XTRA-GOLD RESOURCES CORP - Quarter Report: 2012 September (Form 10-Q)

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

FORM 10-Q

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

For the quarterly period ended September 30, 2012

OR

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

For the transition period from ________________ to ________________

Commission File No. 333-139037

Xtra-Gold Resources Corp.
(Exact name of registrant as specified in its charter)

357 BAY STREET – SUITE 902
TORONTO, ONTARIO – M5H 2T7 – CANADA
(Address of principal executive offices)

416 366-4227
(Registrant’s telephone number, including area code)

360 Bay Street – Suite 301
Toronto, Ontario – M5H 2V6 – Canada
(Former name, former address and former fiscal year, if changed since last report)

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 the filing requirements for the past 90 days.

[X] Yes        [_] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

[X] Yes        [_] 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:

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

[_] Yes        [X] No

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

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

- 1 -

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

- 2 -

- continued -

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

- 3 -

Supplemental disclosure with respect to cash flows (Note 10)

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

- 4 -

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

- 5 -

- 6 -

- 7 -

- 8 -

Kibi, Kwabeng and Pameng Projects

The Company holds an individual mining lease over the lease area of each of the Kibi Project, the Kwabeng Project and the Pameng Project, all of which are located in Ghana. Each of these mining leases grant the Company mining rights to produce gold in the respective lease areas until July 26, 2019 with respect to the Kwabeng and Pameng Projects, and until December 17, 2015 with respect to the Kibi Project (formerly known as the Apapam Project), the latter of which can be renewed for up to a further 30 year term on application and payment of applicable fees to the Minerals Commission of Ghana (“Mincom”). All gold production will be subject to a production royalty of the net smelter returns (“NSR”) payable to the Government of Ghana.

Banso and Muoso Project

During the year ended December 31, 2010, the Company made an application to Mincom to convert a single prospecting license (“PL”) securing its interest in the Banso and Muoso Projects located in Ghana to a mining lease covering the lease

- 9 -

The 1,000,000 Buccaneer shares received were valued at $411,440 at the date of issuance.

- 10 -

The Company has a legal obligation associated with its mineral properties for clean up costs when work programs are completed.

- 11 -

- 12 -

- 13 -

Stock option transactions and the number of stock options outstanding are summarized as follows:

The aggregate intrinsic value for options vested as of September 30, 2012 is approximately $123,860 (December 31, 2011 - $452,250) and for total options outstanding is approximately $123,860 (December 31, 2011 - $758,750).

No stock options were granted during the nine month period ended September 30, 2012. Certain option maturity terms were extended during the period and a non-cash charge of $315,194, reflecting an increase in the expected term to exercise from three years to five years, was booked in the September 2012 quarter. Other significant Black Scholes valuations assumptions regarding the charge include interest at 1.75%, no expected dividends, volatility of 75% and market price at September 30, 2012 of $0.87.

Warrants

At September 30, 2012, the following warrants were outstanding:

- 14 -

There were no significant non-cash transactions during the nine-month period ended September 30, 2012.

- 15 -

- 16 -

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

The following discussion and analysis of the consolidated financial statements and results of operations of Xtra-Gold Resources Corp. (“Xtra-Gold” or “our company”) for the nine months ended September 30, 2012 and 2011 should be read in conjunction with the consolidated financial statements and the related notes to our company’s consolidated financial statements and other information presented elsewhere in this Report. The following discussion contains forward-looking statements that reflect Xtra-Gold’s plans, estimates and beliefs. Our company’s actual results could differ materially from those discussed in the forward-looking statements set out herein. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and as contained elsewhere in this Report. Our company’s consolidated unaudited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

Highlights

Overview

We are a gold exploration company engaged in the exploration of gold properties in the Republic of Ghana, West Africa. Our mining portfolio currently consists of 225.87 square kilometers comprised of 33.65 square kilometers for our Kibi project, 51.67 square kilometers for our Banso project, 55.28 square kilometers for our Muoso project, 44.76 square kilometers for our Kwabeng project, and 40.51 square kilometers for our Pameng project, or 55,873 acres, pursuant to the leased areas set forth in our mining leases.

Plan of Operations

Our strategic plan is, with respect to our mineral projects:

• to focus our efforts and dedicate our financial resources toward the potential to drill out a mineral resource and, perhaps ultimately, a mineral reserve of our Kibi project located on the Kibi Gold Belt;
• to define a mineral resource and, perhaps ultimately, a mineral reserve on our other exploration projects and, in this regard, we will also attempt to do this by optioning to other qualified exploration entities;
• to enter into negotiations with independent Ghanaian contract miners and operators to assume our recovery of gold operations at our Kwabeng project with a view to these contractors conducting recovery of placer gold operations for fixed payments to our company; and
• to acquire further interests in gold mineralized projects that fall within the criteria of providing a geological basis for development of drilling initiatives that can enhance shareholder value by demonstrating the potential to define mineral reserves.

As part of our current business strategy, we plan to continue engaging technical personnel under contract where possible as our management believes that this strategy, at our company’s current level of development, provides the best services available in the circumstances, leads to lower overall costs, and provides the best flexibility for our business operations. We anticipate that our ongoing efforts will continue to be focused on the exploration and development of our projects and completing acquisitions in strategic areas.

- 17 -

In October 2008, we temporarily suspended our placer mining operations at our Kwabeng project while our management evaluated a more economic and efficient manner in which to extract and process the gold from the mineralized material at this project. Our operations resumed in 2010, which focused primarily on reclamation. As of the date of this Report, operations at our Kwabeng project have not resumed. During the next 12 months, we plan to:

• enter into negotiations to contract out the recovery of placer gold operations at this project, as noted above;
• advance the development of our Kibi project by carrying out our 2012 drill program; and
• acquire further interests in mineral projects by way of acquisition or joint venture participation.

We anticipate that, during 2012, we will spend an aggregate of approximately $6,000,000 comprised of $5,000,000 for exploration expenses in connection with our 2012 drill program of our Kibi project located on the Kibi Gold Belt to identify a potential mineral resource and approximately $1,000,000 for general and administrative expenses, which excludes approximately $500,000 in non-cash expenses.

Our company has historically relied on equity and debt financings to finance its ongoing operations. Existing working capital, possible debt instruments, anticipated warrant exercises, further private placements and anticipated cash flow are expected to be adequate to fund our company’s operations over the next year. During and after 2012, we require additional capital to implement our plan of operations. We anticipate that these funds primarily will be raised through equity and debt financing or from other available sources of financing. If we raise additional funds through the issuance of equity or convertible debt securities, it may result in the dilution in the equity ownership of investors in our common stock. There can be no assurance that additional financing will be available upon acceptable terms, if at all. If adequate funds are not available or are not available on acceptable terms, we may be unable to take advantage of prospective new opportunities or acquisitions, which could significantly and materially restrict our operations, or we may be forced to discontinue our current projects.

Trends

In 2011, many commodity and stock market indices continued to experience historically high levels of volatility in the face of the global economic uncertainty.

During 2011, the U.S. dollar was generally in decline, primarily from concerns about the level of U.S. government borrowings and the growing U.S. deficit and from the low interest rates offered on U.S. dollar deposits. The EURO also weakened against the Canadian dollar as a result of low interest rates, concerns about the solvency of certain European economies and the level of sovereign debt in those countries. During the nine months ended September 30, 2012, the U.S. dollar strengthened against the Ghanaian Cedi and stayed roughly even against the Canadian dollar.

Gold price volatility in 2011 remained high with the price reaching a high of $1,895 per ounce. During the third quarter of 2012, the gold price continued to increase and to be volatile, reaching a high of $1,784.50 per ounce on September 21, 2012 during the September 2012 quarter. The average market price for the third quarter of 2012 was $1,650.43 per ounce and for the third quarter of 2011 was $1,700.16 per ounce. The tone for the precious metals market in the near future will depend on whether the U.S. dollar will be supported, and if the central banks will continue to maintain interest rates at low levels to support economic growth. The continued global easing of monetary policy could lead to higher inflation and further U.S. dollar depreciation in the coming years. This dollar depreciation could have a positive impact on gold prices in the future and the long–term upward trend in prices may continue. Conversely, subdued inflation rates and the recovering global economy could put downward pressure on the gold price in the future. Additionally, recent events in Europe could continue to have a positive effect on the gold price.

Overall, a lower U.S. dollar should lead to higher costs in U.S. dollar terms to identify and explore for gold but could be more than offset by higher gold prices, resulting in greater interest in gold exploration companies. Conversely, if the U.S. dollar strengthens, interest in the gold exploration sector could be reduced.

- 18 -

Results of Operations

Summary of Quarterly Results

Three Months Ended September 30, 2012 Compared to the Three Months Ended September 30, 2011

Our company’s loss for the three months ended September 30, 2012 was $6,501 as compared to a net loss of $2,014,669 for the three months ended September 30, 2011, reduction in the quarterly loss of $2,008,168.

Our company’s basic and diluted loss per share for the three months ended September 30, 2012 was $0.00 compared to a net loss of $0.05 per share for the three months ended September 30, 2011. The weighted average number of shares outstanding was 44,650,362 for the three months ended September 30, 2012 compared to 43,964,595 for the three months ended September 30, 2011. The increase in the weighted average number of shares outstanding can be attributed to the exercise of warrants in the second half of 2011 and of stock options in the first quarter of 2012, partly offset by our repurchase and cancellation of 68,300 shares of common stock during 2012 pursuant to our normal course issuer bid.

We incurred expenses of $797,538 in the three months ended September 30, 2012 as compared to $1,827,795 in the three months ended September 30, 2011, a decrease of $1,030,257. The decrease in expenses in the three months ended September 30, 2012 can be primarily attributed to a decrease of $906,255 in exploration costs to $484,791 as compared to $1,391,046 for the three months ended September 30, 2011 as activities were significantly reduced in Q3 2012 to conserve the remaining cash. All exploration costs for the three months ended September 30, 2012 were booked as exploration expenses.

General and administrative expenses (“G&A”) were $236,542 for the three months ended September 30, 2012, as compared to $374,280 for the three months ended September 30, 2011, included consulting fees, stock-based compensation, legal, auditor and regulatory filing fees, travel and promotional expenses. The decrease mostly resulted from a reduction in the non-cash charge of $143,711 related to the stock option expense. Other G&A expenses were in line with the previous year.

Amortization for the three months ended September 30, 2012 was $76,205 as compared to $62,469 for the three months ended September 30, 2011, an increase of $13,736, due to equipment additions in 2011.

Exploration efforts during the quarter focused primarily on drill target generation on our Kibi project with 1,360 meters of trenching conducted on priority gold-in-soil anomalies and geological targets, and 1,393 trench assays received from the laboratory.

Other items totaled a gain of $762,446 for the three months ended September 30, 2012 compared to a loss of $324,218 for the three months ended September 30, 2011. During the three months ended September 30, 2012, our company had a foreign exchange gain of $222,151 compared to a loss of $263,026 in the three months ended September 30, 2011 which loss can be attributed to currency fluctuations. There was no recovery of gold during the three months ended September 30, 2012 as compared to $55,394 for the three months ended September 30, 2011 as efforts in the 2012 quarter were focused on land remediation rather than production. Our company’s portfolio of marketable securities had a realized gain of $585,050 on the sale of some securities and an unrealized gain of $56,782 in the three months ended September 30, 2012 compared to an unrealized loss of $110,942 in the three months ended September 30, 2011. Other income, primarily derived from dividends and interest earned and other miscellaneous items, reported a gain of $12,697 in the three months ended September 30, 2012 as compared to a loss of $5,644 in the three months ended September 30, 2011.

- 19 -

During the three months ended September 30, 2012, no placer gold operations were conducted. These placer gold operations have been contracted to local Ghanaian groups which pay a portion of their gold receipts to us for the right to work on our projects. We pay all government royalties due on all of the production. This method promotes the local economy while avoiding illegal workings on our projects.

Nine Months Ended September30, 2012 Compared to the Nine Months Ended September 30, 2011

Our company’s loss for the nine months ended September 30, 2012 was $4,867,463 as compared to a net loss of $4,164,536 for the nine months ended September 30, 2011, an increase of $702,927. Gold recovery was significantly reduced in the nine-month period of 2012 compared to the nine-month period of 2011 as operations were halted in 2012, generating the greatest change in year-over-year profitability. Foreign exchange created the next largest change. Increased exploration spending and a significant G&A non-cash expense related to a change in terms of stock options was partly offset by options receipts from the transfer of exploration rights. A gain on sale of equipment was recorded in 2011.

Our company’s basic and diluted loss per share for the nine months ended September 30, 2012 was $0.10 compared to net loss of $0.09 per share for the nine months ended September 30, 2011. The weighted average number of shares outstanding was 44,657,090 at September 30, 2012 compared to 43,600,303 for the nine months ended September 30, 2011. The increase in the weighted average number of shares outstanding can be mostly attributed to the issuance of shares in connection with the conversion of warrants and the exercise of stock options during the period, partly offset by share buybacks in 2012.

Exploration spending for the nine months ended September 30, 2012 was $4,330,556 as compared to $4,082,495 for the nine months ended September 30, 2011, an increase of $248,061. Exploration work was focused primarily on our Kibi project in the nine-month period.

General and administrative expenses for the nine months ended September 30, 2012 were $1,053,991 as compared to $951,364 for the nine months ended September 30, 2011, an increase of $102,627. Most of the 2012 expense increase reflects a non-cash stock-based compensation charge of $469,161 (nine months to 2011 - $290,803). Consulting and director fees were $168,409, while legal expenses were $122,009. The balance of the general and administrative expense of $294,412 related to auditor, regulatory, rental and office expense, and marketing fees.

Amortization for the nine months ended September 30, 2012 was $204,735 as compared to $142,035 for the nine months ended September 30, 2011, an increase of $62,700. We purchased equipment at a cost of $1,005,467 in 2011 ($nil in 2012), which increased the comparative expense in 2012.

During the nine months ended September 30, 2012, we received 72 ounces of gold from our share of the placer gold operations, all in the first quarter. These placer gold operations have been contracted to local Ghanaian groups which pay a portion of their gold receipts to us for the right to work on our projects. We pay all government royalties due on all of the production. This method promotes the local economy while avoiding illegal workings on our projects. Our gold receipts, after royalties, generated a profit of $70,557.

Unrealized investment portfolio losses for the nine months ended September 30, 2012 were $286,689 as compared to an unrealized loss of $177,932 for the nine months ended September 30, 2011, an increase of $108,757. Most of the unrealized loss in 2012 related to a mark-to-market valuation of shares received from property options negotiated with other parties. Realized gains on sales of trading securities of $593,816 were realized in the first nine months of 2012 (nil in first nine months of 2011).

Liquidity and Capital Resources

Our activities, principally the exploration and acquisition of properties for gold and other metals, may be financed through joint ventures or through the completion of equity transactions such as equity offerings and the exercise of stock options and warrants. In November 2010, our company issued 8,092,593 common shares for proceeds of $10.8 million and 566,482 broker warrants in conjunction with our initial public offering.

- 20 -

At September 30, 2012, accounts payable and accrued liabilities decreased to $246,347 (December 31, 2011 - $745,860), due to reduced exploration activity. Our cash and cash equivalents as at September 30, 2012 were sufficient to pay these liabilities.

At September 30, 2012, we had total cash of $1,355,495 (December 31, 2011 - $4,498,753). Working capital as of September 30, 2012 was $2,502,648 (December 31, 2011 - $6,629,046).

The decrease in cash mostly reflects exploration and administrative spending. During the September 2012 quarter, our company received proceeds of $577,295 for sales of tradable securities.

During the nine months ended September 30, 2012, we received (i) a final payment of $135,000 from NCD with respect to our assignment of our interest in the Edum Banso Project; and (ii) $110,000 in connection with the exercise of 110,000 stock options by a consultant of our company.

We are an exploration company focused on gold and associated commodities and do not have operating revenues; and therefore, we must utilize our current cash reserves, income from placer gold sales, income from investments, funds obtained from the exercise of stock options and warrants and other financing transactions to maintain our capacity to meet our planned exploration programs, or to fund any further development activities. There is no certainty that future financing will be available to us in the amounts or at the times desired on terms acceptable to us, if at all.

Our common shares, warrants and stock options outstanding as at November 12, 2012, September 30, 2012, and December 31, 2011 were as follows:

As of the date of this Report, the full exercise of the outstanding warrants and options would raise approximately $2.9 million. Exercise of these warrants and options is not anticipated until the market value of our common shares increases in value.

We remain debt free and our credit and interest rate risk is limited to interest-bearing assets of cash and bank or government guaranteed investment vehicles. Accounts payable and accrued liabilities are short-term and non-interest bearing.

Our liquidity risk with financial instruments is minimal as excess cash is invested with a Canadian financial institution in government-backed securities or bank-backed guaranteed investment certificates.

Our fiscal 2012 budget is approximately $6.0 million as disclosed above under the heading “Plan of Operations”. As of the date of this MD&A, our total cash position is sufficient to meet our current budgetary requirements for 2012. These expenditures are subject to change if management decides to scale back or accelerate operations.

We expect to be adequately capitalized to fund ongoing operations at the current level in the short-term for fiscal 2012. As is typical for junior exploration companies, we will require additional funds from equity sources to maintain the current momentum on our projects.

Material Commitments

Save and except for fees payable from time to time (a) to the Minerals Commission for: (i) an extension of an expiry date of a prospecting license (currently $15,000 for each occurrence); (ii) a grant of a mining lease (currently $35,000); (iii) an extension of a mining lease (currently $100,000); (iv) annual operating permits; and (v) the conversion of a reconnaissance license to a prospecting license (currently $20,000); (b) to the EPA for: (i) processing and certificate fees with respect to EPA permits; (ii) the issuance of permits prior to the commencement of any work at a particular concession; or (iii) the posting of a bond in connection with any mining operations undertaken by our company; (c) for a legal obligation associated with our mineral properties for clean up costs when work programs are completed, we are committed to expend an aggregate of less than $500 in connection with annual ground rent and mining permits to enter upon and gain access to the following concessions covered by our company’s mining leases and future reconnaissance and prospecting licenses and such other financial commitments arising out of any approved exploration programs in connection therewith:

- 21 -

Upon and following the commencement of gold production at any of our projects, a royalty of the net smelter returns is payable quarterly to the Government of Ghana as prescribed by legislation.

Purchase of Significant Equipment

We consider the availability of equipment to conduct our exploration activities. Due to demand from the mining and exploration industry, at this time it is difficult to source resources for exploration work in Ghana, including drills, excavators and bulldozers. We will consider the further acquisition of equipment pieces to allow work to expand on our Projects.

Off Balance Sheet Arrangements

Our company has no off balance sheet arrangements.

Significant Accounting Applications

There was no change in significant accounting policies from those used in the December 31, 2011 audited financial statements, unless noted below in this section.

Cash and cash equivalents

Our company considers highly liquid investments with original maturities of three months or less to be cash equivalents. At September 30, 2012 and December 31, 2011, cash and cash equivalents consisted of cash held at financial institutions and highly liquid investments with original maturities of less than three months.

Loss per share

Basic loss per common share is computed using the weighted average number of common shares outstanding during the year. To calculate diluted loss per share, our company uses the treasury stock method and the if converted method. As of September 30, 2012, there were 566,482 warrants (December 31, 2011 – 566,482) and 1,957,000 stock options (December 31, 2011 – 2,067,000) exercisable into common shares, none of which have been included in the weighted average number of common shares outstanding in either period as these were anti-dilutive.

Fair value of financial assets and liabilities

Our company measures the fair value of financial assets and liabilities based on GAAP guidance which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. Effective January 1, 2008, our company adopted the provisions for financial assets and liabilities, as well as for any other assets and liabilities that are carried at fair value on a recurring basis. Effective January 1, 2009, our company adopted the provisions for non-financial assets and liabilities that are required to be measured at fair value.

Our company classifies financial assets and liabilities as held-for-trading, available-for-sale, held-to-maturity, loans and receivables or other financial liabilities depending on their nature. Financial assets and financial liabilities are recognized at fair value on their initial recognition, except for those arising from certain related party transactions which are accounted for at the transferor’s carrying amount or exchange amount.

- 22 -

Financial assets and liabilities classified as held-for-trading are measured at fair value, with gains and losses recognized in net income. Financial assets classified as held-to-maturity, loans and receivables, and financial liabilities other than those classified as held-for-trading are measured at amortized cost, using the effective interest method of amortization. Financial assets classified as available-for-sale are measured at fair value, with unrealized gains and losses being recognized as other comprehensive income until realized, or if an unrealized loss is considered other than temporary, the unrealized loss is recorded in income.

Financial instruments, including cash and cash equivalents, receivables, restricted cash, and accounts payable and accrued liabilities are carried at cost, which management believes approximates fair value due to the short term nature of these instruments. Investments in trading securities are classified as held for trading, with unrealized gains and losses being recognized in income.

The following table presents information about the assets that are measured at fair value on a recurring basis as of December 31, 2011, and indicates the fair value hierarchy of the valuation techniques our company utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and included situations where there is little, if any, market activity for the asset:

The fair values of cash and cash equivalents, restricted cash and investments are determined through market, observable and corroborated sources.

Concentration of credit risk

The financial instrument which potentially subjects our company to concentration of credit risk is cash. Our company maintains cash in bank accounts that, at times, may exceed federally insured limits. As of September 30, 2012 and December 31, 2011, our company has exceeded the federally insured limit. Our company has not experienced any losses in such accounts and believes it is not exposed to any significant risks on its cash in bank accounts.

Recently Adopted Accounting Pronouncements

Fair Value Accounting

In May 2011, the ASC guidance was issued related to disclosures around fair value accounting. The updated guidance clarifies different components of fair value accounting including the application of the highest and best use and valuation premise concepts, measuring the fair value of an instrument classified in a reporting entity’s shareholders’ equity and disclosing quantitative information about the unobservable inputs used in fair value measurements that are categorized in Level 3 of the fair value hierarchy. The update is effective for our company’s fiscal year beginning January 1, 2012. Our company’s January 1, 2012 adoption of the updated guidance had no impact on our company’s consolidated financial position, results of operations or cash flows.

- 23 -

Forward Looking Statements

The information in this quarterly report contains forward-looking statements. These forward-looking statements involve risks and uncertainties, including statements regarding Xtra-Gold’s financial condition, results of operations, business prospects, plans, objectives, goals, strategies, expectations, future events, capital expenditure and exploration efforts. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as “anticipates”, “expects”, “intends”, “plans”, “forecasts”, “projects”, “budgets”, “believes”, “seeks”, “estimates”, “could”, “might”, “should” “may”, “will”, “predict”, “potential” or “continue”, the negative of such terms or other comparable terminology. Actual events or results may differ materially. In evaluating these statements, you should consider various factors, including the risks outlined from time to time, in other reports that Xtra-Gold files with the Securities and Exchange Commission. These factors may cause our company’s actual results to differ materially from any forward-looking statement. Our company disclaims any obligation to publicly update these statements, or disclose any difference between its actual results and those reflected in these statements. The information constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Xtra-Gold is a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and, as such, is not required to provide the information required under this item.

Item 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, including our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Report.

Based on that evaluation, our management has concluded that as of the end of the period covered by this Report our disclosure controls and procedures were effective such that the information required to be disclosed in our Securities and Exchange Commission reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms; and (ii) is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

Our management does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

• pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

- 24 -

• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of September 30, 2012. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Management's assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of these controls. Based on this assessment, our management has concluded that as of September 30, 2012, our internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Changes in Internal Controls over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with our evaluation that occurred during our quarter ended September 30, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

Our company was party to a lawsuit for the sum of $121,336 filed in the Ghanaian courts pertaining to payment for excavation services provided by a subcontractor. We believed that the debt had previously been discharged through the transfer of our shares to the subcontractor in 2008. During the quarter ended March 31, 2010, we settled the lawsuit by paying the subcontractor $108,000 in return for the shares previously issued which we subsequently cancelled.

Except for the foregoing, neither our company nor any of our subsidiaries was a party or of which any of our property was the subject in any material pending legal proceedings that exceeds 10% of our current assets and our subsidiaries on a consolidated basis during the quarter ended September 30, 2012.

Item 1A. RISK FACTORS

Xtra-Gold is a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and, as such, our company is not required to provide the information required by this item.

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

There were no unregistered sales of equity securities during the quarter ended September 30, 2012.

Item 3. DEFAULTS UPON SENIOR SECURITIES

There has been no material default, during the period covered by this Report, in the payment of principal, interest, a sinking or purchase fund installment, or any other material default not cured within 30 days with respect to any indebtedness of our company or any of our significant subsidiaries exceeding 5% of our total assets and our consolidated subsidiaries.

Item 4. MINE SAFETY DISCLOSURES

Not applicable to our operations.

- 25 -

Item 5. OTHER INFORMATION

Xtra-Gold entered into an office space lease with Dundeal Summer 2011 Collection (GP) Inc. dated October 18, 2012 for a rentable area of 881 square feet (the “Lease”) at Suite 902, 357 Bay Street, Toronto, Ontario, which will serve as our company’s principal executive offices.  The Lease is for a five year term commencing on November 1, 2012.  The monthly rent payable is $3,708 (CAD$3,680) and is comprised of basic rent, additional rent (including our share of realty taxes and operating costs, utilities and additional services) and applicable taxes.  A copy of the Lease has been included as an exhibit to this Report.

Item 6. EXHIBITS

Exhibits

The following documents are included as exhibits to this Report. Exhibits incorporated by reference are so indicated.

- 26 -

SIGNATURES

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

- 27 -