financial instruments are
indexed to a company’s own stock. It is effective the fist fiscal year beginning
after December 15, 2008, including interim periods within those fiscal
years.  The Company will adopt EITF 07-5 on January 1, 2009 and
expects a significant impact on its US GAAP reconciliation.
 
 In
October 2008, the FASB issued FSP FAS 157-3 “Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active”. FSP FAS 157-3
clarifies the application of FASB Statement No. 157 “Fair Value Measurements”.
FAS FSP 157-3 is effective as of the issuance date.  The Company does
not expect a significant impact on the reconciliation to US GAAP due to FSP FAS
157-3.
 
 20.           Differences between Canadian
and United States generally accepted accounting principles:
 
 In prior
years, there was one significant difference between Canadian GAAP and US GAAP,
which was the accounting for mineral properties. Effective January 1, 2008, the
Company changed its accounting policy for mineral properties from deferring
exploration costs incurred during the exploration stage to expensing such costs
in the year incurred. This change has been applied retroactively and the
comparative figures in the consolidated financial statements have been
restated.
 
 29
 During
2008, the Company issued options to US employees that were denominated in
Canadian dollars. According to the US GAAP guidance in FASB 123R “Share-Based
Payments”, those options would be classified as liabilities rather than as
equity. This difference between Canadian GAAP and US GAAP is the only
significant difference in 2008. The impact of that difference on the summary
consolidated financial disclosures for the balance sheet, statement of
operations and cash flows is as follows:
  2008
              
              
              2007
              
              
              2006(a)  AssetsTotal
      assets - Canadian GAAP
              
              $
              82,082,200
              
              
              $
              13,487,700
              
              
              $
              15,894,800US
      GAAP adjustment - none
              
              
              -
              
              
              
              -
              
              
              
              -Total
      assets - US GAAP
              
              $
              82,082,200
              
              
              $
              13,487,700
              
              
              $
              15,894,800(b)  LiabilitiesTotal
      liabilities - Canadian GAAP
              
              $
              9,912,900
              
              
              $
              1,075,500
              
              
              $
              781,908US
      GAAP adjustment - option liability
              
              
              279,200
              
              
              
              -
              
              
              
              -Total
      liabilities - US GAAP
              
              $
              10,192,100
              
              
              $
              1,075,500
              
              
              $
              781,908(c)  Shareholders'
      equityTotal
      shareholders' equity - Canadian GAAP
              
              $
              72,169,300
              
              
              $
              12,412,200
              
              
              $
              15,112,900US
      GAAP adjustment - option liability
              
              
              (279,200
              )
              
              
              -
              
              
              
              -Total
      shareholders' equity - US GAAP
              
              $
              71,890,100
              
              
              $
              12,412,200
              
              
              $
              15,112,900(d)
      OperationsNet
      income (loss) - Canadian GAAP
              
              $
              20,315,600
              
              
              $
              (3,348,300
              )
              
              $
              (2,565,400
              )US
      GAAP adjustment - net option expense
              
              
              217,400
              
              
              
              -
              
              
              
              -Net
      income (loss) under U.S. GAAP
              
              $
              20,533,000
              
              
              $
              (3,348,300
              )
              
              $
              (2,565,400
              )(e)
      Earnings per shareBasic
      and diluted income (loss) per share - Canadian GAAP
              
              $
              0.26
              
              
              $
              (0.05
              )
              
              $
              (0.04
              )US
      GAAP adjustment - net option expense
              
              $
              -
              
              
              $
              -
              
              
              $
              -Basic
      and diluted income (loss) per share - US GAAP
              
              $
              0.26
              
              
              $
              (0.05
              )
              
              $
              (0.04
              )(f)
      Cash flows from operating activitiesOperating
      activities - Canadian GAAP
              
              $
              (3,906,500
              )
              
              $
              (4,086,200
              )
              
              $
              (8,404,600
              )US
      GAAP adjustment - net option expense
              
              
              -
              
              
              
              -
              
              
              
              -Operating
      activities - US GAAP
              
              $
              (3,906,500
              )
              
              $
              (4,086,200
              )
              
              $
              (8,404,600
              )(g)
      Cash flows from investing activitiesInvesting
      activities - Canadian GAAP
              
              $
              18,667,700
              
              
              $
              3,784,600
              
              
              $
              (998,300
              )US
      GAAP adjustment - none
              
              
              -
              
              
              
              -
              
              
              
              -Investing
      activities - US GAAP
              
              $
              18,667,700
              
              
              $
              3,784,600
              
              
              $
              (998,300
              )(h)
      Cash flows from financing activitiesFinancing
      activities - Canadian GAAP
              
              $
              501,400
              
              
              $
              283,600
              
              
              $
              739,700US
      GAAP adjustment - none
              
              
              -
              
              
              
              -
              
              
              
              -Financing
      activities - US GAAP
              
              $
              501,400
              
              
              $
              283,600
              
              
              $
              739,700