PINX:XTGR Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012


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 June 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)

NEVADA 91-1956240
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

360 BAY STREET – SUITE 301
TORONTO, ONTARIO – M5H 2V6 – CANADA
(Address of principal executive offices)

416 366-4227
(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 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:

Large Accelerated Filer [_] Accelerated Filer [_]
Non-accelerated filer [_] Smaller reporting company [X]

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.

Class Outstanding as at August 9, 2012
Common stock - $0.001 par value 44,648,417


TABLE OF CONTENTS

    Page
PART I FINANCIAL INFORMATION  
Item 1 Financial Statements (Unaudited)  
  Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011 1
  Consolidated Statements of Operations for the three and six months ended June 30, 2012 and 2011 2
  Consolidated Statements of Cash Flows for the three and six months ended June 30, 2012 and 2011 3
  Consolidated Statements of Changes in Stockholders’ Equity for the six months ended June 30, 2012 5
  Notes to the Consolidated Financial Statements 7
Item 2 Management’s Discussion and Analysis of Financial Conditions and Results of Operations 18
Item 3 Quantitative and Qualitative Disclosures about Market Risk 25
Item 4 Controls and Procedures 25
PART II OTHER INFORMATION  
Item 1 Legal Proceedings 26
Item 1A Risk Factors 26
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 26
Item 3 Defaults upon Senior Securities 26
Item 4 Mine Safety Disclosures 26
Item 5 Other Information 26
Item 6 Exhibits 26


PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

XTRA-GOLD RESOURCES CORP.
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. Dollars)
(unaudited)
AS AT

  June 30, 2012     December 31, 2011  

ASSETS

           

Current

           

     Cash and cash equivalents

$  1,517,683   $  4,498,753  

     Investment in trading securities, at fair value 
          (cost of $1,312,463 (December 31, 2011 - $1,870,648)) (Note 4)

 
1,321,989
   
2,531,644
 

     Due from related party (Note 9)

  18,080     213,872  

     Receivables and other assets

  126,952     130,637  

     Total current assets

  2,984,704     7,374,906  

Restricted cash (Note 7)

  220,961     220,961  

Equipment (Note 5)

  1,241,497     1,370,027  

Mineral properties (Note 6)

  857,422     857,422  

TOTAL ASSETS

$  5,304,584   $  9,823,316  

LIABILITIES AND STOCKHOLDERS’ EQUITY

           

Current

           

     Accounts payable and accrued liabilities

$  524,768   $  745,860  

 

           

   Total current liabilities

  524,768     745,860  

 

           

Asset retirement obligation (Note 7)

  179,395     171,395  

     Total liabilities

  704,163     917,255  

Stockholders’ equity

           

     Capital stock (Note 8)

           

     Authorized

           

     250,000,000 common shares with a par value of $0.001

           

     Issued and outstanding

           

     44,674,717 common shares (December 31, 2011 – 44,569,217 common shares)

  44,674     44,569  

     Additional paid in capital

  28,968,535     28,441,909  

     Deficit

  (1,427,764 )   (1,427,764 )

     Deficit accumulated during the exploration stage

  (22,102,936 )   (17,646,122 )

     Total Xtra-Gold Resources Corp. stockholders’ equity

  5,482,509     9,412,592  

     Non-controlling interest

  (882,088 )   (506,531 )

     Total stockholders’ equity

  4,600,421     8,906,061  

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$  5,304,584   $  9,823,316  

History and organization of the Company (Note 1) APPROVED ON BEHALF OF THE BOARD
Continuance of operations (Note 2)      
Contingency and commitments (Note 12)      
  Paul Zyla   Richard W. Grayston
  Director   Director

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

- 1 -



XTRA-GOLD RESOURCES CORP.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in U.S. Dollars)
(unaudited)

 

  Cumulative                          

 

  amounts                          

 

  from                          

 

  the beginning                          

 

  of the                          

 

  exploration                          

 

  stage on                          

 

  January 1,     Three Month     Three Month     Six Month     Six Month  

 

  2003 to     Period Ended     Period Ended     Period Ended     Period Ended  

 

  June 30,     June 30,     June 30,     June 30,     June 30,  

 

  2012     2012     2011     2012     2011  

 

                             

EXPENSES

                             

       Amortization

$  713,373   $  76,204   $  49,164   $  128,530   $  79,566  

       Exploration

  25,348,745     1,651,464     1,122,471     3,845,765     2,691,449  

       General and administrative

  8,426,459     623,505     321,739     817,449     577,084  

       Option receipts in excess of property value

  (450,000 )           (135,000 )    

       Write-off of mineral property

  26,000                  

LOSS BEFORE OTHER ITEMS

  (34,064,577 )   (2,351,173 )   (1,493,374 )   (4,656,744 )   (3,348,099 )

 

                             

OTHER ITEMS

                             

       Foreign exchange gain (loss)

  457,568     (185,167 )   (271,641 )   (109,112 )   (164,394 )

       Interest expense

  (243,638 )   (1,702 )       (1,702 )    

       Realized gain (losses) on sales of trading securities

  263,085     (26,962 )       8,766      

       Net unrealized loss on trading securities

  (182,697 )   (466,565 )   (47,481 )   (229,907 )   (66,990 )

       Other income

  996,501     54,572     12,873     85,771     24,223  

       Recovery of gold

  9,457,246         260,904     70,557     1,282,679  

       Gain on disposal of property or equipment

  356,488                 260,058  

       Write-off of investment in trading securities

  (25,000 )                 

 

  11,079,553     (625,824 )   (45,345 )   (175,627 )   1,335,576  

 

                             

Net loss for the period

  (22,985,024 )   (2,976,997 )   (1,538,719 )   (4,832,371 )   (2,012,523 )

 

                             

Net loss attributable to non-controlling interest

  882,088     172,066     115,135     375,557     157,477  

Net loss attributable to Xtra-Gold Resources Corp.

$  (22,102,936 ) $  (2,804,931 ) $  (1,423,584 ) $  (4,456,814 ) $  (1,855,046 )

Basic and diluted loss attributable to common stockholders per common share

    $  (0.06 ) $  (0.03 ) $  (0.10 ) $  (0.04 )

Basic and diluted weighted average number of common shares outstanding

      44,658,703     43,668,909     44,663,002     43,322,266  

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

- 2 -



XTRA-GOLD RESOURCES CORP.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. Dollars)
(unaudited)

 

  Cumulative                          

 

  amounts from                          

 

  the beginning                          

 

  of the                          

 

  exploration                          

 

  stage on                          

 

  January 1,     Three Month     Three Month     Six Month     Six Month  

 

  2003 to     Period Ended     Period Ended     Period Ended     Period Ended  

 

  June 30,     June 30,     June 30,     June 30,     June 30,  

 

  2012     2012     2011     2012     2011  

CASH FLOWS FROM OPERATING ACTIVITIES

                   

 Loss for the period

$  (22,985,024 ) $  (2,976,997 ) $  (1,538,719 ) $  (4,832,371 ) $  (2,012,523 )

 Items not affecting cash:

                             

     Amortization

  713,373     76,204     49,164     128,530     79,566  

     Amortization of deferred financing costs

  46,202                  

     Accretion of asset retirement obligation

  48,262     4,000     4,000     8,000     8,000  

     Shares issued for services

  202,365                  

     Stock-based compensation

  2,261,419     380,838     78,111     421,491     99,422  

     Option receipts in excess of property value

  (450,000 )           (135,000 )    

     Unrealized foreign exchange (gain) loss

  (415,004 )   27,679     36,021     (13,048 )   32,460  

     Realized (gain) loss on sale of trading securities

  (263,085 )   26,962         (8,766 )    

     Purchase of trading securities

  (13,411,043 )           (83,157 )    

     Proceeds on sale of trading securities

  13,241,974     939,832         1,084,718      

     Unrealized loss on trading securities

  182,697     466,565     47,481     229,907     66,990  

     Gain on disposal of property or equipment

  (356,488 )               (260,058 )

     Write-off of mineral property

  26,000                  

     Expenses paid by stockholders

  2,700                  

     Write-off of investment in trading securities

  25,000                  

 Changes in non-cash working capital items:

                             

         (Increase) decrease in receivables and other

  (118,577 )   (2,947 )   231,195     217,557     (11,562 )

         Increase (decrease) in accounts payable and accrued liabilities

  514,076     (547,592 )   (162,511 )   (221,091 )   (138,890 )

         Increase (decrease) in due to related party

  31,920     (18,080 )       (18,080 )    

 Net cash used in operating activities

  (20,703,233 )   (1,623,536 )   (1,255,258 )   (3,221,310 )   (2,136,595 )

CASH FLOWS FROM FINANCING ACTIVITIES

                   

 Proceeds from issuance of convertible debentures

  900,000                  

 Deferred financing costs

  (46,202 )                

 Repurchase of capital stock

  (169,760 )   (4,760 )         (4,760 )    

 Issuance of capital stock, net of financing costs

  22,719,711         1,238,564     110,000     1,276,064  

 Net cash provided by (used in) financing activities

  23,403,749     (4,760 )   1,238,564     105,240     1,276,064  

- continued -

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

- 3 -



XTRA-GOLD RESOURCES CORP.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in U.S. Dollars)
(unaudited)

 

  Cumulative                          

 

  amounts                          

 

  from                          

 

  the beginning                          

 

  of the                          

 

  exploration                          

 

  stage on                          

 

  January 1,     Three Month     Three Month     Six Month     Six Month  

 

  2003 to     Period Ended     Period Ended     Period Ended     Period Ended  

 

  June 30,     June 30,     June 30,     June 30,     June 30,  

 

  2012     2012     2011     2012     2011  

 

                             

Continued...

                             

 

                             

CASH FLOWS FROM INVESTING ACTIVITIES

     Acquisition of equipment

$  (1,835,129 ) $  —     (594,273 ) $  —   $  (849,796 )

     Deposit on equipment

  (151,506 )                

     Restricted cash

  (220,961 )               (961 )

     Oil and gas property expenditures

  (250,137 )                

     Acquisition of cash on purchase of subsidiary

  11,510                  

     Acquisition of subsidiary

  (25,000 )                

     Option payment received

  660,000         425,000     135,000     425,000  

     Proceeds on disposal of assets

  628,390                     288,000  

     Net cash provided by (used in) investing activities

  (1,182,833 )       (169,273 )   135,000     (137,757 )

 

                             

Change in cash and cash equivalents during the period

  1,517,683     (1,628,296 )   (185,967 )   (2,981,070 )   (998,288 )

 

                             

Cash and cash equivalents, beginning of the period

      3,145,979     9,283,801     4,498,753     10,096,122  

 

                             

Cash and cash equivalents, end of the period

$  1,517,683   $  1,517,683   $  9,097,834   $  1,517,683   $  9,097,834  

Supplemental disclosure with respect to cash flows (Note 10)

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

- 4 -



XTRA-GOLD RESOURCES CORP.
(An Exploration Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(Expressed in U.S. Dollars)
(unaudited)

 

  Common Stock                       Deficit        

 

                                Accumulated        

 

              Additional           Non-     During the        

 

  Number           Paid in           Controlling     Exploration        

 

  of Shares     Amount     Capital     Deficit     Interest     Stage     Total  

 

                                         

Balance, December 31, 2010

  42,961,179   $  42,961   $  26,089,803   $  (1,427,764 ) $  (36,361 ) $  (12,321,365 ) $  12,347,274  

 

                                         

Conversion of warrants at $1.50 per share

  768,874     769     1,152,542                 1,153,311  

 

                                         

Conversion of warrants at $1.00 per share

  839,164     839     838,325                 839,164  

 

                                         

Stock-based compensation

          361,239                 361,239  

 

                                         

Loss for the year

                  (470,170 )   (5,324,757 )   (5,794,927 )

 

                                         

Balance, December 31, 2011

  44,569,217   $  44,569   $  28,441,909   $  (1,427,764 ) $  (506,531 ) $  (17,646,122 ) $  8,906,061  

- continued -

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

- 5 -



XTRA-GOLD RESOURCES CORP.
(An Exploration Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(Expressed in U.S. Dollars)
(unaudited)

 

  Common Stock                       Deficit        

 

                                Accumulated        

 

              Additional           Non-     During the        

 

  Number           Paid in           Controlling     Exploration        

 

  of Shares     Amount     Capital     Deficit     Interest     Stage     Total  

 

                                         

Balance, December 31, 2011

  44,569,217   $  44,569   $  28,441,909   $  (1,427,764 ) $  (506,531 ) $  (17,646,122 ) $  8,906,061  

 

                                         

January, 2012 – Exercise of options at $1.00 per share

  110,000     110     109,890                 110,000  

 

                                         

Stock-based compensation

          40,653                 40,653  

 

                                         

Loss for the period

                  (203,491 )   (1,651,883 )   (1,855,374 )

 

                                         

Balance, March 31, 2012

  44,679,217   $  44,679   $  28,592,452   $  (1,427,764 ) $  (710,022 ) $  (19,298,005 ) $  7,201,340  

 

                                         

Repurchase of shares at $1.06 per share

  (4,500 )   (5 )   (4,755 )               (4,760 )

 

                                         

Share issuance costs

                           

 

                                         

Stock-based compensation

          380,838                 380,838  

 

                                         

Loss for the period

                  (172,066 )   (2,804,931 )   (2,976,997 )

 

                                         

Balance, June 30, 2012

  44,674,717   $  44,674   $  28,968,535   $  (1,427,764 ) $  (882,088 ) $  (22,102,936 ) $  4,600,421  

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

- 6 -



XTRA-GOLD RESOURCES CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Expressed in U.S. Dollars)
June 30, 2012

1.

HISTORY AND ORGANIZATION OF THE COMPANY

   

Silverwing Systems Corporation (the “Company”), a Nevada corporation, was incorporated on September 1, 1998. On June 23, 1999, the Company completed the acquisition of Advertain On-Line Canada Inc. (“Advertain Canada”), a Canadian company operating in Vancouver, British Columbia, Canada. The Company changed its name to Advertain On-Line Inc. (“Advertain”) on August 19, 1999. Advertain Canada’s business was the operation of a website, “Advertain.com”, whose primary purpose was to distribute entertainment advertising on the Internet.

   

In May 2001, the Company, being unable to continue its funding of Advertain Canada’s operations, decided to abandon its interest in Advertain Canada. On June 15, 2001, the Company sold its investment in Advertain Canada back to Advertain Canada’s original shareholder. On June 18, 2001, the Company changed its name from Advertain to RetinaPharma International, Inc. (“RetinaPharma”) and became inactive.

   

In 2003, the Company became a resource exploration company. On October 31, 2003, the Company acquired 100% of the issued and outstanding common stock of Xtra-Gold Resources, Inc. (“XGRI”). XGRI was incorporated in Florida on October 24, 2003. On December 19, 2003, the Company changed its name from RetinaPharma to Xtra-Gold Resources Corp.

   

In 2004, the Company acquired 100% of the issued and outstanding capital stock of Canadiana Gold Resources Limited (“Canadiana”) and 90% of the issued and outstanding capital stock of Goldenrae Mining Company Limited (“Goldenrae”). Both companies are incorporated in Ghana and the remaining 10% of the issued and outstanding capital stock of Goldenrae is held by the Government of Ghana.

   

On October 20, 2005, XGRI changed its name to Xtra Energy Corp. (“Xtra Energy”).

   

On October 20, 2005, the Company incorporated Xtra Oil & Gas Ltd. (“XOG”) in Alberta, Canada.

   

On December 21, 2005, Canadiana changed its name to Xtra-Gold Exploration Limited (“XG Exploration”).

   

On January 13, 2006, Goldenrae changed its name to Xtra-Gold Mining Limited (“XG Mining”).

   

On March 2, 2006, the Company incorporated Xtra Oil & Gas (Ghana) Limited (“XOGG”) in Ghana.

   
2.

CONTINUANCE OF OPERATIONS

   

The Company is in the early stages of exploration and as is common with any exploration company, it raises financing for its exploration and acquisition activities. The Company has incurred a loss of $4,456,814 for the six month-period ended June 30, 2012 and has accumulated a deficit during the exploration stage of $22,102,936. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan, which is typical for junior exploration companies. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

   

Management of the Company (“Management”) is of the opinion that sufficient financing will be obtained from external financing and further share issuances to meet the Company’s obligations. At June 30, 2012, the Company has working capital of $2,459,936, which would not be sufficient to fund the current level of operations for a period greater than 12 months. The Company’s discretionary exploration activities do have considerable scope for flexibility in terms of the amount and timing of exploration expenditures, and expenditures may be adjusted accordingly if required.

- 7 -



XTRA-GOLD RESOURCES CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Expressed in U.S. Dollars)
June 30, 2012

3.

SIGNIFICANT ACCOUNTING POLICIES

   

Generally accepted accounting principles

   

The accompanying unaudited financial statements have been prepared by the Company in conformity with accounting principles generally accepted in the United States of America applicable to interim financial information and with the rules and regulations of the United States Securities and Exchange Commission. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed, or omitted, pursuant to such rules and regulations. In the opinion of Management, the unaudited interim financial statements include all adjustments necessary for the fair presentation of the results of the interim periods presented. All adjustments are of a normal recurring nature, except as otherwise noted below. These financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2011, included in the Company’s Form 10-K, filed with the Securities and Exchange Commission. The results of operations for the interim periods are not necessarily indicative of the results of operations for any other interim period or for a full fiscal year.

   

Cash and cash equivalents

   

The Company considers highly liquid investments with original maturities of three months or less to be cash equivalents. At June 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, the Company uses the treasury stock method and the if converted method. As of June 30, 2012, there were 566,482 warrants (December 31, 2011 – 566,482) and 1,957,000 stock options (December 31, 2011 – 2,067,000) outstanding which have not been included in the weighted average number of common shares outstanding as these were anti-dilutive.

   

Fair value of financial assets and liabilities

   

The 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.

   

The 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.

   

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

- 8 -



XTRA-GOLD RESOURCES CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Expressed in U.S. Dollars)
June 30, 2012

3.

SIGNIFICANT ACCOUNTING POLICIES (cont’d…)

   

Fair value of financial assets and liabilities (cont’d…)

   

The following table presents information about the assets that are measured at fair value on a recurring basis as of June 30, 2012, and indicates the fair value hierarchy of the valuation techniques the 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:


                  Significant        
            Quoted Prices     Other     Significant  
            in Active     Observable     Unobservable  
            Markets     Inputs     Inputs  
      June 30, 2012     (Level 1)     (Level 2)     (Level 3)  
                           
  Assets:                        
  Cash and cash equivalents $  1,517,683   $  1,517,683   $  —   $  —  
  Restricted cash   220,961     220,961          
  Trading securities   1,321,989     1,321,989          
       Total $  3,060,633   $  3,060,633   $  —   $  —  

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. The Company maintains cash in bank accounts that, at times, may exceed federally insured limits. As of June 30, 2012 and December 31, 2011, the Company has exceeded the federally insured limit. The 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 the Company’s fiscal year beginning January 1, 2012. The Company’s January 1, 2012 adoption of the updated guidance had no impact on the Company’s consolidated financial position, results of operations or cash flows.

   
4.

INVESTMENTS

   

At June 30, 2012, the Company held investments classified as held for trading, which consisted of various equity securities and interest bearing debt instruments. All held for trading investments are carried at fair value. As of June 30, 2012, the fair value of investments was $1,321,989 (December 31, 2011 – $2,531,644).

- 9 -



XTRA-GOLD RESOURCES CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Expressed in U.S. Dollars)
June 30, 2012

4.

INVESTMENTS (cont’d…)

   

The following table summarizes the fair value of the Company’s investments.


      Investments  
      June 30, 2012     December 31, 2011  
               
  Trading securities $  1,321,989   $  2,022,079  
  Interest bearing debt instruments       509,565  
    $  1,321,989   $  2,531,644  

5.

EQUIPMENT


      June 30, 2012     December 31, 2011  
            Accumulated     Net Book           Accumulated     Net Book  
      Cost     Amortization     Value     Cost     Amortization     Value  
                                       
  Furniture and equipment $  8,358   $  7,549   $  809   $  8,358   $  6,549   $  1,809  
  Computer equipment   20,274     19,488     786     20,274     18,666     1,608  
  Exploration equipment   1,464,478     466,826     997,652     1,464,478     379,843     1,084,635  
  Vehicles   333,989     91,739     242,250     333,989     52,014     281,975  
    $  1,827,099   $  585,602   $  1,241,497   $  1,827,099   $  457,072   $  1,370,027  

6.

MINERAL PROPERTIES


      June 30, 2012     December 31, 2011  
               
  Acquisition costs $  1,607,729   $  1,607,729  
  Asset retirement obligation (Note 7)   131,133     131,133  
  Option payment received   (881,440 )   (881,440 )
  Total $  857,422   $  857,422  

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

- 10 -



XTRA-GOLD RESOURCES CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Expressed in U.S. Dollars)
June 30, 2012

6.

MINERAL PROPERTIES (cont’d…)

   

Banso and Muoso Project (cont’d…)

   

area of each of these Projects. This application was approved by Mincom who subsequently made recommendation to the Minister of Lands, Forestry and Mines to grant an individual mining lease for each Project. Subsequent to the year ended December 31, 2010, the Government of Ghana granted two mining leases for these Projects dated January 6, 2011. These mining leases grant the Company mining rights to produce gold in the respective lease areas until January 5, 2025 with respect to the Banso Project and until January 5, 2024 with respect to the Muoso Project. These mining leases supersede the PL previously granted to the Company. Among other things, both mining leases require that the Company (i) pay the Government of Ghana a fee of $30,000 in consideration of granting of each lease (paid in the March 2011 quarter); (ii) pay annual ground rent of GH¢260.00 (USD$167) for the Banso Project and GH¢280.00 (USD$180) for the Muoso Project (paid in the March 2011 quarter); (iii) commence commercial production of gold within two years from the date of the mining leases; and (iv) pay a production royalty to the Government of Ghana.

   

The Company executed a letter of intent (“LOI”) with Buccaneer Gold Corp. (“Buccaneer”), formerly Verbina Resources Inc., a company related by two directors in common, on July 21, 2010 whereby Buccaneer could acquire an undivided 55% interest in the Company’s interest in the mineral rights of the Company’s Banso and Muoso concessions (“Concessions”). On January 21, 2011 the terms of the agreement were amended.

   

Pursuant to the 2011 LOI, Buccaneer can acquire a 55% legal and beneficial interest in the Company’s interest in the mineral rights of the Concessions pursuant to the following terms: Buccaneer shall (i) provide the Company, by February 28, 2011, with notice of its satisfactory completion of due diligence of the Concessions (provided on January 21, 2011), and receipt of regulatory acceptance by the TSX Venture Exchange of the 2011 LOI (received on February 16, 2011) (the “Effective Date”); (ii) make a cash payment to the Company of $425,000 consisting of $100,000 upon the Effective Date and $325,000 within 90 days of the Effective Date (received); (iii) issue 1,000,000 fully paid and non-assessable common shares of Buccaneer to the Company upon the Effective Date (issued in the March 2011 quarter); (iv) incur a total of $4,425,000 in exploration expenditures on the Concessions within five (5) years of the Effective Date with $500,000 to be incurred in the first year (completed) from the Effective Date and $1,000,000 in each year thereafter, except that in the final year the exploration expenditures shall be a minimum of $925,000; and (v) pay to the Company $300,000 in connection with a Versatile Time-domain Electromagnetic (“VTEM”), Magnetic and Radiometric survey to be flown over the Concessions by the Company, which payment shall be credited toward the $500,000 in exploration expenditures referred to above in subparagraph (iv).

   

A definitive binding option agreement shall be entered into between the Company and Buccaneer which agreement will require approval from the Minister of Lands, Forestry and Mines.

   

The status of each Buccaneer commitment to the Company in the 2011 LOI is as follows:


  Item Description Status
  (i) Due diligence completed Completed
    TSX accepts LOI Completed
  (ii) Pay $100,000 to the Company Received by the Company
    Pay a further $325,000 to the Company Received by the Company
  (iii) Issue 1,000,000 Buccaneer shares to the Company Received by the Company
  (iv) Spend $4,425,000 on the properties over 5 years In Progress
  (v) Pay $300,000 to the Company for a VTEM survey Received by the Company

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

- 11 -



XTRA-GOLD RESOURCES CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Expressed in U.S. Dollars)
June 30, 2012

6.

MINERAL PROPERTIES (cont’d…)

   

Option agreement on Edum Banso Project

   

In October 2005, XG Exploration entered into an option agreement (the “Option Agreement”) with Adom Mining Limited (“Adom”) to acquire 100% of Adom’s right, title and interest in and to a prospecting license on the Edum Banso concession (the “Edum Banso Project”) located in Ghana. Adom further granted XG Exploration the right to explore, develop, mine and sell mineral products from this concession. The prospecting license has been renewed for a two year period expiring on July 21, 2013.

   

The consideration paid for the Option Agreement was $15,000 with additional payments of $5,000 to be paid on the anniversary date of the Option Agreement in each year during the term which term has been extended to November 11, 2013. Further net smelter royalty payments, based on proven and probable reserves and gold production, was also payable to Adom.

   

During August 2011, the Company assigned its interest in the Edum Banso Project to Norman Cay Development Inc. (“NCD”) for a cash payment of $125,000, 1,000,000 NCD shares, valued at $260,000 at the date of issuance, and an option payment of $135,000 payable in six months from the date of assignment of the option interest. If NCD did not exercise its six-month option the Project reverted to the Company. Of the payments received, $20,000 reduced the carrying value of the Edum Banso Project on the balance sheet and the balance reduced exploration spending in the third quarter of 2011. A $25,000 finder’s fee was paid to introduce the Company to NCD and this fee reduced the gain recorded in the statement of operations.

   

During the three month period ended March 31, 2012, NCD paid a final option payment of $135,000 to the Company.

   

Mining lease and prospecting license commitments

   

The Company is committed to expend, from time to time fees payable (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 Environmental Protection Agency (“EPA”) (of Ghana) for: (i) processing and certificate fees with respect to EPA permits; (ii) the issuance of permits before the commencement of any work at a particular concession; or (iii) the posting of a bond in connection with any mining operations undertaken by the Company; (c) for a legal obligation associated with our mineral properties for clean up costs when work programs are completed; and (d) an aggregate of less than $500 in connection with annual ground rent and mining permits to enter upon and gain access to the areas covered by the 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.

   
7.

ASSET RETIREMENT OBLIGATION


      June 30, 2012     December 31, 2011  
               
  Balance, beginning of period $  171,395   $  155,395  
  Accretion expense   8,000     16,000  
  Balance, end of period $  179,395   $  171,395  

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

- 12 -



XTRA-GOLD RESOURCES CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Expressed in U.S. Dollars)
June 30, 2012

7.

ASSET RETIREMENT OBLIGATION (cont’d…)

   

The undiscounted amount of cash flows, required over the estimated reserve life of the underlying assets, to settle the obligation, adjusted for inflation, is estimated at $220,000 (2011 - $220,000). The obligation was calculated using a credit- adjusted risk free discount rate of 10% and an inflation rate of 2%. It is expected that this obligation will be funded from general Company resources at the time the costs are incurred. The Company has been required by the Ghanaian government to post a bond of $220,961 which has been recorded in restricted cash with accrued interest ($220,961 at June 30, 2012).

   
8.

CAPITAL STOCK

   

Cancellation of shares

   

In May 2005, 47,000,000 common shares owned by two former directors were returned to treasury and cancelled.

   

In June 2006, 10,000 common shares were returned to the Company in settlement of a dispute and cancelled.

   

In May 2009, 200,000 common shares were repurchased for $50,000 and cancelled.

   

In May 2005, 47,000,000 common shares owned by two former directors were returned to treasury and cancelled.

   

In June 2006, 10,000 common shares were returned to the Company in settlement of a dispute and cancelled.

   

In May 2009, 200,000 common shares were repurchased for $50,000 and cancelled.

   

In March 2010, 80,891 common shares were repurchased for $108,000 and cancelled.

   

Issuance of shares for services

   

In December 2008, an aggregate of 131,243 common shares were issued to three vendors of the Company’s subsidiary, XG Mining to settle outstanding accounts for services at a value of $1.50 per share. In March 2010, 80,891 of these common shares were repurchased for $108,000 and cancelled.

   

Private placements

   

In June 2010, the Company issued 250,000 units at $1.00 per unit for gross proceeds of $250,000. Each unit consisted of one common share and one half of one share purchase warrant. One whole warrant enables the holder to acquire an additional common share at a price of $1.50 expiring 18 months from the date of issue. The Company also issued finder’s warrants enabling the holders to acquire up to 25,000 common shares at the same terms as the unit warrants. The fair value of the finder’s warrants was $15,091 calculated using the Black-Scholes valuation method. The assumptions used were 1.5 years of expected life, risk free interest rate of 1.82%, volatility of 99.78% and a dividend rate of 0%.

   

In April 2010, the Company issued 838,000 units at $1.00 per unit for gross proceeds of $838,000. Each unit consisted of one common share and one half of one share purchase warrant. One whole warrant enables the holder to acquire an additional common share at a price of $1.50 expiring 18 months from the date of issue. The Company also issued finder’s warrants enabling the holders to acquire up to 73,800 common shares at the same terms as the unit warrants. The fair value of finder’s warrants was $40,516 calculated using the Black-Scholes valuation method. The assumptions used were 1.5 years of expected life, risk free interest rate of 2.05%, volatility of 116.59% and a dividend rate of 0%.

   

In December 2009, the Company issued 706,000 units at $1.00 per unit for gross proceeds of $706,000. Each unit consisted of one common share and one half of one share purchase warrant. One whole warrant enables the holder to acquire an additional common share at a price of $1.50 expiring eighteen months from the date of issue. The Company also issued finder’s warrants enabling the holders to acquire up to 50,600 common shares at the same terms as the unit warrants. The fair

- 13 -



XTRA-GOLD RESOURCES CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Expressed in U.S. Dollars)
June 30, 2012

8.

CAPITAL STOCK (cont’d…)

   

Private placements (cont’d…)

   

value of finder’s warrants was $20,098 calculated using the Black-Scholes valuation method. The assumptions used were 1.5 years of expected life, risk free interest rate of 2.05%, volatility of 109% and a dividend rate of 0%.

   

In August 2009, the Company issued 376,875 units at $0.80 per unit for gross proceeds of $301,500. Each unit consisted of one common share and one half of one share purchase warrant. One whole warrant enables the holder to acquire an additional common share at a price of $1.00 expiring two years from the date of issue.

   

In April and May 2009, the Company issued 1,018,000 units at $0.70 per unit for gross proceeds of $712,600. Each unit consisted of one common share and one share purchase warrant enabling the holder to acquire an additional common share at a price of $1.00 expiring two years from the date of issue.

   

Initial Public Offering

   

In November 2010, the Company completed an initial public offering in Canada (the “IPO”) and issued 8,092,593 common shares at CAD$1.35 (USD$1.33) for gross proceeds of CAD$10,925,001 (USD$10,753,149). The Company also issued 566,482 broker warrants with a strike price of CAD$1.35 (US$1.33) per warrant and a two-year term to maturity. The Company valued the warrants at $364,248 using the Black-Scholes model with a 90% volatility, 0% dividend and 1.5% interest rate.

   

Escrow Shares

   

A total of 267,500 shares (the “Escrow Shares”) were deposited into escrow at the time of listing of the Company’s shares on the Toronto Stock Exchange on November 23, 2010 (the “Listing Date”), following completion of the IPO. The Escrow Shares are released from escrow as to (a) 1/4 of the Escrow Shares on the Listing Date; (b) 1/3 of the remaining Escrow Shares, six months after the Listing Date; (c) 1/2 of the remaining Escrow Shares, 12 months after the Listing Date; and (d) the remaining Escrow Shares, 18 months after the Listing Date. As of June 30, 2012, there were no Escrow Shares held in escrow (December 31, 2011 – 66,875).

   

Acquisition of subsidiary

   

Effective December 22, 2004, the Company acquired 90% of the outstanding shares of XG Mining in exchange for 2,698,350 shares of common stock. In connection with this acquisition, 47,000,000 shares owned by two former officers and directors of the Company were returned to treasury and cancelled.

   

Stock options

   

On June 30, 2011, the Company adopted a new 10% rolling stock option plan (the “2011 Plan”) and cancelled the 2005 equity compensation plan. Pursuant to the 2011 Plan, the Company is entitled to grant options and reserve for issuance up to 10% of the shares issued and outstanding at the time of grant. The terms and conditions of any options granted, including the number and type of options, the exercise period, the exercise price and vesting provisions, are determined by the Compensation Committee who makes recommendation to the board of directors for their approval. The maximum term of options granted cannot exceed 10 years.

   

At June 30, 2012, the following stock options were outstanding:

- 14 -



XTRA-GOLD RESOURCES CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Expressed in U.S. Dollars)
June 30, 2012

8.

CAPITAL STOCK (cont’d…) Stock options (cont’d…)


  Number of Exercise Expiry Date
  Options Price  
       
  108,000 $0.75 June 7, 2013
  42,000 $1.00 June 7, 2013
  100,000 $1.85 July 1, 2014
  324,000 $0.70 May 1, 2016
  270,000 $0.75 March 5, 2017
  162,000 $0.75 March 12, 2017
  108,000 $1.00 January 25, 2020
  216,000 $1.00 February 1, 2020
  228,000 $1.00 June 1, 2020
  90,000 $1.15 July 1, 2020
  56,000 $1.98 February 15, 2021
  145,000 $1.95 March 1, 2021
  108,000 $1.85 June 10, 2021

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

      June 30, 2012     December 31, 2011  
      Number of     Weighted Average     Number of     Weighted Average  
      Options     Exercise Price     Options     Exercise Price  
                           
  Outstanding, beginning of period   2,067,000   $  1.07     1,788,000   $  0.88  
     Granted           409,000     1.90  
     Exercised   (110,000 )            
     Cancelled/Expired           (130,000 )   1.05  
  Outstanding, end of period   1,957,000   $  1.08     2,067,000   $  1.07  
                           
  Exercisable, end of period   1,757,000   $  1.02     1,749,500   $  0.99  

The aggregate intrinsic value for options vested as of June 30, 2012 is approximately $294,390 (December 31, 2011 - $452,250) and for total options outstanding is approximately $296,507 (December 31, 2011 - $758,750).

No stock options were granted during the six month period ended June 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 June 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 June 30, 2012 of $1.05.

Warrants

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

  Number of Warrants Exercise Price Expiry Date
  566,482 $1.33 November 23, 2012

- 15 -



XTRA-GOLD RESOURCES CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Expressed in U.S. Dollars)
June 30, 2012

8.

CAPITAL STOCK (cont’d…)

   

Warrants (cont’d…)

   

Warrant transactions and the number of warrants outstanding are summarized as follows:


      June 30, 2012     December 31, 2011  
      Number of     Weighted Average     Number of     Weighted Average  
      Warrants     Exercise Price     Warrants     Exercise Price  
  Outstanding, beginning of period   566,482   $  1.33     2,439,320   $  1.29  
     Issued                  
     Exercised             (1,608,038 )   1.24  
     Expired             (264,800 )   1.49  
  Exercisable, end of period   566,482   $  1.33     566,482   $  1.33  

9.

RELATED PARTY TRANSACTIONS

   

During the six month periods ended June 30, 2012 and June 30, 2011, the Company entered into the following transactions with related parties:


      Six months     Six months  
      June 30, 2012     June 30, 2011  
               
  Consulting fees paid or accrued to officers or their companies $  187,416   $  209,899  
  Directors’ fees   16,918     17,355  
               
  Stock option grants to officers and directors       223,000  
  Stock option grant price range $  —   $  1.90  

An amount of $18,080 was due from a company with two directors in common (December 31, 2011 - $213,872).

   

The amounts charged to the Company for the services provided have been determined by negotiation among the parties. These transactions were in the normal course of operations and were measured at the exchange value, which represented the amount of consideration established and agreed to by the related parties.

   
10.

SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS


      Cumulative amounts              
      from the beginning of              
      the exploration stage              
      on January 1, 2003 to              
      June 30, 2012     June 30, 2012     June 30, 2011  
                     
  Cash paid during the period for:                  
         Interest $  243,638   $  1,702   $  —  
         Income taxes $  —   $  —   $  —  

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

- 16 -



XTRA-GOLD RESOURCES CORP.
(An Exploration Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Expressed in U.S. Dollars)
June 30, 2012

10.

SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS (cont’d…)

   

The significant non-cash transaction during the six months ended June 30, 2011 was the receipt of 1,000,000 Buccaneer common shares per the 2011 LOI valued at $411,440.

   
11.

SEGMENTED INFORMATION

   

The Company has one reportable segment, being the exploration and development of resource properties.

   

Geographic information is as follows:


      June 30, 2012     December 31, 2011  
               
  Cash and restricted cash:            
           Canada $  1,421,730   $  4,263,201  
           Ghana   316,914     456,513  
  Total cash and restricted cash   1,738,644     4,719,714  
  Capital assets            
           Canada   1,595     3,418  
           Ghana   2,097,324     2,224,031  
  Total capital assets   2,098,919     2,227,449  
  Total $  3,837,563   $  6,947,163  

12.

CONTINGENCY AND COMMITMENTS


  a)

The Company entered into a management consulting agreement with the Vice President, Exploration, which extends from March 1, 2011 to March 1, 2014, whereby the Company will pay CAD$12,500 (USD$12,198) per month for the three year term for providing the majority of his time in consulting services to the Company. In the event of termination, without cause, before September 30, 2012, the Company will be required to pay CAD$10,000 (USD$9,758) for each month of early termination up to September 30, 2012. Thereafter, in the event that the services are terminated at any time after October 1, 2012, then no additional payment will be payable.

     
  b)

The Company leases 1,163 square feet for its corporate office located at Suite 301, 360 Bay Street, Toronto, Ontario. The lease has a 66 month term which terminates October 31, 2012, at approximately CAD$4,392 (USD$4,286) per month.

     
  c)

In late 2009, the Government of Ghana announced an increase in the gross overriding royalty (“GOR”) required payable by all mining companies in the country from 3% to 5%. The industry standard remained at 3% due to stability agreements which were in place with a number of companies. From the commencement of gold recovery in July 2010 to September 2010, the Company paid the GOR at 5% and as of October 2010, the Company began to pay the GOR at 3% until July 1, 2011 when the Company again paid the royalty at 5%. As a result of this decision, there is a potential unrecorded liability of $84,300 related to 2010 activities and a recorded liability of $120,000 related to 2011 activities.

- 17 -



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 six months ended June 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

  •  
  • During the quarter, we announced results from our 2012 drill program on our Kibi project, including:
       
     
  •  
  • 25 meters at 1.96 g/t gold (April 4)
         
     
  •  
  • 12 meters at 10.32 g/t gold (April 24)
         
     
  •  
  • 50.5 meters at 2.03 g/t gold (June 19)
         
  •  
  • Used $1,628,296 cash in the quarter
       
  •  
  • Cash of $1,517,683 at June 30, 2012

    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.

    - 18 -


    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 six months ended June 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 US$1,895 per ounce. During the second quarter of 2012, the gold price continued to increase and to be volatile, reaching a high of $1,677.50 per ounce on April 2, 2012 during the June 2012 quarter. The average market price for the second quarter of 2012 was $1,610.76 per ounce and for the second quarter of 2011 was U.S.$1,543.00 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.

    - 19 -


    Results of Operations

    Summary of Quarterly Results

              Basic and Diluted Income  
        Net Income (Loss)     (Loss) Per Share  
    Three Months Ended $   $  
                 
    June 30, 2012   (2,804,931 )   (0.06 )
    March 31, 2012   (1,651,833 )   (0.04 )
    December 31, 2011   (1,455,042 )   (0.03 )
    September 30, 2011   (2,014,669 )   (0.05 )
    June 30, 2011   (1,423,584 )   (0.03 )
    March 31, 2011   (431,462 )   (0.01 )
    December 31, 2010   (1,454,847 )   (0.04 )
    September 30, 2010   (563,501 )   (0.02 )
    June 30, 2010   (886,367 )   (0.03 )
    March 31, 2010   (112,198 )   (0.00 )
    December 31, 2009   (433,872 )   (0.01 )
    September 30, 2009   (425,971 )   (0.01 )

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

    Our company’s loss for the three months ended June 30, 2012 was $2,804,931 as compared to a net loss of $1,423,584 for the three months ended June 30, 2011, an increase of $1,381,347.

    Our company’s basic and diluted loss per share for the three months ended June 30, 2012 was $0.06 compared to a net loss of $0.03 per share for the three months ended June 30, 2011. The weighted average number of shares outstanding was 44,658,703 for the three months ended June 30, 2012 compared to 43,668,909 for the three months ended June 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 4,500 shares of common stock pursuant to our normal course issuer bid.

    We incurred expenses of $2,351,173 in the three months ended June 30, 2012 as compared to $1,493,374 in the three months ended June 30, 2011, an increase of $857,799. The increase in expenses in the three months ended June 30, 2012 can be primarily attributed to an increase of $528,993 in exploration costs to $1,651,464 as compared to $1,122,471 for the three months ended June 30, 2011 resulting from drilling and other exploration activities conducted at our Kibi project. All exploration costs for the three months ended June 30, 2012 were booked as exploration expenses.

    General and administrative expenses (“G&A”) were $623,505 for the three months ended June 30, 2012, as compared to $321,739 for the three months ended June 30, 2011, included consulting fees, stock-based compensation, legal, auditor and regulatory filing fees, travel and promotional expenses. The increase mostly resulted from a non-cash charge of $315,194 as the term to maturity of certain stock options was extended. Other G&A expenses were in line with the previous year. The remaining $65,644 non-cash charge for stock-based compensation in the three months ended June 30, 2012 was in line with the $78,111 in the three months ended June 30, 2011, represented the expense with respect to stock options vested during the period.

    Amortization for the three months ended June 30, 2012 was $76,204 as compared to $49,164 for the three months ended June 30, 2011, an increase of $27,040, due to equipment additions in 2011.

    Exploration results during the quarter were primarily focused on our Kibi project including drilling of 4,444 meters and trenching of 1,352 meters, while 7,883 drill assays and 758 trenching assays were received from the lab.

    Other items totaled a loss of $625,824 for the three months ended June 30, 2012 compared to a loss of $45,345 for the three months ended June 30, 2011. During the three months ended June 30, 2012, our company had a foreign exchange gain of $185,167 compared to a gain of $271,641 in the three months ended June 30, 2011 which loss can be attributed to currency fluctuations. There was no recovery of gold during the three months ended June 30, 2012 as compared to $260,904 for the three months ended June 30, 2011 as efforts in the 2012 quarter were focused on land remediation rather than production. Our company’s portfolio of marketable securities had an unrealized loss of $466,565 in the three months ended June 30, 2012 compared to an unrealized loss of $47,481 in the three months ended June 30, 2011 which loss can be attributed to extreme volatility in the public equity markets this reporting period. Our company had a realized loss of $26,962 in the three month period ended June 30, 2012 from the sale of trading securities as compared to no sales of trading securities in the three months ended June 30, 2011. Other income, primarily derived from dividends and interest earned and other miscellaneous items, reported a gain of $54,572 in the three months ended June 30, 2012 as compared to a gain of $12,873 in the three months ended June 30, 2011.

    - 20 -


    During the three months ended June 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.

    Six Months Ended June 30, 2012 Compared to the Six Months Ended June 30, 2011

    Our company’s loss for the six months ended June 30, 2012 was $4,456,814 as compared to a net loss of $1,855,046 for the six months ended June 30, 2011, an increase of $2,601,768. 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. Gold recovery was significantly reduced in the first half of 2012 compared to the first half of 2011 as operations were halted in 2012. A gain on sale of equipment was recorded in 2011.

    Our company’s basic and diluted loss per share for the six months ended June 30, 2012 was $0.10 compared to net loss of $0.04 per share for the six months ended June 30, 2011. The weighted average number of shares outstanding was 44,663,002 at June 30, 2012 compared to 43,322,266 for the six months ended June 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.

    Exploration spending for the six months ended June 30, 2012 was $3,845,765 as compared to $2,691,449 for the six months ended June 30, 2011, an increase of $1,154,316. Exploration work was focused primarily on our Kibi project in the six-month period. We drilled 12,984 meters and trenched 1,749 meters.

    General and administrative expenses for the six months ended June 30, 2012 were $817,449 as compared to $577,084 for the six months ended June 30, 2011, an increase of $240,365. Most of the 2012 expense reflects a non-cash stock-based compensation charge of $421,491 (6 months to 2011 - $99,422). Consulting and director fees were $110,753, while legal expenses were $87,373. The balance of the general and administrative expense of $197,882 related to rental and office expense, auditor, regulatory and marketing fees.

    Amortization for the six months ended June 30, 2012 was $128,530 as compared to $79,566 for the six months ended June 30, 2011, an increase of $48,964. We purchased equipment at a cost of $946,956 in 2011 ($nil in 2012), which increased the comparative expense in 2012.

    During the six months ended June 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 six months ended June 30, 2011 were $229,907 as compared to an unrealized loss of $66,990 for the six months ended June 30, 2011, an increase of $162,917. Most of the unrealized loss in 2012 related to a mark-to-market valuation of shares received from property options negotiated with other parties.

    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.

    At June 30, 2012, accounts payable and accrued liabilities decreased to $524,768 (December 31, 2011 - $745,860), due to general business payables. Our cash and cash equivalents as at June 30, 2012 were sufficient to pay these liabilities.

    At June 30, 2012, we had total cash of $1,517,683 (December 31, 2011 - $4,498,753). Working capital as of June 30, 2012 was $2,459,936 (December 31, 2011 - $6,629,046).

    - 21 -


    The decrease in cash mostly reflects exploration and administrative spending. During the June 2012 quarter, our company sold $939,832 in tradable securities, including $509,656 of interest-bearing debt instruments.

    During the six months ended June 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 August 9, 2012, June 30, 2012, and December 31, 2011 were as follows:

      August 9, 2012 June 30, 2012 December31, 2011
    Common shares 44,648,417 44,674,717 44,569,217
    Warrants 566,482 566,482 566,482
    Stock Options 1,957,000 1,957,000 2,067,000
    Fully diluted 47,171,899 47,198,199 47,202,699

    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:

      (i)

    the Apapam Concession (Kibi Project);

         
      (ii)

    the Kwabeng Concession (Kwabeng Project);

    - 22 -



      (iii)

    the Pameng Concession (Pameng Project);

         
      (iv)

    the Banso Concession (Banso Project); and

         
      (v)

    the Muoso Concession (Muoso Project).

    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 June 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 June 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.

    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.

    - 23 -


    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:

                    Significant        
              Quoted Prices     Other     Significant  
              in Active     Observable     Unobservable  
              Markets     Inputs     Inputs  
        June 30, 2012     (Level 1)     (Level 2)     (Level 3)  
                             
    Assets:                        
    Cash and cash equivalents $  1,517,683   $  1,517,683   $  —   $  —  
    Restricted cash   220,961     220,961          
    Trading securities   1,321,989     1,321,989          
         Total $  3,060,633   $  3,060,633   $  —   $  —  

    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 June 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.

    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.

    - 24 -



    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

     

  •  
  • 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 June 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 June 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 June 30, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

    - 25 -


    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 June 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 June 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.

    Item 5. OTHER INFORMATION

    None.

    Item 6. EXHIBITS

    Exhibits

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

    Exhibit No. Description of Document
    31.1 Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer
    31.2 Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer
    32.1 Section 1350 Certification of Principal Executive Officer
    32.2 Section 1350 Certification of Principal Financial Officer

    - 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.

    Date: August 9, 2012 XTRA-GOLD RESOURCES CORP.
      (Registrant)
         
      By /s/ Paul Zyla
        Paul Zyla
        Principal Executive Officer
         
      By /s/ John Charles Ross
        John Charles Ross
        Principal Financial Officer

    - 27 -


    PINX:XTGR Quarterly Report 10-Q Filling

    PINX:XTGR Stock - Get Quarterly Report SEC Filing of PINX:XTGR stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

    PINX:XTGR Quarterly Report 10-Q Filing - 6/30/2012
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