VetaNova Inc. - Quarter Report: 2010 July (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 July 31, 2010

Commission file number 000-51068

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

1226 White Oaks Blvd., Suite 10A
Oakville, Ontario L6H 2B9 Canada
(Address of principal executive offices including zip code)

905-845-1073
(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 July 31, 2010 was 41,839,535.

PART I – FINANCIAL INFORMATION

YUKON GOLD CORPORATION, INC.
(AN EXPLORATION STAGE MINING COMPANY)
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2010
(Amounts expressed in US Dollars)
(Unaudited-Prepared by Management)

TABLE OF CONTENTS

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Interim Consolidated Balance Sheets
As at July 31, 2010 (unaudited) and April 30, 2010 (audited)
(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/ J. L. Guerra, Jr.                                                  
J. L. Guerra, Jr., Director and Chairman

/s/ Douglas Oliver                                                    
Douglas Oliver, CEO and Director

F-2

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Interim Consolidated Balance Sheets
As at July 31, 2010 (unaudited) and April 30, 2010 (audited) (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)
Interim Consolidated Statements of Operations
For the three months ended July 31, 2010 and July 31, 2009 and
the period from Inception to July 31, 2010
(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)
Interim Consolidated Statements of Cash Flows
For the three month period ended July 31, 2010 and July 31, 2009 and
the period from Inception to July 31, 2010
(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)
Interim Consolidated Statements of Changes in Stockholders’ Deficiency
From Inception to July 31, 2010
(Amounts expressed in US Dollars)
(Unaudited -Prepared by Management)

F-6

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Interim Consolidated Statements of Changes in Stockholders’ Deficiency
From Inception to July 31, 2010
(Amounts expressed in US Dollars)

F-7

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Interim Consolidated Statements of Changes in Stockholders’ Deficiency
From Inception to July 31, 2010
(Amounts expressed in US Dollars)

F-8

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Interim Consolidated Statements of Changes in Stockholders’ Deficiency
From Inception to July 31, 2010
(Amounts expressed in US Dollars)

See condensed notes to the interim consolidated financial statements

F-9

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Condensed Notes to Interim Consolidated Financial Statements
July 31, 2010
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

1.        BASIS OF PRESENTATION

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with U.S. generally accepted accounting principles (GAAP); however, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for a fair statement of the results for the interim periods. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto together with management’s discussion and analysis of financial condition and results of operations contained in the Company’s annual report on Form 10-K for the year ended April 30, 2010. In the opinion of management, the accompanying interim consolidated financial statements reflect all adjustments of a normal recurring nature considered necessary to fairly state the financial position of the Company at July 31, 2010 and April 30, 2010, the results of its operations for the three-month periods ended July 31, 2010 and July 31, 2009, and its cash flows for the three-month periods ended July 31, 2010 and July 31, 2009. In addition, some of the Company’s statements in this quarterly report on Form 10-Q may be considered forward-looking and involve risks and uncertainties that could significantly impact expected results. The results of operations for the three-month period ended July 31, 2010 are not necessarily indicative of results to be expected for the full year.

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's interim consolidated financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has no source for operating revenue and expects to incur significant expenses before establishing operating revenue. Because of continuing operating losses, negative working capital, stockholders’ deficiency and cash outflows from operations, the Company’s continuance as a going concern is dependent upon its ability to obtain adequate financing and to reach profitable levels of operation. In the event that the Company is unable to raise additional capital, as to which there is no assurance, the Company will not be able to continue doing business. Further, the Company’s subsidiary has been ordered by an Ontario Superior Court of Justice to pay a penalty of $116,832 (CDN $120,138) for early termination of its office lease in Toronto, Ontario. 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 reserves. There is no guarantee that such capital will be available on acceptable terms, if at all or if the Company will attain profitable levels of operation.

The Company is actively pursuing equity and short-term bridge loan financing, which may include financing backed by a pledge of some or all of the Company’s exploration property assets. The Company also is simultaneously exploring opportunities to effect business combinations or joint ventures involving additional mining assets that may provide opportunities for greater long-term financing. On August 31, 2010 the Company entered into an Agreement with Lance Capital Ltd. (Lance), an Ontario Canada corporation, pursuant to which, among other things, Lance is assisting the the Company in the settlement of certain debts of the Company and providing bridge financing, as more particularly described in Note 12 Subsequent Events.

F-10

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Condensed Notes to Interim Consolidated Financial Statements
July 31, 2010
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

2.        GOING CONCERN-Cont’d

These interim consolidated financial statements have been prepared in accordance with United States generally acceptable accounting principles applicable to a going concern. Accordingly, they do not give effect to adjustments that would be necessary should the Company be unable to continue as a going concern and therefore be required to realize its assets and liquidate its liabilities and commitments in other than the normal course of business and at amounts different from those in the accompanying interim consolidated financial statements.

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 the acquisition and exploration of mining properties. Mineral property exploration costs are expensed as incurred. Mineral property payments are initially capitalized in accordance with the ASC 805-20-55-37, previously referenced as EITF 04-2 when incurred. The Company assesses the carrying costs for impairment under Accounting Standards 930 Extractive Activities – Mining (AS 930) at each fiscal quarter end. An impairment is recognized when the sum of the expected undiscounted future cash flows is less than the carrying amount of the mineral property. Impairment losses, if any, are measured as the excess of the carrying amount of the mineral property over its estimated fair value. 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. Once capitalized, such costs will be amortized using the units-of-production method over the estimated life of the probable reserves. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations. The Company assesses the carrying costs for impairment at each fiscal quarter end. The Company has determined that all property payments are impaired and accordingly has written off the acquisition costs to project expense.

4.        PREPAID EXPENSES AND OTHER

Included in prepaid expenses and other is an amount of $11,428 (CDN$11,751) being Goods & Services tax receivable from the Federal Government of Canada.

5.        CAPITAL STOCK

a)        Authorized

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

b)        Issued

41,839,535 Common shares (41,839,535 at April 30, 2010).

F-11

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Condensed Notes to Interim Consolidated Financial Statements
July 31, 2010
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

5.        CAPITAL STOCK-Cont’d

c)        Changes to Issued Share Capital

Year ended April 30, 2010

The Company received subscriptions for 1,100,000 common shares at $0.04 per share for a total consideration of $44,000 through a non-brokered private placement. The Company issued 1,100,000 common shares.

On September 28, 2009 the Company entered into an employment agreement (“Agreement”) with Douglas Oliver (the “Employee”) to serve as its President and Chief Executive Officer. As per the terms of the said agreement, the Company issued to the Employee 250,000 common shares of the Company’s common stock, The Employee acknowledges that such shares will be “restricted shares” subject to limitations on re-sale. The Employee further acknowledges that he will be considered as affiliate for purposes of Rule 144.

Three months ended July 31, 2010

During the three-month period ended July 31, 2010, the Company did not issue any shares.

6.        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.

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"). 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 there under from 2,000,000 to 2,899,044. 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.

F-12

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Condensed Notes to Interim Consolidated Financial Statements
July 31, 2010
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

6.        STOCK-BASED COMPENSATION-Cont’d

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.

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.

Year ended April 30, 2010

The company did not issue any stock options during the year ended April 30, 2010.

Three month period ended July 31, 2010

The company did not issue any stock options during the three month period ended July 31, 2010.

As of April 30, 2010 there was $nil of unrecognized expenses related to non-vested stock-based compensation arrangements granted. The stock-based compensation expense for the three month period ended July 31, 2010 was $nil.

Cancellation/Expiration/Forfeiture of Stock Options:

Year ended April 30, 2010

On June 24, 2009 200,000 stock options held by a former officer were forfeited.

On August 4, 2009 340,000 stock options held by a former director were forfeited.

On October 24, 2009 the Company cancelled 200,000 stock options held by a former officer.

F-13

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Condensed Notes to Interim Consolidated Financial Statements
July 31, 2010
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

6.        STOCK-BASED COMPENSATION-Cont’d

On December 15, 2009 250,000 stock options held by a former director expired.

On January 5, 2010 12,000 stock options held by an officer expired.

On January 19, 2010 350,000 stock options held by a former director were forfeited.

On January 29, 2010 400,000 stock options held by a former director were forfeited.

Cancellation/Expiration/Forfeiture of Stock Options:

For the three months ended July 31, 2010

No stock options were cancelled, expired or forfeited.

F-14

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Condensed Notes to Interim Consolidated Financial Statements
July 31, 2010
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

7.        SALE OF MOUNT HINTON MINING PROPERTY CLAIMS

On May 21, 2009, the Company, through its wholly owned subsidiary, YGC, sold its interest in the Mount Hinton Property to the Hinton Syndicate. All of the claims comprising the Mount Hinton Property were conveyed by the Company’s subsidiary to a member of the Hinton Syndicate. The Hinton Syndicate paid the Company (i) $110,306 (CDN$125,000) on May 21, 2009 and (ii) granted to the Company’s subsidiary a 2% “Net Smelter Royalty (an “NSR”) on the Mount Hinton Property claims. Such 2% NSR may be terminated at any time by payment to YGC of the following:

F-15

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Condensed Notes to Interim Consolidated Financial Statements
July 31, 2010
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

8.        COMMITMENTS AND CONTINGENCIES

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 as amended 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 then due.

The Company agreed to make subsequent payments under the Agreement of: $167,645 (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. On December 4, 2008 the Company and Atna Resources Ltd. (“Atna”) entered into a letter agreement (the “Amendment Agreement”) amending the purchase agreement by which the Company acquired its Marg Property (the “Marg Acquisition Agreement”). Under the terms of the Marg Acquisition Agreement the Company was required to pay to Atna $167,645 (CDN$200,000) (in cash or shares of the Company’s common stock) on December 12, 2008. In lieu of making such payment, the Amendment Agreement permitted the Company to pay Atna $19,980 (CDN$25,000) in cash on December 12, 2008 (paid) and $188,600 (CDN$225,000) (payable in cash or shares of the Company’s common stock) on April 30, 2009. On April 30, 2009, the Company issued to Atna 6,838,906 common shares which represent $188,600 (CDN $225,000), whereby the common shares were valued at $0.0276 (CDN$0.0329) each. Upon the commencement of commercial production at the Marg Property, the Company will pay to Atna $972,479 (CDN$1,000,000) in cash and/or common shares of the Company, or some combination thereof to be determined.

Subsequent to the period covered by this report, the following agreement was terminated by mutual consent of the parties, as described in Note 12 – Subsequent Events. On October 1, 2009 the Company’s board of directors ratified a retainer agreement (the “Agreement”) dated August 28, 2009 with a Panamerican corporation (the “Consultant”) to provide certain exclusive advisory services for financing, acquisition, collaboration, product or services sales transactions and strategies, for a period of twelve (12) months (the “Term”) from the date of execution. If at any time during the Term the Company wished to terminate the exclusivity of the Consultant, the Company could give the Consultant ten (10) days prior written notice and pay the Consultant $200,000. The Agreement states that a monthly cash fee of $50,000 and the Consultant’s out-of-pocket expenses shall accrue and be payable only at such time as the Company secures a minimum of $5,000,000 in financing during the Term of the Agreement, at which time the total amount accrued would be due and payable in full without interest. In the event that the Company fails to timely pay any of the compensation, as defined in the Agreement, each shall bear interest at the rate of six percent (6%) until paid in full. The Consultant has the right upon written notice to the Company of its election to receive gold or other minerals in lieu of cash prior to or concurrent with the closing of any financing transactions (“Financing Transactions”). Compensation payable in kind shall not bear any interest.

F-16

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Condensed Notes to Interim Consolidated Financial Statements
July 31, 2010
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

8.        COMMITMENTS AND CONTINGENCIES – Cont’d

If an acquisition or divestiture is consummated during the Term of the Agreement or for a period of one (1) year thereafter, the Company shall pay a transaction fee (“TF”) to the Consultant based on the following transaction values (“TVs”): (i) 5% TF up to and including $1,000,000 TVs, plus (ii) 4% TF on all TVs from $1,000,000 to $1,999,999, plus (iii) 3% TF on all TVs from $2,000,000 to $2,999,999, plus (iv) 2% on all TVs from $3,000,000 to $3,999,999, plus (v) 1% on all TVs from $4,000,000 to $4,999,999, plus (vi) 1% on all TVs equal to and exceeding $5,000,000. During the Term of the Agreement or for a period of one (1) year after termination, the Company will pay the Consultant a finder’s fee equal to two percent (2%) of the total amount of each and every Financing Transaction successfully undertaken by the Company. In addition the Company shall grant to the Consultant options to purchase that number of shares of the Company’s common stock determined by multiplying two percent (2%) equal to the total number of equity shares placed and/or issued, or if convertible debt, two percent (2%) of the number of common equity shares as if the convertible debt was converted at its earliest possible date. Such options shall be exercisable for a period of five (5) years at an exercise price equal to the five-day weighted average trading price (WATP) for the five (5) consecutive trading days immediately prior to the granting of the Company’s stock options. In addition to the foregoing fees, the Company shall grant to the Consultant a fully-vested option (“Equity Fee”) to acquire a number of shares equal to eight and one-half percent (8.5%) of the total common shares issued and outstanding at the time of the execution of the Agreement. Such options shall be exercisable for a period of five (5) years at an exercise price equal to the five-day WATP for the five (5) consecutive trading days immediately prior to the granting of the Company’s stock options. The number of stock options shall be subject to any and all adjustments of the common shares during the five-year exercise period. Upon the Company entering into any definitive agreement, during the Term, to acquire any properties/projects, as defined in the Agreement, an additional fully-vested performance option shall be granted to the Consultant to acquire a number of shares equal to eight and one-half percent (8.5%) of the then issued and outstanding common shares of the Company. Such options shall be exercisable for a period of five (5) years at an exercise price equal to the five-day WATP for the five (5) consecutive trading days immediately prior to the execution of the definitive agreement. The number of performance options shall be subject to any and all adjustments of the common shares during the five-year exercise period. If any acquisition transaction is contemplated by the Company during the Term or for a period of one (1) year after the Company will grant to the Consultant the absolute right to participate, on a pro rata basis, in up to a ten percent (10%) interest in the Company’s acquisition.

F-17

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Condensed Notes to Interim Consolidated Financial Statements
July 31, 2010
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

8.        COMMITMENTS AND CONTINGENCIES-Cont’d

The Consultant shall also be responsible for all pro rata future development and operating costs of said acquisition when paid by the parties owning the other 90% interests. Notwithstanding anything within the Agreement to the contrary, any stock or equity-based compensation must be pre-cleared by the Toronto Stock Exchange (TSX). If any Financing Transaction(s) described in paragraphs 2 A and B of Schedule A to this Agreement are concluded during the Term, or for a period of one (1) year thereafter, provided such Financing Transaction(s) results from parties identified in writing by the Consultant in performing the Services, the Company will pay to the Consultant, or a designee of the Consultant, the following: (i) with respect to any equity financing, a cash fee equal to seven percent (7%) of the total amount of the Financing Transaction (gross proceeds, without offset for costs or fees), (ii) with respect to any debt financing, a cash fee equal to four percent (4%) of the total amount of such Financing Transaction (gross proceeds, without offset for costs or fees), and (iii) in addition, upon the completion of any Financing Transaction of the Company or its, parents, subsidiaries or affiliates, the Company shall grant to the Consultant the right and option to purchase that number of shares, units or interests in the Company determined by dividing five percent (5%) of the amount of the Financing Transaction by an amount equal to equal to the five-day WATP for the five (5) consecutive trading days immediately prior to the payment of Yukon Gold Corporation stock options. Such rights shall be exercisable, for a period of five (5) years, from date of issue and shall possess “most favored nation” registration rights, i.e., registration rights equal to the best/most favorable rights/treatment of any issued/outstanding registration rights provisions applicable to any securities of the Company, specifically including, but not limited to demand and “piggy back” registration rights, including the right to include such shares in any offering undertaken by the Company, i.e., “tag-along” rights. Such Fee shall be paid by the Company to the Consultant within ten (10) calendar days after the closing of each Financing Transaction, or, if such Financing Transaction closes in several tranches, within ten (10) calendar days after the closing of each tranche, until paid in full. Subsequent to the quarter ended July 31, 2010 on August 10, 2010 the Consultant and the Company signed an unconditional and absolute general release which terminated the Agreement.

F-18

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Condensed Notes to Interim Consolidated Financial Statements
July 31, 2010
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

8.        COMMITMENTS AND CONTINGENCIES-Cont’d

Subsequent to the period covered by this report, the Company has opened discussions to renegotiate and/or terminate the following agreement. On October 1, 2009 the Company’s board of directors ratified a consulting agreement (the “Agreement”), dated September 20, 2009, with an individual to provide services as a special advisor (the “Consultant”). The Agreement states that the Consultant will receive 450,000 restricted common shares no later than ten (10) business days from the date of signing the Agreement. During the quarter and subsequent to the period ended July 31, 2010, the Company has not issued these shares to the Consultant but the Company has expensed the cost at fair value. The Consultant is entitled to receive a cash fee of two and one-half percent (2.5%) on the aggregate value of a financing(s) or transaction(s) entered into by the Company during the term of the Agreement or within the twelve (12) months following the term of this Agreement if the discussions regarding the financial transaction(s) were initiated by the Consultant during the term of this Agreement. Further it was agreed that the Consultant would receive a bonus of up to 1,000,000 restricted common shares of the Company of any financing or transaction, such bonus to be awarded on transactions values (“TV”) as follows: (i) up to a $1,000,000 TV, 200,000 shares (ii) between a $1,000,000 up to a $6,000,000 TV, an additional 300,000 shares and (iii) over a $6,000,000 TV, an additional 500,000 shares. Upon receipt of an itemized invoice the Consultant will be reimbursed for all traveling and other actual legitimate expenses. The Agreement is for a three month minimum term and may be extended by the mutual agreement of both parties in writing. On December 20, 2009 the agreement terminated and the Consultant was not successful in raising any financing. No services were provided under this agreement. The Company considers the agreement not consummated and has not issued the shares for that reason.

Subsequent to the period covered by this report, the following agreement was terminated, as described in Note 12 - Subsequent Events. On September 28, 2009 the Company entered into an employment agreement (“Agreement”) with Douglas Oliver (the “Employee”) to serve as its President and Chief Executive Officer. During the employment term, the Company will pay the Employee a base salary at the annual rate of one hundred and eighty thousand ($180,000) dollars per year ("Base Salary"). Half of the Employee’s Base Salary shall be deferred and shall accrue interest at the LIBOR rate plus five percent (5%). Deferred Base Salary shall be payable to the Employee with interest no sooner than the Cerro Quema gold project entering production but may be further deferred at the Employee’s discretion. In the event that this Agreement is terminated for any reason, the Employee shall be entitled to all deferred Base Salary, with interest, to be paid within three (3) months of such termination. The Agreement further states that the Employee immediately shall be awarded 250,000 shares of the Company’s common stock, which were issued in the last quarter of the year ending April 30, 2010. The Employee acknowledges that such shares will be “restricted shares” subject to limitations on re-sale. The Employee further acknowledges that he will be considered as affiliate for purposes of Rule 144. The Company agrees to register such shares as part of any registration statement it files under the Securities Act of 1933. Additional stock options shall be awarded to Employee based upon the Company’s achieving certain production goals and in accordance with the Company’s 2006 Stock Option Plan. Employee and the Company shall agree upon the goals and option amounts within two (2) months of the execution of this Agreement. As of the date of these statements, the option amounts were not agreed upon. The Employee may terminate employment at any time after providing forty-five (45) days’ prior written notice to the Company. The Company may terminate the Employee's employment without cause at any time after providing written notice to Employee and paying all unpaid salaries and benefits.

F-19

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Condensed Notes to Interim Consolidated Financial Statements
July 31, 2010
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

8.        COMMITMENTS AND CONTINGENCIES-Cont’d

In addition, an amount equal to twelve (12) months of Base Salary (at the rate in effect as of the date of the Employee’s termination without cause) will be paid to the Employee if this Agreement is terminated by the Company at any time prior to the second anniversary of the date of this Agreement. Subsequent to the quarter ended July 31, 2010 on August 9, 2010 the Employee and the Company mutually agreed to terminate their Agreement without notice. The Employee assigned all amounts owed by the Company to Lance Capital Ltd.

On October 26, 2009 the Company entered into a letter agreement (the “Agreement”) with a former officer to act as a consultant providing accounting and administration services for $1,945 (CDN$2,000) per month and to warehouse the Company records for $486 (CDN$500) per month. The Company further agreed to reimburse the consultant for any out of pocket expenses and that either party may give 30 days notice in writing of their intention to terminate the Agreement. Subsequent to the quarter ended July 31, 2010, on August 31, 2010, the consultant agreed to termination of the Agreement without notice and further agreed to accept $8,752 (CDN$9,000) as full payment for services rendered under the Agreement to be paid within 30 days. Lance Capital Ltd. agreed to advance the funds to the Company to cover this payment. See Note 12 - Subsequent Events herein.

The Company subsidiary YGC has been served by an Ontario Court order to pay a penalty of $116,832 (CDN $120,138) for early termination of its office lease. The Company’s former landlord had made the said claim in the Ontario Superior Court of Justice. On June 17, 2010 our subsidiary’s bank remitted $1,271 (CDN$1,307) to the Ontario Superior Court of Justice, being the balance of funds in YGC’s bank account.

9.        RELATED PARTY TRANSACTIONS

Three month period ended July 31, 2010

The Company and its subsidiary expensed a total of $nil in consulting fees and wages to three Company Directors, and $55,896 to three of its officers.

No director or officer exercised stock options during the three month period ended July 31, 2010.

Three month period ended July 31, 2009

The Company and its subsidiary expensed a total of $nil in consulting fees and wages to three Company Directors and $66,339 to three of its officers.

No director or officer exercised stock options during the three month period ended July 31, 2009.

F-20

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Condensed Notes to Interim Consolidated Financial Statements
July 31, 2010
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

11.      DEMAND LOAN FROM DIRECTOR

The Company received loans for $64,500 on September 21, 2009, $37,500 on October 5, 2009, $8,000 on June 28, 2010, and $7,798 on July 20, 2010 for a total of $117,798 from a director of the Company. The Company issued Promissory Notes to the director which carry simple interest at the rate of seven percent (7%) of the outstanding principal balance per annum. The entire principal balance outstanding and any interest thereon shall be payable on demand by the holder of the Promissory Notes, but no later than three years from the date of the loan. Subsequent to the quarter ended July 31, 2010, on August 6, 2010 the Company received a loan for $9,900 from this same director of the Company. The Company issued a Promissory Note to the director which carries simple interest at the rate of seven percent (7%) of the outstanding principal balance per annum. The entire principal balance outstanding and any interest thereon shall be payable on demand by the holder of the Promissory Note, but no later than three years from the date of the loan. Subsequent to the quarter ended July 31, 2010, on August 10, 2010, the director assigned all of the demand loans, interest and expenses owed to the director to Lance Capital Ltd. See Note 12 - Subsequent Events for the assignment of this demand loan and interest.

12.      SUBSEQUENT EVENTS

On August 6, 2010 the Company received a loan for $9,900 from a director of the Company. The Company issued a Promissory Note to the director which carries simple interest at the rate of seven percent (7%) of the outstanding principal balance per annum. The entire principal balance outstanding and any interest thereon shall be payable on demand by the holder of the Promissory Note, but no later than three years from the date of the loan.

On August 9, 2010 Douglas Oliver, President and CEO of the Company (the Employee), and the Company mutually agreed to terminate their Agreement without notice. The Employee assigned all amounts due to Lance Capital Ltd.

On August 10, 2010 a director assigned all of the demand loans, interest and expenses owed to the director to Lance Capital Ltd.

On August 10, 2010 a debtor assigned an agreed debt totaling $66,923 to Lance Capital Ltd.

F-21

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Condensed Notes to Interim Consolidated Financial Statements
July 31, 2010
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

12.      SUBSEQUENT EVENTS-Cont’d

On August 10, 2010 a consultant and the Company signed an unconditional and absolute general release which terminated the Agreement dated August 28, 2009 with a Panamerican corporation.

On August 15, 2010 62,500 stock options granted to a consulting company expired.

On August 23, 2010 the Company changed its mailing address to 1226 White Oaks Blvd, Suite 10A, Oakville, Ontario L6H 2B9 Canada.

On August 31, 2010, a consultant agreed to termination of an Agreement dated October 26, 2009 without notice and further agreed to accept $8,752 (CDN$9,000) as full payment for services rendered under the Agreement to be paid within 30 days. Lance Capital Ltd. agreed to advance the funds to the Company to cover this payment .

As of August 31, 2010, Yukon Gold Corporation, Inc. (the “Company”) and Lance Capital Ltd, an Ontario company (“Lance”), entered into a Note Purchase and Security Agreement (the “Agreement”) pursuant to which the Company has issued to Lance a Secured Convertible Promissory Note with a face amount of $375,000, bearing interest at 5% per annum and convertible into common shares of the Company at a conversion rate of $0.0025 per share (the “Note”). The Note matures on December 31, 2011. The Note is secured by a first lien and security interest in the Marg Property, a group of mineral claims located in the Mayo Mining District of the Yukon Territory, Canada (the “Marg Property”). Upon registration of the lien, the Agreement will be complete. The Marg Property is owned by the Company’s wholly-owned Canadian subsidiary.

The Note was issued by the Company to Lance as consideration for: (i) the assumption by Lance of certain of the Company’s obligations to three creditors totaling $382,545 as of August 31, 2010 which amounts were settled for $356,835 and (ii) a loan from Lance to the Company of $18,165 to cover certain ongoing expenses of the Company. This note totaling $375,000 replaces the payables assumed by Lance and the loan of $18,165.

Lance is engaged in efforts to resolve outstanding obligations of the Company and raise working capital for the Company. In its sole discretion, Lance may continue to fund operating expenses of the Company for a limited period of time while it explores the feasibility of private placement or other financing for the Company. In the event that Lance exercises its option to convert the Note into Shares, Lance would become the principal shareholder of the Company and would effectively control the Company. Completion of the Agreement is awaiting registration of the lien.

F-22

YUKON GOLD CORPORATION, INC.
(An Exploration Stage Mining Company)
Condensed Notes to Interim Consolidated Financial Statements
July 31, 2010
(Amounts expressed in US Dollars)
(Unaudited – Prepared by Management)

12.      SUBSEQUENT EVENTS-Cont’d

On September 2, 2010 the Company’s board of directors accepted the resignation of Rakesh Malhotra as Chief Financial Officer effective September 1, 2010. There were no material disagreements between Mr. Malhotra, the Company or its board with respect to the Company’s operations or public disclosures.

On September 2, 2010, the Company’s board of directors appointed Mrs. Kathy Chapman, Chief Financial Officer and Corporate Secretary of the Company. Mrs. Chapman is also the Corporate Secretary of YGC.

F-23

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
FOR THE THREE MONTH PERIOD
ENDED JULY 31, 2010

Discussion of Operations & Financial Condition

Yukon Gold has no source of revenue and we continue to operate at a loss. We expect our operating losses to continue for so long as we remain in an exploration stage and perhaps thereafter. As at July 31, 2010, we had accumulated losses of $15,509,342. 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 year has been its effort to raise additional capital to meet its administrative expenses and pursue its exploration activities. We are working urgently to obtain additional financing, which may entail the acquisition of additional properties in order to attract such financing.

SELECTED INFORMATION

The Company's expenses are reflected in the Interim 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 July 31, 2010 is general and administrative expense of $65,267 as compared to $114,131 for the three months ended July 31, 2009. General and administrative expenses have decreased substantially during the period ended July 31, 2010 as compared to the period ended July 31, 2009 due to efforts by management to reduce costs.

(b) Project Expense

Included in operating expenses for the three months ended July 31, 2010 is project expenses of $nil as compared with $5,454 for the three months ended July 31, 2009. The Company has incurred little or no project expenses during these periods due to lack of funding.

Agreement with Hinton Syndicate Concerning our Former Mount Hinton Property

The following disclosure relates to our former property known as the “Mount Hinton” property. Our interest in the Mount Hinton property was sold on May 21, 2009.

On May 21, 2009, the Company, through its wholly owned subsidiary, YGC, sold its interest in the Mount Hinton Property to the Hinton Syndicate. YGC retained a 2% NSR on the property sold with the following provisions and rights. Such 2% NSR may be terminated at any time by payment to YGC of the following:

Calculation and payment of the NSR are as follows

provided: (i) that where a cost or expense otherwise constituting a Permissible Deduction is incurred by the Payor in a transaction with a party with whom it is not dealing at arm’s length (as that term is defined in the Income Tax Act (Canada)), such costs or expenses may be deducted, but only as to the lesser of the actual cost incurred by the Payor and the fair market value thereof considering the time of such transaction and under all the circumstances thereof; and (ii) transportation costs and milling costs at another site, prior to the smelting and refining shall not be included in the definition of Permissible Deductions.

4.      The NSR shall be calculated and paid within 30 days after the end of each calendar quarter ending March 31, June 30, September 30 and December 31 of each year. Smelter settlement sheets, if any, and a statement setting forth calculations in sufficient detail to show how the payment was derived (the “Statement”) shall be submitted with the payment.

5.      In the event that final amounts required for the calculation of the NSR are not available within the time period referred to in paragraph 4 of this Schedule, then provisional amounts shall be established, the NSR shall be paid on the basis of such provisional amounts and positive or negative adjustments shall be made to the payment in the succeeding quarter, as necessary.

6.      All NSR payments shall be considered final and in full satisfaction of all obligations of the Payor with respect thereto, unless the Payee delivers to the Payor a written notice (the “Objection Notice”) describing and setting forth a specific objection to the calculation thereof within 60 days after receipt by the Payee of the Statement. If the Payee objects to a particular Statement as herein provided, the Payee shall, for a period of 60 days after the Payor’s receipt of such Objection Notice, have the right, upon reasonable notice and at a reasonable time, to have the Payor’s accounts and records relating to the calculation of the NSR in question audited by the auditors of the Payor. If such audit determines that there has been a deficiency or an excess in the payment made to the Payee, such deficiency or excess will be resolved by adjusting the next monthly NSR payment due hereunder. The Payee shall pay all the costs and expenses of such audit unless a deficiency of 2 1/2% or more of the amount due is determined to exist. The Payor shall pay the costs and expenses of such audit if a deficiency of 2 1/2% or more of the amount due is determined to exist. All books and records used and kept by the Payor to calculate the NSR due hereunder shall be kept in accordance with Canadian generally accepted accounting principles. Failure on the part of the Payee to make claim against the Payor for adjustment in such 60 day period by delivery of an Objection Notice shall conclusively establish the correctness and sufficiency of the Statement and NSR payment in respect of the applicable quarter.

7.      All profits and losses resulting from the Payor engaging in any commodity futures trading, option trading, metals trading, gold loans or any combination thereof, and any other hedging transactions with respect to mineral products (collectively, “Hedging Transactions”) are specifically excluded from calculations of the NSR pursuant to this Schedule, it being understood by the parties that both the Payor and Payee may engage in speculative hedging trading activities for their own account. All Hedging Transactions by the Payor and all profits or losses associated therewith, if any, shall be solely for the Payor’s account, irrespective of whether or not mineral products are delivered in fulfilment of such obligations. When necessary to give effect to the provisions of this paragraph 7, Gross Revenue from mineral products subject to Hedging Transactions by the Payor shall be determined pursuant to subclause 3.1(a)(ii), rather than 3.1(a)(i) hereof.

8.      Fair market value shall be determined by using, for gold, the quarterly average price of gold which shall be calculated by dividing the sum of all London Bullion Market Association P.M. Gold Fix prices reported for the calendar quarter in question by the number of days for which such prices were quoted and, for silver and other metals, the quarterly average price which shall be calculated by dividing the sum of all New York Commodity Exchange (“COMEX”) prices reported for silver and the other metal quoted by and at the closing of COMEX for the calendar quarter in question by a number of days for which such prices were quoted, less, in each case, an amount reasonably equivalent to the deductions permitted by clause 3.2 hereof.

Exploration

During the year ended April 30, 2009, the Company completed its acquisition of the Marg Property and currently owns it outright. The Marg Property consists of 402 contiguous mineral claims covering approximately 20,000 acres. Access to the claim group is possible either by helicopter, based in Mayo, Yukon Territory, Canada, located approximately 80 km to the southwest or by small aircraft to a small airstrip located near the Marg deposit. A 50 kilometer winter road from Keno City to the property boundary was completed in 1997. The camp site on the property provides accommodation for up to 12 people. Presently the hydroelectric power grid terminates at Keno City some 50km to the southwest and water is available from the Keno Ladue River, which flows through the property. The Company on August 31, 2010 granted Lance Capital Ltd. a security interest of $375,000 to be registered against the Marg Property. The Company also credited YGC with an equal amount of the amount owed to the Company. See Part II Item 5 Other Information.

Liquidity and Capital Resources

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

As at July 31, 2010 the Company had working capital deficit of $708,059 as compared to a working capital deficit of $ 179,973 in the previous period. During the current period the Company received demand loans of $15,798, and an additional $9,900 subsequent to the quarter, all carrying interest of 7% per annum from a director of the Company.

Off-Balance Sheet Arrangement

The Company has no Off-Balance Sheet Arrangement as of July 31, 2010 and April 30, 2010.

Contractual Obligations and Commercial Commitments

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 as amended 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 then due.

The Company agreed to make subsequent payments under the Agreement of: $167,645 (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. On December 4, 2008 the Company and Atna Resources Ltd. (“Atna”) entered into a letter agreement (the “Amendment Agreement”) amending the purchase agreement by which the Company acquired its Marg Property (the “Marg Acquisition Agreement”). Under the terms of the Marg Acquisition Agreement the Company was required to pay to Atna $167,645 (CDN$200,000) (in cash or shares of the Company’s common stock) on December 12, 2008. In lieu of making such payment, the Amendment Agreement permitted the Company to pay Atna $19,980 (CDN$25,000) in cash on December 12, 2008 (paid) and $188,600 (CDN$225,000) (payable in cash or shares of the Company’s common stock) on April 30, 2009. On April 30, 2009, the Company issued to Atna 6,838,906 common shares which represent $188,600 (CDN $225,000), whereby the common shares were valued at $0.0276 (CDN$0.0329) each. Upon the commencement of commercial production at the Marg Property, the Company will pay to Atna $972,479 (CDN$1,000,000) in cash and/or common shares of the Company, or some combination thereof to be determined.

Subsequent to the period covered by this report, the following agreement was terminated by the mutual consent of the parties. On October 1, 2009 the Company’s board of directors ratified a retainer agreement (the “Agreement”) dated August 28, 2009 with a Panamerican corporation (the “Consultant”) to provide certain exclusive advisory services for financing, acquisition, collaboration, product or services sales transactions and strategies, for a period of twelve (12) months (the “Term”) from the date of execution. If at any time during the Term the Company wishes to terminate the exclusivity of the Consultant, the Company will give the Consultant ten (10) days prior written notice and pay the Consultant $200,000. The Agreement states that a monthly cash fee of $50,000 and the Consultant’s out-of-pocket expenses shall accrue and be payable only at such time as the Company secures a minimum of $5,000,000 in financing during the Term of this agreement at which time the total amount accrued shall be due and payable in full without interest. In the event that the Company fails to timely pay any of the compensation, as defined in the Agreement, each shall bear interest at the rate of six percent (6%) until paid in full. The Consultant has the right upon written notice to the Company of its election to receive gold or other minerals in lieu of cash prior to or concurrent with the closing of any financing transactions (“Financing Transactions”). Compensation payable in kind shall not bear any interest. If an acquisition or divestiture is consummated during the Term of the Agreement or for a period of one (1) year thereafter, the Company shall pay a transaction fee (“TF”) to the Consultant based on the following transaction values (“TVs”): (i) 5% TF up to and including $1,000,000 TVs, plus (ii) 4% TF on all TVs from $1,000,000 to $1,999,999, plus (iii) 3% TF on all TVs from $2,000,000 to $2,999,999, plus (iv) 2% on all TVs from $3,000,000 to $3,999,999, plus (v) 1% on all TVs from $4,000,000 to $4,999,999, plus (vi) 1% on all TVs equal to and exceeding $5,000,000. During the Term of the Agreement or for a period of one (1) year after termination, the Company will pay the Consultant a finder’s fee equal to two percent (2%) of the total amount of each and every Financing Transaction successfully undertaken by the Company. In addition the Company shall grant to the Consultant options to purchase that number of shares of the Company’s common stock determined by multiplying two percent (2%) equal to the total number of equity shares placed and/or issued, or if convertible debt, two percent (2%) of the number of common equity shares as if the convertible debt was converted at its earliest possible date. Such options shall be exercisable for a period of five (5) years at an exercise price equal to the five-day weighted average trading price (WATP) for the five (5) consecutive trading days immediately prior to the granting of the Company’s stock options. In addition to the foregoing fees, the Company shall grant to the Consultant a fully-vested option (“Equity Fee”) to acquire a number of shares equal to eight and one-half percent (8.5%) of the total common shares issued and outstanding at the time of the execution of the Agreement. Such options shall be exercisable for a period of five (5) years at an exercise price equal to the five-day WATP for the five (5) consecutive trading days immediately prior to the granting of the Company’s stock options. The number of stock options shall be subject to any and all adjustments of the common shares during the five-year exercise period. Upon the Company entering into any definitive agreement, during the Term, to acquire any properties/projects, as defined in the Agreement, an additional fully-vested performance option shall be granted to the Consultant to acquire a number of shares equal to eight and one-half percent (8.5%) of the then issued and outstanding common shares of the Company. Such options shall be exercisable for a period of five (5) years at an exercise price equal to the five-day WATP for the five (5) consecutive trading days immediately prior to the execution of the definitive agreement. The number of performance options shall be subject to any and all adjustments of the common shares during the five-year exercise period. If any acquisition transaction is contemplated by the Company during the Term or for a period of one (1) year after the Company will grant to the Consultant the absolute right to participate, on a pro rata basis, in up to a ten percent (10%) interest in the Company’s acquisition. The Consultant shall also be responsible for all pro rata future development and operating costs of said acquisition when paid by the parties owning the other 90% interests. Notwithstanding anything within the Agreement to the contrary, any stock or equity-based compensation must be pre-cleared by the Toronto Stock Exchange (TSX). If any Financing Transaction(s) described in paragraphs 2 A and B of Schedule A to this Agreement are concluded during the Term, or for a period of one (1) year thereafter, provided such Financing Transaction(s) results from parties identified in writing by the Consultant in performing the Services, the Company will pay to the Consultant, or a designee of the Consultant, the following: (i) with respect to any equity financing, a cash fee equal to seven percent (7%) of the total amount of the Financing Transaction (gross proceeds, without offset for costs or fees), (ii) with respect to any debt financing, a cash fee equal to four percent (4%) of the total amount of such Financing Transaction (gross proceeds, without offset for costs or fees), and (iii) in addition, upon the completion of any Financing Transaction of the Company or its, parents, subsidiaries or affiliates, the Company shall grant to the Consultant the right and option to purchase that number of shares, units or interests in the Company determined by dividing five percent (5%) of the amount of the Financing Transaction by an amount equal to equal to the five-day WATP for the five (5) consecutive trading days immediately prior to the payment of Yukon Gold Corporation stock options. Such rights shall be exercisable, for a period of five (5) years, from date of issue and shall possess “most favored nation” registration rights, i.e., registration rights equal to the best/most favorable rights/treatment of any issued/outstanding registration rights provisions applicable to any securities of the Company, specifically including, but not limited to demand and “piggy back” registration rights, including the right to include such shares in any offering undertaken by the Company, i.e., “tag-along” rights. Such Fee shall be paid by the Company to the Consultant within ten (10) calendar days after the closing of each Financing Transaction, or, if such Financing Transaction closes in several tranches, within ten (10) calendar days after the closing of each tranche, until paid in full. Subsequent to the quarter ended July 31, 2010 on August 10, 2010 the Consultant and the Company signed an unconditional and absolute general release which terminated the Agreement.

Subsequent to the period covered by this report, the Company has opened discussions to renegotiate and/or terminate the following agreement. On October 1, 2009 the Company’s board of directors ratified a consulting agreement (the “Agreement”), dated September 20, 2009, with an individual to provide services as a special advisor (the “Consultant”). The Agreement states that the Consultant will receive 450,000 restricted common shares no later than ten (10) business days from the date of signing the Agreement. During the quarter and subsequent to the period ended July 31, 2010 the Company has not issued these shares to the Consultant but the Company has expensed the cost at fair value. The Consultant is entitled to receive a cash fee of two and one-half percent (2.5%) on the aggregate value of a financing(s) or transaction(s) entered into by the Company during the term of the Agreement or within the twelve (12) months following the term of this Agreement if the discussions regarding the financial transaction(s) were initiated by the Consultant during the term of this Agreement. Further it was agreed that the Consultant would receive a bonus of up to 1,000,000 restricted common shares of the Company of any financing or transaction, such bonus to be awarded on transactions values (“TV”) as follows: (i) up to a $1,000,000 TV, 200,000 shares (ii) between a $1,000,000 up to a $6,000,000 TV, an additional 300,000 shares and (iii) over a $6,000,000 TV, an additional 500,000 shares. Upon receipt of an itemized invoice the Consultant will be reimbursed for all traveling and other actual legitimate expenses. The Agreement is for a three month minimum term and may be extended by the mutual agreement of both parties in writing. On December 20, 2009 the agreement terminated and the Consultant was not successful in raising any financing. No services were provided under this agreement. The Company considers the agreement not consummated and has not issued the shares for that reason.

Subsequent to the period covered by this report, the following agreement was terminated, as described in Note 12 (Subsequent Events) to our Financial Statements contained herein. On September 28, 2009 the Company entered into an employment agreement (“Agreement”) with Douglas Oliver (the “Employee”) to serve as it’s President and Chief Executive Officer. During the employment term, the Company will pay the Employee a base salary at the annual rate of one hundred and eighty thousand ($180,000) dollars per year ("Base Salary"). Half of the Employee’s Base Salary shall be deferred and shall accrue interest at the LIBOR rate plus five percent (5%). Deferred Base Salary shall be payable to the Employee with interest no sooner than the Cerro Quema gold project entering production but may be further deferred at the Employee’s discretion. In the event that this Agreement is terminated for any reason, the Employee shall be entitled to all deferred Base Salary, with interest, to be paid within three (3) months of such termination. The Agreement further states that the Employee immediately shall be awarded 250,000 shares of the Company’s common stock, which were issued in the last quarter of the year ending April 30, 2010. The Employee acknowledges that such shares will be “restricted shares” subject to limitations on re-sale. The Employee further acknowledges that he will be considered as affiliate for purposes of Rule 144. The Company agrees to register such shares as part of any registration statement it files under the Securities Act of 1933. Additional stock options shall be awarded to Employee based upon the Company’s achieving certain production goals and in accordance with the Company’s 2006 Stock Option Plan. Employee and the Company shall agree upon the goals and option amounts within two (2) months of the execution of this Agreement. As of the date of these statements, the option amounts were not agreed upon. The Employee may terminate employment at any time after providing forty-five (45) days’ prior written notice to the Company. The Company may terminate the Employee's employment without cause at any time after providing written notice to Employee and paying all unpaid salaries and benefits. In addition, an amount equal to twelve (12) months of Base Salary (at the rate in effect as of the date of the Employee’s termination without cause) will be paid to the Employee if this Agreement is terminated by the Company at any time prior to the second anniversary of the date of this Agreement. Subsequent to the quarter ended July 31, 2010 on August 9, 2010 the Employee and the Company mutually agreed to terminate their Agreement without notice. The Employee assigned all amounts owed by the Company to Lance Capital Ltd. See Part II Item 5 Other Information for termination of this agreement and assignment of the balance due.

On October 26, 2009 the Company entered into a letter agreement (the “Agreement”) with a former officer to act as a consultant providing accounting and administration services for $1,945 (CDN$2,000) per month and to warehouse the Company records for $486 (CDN$500) per month. The Company further agreed to reimburse the consultant for any out of pocket expenses and that either party may give 30 days notice in writing of their intention to terminate the Agreement. Subsequent to the quarter ended July 31, 2010, on August 31, 2010, the consultant agreed to Agreement without notice and further agreed to accept $8,752 (CDN$9,000) as full payment for services rendered under the Agreement to be paid within 30 days. Lance Capital Ltd. agreed to advance the funds to the Company to cover this payment .See Part II Item 5 Other Information for termination of this agreement.

The Company subsidiary YGC has been served an Ontario Court order to pay a penalty for $116,832 (CDN $120,138) for early termination for its office lease. The prior landlord had made the said claim in the Ontario Superior Court of Justice. On June 17, 2010 the Company’s subsidiary’s financial institution remitted $1,271 (CDN$1,307) to the Ontario Superior Court of Justice being the balance of funds in YGC’s bank account.

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 initially capitalized in accordance with the ASC 805-20-55-37, previously referenced as EITF 04-2 when incurred. The Company assesses the carrying costs for impairment under Accounting Standards 930 Extractive Activities – Mining (AS 930) at each fiscal quarter end. An impairment is recognized when the sum of the expected undiscounted future cash flows is less than the carrying amount of the mineral property. Impairment losses, if any, are measured as the excess of the carrying amount of the mineral property over its estimated fair value. 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. Once capitalized, such costs will be amortized using the units-of-production method over the estimated life of the probable reserves. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations. The Company assesses the carrying costs for impairment at each fiscal quarter end. The Company has determined that all property payments are impaired and accordingly has written off the acquisition costs to project expense.

CONTROLS AND PROCEDURES

DISCLOSURE AND FINANCIAL 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

On June 17, 2010 the Company’s bank received a Notice of Garnishment from the Ontario Superior Court of Justice, Canada, dated June 15, 2010, in the amount of $118,269 (CDN$120,138) with the Company’s former landlord named as the creditor, the Company’s wholly owned Canadian subsidiary (YGC) named as the debtor, and the Company’s bank as the garnishee. On June 17, 2010 our subsidiary’s bank remitted $1,271 (CDN$1,307) to the Ontario Superior Court of Justice, being the balance of funds in YGC’s bank account. YGC did not have the funds to fully settle the Notice of Garnishment. It is possible that one or more other creditors of YGC will bring an action to enforce a debt.

Item 1A.   RISK FACTORS

Yukon Gold must immediately secure additional financing to remain viable. Management of Yukon Gold believes that we must identify and purchase new mineral properties in order to obtain such financing.

Yukon Gold has rights in certain mineral claims located in the Yukon Territory, Canada. To date we have done limited exploration of the property covered by our mineral claims. We do not have a mine or a mining business of any kind. There is no assurance that we will develop an operating business in the future.

Currently, we have no source of revenue, we do not have working capital to complete our exploration programs (including feasibility studies) and we do not have any commitments to obtain additional financing. We have no operating history upon which an evaluation of our future success or failure can be made. Our ability to achieve and maintain profitability and positive cash flow is dependent upon:

Failure to raise the necessary capital to continue exploration and development could cause us to go out of business.

The Company has included a “going concern” qualification in the Interim Consolidated Financial Statements to the effect that we are an exploration stage company and have no established sources of revenue. In the event that we are unable to raise additional capital and/or locate mineral resources, as to which in each case there can be no assurance, we may not be able to continue our operations. In addition, the existence of the “going concern” qualification in our auditor’s report may make it more difficult for us to obtain additional financing. If we are unable to obtain additional financing, you may lose all or part of your investment.

On August 31, 2010 the Company entered into an Agreement with Lance Capital Ltd. (Lance) an Ontario Canada corporation regarding the settlement of certain debts of the Company. Lance is continuing to assist the Company with financing going forward as more particularly described in Item 5 Other Information.

Our common stock is considered a "penny stock" and the sale of our stock by you will be subject to the "penny stock rules" of the Securities and Exchange Commission. The penny stock rules require broker-dealers to take steps before making any penny stock trades in customer accounts. As a result, our shares could be illiquid and there could be delays in the trading of our stock which would negatively affect your ability to sell your shares and could negatively affect the trading price of your shares.

The Company conducts the majority of its business activities in Canadian dollars. Consequently, the Company is subject to gains or losses due to fluctuations in Canadian currency relative to the US dollar.

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

None

Item 3.    DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

Item 5.    OTHER INFORMATION

On August 6, 2010 the Company received a loan for $9,900 from a director of the Company. The Company issued a Promissory Note to the director which carries simple interest at the rate of seven percent (7%) of the outstanding principal balance per annum. The entire principal balance outstanding and any interest thereon shall be payable on demand by the holder of the Promissory Note, but no later than three years from the date of the loan.

On August 9, 2010 Douglas Oliver, President and CEO of the Company (the Employee), and the Company mutually agreed to terminate their Agreement without notice. The Employee assigned all amounts due to Lance Capital Ltd.

On August 10, 2010 a director assigned all of the demand loans, interest and expenses owed to the director to Lance Capital Ltd.

On August 10, 2010 a debtor assigned an agreed debt totaling $66,923 to Lance Capital Ltd.

On August 10, 2010 a consultant and the Company signed an unconditional and absolute general release which terminated the Agreement dated August 28, 2009 with a Panamerican corporation.

On August 15, 2010 62,500 stock options granted to a consulting company expired.

On August 23, 2010 the Company changed its mailing address to 1226 White Oaks Blvd, Suite 10A, Oakville, Ontario L6H 2B9 Canada.

On August 31, 2010, a consultant agreed to termination of an Agreement dated October 26, 2009 without notice and further agreed to accept $8,752 (CDN$9,000) as full payment for services rendered under the Agreement to be paid within 30 days. Lance Capital Ltd. agreed to advance the funds to the Company to cover this payment .

As of August 31, 2010, Yukon Gold Corporation, Inc. (the “Company”) and Lance Capital Ltd, an Ontario company (“Lance”), entered into a Note Purchase and Security Agreement (the “Agreement”) pursuant to which the Company has issued to Lance a Secured Convertible Promissory Note with a face amount of $375,000, bearing interest at 5% per annum and convertible into common shares of the Company at a conversion rate of $0.0025 per share (the “Note”). The Note matures on December 31, 2011. The Note is to be secured by a first lien and security interest in the Marg Property, a group of mineral claims located in the Mayo Mining District of the Yukon Territory, Canada (the “Marg Property”). Upon registration of the lien, the Agreement will be complete. The Marg Property is owned by the Company’s wholly-owned Canadian subsidiary.

The Note was issued by the Company to Lance as consideration for: (i) the assumption by Lance of certain of the Company’s obligations to three creditors totaling $382,545 as of August 31, 2010 which amounts were settled with Lance for $356, 835 and (ii) a loan from Lance to the Company of $18,165 to cover certain ongoing expenses of the Company. This note totaling $375,000 replaces the payables assumed by Lance and the loan of $18,165.

Lance is engaged in efforts to resolve outstanding obligations of the Company and raise working capital for the Company. In its sole discretion, Lance may continue to fund operating expenses of the Company for a limited period of time while it explores the feasibility of private placement or other financing for the Company. In the event that Lance exercises its option to convert the Note into Shares, Lance would become the principal shareholder of the Company and would effectively control the Company. Completion of the Agreement is awaiting registration of the lien.

On September 2, 2010 the Company’s board of directors accepted the resignation of Rakesh Malhotra as Chief Financial Officer effective September 1, 2010. There were no material disagreements between Mr. Malhotra, the Company or its board with respect to the Company’s operations or public disclosures.

On September 2, 2010, the Company’s board of directors appointed Mrs. Kathy Chapman, Chief Financial Officer and Corporate Secretary of the Company. Mrs. Chapman is also the Corporate Secretary of YGC. Mrs. Chapman has over 30 years of experience in internal accounting and administration and 13 years of experience in public company disclosure in the United States and Canada. Mrs. Chapman also is employed by Lance Capital Ltd. Lance does not have any relationship with the Company, except as described above. Mrs. Chapman also owns and operates an award winning bed and breakfast establishment in Paris, Ontario, which she has managed since July, 2000. She is currently the Co-Chair of Women in Mining Toronto Branch, based in Toronto, Canada. The focus of this group is to assist women in pursuing careers in the mining sector through mentorship, job opportunities and networking venues.

Item 6.    EXHIBITS & REPORTS ON FORM 8-K

Exhibits

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.