Item
1. Financial Statements
Nevada
Canyon Gold Corp.
Condensed
Balance Sheets
(Presented
in US Dollars)
(Unaudited)
|
|
March
31, 2020
|
|
|
December
31, 2019
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
491,946
|
|
|
$
|
367,201
|
|
Prepaid
expenses
|
|
|
1,466
|
|
|
|
1,283
|
|
|
|
|
493,412
|
|
|
|
368,484
|
|
|
|
|
|
|
|
|
|
|
Equity investment
|
|
|
714,769
|
|
|
|
1,030,406
|
|
Mineral
property interest
|
|
|
10,395
|
|
|
|
10,395
|
|
TOTAL
ASSETS
|
|
$
|
1,218,576
|
|
|
$
|
1,409,285
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
DEFICIT
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
and accrued liabilities
|
|
$
|
353,500
|
|
|
$
|
351,000
|
|
Related party payables
|
|
|
1,062,232
|
|
|
|
1,062,232
|
|
Notes
and advances payable
|
|
|
16,164
|
|
|
|
16,164
|
|
Total
liabilities
|
|
|
1,431,896
|
|
|
|
1,429,396
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
Preferred Stock:
Authorized 10,000,000 preferred shares, $0.0001 par, none issued
|
|
|
|
|
|
|
|
|
and outstanding as of March 31, 2020
and December 31, 2019
|
|
|
|
|
|
|
|
|
Common Stock: Authorized
100,000,000 common shares, $0.0001 par, 44,550,000
|
|
|
-
|
|
|
|
-
|
|
issued and outstanding as of March
31, 2020 and December 31, 2019
|
|
|
4,455
|
|
|
|
4,455
|
|
Additional paid-in
capital
|
|
|
522,645
|
|
|
|
522,645
|
|
Deficit
|
|
|
(740,420
|
)
|
|
|
(547,211
|
)
|
|
|
|
(213,320
|
)
|
|
|
(20,111
|
)
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
$
|
1,218,576
|
|
|
$
|
1,409,285
|
|
The
accompanying notes are an integral part of these unaudited interim condensed financial statements
Nevada
Canyon Gold Corp.
Condensed
Statements of Operations
(Presented
in US Dollars)
(Unaudited)
|
|
For
the three months ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
Exploration
expenses
|
|
$
|
-
|
|
|
$
|
30,000
|
|
General and administrative
expenses
|
|
|
2,859
|
|
|
|
70,384
|
|
Professional fees
|
|
|
2,500
|
|
|
|
2,200
|
|
Transfer
agent and filing fees
|
|
|
2,487
|
|
|
|
2,484
|
|
|
|
|
(7,846
|
)
|
|
|
(105,068
|
)
|
Other items
|
|
|
|
|
|
|
|
|
Fair value gain
(loss) on equity investments
|
|
|
(232,587
|
)
|
|
|
890,801
|
|
Foreign exchange
gain (loss)
|
|
|
(36,450
|
)
|
|
|
3,772
|
|
Interest income
|
|
|
1,394
|
|
|
|
468
|
|
Realized
gain on equity investment
|
|
|
82,280
|
|
|
|
247,524
|
|
Net
income (loss)
|
|
$
|
(193,209
|
)
|
|
$
|
1,037,497
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per common share - basic
|
|
$
|
(0.00
|
)
|
|
$
|
0.02
|
|
Net
income (loss) per common share - diluted
|
|
$
|
(0.00
|
)
|
|
$
|
0.02
|
|
Weighted average number of common shares
outstanding
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
44,550,000
|
|
|
|
44,550,000
|
|
The
accompanying notes are an integral part of these unaudited interim condensed financial statements
Nevada
Canyon Gold Corp.
Condensed
Statements of Cash Flow
(Presented
in US Dollars)
(Unaudited)
|
|
For
the three months ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Cash
flows used in operating activities
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(193,209
|
)
|
|
$
|
1,037,497
|
|
Adjustment
to reconcile net income (loss) to net cash
|
|
|
|
|
|
|
|
|
used
by operating activities:
|
|
|
|
|
|
|
|
|
Fair value (gain)
loss on equity investments
|
|
|
150,307
|
|
|
|
(1,138,325
|
)
|
Foreign exchange
loss (gain)
|
|
|
36,450
|
|
|
|
(7,504
|
)
|
Interest income
|
|
|
-
|
|
|
|
(468
|
)
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
and accrued liabilities
|
|
|
2,500
|
|
|
|
9,909
|
|
Prepaid expenses
|
|
|
(183
|
)
|
|
|
(184
|
)
|
Related
party payables
|
|
|
-
|
|
|
|
60,100
|
|
Net
cash used by operating activities
|
|
|
(4,135
|
)
|
|
|
(38,975
|
)
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Sale
of equity investments
|
|
|
165,330
|
|
|
|
478,077
|
|
Net
cash povided by investing activities
|
|
|
165,330
|
|
|
|
478,077
|
|
|
|
|
|
|
|
|
|
|
Effect
of foreign currency translation on cash
|
|
|
(36,450
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
increase in cash
|
|
|
124,745
|
|
|
|
439,102
|
|
Cash,
beginning
|
|
|
367,201
|
|
|
|
1,601
|
|
Cash, ending
|
|
$
|
491,946
|
|
|
$
|
440,703
|
|
|
|
|
|
|
|
|
|
|
Supplemental
cash flow information:
|
|
|
|
|
|
|
|
|
Cash
received for interest
|
|
$
|
1,394
|
|
|
$
|
468
|
|
Cash
paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Significant
non-cash transactions:
|
|
|
|
|
|
|
|
|
Fair
value (gain) loss on equity investments
|
|
$
|
232,587
|
|
|
$
|
(890,801
|
)
|
The
accompanying notes are an integral part of these unaudited interim condensed financial statements
Nevada
Canyon Gold Corp.
Condensed
Statements of Stockholders’ Equity (Deficit)
(Presented
in US Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Additional
|
|
|
Accumulated
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Paid-in
Capital
|
|
|
Deficit
|
|
|
Deficit
|
|
Balance,
December 31, 2018
|
|
|
44,550,000
|
|
|
$
|
4,455
|
|
|
$
|
522,645
|
|
|
$
|
(721,016
|
)
|
|
$
|
(193,916
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income for the period ended March 31, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,037,497
|
|
|
|
1,037,497
|
|
Balance, March 31,
2019
|
|
|
44,550,000
|
|
|
|
4,455
|
|
|
|
522,645
|
|
|
|
316,481
|
|
|
|
843,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the period ended December 31, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(863,692
|
)
|
|
|
(863,692
|
)
|
Balance, December 31,
2019
|
|
|
44,550,000
|
|
|
|
4,455
|
|
|
|
522,645
|
|
|
|
(547,211
|
)
|
|
|
(20,111
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the period ended March 31, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(193,209
|
)
|
|
|
(193,209
|
)
|
Balance,
March 31, 2020
|
|
|
44,550,000
|
|
|
$
|
4,455
|
|
|
$
|
522,645
|
|
|
$
|
(740,420
|
)
|
|
$
|
(213,320
|
)
|
The
accompanying notes are an integral part of these unaudited interim condensed financial statements
NEVADA
CANYON GOLD CORP.
Notes
to the Condensed Financial Statements
(Unaudited)
March
31, 2020
NOTE
1 - NATURE OF BUSINESS
Nevada
Canyon Gold Corp. (the “Company”) was incorporated under the laws of the state of Nevada on February 27, 2014. The
Company is involved in acquiring and exploring mineral properties in Nevada.
Going
Concern
The
Company’s unaudited interim condensed financial statements are prepared using accounting principles generally accepted in
the United States of America (“US GAAP”) applicable to a going concern, which contemplates the realization of assets
and liquidation of liabilities in the normal course of business. The Company has only recently begun its exploration operations
and has not generated or realized any revenues from these business operations. The ability of the Company to continue as a going
concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company
is unable to obtain adequate capital, it could be forced to cease operations.
NOTE
2 - BASIS OF PRESENTATION
The
unaudited interim condensed financial statements of the Company have been prepared in accordance with US GAAP for interim condensed
financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). They do not
include all information and footnotes required by US GAAP for complete financial statements. Except as disclosed herein, there
have been no material changes in the information disclosed in the notes to the financial statements for the year ended December
31, 2019, included in the Company’s Annual Report on Form 10-K, filed with the SEC. The unaudited interim condensed financial
statements should be read in conjunction with those financial statements included in Form 10-K. In the opinion of management,
all adjustments considered necessary for fair presentation, consisting solely of normal recurring adjustments, have been made.
Operating results for the three months ended March 31, 2020, are not necessarily indicative of the results that may be expected
for the year ending December 31, 2020.
Recent
Accounting Pronouncements
The
Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and
does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact
on its financial position or results of operations.
NOTE
3 – RELATED PARTY TRANSACTIONS
Amounts
due to related parties at March 31, 2020 and December 31, 2019:
|
|
March
31, 2020
|
|
|
December
31, 2019
|
|
Advances
due to the Chief Executive Officer (“CEO”) (a)
|
|
$
|
170,232
|
|
|
$
|
170,232
|
|
Amounts due to a
company controlled by the CEO(a)
|
|
|
360,000
|
|
|
|
360,000
|
|
Advances due to
a director(a)
|
|
|
271,000
|
|
|
|
271,000
|
|
Amounts due to a
company controlled by a director(a)
|
|
|
240,000
|
|
|
|
240,000
|
|
Advances
due to a major shareholder(a)
|
|
|
21,000
|
|
|
|
21,000
|
|
Related party
advances
|
|
$
|
1,062,232
|
|
|
$
|
1,062,232
|
|
(a)
|
These
amounts are non-interest bearing, unsecured and due on demand.
|
During
the three-month period ended March 31, 2020, the Company did not have any transactions with its related parties. During
the comparative three-month period ended March 31, 2019, the Company accrued $30,000 in consulting fees payable to a company controlled
by the CEO and $30,000 in consulting fees to a company controlled by a director of the Company.
NOTE
4 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
|
|
March
31, 2020
|
|
|
December
31, 2019
|
|
Trade payables
|
|
$
|
342,800
|
|
|
$
|
340,300
|
|
Accrued liabilities
|
|
|
10,700
|
|
|
|
10,700
|
|
|
|
$
|
353,500
|
|
|
$
|
351,000
|
|
NOTE
5 – MINERAL PROPERTY INTERESTS
Lazy
Claims
On
August 2, 2017, the Company entered into an exploration lease agreement (the “Lazy Claims Agreement”) with Tarsis
Resources US Inc. (“Tarsis”), a Nevada corporation, to lease the Lazy Claims, consisting of three claims. The term
of the Lazy Claims Agreement is ten years, and is subject to extension for additional two consecutive 10-year terms. Full consideration
of the Lazy Claims Agreement consists of the following: an initial cash payment of $1,000 to Tarsis, paid upon the execution of
the Lazy Claims Agreement, with $2,000 payable to Tarsis on each subsequent anniversary of the effective date. The Company agreed
to pay Tarsis a 2% production royalty (the “Lazy Claims Royalty”) based on the gross returns from the production and
sale of minerals from the Lazy Claims. Should the Lazy Claims Royalty payments to Tarsis be in excess of $2,000 per year, the
Company will not be required to pay a $2,000 annual minimum payment.
During
the three-month periods ended March 31, 2020 and 2019, the Company did not incur any expenses associated with the Lazy Claims.
Loman
Claims
In
December 2019 the Company acquired 27 mining claims for a total of $10,395. The claims were acquired from a third-party by the
Company. As at the date of these unaudited interim condensed financial statements, the Loman Claims are being re-registered into
the Company’s name.
During
the three-month periods ended March 31, 2020 and 2019, the Company did not incur any expenses associated with the Loman Claims.
NOTE
6 – EQUITY INVESTMENT
As
at March 31, 2020, the Company’s equity investments consist of 12,589,000 common shares of Walker River Resources Corp.
(“WRR”) and warrants to acquire an additional 1,900,000 WRR common shares (the “WRR Warrants”).
The
WRR Warrants expire on July 18, 2022, and can be exercised without further consideration into 1,900,000 common shares in the capital
of WRR (the “WRR Shares”). The terms of the WRR Warrants contain a provision which prevents the Company to
exercise any part of the WRR Warrants which would result in the Company owning 10% or more of the issued and outstanding shares
of WRR. Because these warrants can be exercised for no further consideration they have been accounted for as being equivalent
to shares and classified as available for sale.
On
January 9, 2020, the Company exercised 10,000,000 WRR Warrants. At the time of the exercise, the WRR Shares had a fair
market value of $878,539 (CAD$1,149,042).
At
March 31, 2020, the fair market value of the equity investment was calculated to be $714,769 (2019 - $1,030,406) based on the
market price of WRR Shares at March 31, 2020.
During
the three-month period ended March 31, 2020, the Company sold 1,269,000 WRR Shares for net proceeds of $165,330 (2019 –
the Company sold 5,242,000 WRR Shares for net proceeds of $478,077). The Company recorded a net realized gain of $82,280 on the
sale of WRR Shares (2019 - $247,524).
The
revaluation of the equity investment in WRR resulted in $232,587 loss (2019 - $890,801 gain). The loss resulted from the
decrease of the market price of WRR’s common stock from CAD$0.085 per share at December 31, 2019, to CAD$0.07 per share
at March 31, 2020, and was further affected by weakening of the Canadian Dollar in comparison to the US Dollar. In comparison,
during the three-month period ended March 31, 2019, the market price of WRR’s common stock increased from CAD$0.06 per share
at December 31, 2018, to CAD$0.135 per share at March 31, 2019, resulting in an overall gain, which was further augmented by the
strengthening Canadian dollar.
NOTE
7 – NOTES AND ADVANCES PAYABLE
At
March 31, 2020, the Company’s liability associated with notes and advances payable consisted of $15,064 the Company received
as an advance for its operating activities during the year ended December 31, 2018, and $1,100 the Company received from WRR as
a payment of its vendor payable. The advances are non-interest bearing, unsecured and due on demand.
NOTE
8 – STOCKHOLDERS’ EQUITY
The
Company was formed with one class of common stock, $0.0001 par value and is authorized to issue 100,000,000 common shares and
one class of preferred stock, $0.0001 par value and is authorized to issue 10,000,000 preferred shares. Voting rights are not
cumulative and, therefore, the holders of more than 50% of the common stock could, if they chose to do so, elect all of the directors
of the Company.
During
the three-month period ended March 31, 2020 and for the year ended December 31, 2019, the Company did not have any transactions
that would have resulted in issuance of the shares of its common stock.
Item
2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations
Forward
Looking Statements
This
Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” in Item 2 of Part I of this report include forward-looking statements within the meaning of Section 27A of
the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995 (collectively, the “Reform
Act”). The Reform Act provides a safe harbor for forward-looking statements to encourage companies to provide prospective
information about themselves so long as they identify these statements as forward-looking and provide meaningful cautionary statements
identifying important factors that could cause actual results to differ from the projected results. All statements, other than
statements of historical fact that we make in this Quarterly Report on Form 10-Q are forward-looking. The words “anticipates,”
“believes,” “expects,” “intends,” “will continue,” “estimates,” “plans,”
“projects,” the negative of these terms and similar expressions are intended to identify forward-looking statements.
However, the absence of these words does not mean the statement is not forward-looking.
Forward-looking
statements involve risks, uncertainties or other factors which may cause actual results to differ materially from the future results,
performance or achievements expressed or implied by the forward-looking statements. These statements are based on our management’s
beliefs and assumptions, which in turn are based on currently available information. Certain risks, uncertainties or other important
factors are detailed in this Quarterly Report on Form 10-Q and may be detailed from time to time in other reports we file with
the Securities and Exchange Commission, including on Forms 8-K and 10-K.
Examples
of forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, our expectations regarding
our ability to generate operating cash flows and to fund our working capital and capital expenditure requirements. Important assumptions
relating to the forward-looking statements include, among others, assumptions regarding demand for our future products, the timing
and cost of capital expenditures, competitive conditions and general economic conditions. These assumptions could prove inaccurate.
Although we believe that the estimates and projections reflected in the forward-looking statements are reasonable, our expectations
may prove to be incorrect. Important factors that could cause actual results to differ materially from the results and events
anticipated or implied by such forward-looking statements include:
|
●
|
management’s
plans, objectives and budgets for its future operations and future economic performance;
|
|
●
|
capital
budget and future capital requirements;
|
|
●
|
meeting
future capital needs;
|
|
●
|
our
dependence on management and the need to recruit additional personnel;
|
|
●
|
limited
trading for our common stock;
|
|
●
|
the
level of future expenditures;
|
|
●
|
impact
of recent accounting pronouncements;
|
|
●
|
the
outcome of regulatory and litigation matters; and
|
|
●
|
the
assumptions described in this report underlying such forward-looking statements.
|
Actual
results and developments may materially differ from those expressed in, or implied by, such statements due to a number of factors,
including:
|
●
|
those
described in the context of such forward-looking statements;
|
|
●
|
future
product development and marketing costs;
|
|
●
|
the
markets of our domestic operations;
|
|
●
|
the
impact of competitive products and pricing;
|
|
●
|
the
political, social and economic climate in which we conduct operations; and
|
|
●
|
the
risk factors described in other documents and reports filed with the Securities and Exchange Commission, including our Registration
Statement on Form S-1/A (SEC File No. 333-196075).
|
We
operate in an extremely competitive environment. New risks emerge from time to time. It is not possible for us to predict all
of those risks, nor can we assess the impact of all of those risks on our business or the extent to which any factor may cause
actual results to differ materially from those contained in any forward-looking statement. We believe these forward-looking statements
are reasonable. However, you should not place undue reliance on any forward-looking statements, which are based on current expectations.
Further, forward-looking statements speak only as of the date they are made, and unless required by law, we expressly disclaim
any obligation or undertaking to update publicly any of them in light of new information or future events.
The
following is management’s discussion and analysis of financial condition and results of operations and is provided as a
supplement to the accompanying unaudited interim condensed financial statements and notes to help provide an understanding of
our financial condition, results of operations and cash flows during the periods included in the accompanying unaudited interim
condensed financial statements.
In
this Quarterly Report on Form 10-Q, “Company,” “the Company,” “us,” and “our”
refer to Nevada Canyon Gold Corp., a Nevada corporation, unless the context requires otherwise.
We
intend the following discussion to assist in the understanding of our financial position and our results of operations for the
three-month periods ended March 31, 2020 and 2019. You should refer to the Financial Statements and related Notes in conjunction
with this discussion.
General
We
were incorporated under the laws of the state of Nevada on February 27, 2014. We are involved in acquiring and exploring mineral
properties in Nevada, however, as of the date of this Quarterly Report on Form 10-Q we have not generated or realized any revenues
from these business operations.
We
were a party to an exploration agreement (the “Agreement”) with an option to form a joint venture with Walker River
Resources Corp. (“WRR”) on its wholly-owned Lapon Canyon Gold Project (“Lapon Canyon Project”) located
approximately 40 miles southeast of Yerington, Nevada. On July 5, 2017, we entered into a property purchase agreement with WRR
on the Lapon Canyon Project, pursuant to which WRR agreed to buy back our interest in the Lapon Canyon Project in exchange for
9,100,000 common shares of WRR (the “WRR Shares”) and warrants to acquire an additional 11,900,000 WRR Shares (the
“WRR Warrants”). Each WRR Warrant is exercisable for a period of five years without further consideration into one
WRR Share. The terms of the WRR Warrants contain a provision which prevents us from exercising any WRR Warrants which would result
in us owning 10% or more of the issued and outstanding shares of WRR.
On
June 7, 2017, we entered into an exploration lease and option to purchase agreement (the “Garfield Agreement”) with
Goodsprings Development LLC (“Goodsprings”), a Nevada limited liability corporation on the Garfield Flats Project
(the “Garfield Property”), consisting of six Orsa Claims and six Lazy Claims totaling 240 acres located in sections
27 and 28 of T 7 N, R 32 E, Mineral County, Nevada about 18 miles southeast of the town of Hawthorne. During our Fiscal 2017,
we staked an additional 69 Orsa Claims and 75 Lazy Claims which we added to the Garfield Flats Project.
On
July 11, 2018, we entered into a definitive purchase agreement with WRR for the sale of the Garfield Agreement. Full consideration
for the Garfield Agreement consisted of a one-time cash payment of $55,000 (the “Cash Consideration”). In lieu of
the Cash Consideration, WRR agreed to extinguish the $55,000 note payable we issued to WRR during our fiscal 2017.
On
August 2, 2017, we entered into an exploration lease agreement (the “Lazy Claims Agreement”) with Tarsis Resources
US Inc. (“Tarsis”), a Nevada corporation, to lease rights to three additional Lazy claims totaling 60 acres and located
in the vicinity of the Garfield Property. The term of the Lazy Claims Agreement is ten years and is subject to extension for an
additional two consecutive 10-year terms. Full consideration of the Lazy Claims Agreement consists of the following: an initial
cash payment of $1,000 to Tarsis, which we paid upon the execution of the Lazy Claims Agreement, with $2,000 payable to Tarsis
on each subsequent anniversary of the effective date. We agreed to pay Tarsis a 2% production royalty (the “Lazy Claims
Royalty”) based on the gross returns from the production and sale of minerals from the Lazy Claims Property. Should the
Lazy Claims Royalty payments be in excess of $2,000 per year, we will not be required to pay a $2,000 annual minimum payment.
In
December 2019 we acquired 27 unpatented mining claims for a total of $10,395 from a third-party (the “Loman Property”).
As at the date of this Quarterly Report on Form 10-Q, the Loman Property claims are being re-registered into the Company’s
name.
As
of the date of this Quarterly Report on Form 10-Q, our mineral interests are represented by Lazy Claims Property and Loman Property.
Critical
Accounting Policies and Estimates
Our
financial statements and related public financial information are based on the application of accounting principles generally
accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective
interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported.
These estimates can also affect supplemental information contained in our external disclosures including information regarding
contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP
and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different
assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.
Our
Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our unaudited interim
condensed 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 and investing 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 unaudited interim condensed financial
statements include estimates as to the appropriate carrying value of certain assets and liabilities, which are not readily apparent
from other sources.
The
following discussion of our financial condition and results of operations should be read in conjunction with our unaudited interim
condensed financial statements for the three months ended March 31, 2020, together with notes thereto, which are included in this
Quarterly Report on Form 10-Q, as well as our most recent audited financial statements on Form 10-K for the year ended December
31, 2019.
Results
of Operations
Three
months ended March 31, 2020, compared to the three months ended March 31, 2019:
|
|
Three
months ended March 31,
|
|
|
Changes
between
|
|
|
|
2020
|
|
|
2019
|
|
|
the
periods
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
expenses
|
|
$
|
-
|
|
|
$
|
30,000
|
|
|
$
|
(30,000
|
)
|
General and administrative
expenses
|
|
|
2,859
|
|
|
|
70,384
|
|
|
|
(67,525
|
)
|
Professional fees
|
|
|
2,500
|
|
|
|
2,200
|
|
|
|
300
|
|
Transfer
agent and filing fees
|
|
|
2,487
|
|
|
|
2,484
|
|
|
|
3
|
|
Total operating expenses
|
|
|
(7,846
|
)
|
|
|
(105,068
|
)
|
|
|
(97,222
|
)
|
Other items
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value gain
(loss) on equity investments
|
|
|
(232,587
|
)
|
|
|
890,801
|
|
|
|
(1,123,388
|
)
|
Realized gain on
investments
|
|
|
82,280
|
|
|
|
247,524
|
|
|
|
(165,244
|
)
|
Foreign exchange
gain (loss)
|
|
|
(36,450
|
)
|
|
|
3,772
|
|
|
|
(40,222
|
)
|
Interest
income
|
|
|
1,394
|
|
|
|
468
|
|
|
|
926
|
|
Net
income (loss)
|
|
$
|
(193,209
|
)
|
|
$
|
1,037,497
|
|
|
$
|
(1,230,706
|
)
|
Revenues
We
had no revenues for the three-month periods ended March 31, 2020 and 2019. Due to the exploration rather than the production nature
of our business, we do not expect to have significant operating revenue in the foreseeable future.
Operating
Expenses
Our
operating expenses include exploration expenses, general and administrative expenses, professional fees and transfer agent and
filing fees. During the three-month period ended March 31, 2020, our operating expenses decreased by $97,222, or 93%, to $7,846
for the three months then ended, compared to $105,068 for the three-month period ended March 31, 2019. This change was mainly
associated with decreased general and administrative fees, which decreased by $67,525 to $2,859 for the three-month period ended
March 31, 2020, as compared to $70,384 we incurred during the three months ended March 31, 2019, the main component affecting
the change in general and administrative expenses was associated with absence of management consulting fees, as the Company’s
related parties agreed to provide their consulting services free of charge. During the comparative three-month period ended March
31, 2019, we incurred $60,000 in management consulting fees. In addition to the increases in general and administrative expenses,
we did not incur any exploration expenses for the three-month period ended March 31, 2020, as compared to $30,000 in exploration
expenses we incurred during the three-month period ended March 31, 2019. These decreases were in part offset by $300 increase
in professional fees, from $2,200 we incurred during a three-month period ended March 31, 2019 to $2,500 we incurred during
the three months ended March 31, 2020.
Other
Items
During
the three months ended March 31, 2020, we recognized $232,587 loss on fair value of equity investments (2019 –$890,801 gain).
The loss resulted from revaluation of WRR Shares and WRR warrants and was caused mainly by decreased market price of WRR’s
shares from CAD$0.085 per share at December 31, 2019, to CAD$0.07 per share at March 31, 2020, and to a smaller degree from fluctuation
of exchange rates between the US and Canadian dollars.
During
the same period, we recorded $82,280 gain on equity investments which was associated with the sale of 1,269,000 WRR Shares for
net proceeds of $165,330 (CAD$219,974). We earned $1,394 in interest revenue (2019 - $468). Since the funds generated from the
sale of equity investments are held in Canadian dollars, we incurred $36,450 loss associated with foreign exchange fluctuation
rates (2019 - $3,772 gain).
Net
Income (Loss)
At
March 31, 2020, we recorded a net loss of $193,209, as compared to net income of $1,037,497 for the three-month period ended March
31, 2019. This change mainly resulted from $232,587 loss on revaluation of our equity investments, as opposed to $890,801 gain
we recognized in the comparative period, and $82,280 realized gain on the sale of WRR Shares as compared to $247,524 gain we recognized
in the comparative period.
Liquidity
and Capital Resources
|
|
March
31, 2020
|
|
|
December
31, 2019
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
493,412
|
|
|
$
|
368,484
|
|
Current liabilities
|
|
|
1,431,896
|
|
|
|
1,429,396
|
|
Working capital
deficit
|
|
$
|
(938,484
|
)
|
|
$
|
(1,060,912
|
)
|
As
of March 31, 2020, we had a cash balance of $491,946, of which $439,134 (CAD$622,999) were held in high-interest savings account
with a major Canadian bank, and working capital deficit of $938,484 with cash flows used in operations totaling $4,135
for the period then ended. During the three months ended March 31, 2020, our operations were funded with $165,330 cash we generated
from the sales of our equity investments.
We
did not generate sufficient cash flows from our operating activities to satisfy our cash requirements for the three-month period
ended March 31, 2020. There is no assurance that we will be able to generate sufficient cash from our operations to repay the
amounts owing under the advances payable, or to support our exploration program. If we are unable to generate sufficient cash
flow from our operations to repay the amounts owing when due, we may be required to continue selling our equity investments or
raise additional financing by borrowing funds or issuing our equity. There can be no assurance that we will be successful in our
efforts to raise additional capital.
Cash
Flow
|
|
Three
Months Ended
March 31,
|
|
|
|
2020
|
|
|
2019
|
|
Cash flows used in operating
activities
|
|
$
|
(4,135
|
)
|
|
$
|
(38,975
|
)
|
Cash flows provided by investing activities
|
|
|
165,330
|
|
|
|
478,077
|
|
Effects of foreign
currency exchange on cash
|
|
|
(36,450
|
)
|
|
|
-
|
|
Net increase
in cash during the period
|
|
$
|
124,745
|
|
|
$
|
439,102
|
|
Net
cash used in operating activities
Our
net cash used in operating activities decreased by $34,840, or 89%, to $4,135 for the three months ended March 31, 2020, compared
with $38,975 for the comparable period in 2019. During the three months ended March 31, 2020, we used $6,452 to cover our cash
operating costs and $183 to increase our prepaid expenses. These uses of cash were offset by $2,500 increase in our accounts payable
and accrued liabilities.
For
the three months ended March 31, 2019, our net cash used in operating activities increased by $29,606, or 316%, to $38,975 for
the three months ended March 31, 2019, compared with $9,369 for the comparable period in 2018. During the three months ended March
31, 2019, we used $108,800 to cover our cash operating costs and $184 to increase our prepaid expenses. These uses of cash were
offset by $9,909 increase in our accounts payable and by $60,100 increase in the amounts due to our related parties.
Adjustments
to reconcile net income (loss) to net cash used by operating activities
During
the three months ended March 31, 2020, we recognized $232,587 loss on revaluation of fair value of equity investments associated
with WRR Shares and WRR Warrants and recorded $82,280 gain on sale of 1,269,000 WRR Shares for net proceeds of $165,330 (CAD$219,974).
In addition, we recognized $36,450 loss on foreign exchange fluctuations.
During
the three months ended March 31, 2019, we recognized $890,801 gain on revaluation of fair value of equity investments associated
with WRR Shares and WRR Warrants, we also recorded $247,524 gain on sale of our equity investments. These gains were further increased
by $7,504 in foreign exchange fluctuations and $468 we received in interest and dividend income on our investments.
Net
cash generated by investing activities
During
the three-month period ended March 31, 2020, we generated $165,330 on the sale of 1,269,000 WRR Shares.
During
the three-month period ended March 31, 2019, we generated $478,077 on the sale of 5,242,000 WRR Shares.
Going
Concern
At
March 31, 2020, we had a working capital deficit of $938,484 and cash on hand of $491,946, which is sufficient enough to support
our current plan of operations for the next 12-month period. Our equity investments include 12,589,000 WRR Shares and 1,900,000
WRR Warrants, which we have been using and are planning to continue to use as a source of additional cash inflow. To support our
operations beyond the 12-month period we may require additional funds; therefore, we continue to actively pursue other means of
financing our operations through equity and/or debt financing. There can be no assurance that we will be able to procure funds
sufficient to support our day-to-day operations and exploration programs. If operating difficulties or other factors (many of
which are beyond our control) delay our realization of revenues or cash flows from operations, we may be limited in our ability
to pursue our business plan. Moreover, if our resources from obtaining additional capital or cash flows from operations, once
we commence them, do not satisfy our operational needs or if unexpected expenses arise due to unanticipated pressures or if we
decide to expand our business plan beyond its currently anticipated level or otherwise, we will require additional financing to
fund our operations, in addition to anticipated cash generated from our operations. Additional financing might not be available
on terms favorable to us, or at all. If adequate funds were not available or were not available on acceptable terms, our ability
to fund our operations, take advantage of unanticipated opportunities, develop or enhance our business or otherwise respond to
competitive pressures would be significantly limited. In a worst-case scenario, we might not be able to fund our operations or
to remain in business, which could result in a total loss of our stockholders’ investment. If we raise additional funds
through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders would be reduced,
and these newly issued securities might have rights, preferences or privileges senior to those of existing stockholders.
Uncertainty
due to Global Outbreak of COVID-19
In
March of 2020, the World Health Organization declared an outbreak of COVID-19 Global pandemic. The COVID-19 has impacted vast
array of businesses through the restrictions put in place by most governments internationally, including the USA federal government
as well as provincial and municipal governments, regarding travel, business operations and isolation/quarantine orders. At this
time, it is unknown to what extent the impact of the COVID-19 outbreak may have on the Company as this will depend on future developments
that are highly uncertain and that cannot be predicted with confidence. These uncertainties arise from the inability to predict
the ultimate geographic spread of the disease, and the duration of the outbreak, including the duration of travel restrictions,
business closures or disruptions, and quarantine/isolation measures that are currently, or may be put, in place world-wide to
fight the virus. While the extent of the impact is unknown, the COVID-19 outbreak may hinder the Company’s ability to raise
financing for exploration or operating costs due to uncertain capital markets, supply chain disruptions, increased government
regulations and other unanticipated factors, all of which may also negatively impact the Company’s business and financial
condition.
Impact
of Inflation
We
believe that inflation has had a negligible effect on operations over the past fiscal quarter.
Capital
Expenditures
The
Company expended no amounts on capital expenditures for the three months ended March 31, 2020.
Unproved
Mineral Properties
As
of the date of this quarterly report on Form 10-Q, our mineral interests are represented by Lazy Claims Property and the Loman
Claims Property.
We
acquired Lazy Claims Property through an exploration lease agreement with Tarsis Resources US Inc. (“Tarsis”), a Nevada
corporation, dated for reference August 2, 2017 (the “Lazy Claims Agreement”). The Lazy Claims Agreement grants us
a right to conduct exploratory work for minerals on three Lazy Claims totaling 60 acres and located in Mineral County, Nevada
about 18 miles southeast of the town of Hawthorne (the “Lazy Claims”).
The
term of the Lazy Claims Agreement is ten years and is subject to extension for an additional two consecutive 10-year terms. Full
consideration for the Lazy Claims Agreement consists of the following: an initial cash payment of $1,000 to Tarsis, which we paid
upon the execution of the Lazy Claims Agreement, with $2,000 payable to Tarsis on each subsequent anniversary of the effective
date. We agreed to pay Tarsis a 2% production royalty (the “Lazy Claims Royalty”) based on the gross returns from
the production and sale of minerals from the Lazy Claims Property. Should the Lazy Claims Royalty payments to Tarsis be in excess
of $2,000 per year, we will not be required to pay a $2,000 annual minimum payment.
In
December 2019 we acquired 27 unpatented mining claims for a total of $10,395 from a third-party (the “Loman Property”).
As at the date of this Quarterly Report on Form 10-Q, the Loman Property claims are being re-registered into the Company’s
name.
Off-Balance
Sheet Arrangements
None.
Use
of Estimates
Areas
where significant estimation judgments are made and where actual results could differ materially from these estimates are the
carrying value of certain assets and liabilities which are not readily apparent from other sources and the classification of net
operating loss and tax credit carry forwards.
We
evaluate impairment of our long-lived assets by applying the provisions of SFAS No. 144. In applying those provisions, we have
not recognized any impairment charge on our long-lived assets during the three-month period ended March 31, 2020.