NGLD Nevada Canyon Gold Corporation (PK)

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:

Actual results and developments may materially differ from those expressed in, or implied by, such statements due to a number of factors, including:

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 nine-month periods ended September 30, 2021 and 2020. You should refer to the Financial Statements and related Notes in conjunction with this discussion.

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.

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 and Idaho, 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. We exercised 10,000,000 WRR Warrants on January 9, 2020. As at September 30, 2021, we held 8,197,000 WRR Shares and 1,900,000 WRR Warrants, valued at $475,341.

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.

On May 19, 2021, we entered into exploration lease with option to purchase agreement (the “Agai-Pah Agreement”) with MSM Resource, L.L.C., (“MSM”) a Nevada limited liability Corporation on the Agai-Pah Property, consisting of 20 unpatented mining claims totaling 400 acres, located in sections 32 & 33, T4N, R34E, MDM, Mineral County, Nevada about 10 miles northeast of the town of Hawthorne (the “Agai-Pah Property”). The term of the Agai-Pah Agreement commenced on May 19, 2021, and continues for ten years, subject to our right to extend the Agai-Pah Agreement for two additional terms of ten years each, and subject to the Company’s option to purchase the Agai-Pah Property.

Full consideration of the Agai-Pah Agreement consists of the following: (i) an initial cash payment of $20,000 to be paid within 90 days from the execution of the Agai-Pah Agreement on May 19, 2021 (the “Effective Date”), and (ii) annual payments of $20,000 to be paid on the anniversary of the Effective Date while the Agai-Pah Agreement remains in effect. We retain the exclusive option and right to acquire 100% ownership of the Agai-Pah Property (the “Agai-Pah Purchase Option”). To exercise the Agai-Pah Purchase Option, we will be required to pay $750,000 (the “Agai-Pah Purchase Price”). The Agai-Pah Purchase Price can be paid in either cash and/or equity, or a combination thereof, at the election of MSM. The annual payments paid by us, shall not be applied or credited against the Purchase Price.

As of the date of this quarterly report on Form 10-Q, the initial cash payment remains outstanding pursuant to a verbal extension granted to us by MSM.

On June 4, 2021, we entered into exploration lease with option to purchase agreement (the “Belshazzar Agreement”) with Belshazzar Holdings, L.L.C., (“BH”) a Nevada limited liability Corporation on the Belshazzar Property, consisting of ten unpatented lode mining claims and seven unpatented placer mineral claim totaling 200 acres, within Quartzburg mining district, in Boise County, Idaho (the “Belshazzar Property”).

The term of the Belshazzar Agreement commences on June 4, 2021, and continues for ten years, subject to our right to extend the Belshazzar Agreement for two additional terms of ten years each, and subject to our option to purchase the Belshazzar Property.

Full consideration of the Belshazzar Agreement consists of the following: (i) an initial cash payment of $20,000 to be paid within 90 days from the execution of the Belshazzar Agreement on June 4, 2021 (the “effective date”), and (ii) annual payments of $20,000 to be paid on the anniversary of the Effective Date while the Belshazzar Agreement remains in effect. We retain the exclusive option and right to acquire 100% ownership of the Belshazzar Property (the “Belshazzar Purchase Option”). To exercise the Belshazzar Purchase Option, we will be required to pay $800,000 (the “Belshazzar Purchase Price”). The Belshazzar Purchase Price can be paid in either cash and/or equity, or a combination thereof, at the election of BH. The annual payments paid by us to BH, shall not be applied or credited against the Belshazzar Purchase Price. The Belshazzar Property is subject to a 1% Gross Returns Royalty payable to the property owner, from the commencement of commercial production subject to certain terms.

As of the date of this quarterly report on Form 10-Q, the initial cash payment remains outstanding pursuant to a verbal extension granted to us by BH.

Convertible Debt Financing

During the quarter ended September 30, 2021, we organized a convertible debt financing of up to $1,000,000 worth of convertible promissory notes (each, a “Note”, and collectively, the “Notes”) due twelve (12) months after issuance (the “Maturity Date”) to accredited investors only (the “Holders”). The Notes accrue interest at a rate of 15% per annum. At the option of the Note Holder, the Company may either (i) pay the interest quarterly in arrears, or (ii) allow the interest to accrue until the Maturity Date. In addition, at the Company’s sole discretion, we may either (i) repay the principal amount of the Notes on the Maturity Date, or (ii) commencing one month from the issue date, we may repay 1/12 of the outstanding principal amount of the Notes in any given month until the Maturity Date. At the discretion of the Holder the Note may be converted into common stock of the Company (the “Common Stock”) at a conversion price equal to the lesser of (i) $0.375 per Share, or (ii) a 25% discount to the price per Share in a Qualified Public Offering. The term “Qualified Public Offering” shall mean a debt or equity offering that occurs subsequent to the sale of the Notes in an aggregate amount of $5,000,000 that results in gross offering proceeds to the Company of at least $5,000,000. The Holder(s) will be limited to converting to a number of Shares of Common Stock that shall not exceed 4.99% of the issued and outstanding Shares of the Company at time of conversion. The Company closed the convertible debt financing on October 14, 2021.

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 of America (“GAAP”) and are presented in US dollars. 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.

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 nine-month periods ended September 30, 2021, 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, 2020.

Revenues

We had no revenues for the three- and nine-month periods ended September 30, 2021 and 2020. 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 for the three-month periods ended September 30, 2021 and 2020 included exploration expenses, general and administrative expenses, professional fees and transfer agent and filing fees. During the three-month period ended September 30, 2021, our operating expenses decreased by $9,217, or 48%, to $9,795 for the three months ended September 30, 2021, compared to $19,012 for the three months ended September 30, 2020. This change was associated with $4,806 decrease in mineral exploration expenses from $7,349 we incurred during the three-month period ended September 30, 2020, to $2,543 we incurred during the three-month period ended September 30, 2021. The exploration expenses during the current period were associated with annual payments for the Lazy Claims, whereas during the comparative period we paid annual fees on the Lazy Claims as well as on the Loman Claims. Our professional fees decreased by $2,700, from $5,200 we incurred during the three-month period ended September 30, 2020 to $2,500 we incurred during the three-month period ended September 30, 2021; and our transfer agent and filing fees decreased by $1,551, from $3,475 we incurred during the three-month period ended September 30, 2020, to $1,924 we incurred during the three-month period ended September 30, 2021. Our general and administrative fees decreased by $160 to $2,828 for the three-month period ended September 30, 2021.

On a year-to-date basis, our operating expenses increased by $14,510, or 42%, to $49,065 for the nine months ended September 30, 2021, compared to $34,555 we incurred for the nine months ended September 30, 2020. This change was associated with $30,983 we incurred in general and administrative expenses, of which $20,700 we paid for redesigning of our website and corporate presentation materials, the expense we did not have during the nine months ended September 30, 2020. This increase was in part offset by decreases in our professional fees of $1,700, which amounted to $8,500 as comparted to $10,200 we incurred during the nine months ended September 30, 2020; $4,806 decrease in mineral exploration expenses from $7,349 we incurred during the nine-month period ended September 30, 2020, to $2,543 we incurred during the nine-month period ended September 30, 2021, and $1,248 decrease to our transfer agent and filing fees from $8,287 we incurred during the nine-month period ended September 30, 2020, to $7,039 we incurred during the nine-month period ended September 30, 2021.

Other Items

During the three-month period ended September 30, 2021, we recognized $94,775 loss on fair value of equity investments (2020 – $237,226 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$0.07 per share at June 30, 2021, to CAD$0.06 per share at September 30, 2021, and to a smaller degree from fluctuation of exchange rates between the US and Canadian dollars. We earned $63 in interest revenue (2020 - $481). Since the funds generated from the sale of equity investments are held in Canadian dollars, we incurred $13,725 loss associated with foreign exchange fluctuation rates (2020 - $8,811 gain). During the comparative three-month period ended September 30, 2020, we recorded $86,586 gain on equity investments which was associated with the sale of 4,371,000 WRR Shares for net proceeds of $375,249. We did not sell any WRR Shares during the three-month period ended September 30, 2021. In addition, during the three-month period ended September 30, 2021, we recorded $3 in accretion expenses associated with the beneficial conversion discount we recognized on our convertible notes payable we issued in September of 2021.

During the nine-month period ended September 30, 2021, we recognized $317,364 loss on fair value of equity investments (2020 – $246,593 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$0.10 per share at December 31, 2020, to CAD$0.06 per share at September 30, 2021, and to a smaller degree from fluctuation of exchange rates between the US and Canadian dollars. We earned $694 in interest revenue (2020 - $2,363). Since the funds generated from the sale of equity investments are held in Canadian dollars, we incurred $4,683 gain associated with foreign exchange fluctuation rates (2020 - $9,615 loss). During the nine-month period ended September 30, 2021, we recorded $315 (2020 - $168,866) gain on equity investments which was associated with the sale of 21,000 WRR Shares for net proceeds of $2,152. During the comparative period ended September 30, 2020, we sold a total of 5,640,000 WRR Shares for net proceeds of $540,579. In addition, during the nine-month period ended September 30, 2021,we recorded $3 in accretion expenses associated with the beneficial conversion discount we recognized on our convertible notes payable we issued in September of 2021.

Net Income (Loss)

During the three months ended September 30, 2021, we incurred net loss of $118,235, as compared to net income of $314,092 we generated during the three-month period ended September 30, 2020. This change mainly resulted from $94,775 loss on revaluation of our equity investments in WRR Shares, as opposed to $237,226 gain we recognized in the comparative period.

During the nine months ended September 30, 2021, we incurred net loss of $360,740, as compared to net income of $373,652 we generated during the nine-month period ended September 30, 2020. This change mainly resulted from $317,364 loss on revaluation of our equity investments in WRR Shares, as opposed to $246,593 gain we recognized in the comparative period. In addition, during the comparative nine-month period we recorded $168,866 gain on equity investments which was associated with the sale of 5,640,000 WRR Shares for net proceeds of $540,579.

As of September 30, 2021, we had a cash balance of $992,891 and working capital deficit of $468,429 with cash flows used in operations totaling $57,767 for the period then ended. During the nine months ended September 30, 2021, our operations were funded with cash on hand.

The cash that we had on hand at September 30, 2021, was generated by selling our investment in WRR shares and from the proceeds we generated from issuing convertible notes payable due in 12 months from the issuance date. Our operating activities did not generate sufficient cash flows to satisfy our cash requirements for the nine-month period ended September 30, 2021. Due to the exploration rather than the production nature of our business, there is no assurance that we will be able to generate sufficient cash from our operations. 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 in WRR 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.