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

FORM 10-QSB
(Mark One)

x
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2006

o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ________________ to _______________

000-50146
(Commission file number)

TORNADO GOLD INTERNATIONAL CORP.
(Exact name of small business issuer as specified in its charter)
Nevada
94-3409645
(State or other jurisdiction
(IRS Employer
of incorporation or organization)
Identification No.)
 
3841 Amador Way, Reno, Nevada 89502
(Address of principal executive offices)

(775) 827-2324
(Issuer's telephone number)

N/A
(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The number of shares of common stock outstanding as of August 11, 2006 was 28,816,526.

Transitional Small Business Disclosure Format (check one): Yes o No x
 

TORNADO GOLD INTERNATIONAL CORP.
Index

   
Page
   
Number
     
PART I.
FINANCIAL INFORMATION
2
     
Item 1.
Financial Statements
2
     
 
Balance Sheet as of June 30, 2006 (unaudited)
2
     
 
Statements of Operations for the
  
 
three months ended June 30, 2006 and 2005 (unaudited)
3
     
 
Statements of Cash Flows for the
  
 
three months ended June 30, 2006 and 2005 (unaudited)
4
     
 
Notes to Financial Statements (unaudited)
5
     
Item 2.
Management's Discussion and Analysis or Plan of Operation
18
     
Item 3.
Controls and Procedures
24
     
PART II.
OTHER INFORMATION
24
     
Item 6.
Exhibits
24
     
SIGNATURES
  
24
     
CERTIFICATIONS
  
24
 
 
1

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

TORNADO GOLD INTERNATIONAL CORP.
(formerly Nucotec, Inc.)
BALANCE SHEET
   
June 30,
  
   
2006
  
   
(Unaudited)
  
ASSETS
      
       
CURRENT ASSETS
      
Cash and cash equivalents
  
$
9,856
  
Prepaid expenses
    
1,413
 
TOTAL CURRENT ASSETS
    
11,269
 
         
MINING CLAIMS
    
965,598
 
         
OTHER ASSETS
        
Deferred offering costs
    
5,000
 
TOTAL ASSETS
  
$
981,867
  
         
LIABILITIES AND STOCKHOLDERS' DEFICIT
        
         
CURRENT LIABILITIES
        
Accounts payable - related party
  
$
5,250
  
Accounts payable - others
    
31,883
 
Notes payable (including accrued interest of $50,426)
    
1,131,242
 
TOTAL CURRENT LIABILITIES
    
1,168,375
 
         
COMMITMENTS AND CONTINGENCIES
    
-
 
         
STOCKHOLDERS' DEFICIT
        
Common stock; $0.001 par value; 100,000,000 shares
        
 authorized; 28,816,526 shares issued and outstanding
    
28,817
 
Additional paid in capital
    
1,697,000
 
Accumulated deficit
    
(704,993
)
Deficit accumulated during the exploratory stage
    
(1,206,914
)
Stock subscription receivable
    
(418
)
TOTAL STOCKHOLDERS' DEFICIT
    
(186,508
)
         
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
  
$
981,867
  
 
 

The accompanying notes are an integral part of these financial statements.
 
2

TORNADO GOLD INTERNATIONAL CORP.
(formerly Nucotec, Inc.)
STATEMENTS OF OPERATIONS


                   
From
  
   
For the Three Months Ended
  
For the Six Months Ended
  
March 19, 2004
  
   
June 30, 2006
  
June 30, 2006
  
through
  
   
2006
  
2005
  
2006
  
2005
  
June 30, 2006
  
   
(Unaudited)
  
(Unaudited)
  
(Unaudited)
  
(Unaudited)
  
(Unaudited)
  
                       
NET REVENUE
  
$
-
  
$
-
  
$
-
  
$
-
  
$
-
  
                                 
OPERATING EXPENSES
                                
Compensation expense on option grants
    
-
   
-
   
-
   
-
   
22,409
 
Mining exploration expenses
    
41,307
   
3,150
   
81,267
   
21,000
   
537,198
 
General and administrative expenses
    
125,508
   
54,454
   
209,318
   
82,579
   
515,771
 
     
166,815
   
57,604
   
290,585
   
103,579
   
1,075,378
 
                                 
LOSS FROM OPERATIONS
    
(166,815
)
  
(57,604
)
  
(290,585
)
  
(103,579
)
  
(1,075,378
)
                                 
OTHER INCOME (EXPENSE)
                                
Interest expense
    
(21,557
)
  
(3,600
)
  
(37,738
)
  
(23,238
)
  
(131,536
)
TOTAL OTHER INCOME (EXPENSE)
    
(21,557
)
  
(3,600
)
  
(37,738
)
  
(23,238
)
  
(131,536
)
                                 
LOSS BEFORE PROVISION FOR INCOME TAXES
    
(188,372
)
  
(61,204
)
  
(328,323
)
  
(126,817
)
  
(1,206,914
)
                                 
PROVISION FOR INCOME TAXES
    
-
   
-
   
-
   
-
   
-
 
NET LOSS
  
$
(188,372
)
$
(61,204
)
$
(328,323
)
$
(126,817
)
  
(1,206,914
)
                                 
NET LOSS PER SHARE - BASIC AND DILUTED
  
$
(0.01
)
$
(0.00
)
$
(0.01
)
$
(0.00
)
      
                                 
WEIGHTED AVERAGE COMMON EQUIVALENT
                                
SHARES OUTSTANDING - BASIC AND DILUTED
    
28,798,266
   
32,427,331
   
28,795,014
   
43,161,233
       

 
The accompanying notes are an integral part of these financial statements.
 
3

 
TORNADO GOLD INTERNATIONAL CORP.
(formerly Nucotec, Inc.)
STATEMENTS OF CASH FLOWS


           
From
  
   
For the Six Months Ended
  
March 19, 2004
  
   
Jun-30
  
through
  
   
2006
  
2005
  
June 30, 2006
  
   
(Unaudited)
  
(Unaudited)
  
(Unaudited)
  
               
CASH FLOWS FROM OPERATING ACTIVITIES:
              
Net loss from continuing operations
  
$
(328,323
)
$
(126,817
)
$
(1,206,914
)
Adjustment to reconcile net loss to net cash
                    
used in operating activities:
                    
Value of options and warrants granted for services
    
-
   
-
   
22,409
 
Changes in:
                    
Prepaid expenses and other current assets
    
(17
)
  
-
   
(1,412
)
Accounts payable and accrued expenses
    
61,570
   
67,069
   
162,659
 
Net cash used in operating activities
    
(266,770
)
  
(59,748
)
  
(1,023,258
)
                     
CASH FLOWS FROM INVESTING ACTIVITIES:
                    
Purchase of mining claims
    
(441,265
)
  
(43,314
)
  
(965,598
)
Net cash used in investing activities
    
(441,265
)
  
(43,314
)
  
(965,598
)
                     
                     
CASH FLOWS FROM FINANCING ACTIVITIES:
                    
Proceeds from notes payable
   
649,838
   
50,000
   
2,105,816
 
Proceeds from issuance of common stock
    
3,720
         
513,302
 
Payment on note payable - related party
                
(42,500
)
Repurchase of shares on common stock
                
(577,906
)
                     
Net cash provided by financing activities
    
653,558
   
50,000
   
1,998,712
 
                     
NET CASH PROVIDED BY CONTINUING OPERATIONS
    
(54,477
)
  
(53,062
)
  
9,856
 
                     
CASH AND CASH EQUIVALENTS, Beginning of year
    
64,333
   
53,141
   
-
 
                     
CASH AND CASH EQUIVALENTS, End of year
  
$
9,856
  
$
79
  
$
9,856
  
                     
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
                    
                     
Interest paid
  
$
-
  
$
-
        
Income taxes paid
  
$
-
  
$
-
        
 

The accompanying notes are an integral part of these financial statements.
 
4
TORNADO GOLD INTERNATIONAL CORP.
(formerly Nucotec, Inc.)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
 
 
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
 
Organization
 
Tornado Gold International Corp. (formerly Nucotec, Inc.) was incorporated in the state of Nevada on October 8, 2001. On July 7, 2004, the name of the company was officially changed to Tornado Gold International Corp. (the "Company"). The Company is currently in the exploratory stage with its principal activity being the exploration of mining properties for future commercial development and production (See Note 3).
 
Basis of Presentation
 
The accompanying interim financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting.  These interim financial statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary to present fairly the balance sheet, operating results and cash flows for the periods presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  Operating results for the six months ended June 30, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006 or for any other interim period during such year.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted in accordance with the rules and regulations of the SEC.  These interim financial statements should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Form 10-K for the year ended December 31, 2005.
 
Going Concern
 
The accompanying financial statements contemplate continuation of the Company as a going concern. The Company has no established source of material revenue, has incurred a net loss for the six-months ended June 30, 2006 of $301,156 and, as of June 30, 2006, had a negative working capital of $1,128,659 and accumulated deficit since its inception of $1,884,740. These conditions raise substantial doubt as to the Company's ability to continue as a going concern. These financial statements do not include any adjustments that might result from the outcome of this uncertainty nor any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern (See Note 9 - Subsequent Events).
 
The Company plans to raise additional operating funds through equity or debt financings, which management believes will be sufficient to provide the Company with the ability to continue in existence. There is no assurance that the Company will be able to arrange for financing and has not, to date, had any substantive discussions with any third parties regarding such financing. (See Note __).
 
Stock Split
 
On April 19, 2004, the Company authorized a 50-for-1 stock split. On August 18, 2004, the Company authorized a 6.82-for-1 stock split. On May 16, 2005, the Company authorized a 1.20-for-1 stock split. The accompanying financial statements have been prepared as if all of the stock-splits occurred at the beginning of each period presented.
 
5
 

TORNADO GOLD INTERNATIONAL CORP.
(formerly Nucotec, Inc.)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
 
 
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Stock Based Compensation
 
The Company accounts for stock-based compensation under SFAS No. 123R, "Share- based Payment", and SFAS No. 148, "Accounting for Stock-Based Compensation--Transition and Disclosure--An amendment to SFAS No. 123." These standards define a fair value based method of accounting for stock-based compensation. In accordance with SFAS Nos. 123R and 148, the cost of stock-based employee compensation is measured at the grant date based on the value of the award and is recognized over the vesting period. The value of the stock-based award is determined using the Black-Scholes option-pricing model, whereby compensation cost is the excess of the fair value of the award as determined by the pricing model at the grant date or other measurement date over the amount an employee must pay to acquire the stock. The resulting amount is charged to expense on the straight-line basis over the period in which the Company expects to receive the benefit, which is generally the vesting period. During the three months and six-months ended June 30, 2006 and 2005, the Company recognized no compensation expense under SFAS No. 123 as no options were issued to employees during these two periods (See Note 6).
 
As of April 15, 2005, the Company adopted its 2005 stock option plan to compensate its directors. As of June 30, 2006, no options have been granted to the directors.
 
Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates.
 
Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, accounts payable, accrued expenses and notes payable. Pursuant to SFAS No. 107, “Disclosures About Fair Value of Financial Instruments,” the Company is required to estimate the fair value of all financial instruments as of the balance sheet date. The Company considers the carrying values of its financial instruments in the financial statements to approximate their fair values.
 
Cash and Cash Equivalents
 
For purposes of the statements of cash flows, the Company defines cash equivalents as all highly liquid debt instruments purchased with a maturity of three months or less, plus all certificates of deposit.
 
Concentration of Credit Risk
 
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist of cash. The Company places its cash with high quality financial institutions and at times may exceed the FDIC $100,000 insurance limit. The Company extends credit based on an evaluation of the customer's financial condition, generally without collateral. The Company monitors its exposure for credit losses and maintains allowances for anticipated losses, as required.
6
 
TORNADO GOLD INTERNATIONAL CORP.
(formerly Nucotec, Inc.)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
 
 
Revenue Recognition
 
The Company has not generated any revenue from its mining operations.
 
Mining Costs
 
Costs incurred to purchase, lease or otherwise acquire property are capitalized when incurred. General exploration costs and costs to maintain rights and leases are expensed as incurred. Management periodically reviews the recoverability of the capitalized mineral properties and mining equipment. Management takes into consideration various information including, but not limited to, historical production records taken from previous mine operations, results of exploration activities conducted to date, estimated future prices and reports and opinions of outside consultants. When it is determined that a project or property will be abandoned or its carrying value has been impaired, a provision is made for any expected loss on the project or property.
 
Income Taxes
 
The Company accounts for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes." Deferred taxes are provided on the liability method whereby deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
 
Loss Per Share
 
The Company reports earnings (loss) per share in accordance with SFAS No. 128, "Earnings per Share." Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted average number of common shares available. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Diluted earnings (loss) per share has not been presented since the effect of the assumed conversion of options to purchase common shares would have an anti-dilutive effect. The only potential common shares as of June 30, 2006 were 210,000 options and 650,000 warrants that have been excluded from the computation of diluted net loss per share because the effect would have been anti-dilutive. If such shares were included in diluted EPS, they would have resulted in weighted-average common shares of 29,626,725 and 32,487,331 for the three months ended June 30, 2006 and 2005, respectively, and 29,626,725 and 43,160,937 for the six months ended June 30, 2006 and 2005, respectively.
 
Reclassification
 
Certain reclassifications have been made to the 2005 balances to conform to the 2006 presentation.
 
Recently Issued Accounting Pronouncements
 
In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections." This statement applies to all voluntary changes in accounting principle and requires retrospective application to prior periods' financial statements of changes in accounting principle, unless this would be impracticable. This statement also makes a distinction between "retrospective application" of an accounting principle and the "restatement" of financial statements to reflect the correction of an error. This statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company believes the adoption of this standard will have no material impact on its financial statements.
 
7
 
 
TORNADO GOLD INTERNATIONAL CORP.
(formerly Nucotec, Inc.)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

In February 2006, FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments”. SFAS No. 155 amends SFAS No 133, “Accounting for Derivative Instruments and Hedging Activities”, and SFAF No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”. SFAS No. 155, permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133, establishes a requirement to evaluate interest in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and amends SFAS No. 140 to eliminate the prohibition on the qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. This statement is effective for all financial instruments acquired or issued after the beginning of the Company’s first fiscal year that begins after September 15, 2006. The Company believes the adoption of this standard will have no material impact on its financial statements.

In December 2004, the FASB issued FASB Statement No. 123R, "Share-Based Payment, an Amendment of FASB Statement No. 123" ("FAS No. 123R"). FAS No. 123R requires companies to recognize in the statement of operations the grant- date fair value of stock options and other equity-based compensation issued to employees. FAS No. 123R is effective beginning in the Company's first quarter of fiscal 2006. The Company believes the adoption of this standard may have a significant impact on its financial statements.

In December 2004, the FASB issued SFAS No. 153, “Exchanges of Non-Monetary Assets, an amendment of APB Opinion 29, Accounting for Non-Monetary Transactions.” The amendments made by SFAS No. 153 are based on the principle that exchanges of non-monetary assets should be measured based on the fair value of the assets exchanged. Further, the amendments eliminate the narrow exception for non-monetary exchanges of similar productive assets and replace it with a broader exception for exchanges of non-monetary assets that do not have "commercial substance." The provisions in SFAS No. 153 are effective for non-monetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Early application is permitted and companies must apply the standard prospectively. The Company adopted this statement on January 1, 2005. The adoption of the statement did not cause a significant change in the current manner in which the Company accounts for its exchanges of non-monetary assets.

In June 2005, the EITF reached consensus on Issue No. 05-6, Determining the Amortization Period for Leasehold Improvements ("EITF 05-6.") EITF 05-6 provides guidance on determining the amortization period for leasehold improvements acquired in a business combination or acquired subsequent to lease inception. The guidance in EITF 05-6 will be applied prospectively and is effective for periods beginning after June 29, 2005. EITF 05-6 is not expected to have a material effect on the Company’s financial position or results of operations.
 
8
 
TORNADO GOLD INTERNATIONAL CORP.
(formerly Nucotec, Inc.)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
 
NOTE 3 - Mining Claims
 
NT Green Property, HMD Gold Property, Goodwin Hill Gold Property, and Wilson Peak Property
 
On May 31, 2004, the Company entered into four agreements with a company wholly owned by Mr. Carl Pescio ("Pescio"), a Director of the Company, to lease four mining properties. The terms of the four leases are substantially identical and are as follows:
 
A schedule of the advanced lease payments for each of the four properties is as follows:
 
 
Amount
  
June 5, 2004
 
$
15,000
  
May 15, 2005
 
$
22,500
  
February 5, 2006
 
$
30,000
  
February 5, 2007
 
$
37,500
  
February 5, 2008
 
$
50,000
  
February 5, 2009
 
$
62,500
  
February 5, 2010
 
$
75,000
  
February 5, 2011 and each
        
year thereafter until
        
production commences
 
$
100,000
  
 

 
9
 
TORNADO GOLD INTERNATIONAL CORP.
(formerly Nucotec, Inc.)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
 
Upon completion of a bankable feasibility study and payments totaling $105,000, the Company will own 100% of the property subject to a continuing production royalty of 4%. Once the $105,000 is paid, all subsequent payments will convert into advance minimum royalty payments that are credited against the 4% production royalty due. A 1% royalty is also due Pescio on production on property consisting of a 2 mile circumference surrounding the leased property.
 
The Company will pay additional land acquisition and filling fees on the property. The Company is committed to drill 5,000 feet on the property in each year commencing on or before September 1, 2006 and continuing until the completion of the feasibility study. Excess footage drilled in any year will be carried forward to subsequent years. The Company has the option to pay Pescio $10 per foot committed to and not drilled.
 
Prior to the completion of the feasibility study, the Company has the right to purchase 2% of the 4% production royalty for $1,500,000 for each percentage point. The Company also has the option to purchase 50% of the 1% royalty for $500,000.
 
The Company shall be responsible for all environmental liabilities and reclamation costs it creates and indemnifies Pescio against any such claims or obligations. The Company can terminate the lease at any time by giving 30 days notice provided that there are no outstanding environmental or reclamation liabilities and that all lease and production royalty payments are current.
 
Jack Creek Property
 
On October 3, 2005, the Company paid the Bureau of Land Management $30,875 as consideration on the Exploration License and Option to Lease Agreement entered into between the Company and Mr. Earl Abbott, and Stanley Keith ("the owners"), to explore 247 claims (nearly 5,000 acres) known as the Jack Creek Property. Mr. Abbott is the Company's President, and Mr. Keith is a Company Director.
 
The Company entered into a definitive Exploration License and Option to Lease Agreement for the above claims for a period of twenty years Under this agreement, the Company is responsible to make minimum lease payments to the owners as follows:
 
 
Amount
  
Upon signing
 
$
22,500
  
1st anniversary
 
$
30,000
  
2nd anniversary
 
$
37,500
  
3rd anniversary
 
$
50,000
  
4th anniversary
 
$
62,500
  
5th anniversary and each
        
anniversary thereafter
 
$
100,000
  

 
10
 
 
TORNADO GOLD INTERNATIONAL CORP.
(formerly Nucotec, Inc.)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
 
If any payments due by the Company to the owners are not paid within 30 days of its due date, interest will begin to accrue on the late payment at a rate of 2% over the prime rate established by the Department of Business and Industry of the State of Nevada.
 
Upon completion of a bankable feasibility study and payments totaling $140,000, all subsequent payments will convert into advance minimum royalty payments that are credited against the 4% production royalty due.
 
The Company shall have the option to purchase one-half (1/2) of the royalty applicable to the property representing two percent (2%) of the Net Smelter Returns. The Company shall have the right to elect to purchase such part of the royalty in increments representing one percent (1%) of the Net Smelter Returns and the purchase price for each such increment shall be $1,500,000. The Company shall have the option to purchase one-half (1/2) of the area-of-interest royalty applicable to mineral rights, mining claims and properties which the Company acquires from third parties representing one-half percent (.5%) of the Net Smelter Returns. The purchase price for such part of the area-of-interest royalty shall be $500,000 for the one-half percent (.5%) of the area-of-interest royalty applicable to mineral rights, mining claims and properties which the Company acquires from any third party.
 
The Company shall be responsible for all environmental liabilities and reclamation costs it creates and indemnifies the owners against any such claims or obligations. The Company can terminate the lease at any time by giving 30 days notice provided that there are no outstanding environmental or reclamation liabilities and that all lease and production royalty payments are current.
 
Additional Properties
 
On October 6, 2005, the Company entered into a preliminary agreement with Mr. Carl Pescio, a Director of the Company, to lease 10 mineral properties (about 1,300 claims) in Nevada. Under the term of the preliminary agreement, the Company is to make advance lease payments to Mr. Pescio on each property based upon the following schedule:
 
Due Date
 
Amount
  
Upon signing
 
$
35,000
  
1st anniversary
 
$
55,000
  
2nd anniversary
 
$
75,000
  
3rd anniversary
 
$
100,000
  
4th anniversary
 
$
125,000
  
5th anniversary
 
$
150,000
  
6th anniversary and each
        
anniversary thereafter
 
$
200,000
  

 
11
 
TORNADO GOLD INTERNATIONAL CORP.
(formerly Nucotec, Inc.)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
 
Based upon the actual terms of the leases acquired in May 2004 and the preliminary terms of the leases acquired in October 2005, the Company's obligation as of June 30, 2006 for the payment of minimum lease payments on these 15 properties is as follows:
 
 
$
572,500
  
2007
 
$
930,000
  
2008
 
$
1,237,500
  
2009
 
$
1,550,000
  
2010
 
$
1,862,500
  
Minimum lease payments in
        
Subsequent years
 
$
2,500,000
  


 
A description of the mining properties leased by the Company is as follows:
 
NT Green Property is located in central Lander County, Nevada, about 40 miles southwest of the town of Battle Mountain. The property is within the Battle Mountain/Eureka Trend at the northern end of the Toiyabe Range.
 
HMD Gold Property is located in Eureka County, Nevada along the west side of the Cortez Range, about 30 miles southwest of the town of Carlin. Access to the property is gained by driving 41 miles west of Elko on I-80, then 20 miles south on SH-306 to the town of Crescent Valley. A well-maintained gravel road leads east-southeast past the Hot Springs Point to the vicinity of the Dean Ranch. A two-track road leads to the southeast and the property position is reached in about one-half mile.
 
Goodwin Hill Gold Property is located in east central Lander County, Nevada about 60 miles south of the town of Battle Mountain and about 25 miles northeast of the town of Austin. It is positioned in grass Valley between the Simpson Park Range to the east and the Toiyabe Range to the west.
 
Wilson Peak property is located in Elko County, Nevada about 70 miles north of the town of Elko and about 20 miles north of the town of Tuscarora.
 
Jack Creek Property is located in the northern Independence Range about 50 miles north of Elko, Elko County, Nevada. It is comprised of 247 lode mining claims (nearly 5,000 acres).
 
Stargo Property is located in the Monitor Range about 45 miles southwest of the town of Eureka and comprises of a total of 257 lode claims (about 5,140 acres) in Nye County, Nevada.
 
West Whistler Property is located on the west flank of Whistler Mountain, about 10 miles northwest of the town of Eureka and comprises of a total of 103 lode claims (about 2,060 acres) in Eureka County, Nevada.
 
Brock Property is located in the Monitor Range about 36 miles southwest of the town of Eureka, and it comprises a total of 222 lode claims (about 4,440 acres) in Eureka County, Nevada.
 
Horseshoe Basin Property is located in the Fish Creek Mountains about 30 miles south of the town of Battle Mountain.
 
South Lone Mountain Property is located on the west flank of the Mountain Boy Range in Antelope Valley about 15 miles southwest of the town of Eureka and consists of a total of 140 lode claims (about 2,800 acres) in Eureka County, Nevada.
 
12
 
TORNADO GOLD INTERNATIONAL CORP.
(formerly Nucotec, Inc.)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
 
 
Golconda Property is located in Rock Creek Valley about 12 miles east of the town of Winnemucca and near the intersection of the Getchell Trend and the north end of the Battle Mountain-Eureka Trend, and it comprises of a total of 108 lode claims (about 2,160 acres) in Humboldt County, Nevada.
 
North Battle Mountain Property is located in the Sheep Creek Range about 4 miles northeast of the town of Battle Mountain near the northern extension of the Battle Mountain-Eureka Trend, and it comprises a total of 73 lode claims (about 1,460 acres) in Lander County, Nevada.
 
Dry Hills Property is located in the Dry Hills about 20 miles southwest of the town of Carlin, and it comprises of a total of 96 lode claims (about 1,920 acres) in Eureka County, Nevada.
 
Walti Property is located in Grass Valley about 62 miles south of the town of Carlin and consists of a total of 402 lode claims (about 8,040 acres) in Eureka and Lander Counties, Nevada.
 
Marr Property is located between the Fish Creek Mountains and the Ravenswood Mountains about 50 miles southwest of the town of Battle Mountain. The property is along the Western Nevada Rift and consists of a total of 93 lode claims (about 1,840 acres) in Lander County, Nevada.
 
As of June 30, 2006, the Company incurred a total of $965,598 in acquisition costs. The Company has recently commenced exploration of its properties and has yet to determine whether any of its properties are commercially feasible. In order for the Company to complete its analysis, additional funding is required (See Note 9 - Subsequent Events).
 
NOTE 4 - DEFERRED OFFERING COSTS
 
Legal and related costs associated with the preparation of the Company’s private stock offering has been accrued and will be charged against the proceeds raised through the offering, or expensed if the offering is unsuccessful (See Note 9 - Subsequent Events).
 
NOTE 5 - NOTES PAYABLE
 
On July 1, 2005, the Company borrowed $100,000 from Gatinara Holdings, Inc., an unrelated third party. The loan is evidenced by an unsecured promissory note. The note accrues interest at 8% per annum and matures on December 31, 2006. Accrued interest related to this note as of June 30, 2006 amounted to $7,978.
 
From August 9, 2005 to October 5, 2005, the Company borrowed a total of $330,978 from Greenshoe Investment, Inc., an unrelated third party. The loans are evidenced by unsecured promissory notes. The notes accrue interest at 8% per annum and mature on December 31, 2006. Accrued interest related to these notes as of June 30, 2006 amounted to $21,807.
 
During the three months ended March 31, 2006, the Company borrowed a total of $649,838 from Greenshoe Investment, Inc. The loans are evidenced by unsecured promissory notes. The notes accrue interest at 8% per annum and mature on December 31, 2006. Prior to maturity, the notes may be converted at the sole discretion of the Company into shares of the Company’s common stock at a rate of $1.00 per share. Accrued interest related to these notes as of June 30, 2006 amounted to $20,641.
 
13
 
TORNADO GOLD INTERNATIONAL CORP.
(formerly Nucotec, Inc.)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
 
NOTE 6 - STOCKHOLDERS’ DEFICIT
 
Common Stock
 
On April 19, 2004, the Company authorized a 50-for-1 stock split. On August 18, 2004, the Company authorized a 6.82-for-1 stock split. On May 16, 2005, the Company authorized a 1.20-for-1 stock split. In addition, the Company increased it authorized shares to 100,000,000. The accompanying financial statements have been retroactively restated to present the effect of these three stock splits.
 
On April 15, 2005, the Company's officers and directors agreed to redeem an aggregate of 27,172,800 of their shares for $7,906 or $.0002909 per share. The shares includes 13,586,400 shares from Dr. Abbott and 6,793,200 shares from each of Messrs. Pescio and Keith. Dr. Abbott's shares were redeemed for $3,954, and Messrs. Pescio and Keith each received $1,976 for their shares. These amounts are the equivalent to the pre-split prices they paid for their shares when they joined the Company in March 2004. The $7,906 was paid during the three months ended September 30, 2005.
 
In April 15, 2005, the holders of the notes payable converted the principal amount of the notes totaling $1,025,000 and accrued interest of $79,271 into 1,325,126 shares of the Company's common stock.
 
In the fourth quarter of 2005, the Company sold 625,000 shares of common stock to an investor for total cash proceeds of $500,000. In connection with this transaction, the Company also issued to this investor a warrant to purchase 625,000 shares of common stock for $0.85 per share. As of December 31, 2005, the Company received $499,582. The remaining $418 has been charged to equity and included in subscription receivable.
 
Options and Warrants

 Options and Warrants:

In March 2004, the Company issued 60,000 options to former employees of the Company. The fair value for these options was estimated to be $4,540 and has been recorded as an expense in the accompanying statement of operations. The fair value was estimated using a Black-Scholes option pricing model with the following weighted-average assumptions: risk-free interest rate of 5.5%; dividend yields of 0%; volatility factors of the expected market price of the Company's common stock of 50%; and a weighted average expected life of the option of 10 years, respectively.

In accordance with a consulting agreement with Access Capital Management Corp., the Company issued Access Capital (“Access”) 25,000 options in September 2005 to purchase shares of the Company’s common stock for $0.75 per shares. These options were valued using the Black-Scholes option pricing model using the following assumptions: term of 1,853 days, a risk-free interest rate of 3.85%, a dividend yield of 0% and volatility of 63%. The value of these options of $12,075 was amortized over the three-month initial term of the agreement and was charged to operations in 2005.

In December 2005, the Company extended the term of the agreement and granted Access an additional 125,000 options to purchase shares of the Company’s common stock at a price of $0.75 per shares. These options were valued using the Black-Scholes option pricing model using the following assumptions: term of 1,762 days, a risk-free interest rate of 4.45%, a dividend yield of 0% and volatility of 71%. These options were valued at $52,150 and are being amortized over the nine month remaining term of the agreement. In 2005, $5,794 was charged to operations in 2005.

The 150,000 options granted in 2005 expire on September 28, 2010 unless Access Capital no longer provides services for the Company whereby the options expire one year from the date of termination.
 
14
 
TORNADO GOLD INTERNATIONAL CORP.
(formerly Nucotec, Inc.)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

As discussed above, in connection with the issuance of the 625,000 shares of the Company’s common stock, the Company granted 625,000 warrants to purchase shares of the Company’s common stock at $.85 per share.

In June 2006, former management exercised some of their options to purchase a total of 24,800 shares of the Company’s common stock at a price of $.15 per share.

The following table summarizes the options and warrants outstanding:

       
Weighed
 
   
Options/
  
Average
  
   
Warrants
  
Exercise
  
   
Outstanding
  
Price
  
Balance - December 31, 2004
    
60,000
   
0.1500
  
Granted
    
775,000
   
0.8306
  
Exercised
    
-
       
Forfeited
    
-
     
Balance - December 31, 2005
    
835,000
   
0.7817
 
Granted
    
-
       
Exercised
    
(24,800
)
  
(0.1500
)
Forfeited
    
-
     
Balance - June 30, 2006
    
810,200
   
0.801
 

 
NOTE 7 - INCOME TAXES
 
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of June 30, 2006 are as follows:
 
Deferred tax assets:
      
Net operating loss
 
$
650,000
  
Less valuation allowance
   
(650,000
)
 
  
$
 -  

 
15
 
TORNADO GOLD INTERNATIONAL CORP.
(formerly Nucotec, Inc.)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
 
At June 30, 2006, the Company had federal net operating loss ("NOL") carryforwards of approximately $1,912,000. Federal NOLs could, if unused, begin to expire in 2017.
 
Utilization of the net operating loss and tax credit carryforwards is subject to significant limitations imposed by the change in control under I.R.C. 382, limiting its annual utilization to the value of the Company at the date of change in control times the federal discount rate.
 
NOTE 8 - RELATED PARTY TRANSACTIONS
 
During the six months ended June 30, 2006 and 2005, the Company had the following transactions with related parties:
 
As discussed in Note 3, the Company entered into agreements with a company owned by Mr. Carl Pescio, a Director of the Company, to acquire mining claims. During the six months ended June 30, 2006, the Company paid Mr. Pescio $420,000 related to these agreements.
 
As further discussed in Note 3, the Company entered into an agreement with Messrs. Abbott and Keith to acquire certain mining properties. During the six months ended June 30, 2006, the Company paid Mr. Abbott $8,294 and Mr. Keith $12,971 related to this agreement.
 
During the six months ended June 30, 2006 and 2005, the Company incurred consulting fees for services rendered by Mr. Earl Abbott, the Company's President, totaling $101,898 and $43,750, respectively. Of the $101,898 incurred in 2006, $64,276 related to mining exploration and $37,622 related to general administrative activities. Of the $43,750 incurred in 2005, $21,000 related to mining exploration and $22,750 related to general administrative activities. In addition, during the six-months ended June 30, 2005, the Company reimbursed Mr. Abbott $9,209 for travel and other related expenses.
 
During the six-months ended June 30, 2006, the Company paid Mr. George Drazenovic, its Chief Financial Officer, $20,000 for services rendered in that capacity. Mr. Drazenovic was not affiliated with the Company until 2006.
 
16
 
TORNADO GOLD INTERNATIONAL CORP.
(formerly Nucotec, Inc.)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
 
NOTE 9 - SUBSEQUENT EVENTS
 
On July 24, 2006, the Company announced that it had sold an aggregate of approximately 6.15 million units of its securities to a limited number of accredited investors or non-U.S. persons in a private placement. The closing occurred on July 18, 2006. Each unit consists of one share of common stock and one warrant ("Warrant") to purchase one share of common stock. The purchase price was $0.30 per unit, for an aggregate amount of approximately $1.84 million. The Warrants have an exercise period of three years and an exercise price of $.60 per share. Pursuant to the terms of the Registration Rights Agreement entered into by the Company and the investors, the Company agreed to file a registration statement with the SEC to cover the resale of the shares of common stock and the shares underlying the Warrants within 120 days after the closing and to use commercially reasonable efforts to cause the registration statement to be declared effective by the Sec within 180 days after the closing. If the registration statement is not so filed within the 120-day period or if it has not been declared effective within the 180-day period, the Company will pay to each investor an amount equal to one percent of the aggregate amount invested by the investor for each 30-day period following the expiration of either such period until the registration statement has been filed or declared effective, respectively. The Company sold to one of the investors units consisting of five million special warrants and an equivalent number of Warrants. Each special warrant converts into one share of common stock not later than 10 years from the closing without the tender of any additional consideration. The special warrants have no voting rights. The Company also agreed to pay eight percent of the proceeds received in the Private Placement as finders' fees.
 
On August 7, 2006, the Company acquired an option for 53 additional claims at the Jack Creek Property, Elko County, Nevada. The option was acquired from Gateway Gold (USA) Corp. through two of the Company’s directors, Earl Abbott and Stanley Keith, and is subject to the Area of Interest clause in the original Jack Creek agreement between the Company and those directors that the Company announced in its October 3, 2005, news release. The Company has the option to earn a 50% undivided interest in the 53 claims through its expenditure on the claims of a total of $500,000 in various stages by March 1, 2007, 2008, and 2009. Thereafter, the Company and Gateway Gold could form a joint venture; but, if Gateway declines to participate at its 50% level, the Company could exercise its option to earn an additional 20% in the claims through its expenditure on the claims of an additional $500,000 in two equal stages on or before March 1, 2010, and 2011. Mr. Abbott is also an officer of the Company.
 
 
17
 
Item 2. Management's Discussion and Analysis or Plan of Operations

THIS FOLLOWING INFORMATION SPECIFIES CERTAIN FORWARD-LOOKING STATEMENTS OF MANAGEMENT OF THE COMPANY. FORWARD-LOOKING STATEMENTS ARE STATEMENTS THAT ESTIMATE THE HAPPENING OF FUTURE EVENTS AND ARE NOT BASED ON HISTORICAL FACT. FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY, SUCH AS "MAY", "SHALL", "COULD", "EXPECT", "ESTIMATE", "ANTICIPATE", "PREDICT", "PROBABLE", "POSSIBLE", "SHOULD", "CONTINUE", OR SIMILAR TERMS, VARIATIONS OF THOSE TERMS OR THE NEGATIVE OF THOSE TERMS. THE FORWARD-LOOKING STATEMENTS SPECIFIED IN THE FOLLOWING INFORMATION HAVE BEEN COMPILED BY OUR MANAGEMENT ON THE BASIS OF ASSUMPTIONS MADE BY MANAGEMENT AND CONSIDERED BY MANAGEMENT TO BE REASONABLE. OUR FUTURE OPERATING RESULTS, HOWEVER, ARE IMPOSSIBLE TO PREDICT AND NO REPRESENTATION, GUARANTY, OR WARRANTY IS TO BE INFERRED FROM THOSE FORWARD-LOOKING STATEMENTS.

THE ASSUMPTIONS USED FOR PURPOSES OF THE FORWARD-LOOKING STATEMENTS SPECIFIED IN THE FOLLOWING INFORMATION REPRESENT ESTIMATES OF FUTURE EVENTS AND ARE SUBJECT TO UNCERTAINTY AS TO POSSIBLE CHANGES IN ECONOMIC, LEGISLATIVE, INDUSTRY, AND OTHER CIRCUMSTANCES. AS A RESULT, THE IDENTIFICATION AND INTERPRETATION OF DATA AND OTHER INFORMATION AND THEIR USE IN DEVELOPING AND SELECTING ASSUMPTIONS FROM AND AMONG REASONABLE ALTERNATIVES REQUIRE THE EXERCISE OF JUDGMENT. TO THE EXTENT THAT THE ASSUMED EVENTS DO NOT OCCUR, THE OUTCOME MAY VARY SUBSTANTIALLY FROM ANTICIPATED OR PROJECTED RESULTS, AND, ACCORDINGLY, NO OPINION IS EXPRESSED ON THE ACHIEVABILITY OF THOSE FORWARD-LOOKING STATEMENTS. NO ASSURANCE CAN BE GIVEN THAT ANY OF THE ASSUMPTIONS RELATING TO THE FORWARD-LOOKING STATEMENTS SPECIFIED IN THE FOLLOWING INFORMATION ARE ACCURATE, AND WE ASSUME NO OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS.

CRITICAL ACCOUNTING POLICIES.
 
Our Management's Discussion and Analysis or Plan of Operation section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources, accruals for other costs, and the classification of net operating loss and tax credit carry forwards between current and long-term assets. These accounting policies are more fully described in the notes to the financial statements included in our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005.
 
18
 
MINING COSTS.
 
Costs incurred to purchase, lease or otherwise acquire property are capitalized when incurred. General exploration costs and costs to maintain rights and leases are expensed as incurred. Management periodically reviews the recoverability of the capitalized mineral properties and mining equipment. Management takes into consideration various information including, but not limited to, historical production records taken from previous mine operations, results of exploration activities conducted to date, estimated future prices and reports and opinions of outside consultants. When it is determined that a project or property will be abandoned or its carrying value has been impaired, a provision is made for any expected loss on the project or property.
 
OVERVIEW. 
 
We were incorporated in Nevada on October 8, 2001 in order to serve as a holding company for Salty's Warehouse, Inc., which sold consumer electronics products and other name brand consumer products over the Internet.
 
On March 19, 2004, pursuant to a Plan of Reorganization and Acquisition, we disposed of our operating asset, Salty's Warehouse, Inc., when our prior management departed. Under our new management, we undertook a different business focus: the identification and acquisition of properties exhibiting the potential for gold mining operations by others. On July 7, 2004, we changed our name from Nucotec, Inc. to Tornado Gold International Corp. to reflect our new business focus. The name change was approved on May 12, 2004 by our Board of Directors. In addition, stockholders holding a majority of our outstanding common stock approved those actions by written consent in lieu of a meeting on May 12, 2004.
 
LIQUIDITY AND CAPITAL RESOURCES. 
 
We had cash and cash equivalents totaling $9,856 as of June 30, 2006 and had prepaid our office lease and attorney fees totaling $1,413, making our total current assets $11,269. We also had mining assets of $965,598, making our total assets $981,867 as of June 30, 2006. As of that date, our available cash and cash equivalents were not sufficient to pay our day-to-day expenditures or to effectuate our business plan. In July, we sold approximately $1.84 million of our equity securities in a private placement. We are committed to continue to seek the necessary financing needed to continue operating through the sale of equity or debt financing, though there is no guarantee we will be able to do so.
 
As of June 30, 2006, we had a net working capital deficit of $1,157,106.
 
Net cash used in operating activities was $266,770 for the six months ended June 30, 2006 compared to $59,748 for the six months ended June 30, 2005. Net cash used in operating activities was $153,764 for the three months ended June 30, 2006 compared to $26,808 for the three months ended June 30, 2005. 
 
Since we have no current source of operating revenue, our only source of cash is from the issuance of debt or equity instruments. During the six months ended June 30, 2006, we borrowed $649,838 compared to the $50,000 we borrowed during the six months ended June 30, 2005. We used $441,265 to make advance lease payments and acquisition costs on our mining claims during the six months ended June 30, 2006 compared to $43,314 we incurred during the six months ended June 30, 2005. As previously disclosed, in July we sold approximately $1.84 million of our equity securities in a private placement.
 
Due to numerous economic and competitive risks, any or all of which may have a material adverse impact upon our operations, there can be no assurance that we will be able to generate significant revenues or achieve a level of positive cash flow that would permit us to continue our current business plan. Our current plans encompass the identification and acquisition of properties exhibiting the potential for gold mining operations by others. However, as noted, we must continue to raise additional capital in order to ensure the availability of resources sufficient to fund all of our general and administrative expenses for the next twelve months.
 
19
 
No assurances can be given that we will be able to obtain sufficient operating capital trough the sale of our common stock and borrowing or that the development and implementation of our business plan will generate sufficient revenues in the future to sustain ongoing operations. These factors raise substantial doubt with our auditor about our ability to continue as a going concern.

PLAN OF OPERATIONS.
 
The Company recently announced that it had closed a financing of US $1,844,000. A substantial portion of the funds will be devoted to the lease costs of its 15 properties. The Company will also maintain a material portion for administrative overhead and future acquisition opportunities. Thus, the Company expects to have less than $500,000 available for exploration on its current properties over the next 12 months. The Company will continue to pursue additional financing opportunities to further its exploration and acquisition program over the next twelve months.

The Company begins its exploration process by attempting to understand the regional geology of its prospects and by progressing through the district-wide geologic setting. Eventually, the Company graduates to the geologic setting of each individual proposed drill hole. Before drilling, the Company attempts to predict its chances of success, and it will drill only sites that it believes have the best chance of encountering a gold deposit. Typically, the Company will engage in integrated surface geological, geochemical and geophysical analysis before it begins drilling. Some of the specific methods that the Company will engage in include magmatic affinity, pluton vectoring, kinetic structural analysis and metal dispersion.

To date, the Company has acquired leases in several claim blocks in the North Central Nevada area. In total, the property package represents 15 properties comprised of approximately 44,840 acres. However, in addition to its initial exploration program, the Company will need to spend significant funds to complete further in-depth drilling and engineering studies before it can identify whether or not it has a commercially viable mineral deposit.

Future funding levels will also determine the extent and number of properties that it will explore. No certainty can be ascertained on its overall exploration program until significant funding levels have been achieved.
 
While most properties will be examined and sampled, the Company will also analyze the results of all previous work that is publicly available for the properties. The Company currently expects that in Spring 2007 it will perform a small amount of drilling on the Jack Creek property. A ranking system will enable the Company to decide which properties will undergo detailed work and drill at the earliest opportunity. The remaining properties will be made available for farm-out, for development at a later date, or dropped all-together from further work.

The following is a list of projects on which, as of the date of this Quarterly Report, the Company has decided to focus during the next 12 months. The prioritization of, and the projects themselves, are expected to change depending on funding levels and preliminary sampling results:
 
20
 
Jack Creek

The Company intends to undertake geological and structural analysis, as well as soil sampling and geophysical surveys, on this property, located in the Independence Mountains mining district about 50 miles north of Elko, Nevada. The intended work is in preparation for an intended drill program on the property currently expected to be performed in Spring 2007, which, in aggregate, is expected to cost up to approximately $100,000.

The Jack Creek property comprises a total of approximately 6,000 acres in Elko County, Nevada, and is located in the northern Independence Mountains. Management believes that the property is attractive because it occupies the southwest flank of a prominent gravity high, indicating the presence of relatively shallow Paleozoic carbonate sedimentary rocks.

Recently, the Company acquired an option for 53 additional claims at the Jack Creek Property, Elko County, Nevada. The option was acquired from Gateway Gold (USA) Corp. through two of the Company's directors, Earl Abbott and Stanley Keith. The Company has the option to earn a 50% undivided interest in the 53 claims through its expenditure on the claims of a total of $500,000 in various stages by March 1, 2007, 2008, and 2009. Currently, however, the Company does not have such funds available and will need to raise additional funds in order to exercise the option.
 
NT Green
 
Exploration currently anticipated to occur during the Spring of 2007 will focus on delineating drill targets.  The property will be prospected by sampling and analysis of mineralized rock. The Company expects to perform a kinematic structural analysis of the property and expects to produce a more realistic geologic map than those made available in the past.  A soil geochemistry program will aid in identifying favorable fault structures and intersections, as well as the centers of the most active hydrothermal activity.  A pluton vectoring study is expected to be performed by analysis of all intrusive rocks and their interpretation.  In addition, an airborne magnetic survey is expected to be performed over the property to aid in the discovery of dikes and sills and to aid in the mapping and structural analysis.  It is intended that by the Spring of 2007, the Company will have identified targets for permitting and drilling. The Company has budgeted up to approximately $100,000 to complete this program; however, that amount may vary depending on preliminary results.
 
Goodwin Hill
 
Exploration on this property may include geologic mapping to identify prospective fault structures that can be projected under alluvium.  Sampling of all mineralized rocks is expected to provide a vector toward the center of hydrothermal activity.  Gravity and magnetic geophysical studies are expected to be performed to define the buried shallow basement rocks better.  These studies are intended to provide low risk drilling targets for permitting and drilling in the Spring of 2007. As of the date of this Quarterly Report, the Company has budgeted nearly $50,000 for this program.
 
Work to date in the area has indicated a large Carlin type system within prospective lower plate carbonate rocks on the flanks of a major dome and near intrusive bodies. 
 
HMD

Exploration on this property will be directed toward delineating low-risk drill targets.  The Company currently expects that it will undertake a kinematic structural analysis of the exposed silicified rocks along the HMD structure combined with careful rock sampling to locate points along the fault where hydrothermal activity is most intense.  The Company intends to supplement these studies with soil sampling, and the resulting drill targets will be sharpened by detailed IP surveys.  By the Spring of 2007, the Company hopes to have targets prepared for permitting and drilling. The Company expects to spend up to approximately $50,000 for this program over the next 12 months.
 
21
 
Wilson Peak
 
A program of kinematic structural analysis, combined with multi-element rock and soil sampling, is currently planned for Wilson Peak.  Potential drill targets will be sharpened by IP geophysical surveys.  Assuming sufficient funds have been raised by the Company, permitting and drilling are planned for Spring 2007. The Company expects that this program will require up to approximately $50,000 for the next 12 months.
 
Other Properties
 
The Company hopes to undertake additional exploration studies on the Stargo, West Whistler, Brock, Horseshoe Basin, South Lone Mountain, Golconda, North Battle Mountain, Dry Hills Property, Walti, and Marr Properties, but no detailed plans to conduct exploration on these properties have yet been determined. The Company believes that it could expect to spend up to approximately $150,000 on these properties, thus, bringing the total funds budgeted for the next 12 months to $500,000.
 
The projects described above will be managed by Dr. Abbott. The Company expects to utilize the services of various third-party geological professionals to assist with the various projects. The number of consultants will depend on the Company’s initial exploratory results and funding levels. No plans are in place for a significant change in the number of full-time personnel.
 
Currently, the Company has no research and development plans and no intention to purchase or sell plant or significant equipment.
 
RESULTS OF OPERATIONS.
 
FOR THE SIX MONTHS ENDED JUNE 30, 2006 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2005. 
 
REVENUE. We have realized no revenues for the six months ended June 30, 2006 and 2005.
 
OPERATING EXPENSES. For the six months ended June 30, 2006, our total operating expenses were $290,585 compared to our total operating expenses of $103,579 in the corresponding prior period. Of the $290,585 incurred in 2006, $81,267 related to our mining exploration and $209,318 was incurred in general and administrative activities. Of the $103,579 incurred in 2005, $21,000 related to mining exploration and $82,579 related to general and administrative activities. During the six months ended June 30, 2006, we accrued $37,738 in interest expenses on notes payable compared to interest accruing during the six months ended June 30, 2005 of $23,238. No interest has been paid on notes payable during either period.
 
22
 
 
FOR THE THREE MONTHS ENDED JUNE 30, 2006 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2005. 
 
REVENUE. We have realized no revenues for the three months ended June 30, 2006 and 2005.
 
OPERATING EXPENSES. For the three months ended June 30, 2006, our total operating expenses were $166,815 compared to our total operating expenses were $57,604 in the corresponding prior period. Of the $166,815 incurred in 2006, $41,307 related to our mining exploration and $125,508 was incurred in general and administrative activities. Of the $57,604 incurred in 2005, $3,150 related to mining exploration and $54,454 related to general and administrative activities. During the three months ended June 30, 2006, we accrued $21,537 in interest expenses on notes payable compared to interest accruing during the three months ended June 30, 2005 of $3,600. No interest has been paid on notes payable during either period.
 
Of the $41,307 that we incurred in our mining operations during the three months ended June 30, 2006, $41,307 relates to technical consulting services rendered by our President. Of the $125,508 that we incurred in general and administrative expenses during the three-months ended June 30, 2006, $10,000 relates to services rendered by our Chief Financial Officer. Other notable general and administrative expenses incurred for the quarter in 2006 include investor relations fees of $31,510, accounting and auditing fees of $13,091, legal fees of $19,500, rent expense of $4,217, and fees paid to the staffing agency for the services rendered by our President's assistant during the three-month period amounting to $6,752.
 
   
For the Three Months Ended
  
For the Six Months Ended
  
   
June 30,
  
June 30,
  
   
2006
  
2005
  
2006
  
2005
  
Professional fees: Legal fees
  
$
46,665
  
$
15871
  
$
49,081
  
$
17,895
  
Administrative Fee: E Abbott
    
6,719
   
17500
    
42,306
   
22,750
 
Investor Relations
    
31,582
         
37,813
   
-
 
Professional fees:Accounting fees
    
9,373
   
13398
    
24,717
   
15,766
 
Administrative Fee: G. Drazenovic
    
10,000
         
20,000
   
-
 
Employee leasing
    
6,752
         
11,554
   
-
 
Travel
    
7,877
   
1328
    
8,620
   
9,582
 
Rent
    
4,213
   
4187
    
8,400
   
8,372
 
Consulting fees
    
-
         
3,000
   
2,778
 
Outside services
    
1,550
   
705
    
1,550
   
1,308
 
Continuing Education
    
-
   
209
    
709
   
209
 
Telephone
    
303
   
62
    
665
   
124
 
Website
   
-
         
-
   
660
 
Office expense
    
406
   
1232
    
491
   
3,010
 
Dues and subscriptions
    
68
         
282
   
-
 
Bank fees
    
-
   
(37
)
  
70
   
-
 
Taxes and licenses
    
-
         
60
   
125
 
   
$
125,508
  
$
54,455
  
$
209,318
  
$
82,579
  
 
OFF-BALANCE SHEET ARRANGEMENTS.
 
There are no off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors; except for our commitment to lease certain mining property that require us to make substantial lease payments in the future as disclosed in Note 3 to the financial statements included elsewhere in this Quarterly Report on Form 10-QSB.
 
SUBSEQUENT EVENTS.
 
On August 7, 2006, we announced that we acquired an option for 53 additional claims at the Jack Creek Property, Elko County, Nevada. The option was acquired from Gateway Gold (USA) Corp. through two of our directors, Earl Abbott and Stanley Keith, and is subject to the Area of Interest clause in the original Jack Creek agreement between the directors and us that we had announced in October 2005. We have the option to earn a 50% undivided interest in the 53 claims through expenditure on the claims of a total of $500,000 in various stages by March 1, 2007, 2008, and 2009. Thereafter, Gateway Gold and we could form a joint venture, but, if Gateway declines to participate at its 50% level, we could exercise our option to earn an additional 20% in the claims through our expenditure on the claims of an additional $500,000 in two equal stages on or before March 1, 2010, and 2011.
 
In late July, we announced that we sold approximately $1.84 million of our equity securities in a private placement. We currently intend to leverage these funds to acquire additional exploration properties and to maintain administrative operations for the next 12 months. We also expect to continue to seek additional funds to expedite and expand our exploration and drilling programs.
 
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Item 3. Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and the principal financial officer, we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were effective such that the material information required to be included in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, including any consolidating subsidiaries, and was made known to us by others within those entities, particularly during the period when this report was being prepared.

Additionally, there were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the evaluation date. We have not identified any significant deficiencies or material weaknesses in our internal controls, and therefore there were no corrective actions taken. 

Part II. OTHER INFORMATION

Item 6. Exhibits

Exhibit
Number
Description of Document
31.1
Certification pursuant to Section 302 of the Sarbanes-Oxley Act
31.2
Certification pursuant to Section 302 of the Sarbanes-Oxley Act
32.1
Certification pursuant to Section 906 of the Sarbanes-Oxley Act



SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
     
  TORNADO GOLD INTERNATIONAL CORP.
 
 		  
 		  
 
August 18, 2006 By:   /s/ GEORGE DRAZENOVIC
 
George Drazenovic, Chief Financial Officer
(Principal financial officer and duly authorized signatory)
 
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