News Column

HANDENI GOLD INC. - 10-K - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

August 19, 2014

The following discussion of our financial condition, changes in financial position, plan of operations and results of operations should be read in conjunction with (i) our audited consolidated financial statements as at May 31, 2014, May 31, 2013 and for the period from inception (January 5, 2004) to May 31, 2014 and (ii) the section entitled "Business" included in this annual report. All financial information in this Management's Discussion and Analysis ("MD&A" or the "discussion") is expressed and prepared in conformity with U.S. generally accepted accounting principles. All dollar references are to the U.S. dollar, the Company's reporting currency, unless otherwise noted. Some numbers in this MD&A have been rounded to the nearest thousand for discussion purposes.

FORWARD-LOOKING STATEMENTS



This MD&A contains forward-looking statements that involve risks, uncertainties and assumptions with respect to the Company's activities and future financial results, which are made based upon management's current expectations and beliefs. These forward-looking statements involve risks and uncertainties, including statements regarding the Company's capital needs, business plans and expectations. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those set forth under "Risk Factors" and elsewhere in this annual report. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. Management disclaims any obligation to publicly update these statements, or disclose any difference between its actual results and those reflected in these statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Overview

To take advantage of Tanzania's rich natural resources, the Company is engaged in the acquisition and exploration of mineral properties in the United Republic of Tanzania, Africa, through its wholly-owned subsidiaries, HG Limited (formerly: DLM Tanzania Limited), and Douglas Lake Tanzania Limited which is inactive. Over these years, the Company has built strong relationships with the Ministry of Mines, the Geological Survey of Tanzania, and other government agencies in Tanzania.

In the past four years, the Company has focused exclusively on its Handeni Gold Project located in Tanzania. The Company's exploration activities conducted in the past two fiscal years were outlined under Item 1. Business - Our Mineral Claims, above.

Our exploration program and achievements during our fiscal year ended May 31, 2014 are highlighted as follows:

a) We completed our evaluation process of the application of XRF to identify soil samples with a high likelihood to contain anomalous gold values. This process was completed with the submission of 232 of 5028 soil samples for gold assay of which 57% returned anomalous gold. b) We completed the XRF analyses of 5,672 soil samples, standards and blanks of target A. These samples will be treated statistically and those with a high likelihood of anomalous gold will be submitted for assays. c) We completed a detailed structural interpretation of the Kwandege target with the aim of completion the final recommendations for the further drilling of this target. d) We submitted 84 samples for gold assay as a pilot investigation on one of the targets on PL6743/2010. In combination with the large amount of XRF results conducted on this target the soil sampling method will be adapted to yield the best possible results in the Handeni district. e) We completed mapping and lithogeochemical sampling on Target 5 and submitted samples for gold assays. This remains a target with high potential based on the results of the lithogeochemical gold assays and soil sample results combined with the geophysics. f) We completed a detailed geological map, a preliminary structural interpretation, a ground magnetic survey as well as detailed soil sampling and XRF analyses on our Mjembe target. The results defined a significant potential gold mineralization zone with a high correlation between geochemical, structural and geophysical data. Mjembe will be the Company's primary target during the 2014/2015 field season. g) We initiated a mapping and soil sampling program on Target 8. h) We retained our prime exploration targets following a detailed interpretation of our drill data, geophysical (airborne and ground) data, geochemical data, structural interpretation, the application of our new geological and structural model for gold mineralization in our property area and finally the successful application of areas to be retained to the Ministry of Energy and Minerals. 23



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Plan of Operations

Our plan of operations through our next fiscal year ending May 31, 2015 is to continue to focus on the exploration of our Handeni mineral property in Tanzania, and the budget for this plan requires approximately $0.8 million for our plan of the exploration work and $0.9 million for our general and administration expenses, professional and consulting fees and other operating expenses.

Other exploration related activities currently under way on the Company's Handeni licenses include:

a) Identification of potential alluvial mining areas other than those currently known and being evaluated by utilizing remote sensing activities. b) A detailed interpretation of already collected geophysical data, specifically aimed at Target 8 and the Mjembe target. c) A petrological, geochemical and mineralogical investigation of the Kwandege drill core to understand the style of gold mineralization at this locality. d) The planning and siting of drill holes as a follow up Reverse Circulation program to evaluate the near - surface potential of the Kwandege target. e) Continued work on development of other targets to drill target status, specifically Mjembe and Target 5. f) Detailed structural work on the Mjembe target as well as on targets on PL6743/2010. g) Adapting our soil sampling technique to yield the best possible results under the conditions experienced in the Handeni district further increasing exploration activity at a reduced cost. Evaluate the ground relinquished but currently on offer to us to establish any potential interest of it to the Company's exploration program. h) Drastically reduce our land holding in our Handeni properties to remain with only targets with high potential identified by September 2014.



The estimated budget for the completion of these exploration programs is provided below:

EXPLORATION WORK BUDGET (US$) Ground Geophysics 50,000 Mapping, trenching, sampling, etc. 50,000 Drilling 250,000 Geologists, field personnel and general exploration 250,000 Sundry & contingencies 200,000 TOTAL $800,000



At May 31, 2014, we had cash of $533,000 but working capital deficit of $876,000. On June 18, 2014, the Company's $1.07 million loan repayment due date has been extended from June 30, 2014 to June 30, 2015. We assume such related party loan to the Company would not be demanded for the repayment by the Company's major shareholder at the due date on June 30, 2015. As such, we estimated that we will still need a minimum of $1.5 million additional funds in order to cover our planned operations over the next twelve months ending May 31, 2015. Our actual expenditures may exceed our estimations.

We anticipate that we will not generate any revenues for so long as we are an exploration stage company. Accordingly, we will be required to obtain additional financing in order to pursue our plan of operations.

We believe that external debt financing will not be an alternative for funding our next fiscal year exploration, as we do not have significant tangible assets to secure any debt financing. Therefore, we anticipate that additional funding will be in the form of equity financing from the sale of our common stock and/or related parties debt financing. We cannot provide investors with any assurance that we will be able to obtain sufficient financing to fund our acquisition and exploration program going forward. In the absence of sufficient funding, we will not be able to continue acquisition and exploration of mineral claims and we will be forced to abandon our mineral claims and our plan of operations. Even if we are successful in obtaining financing to fund our acquisition and exploration program, there is no assurance that we will obtain the funding necessary to pursue any advanced exploration of any mineral claims.

Results of Operations

During the year ended May 31, 2014, we spent approximately $222,000 (2013 - $659,000) cash on exploration, annual property rental and licenses renewal fees. We were not able to make further expenditures as our plan of operations due to our funding limitation. During the year ended May 31, 2014, we also spent approximately $799,000 (2013 - $1,271,000) cash expenditures on other operating expenses.

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We have had no operating revenues since our inception (January 5, 2004) to May 31, 2014. The following table sets out our losses for the periods indicated:

Accumulated from January 5, 2004 For the Years Ended, (Date of Inception) to May 31, 2014 May 31, 2013 May 31, 2014 Revenue $ - $ - $ - Expenses Consulting fees 22,500 594,608 24,092,224 Depreciation 189,200 202,726 631,809 Exploration expenses 221,977 658,756 8,277,590 (Gain) / Loss on disposal or write-down of equipment (3,210 ) 2,687 18,530 General and administrative 524,088 786,042 3,682,234 Impairment of mineral property - - 77,492,074 Interest expenses 89,869 28,379 118,248 Professional 141,356 186,661 2,696,376 Rent 83,994 94,096 525,672 Travel and investor relations 24,111 99,110 2,012,507 Total Expenses 1,293,885 2,653,065 119,547,264 Loss From Operations (1,293,885 ) (2,653,065 ) (119,547,264 ) Other Income (Expenses) Gain on write-down of accrued liabilities - - 458,058 Impairment of marketable securities (Note 6) (1,000,000 ) (1,600,000 ) (2,600,000 ) Interest income 290 664 1,744 Loss on sale of investment securities - - (57,071 ) Recovery (Loss) on write-down of amounts receivable - 14,870 (66,771 ) Mineral property option payments received - - 3,616,017 Recovery of mineral property costs for stock not issuable - - 2,253,000 Total other (Expenses) / Income (999,710 ) (1,584,466 ) 3,604,977 Net Loss $ (2,293,595 )$ (4,237,531 ) $ (115,942,287 )



Year Ended May 31, 2014 Compared to Year Ended May 31, 2013

Our net loss for the fiscal year ended May 31, 2014 was $2,294,000, compared to $4, 238,000 for the same period ended May 31, 2013, mainly due to $1,000,000 (2013 - $1,600,000) permanent impairment of marketable securities and the following operation expenses changes.

Our operating expenses for the fiscal year ended May 31, 2014 decreased by $1.36 million to $1,294,000 from $2,653,000 for the fiscal year ended May 31, 2013, as follows:

our consulting, general and administrative fees decreased by $834,000 to

$547,000 during the fiscal year ended May 31, 2014 (2013 - $1,381,000), primarily due to decreases of $345,000 in cash expenditures and $489,000 in stock-based compensation. The stock-based compensation included in consulting, general and administrative fees was $Nil during the fiscal year ended May 31, 2014 (2013 - $489,000); Excluding the stock-based compensation, our other consulting, general and administrative fees was decreased to $547,000 during the fiscal year ended May 31, 2014 (2013 - $892,000), primarily due to decreased independent directors' fees, less employees and consultants, and continuing cost management; At May 31, 2014, approximately $278,000 (2013 - $145,000) of general and administrative fees remained as payables due to the related parties;



depreciation increased by $14,000 to $189,000 during the fiscal year ended

May 31, 2014 (2013 - $203,000) mainly due to less net book value on the

equipment;

our exploration expenses decreased by $437,000 to $222,000 during the fiscal

year ended May 31, 2014 (2013 - $659,000) due to further decreased

exploration and drilling activities caused by our funding limitation during

the fiscal year ended May 31, 2014;

interest expenses increased to $90,000 during the fiscal year ended May 31,

2014 (2013 - $28,000), mainly due to increased deemed interest on an interest free unsecured loan from a related party. Such deemed interest was recorded as donated capital; 25



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our professional fees decreased by $45,000 to $141,000 during the fiscal

year ended May 31, 2014 (2012 - $186,000) primarily due to continuing

decreased legal and accounting services as a result of more work performed

in-house by management to save the cost.

our rent expenses decreased by $10,000 to $84,000 during the fiscal year

ended May 31, 2014 (2013 - $94,000) mainly due to our Tanzania office reduced to half commencing March 2013 and further moved to a smaller office commencing March 2014. In addition, included in the fiscal year ended May 31, 2014, there was $25,200 rent representing 60% of rental expense associated with renting our Chief Executive Officer's family house in Tanzania pursuant to the Executive Services Agreement. Such rent for 2012 was paid and included in the fiscal year ended May 31, 2012.



our travel and investor relations expenses decreased by $75,000 to $24,000

during the fiscal year ended May 31, 2014 (2013 - $99,000) primarily due to significantly less travel expenses and investor relations expenses and cost management.



Year Ended May 31, 2013 Compared to Year Ended May 31, 2012

Our net loss for the fiscal year ended May 31, 2013 was $4, 238,000, compared to $6,904,000 for the same period ended May 31, 2012, mainly due to $1,600,000 permanent impairment of marketable securities and the following operation expenses changes.

Our operating expenses for the fiscal year ended May 31, 2013 decreased by $6.8 million to $2,653,000 from $9,448,000 for the fiscal year ended May 31, 2012, as follows:

our consulting, general and administrative fees decreased by $1.6 million to

$1,383,000 during the fiscal year ended May 31, 2013 (2012 - $3,020,000), primarily due to decreases of $397,000 in cash expenditures and $1,240,000 in stock-based compensation. The stock-based compensation included in consulting, general and administrative fees was $489,000 during the fiscal year ended May 31, 2013 (2012 - $1,729,000); Excluding the stock-based compensation, our other consulting, general and administrative fees was decreased to $894,000 during the fiscal year ended May 31, 2013 (2012 - $1,291,000), primarily due to cost management; At May 31, 2013, approximately $145,000 (2012 - $30,000) of general and administrative fees remained as payables due to the related parties;



depreciation increased by $42,000 to $203,000 during the fiscal year ended

May 31, 2013 (2012 - $161,000) mainly due to additional depreciation on camp

equipment acquired in the prior year;

our exploration expenses decreased by $4.3 million to $659,000 during the

fiscal year ended May 31, 2013 (2012 - $4,958,000) due to decreased

exploration and drilling activities caused by our funding limitation during

the fiscal year ended May 31, 2013;

interest expenses increased to $28,000 during the fiscal year ended May 31,

2013 (2012 - $Nil), which represented deemed interest on an interest free

unsecured loan from a related party. Such deemed interest was recorded as

donated capital;

our professional fees decreased by $620,000 to $186,000 during the fiscal

year ended May 31, 2013 (2012 - $806,000) primarily due to significantly decreased legal and accounting services fees as a result of more work performed in-house by management. During the fiscal year ended May 31, 2012, the Company had significant changes in the management. In addition, in fiscal year 2012, we had incurred an additional accounting services fees associated with our Tanzania subsidiary;



our rent expenses decreased by $63,000 to $94,000 during the fiscal year

ended May 31, 2013 (2012 - $157,000) mainly due to our Tanzania office reduced to half commencing March 2013 and cost management; In addition, there was $25,200 rent included in 2012 representing 60% of rental expense associated with renting our Chief Executive Officer's family house in Tanzania pursuant to the Executive Services Agreement. Such rent for 2013 was paid subsequent to the fiscal year ended May 31, 2013.



our travel and investor relations expenses decreased by $246,000 to $99,000

during the fiscal year ended May 31, 2013 (2012 - $345,000) primarily due to

significantly less travel expenses and cost management.

Liquidity and Capital Resources

The Company has been reviewing its budgets for its current business needs and its further exploration. We estimate that our total expenditures for our fiscal year ending May 31, 2015 will be approximately $1.7 million, as outlined above under the heading "Plan of Operations". At May 31, 2014, we had cash of $533,000 but working capital deficit of $876,000. We believe that we have insufficient capital to fund our plan of operations in the next 12 months. If we exclude $1.07 million of the related party loan from the current liabilities, then we have working capital of $195,000 for our fiscal year ending May 31, 2015. As such, we estimate we will be required to obtain a minimum of $1.5 million additional funds in order to pursue our planned operations over the fiscal year ending May 31, 2015.

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On December 7, 2012, we entered into a facility agreement with IPP Ltd. a private company controlled by our Chairman of the Board of Directors. The funding is in the form of an interest free unsecured loan to the Company of up to $720,000 through and including June 2013. As of the date of this report, we received a total of $695,683. In June 2014, the loan repayment due date has been further extended to June 30, 2015 by the Company and IPP Ltd.

On October 9, 2013, the Company entered into a facility agreement with Consultancy & Finance Company Associates Ltd, a private company controlled by our Chairman of the Board of Directors. The funding is also in the form of an interest free unsecured loan to the Company of up to $405,000. As of the date of this report, we received a total of $375,000 which is due to be repaid on or before June 30, 2015 pursuant to this facility agreement, as amended.

During the fiscal year ended May 31, we received $47,000 of recoverable goods and services tax/harmonized sales tax from Canada Revenue Agency. We also received $538,000 of recoverable value added tax from the Tanzania Revenue Authority and realized a loss of $23,000 on Tanzanian shillings foreign exchange.

As of May 31, 2014, there was $23,000 of recoverable value added tax paid in Tanzania and $10,000 of recoverable goods and services tax paid in Canada. Such recoverable amounts were included in our working capital and expected to be refunded during the fiscal year 2015.

We have not generated revenues since the date of inception on January 5, 2004, and our cash has been generated primarily from the sale of our securities. During the 12-month period following the date of this annual report, we anticipate that we will not generate any revenue. We anticipate that additional funding will be in the form of equity financing from the sale of our common stock, debt financing, joint ventures or some combination of these or other means. We believe that external debt financing will not be an alternative at this stage for funding additional phases of our exploration as we do not have significant tangible assets to secure any debt financing.

We cannot provide investors with any assurance that we will be able to raise sufficient funding to continue our acquisition and exploration program going forward. If we are not able to obtain financing in the amounts required or on terms that are acceptable to us, we may be forced to scale back, or abandon, our plan of operations. Even if we are successful in obtaining equity and/or debt financing to fund our acquisition and exploration program, there is no assurance that we will obtain the funding necessary to pursue any advanced exploration of any mineral claims. If we do not continue to obtain additional funding, we will be forced to abandon our mineral claims and our plan of operations.

Net Cash Used in Operating Activities

Net cash used in operating activities was $203,000 during the fiscal year ended May 31, 2014, as compared to $1.8 million during the fiscal year ended May 31, 2013. During the fiscal quarter ended May 31, 2014, net cash provided in operating activities was $342,000, while net cash used in operating activities was $401,000 during the same period in 2013. Net cash used in operating activities from our inception on January 5, 2004 to May 31, 2014 was $19.4 million.

Net Cash Used in Investing Activities

Net cash used in investing activities was $4,000 during the fiscal year ended May 31, 2014. During the year, we purchased $3,000 of office equipment and computer software, and received $7,000 from disposal of office furniture and vehicle. During the fiscal year ended May 31, 2013, net cash used in investing activities was $41,000 primarily due to $9,000 of office equipment purchase and received $50,000 from disposal of vehicle and redemption of restricted cash equivalent.

During the fiscal quarter ended May 31, 2014, net cash used in investing activities was $896. During the same period in 2013, net cash received in investing activities was $28,726 from redemption of restricted cash equivalent. Net cash used in investing activities from our inception on January 5, 2004 to May 31, 2014 was $831,000 mainly used in purchase of property and equipment.

Net Cash from Financing Activities

During the fiscal year ended May 31, 2014, we received $525,000 (2013 - 546,000) cash from a related party as interest-free loans. During the fiscal year ended May 31, 2013, we also received $500,000 net cash from financing activities (receipt of stock subscriptions). During the fiscal quarter ended May 31, 2014, net cash from financing activities was $475,000 received from a related party as a loan, as compared to $396,000 received from an interest-free loan and $500,000 received from a stock subscription during the same period in 2012. We have funded our business to date primarily from sales of our common stock. From our inception on January 5, 2004 to May 31, 2014, net cash provided by financing activities was $20,784,000.

There are no assurances that we will be able to achieve further sales of our common stock or any other form of additional financing. If we are unable to achieve the financing necessary to continue our plan of operations, then we will not be able to continue our exploration of the property underlying our mineral claim interest and our venture will fail.

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Going Concern

We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive exploration activities. The Company has not generated any revenues and has accumulated losses of $115,942,287 since inception to May 31, 2014. In addition, we had working capital deficit of $876,000 as of May 31, 2014. For these reasons our auditors stated in their report on our audited financial statements for the year ended May 31, 2014 that they have substantial doubt we will be able to continue as a going concern.

Future Financings

We anticipate continuing to rely on equity sales of our common shares, debt financing from our related parties, and/or other financing in order to continue to fund our business operations over next fiscal year ending May 31, 2015. Issuances of additional shares will result in dilution to our existing shareholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned exploration activities.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

Related Party Transactions

The details of related party transactions are disclosed in footnote 9 of our Company's audited consolidated financial statements for the fiscal year ended May 31, 2014 (Item 8 - FINANCIAL STATEMENTS, below).

Segment Disclosures

The Company operates in one reportable segment, located in TanzaniaAfrica, being the acquisition and exploration of mineral properties. The details of segment disclosures are disclosed in footnote 17 of our Company's audited consolidated financial statements for the fiscal year ended May 31, 2014 (Item 8 - FINANCIAL STATEMENTS, below).

Inflation

We do not believe that inflation has had a significant impact on our consolidated results of operations or financial condition.

Contractual Obligations

a) On December 7, 2012, the Company entered into a facility agreement with IPP Ltd., a private company controlled by the chairman of the Company. The funding is in the form of an interest free unsecured loan of up to $720,000 to the Company by way of monthly drawdowns of a maximum amount of US$100,000 per calendar month up to and including June 2013. The total amount drawn down by the Company is due to be repaid on or before June 30, 2015, as amended. As at May 31, 2014, IPP Ltd. had provided a total of $695,683 to the Company pursuant to this facility agreement. b) On October 9, 2013, the Company entered into a facility agreement with Consultancy & Finance Company Associates Ltd. ("C&F"), a private company controlled by the chairman of the Company. The funding is in the form of an interest free unsecured loan to the Company of up to $405,000 by way of monthly drawdowns of a maximum amount of US$75,000 per calendar month. The total amount drawn down by the Company is due to be repaid on or before June 30, 2015, as amended. As at May 31, 2014, C&F had provided a total of $375,000 to the Company pursuant to this facility agreement. c) In May 2011, the Company entered a Vancouver office lease agreement commencing October 1, 2011 for a term of three years expiring September 30, 2014 and a base rent of Cdn $4,050 per month subject to 4% increase each year; in the meantime, the Company had paid Cdn $192,853 as deposit and prepaid rent. As at May 31, 2014, there was Cdn $13,802 of such prepaid rent and deposit remained. Critical Accounting Policies



Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

We believe the following critical accounting policies require us to make significant judgments and estimates in the preparation of our consolidated financial statements.

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Basis of Presentation

The Company's consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in U.S. dollars. The Company's consolidated financial statements include the accounts of the Company and its subsidiaries described as follows. In June 2011, the Company incorporated in Tanzania a new wholly-owned subsidiary, DLM Tanzania Limited (now known as HG Limited), which undertakes mineral property exploration activities in Tanzania. The Company also has a wholly-owned non-operating Tanzanian subsidiary (Douglas Lake Tanzania Limited).

All significant intercompany transactions and balances have been eliminated. The Company's fiscal year-end is May 31.

Use of Estimates

The preparation of consolidated financial statements in accordance with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses in the reporting period. The Company regularly evaluates estimates and assumptions related to the recoverability and useful life of long-lived assets, recoverability of mineral prospecting licenses, valuation of stock-based compensation, deferred income tax asset valuation allowances and determination of a fair value interest rate on non-interest bearing loans from related parties and recognition of contingent liabilities. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company's estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Basic and Diluted Net Income (Loss) Per Share

The Company computes net income (loss) per share in accordance with ASC 260, Earnings per Share which requires presentation of both basic and diluted earnings per share ("EPS") on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

Comprehensive Income (Loss)

ASC 220, Comprehensive Income establishes standards for the reporting and display of comprehensive income (loss) and its components in the financial statements.

Cash and Cash Equivalents

Cash and cash equivalents are carried at fair value and they comprise cash on hand, deposits held with banks and other highly liquid investments. Highly liquid investments are readily convertible to cash and generally have maturities of three months or less from the time acquired. The Company places its cash and cash equivalents with high quality financial institutions which the Company believes limits credit risk.

Marketable Securities

The Company reports investments in marketable equity securities at fair value based on quoted market prices. All investment securities are designated as available for sale with unrealized gains and losses included in stockholders' equity. Realized gains and losses are accounted for on the specific identification method.

The Company periodically reviews these investments for other-than-temporary declines in fair value based on the specific identification method. When an other-than- temporary decline has occurred, unrealized losses that are other than temporary are recognized in earnings. When determining whether a decline is other-than-temporary, the Company examines (i) the length of time and the extent to which the fair value of an investment has been lower than its carrying value: (ii) the financial condition and near-term prospects of the investee, including any specific events that may influence the operations of the investee such as changes in technology that may impair the earnings potential of the investee: and (iii) the Company's intent and ability to retain its investment in the investee for a sufficient period of time to allow for any anticipated recovery in market value. The Company generally believes that an other-than-temporary decline has occurred when the fair value of the investment is below the carrying value for one year, absent of evidence to the contrary.

Property and Equipment

Property and equipment are recorded at cost and depreciated on a straight-line basis as follows:

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Automobiles 3 years Camp and equipment 3 years Computer software 1 year Office furniture and equipment 3 years



Mineral Property Costs

The Company has been in the exploration stage since its inception on January 5, 2004 and has not yet realized any revenues from its planned operations. It is primarily engaged in the acquisition and exploration of mining properties. Mineral property exploration costs are expensed as incurred. Mineral property acquisition costs are initially capitalized. The Company assesses the carrying costs for impairment under ASC 360, Property, Plant, and Equipment at each fiscal quarter end. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then incurred to develop such property, are capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve. If mineral properties are subsequently abandoned or impaired, any capitalized costs will be charged to operations.

Long-Lived Assets

In accordance with ASC 360, Property Plant and Equipment the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

Asset Retirement Obligations

The Company accounts for asset retirement obligations in accordance with the provisions of ASC 440 Asset Retirement and Environmental Obligations which requires the Company to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development and/or normal use of the assets.

Financial Instruments

ASC 825, Financial Instruments requires an entity to maximize the use of observable inputs. The fair value of certain financial instruments, which include cash and cash equivalents, restricted cash equivalent and accounts payable were estimated to approximate their carrying values due to the immediate or short-term maturities of these financial instruments.

The Company's operations are in Canada and Africa, which results in exposure to market risks from changes in foreign currency rates. The financial risk is the risk to the Company's operations that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk.

Income Taxes

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, Income Taxes. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

Foreign Currency Translation

The functional and reporting currency of the Company is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated to United States dollars in accordance with ASC 830, Foreign Currency Translation Matters, using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average rates are used to translate revenues and expenses.

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Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income. The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

To the extent that the Company incurs transactions that are not denominated in its functional currency, they are undertaken in Canadian dollars and Tanzanian shillings. The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

Stock-based Compensation

The Company records stock-based compensation in accordance with ASC 718, Compensation - Stock Based Compensation and ASC 505, Equity Based Payments to Non-Employees, which requires the measurement and recognition of compensation expense based on estimated fair values for all share-based awards made to employees and directors, including stock options.

ASC 718 requires companies to estimate the fair value of share-based awards on the date of grant using an option-pricing model. The Company uses the Black-Scholes option-pricing model as its method of determining fair value. This model is affected by the Company's stock price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to the Company's expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviours. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the statement of operations over the requisite service period.

All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

Recent Issued Accounting Pronouncements

The Company has adopted all new accounting pronouncements that are mandatorily effective and none impact its consolidated financial statements. The Company does not believe that there are any new accounting pronouncements that have been issued that are expected to have a material impact on its financial position or results of operations.

Reclassification

Certain reclassifications have been made to the prior years' financial statements to conform to the current year's presentation.


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Source: Edgar Glimpses


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