What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2011-03-23 compared with 2010-03-31 · 298 added, 27 removed, 62 unchanged (84% of the section changed)

Market for Registrants Common Equity, Related Stockholder Matters and Issuer Repurchase of Equity Securities

Market for Registrants Common Equity, Related Stockholder Matters and

Issuer Repurchase of Equity Securities

OFFER AND LISTING DETAILS

1 unchanged sentence

are traded on The Toronto Stock Exchange (TSX) and on the NYSE Amex under the symbol GRZ. Neither the Companys equity units nor the 5.50% convertible notes and the related underlying securities are listed for trading on any exchange.

TSX NYSE Amex

Canadian dollars U.S.

2010 High Low High Low

Canadian dollars

March (through 03/22/11)

February 1.36 1.10 1.27 1.05

January 1.63 1.26 1.58 1.20

Fourth Quarter

14 unchanged sentences

The payment of future cash dividends, if any, will be reviewed periodically by the Board of Directors and will depend upon, among other things, conditions then existing including earnings, financial condition and capital requirements, restrictions in financing agreements, business opportunities and conditions and other factors.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

Among Gold Reserve Corporation, the NASDAQ Composite Index and the S&P Gold Index

Fiscal year ending December 31.

Exchange Controls

There are no governmental laws, decrees or regulations in Canada that restrict the export or import of capital, including foreign exchange controls, or that affect the remittance of dividends, interest or other payments to non-resident holders of the securities of the Company, other than a Canadian withholding tax.

There are no governmental laws, decrees or regulations in Canada that restrict the export or import of capital, including foreign exchange controls, or that affect the remittance of dividends, interest or other payments to nonresident holders of the securities of the Company, other than a Canadian withholding tax.

See Certain Canadian Income Tax Considerations for U.S.

25 unchanged sentences

Selected Financial Data

2009 2008 2007 2006 2005

STATEMENT OF OPERATIONS

Other Income $ 3,165,736 $ 2,521,302 $6,499,084 $8,252,058 $1,402,868

General and administrative 4,380,165 7,453,842 12,143,569 6,646,798 5,054,420

Technical services 4,264,103 5,410,181 5,093,963 5,015,222 3,876,928

Corporate general and administrative

Venezuelan expenses

Corporate communications

Legal and accounting

10,645,650 14,704,220 18,915,829 13,118,694 10,342,906

Takeover defense and litigation 2,021,729 5,407,230

Loss on sale of equipment 3,423,544 1,346,423

Equipment holding costs

Write-down of machinery & equipment

Loss (gain) on sale of equipment

Takeover defense

Foreign currency (gain) loss

Loss before income tax, minority interest, interest

expense and extraordinary item (12,919,758) (18,997,783) (11,490,446) (6,008,568) (9,018,108)

Income tax expense (142,319) (737,050) (26,848) (521,803) (1,471)

Minority interest 27,124 8,712 (462,474) (446,374) (7,703)

Loss before interest expense, income

tax and extraordinary item

Interest expense

Income tax benefit (expense)

Loss before extraordinary item

Extraordinary loss on expropriation of assets (150,726,472)

Net loss $(165,449,828) $(19,726,121) $(11,979,768) $(6,976,745) $(9,027,282)

Extraordinary loss on expropriation

(150,726,472)

(165,449,828)

Net loss per share - basic and diluted

Expenses for the periods prior to the year ended December 31, 2010 have been reclassified to be comparative with the 2010 presentation.

The revisions had no effect on previously reported results of operations

BALANCE SHEET

Cash and cash equivalents,

marketable securities, restricted cash $81,226,435 $110,402,599 $151,748,690 $28,684,310 $22,355,486

Cash and cash equivalents, marketable

securities, restricted cash

Property, plant and equipment, net (1)

2 unchanged sentences

Total liabilities

Total shareholders' equity 19,917,600 185,106,436 201,320,809 100,972,012 79,637,766

Total shareholders equity (deficit)

(1) Includes approximately $28 million related to Brisas Project equipment management intends to dispose of in the future.

(2) Includes approximately $7.9 million of assets held for sale liquidated in the first quarter of 2011.

(3) Face value of outstanding convertible notes is approximately $102.3 million.

See Note 18 to the consolidated financial statements.

STATEMENT OF CASHFLOWS

to the consolidated financial statements.

STATEMENT OF CASH FLOWS

Net cash used in operating activities

Net cash provided by (used in) investing activities (15,048,843) 10,454,475 (97,797,970) (8,518,467) (2,691,289)

Net cash provided by financing activities (408,166) 273,338 172,779,163 25,702,673 2,612,344

$(20,428,684)

$(15,130,345)

$(13,858,222)

$(11,179,770)

Net cash provided by (used in)

investing activities

Net cash provided by (used in)

financing activities

Managements Discussion and Analysis of Financial Condition

and Results of Operations

This Managements Discussion and Analysis of Financial Condition and Results of Operations, dated March 22, 2011 is intended to assist in understanding and assessing our results of operations and financial condition.

Gold Reserve, an exploration stage company, is engaged in the business of acquiring, exploring and developing mining projects.

From 1992 to 2008 we focused substantially all of our management and financial resources on the development of the Brisas gold and copper project located in the Kilometre 88 mining district of the State of Bolivar in south-eastern Venezuela (which we refer to as the Brisas Project or Brisas).

Since 1992, expenditures associated with the Brisas Project and Choco 5 property both capitalized and expensed as a period cost total nearly $300 million.

The Companys current financial position and historical results of operations are a product of the Companys efforts, since 1992, to develop the Brisas Project into an operating mine and more specifically, a function of our decision, subsequent to the issuance of the Authorization to Affect, to place orders to acquire approximately $125 million of equipment, raise $183 million through the issuance of convertible notes and common shares and to continue to incur substantial operating deficits.

Likewise, our October 2009 Request for Arbitration under the Additional Facility Rules of ICSID and the write-off of the costs associated with our Venezuelan operations will continue to influence the future financial position and results of operations of the Company.

We expect the arbitration process, which commenced in April 2009 when we advised Venezuela of our claims pursuant to the Canada Venezuela Treaty, to last three to five years from commencement and consume substantial management time and financial resources.

In continuance of our 2010 efforts, our primary 2011 objectives are to manage the arbitration claim against Venezuela including, to the extent possible, accelerating its completion and to minimize costs.

Our other major objectives for 2011 are to continue to:

(1) pursue an amicable settlement with Venezuela that may include a monetary agreement and/or project participation;

(2) dispose of previously purchased Brisas Project assets, which originally cost approximately $39 million and are recorded on the balance sheet at their estimated net realizable value of $28 million;

(3) pursue alternative industry opportunities for participation;

and (4) continue to evaluate the Companys options to redeem, restructure or otherwise modify the terms of the 5.50% convertible notes which, among other things, are subject to the sale of the Brisas Project assets.

We believe the successful execution of these objectives will be facilitated by the Companys senior management team, which has extensive technical, financial and administrative experience in the mining industry- substantially all of whom have been employed by the Company for over 15 years with a single focus of developing the Brisas Project.

These individuals not only possess valuable historical knowledge related to the Brisas Project which is important to the successful execution of our arbitration efforts but they also play a critical role in the Companys ongoing evaluation and monitoring of mining opportunities for potential participation by the Company.

The timing of any such new investment or transaction if any, and the amounts that may be required cannot be determined at this time and are subject to available cash, sale of equipment originally slated for the Brisas Project and/or future financings, if any.

On October 26, 2009, in apparent response to our filing on October 21, 2009, a Request for Arbitration under the Additional Facility Rules of ICSID against Venezuela, government personnel arrived at the project site, claimed ownership of the Brisas Alluvial Concession, seized assets, expelled our personnel, and took physical possession of the property.

Subsequently, on November 4, 2009, Venezuela notified us through the issuance of an Administrative Act, dated October 20, 2009, of its intent to cancel our underlying hard rock concession which it formally completed in June 2010.

We recorded a non-cash expense adjustment of approximately of $151 million related to the capital costs associated with the Brisas Project for the year ended December 31, 2009.

Legal Proceedings Arbitration.

In October 2010, the Company attended a meeting with representatives from the Venezuelan Attorney Generals office and MIBAM to discuss our dispute and possible resolutions.

As a result of the meeting we have had formal and informal communications and expect to meet with these representatives in the near future to continue our discussions.

In December 2010, Venezuela filed a request with the Tribunal for the production of documents over and above the 33 volumes of hard copy exhibits and thousands of pages of electronic appendices which accompanied the Companys September 24, 2010 Memorial and also filed a jurisdictional objection claiming that Gold Reserve did not have the right to present a claim under the Canada Venezuela Treaty.

Venezuela further requested a suspension of the proceedings on the merits so that the jurisdictional objections could be treated as a preliminary matter separate from the merits.

On February 3, 2011, the Tribunal issued a procedural order granting in part Venezuelas request for the production of certain documents.

To the extent the documents ordered to be produced were deemed to be proprietary by the Company, the Tribunals order granted view-only access to such documents.

In addition to the production of documents, the Tribunal in its order established a revised schedule for the remaining written submissions including granting Venezuela a five week extension from March 7, 2011 to April 14, 2011 to file its response or Counter-Memorial to the Companys Memorial.

The oral hearing date of February 6, 2012 remains unchanged.

On February 25, 2011, the Tribunal denied Venezuelas previous petition to bifurcate the arbitration into a jurisdiction phase and a merits phase and decided that Venezuelas jurisdictional objections will be addressed together with the merits.

Legal Proceedings Arbitration We have no commercial production at this time and, as a result, we have not recorded revenue or cash flows from mining operations and continue to experience losses from operations, a trend we expect to continue unless and until the investment dispute regarding Brisas is resolved favorably to the Company and/or we acquire or invest in an alternative project.

Historically we have financed the Companys operations through the issuance of common stock, other equity securities and convertible debt.

The Company has only one operating segment, the exploration and development of mineral properties.

Segmented financial information by geographic region is shown in Note 14 to the consolidated financial statements.

The expense categories shown in the consolidated statements of operations were reclassified in 2010 to better present the current operations of the Company.

As a result, expenses for the years ended December 31, 2009 and 2008 have been reclassified to be comparative with the December 31, 2010 presentation.

These reclassifications had no effect on previously reported results of operations.

We prepare our consolidated financial statements in U.S.

dollars in accordance with accounting principles generally accepted in Canada.

to the consolidated financial statements.

Forward-looking statements, which reflect our current views about future events, are based on assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements.

Factors that may cause differences between actual results and those contemplated by forward-looking statements include, but are not limited to, those discussed in Part I- Item 1A.

Risk Factors of this Annual Report on Form 10-K.

This Managements Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with Part II- Item 6.

Selected Financial Data and the consolidated financial statements and related notes.

The Company no longer characterizes historically reported mineralization as reserves.

The information contained in this Annual Report on Form 10-K relating to our past development efforts, regulatory process and reported mineral reserves for the Brisas Project and Choco 5 property are presented only for informational and historical purposes and should not be construed as an indication of our expectations regarding the future development and operation of these properties or the outcome of the arbitration proceedings.

Investors are urged to read our filings with U.S.

and Canadian securities regulatory agencies, which can be viewed on-line at www.sec.gov, www.sedar.com or at the Companys website, www.goldreserveinc.com which also includes the Companys corporate governance policies.

Additionally, you can request a copy of any of these documents directly from us.

Critical Accounting Estimates

We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

Management considers the sum of the expected future net cash flows to be generated from the use or disposition of a long-lived asset (undiscounted and without interest charges) and compares that to its carrying value and if such expected future net cash flows are less than the carrying value an impairment loss is recognized and the asset is written down to fair value.

Fair value is generally determined by discounting estimated cash flows, using quoted market prices where available or making estimates based on the best information available.

In 2009, subsequent to the loss of control and physical access to the Brisas Project, we

recorded a non-cash adjustment of approximately $151 million related to the carrying value of Brisas Project assets including an adjustment of approximately $14.5 million for the estimated net realizable value of certain processing and related equipment.

In 2010 we recorded an additional $2.5 million write-down of some of this processing and related equipment to estimated net realizable value.

Management makes no assurances that the estimated net realizable value of the remaining processing and related equipment can be disposed of for its recorded estimated value.

to the consolidated financial statements.

The fair value of the debt component of the Companys convertible notes is accreted to the face value of the notes using the effective interest rate method over the expected life of the notes, with the resulting charge recorded as interest expense.

The expected life of the notes is an estimate and is subject to change, if warranted by facts and circumstances related to the potential early redemption of the notes by either the Company or the holders.

At December 31, 2008, we revised our estimate of the expected life of the notes to June 15, 2012 and adjusted the carrying value accordingly.

See Consolidated Balance Sheets - Convertible Notes and Note 17.

to the consolidated financial statements.

The adjusted carrying value was calculated by computing the present value of estimated future interest and principal payments at the original effective interest rate.

As a result of this change, the carrying value of the notes increased by approximately $20.5 million with a corresponding increase in capitalized interest and accretion.

The Company uses the liability method of accounting for income taxes.

Future tax assets and liabilities are determined based on the differences between the tax basis of assets and liabilities and those amounts reported in the financial statements.

The future tax assets or liabilities are calculated using the substantively enacted tax rates expected to apply in the periods in which the differences are expected to be settled.

Future tax assets are recognized to the extent that they are considered more likely than not to be realized.

We operate and file tax returns in a number of jurisdictions.

The preparation of such tax filings requires considerable judgment and the use of assumptions.

Accordingly, the amounts reported could vary in the future.

See Consolidated Statements of Operations - Income tax expense.

The Company uses the fair value method of accounting for stock options.

The fair value is computed using the Black-Scholes method which utilizes estimates that affect the amounts ultimately recorded as stock based compensation.

to the consolidated financial statements.

Significant Accounting Policies

Our accounting policies are described in Note 1 of the consolidated financial statements contained in this Annual Report on Form 10-K for the year ended December 31, 2010.

The more significant accounting policies are as follows:

Financial Instruments.

The Company provides disclosures in its financial statements that enable users to evaluate:

(a) the significance of financial instruments for the Company's financial position and performance;

and (b) the nature and extent of risks arising from financial instruments to which the Company is exposed during the period and at the balance sheet date, and how the Company manages those risks.

Stock Based Compensation.

We use the fair value method of accounting for stock options granted to employees and directors.

Consideration paid for shares on exercise of share options in addition to the fair value attributable to stock options granted is credited to capital stock.

Exploration and Development Costs.

Exploration costs incurred in locating areas of potential mineralization are expensed as incurred.

Exploration costs of properties or working interests with specific areas of potential mineralization are capitalized at cost pending the determination of a propertys economic viability.

Development costs of proven mining properties not yet producing are capitalized at cost and classified as capitalized exploration costs under property, plant and equipment.

Costs related to staffing and maintenance of offices and facilities in Venezuela are charged to operations.

Property holding costs are charged to operations during the period if no significant exploration or development activities are being conducted on the related properties.

Upon commencement of production, capitalized exploration and development costs would be amortized based on the estimated proven and probable reserves benefited.

Properties determined to be impaired or that are abandoned are written-down to the estimated fair value.

Carrying values do not necessarily reflect present or future values.

Measurement Uncertainty.

Any operations we may have are subject to the effects of changes in legal, tax and regulatory regimes, political, labor and economic developments, social and political unrest, currency and exchange controls, import/export restrictions and government bureaucracy in the countries in which we operate.

The realizable value of the remaining processing and related equipment recorded in the consolidated financial statements may be different than managements current estimate.

to the consolidated financial

The Company operates and files tax returns in a number of jurisdictions.

The preparation of such tax filings requires considerable judgment and the use of assumptions.

Accordingly, the amounts reported could vary in the future.

Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting.

We believe that internal controls over financial reporting no matter how well conceived and operated, can only provide reasonable assurance that their objectives are met.

There have been no changes in the Companys internal control over financial reporting during the twelve months ended December 31, 2010 that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2010 the Company had cash and cash equivalents of approximately $58.2 million which represents a net reduction over the prior period of approximately $2.8 million.

The net reduction in cash and cash equivalents was primarily comprised of cash used by operations of $20.4 million offset by cash provided by investing activities of $17.6 million.

The components of changes in cash are more fully described in the Operating, Investing and Financing Activities section below.

Cash and cash equivalents

$ (2,776,335)

Total financial resources, which includes cash and cash equivalents as well as restricted cash, marketable securities and assets held for sale (which were liquidated in the first quarter of 2011), totaled approximately $68.4 million at December 31, 2010.

As of March 22, 2011 we held approximately $66 million in cash and investments.

The Companys cash and investments are held primarily is US dollar denominated accounts.

In addition to cash and cash equivalents and investments, the Company holds approximately $28.1 million of equipment that it intends to dispose of in 2011.

The primary future obligation of the Company is the $103.5 million 5.50% convertible notes which may be settled in cash or common shares in the event the holder chooses the onetime option to put the notes back to the Company for repurchase on June 15, 2012.

See Note 17 to the consolidated financial statements and Contractual Obligations below.

With the ability to settle any call for redemption of the convertible notes with common shares, we believe that cash and investment balances and funds available from potential future equipment sales will be sufficient to enable us to fund our activities through 2012.

The timing and extent of additional funding, if any, depends on a number of important factors, including, but not limited to the timing and outcome of our investment dispute with Venezuela, the timing and the amount of proceeds, if any, from the sale of Brisas Project assets, the extent of future acquisitions or investments, if any, status of the financial markets and our share price.

Operating Activities

Cash flow used by operating activities for 2010 was approximately $20.4 million, which consists of a net operating loss of approximately $23.5 million adjusted for certain non-cash income and expense items primarily related to the write-down of Brisas Project assets, accretion of convertible notes and shares issued for compensation and certain non-cash changes in working capital.

Cash flow used by operating activities for 2010 represented an increase over the prior comparable period of approximately $5.3 million which is primarily attributable to the increase in costs associated with arbitration and equipment storage, maintenance and insurance (equipment holding costs).

Although management was successful in reducing certain operating expenses as more fully discussed below in Results of Operations, non-core expenses increased as a result of our arbitration efforts, equipment holding costs and the recognition of interest expense in the statement of operations which was previously capitalized.

Investing Activities

In 2010 net cash provided by investing activities amounted to $17.6 million an increase of $32.7 million compared to 2009 during which $15 million of net cash was used in investing activities.

Net proceeds (purchases) of marketable

$ (8,042,632)

$ (9,247,214)

Purchase of property, plant and

Proceeds from sale of equipment

Decrease in restricted cash

Capitalized interest on convertible debt

$ (15,048,843)

$ (25,503,318)

In 2010, net proceeds from marketable securities totaled approximately $10.1 million compared to net purchases of $8.0 million in 2009 and net proceeds of $1.2 million in 2008.

The change in marketable securities primarily relates to debt securities which were purchased in 2009 and matured in 2010.

Investments in property, plant and equipment mainly relate to contractual purchases of equipment entered in 2007 and paid when the equipment was manufactured and delivered to the Company.

Equipment purchases in 2010, 2009 and 2008 totaled approximately $9.5 million, $17.8 million and $38.7 million, respectively.

Since the revocation of the Authorization to Affect, the Company has sold certain equipment originally costing approximately $61.4 million.

In 2010 the Company collected proceeds from the disposal of this equipment totaling approximately $8.9 million.

Over all, the Company has recovered approximately $35.1 million of progress payments and the purchaser assumed the Company's remaining payment obligations of approximately $21.9 million.

As of December 31, 2010, the Companys equipment purchase commitments were substantially complete and it held approximately $28.1 million of equipment intended for sale.

In connection with a portion of the 2007 equipment commitments, we opened an irrevocable standby letter of credit, secured by cash, with a Canadian chartered bank providing security on the performance of certain of our purchase obligations.

During 2010, the Company made its final payments on the commitments covered under the letter of credit and accordingly, as of December 31, 2010 the Company had no restricted cash.

Prior to October 2009, we capitalized interest expense related to our convertible notes.

After Venezuela seized physical control of the Brisas Project in October 2009, we expensed interest charges related to the convertible notes.

Included in interest expense are amounts related to the accretion of the notes to their face value.

to the consolidated financial statements.

Financing Activities

The Company had no significant financing activities in 2010.

Net proceeds from the issuance of commons shares have been limited over the last three years and mainly relates to the exercise of employee stock options.

The repurchase of convertible notes relates to the open market purchase of approximately $1.1 million (face value) of convertible notes for $0.4 million.

to the consolidated financial statements and Contractual Obligations below.

Net proceeds from issuance of common shares

Repurchase of convertible notes

Contractual Obligations

The following table sets forth information on the Companys material contractual obligation payments for the periods indicated as of December 31, 2010:

Payments due by Period

Less than 1 Year

More Than 5 Years

Convertible Notes (1)

Equipment Contracts (2)

1 In May 2007, the Company issued $103,500,000 aggregate principal amount of its 5.50% convertible notes.

The notes pay interest semi-annually and are due on June 15, 2022.

Although the convertible notes have a

face value of $103.5 million, they are recorded on the balance sheet at approximately $97 million as

Canadian accounting standards require the Company to allocate the proceeds from the notes between their

equity and debt components based on their respective fair values at the time of issuance.

Subject to certain

conditions, the notes may be converted into Class A common shares of the Company, redeemed or

The note holders have the option to require the Company to repurchase the notes on June 15, 2012, at a

price equal to 100% of the principal amount of the notes plus accrued but unpaid interest.

may elect to satisfy its obligation to pay the repurchase price, in whole or in part, by delivering Common

If in the future we elect to repurchase the notes with common shares, we would be required to issue

shares based on the share price on June 15, 2012.

At any time on or after June 16, 2010, and until June 15, 2012, the Company may redeem the notes, in

whole or in part, for cash at a redemption price equal to 100% of the principal amount being redeemed plus

accrued and unpaid interest if the closing sale price of the Common Shares is equal to or greater than 150%

of the conversion price then in effect and the closing price for the Companys Common Shares has

remained above that price for at least 20 trading days in the period of 30 trading days preceding the

Companys notice of redemption.

Beginning on June 16, 2012, the Company may, at its option, redeem all

or part of the notes for cash at a redemption price equal to 100% of the principal amount being redeemed

plus accrued and unpaid interest.

The convertible notes are trading in the gray market often at a significant discount to face value.

terms of the indenture provide that the Company may repurchase the convertible notes in open market

purchases or negotiated transactions.

As of December 31, 2010, $1,151,000 face value of convertible notes

have been settled in cash or repurchased by the Company at a total cost of $451,000.

The amounts shown

above include the interest and principal payments due based on the estimate that the term of the notes will

end on June 15, 2012.

If the notes were to reach their contractual maturity date of June 15, 2022, additional

interest payments would amount to $56.3 million over the additional ten year term of the notes.

The covenants contained in the 5.50% convertible note indenture are limited to administrative issues such

as payments of interest, maintenance of office or agency location, delivery of reports and other related

Likewise, events of default are defined as failure to pay interest and principal amounts when due,

default in the performance of covenants, failure to convert notes upon holders exercise of conversion

rights and similar provisions or the Companys failure to give notice of a fundamental change which is

generally defined as events related to a change of control in the Company.

In the event of a change of

control of the Company, the Company will be required to offer to repurchase the notes at a purchase price

equal to 100% of the principal amount of the notes plus accrued but unpaid interest with cash or Common

Shares unless there has occurred and is continuing certain events of default under the Companys indenture.

2 Remaining balance due on equipment purchase contracts entered during 2007.

Off-Balance Sheet Arrangements

The Company is not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on the Companys financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.

RESULTS OF OPERATIONS

Summary Results of Operations

Consolidated net loss for the year ended December 31, 2010 was approximately $23.5 million or $0.41 per share compared to a net loss for the year ended December 31, 2009 of $165.4 million or $2.89 per share, a decrease of approximately $141.9 million.

Subsequent to the seizure of the Brisas Project in October 2009 by Venezuela, we recorded a $150.7 million non-cash expense adjustment related to the carrying value of the project assets and the value of certain processing and related equipment.

$ (2,207,368)

Total expenses

(168,615,564)

(146,368,141)

$ 141,902,894

$ 165,449,828

$(145,723,707)

Excluding the 2009 extraordinary loss on expropriation of assets of $150.7 million, the net loss increased from 2009 to 2010 approximately $8.8 million.

Core operating expenses (Corporate G&A, Venezuela expenses, Corporate communications and Legal and accounting) declined by nearly 40% or $4.3 million during this period but were offset by increases in costs associated with arbitration, equipment holding costs and interest expense which was previously capitalized.

Consolidated net loss for the year ended December 31, 2009 was approximately $165.5 million or $2.89 per share, an increase of approximately $145.7 million from 2008.

In addition to the $150.7 million adjustment for the impairment of the assets associated with the Brisas project, the change in net loss was due to decreases in other expenses of $4.4 million and an increase in other income of $0.6 million.

We have no commercial production at this time and as a result, other income is often variable from period to period due to one-time or otherwise variable sources of income such as gains on disposition of marketable securities, extinguishment of debt and sale of equipment.

In 2010, the decrease in other income was primarily attributable to reductions in gains on sales of marketable securities of $2.0 million.

In addition, gains on extinguishment of debt decreased $0.6 million due to the absence of any re-purchases of the Companys convertible notes.

These reductions in other income were partially offset by a $0.5 million gain on the disposition of equity interests in two previously consolidated subsidiaries.

to the consolidated financial statements.

In 2009, the increase in other income was due to a $2.5 million increase of gains on disposition of marketable securities and a $0.5 million increase in gains on the extinguishment of debt as a result of the re-purchase of approximately $1.0 million (face value) of the Companys convertible notes at a substantial discount.

These increases were offset by a decrease in interest income primarily due to substantially reduced rates of return on invested cash and to a lesser extent, lower levels of invested cash.

Gain (loss) on disposition of marketable

Gain on sale of subsidiaries

Gain on extinguishment of debt

$ (2,207,368)

Overall the changes in expenditures are a function of the Companys efforts to reduce principal operating expenses which are masked by ongoing costs associated with our arbitration claim against the Republic of Venezuela, equipment storage costs, takeover defense costs associated with the 2008 Rusoro hostile takeover bid and interest expense on the convertible debt, which as a result of the seizure of the Brisas Project is no longer capitalized as a cost of the project.

During 2010 and 2009, core operating costs decreased from the prior years by $4.3 million and $4.6 million, respectively, primarily as a result of reductions related to both the number of personnel and compensation related items, fees associated with consultants and other discretionary costs.

Excluding the extraordinary loss, costs associated with equipment holding costs, further write-down of Brisas Project related assets, net equipment sales, arbitration, takeover defense and interest on the convertible notes that is no longer capitalized, increased during 2010 and 2009 by $10.9 million and $0.2 million, respectively.

Corporate general and administrative

$ (1,271,030)

$ (3,147,824)

Venezuela expenses

Corporate communications

Legal and accounting

Equipment holding costs

Write-down of machinery & equipment

Loss (gain) on sale of equipment

Takeover defense

Foreign currency (gain) loss

Interest expense

Income tax (benefit) expense

Extraordinary loss on expropriation

(150,726,472)

Total expenses for the period

$ (144,110,262)

Future expenditures associated with corporate general and administrative, corporate communications and legal and accounting are expected to decline at a moderate level, while we expect Venezuelan expenses to decline considerably from the amounts recorded in 2010.

Costs associated with the arbitration are expected to moderate and decline as we incurred a substantial portion of the expected costs upfront in preparation of our initial Memorial and case.

Equipment write-downs are expected to be negligible while equipment holding costs will continue until we are able to dispose of Brisas Project related equipment.

Interest expense, which was previously capitalized and comprised of approximately $5.6 million of actual interest paid plus an amount related to accretion of the face value of the convertible note, is expected to stay at substantially the same level as 2010.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity