Item
1. Financial Statements
Nevada
Canyon Gold Corp.
Condensed
Balance Sheets
(Presented
in US Dollars)
(Unaudited)
|
|
June 30, 2020
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
490,394
|
|
|
$
|
367,201
|
|
Prepaid expenses
|
|
|
6,166
|
|
|
|
1,283
|
|
|
|
|
496,560
|
|
|
|
368,484
|
|
|
|
|
|
|
|
|
|
|
Equity investment
|
|
|
956,723
|
|
|
|
1,030,406
|
|
Mineral property interest
|
|
|
10,395
|
|
|
|
10,395
|
|
TOTAL ASSETS
|
|
$
|
1,463,678
|
|
|
$
|
1,409,285
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
345,833
|
|
|
$
|
351,000
|
|
Related party payables
|
|
|
1,062,232
|
|
|
|
1,062,232
|
|
Notes and advances payable
|
|
|
16,164
|
|
|
|
16,164
|
|
Total liabilities
|
|
|
1,424,229
|
|
|
|
1,429,396
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity (Deficit)
|
|
|
|
|
|
|
|
|
Preferred Stock: Authorized 10,000,000 preferred shares, $0.0001 par, none issued and outstanding as of June 30, 2020 and December 31, 2019
|
|
|
-
|
|
|
|
-
|
|
Common Stock: Authorized 100,000,000 common shares, $0.0001 par, 44,550,000
issued and outstanding as of June 30, 2020 and December 31, 2019
|
|
|
4,455
|
|
|
|
4,455
|
|
Additional paid-in capital
|
|
|
522,645
|
|
|
|
522,645
|
|
Deficit
|
|
|
(487,651
|
)
|
|
|
(547,211
|
)
|
|
|
|
39,449
|
|
|
|
(20,111
|
)
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
$
|
1,463,678
|
|
|
$
|
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
June 30,
|
|
|
For the six months ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration expenses
|
|
$
|
-
|
|
|
$
|
30,687
|
|
|
$
|
-
|
|
|
$
|
60,687
|
|
General and administrative expenses
|
|
|
2,872
|
|
|
|
63,013
|
|
|
|
5,731
|
|
|
|
133,397
|
|
Professional fees
|
|
|
2,500
|
|
|
|
4,500
|
|
|
|
5,000
|
|
|
|
6,700
|
|
Transfer agent and filing fees
|
|
|
2,325
|
|
|
|
1,675
|
|
|
|
4,812
|
|
|
|
4,159
|
|
|
|
|
(7,697
|
)
|
|
|
(99,875
|
)
|
|
|
(15,543
|
)
|
|
|
(204,943
|
)
|
Other items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value gain on equity investments
|
|
|
241,954
|
|
|
|
624,327
|
|
|
|
9,367
|
|
|
|
1,515,128
|
|
Foreign exchange gain (loss)
|
|
|
18,024
|
|
|
|
19,033
|
|
|
|
(18,426
|
)
|
|
|
22,805
|
|
Interest income
|
|
|
488
|
|
|
|
1,556
|
|
|
|
1,882
|
|
|
|
2,024
|
|
Realized gain on equity investment
|
|
|
-
|
|
|
|
-
|
|
|
|
82,280
|
|
|
|
247,524
|
|
Net income
|
|
$
|
252,769
|
|
|
$
|
545,041
|
|
|
$
|
59,560
|
|
|
$
|
1,582,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share - basic
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
$
|
0.00
|
|
|
$
|
0.04
|
|
Net income per common share - diluted
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
$
|
0.00
|
|
|
$
|
0.04
|
|
Weighted average number of common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
44,550,000
|
|
|
|
44,550,000
|
|
|
|
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 six months ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Cash flows used in operating activities
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
59,560
|
|
|
$
|
1,582,538
|
|
Adjustment to reconcile net income to net cash used by operating activities:
|
|
|
|
|
|
|
|
|
Fair value gain on equity investments
|
|
|
(91,647
|
)
|
|
|
(1,762,652
|
)
|
Foreign exchange loss (gain)
|
|
|
18,426
|
|
|
|
(17,212
|
)
|
Interest income
|
|
|
-
|
|
|
|
(2,024
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
(5,167
|
)
|
|
|
48,633
|
|
Prepaid expenses
|
|
|
(4,883
|
)
|
|
|
(3,300
|
)
|
Related party payables
|
|
|
-
|
|
|
|
120,100
|
|
Net cash used by operating activities
|
|
|
(23,711
|
)
|
|
|
(33,917
|
)
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Sale of equity investments
|
|
|
165,330
|
|
|
|
478,077
|
|
Net cash povided by investing activities
|
|
|
165,330
|
|
|
|
478,077
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Advances from shareholders
|
|
|
-
|
|
|
|
1,100
|
|
Net cash provided by financing activities
|
|
|
-
|
|
|
|
1,100
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency translation on cash
|
|
|
(18,426
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
123,193
|
|
|
|
445,260
|
|
Cash, beginning
|
|
|
367,201
|
|
|
|
1,601
|
|
Cash, ending
|
|
$
|
490,394
|
|
|
$
|
446,861
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
Cash received for interest
|
|
$
|
1,882
|
|
|
$
|
2,024
|
|
Cash paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Significant non-cash transactions:
|
|
|
|
|
|
|
|
|
Fair value gain on equity investments
|
|
$
|
(9,367
|
)
|
|
$
|
(1,515,128
|
)
|
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)
(Unaudited)
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Stockholders’ Equity
|
|
|
|
Shares
|
|
|
Amount
|
|
|
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 income for the period ended June 30, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
545,041
|
|
|
|
545,041
|
|
Balance, June 30, 2019
|
|
|
44,550,000
|
|
|
$
|
4,455
|
|
|
$
|
522,645
|
|
|
$
|
861,522
|
|
|
$
|
1,388,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the period ended June 30, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
252,769
|
|
|
|
252,769
|
|
Balance, June 30, 2020
|
|
|
44,550,000
|
|
|
$
|
4,455
|
|
|
$
|
522,645
|
|
|
$
|
(487,651
|
)
|
|
$
|
39,449
|
|
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)
JUNE
30, 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 and six months ended June 30, 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 June 30, 2020 and December 31, 2019:
|
|
June 30,
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- and six-month periods ended June 30, 2020, the Company did not have any transactions with its related parties. During
the three-month period ended June 30, 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. During the six-month period ended
June 30, 2019, the Company accrued $60,000 in consulting fees payable to a company controlled by the CEO and $60,000 in consulting
fees to a company controlled by a director of the Company.
NOTE
4 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
|
|
June 30,
2020
|
|
|
December 31,
2019
|
|
Trade payables
|
|
$
|
342,133
|
|
|
$
|
340,300
|
|
Accrued liabilities
|
|
|
3,700
|
|
|
|
10,700
|
|
|
|
$
|
345,833
|
|
|
$
|
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 and six months ended June 30, 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.
During
the three- and six-month periods ended June 30, 2020, the Company did not incur any expenses associated with the Loman Claims.
During the three- and six-month periods ended June 30, 2019, the Company paid $30,000 and $60,000, respectively in consulting
fees associated in part with preparing geological program to be run on Lazy Claims and $687 for other exploration expenses.
NOTE
6 – EQUITY INVESTMENT
As
at June 30, 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
June 30, 2020, the fair market value of the equity investment was calculated to be $956,723 (2019 - $1,030,406) based on the market
price of WRR Shares at June 30, 2020.
During
the six-month period ended June 30, 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). During the three-month periods ended June 30, 2020 and 2019, the Company did not sell WRR Shares.
The
revaluation of the equity investment in WRR resulted in $9,367 gain (2019 - $1,515,128). The gain resulted from the increase of
the market price of WRR’s common stock from CAD$0.085 per share at December 31, 2019, to CAD$0.09 per share at June 30,
2020, and was further affected by weakening of the Canadian Dollar in comparison to the US Dollar. In comparison, during the six-month
period ended June 30, 2019, the market price of WRR’s common stock increased from CAD$0.06 per share at December 31, 2018,
to CAD$0.185 per share at June 30, 2019, resulting in an overall gain, which was further augmented by the strengthening Canadian
dollar.
NOTE
7 – NOTES AND ADVANCES PAYABLE
At
June 30, 2020, the Company’s liability associated with notes and advances payable consisted of $16,164 the Company received
as an advance for its operating activities during the year ended December 31, 2018, of which $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-and six-month periods ended June 30, 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- and six-month periods ended June 30, 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 yet to be re-registered into the Company’s
name, as due to COVID-19 pandemic certain regulatory requirements cannot be finalized. The Company intends to finalize the re-registration
once the current world health crisis has passed and all local regulatory services are operating at full capacity.
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- and six-month periods ended June 30, 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
and six months ended June 30, 2020, compared to the three and six months ended June 30, 2019:
|
|
Three months ended
June 30,
|
|
|
Changes between the
|
|
|
Six months ended
June 30,
|
|
|
Changes between the
|
|
|
|
2020
|
|
|
2019
|
|
|
periods
|
|
|
2020
|
|
|
2019
|
|
|
periods
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration expenses
|
|
$
|
-
|
|
|
$
|
30,687
|
|
|
$
|
(30,687
|
)
|
|
$
|
-
|
|
|
$
|
60,687
|
|
|
$
|
(60,687
|
)
|
General and administrative expenses
|
|
|
2,872
|
|
|
|
63,013
|
|
|
|
(60,141
|
)
|
|
|
5,731
|
|
|
|
133,397
|
|
|
|
(127,666
|
)
|
Professional fees
|
|
|
2,500
|
|
|
|
4,500
|
|
|
|
(2,000
|
)
|
|
|
5,000
|
|
|
|
6,700
|
|
|
|
(1,700
|
)
|
Transfer agent and filing fees
|
|
|
2,325
|
|
|
|
1,675
|
|
|
|
650
|
|
|
|
4,812
|
|
|
|
4,159
|
|
|
|
653
|
|
Total operating expenses
|
|
|
(7,697
|
)
|
|
|
(99,875
|
)
|
|
|
(92,178
|
)
|
|
|
(15,543
|
)
|
|
|
(204,943
|
)
|
|
|
(189,400
|
)
|
Other items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value gain on equity investments
|
|
|
241,954
|
|
|
|
624,327
|
|
|
|
(382,373
|
)
|
|
|
9,367
|
|
|
|
1,515,128
|
|
|
|
(1,505,761
|
)
|
Foreign exchange gain (loss)
|
|
|
18,024
|
|
|
|
19,033
|
|
|
|
(1,009
|
)
|
|
|
(18,426
|
)
|
|
|
22,805
|
|
|
|
(41,231
|
)
|
Interest income
|
|
|
488
|
|
|
|
1,556
|
|
|
|
(1,068
|
)
|
|
|
1,882
|
|
|
|
2,024
|
|
|
|
(142
|
)
|
Realized gain on equity investment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
82,280
|
|
|
|
247,524
|
|
|
|
(165,244
|
)
|
Net and comprehensive income
|
|
$
|
252,769
|
|
|
$
|
545,041
|
|
|
$
|
(292,272
|
)
|
|
$
|
59,560
|
|
|
$
|
1,582,538
|
|
|
$
|
(1,522,978
|
)
|
Revenues
We
had no revenues for the three- and six-month periods ended June 30, 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 June 30, 2020, our operating expenses decreased by $92,178, or 92%, to $7,697 for the three months
then ended, compared to $99,875 for the three-month period ended June 30, 2019. This change was mainly associated with decreased
general and administrative fees, which decreased by $60,141 to $2,872 for the three-month period ended June 30, 2020, as compared
to $63,013 we incurred during the three months ended June 30, 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 June 30, 2019, we incurred $60,000 in management
consulting fees. Our professional fees decreased by $2,000, from $4,500 we incurred during a three-month period ended June 30,
2019 to $2,500 we incurred during the three months ended June 30, 2020. In addition to the increases in above noted expenses,
we did not incur any exploration expenses for the three-month period ended June 30, 2020, as compared to $30,687 in exploration
expenses we incurred during the three-month period ended June 30, 2019. These decreases were in part offset by $650 increase in
transfer agent and filing fees, from $1,675 we incurred during a three-month period ended June 30, 2019 to $2,325 we incurred
during the three months ended June 30, 2020.
On
a year-to-date basis, our operating expenses decreased by $189,400, or 92%, to $15,543 for the six months ended June 30, 2020,
compared to $204,943 for the six-month period ended June 30, 2019. This change was mainly associated with decreased general and
administrative fees, which decreased by $127,666 to $5,731 for the six-month period ended June 30, 2020, as compared to $133,397
we incurred during the six months ended June 30, 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 six-month period ended June 30, 2019, we incurred $120,000 in management consulting
fees. Our professional fees decreased by $1,700, from $6,700 we incurred during the six-month period ended June 30, 2019
to $5,000 we incurred during the six months ended June 30, 2020. In addition to the increases in above noted expenses, we did
not incur any exploration expenses for the six-month period ended June 30, 2020, as compared to $60,687 in exploration expenses
we incurred during the three-month period ended June 30, 2019. These decreases were in part offset by $653 increase in transfer
agent and filing fees, from $4,159 we incurred during the six-month period ended June 30, 2019 to $4,812 we incurred during the
six months ended June 30, 2020.
Other
Items
During
the three months ended June 30, 2020, we recognized $241,954 gain on fair value of equity investments (2019 –$624,327).
The gain resulted from revaluation of WRR Shares and WRR warrants and was caused mainly by increased market price of WRR’s
shares from CAD$0.07 per share at March 31, 2020, to CAD$0.09 per share at June 30, 2020, and to a smaller degree from fluctuation
of exchange rates between the US and Canadian dollars. During the same period, we earned $488 in interest revenue (2019 - $1,556).
Since the funds generated from the sale of equity investments are held in Canadian dollars, we incurred $18,024 gain associated
with foreign exchange fluctuation rates (2019 - $19,033).
During
the six months ended June 30, 2020, we recognized $9,367 gain on fair value of equity investments (2019 –$1,515,128). The
gain resulted from revaluation of WRR Shares and WRR warrants and was caused mainly by increased market price of WRR’s shares
from CAD$0.085 per share at December 31, 2019, to CAD$0.09 per share at June 30, 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) (2019 - $247,524). We earned $1,882 in interest revenue (2019 - $2,024). Since the funds
generated from the sale of equity investments are held in Canadian dollars, we incurred $18,426 loss associated with foreign exchange
fluctuation rates (2019 - $22,805 gain).
Net
Income
At
June 30, 2020, we recorded a net income of $252,769, as compared to net income of $545,041 for the three-month period ended June
30, 2019. This change mainly resulted from $241,954 gain on revaluation of our equity investments, as opposed to $624,327 gain
we recognized in the comparative period.
On
a year-to-date basis, we recorded a net income of $59,560, as compared to net income of $1,582,538 for the six-month period ended
June 30, 2019. This change mainly resulted from $9,367 gain on revaluation of our equity investments, 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
|
|
June 30,
2020
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
Current assets
|
|
$
|
496,560
|
|
|
$
|
368,484
|
|
Current liabilities
|
|
|
1,424,229
|
|
|
|
1,429,396
|
|
Working capital deficit
|
|
$
|
(927,669
|
)
|
|
$
|
(1,060,912
|
)
|
As
of June 30, 2020, we had a cash balance of $490,394, of which $457,643 (CAD$623,676) were held in high-interest savings account
with a major Canadian bank, and working capital deficit of $927,669 with cash flows used in operations totaling $23,711 for the
period then ended. During the six months ended June 30, 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-and six-month
periods ended June 30, 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
|
|
Six Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Cash flows used in operating activities
|
|
$
|
(23,711
|
)
|
|
$
|
(33,917
|
)
|
Cash flows provided by investing activities
|
|
|
165,330
|
|
|
|
478,077
|
|
Cash flows provided by financing activities
|
|
|
-
|
|
|
|
1,100
|
|
Effects of foreign currency exchange on cash
|
|
|
(18,426
|
)
|
|
|
-
|
|
Net increase in cash during the period
|
|
$
|
123,193
|
|
|
$
|
445,260
|
|
Net
cash used in operating activities
Our
net cash used in operating activities decreased by $10,206, or 30%, to $23,711 for the six months ended June 30, 2020, compared
with $33,917 for the comparable period in 2019. During the six months ended June 30, 2020, we used $13,661 to cover our cash operating
costs, $4,883 to increase our prepaid expenses, and $5,167 to reduce our accounts payable and accrued liabilities.
Our
net cash used in operating activities increased by $17,666, or 109%, to $33,917 for the six months ended June 30, 2019, compared
with $16,251 for the comparable period in 2018. During the six months ended June 30, 2019, we used $199,350 to cover our cash
operating costs and $3,300 to increase our prepaid expenses. These uses of cash were offset by $48,633 increase in our accounts
payable and by $120,100 increase in the amounts due to our related parties.
Adjustments
to reconcile net income to net cash used by operating activities
During
the six months ended June 30, 2020, we recognized $9,367 gain 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 $18,426 loss on foreign exchange fluctuations.
During
the six months ended June 30, 2019, we recognized $1,515,128 gain on revaluation of fair value of equity investments associated
with WRR Shares and WRR Warrants we received in exchange for our 30% interest in Lapon Canyon Gold Property which resulted from
the fluctuation in share prices and foreign exchange rates, we also recorded $247,524 gain on sale of our equity investments.
These gains were further increased by $17,212 in foreign exchange fluctuations and $2,024 we received in interest and dividend
income on our investments.
Net
cash generated by investing activities
During
the six-month period ended June 30, 2020, we generated $165,330 on the sale of 1,269,000 WRR Shares.
During
the six-month period ended June 30, 2019, we generated $478,077 on the sale of 5,242,000 WRR Shares.
Net
cash provided by financing activities:
During
the six months ended June 30, 2019, we recorded $1,100 as non-interest-bearing advance owed to WRR for a payment that WRR made
on our behalf. We did not have similar transactions during the six months ended June 30, 2020.
Going
Concern
At
June 30, 2020, we had a working capital deficit of $927,669 and cash on hand of $490,394, 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.
Continued
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 six months ended June 30, 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 yet to be re-registered into the Company’s
name, as due to COVID-19 pandemic certain regulatory requirements cannot be finalized. The Company intends to finalize the re-registration
once the current world health crisis has passed and all local regulatory services are operating at full capacity.
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 ASC No. 360. In applying those provisions, we have
not recognized any impairment charge on our long-lived assets during the three-month period ended June 30, 2020.