VetaNova Inc. - Quarter Report: 2008 October (Form 10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended October 31, 2008

Commission file number 000-51068

YUKON GOLD CORPORATION, INC.
(Exact name of registrant as specified in its charter)

55 York Street, Suite 401, Toronto, Ontario M5J 1R7
(Address of principal executive offices including zip code)

(416) 865-9790
(Registrant's telephone number including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 Yes [X]    No [   ]

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 Yes [   ]    No [X]

The number of shares of registrant's common stock outstanding as of October 31, 2008 was 33,650,629.

PART I – FINANCIAL INFORMATION

YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE MINING COMPANY)
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2008
(Amounts expressed in US Dollars)
(Unaudited-Prepared by Management)

TABLE OF CONTENTS

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Consolidated Balance Sheets
As at October 31, 2008 and April 30, 2008
(Amounts expressed in US Dollars)
(Unaudited-Prepared by Management)

See condensed notes to the interim consolidated financial statements.

APPROVED ON BEHALF OF THE BOARD

/s/ Robert Van Tassell
      Robert Van Tassell, Director

/s/ J. L. Guerra, Jr. 
      J. L. Guerra, Jr., President, CEO and Director

F-2

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Consolidated Balance Sheets
As at October 31, 2008 and April 30, 2008
(Amounts expressed in US Dollars)
(Unaudited-Prepared by Management)

See condensed notes to the interim consolidated financial statements.

F-3

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Consolidated Statements of Operations
For the six months and three months ended October 31, 2008 and October 31, 2007 and
the period from Inception to October 31, 2008
(Amounts expressed in US Dollars)
(Unaudited-Prepared by Management)

See condensed notes to the interim consolidated financial statements

F-4

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Consolidated Statements of Cash Flows
For the six month period ended October 31, 2008 and October 31, 2007 and
the period from Inception to October 31, 2008
(Amounts expressed in US Dollars)
(Unaudited-Prepared by Management)

See condensed notes to the interim consolidated financial statements

F-5

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Consolidated Statements of Changes in Stockholders' Equity
From Inception to October 31, 2008
(Amounts expressed in US Dollars)

F-6

F-7

F-8

See condensed notes to the interim consolidated financial statements

F-9

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Notes to Interim Consolidated Financial Statements
October 31, 2008
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

1.        BASIS OF PRESENTATION

The accompanying unaudited interim consolidated financial statements do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of all recurring accruals) considered necessary for fair presentation have been included. Operating results for the interim period are not necessarily indicative of the results that may be expected for the year ended April 30, 2009. Interim financial statements should be read in conjunction with the Company's annual audited financial statements.

The interim consolidated financial statements include the accounts of Yukon Gold Corporation, Inc. (the “Company”) and its wholly owned subsidiary Yukon Gold Corp. (“YGC”). All material inter-company accounts and transactions have been eliminated.

2.        GOING CONCERN

The Company has no source for operating revenue and expects to incur significant expenses before establishing operating revenue. The Company has a need for equity capital and financing for working capital and exploration and development of its properties. Because of continuing operating losses, the current deterioration in economic conditions and market volatility, the Company's continuance as a going concern is dependent upon its ability to obtain adequate financing and to reach profitable levels of operation. The Company's future success is dependent upon its continued ability to raise sufficient capital, not only to maintain its operating expenses, but to explore for ore reserves and develop those it has on its mining claims. There is no guarantee that such capital will continue to be available on acceptable terms, if at all or if the Company will attain profitable levels of operation.

Management has initiated plans to raise equity funding through the issuance of common shares including flow-through shares. The Company was successful in raising funds (net) of approximately $4 million during the year ended April 30, 2006, which assisted the Company in meeting its commitments and requirements for project expenses and general and administrative expenses. The Company also raised (net) approximately $1.3 million during the six months ended October 31, 2006. The Company raised (net) approximately $1.9 million through subscription of flow-through special warrants and raised (net) approximately $230,000 through subscription of unit special warrants during the three months ended January 31, 2007. The Company further raised an additional (net) approximately $227,000 through subscription of flow-through units and raised (net) approximately $557,000 through subscription of units during the three months ended October 31, 2007. The Company further raised approximately (net) $450,000 through subscription of flow-through units and raised (net) approximately $1,037,000 through subscription of units during the three months ended January 31, 2008. The Company further raised approximately (net) $578,109 through issue of flow-through shares during the three months ended July 31, 2008. Further, Management has commenced monitoring costs and is initiating measures to reduce costs wherever appropriate. The Company's common shares are listed on the Toronto Stock Exchange (the “TSX”) and included for quotation on the OTC Bulletin Board® in the United States. The trading of the Company's stock in both the United States and Canada has expanded its investor base, as the Company continues to explore sources of funding from both the United States and Canada.

F-10

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Notes to Interim Consolidated Financial Statements
October 31, 2008
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

3.        NATURE OF OPERATIONS

The Company is an exploration stage mining company and has not yet realized any revenue from its operations. It is primarily engaged in acquisition and exploration of its two mining properties, both located in the province of Yukon in Canada. The Company has not yet determined whether these properties contain mineral reserves that are economically recoverable. The business of mining and exploring for minerals involves a high degree of risk and there can be no assurances that current exploration programs will result in profitable mining operations.

4.        RESTRICTED CASH

Under Canadian income tax regulations, a company is permitted to issue flow-through shares whereby the company agrees to incur qualifying expenditures and renounce the related income tax deductions to the investors. Notwithstanding that, there is no specific requirement to segregate the funds. The flow-through funds, which are unexpended at the consolidated balance sheet date are considered to be restricted and are not considered to be short term deposits or cash or cash equivalents. As of October 31, 2008 and April 30, 2008 unexpended flow-through funds were $nil (April 30, 2008: $817,092) which were restricted cash.

5.        PREPAID EXPENSES AND OTHER

Included in prepaid expenses and other is an amount of $87,777 (CDN$105,727) being Goods & Services tax receivable from the Federal Government of Canada. Subsequent to the quarter ended October 31, 2008 on November 12, 2008 the Company received $26,140 (CDN$31,486) of this amount.

6.        CAPITAL STOCK

a)        Authorized

150,000,000 of Common shares, $0.0001 par value

b)        Issued

33,650,629 Common shares

F-11

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Notes to Interim Consolidated Financial Statements
October 31, 2008
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

6.        CAPITAL STOCK-Cont'd

c)        Changes to Issued Share Capital

Year ended April 30, 2008

On July 7, 2007 the Company issued 136,364 common shares in settlement of a property payment on the Mount Hinton Property. The shares represent $57,252 (CDN$60,000) which is 40% of the contracted payment and were valued at $0.42 (CDN$0.44) each. The balance 60% payment was paid in cash.

On August 16, 2007 the Company completed a private placement (the “Financing”) with Northern Securities Inc. (“Northern”), acting as agent. The Financing was comprised of the sale of 1,916,666 units (the “Units”) at $0.42 (CDN$0.45) per Unit (the “Unit Issue Price”) for gross proceeds of $802,101 (CDN$862,500) and the sale of 543,615 flow-through units (the “Flow-Through Units” which qualify as flow-through shares for the purposes of the Canadian Income Tax Act) at $0.49 (CDN$0.52) per Flow-Through Unit (the “Flow-Through Unit Issue Price”) for gross proceeds of $262,884 (CDN$282,680). The proceeds raised were allocated between the offering of shares and the sale of tax benefits. A liability of $35,381 was recognized for the sale of taxable benefits, which was reversed and credited to income when the Company renounced resource expenditure deduction to the investor. Each Unit consisted of one non-flow through common share (“Common Share”) and one half of one Common Share purchase warrant (each whole warrant, a “Warrant”). Each Warrant is exercisable into one Common Share until August 16, 2009 at an exercise price of $0.60 (CDN$0.60) per share. Each Flow-Through Unit consisted of one flow-through common share and one half of one Common Share purchase warrant (each whole warrant, an “FT Warrant”). Each FT Warrant is exercisable into one Common Share until August 16, 2009 at an exercise price of $0.70 (CDN$0.70) per share. The Company paid Northern a commission equal to 8% of the aggregate gross proceeds which amounted to $85,199 (CDN$91,614) and issued 153,333 “Unit Compensation Warrants” and 43,489 “FT Unit Compensation Warrants”. Each Unit Compensation Warrant is exercisable into one Unit at the Unit Issue Price until August 16, 2009. Each FT Unit Compensation Warrant is exercisable into one Common Share and one half of one FT Warrant at the Flow-Through Unit Issue Price until August 16, 2009. Yukon Gold also granted Northern an option (the “Over-Allotment Option”) exercisable until October 15, 2007 to offer for sale up to an additional $468,691 (CDN$500,000) of Units and/or Flow-Through Units on the same terms and conditions. The Company paid a $70,304 (CDN$75,000) due diligence fee to Northern at closing. The Company reimbursed Northern expenses of $18,600 (CDN$20,000) and legal fees of $18,600 (CDN$20,000).

F-12

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Notes to Interim Consolidated Financial Statements
October 31, 2008
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

6.        CAPITAL STOCK-Cont'd

c)        Changes to Issued Share Capital-Cont'd

On November 16, 2007 the Company completed the second part of a private placement (the “Second Financing”) with Northern acting as agent. The Second Financing was comprised of the sale of 2,438,888 units (the “Units”) at $0.46 (CDN$0.45) per Unit (the “Unit Issue Price”) for gross proceeds of $1,127,028 (CDN$1,097,500) and the sale of 1,071,770 flow through units (the “Flow-Through Units”) at $0.53 (CDN$0.52) per Flow-Through Unit (the “Flow-Through Unit Issue Price”) for gross proceeds of $572,315 (CDN$557,320). The proceeds raised were allocated between the offering of shares and the sale of tax benefits. A liability of $77,043 was recognized for the sale of taxable benefits, which was reversed and credited to income when the Company renounced resource expenditure deduction to the investor. The closing represented the final tranche of a $2,816,673 (CDN$2.8 million) private placement with Northern announced on July 24, 2007. Each Unit consists of one non-flow through common share (“Common Share”) and one half of one Common Share purchase warrant (each whole warrant, a “Warrant”). Each Warrant is exercisable into one Common Share until November 16, 2009 at an exercise price of $0.60 (CDN$0.60) per share. Each Flow-Through Unit consisted of one flow-through common share and one half of one Common Share purchase warrant (each whole warrant, an “FT Warrant”). Each FT Warrant is exercisable into one Common Share until November 16, 2009 at an exercise price of $0.70 (CDN$0.70) per share. Yukon Gold paid Northern a commission equal to 8% of the aggregate gross proceeds and issued 195,111 “Unit Compensation Warrants” and 85,741 “FT Unit Compensation Warrants”. Each Unit Compensation Warrant is exercisable into one Common Share and one half of one Common Share purchase warrant at the Unit Issue Price until November 16, 2009. Each full Common share purchase warrant is exercisable at $0.60 (CDN$0.60) . Each FT Unit Compensation Warrant is exercisable into one Common Share and one half of one Common Share purchase warrant at the Flow-Through Unit Issue Price. Each full Common Share purchase warrant is exercisable at $0.70 (CDN$0.70) .

The foregoing private placements were undertaken pursuant to an exemption offered by Regulation S promulgated under the Securities Act of 1933, as amended.

Six months ended October 31, 2008

On July 7, 2008, the Company issued 476,189 common shares in settlement of a property payment on the Mount Hinton property. These shares represent $58,887 (CDN$60,000) which is 40% of the contracted payment and were valued at $0.123 (CDN$0.126) each. The balance of the property payment in the amount of $88,330 (CDN$90,000) was paid in cash.

F-13

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Notes to Interim Consolidated Financial Statements
October 31, 2008
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

6.        CAPITAL STOCK-Cont'd

c)        Changes to Issued Share Capital-Cont'd

On May 16, 2008 the Company entered into a consulting agreement with Clarke Capital Group Inc. (“Clarke”) pursuant to which Clarke was retained to provide the Company with investor relations and business communications services for an initial term of 6 months, renewable thereafter for an additional 6 month term. Upon execution of the Clarke Agreement the Company paid Clarke $14,648 (CDN$15,000). Pursuant to the Clarke Agreement, the Company issued Clarke 50,000 shares of common stock on July 14, 2008.

On July 23, 2008 the Company closed a non-brokered private placement of up to $976,563 (CDN$1,000,000). The Company completed the sale of 4,134,000 common shares on a flow-through basis at a price of $0.15 (CDN$0.15) per share for gross proceeds of $613,778 (CDN$620,100). The Company paid a 5% finders fee on this private placement. The private placement was exempt from registration under the Securities Act of 1933, pursuant to an exemption afforded by Regulation S. The flow through shares were issued at market without any additional price charged for sale of taxable benefits.

7.        STOCK BASED COMPENSATION

Per SEC Staff Accounting Bulletin 107, Topic 14.F, “Classification of Compensation Expense Associated with Share-Based Payment Arrangements” stock based compensation expense is being presented in the same lines as cash compensation paid.

The Company adopted a new Stock Option Plan at its shareholders meeting on January 19, 2007 (the “2006 Stock Option Plan”). The 2006 Stock Option Plan will be administered by the board of directors of the Company or, in the board of directors' discretion, by a committee appointed by the board of directors for that purpose. The TSX approved the 2006 Stock Option plan on March 9, 2007.

On March 18, 2008 at the Annual and Special Meeting of Shareholders the shareholders of the Company approved an amendment to the 2006 Stock Option Plan increasing the number of Shares reserved for issuance thereunder from 2,000,000 to 2,899,044.

Subject to the provisions of the 2006 Stock Option Plan, the aggregate number of shares which may be issued under the 2006 Stock Option Plan shall not exceed 2,000,000 shares ("Total Shares"). Any Stock Option granted under the 2006 Stock Option Plan which has been exercised shall again be available for subsequent grant under the 2006 Stock Option Plan, effectively resulting in a re-loading of the number of shares available for grant under the 2006 Stock Option Plan. Any shares subject to an option granted under the 2006 Stock Option Plan which for any reason is surrendered, cancelled or terminated or expires without having been exercised shall again be available for subsequent grant under the 2006 Stock Option Plan.

Under the 2006 Stock Option Plan, at no time shall: (i) the number of shares reserved for issuance pursuant to Stock Options granted to any one optionee exceed 10% of the Total Shares; (ii) the number of shares, together with all security based compensation arrangements of the Company in effect, reserved for issuance pursuant to Stock Options granted to any "insiders" (as that term is defined under the Securities Act (Ontario)) exceed 10% of the total number of issued and outstanding shares. In addition, the number of shares issued to insiders pursuant to the exercise of Stock Options, within any one year period, together with all security based compensation arrangements of the Company in effect, shall not exceed 10% of the total number of issued and outstanding shares.

F-14

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Notes to Interim Consolidated Financial Statements
October 31, 2008
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

7.        STOCK BASED COMPENSATION-Cont'd

The purchase price (the “Price”) per share under each Stock Option shall be determined by the board of directors or a committee, as applicable. The Price shall not be lower than the closing market price on the TSX, or another stock exchange where the majority of the trading volume and value of the Shares occurs, on the trading day immediately preceding the date of grant, or if not so traded, the average between the closing bid and asked prices thereof as reported for the trading day immediately preceding the date of the grant; provided that if the shares have not traded on the TSX or another stock exchange for an extended period of time, the “market price” will be the fair market value of the shares at the time of grant, as determined by the board of directors or committee. The board of directors or committee may determine that the Price may escalate at a specified rate dependent upon the date on which an option may be exercised by the Eligible Participant.

Options shall not be granted for a term exceeding ten years (or such shorter or longer period as is permitted by the TSX) (the “Option Period”).

During the six month period ended October 31, 2008, the following stock options were granted under the 2006 stock option plan:

On July 28, 2008 the board of directors granted options to a consultant to acquire 250,000 shares, to vest 50,000 immediately and the balance of 50,000 each at three month intervals. These options can be exercised over a period of five (5) years. The exercise price was set at $0.15 (CDN$0.15) per share. These options were granted under the Company's 2006 stock option plan. Subsequent to the quarter ended October 31, 2008 on December 12, 2008 the Company and the consultant mutually agreed to terminate the agreement effective October 31, 2008.

For this six month period ended October 31, 2008, the Company has recognized in the financial statements, stock-based compensation costs as per the following details. The fair value of each option used for the purpose of estimating the stock compensation is based on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions:

F-15

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Notes to Interim Consolidated Financial Statements
October 31, 2008
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

7.        STOCK BASED COMPENSATION-Cont'd

As of October 31, 2008, there was $29,810 of unrecognized expenses related to non-vested stock-based compensation arrangements granted. The stock-based compensation expense for the six month period ended October 31, 2008 was $24,823.

On June 11, 2008, the Company cancelled 200,000 stock options held by a former officer.

8.        SHORT-TERM INVESTMENT IN AVAILABLE- FOR- SALE SECURITIES

During the six month period ended October 31, 2008, the Company sold the balance of 450,000 shares of Industrial Minerals, Inc. at an average selling price of $.0655 for a total consideration of $29,460 in the open market.

9.        COMMITMENTS AND CONTINGENCIES

a)        Mount Hinton Property Mining Claims

The Mount Hinton Property is adjacent to the Keno Hill Mining Camp in central Yukon Territory. It consists of 186 staked claims under the Yukon Quartz Mining Act, covering approximately 9300 acres.

On July 7, 2002, the Company's wholly owned subsidiary, Yukon Gold Corp. (“YGC”) entered into an option agreement with the Hinton Syndicate to acquire a 75% interest in the 273 unpatented mineral claims covering approximately 14,000 acres in the Mayo Mining District of Yukon, Canada. This agreement was replaced with a revised and amended agreement (the “Hinton Option Agreement”) dated July 7, 2005 which superseded the original agreement and amendments thereto. The new agreement is between the Company, its wholly-owned subsidiary YGC and the Hinton Syndicate.

YGC must make scheduled cash payments and perform certain work commitments to earn up to a 75% interest in the mineral claims, subject to a 2% net smelter return royalty in favor of the Hinton Syndicate, as further described below.

F-16

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Notes to Interim Consolidated Financial Statements
October 31, 2008
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

9.        COMMITMENTS AND CONTINGENCIES-Cont'd

The schedule of Property Payments and Work Programs are as follows:

PROPERTY PAYMENTS

WORK PROGRAM-expenditures to be incurred in the following periods;

By letter agreement dated August 17, 2006, the Hinton Syndicate agreed to allow the Company to defer a portion of the Work Program expenditure scheduled to be incurred by December 31, 2006. The agreement to defer such Work program expenditures was due to the mechanical break-down of drilling equipment and the unavailability of replacement drilling equipment at the Mount Hinton site. As a result, the Company was allowed to defer the expenditure of approximately $220,681 (CDN$235,423) until December 31, 2007. The Company had incurred that expenditure in addition to the expenditure for January 1 to December 31, 2007 as at October 31, 2007. All other Property Payments and Work Program expenditures due have been made and incurred.

F-17

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Notes to Interim Consolidated Financial Statements
October 31, 2008
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

9.        COMMITMENTS AND CONTINGENCIES-Cont'd

**By letter agreement dated February 29, 2008, the Company gave notice to the Hinton Syndicate that all of the Work Program expenditures scheduled to be incurred by December 31, 2008 would be deferred until December 31, 2009. Subsection 2.2(f) of the Hinton Option Agreement provides that if Yukon Gold has earned at least 25% of the right, title and interest in the Property as provided for in Subsection 2.2(e) of the Hinton Option Agreement and is unable to meet its next year's Work Program expenditures as set out in Section 2.2 of the Hinton Option Agreement, it shall be entitled to extend the time required to incur the Work Program expenditures from year to year by giving notice to the Hinton Syndicate to such effect; provided that the full amount of the Work Program expenditures has been incurred by December 31, 2009.

Provided all Property Payments have been made that are due prior to the Work Program expenditure levels being attained, YGC shall have earned a:

25% interest upon completion of Work Program expenditures of $1,245,330 (CDN$1,500,000)

50% interest upon completion of Work Program expenditures of $2,075,550 (CDN$2,500,000)

75% interest upon completion of Work Program expenditures of $4,459,374 (CDN$5,225,000)

YGC earned a 50% interest in the claims covered by the Hinton Option Agreement as at October 31, 2007. In some cases, payments made to service providers include amounts advanced to cover the cost of future work. These advances are not loans but are considered “incurred” exploration expenses under the terms of the Hinton Option Agreement. Section 2.2(a) of the Hinton Option Agreement defines the term, “incurred” as follows: “Costs shall be deemed to have been “incurred” when YGC has contractually obligated itself to pay for such costs or such costs have been paid, whichever should first occur.” Consequently, the term, “incurred” includes amounts actually paid and amounts that YGC has obligated itself to pay.

The Hinton Option Agreement contemplates that upon the earlier of: (i) a production decision or (ii) investment of $4,459,374 (CDN$5,225,000) or (iii) YGC has a minority interest and decides not to spend any more money on the project, YGC's relationship with the Hinton Syndicate will become a joint venture for the further development of the property. Under the terms of the Hinton Option Agreement, the party with the majority interest would control the joint venture. Although YGC had earned a 50% interest as at October 31, 2007, if the relationship is converted to a joint venture currently, YGC's interest would automatically be reduced to a 45% interest in the joint venture (by the terms of the Hinton Option Agreement) and the Hinton Syndicate would control the joint venture. Once the 75% interest is earned, as described above, YGC has a further option to acquire the remaining 25% interest in the mineral claims for a further payment of $4,151,100 (CDN$5,000,000).

F-18

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Notes to Interim Consolidated Financial Statements
October 31, 2008
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

9.        COMMITMENTS AND CONTINGENCIES-Cont'd

The Hinton Option Agreement provides that the Hinton Syndicate receives a 2% “net smelter return royalty.” In the event that the Company exercises its option to buy-out the remaining 25% interest of the Hinton Syndicate (which is only possible if the Company has reached a 75% interest, as described above) then the “net smelter return royalty” would become 3% and the Hinton Syndicate would retain this royalty interest only. The “net smelter return royalty” is a percentage of the gross revenue received from the sale of the ore produced from the mine less certain permitted expenses.

The Hinton Option Agreement entitles the Hinton Syndicate to recommend for appointment one member to the board of directors of the Company.

The Hinton Option Agreement provides both parties (YGC and the Hinton Syndicate) with rights of first refusal in the event that either party desires to sell or transfer its interest.

The Hinton Syndicate members each have the option to receive their share of property payments in stock of the Company at a 10% discount to the market. YGC and the Company have a further option to pay 40% of any property payment due after the payment on January 2, 2006 with common stock of the Company. On July 7, 2007 the Company issued 136,364 common shares, with the approval of the TSX, in settlement of 40% of the property payment due on July 7, 2007. The shares represent $57,252 (CDN$60,000) which is 40% of the contracted payment and were valued at $0.42 (CDN$0.44) each. The $84,727 (CDN$90,000) balance was paid in cash to the members of the Hinton Syndicate on July 7, 2007. This entire issuance of shares and cash payment was expensed as project expense. On July 7, 2008, the Company issued 476,189 common shares in settlement of a property payment on the Mount Hinton property. These shares represent $58,887 (CDN$60,000) which is 40% of the contracted payment and were valued at $0.126 (CDN$0.126) each. The balance of the property payment in the amount of $88,331 (CDN$90,000) was paid in cash.

The Hinton Option Agreement pertains to an “area of interest” which includes the area within ten kilometres of the outermost boundaries of the 273 mineral claims, which constitute our mineral properties. Either party to the Hinton Option Agreement may stake claims outside the 273 mineral claims, but each must notify the other party if such new claims are within the “area of interest.” The non-staking party may then elect to have the new claims included within the Hinton Option Agreement. As of December 11, 2006, there were an additional 24 claims staked, known as the “Gram Claims” which became subject to the Hinton Option Agreement. On June 16, 2008 an additional 18 claims were staked (#25-#42), known as the “Gram Claims”, at a cost of $8,679 (CDN$8,887), which became subject to the Hinton Option Agreement. On April 2, 2007 the Company accepted a proposed work program, budget and cash call schedule for the Mount Hinton project which was revised on May 15, 2007. The Company paid cash calls in the amount of $2,152,317 (CDN$2,105,200) for the 2007 Work Program. The Company had approximately $70,304 (CDN$75,000) on deposit left over from the 2006 cash call schedule.

F-19

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Notes to Interim Consolidated Financial Statements
October 31, 2008
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

9.        COMMITMENTS AND CONTINGENCIES-Cont'd

On May 15, 2007 the Company paid $180,164 (CDN$200,000), on June 15, 2007 the Company paid $202,684 (CDN$225,000), being two of the four cash call payments. Due to delays in the drilling program the third payment of $635,123 (CDN$600,000), which was due on July 31, 2007 was changed to August 31, 2007. On August 15, 2007 the Company paid $97,259 (CDN$91,880) towards the third cash call payment for the Mount Hinton 2007 Work Program. On August 31, 2007 the Company re-allocated $537,864 (CDN$508,120) being the balance of the third cash call payment from cash call funds previously allocated to the Marg Project. These re-allocated funds were not needed for the Marg Project. The fourth payment of $428,919 (CDN$405,200) which was originally due on August 15, 2007 was changed to and paid on September 15, 2007.

b)        The Marg Property

In March 2005, the Company acquired rights to purchase 100% of the Marg Property, which consists of 402 contiguous mineral claims covering approximately 20,000 acres located in the Mayo Mining District of the Yukon Territory of Canada. Title to the claims is registered in the name of YGC.

The Company assumed the rights to acquire the Marg Property under a Property Purchase Agreement (“Agreement”) with Atna Resources Ltd. (“Atna”). Under the terms of the Agreement the Company paid $119,189 (CDN$150,000) cash and 133,333 common shares as a down payment. The Company made payments under the Agreement for $43,406 (CDN$50,000) cash and an additional 133,333 common shares of the Company on December 12, 2005; $86,805 (CDN$100,000) cash and an additional 133,334 common shares of the Company on December 12, 2006. On December 12, 2007 the Company paid $98,697 (CDN$100,000) being the next payment due.

The Company has agreed to make subsequent payments under the Agreement of: $166,044 (CDN$200,000) in cash and/or common shares of the Company (or some combination thereof to be determined) on or before December 12, 2008. Subsequent to the quarter ended October 31, 2008 the Company entered into a letter agreement with Atna, amending the terms of the payments due under the Agreement. See Note 13 “SUBSEQUENT EVENTS” below. Upon the commencement of commercial production at the Marg Property, the Company will pay to Atna $830,220 (CDN$1,000,000) in cash and/or common shares of the Company, or some combination thereof to be determined.

On April 2, 2007 the Company accepted a proposed work program, budget and cash call schedule for the Marg project. The Company has paid cash calls in the amount of $2,100,528 (CDN$2,281,880) for the 2007 Work Program. The Company had approximately $515,561 (CDN$550,000) on deposit left over from the 2006 cash call schedule. On May 15, 2007 the Company paid $703,037 (CDN$750,000), on June 15, 2007 the Company paid $703,037 (CDN$750,000), and on July 15, 2007 the Company paid $703,037 (CDN$750,000) being three of the four cash call payments.

F-20

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Notes to Interim Consolidated Financial Statements
October 31, 2008
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

9.        COMMITMENTS AND CONTINGENCIES-Cont'd

The fourth and final payment of $402,244 (CDN$380,000) was paid on August 15, 2007. On August 31, 2007 the Company re-allocated $537,864 (CDN$508,120) being the balance of the third cash call payment for the Mount Hinton 2007 Work Program from cash call funds previously allocated to the Marg Project. These re-allocated funds were not needed for the Marg Project. On January 23, 2008 the Company was refunded $388,524 (CDN$390,000) as these funds were not needed for the Marg Project.

c)        On August 15, 2007 the Company entered into an investor relations marketing agreement with a consultant for a one year term, with the option to renew for an additional 12 months. In return for services rendered, the Company will pay the consultant $1,992 (CDN$2,000) per month. On August 31, 2007 the Company paid $3,787 (CDN$4,000) being the first and last payments of the contract. On September 15, 2007 the Company paid $1,941 (CDN$2,000) and on October 15, 2007 the Company paid $2,048 (CDN$2,000), being the second and third payments respectively. On November 15, 2007 the Company paid $2,030 (CDN$2,000) being the fourth payment of the contract. On December 14, 2007 the Company paid $1,967 (CDN$2,000) and on January 15, 2008 the Company paid $1,967 (CDN$2,000), being the fifth and sixth payments of the contract respectively. In addition, the consultant has been granted an option to purchase 125,000 shares of the Company at $0.45 (CDN$0.45) per share, with the option vesting in equal quarterly amounts of 31,250 shares on November 15, 2007, February 15, 2008, May 15, 2008 and August 15, 2008, and the first exercise date being August 15, 2008 and an expiry date of August 15, 2010. On February 12, 2008 the Company terminated the contract and the Company received a refund on March 11, 2008 of $1,295(CDN$1,300) previously paid on August 31, 2007 to cover the last payment of the one year term. The 31,250 options granted under the contract to vest on each of May 15, 2008 and August 15, 2008 respectively were also cancelled.

d)        On December 5, 2007 the Company entered into an agreement with a consultant to create investor awareness for a period of six months, commencing on December 5, 2007 for a fee of $20,000 and 300,000 restricted common shares to be issued in equal tranches of 50,000 shares at the end of each month during the term of the agreement. On December 6, 2007 the Company received conditional approval from the TSX to issue the 300,000 restricted shares as per the terms of the agreement. The consulting fee of $20,000 was paid on December 11, 2007. The Company had accrued the expense of $22,000 for 100,000 shares to be issued to January 31, 2008 . Due to non-performance of the agreement by the consultant, the Company has obtained legal opinion that it is not obligated to issue any of the restricted 300,000 common shares. The consulting expense accrual for $22,000 set up during the quarter ended January 31, 2008 was reversed and credited back to income in the quarter ended April 30, 2008. The Company has also paid the requisite fee to the TSX for cancellation of all of these shares.

F-21

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Notes to Interim Consolidated Financial Statements
October 31, 2008
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

9.        COMMITMENTS AND CONTINGENCIES-Cont'd

e)        Effective as of December 15, 2007 the Company entered into a consulting agreement with Ronald Mann (the “Mann Agreement”), pursuant to which Mr. Mann was retained as the Company's President and Chief Executive Officer. The board of directors of the Company appointed Mr. Mann to fill a vacancy on the board of directors, also effective as of December 15, 2007. The Mann Agreement has a one-year term commencing on December 15, 2007, and is automatically renewable thereafter, unless terminated pursuant to the terms of the Mann Agreement. Pursuant to the Mann Agreement, the parties agreed that Mr. Mann and the Company shall indicate their respective intentions to renew the term after the passage of eight (8) months from the date of the Mann Agreement. Pursuant to the Mann Agreement, Mr. Mann will receive an annual consulting fee of $124,533 (CDN$150,000). In addition, Mr. Mann received 500,000 warrants to purchase shares of the Company's common stock (the “Mann Warrants”). The Mann Warrants shall have a term of 5 years and an exercise price of $0.20 (CDN$0.24) . 250,000 of the Mann Warrants were fully vested upon issuance, and the remaining 250,000 vested 6 months from the date of issuance, on June 15, 2008. Subsequent to the quarter ended October 31, 2008 Mr. Mann resigned as an Officer and as a Director of the Company. See Note 13, “SUBSEQUENT EVENTS” below.

f)        As of December 18, 2007 the Company entered into a consulting agreement with Cletus Ryan (the “Ryan Agreement”) pursuant to which Mr. Ryan was retained as the Company's Vice President, Corporate Development. The Ryan Agreement has a six-month term commencing on December 18, 2007 and is automatically renewable thereafter, unless terminated pursuant to the terms of the Ryan Agreement. Pursuant to the Ryan Agreement, Mr. Ryan will receive an annual consulting fee of $99,626 (CDN$120,000). In addition, Mr. Ryan received 200,000 options to purchase shares of the Company's common stock (the “Ryan Options”). The Ryan Options were fully vested upon the date of issuance and have an exercise price of $0.20 (CDN $0.24) . On March 7, 2008 the Company renewed the Ryan Agreement for an additional six months.

g)        On February 11, 2008 by letter engagement agreement the Company contracted the services of a Corporate Secretarial company to fill the role of Mrs. Lisa Rose during her maternity leave for a monthly fee of $1,121 (CDN$1,350) plus eligible expenses.

h)        On February 18, 2008 the Company and YGC, it's wholly-owned subsidiary, signed a surface drilling contract with a diamond drilling company for the Marg Project to commence on or about June 18, 2008. On February 18, 2008 the Company paid $148,928 (CDN$150,000) as a deposit per the terms of the contract. During the quarter ended July 31, 2008 the Company paid $281,581 (CDN$288,339) to the contractor. During the quarter ended October 31, 2008 the Company paid $224,283 (CDN$270,149) to the contractor and on August 30, 2008 the drilling program was demobilized. The balance of the deposit in the amount of $8,515 (CDN$10,256) is being held by the diamond drilling company as a deposit on the 2009 drilling program.

F-22

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Notes to Interim Consolidated Financial Statements
October 31, 2008
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

9.        COMMITMENTS AND CONTINGENCIES-Cont'd

i)        On March 10, 2008 the Company entered into a contract with a global mining consultancy business for a scoping study and to prepare a report pursuant to the terms of Canadian National Instrument 43-101, regarding the Marg Deposit at an estimated cost of $76,675 (CDN$81,300). The Company paid $18,579 (CDN$18,713) at April 30, 2008. During the quarter ended July 31, 2008 the Company paid an additional $41,042 (CDN$42,027). During the quarter ended October 31, 2008 the Company paid a further $17,054 (CDN$20,542) to the consultant.

j)        On March 18, 2008 the Company entered into a consulting agreement with Gary Cohoon (the “Cohoon Agreement”) pursuant to which Mr. Cohoon was retained as Vice-President, Exploration, of the Company. The Cohoon Agreement has a one-year term commencing on March 18, 2008 and is automatically renewable thereafter, unless terminated pursuant to its terms. Pursuant to the Cohoon Agreement, Mr. Cohoon will receive an annual consulting fee of $116,231 (CDN$140,000). Additionally, Mr. Cohoon received 200,000 options to purchase shares of the Company's common stock (the “Cohoon Options”). The Cohoon Options fully vested upon issuance and have an exercise price of $0.18 (CDN$0.22) .

k)        On April 10, 2008 by letter agreement the Company procured the services of Galina Morozova through a contract position as a Geologist with YGC, the Company's wholly-owned subsidiary commencing April 15, 2008 until August 31, 2008. Ms. Morozova received $6,454 (CDN$6,500) per month until the project began at the Marg Property on approximately June 15, 2008, whereupon Ms. Morozova received $405 (CDN$500) per day plus expenses for the duration of the term of the letter agreement. The contract position ended on August 28, 2008.

l)        On April 29, 2008 the Company entered into a letter agreement with R. Andrew Hureau for a contract position as Senior Geologist with YGC, the Company's wholly-owned subsidiary. Mr. Hureau's position commenced on May 1, 2008 at a rate of $623 (CDN$750) per day plus expenses. The letter agreement states that the term is on commencement and for the duration of drilling on the Marg Project, approximately mid June, 2008 to the end of August, 2008, on a regular schedule. The contract position ended on September 3, 2008.

m)        On May 5, 2008 the Company entered into an investor relations agreement (the “Equicom Agreement”) with Equicom Group Inc. (“Equicom”) pursuant to which Equicom was retained to provide the Company with general marketing and business consulting services for an initial term of one year, then renewable thereafter. Equicom will receive an annual work fee of $49,813 (CDN$60,000), payable in monthly installments of $4,151 (CDN$5,000). The initial prorated retainer in the amount of $4,248 (CDN$4,350) and the June 1-30, 2008 installment of $4,883 (CDN$5,000) were made on May 30, 2008. On July 1, 2008 the installment covering July 1-31, 2008 of $4,883 (CDN$5,000) was paid. By letter on July 23, 2008 the Company terminated the Equicom Agreement with such termination taking effect September 18, 2008. Payments were made on August 1, 2008 of $4,151 (CDN$5,000) and on September 1, 2008 of $2,491 (CDN$3,000) representing the balance due on the contract.

F-23

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Notes to Interim Consolidated Financial Statements
October 31, 2008
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

9.        COMMITMENTS AND CONTINGENCIES-Cont'd

n)        On May 16, 2008 the Company entered into a consulting agreement (the “Clarke Agreement”) with Clarke Capital Group Inc. (“Clarke”) pursuant to which Clarke was retained to provide the Company with investor relations and business communications services for an initial term of 6 months, renewable thereafter for an additional 6 month term. Upon execution of the Clarke Agreement the Company paid Clarke $14,648 (CDN$15,000). Clarke will also receive a monthly work fee of $2,906 (CDN$3,500) during the term of the agreement. Upon renewal, Clarke will receive an additional payment of $8,302 (CDN$10,000). Pursuant to the Clarke Agreement, the Company issued Clarke 50,000 shares of common stock on July 14, 2008, with an additional 50,000 shares issuable upon renewal. The Company paid the June and July installments on their respective due dates. The Company paid the August, September and October installments on their respective due dates. Subsequent to the quarter ended October 31, 2008 the Company advised Clarke that it was terminating the Clarke Agreement and would not be issuing any further installment payments.

o)        On May 20, 2008 YGC, the Company's wholly-owned subsidiary entered into a service provision agreement with a company to provide cooking and first aid services on the Marg Property from June 15, 2008 to September 30, 2008. On June 4, 2008 the Company paid a $9,766 (CDN$10,000) advance to the service provider as per the terms of the agreement. During the quarter ended July 31, 2008 the Company also paid $15,178 (CDN$15,543) to the service provider. During the quarter ended October 31, 2008 the Company paid an additional $24,233 (CDN$29,189) and the contractor refunded the balance of the advance in the amount of $382 (CDN$460) to the Company.

p)        On July 28, 2008 the Company entered into a consulting agreement with First Canadian Capital (“First Canadian”) pursuant to which First Canadian will provide general marketing and business consulting services for an initial term of one year, renewable thereafter. The Company will pay First Canadian $4,864 (CDN$6,000) per month. The Company paid the first three months of such fees in advance. In addition on July 28, 2008 the Company issued 250,000 stock options to buy the Company's shares at a purchase price of $0.12 (CDN$0.15) per share. The stock options shall vest over the initial term of the agreement. Subsequent to the quarter ended October 31, 2008, on December 12, 2008 the Company and the consultant mutually agreed to terminate the agreement effective October 31, 2008.

10.      RELATED PARTY TRANSACTIONS

Six Months ended October 31, 2008

The Company and its subsidiary expensed a total of $80,015 in consulting fees & wages to five Company Directors, and $174,159 to five of its officers.

No director or officer exercised stock options during the six month period ended October 31, 2008.

F-24

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Notes to Interim Consolidated Financial Statements
October 31, 2008
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management) 

11.      CHANGES IN OFFICERS AND DIRECTORS

On August 1, 2008 the board of directors appointed Kathy Chapman Chief Administrative Officer of the Company.

On December 11, 2008 the Company accepted G.E. “Ted” Creber's resignation as a Director.

On December 12, 2008 the Company accepted Ronald Mann's resignation as Chief Executive Officer and President and as a Director, and as an Officer and Director of YGC, the Company's wholly-owned subsidary. There were no disagreements between the Company and Mr. Mann with regards to the Company's operations or public disclosures. The Company has agreed to pay Mr. Mann severance of $20,756 (CDN$25,000), payable in two installments.

On December 12, 2008 the Company appointed J.L. Guerra, Jr. President and Chief Executive Officer. Mr. Guerra is also the Chairman of the Company's Board of Directors.

12.      EXPIRY OF WARRANTS

On August 22, 2008 245,455 warrants held by J.L. Guerra, Jr., Chairman of the Board, expired.

13.      SUBSEQUENT EVENTS

F-25

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
FOR THE THREE AND SIX MONTH PERIODS
ENDED OCTOBER 31, 2008

Discussion of Operations & Financial Condition

Yukon Gold has no source of revenue, operates at a loss and expects operating losses to continue as long as it remains in an exploration stage and perhaps thereafter. As at October 31, 2008, we had accumulated losses of $14,323,531. These losses raise substantial doubt about our ability to continue as a going concern. Our ability to emerge from the exploration stage and conduct mining operations is dependent, in large part, upon our raising additional equity financing.

As described in greater detail below, the Company's major endeavor over the quarter ended October 31, 2008 has been its effort to raise additional capital to meet its ongoing obligations under both the Hinton Option Agreement and the Marg Acquisition Agreement and to pursue its exploration activities.

Having obtained material financing, we implemented an exploration program at the Marg Property.

SELECTED INFORMATION

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Revenues

No revenue was generated by the Company's operations during the six month and three month period ended October 31, 2008 and October 31, 2007 respectively.

Net Loss

The Company's expenses are reflected in the Consolidated Statements of Operations under the category of Operating Expenses. To meet the criteria of United States generally accepted accounting principles (“GAAP”), all exploration and general and administrative costs related to projects are charged to operations in the year incurred.

The significant components of expense that have contributed to the total operating expense are discussed as follows:

(a) General and Administrative Expense

Included in operating expenses for the three months ended October 31, 2008 is general and administrative expense of $322,807 as compared to $392,087 for the three months ended October 31, 2007. General and administrative expense for the six month period ended October 31, 2008 was $689,617 as compared with $466,973 for the six month period ended October 31, 2007. General and administrative expense represents approximately 36.46% of the total operating expense for the three months ended October 31, 2008 and approximately 16.2% of the total operating expense for the three months ended October 31, 2007. During the prior quarter ended July 31, 2007, the Company had credited $136,668 to General and Administration expense relating to the cancellation and waiver of an agreement with a consultant for which the Company had accrued for this amount as payable.

(b) Project Expense

Included in operating expenses for the three months ended October 31, 2008 is project expenses of $551,729 as compared with $2,023,086 for the three months ended October 31, 2007. Project expenses for the six month period ended October 31, 2008 was $1,723,638 as compared with $2,997,811 for the six month period ended October 31, 2007. Project expense is a significant expense and it represents approximately 62.3% of the total operating expense for the three months ended October 31, 2008 and approximately 83.62% of the total operating expense for the three months ended October 31, 2007. Due to lower cash availability, project expenses during the current quarter was significantly less than the prior quarter.

Exploration Expenditures at the Company's Properties

Mount Hinton

The Mount Hinton Property is adjacent to the Keno Hill Mining Camp in central Yukon Territory. It consists of 186 staked claims under the Yukon Quartz Mining Act, covering approximately 9300 acres.

On April 2, 2007 the Company accepted a proposed work program, budget and cash call schedule for the Mount Hinton project which was revised on May 15, 2007, totaling $2,152,317 (CDN$2,105,200) for the 2007 Work Program. The Company had approximately $70,304 (CDN$75,000) on deposit left over from the 2006 cash call schedule. On May 15, 2007 the Company paid $180,164 (CDN$200,000), on June 15, 2007 the Company paid $202,684 (CDN$225,000), being two of the four cash call payments. Due to delays in the drilling program the third payment of $635,123 (CDN$600,000) which was due on July 31, 2007 was changed to August 31, 2007. On August 15, 2007 the Company paid $97,259 (CDN$91,880) towards the third cash call payment for the Mount Hinton 2007 Work Program. On August 31, 2007 the Company reallocated $537,864 (CDN$508,120) being the balance of the third cash call payment from cash call funds previously allocated to the Marg Project. These re-allocated funds were not needed for the Marg Project. The fourth payment of $428,919 (CDN$405,200) which was originally due on August 15, 2007 was changed to and paid on September 15, 2007.

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By letter agreement dated August 17, 2006, the Hinton Syndicate agreed to allow the Company to defer a portion of the Work Program expenditure scheduled to be incurred by December 31, 2006. The agreement to defer such Work program expenditures was due to the mechanical break-down of drilling equipment and the unavailability of replacement drilling equipment at the Mount Hinton site. As a result, the Company was allowed to defer the expenditure of approximately $220,681 (CDN$235,423) until December 31, 2007. The Company had incurred that expenditure in addition to the expenditure for January 1 to December 31, 2007 as at October 31, 2007. All other Property Payments and Work Program expenditures due have been made and incurred.

By letter agreement dated February 29, 2008, the Company gave notice to the Hinton Syndicate that all of the Work Program expenditures scheduled to be incurred by December 31, 2008 would be deferred until December 31, 2009. Subsection 2.2(f) of the Hinton Option Agreement provides that if Yukon Gold has earned at least 25% of the right, title and interest in the Property as provided for in Subsection 2.2(e) of the Hinton Option Agreement and is unable to meet its next year's Work Program expenditures as set out in Section 2.2 of the Hinton Option Agreement, it shall be entitled to extend the time required to incur the Work Program expenditures from year to year by giving notice to the Hinton Syndicate to such effect; provided that the full amount of the Work Program expenditures has been incurred by December 31, 2009.

Provided all Property Payments have been made that are due prior to the Work Program expenditure levels being attained, YGC shall have earned a:

25% interest upon completion of Work Program expenditures of $1,245,330 (CDN$1,500,000);

50% interest upon completion of Work Program expenditures of $2,075,550 (CDN$2,500,000); and

75% interest upon completion of Work Program expenditures of $4,459,374 (CDN$5,225,000).

YGC earned a 50% interest in the claims covered by the Hinton Option Agreement as at October 31, 2007. In some cases, payments made to service providers include amounts advanced to cover the cost of future work. These advances are not loans but are considered "incurred" exploration expenses under the terms of the Hinton Option Agreement. Section 2.2(a) of the Hinton Option Agreement defines the term, “incurred” as follows: “Costs shall be deemed to have been “incurred” when YGC has contractually obligated itself to pay for such costs or such costs have been paid, whichever should first occur.” Consequently, the term, “incurred” includes amounts actually paid and amounts that YGC has obligated itself to pay. Under the Hinton Option Agreement there is also a provision that YGC must have raised and have available the Work Program funds for the period from July 7, 2005 to December 31, 2006, by May 15 of 2006. This provision was met on May 15, 2006.

All Property Payments and Work Program expenditures have been made and incurred.

The Hinton Option Agreement contemplates that upon the earlier of: (i) a production decision or (ii) investment of $4,459,374 (CDN$5,225,000) or (iii) YGC has a minority interest and decides not to spend any more money on the project, YGC's relationship with the Hinton Syndicate will become a joint venture for the further development of the property. Under the terms of the Hinton Option Agreement, the party with the majority interest would control the joint venture. Although YGC had earned a 50% interest as at October 31, 2007, if the relationship is converted to a joint venture currently, YGC's interest would automatically be reduced to a 45% interest in the joint venture (by the terms of the Hinton Option Agreement) and the Hinton Syndicate would control the joint venture. Once the 75% interest is earned, as described above, YGC has a further option to acquire the remaining 25% interest in the mineral claims for a further payment of $4,151,100 (CDN$5,000,000).

- 31 -

The Hinton Option Agreement provides that the Hinton Syndicate receive a 2% “net smelter returns royalty.” In the event that we exercise our option to buy the entire interest of the Hinton Syndicate (which is only possible if we have reached a 75% interest, as described above) then the "net smelter returns royalty" would become 3% and the Hinton Syndicate would retain this royalty interest only. The “net smelter returns royalty” is a percentage of the gross revenue received from the sale of the ore produced from our mine less certain permitted expenses.

The Hinton Option Agreement entitles the Hinton Syndicate to recommend for appointment (but not nominate) one member to the board of directors of Yukon Gold.

The Hinton Syndicate members each have the option to receive their share of property payments in stock of Yukon Gold at a 10% discount to the market. YGC and Yukon Gold also have the option to pay 40% of any property payment due after the payment on January 2, 2006 with common stock of Yukon Gold. As of July 7, 2006, Yukon Gold issued to the Hinton Syndicate 43,166 shares of its common stock, based upon a valuation adopted by the board of Yukon Gold of $1.24 (CDN$1.39) per share, as partial payment of the July 7, 2006 Property Payment. On July 7, 2006 the Company issued 43,166 common shares and paid $80,501 (CDN$90,000) in cash in settlement of the property payment due on July 7, 2006 on the Mount Hinton Property. The shares represented 40% of the total $134,168 (CDN$150,000) payment and were valued at $1.24 (CDN$1.39) each. On July 7, 2007 the Company issued 136,364 common shares in settlement of a property payment on the Mount Hinton property. The shares represent $57,252 (CDN$60,000) which is 40% of the contracted payment and were valued at $0.42 (CDN$0.44) each. On July 7, 2008, the Company issued 476,189 common shares in settlement of a property payment on the Mount Hinton property. These shares represent $58,887 (CDN$60,000) which is 40% of the contracted payment and were valued at $0.126 (CDN$0.126) each. The balance of the property payment in the amount of $88,331 (CDN$90,000) was paid in cash.

The Hinton Option Agreement pertains to an “area of interest” which includes the area within ten kilometers of the outermost boundaries of the 273 mineral claims, which constitute our mineral properties. Either party to the Hinton Option Agreement may stake claims outside the 273 mineral claims, but each must notify the other party if such new claims are within the “area of interest.” The non-staking party may then elect to have the new claims included within the Hinton Option Agreement. As of December 11, 2006, there were an additional 24 claims staked, known as the “Gram Claims” which became subject to the Hinton Option Agreement. On June 16, 2008 an additional 18 claims were staked (#25-#42), known as the “Gram Claims”, at a cost of $8,679 (CDN$8,887), which became subject to the Hinton Option Agreement.

The Hinton Option Agreement provides both parties (YGC and the Hinton Syndicate) with rights of first refusal in the event that either party desires to sell or transfer its interest.

Under the Hinton Option Agreement, the Hinton Syndicate is responsible for any environmental liability claims arising from the status of the property prior to the effective date of the Hinton Option Agreement.

Under the terms of the Hinton Option Agreement three of the syndicate members are entitled to bid on work we propose to carry out and if their price is competitive they are entitled to do the work. There is no requirement in the Hinton Option Agreement that these parties perform exploration work.

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Marg Property

In March 2005, the Company acquired rights to purchase 100% of the Marg Property, which consists of 402 contiguous mineral claims covering approximately 20,000 acres located in the Mayo Mining District of the Yukon Territory of Canada. Title to the claims is registered in the name of YGC.

The Company assumed the rights to acquire the Marg Property under a Property Purchase Agreement (“Agreement”) with Atna Resources Ltd. (“Atna”). Under the terms of the Agreement the Company paid $119,189 (CDN$150,000) cash and 133,333 common shares as a down payment. The Company made payments under the Agreement for $43,406 (CDN$50,000) cash and an additional 133,333 common shares of the Company on December 12, 2005; $86,805 (CDN$100,000) cash and an additional 133,334 common shares of the Company on December 12, 2006. On December 12, 2007 the Company paid $98,697 (CDN$100,000) being the next payment due.

The Company has agreed to make subsequent payments under the Agreement of: $195,313 (CDN$200,000) in cash and/or common shares of the Company (or some combination thereof to be determined) on or before December 12, 2008. Subsequent to the quarter ended October 31, 2008 on December 4, 2008 the Company by letter agreement with Atna (the “Amendment Agreement”) was granted a deferral of the payment due on December 12, 2008. The Amendment Agreement allows the Company, in lieu of making such payment, to pay Atna $20,756 (CDN$25,000) in cash on December 12, 2008 and $186,800 (CDN$225,000) (payable in cash or shares of the Company's common stock) on April 30, 2009. Upon the commencement of commercial production at the Marg Property, the Company will pay to Atna $830,220 (CDN$1,000,000) in cash and/or common shares of the Company, or some combination thereof to be determined.

On April 2, 2007 the Company accepted a proposed work program, budget and cash call schedule for the Marg project. The Company has paid cash calls in the amount of $2,100,528 (CDN$2,281,880) for the 2007 Work Program. The Company had approximately $515,561(CDN $550,000) on deposit left over from the 2006 cash call schedule. On May 15, 2007 the Company paid $703,037 (CDN$750,000), on June 15, 2007 the Company paid $703,037 (CDN$750,000), and on July 15, 2007 the Company paid $703,037 (CDN$750,000) being three of the four cash call payments. The fourth and final payment of $402,244 (CDN$380,000) was paid on August 15, 2007. On August 31, 2007 the Company re-allocated $537,864 (CDN$508,120) being the balance of the third cash call payment for the Mount Hinton 2007 Work Program from cash call funds previously allocated to the Marg Project. These re-allocated funds were not needed for the Marg Project. On January 23, 2008 the Company was refunded $388,524 (CDN$390,000) as these funds were not needed for the Marg Project.

Liquidity and Capital Resources

The following table summarizes the Company's cash flows and cash in hand:

Off-Balance Sheet Arrangement

The Company has no Off-Balance Sheet Arrangement as of October 31, 2008.

- 33 -

Contractual Obligations and Commercial Commitments

In addition to the contractual obligations and commitments of the Company to acquire its mineral properties as described in Note 9 to our Financial Statements included with this report, the Company has additional commitments for its office lease and to pay minimum lease payments under its capital lease. Refer to our annual financial statements for April 30, 2008 for future obligation payments.

Flow-Through and Unit Share Subscriptions

2007-2008

On August 16, 2007 the Company completed a private placement (the “Financing”) with Northern Securities Inc. (“Northern”), acting as agent. The Financing was comprised of the sale of 1,916,666 units (the “Units”) at $0.42 (CDN$0.45) per Unit (the “Unit Issue Price”) for gross proceeds of $802,101 (CDN$862,500) and the sale of 543,615 flow-through units (the “Flow-Through Units” which qualify as flow-through shares for the purposes of the Canadian Income Tax Act) at $0.49 (CDN$0.52) per Flow-Through Unit (the “Flow-Through Unit Issue Price”) for gross proceeds of $262,884 (CDN$282,680). The proceeds raised were allocated between the offering of shares and the sale of tax benefits. A liability of $35,381 was recognized for the sale of taxable benefits, which was reversed and credited to income when the Company renounced resource expenditure deduction to the investor. Each Unit consisted of one non-flow through common share (“Common Share”) and one half of one Common Share purchase warrant (each whole warrant, a “Warrant”). Each Warrant is exercisable into one Common Share until August 16, 2009 at an exercise price of $0.60 (CDN$0.60) per share. Each Flow-Through Unit consisted of one flow-through common share and one half of one Common Share purchase warrant (each whole warrant, an “FT Warrant”). Each FT Warrant is exercisable into one Common Share until August 16, 2009 at an exercise price of $0.70 (CDN$0.70) per share. The Company paid Northern a commission equal to 8% of the aggregate gross proceeds which amounted to $85,199 (CDN$91,614) and issued 153,333 “Unit Compensation Options” and 43,489 “FT Unit Compensation Options”. Each Unit Compensation Option is exercisable into one Unit at the Unit Issue Price until August 16, 2009. Each FT Unit Compensation Option is exercisable into one Common Share and one half of one FT Warrant at the Flow-Through Unit Issue Price until August 16, 2009. The Company reimbursed Northern expenses of $18,600 (CDN $20,000).

On November 16, 2007 the Company completed the second tranche of the Financing with Northern acting as agent. The second tranche of the Financing was comprised of the sale of 2,438,888 units (the “Units”) at $0.46 (CDN$0.45) per Unit (the “Unit Issue Price”) for gross proceeds of $1,127,028 (CDN$1,097,500) and the sale of 1,071,770 flow through units (the “Flow-Through Units”) at $0.53 (CDN$0.52) per Flow-Through Unit (the “Flow-Through Unit Issue Price”) for gross proceeds of $572,315 (CDN$557,320) . The proceeds raised were allocated between the offering of shares and the sale of tax benefits. A liability of $77,043 was recognized for the sale of taxable benefits, which was reversed and credited to income when the Company renounced resource expenditure deduction to the investor. The closing represented the final tranche of a $2,816,673 (CDN$2.8 million) private placement with Northern announced on July 24, 2007. Each Unit consists of one non-flow through common share (“Common Share”) and one half of one Common Share purchase warrant (each whole warrant, a “Warrant”). Each Warrant is exercisable into one Common Share until November 16, 2009 at an exercise price of $0.60 (CDN$0.60) per share. Each Flow-Through Unit consists of one flow-through common share and one half of one Common Share purchase warrant (each whole warrant, an “FT Warrant”). Each FT Warrant is exercisable into one Common Share until November 16, 2009 at an exercise price of $0.70 (CDN$0.70) per share. Yukon Gold paid Northern a commission equal to 8% of the aggregate gross proceeds and issued 195,111 “Unit Compensation Options” and 85,741 “FT Unit Compensation Options”. Each Unit Compensation Option is exercisable into one Common Share and one half of one Common Share purchase warrant at the Unit Issue Price until November 16, 2009. Each full Common share purchase warrant is exercisable at $0.60 (CDN$0.60) . Each FT Unit Compensation Option is exercisable into one Common share and one half of one Common share purchase warrant at the Flow-Through Unit Issue Price. Each full Common share purchase warrant is exercisable at $0.70 (CDN$0.70) .

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2008-2009

On July 23, 2008 the Company closed a non-brokered private placement of up to $976,563 (CDN$1,000,000). The Company completed the sale of 4,134,000 common shares on a flow-through basis at a price of $0.15 (CDN$0.15) per share for gross proceeds of $613,778 (CDN$620,100). The Company paid a 5% finders fee on this private placement. The private placement was exempt from registration under the Securities Act of 1933, pursuant to an exemption afforded by Regulation S. The flow through shares were issued at market without any additional price charged for sale of taxable benefits. The proceeds of the Financing are being used for the exploration and development of Yukon Gold's properties.

Consulting Agreements

On August 15, 2007 the Company entered into an investor relations marketing agreement with a consultant for a one year term, with the option to renew for an additional 12 months. In return for services rendered, the Company will pay the consultant $1,992 (CDN$2,000) per month. On August 31, 2007 the Company paid $3,787 (CDN$4,000) being the first and last payments of the contract. On September 15, 2007 the Company paid $1,941 (CDN$2,000) and on October 15, 2007 the Company paid $2,048 (CDN$2,000), being the second and third payments respectively. On November 15, 2007 the Company paid $2,030 (CDN$2,000) being the fourth payment of the contract. On December 14, 2007 the Company paid $1,967 (CDN$2,000) and on January 15, 2008 the Company paid $1,967 (CDN$2,000), being the fifth and sixth payments of the contract respectively. In addition, the consultant has been granted an option to purchase 125,000 shares of the Company at $0.45 (CDN$0.45) per share, with the option vesting in equal quarterly amounts of 31,250 shares on November 15, 2007, February 15, 2008, May 15, 2008 and August 15, 2008, and the first exercise date being August 15, 2008 and an expiry date of August 15, 2010. On February 12, 2008 the Company terminated the contract and the Company received a refund on March 11, 2008 of $1,295(CDN$1,300) previously paid on August 31, 2007 to cover the last payment of the one year term. The 31,250 options granted under the contract to vest on each of May 15, 2008 and August 15, 2008 respectively were also cancelled.

On December 5, 2007 the Company entered into an agreement with a consultant to create investor awareness for a period of six months, commencing on December 5, 2007 for a fee of $20,000 and 300,000 restricted common shares to be issued in equal tranches of 50,000 shares at the end of each month during the term of the agreement. On December 6, 2007 the Company received conditional approval from the TSX to issue the 300,000 restricted shares as per the terms of the agreement. The consulting fee of $20,000 was paid on December 11, 2007. The Company had accrued the expense of $22,000 for 100,000 shares to be issued to January 31, 2008. Due to non-performance of the agreement by the consultant, the Company has obtained legal opinion that it is not obligated to issue any of the restricted 300,000 common shares. The consulting expense accrual for $22,000 set up during the quarter ended January 31, 2008 was reversed and credited back to income during the quarter ended April 30, 2008. The Company has also paid the requisite fee to the TSX for cancellation of all of these shares.

Effective as of December 15, 2007 the Company entered into a consulting agreement with Ronald Mann (the “Mann Agreement”), pursuant to which Mr. Mann was retained as the Company's President and Chief Executive Officer. The board of directors of the Company appointed Mr. Mann to fill a vacancy on the board of directors, also effective as of December 15, 2007. The Mann Agreement has a one-year term commencing on December 15, 2007, and is automatically renewable thereafter, unless terminated pursuant to the terms of the Mann Agreement. Mr. Mann and the Company shall indicate their respective intentions to renew the term after the passage of eight (8) months from the date of the Mann Agreement. Pursuant to the Mann Agreement,

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Mr. Mann will receive an annual consulting fee of $124,533 (CDN$150,000). In addition, Mr. Mann received 500,000 warrants to purchase shares of the Company's common stock (the “Mann Warrants”). The Mann Warrants shall have a term of 5 years and an exercise price of $0.20 (CDN$0.24) . 250,000 of the Mann Warrants were fully vested upon issuance, and the remaining 250,000 vested 6 months from the date of issuance, on June 15, 2008. Subsequent to the quarter ended October 31, 2008 Mr. Mann resigned as an Officer and Director of the Company. For more information see the section entitled “Subsequent Events” below.

As of December 18, 2007 the Company entered into a consulting agreement with Cletus Ryan (the “Ryan Agreement”) pursuant to which Mr. Ryan was retained as the Company's Vice President, Corporate Development. The Ryan Agreement has a six-month term commencing on December 18, 2007 and is automatically renewable thereafter, unless terminated pursuant to the terms of the Ryan Agreement. Pursuant to the Ryan Agreement, Mr. Ryan will receive an annual consulting fee of $99,626 (CDN$120,000). In addition, Mr. Ryan received 200,000 options to purchase shares of the Company's common stock (the “Ryan Options”) at an exercise price of $0.20 (CDN$0.24) . The Ryan Options were fully vested upon the date of issuance. On March 7, 2008 the Company renewed the Ryan Agreement for an additional six months.

On February 11, 2008 by letter engagement agreement the Company contracted the services of a Corporate Secretarial company to fill the role of Mrs. Lisa Rose during her maternity leave for a monthly fee of $1,121 (CDN$1,350) plus eligible expenses.

On February 18, 2008 the Company and YGC, it's wholly-owned subsidiary, signed a surface drilling contract with a diamond drilling company for the Marg Project to commence on or about June 18, 2008. On February 18, 2008 the Company paid $148,928 (CDN$150,000) as a deposit per the terms of the contract. During the quarter ended July 31, 2008 the Company paid $281,581 (CDN$288,339) to the contractor. During the quarter ended October 31, 2008 the Company paid $224,283 (CDN$270,149) to the contractor and on August 30, 2008 the drilling program was demobilized. The balance of the deposit in the amount of $8,515 (CDN$10,256) is being held by the diamond drilling company as a deposit on the 2009 drilling program.

On March 10, 2008 the Company entered into a contract with a global mining consultancy business for a scoping study and to prepare a report pursuant to the terms of Canadian National Instrument 43-101, regarding the Marg Deposit at an estimated cost of $76,675 (CDN$81,300). The Company paid $18,579 (CDN$18,713) at April 30, 2008. During the quarter ended July 31, 2008 the Company paid an additional $41,042 (CDN$42,027). During the quarter ended October 31, 2008 the Company paid a further $17,054 (CDN$20,542) to the consultant.

On March 18, 2008 the Company entered into a consulting agreement with Gary Cohoon (the “Cohoon Agreement”) pursuant to which Mr. Cohoon was retained as Vice-President, Exploration, of the Company. The Cohoon Agreement has a one-year term commencing on March 18, 2008 and is automatically renewable thereafter, unless terminated pursuant to its terms. Pursuant to the Cohoon Agreement, Mr. Cohoon will receive an annual consulting fee of $116,231 (CDN$140,000). Additionally, Mr. Cohoon received 200,000 options to purchase shares of the Company's common stock (the “Cohoon Options”). The Cohoon Options fully vested upon issuance and have an exercise price of $0.18 (CDN$0.22) .

On April 10, 2008 by letter agreement the Company procured the services of Galina Morozova through a contract position as a Geologist with YGC, the Company's wholly-owned subsidiary commencing April 15, 2008 until August 31, 2008. Ms. Morozova received $6,454 (CDN$6,500) per month until the project began at the Marg Property on approximately June 15, 2008, whereupon Ms. Morozova received $405 (CDN$500) per day plus expenses for the duration of the term of the letter agreement. The contract position ended on August 28, 2008.

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On April 29, 2008 the Company entered into a letter agreement with R. Andrew Hureau for a contract position as Senior Geologist with YGC, the Company's wholly-owned subsidiary. Mr. Hureau's position commenced on May 1, 2008 at a rate of $623 (CDN$750) per day plus expenses. The letter agreement states that the term is on commencement and for the duration of drilling on the Marg Project, approximately mid June, 2008 to the end of August, 2008, on a regular schedule. The contract position ended on September 3, 2008.

On May 5, 2008 the Company entered into an investor relations agreement (the “Equicom Agreement”) with Equicom Group Inc. (“Equicom”) pursuant to which Equicom was retained to provide the Company with general marketing and business consulting services for an initial term of one year, then renewable thereafter. Equicom will receive an annual work fee of $49,813 (CDN$60,000), payable in monthly installments of $4,151 (CDN$5,000). The initial prorated retainer in the amount of $4,248 (CDN$4,350) and the June 1-30, 2008 installment of $4,883 (CDN$5,000) were made on May 30, 2008. On July 1, 2008 the installment covering July 1-31, 2008 of $4,883 (CDN$5,000) was paid. By letter on July 23, 2008 the Company terminated the Equicom Agreement with such termination taking effect September 18, 2008. During the quarter ended October 31, 2008, the Company paid on August 1, 2008 $4,151 (CDN$5,000) and on September 1, 2008 $2,491 (CDN$3,000) being the balance payments on the contract.

On May 16, 2008 the Company entered into a consulting agreement (the “Clarke Agreement”) with Clarke Capital Group Inc. (“Clarke”) pursuant to which Clarke was retained to provide the Company with investor relations and business communications services for an initial term of 6 months, renewable thereafter for an additional 6 month term. Upon execution of the Clarke Agreement the Company paid Clarke $14,648 (CDN$15,000). Clarke will also receive a monthly work fee of $2,906 (CDN$3,500) during the term of the agreement. Upon renewal, Clarke will receive an additional payment of $8,302 (CDN$10,000). Pursuant to the Clarke Agreement, the Company issued Clarke 50,000 shares of common stock on July 14, 2008, with an additional 50,000 shares issuable upon renewal. The Company paid the June and July installments on their respective due dates. During the quarter ended October 31, 2008 the Company paid the August, September and October installments on their due dates. Subsequent to the quarter ended October 31, 2008 the Company advised Clarke that it was terminating the Clarke Agreement and would not be issuing any further installment payments.

On May 20, 2008 YGC, the Company's wholly-owned subsidiary entered into a service provision agreement with a company to provide cooking and first aid services on the Marg Property from June 15, 2008 to September 30, 2008. On June 4, 2008 the Company paid a $9,766 (CDN$10,000) advance to the service provider as per the terms of the agreement. During the quarter ended July 31, 2008 the Company also paid $15,178 (CDN$15,543) to the service provider. During the quarter ended October 31, 2008 the Company paid an additional $24,233 (CDN$29,189) and the contractor refunded the balance of the advance in the amount of $382 (CDN$460) to the Company.

On July 28, 2008 the Company entered into a consulting agreement with First Canadian Capital (“First Canadian”) pursuant to which First Canadian will provide general marketing and business consulting services for an initial term of one year, renewable thereafter. The Company will pay First Canadian $4,981 (CDN$6,000) per month. The Company paid the first three months of such fees in advance. In addition on July 28, 2008 the Company issued 250,000 stock options to buy the Company's shares at a purchase price of $0.12 (CDN$0.15) per share. The stock options shall vest over the initial term of the agreement. Subsequent to the quarter ended October 31, 2008 on December 12, 2008 the Company and the consultant mutually agreed to terminate the agreement effective October 31, 2008.

Subsequent Events

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On December 12, 2008 J.L. Guerra, Jr. the Chairman of the Company's Board of Directors, was appointed President and Chief Executive Officer of the Company.

Critical Accounting Policies

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect reported amounts of assets and liabilities at the date of the financial statements, the reported amount of revenues and expenses during the reporting period and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and judgments, particularly those related to the determination of the estimated Canadian exploration tax credit receivable and accrued liabilities. To the extent actual results differ from those estimates, our future results of operations may be affected. Besides this critical accounting policy on use of estimates, we believe the following critical accounting policy affects the preparation of our consolidated financial statements.

Acquisition, Exploration and Evaluation Expenditures

The Company is an exploration stage mining company and has not yet realized any revenue from its operations. It is primarily engaged in the acquisition and exploration of mining properties. Mineral property exploration costs are expensed as incurred. Mineral property payments are capitalized only if the Company is able to allocate any economic value beyond proven and probable reserves. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to develop such property will be capitalized. For the purpose of preparing financial information, the Company is unable to allocate any economic value beyond proven and probable reserves and hence all property payments are considered to be impaired and accordingly written off to project expense. All costs associated with a property that has the potential to add to the Company's proven and probable reserves are expensed until a final feasibility study demonstrating the existence of proven and probable reserves is completed. No costs have been capitalized in the periods covered by these financial statements. Once capitalized, such costs will be amortized using the units-of-production method over the estimated life of the probable reserve.

Mineral property acquisition costs will also be capitalized in accordance with the FASB Emerging Issues Task Force (“EITF”) Issue 04-2 when management has determined that probable future benefits consisting of a contribution to future cash inflows have been identified and that adequate financial resources are available or are expected to be available as required to meet the terms of property acquisition and budgeted exploration and development expenditures. Mineral property payments are expensed as incurred if the criteria for capitalization is not met.

To date, mineral property exploration costs have been expensed as incurred. As of the date of these financial statements, the Company has incurred only property payments and exploration costs, which have been expensed. To date the Company has not established any proven or probable reserves on its mineral properties

CONTROLS AND PROCEDURES

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DISCLOSURE AND FINANCIAL CONTROLS AND PROCEDURES

In connection with the Company's compliance with securities laws and rules, its board of directors evaluated the Company's disclosure controls and procedures. The board of directors has concluded that the Company's disclosure controls and procedures are effective. There have been no significant changes in these controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Internal financial controls and procedures have been designed under the supervision of the Company's board of directors. The internal financial controls provide reasonable assurance regarding the reliability of the Company's financial reporting and preparation of financial statements in accordance with generally accepted accounting principals. There have been no significant changes in these controls or in other factors that could significantly affect these controls since they were instituted, including any corrective actions with regard to significant deficiencies and material weaknesses.

PART II-OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

None.

Item 1A. RISK FACTORS

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Item 2.        UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On July 23, 2008 the Company closed a non-brokered private placement of up to $976,563 (CDN$1,000,000). The Company completed the sale of 4,134,000 common shares on a flow-through basis at a price of $0.15 (CDN$0.15) per share for gross proceeds of $613,778 (CDN$620,100). The Company paid a 5% finders fee on this private placement. The flow-through shares were issued at market without any additional price charged for sale of taxable benefits. The private placement was exempt from registration under the Securities Act of 1933, as amended, pursuant to an exemption afforded by Regulation S.

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On July 7, 2008, the Company issued 476,189 common shares in settlement of a property payment on the Mount Hinton property. These shares represent $58,887 (CDN$60,000) which is 40% of the contracted payment and were valued at $0.123 (CDN$0.126) each. The balance of the property payment in the amount of $88,330 (CDN$90,000) was paid in cash.

On June 18, 2008 the Company approved the issuance of 100,000 shares of common stock to a consultant as payment for investor relations and business communications services. Of that amount, 50,000 shares were issued July 14, 2008 with the balance of 50,000 shares to be issued upon renewal of the consulting agreement.

Item 3.        DEFAULTS UPON SENIOR SECURITIES

None.

Item 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

Item 5.        OTHER INFORMATION

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Item 6.        EXHIBITS & REPORTS ON FORM 8-K

SIGNATURE

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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