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:
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the
risks of an exploration stage company;
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management’s
plans, objectives and budgets for its future operations and future economic performance;
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capital
budget and future capital requirements;
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meeting
future capital needs;
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our
dependence on management and the need to recruit additional personnel;
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limited
trading for our common stock;
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the
level of future expenditures;
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impact
of recent accounting pronouncements;
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the
outcome of regulatory and litigation matters; and
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●
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the
assumptions described in this report underlying such forward-looking statements.
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Actual
results and developments may materially differ from those expressed in, or implied by, such statements due to a number of factors,
including:
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●
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those
described in the context of such forward-looking statements;
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future
product development and marketing costs;
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the
markets of our domestic operations;
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the
impact of competitive products and pricing;
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the
political, social and economic climate in which we conduct operations; and
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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).
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We
operate in a very competitive and rapidly changing 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 condensed interim 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 condensed interim 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 months ended June 30, 2017 and 2016. You should refer to the Financial Statements and related Notes in conjunction
with this discussion.
General
We
are an exploration stage Company. We have only recently begun our exploration operations and have not generated or realized any
revenues from these business operations.
We
were a party to an Exploration Agreement (the “Agreement”) with Option to form a Joint Venture with Walker River Resources
Corp. (“WRR”) on its wholly-owned Lapon Canyon Gold Project (“Lapon Canyon Project”, or “the Property”)
located approximately 40 miles southeast of Yerington, Nevada. The Agreement did not grant us an interest in or to the Property,
or any equity interest in WRR, but rather, granted us the right to earn up to an undivided 50% interest in the Property by incurring
eligible expenditures of $500,000 (over a two-year period) in exploration and other expenses required to carry out a work program
established and operated by WRR on the Property (the “Eligible Expenses”).
As
of June 30, 2017, our interest in the Property was 30%, prorated based on the amount of eligible expenditures we’ve incurred
as of that date.
On
July 5, 2017, we entered into an option purchase agreement (the “Second Option Agreement”) with WRR on the Lapon Canyon
Project. Under the terms of the Second Option Agreement WRR agreed to buy back our interest in the Lapon Canyon Project in exchange
for 9,100,000 common shares of WRR and warrants to acquire an additional 11,900,000 common shares. Each warrant is exercisable
for a period of five years without further consideration into one common share in the capital of WRR. The terms of the warrants
contain a provision which prevents us from exercising any warrants which would result in us owning 10% or more of the issued and
outstanding shares of WRR. Closing of the Second Option Agreement was subject to the acceptance of the TSX Venture Exchange,
which was received on July 17, 2017. All securities issued pursuant to the Second Option Agreement are subject to a hold period
expiring on November 20, 2017.
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 12 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. The term of the Garfield Agreement is ten years,
and is subject to extension for two additional terms of ten years each.
In
order to retain the rights to the exploration lease, we are required to make the following minimum annual payments:
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|
Minimum
Payment
|
|
Upon
execution of the option agreement (the “Effective Date”)(paid)
|
|
$
|
15,000
|
|
First
anniversary of the Effective Date
|
|
$
|
15,000
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|
Second
and third anniversaries of the Effective Date
|
|
$
|
20,000
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|
Fourth
and fifth anniversaries of the Effective Date
|
|
$
|
25,000
|
|
Sixth
and each succeeding anniversary of the Effective Date in perpetuity
|
|
$
|
40,000
|
|
In
addition to the minimum annual payments, we agreed to pay Goodsprings a 2% production royalty based on the gross returns from
the production and sale of minerals from the Garfield Property.
At
any time during the term of the Agreement we have a right to acquire 100% ownership of the Garfield Property for a one-time payment
of $300,000 (the “Purchase Price”). The minimum annual payments paid by us to Goodsprings, cannot be applied or credited
against the Purchase Price, however, once we exercise our option to acquire the Garfield Property, the minimum annual payments
shall be credited against the production royalties payable.
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 acquire rights to the Lazy Claims, consisting of three claims totaling
60 acres and located in Mineral County, Nevada about 18 miles southeast of the town of Hawthorne (the “Lazy Claims Property”).
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, 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.
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 condensed
interim financial statements, which have been prepared in accordance with accounting principles generally accepted in the United
States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those
related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its
estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most
significant accounting estimates inherent in the preparation of our unaudited condensed interim 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
financial statements for the three and six months ended June 30, 2017 and 2016, 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, 2016.
Results
of Operations
Three
and six months ended June 30, 2017 compared to the three and six months ended June 30, 2016:
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Three months ended June 30,
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Changes between the
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|
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Six months ended June 30,
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Changes between the
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2017
|
|
|
2016
|
|
|
periods
|
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|
2017
|
|
|
2016
|
|
|
periods
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Revenue
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$
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15,000
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|
|
$
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-
|
|
|
$
|
15,000
|
|
|
$
|
15,000
|
|
|
$
|
-
|
|
|
$
|
15,000
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Exploration expenses
|
|
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9,284
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|
|
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14,171
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|
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|
(4,887
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)
|
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29,292
|
|
|
|
39,124
|
|
|
|
(9,832
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)
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General and administrative expenses
|
|
|
5,885
|
|
|
|
11,133
|
|
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|
(5,248
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)
|
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|
10,830
|
|
|
|
22,597
|
|
|
|
(11,767
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)
|
Professional fees
|
|
|
1,500
|
|
|
|
23,677
|
|
|
|
(22,177
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)
|
|
|
4,000
|
|
|
|
26,177
|
|
|
|
(22,177
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)
|
Transfer agent and filing fees
|
|
|
1,875
|
|
|
|
3,326
|
|
|
|
(1,451
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)
|
|
|
3,976
|
|
|
|
5,552
|
|
|
|
(1,576
|
)
|
Total operating expenses
|
|
|
(18,544
|
)
|
|
|
(52,307
|
)
|
|
|
(33,763
|
)
|
|
|
(48,098
|
)
|
|
|
(93,450
|
)
|
|
|
(45,352
|
)
|
Other items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
-
|
|
|
|
(1,260
|
)
|
|
|
(1,260
|
)
|
|
|
-
|
|
|
|
(2,493
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)
|
|
|
(2,493
|
)
|
Net and comprehensive loss
|
|
$
|
(3,544
|
)
|
|
$
|
(53,567
|
)
|
|
$
|
(50,023
|
)
|
|
$
|
(33,098
|
)
|
|
$
|
(95,943
|
)
|
|
$
|
(62,845
|
)
|
Revenues
.
During the three and six months ended June 30, 2017, we recorded $15,000 in revenue from consulting services we’ve provided
to WRR. We did not have similar revenues during the three and six months ended June 30, 2016. 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, 2017, our operating expenses decreased by $33,763,
or 65%, to $18,544 for the three months then ended, compared to $52,307 for the comparable period in 2016. This change was mainly
associated with reduced professional fees as well as exploration expenses, as the main part of the drilling program we commenced
on the Lapon Canyon claims (the “Exploration Program”), which was required under our Agreement with WRR to earn a
50% interest in a joint venture, was completed in our Fiscal 2016.
During
the six-month period ended June 30, 2017, our operating expenses decreased by $45,352, or 49%, to $48,098 for the six months ended
June 30, 2017, as compared to $93,450 for the comparable period in 2016. This change was associated with reduced exploration operations
on the Lapon Property, as the main part of the drilling program on the Lapon Canyon claims (the “Exploration Program”),
which was required under our Agreement with WRR to earn a 50% interest in a joint venture, was completed in our Fiscal 2016. During
the six-month period ended June 30, 2017, we recorded $29,292 in exploration expenses directly associated with the Exploration
Program, as compared with $39,124 we spent during the six-month period ended June 30, 2016. Our general and administrative expenses
decreased by $11,767, or 52%, to $10,830 for the six months ended June 30, 2017, compared with $22,597 for the six-month period
ended June 30, 2016. The greater general and administrative expenses during the comparable period were attributable to the fair
value of 800,000 common shares we issued to Nevada Canyon Gold Corporation, a Nevada privately held corporation, with the President
and CEO in common (“NCG”), which were valued at $8,000. The shares were issued to purchase the intangible assets of
NCG which included its corporate name, domain name and all related content. In addition to the above, our professional fees decreased
by $22,177 to $4,000 we incurred during the six-month period ended June 30, 2017, as compared to $26,177 we incurred during the
comparable period in 2016. Greater professional fees in our Fiscal 2016 were mainly associated with legal and audit fees which
increased in parallel with increased business activity.
Net
loss.
Our net loss decreased by $50,023, or 93%, to $3,544 for the three months ended June 30, 2017, compared to $53,567 for
the comparable period in 2016.
Our
net loss for the six months ended June 30, 2017 decreased by $62,845, or 66%, to $33,098, compared to $95,943 for the comparable
period in 2016.
These
decreases were primarily attributable to the decreases in operating expenses discussed above, which were further augmented by
consulting revenue we recorded in the second quarter of our Fiscal. In addition, absence of interest-bearing liabilities also
contributed to reduction of our net loss during the three and six months ended June 30, 2017.
Liquidity
and Capital Resources
|
|
June
30, 2017
|
|
|
December
31, 2016
|
|
|
|
|
|
|
|
|
Current
assets
|
|
$
|
11,541
|
|
|
$
|
66,797
|
|
Current
liabilities
|
|
|
99,042
|
|
|
|
106,200
|
|
Working
capital deficit
|
|
$
|
(87,501
|
)
|
|
$
|
(39,403
|
)
|
As
of June 30, 2017, we had a cash balance of $4,538, and working capital deficit of $87,501 with cash flows used in operations totaling
$27,251 for the period then ended. During the six-month period ended June 30, 2017, our operations were funded with $15,000 we
received on account of our consulting services provided to WRR, and with proceeds from a private placement for gross proceeds
of $375,000, which we closed in the second quarter of our Fiscal 2016.
We
did not generate sufficient cash flows from our operating activities to satisfy our cash requirements for the six-month period
ended June 30, 2017. 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 raise additional financing from other sources.
To
provide us with the necessary capital to accomplish our plan of operation we intend to seek additional financing in the form of
equity or debt. There can be no assurance that we will be successful in our efforts to raise additional capital.
Cash
Flow
|
|
Six
Months Ended
June
30,
|
|
|
|
2017
|
|
|
2016
|
|
Cash
flows used in operating activities
|
|
$
|
(27,251
|
)
|
|
$
|
(82,489
|
)
|
Cash
flows used in investing activities
|
|
|
(15,000
|
)
|
|
|
-
|
|
Cash
flows provided by (used in) financing activities
|
|
|
(5,000
|
)
|
|
|
407,907
|
|
Net
increase (decrease) in cash during the period
|
|
$
|
(47,251
|
)
|
|
$
|
325,418
|
|
Net
cash used in operating activities
: Our net cash used in operating activities decreased by $55,238, or 67%, to $27,251 for
the six months ended June 30, 2017, compared with $82,489 for the comparable period in 2016. During the six months ended June
30, 2017, we used $33,098 to cover our cash operating costs and $2,158 to decrease amounts payable to our vendors. These uses
of cash were offset by $8,005 decrease in our prepaid expenses.
During
the six months ended June 30, 2016, our net cash used in operating activities increased by $35,099, or 74%, to $82,489, compared
with $47,390 for the comparable period in 2015. We used $85,450 to cover our cash operating costs, and $4,495 to increase our
prepaid expenses. These uses of cash were offset by increase in our accounts payable of $7,456.
Certain
non-cash transactions:
During the six months ended June 30, 2016, our operating costs included $2,493 in accrued interest
on $100,000 note payable we issued to an arms-length party, as well as $8,000 in share-based payment we recorded on issuance of
800,000 common shares to NCG in exchange for its intangible assets, including its corporate name, domain name and all related
content. We did not have any non-cash transactions during the six-month period ended June 30, 2017.
Net
cash provided by (used in) financing activities
: Our net cash provided by financing activities decreased by $412,907, or 101%.
During the six months ended June 30, 2017, we repaid $5,000 in advances we received from our CEO and President during our Fiscal
2016.
During
the six months ended June 30, 2016, our net cash provided by financing activities increased by $399,407, or 4,699%, to $407,907
as compared with $8,500 for the comparable period in 2015. We received $375,000 in gross proceeds from a private placement for
3,750,000 shares of our common stock at $0.10 per share, which we closed on June 21, 2016. We received $30,000 advance from our
CEO and President free of interest and payable on demand. In addition, our CEO and a director made certain payments on behalf
of the Company, which payments amounted to $2,907.
Net
cash used in investing activities
: During the six months ended June 30, 2017, we paid $15,000 as an initial payment to acquire
Garfield Property pursuant to our exploration lease and option to purchase agreement with Goodsprings Development LLC.
During
the six months ended June 30, 2016, we did not have any investing transactions that would have effected our cash flows.
Going
Concern
At
June 30, 2017, we had a working capital deficit of $87,501 and cash on hand of $4,538, which is not sufficient enough to carry
out our current plan of operation, however we are in the process of trying to procure funds sufficient to fund our operations
until we are able to finance our operations through cash flow. There can be no assurance that we will be able to procure funds
sufficient for such purpose. 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.
Income
Tax Benefit
The
Company has a prospective income tax benefit resulting from a net operating loss carry forwards that may offset any future operating
profit.
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, 2017.
Unproved
Mineral Properties
As
of the date of this quarterly report on Form 10-Q, we hold interest in the following properties:
Name
|
|
Number
of Claims
|
|
|
Total
Size
(Acres)
|
|
Garfield
Flats Project
|
|
|
12
|
|
|
|
240
|
|
Lazy
Claims Property
|
|
|
3
|
|
|
|
60
|
|
Total
|
|
|
15
|
|
|
|
300
|
|
Garfield
Flats Project
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 12 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. The term of the Garfield Agreement is ten years,
and is subject to extension for two additional terms of ten years each.
In
order to retain the rights to the exploration lease, we are required to make the following minimum annual payments:
|
|
Minimum
Payment
|
|
Upon
execution of the option agreement (the “Effective Date”)(paid)
|
|
$
|
15,000
|
|
First
anniversary of the Effective Date
|
|
$
|
15,000
|
|
Second
and third anniversaries of the Effective Date
|
|
$
|
20,000
|
|
Fourth
and fifth anniversaries of the Effective Date
|
|
$
|
25,000
|
|
Sixth
and each succeeding anniversary of the Effective Date in perpetuity
|
|
$
|
40,000
|
|
In
addition to the minimum annual payments, we agreed to pay Goodsprings a 2% production royalty based on the gross returns from
the production and sale of minerals from the Garfield Property.
At
any time during the term of the Agreement we have a right to acquire 100% ownership of the Garfield Property for a one-time payment
of $300,000 (the “Purchase Price”). The minimum annual payments paid by us to Goodsprings, cannot be applied or credited
against the Purchase Price, however, once we exercise our option to acquire the Garfield Property, the minimum annual payments
shall be credited against the production royalties payable.
Lazy
Claims Property
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 acquire rights to the Lazy Claims, consisting of three claims totaling
60 acres and located in Mineral County, Nevada about 18 miles southeast of the town of Hawthorne (the “Lazy Claims 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 to Tarsis be in excess
of $2,000 per year, we will not be required to pay a $2,000 annual minimum payment.
Lapon
Canyon Property
On
December 17, 2015, we entered into a definitive agreement (the “Agreement”) with Nevada Canyon Gold Corporation, to
acquire all of NCG’s rights, titles and interests in and into an exploration agreement with an option to form a joint venture
with Walker River Resources Corp. dated September 15, 2015. WRR owns a 100% undivided interest in and to the Lapon Canyon Gold
Property, containing the Lapon Canyon claims (“the Property”), which is the subject of the Agreement.
The
Agreement did not grant us an interest in or to the Property, or any equity interest in WRR, but rather, granted us the right
to earn up to an undivided 50% interest in the Property by incurring $500,000 (over a two-year period) in eligible exploration
and other expenses required to carry out an Exploration Program established and operated by WRR on the Property (the “Eligible
Expenses”). As of October 15, 2016, we have incurred required $250,000 in Eligible Expenses, and earned the 25% interest
to the Property. As at June 30, 2017, our interest in the Property had increased to a 30%.
On
July 5, 2017, we entered into an option purchase agreement (the “Second Option Agreement”) with WRR on the Property.
Under the terms of the Second Option Agreement WRR agreed to buy back our interest in the Lapon Canyon Project in exchange for
9,100,000 common shares of WRR and warrants to acquire an additional 11,900,000 common shares. Each warrant is exercisable for
a period of five years without further consideration into one common share in the capital of WRR. The terms of the warrants contain
a provision which prevents us from exercising any warrants which would result in us owning 10% or more of the issued and outstanding
shares of WRR. The above securities were issued on July 19, 2017, upon acceptance of the Second Option Agreement by the TSX Venture
Exchange. All securities issued pursuant to the Second Option Agreement are subject to a hold period expiring on November 20,
2017.
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 six months ended June 30, 2017.