As filed with the Securities and Exchange Commission on July 24, 2018.
Registration No. ___________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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Joshua Gold Resources Inc.
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(Exact name of registrant as specified in its charter)
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Nevada
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1040
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27-0531073
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(State or Other Jurisdiction of
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(Primary Standard Industrial
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(IRS Employer
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Incorporation or Organization)
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Classification Number)
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Identification Number)
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Joshua Gold Resources Inc
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35 Perry Street, Woodstock, Ontario, Canada N4S 3C4
(Address of Principal Executive Offices)(Zip Code)
(877) 539-6109
(Name, address, including zip code, and telephone number, including area code, of registrant's principal executive offices)
Benedetto Fuschino
President and Chief Executive Officer
Joshua Gold Resources Inc
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35 Perry Street, Woodstock, Ontario, Canada N4S 3C4
(877) 539-6109
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Branden T. Burningham, Esq.
Burningham Law Group
2150 South 1300 East, Suite 500
Salt Lake City, Utah, 84106
Telephone No.: (801) 363-7411
Facsimile No.: (801) 990-4235
Approximate date of proposed sale to the public: As soon as practicable and from time to time after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.
x
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
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If this Form is a post-effective amendment filed pursuant to rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
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If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of
large accelerated filer,
accelerated filer,
and
smaller reporting company
and
emerging growth company
in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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x
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(Do not check if a smaller reporting company)
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Emerging growth company
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x
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act.
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CALCULATION OF REGISTRATION FEE
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Title of Each Class of Securities to be Registered
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Amount to Be
Registered (1)
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Proposed
Maximum
Offering Price
per Share
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Proposed
Maximum
Aggregate
Offering Price
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Amount of
Registration Fee
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Common Stock, par value $0.001 per share, to be registered as part of the Primary Offering (as hereinafter defined)
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5,000,000
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(2)
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$
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0.15
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(2)
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$
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750,000
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$
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93.37
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Common Stock, par value $0.001 per share, to be registered as part of the Secondary Offering by Selling Stockholders (as hereinafter defined)
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62,912,797
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(3)
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$
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0.15
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(3)
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$
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9,436,919.55
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$
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1,174.90
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TOTAL
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67,912,797
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$
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0.15
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$
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10,186,919.55
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$
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1,268.27
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(1)
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In the event of a stock split, stock dividend or similar transaction involving our common stock, the number of shares registered shall automatically be increased to cover the additional shares of common stock issuable pursuant to Rule 416 under the Securities Act of 1933, as amended.
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(2)
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The registration fee for securities to be offered by the Registrant is based on an estimate of the proposed maximum aggregate offering price of the securities, and such estimate is solely for the purpose of calculating the registration fee pursuant to Rule 457(c).
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(3)
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This offering price has been arbitrarily valued and bears no relationship to any objective criterion of value. There is no current public market for the securities. Therefore the Registrant believes that it is impossible to estimate the filing fee in accordance with Rule 457(c) under the Securities Act of 1933. As such, for the purposes of calculating the registration fee under Rule 457(a), the Registrant has valued the common stock to be offered and sold by the sell Stockholders at the same price as the Primary Offering price.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the U.S. Securities and Exchange Commission (the "SEC") is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
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PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION
5,000,000 SHARES OF COMMON STOCK OFFERED BYJOSHUA GOLD RESOURCES INC.
62,912,797 SHARES OF COMMON STOCK OFFERED BY SELLING STOCKHOLDERS
This prospectus relates to both (i) the initial public offering of the common stock of Joshua Gold Resources Inc, a Nevada corporation (Joshua Gold, the Company, we, us, our and words of similar import), in which we are offering a maximum of 5,000,000 of our common stock, and (ii) the resale by certain Selling Stockholders of Joshua Gold of up to 62,912,797 shares of common stock held by Selling Stockholders of Joshua Gold. While we will receive proceeds from our own sale of our common stock, we will not receive any of the proceeds from the sale of the shares by the Selling Stockholders.
Any purchaser of common stock in the offerings may be the only purchaser, given the lack of a minimum offering amount.
In our initial public offering, we are offering for sale a total of 5,000,000 shares of common stock at a fixed price of $0.15 per share for the duration of the offering. There is no minimum number of shares that must be sold by us for the offering to proceed, and we will retain the proceeds from the sale of any of the offered shares. The offering is being conducted on a self-underwritten, best efforts basis, which means our management will attempt to sell the shares. This prospectus will permit our President, Benedetto Fuschino to sell the shares directly to the public, with no commission or other remuneration payable to him for any shares he may sell. Mr. Fuschino will sell the shares and intends to offer them to friends, family members and business acquaintances. Mr. Fuschino will not sell any of his shares until the Company sells all of the 5,000,000 shares in its offering. In offering the securities on our behalf, Mr. Fuschino will rely on the safe harbor from broker-dealer registration set out in Rule 3a4-1 under the Securities Exchange Act of 1934, as amended (the Exchange Act). The shares will be offered at a fixed price of $0.15 per share for the duration of the offering, which is a period of 16 months from the effective date of this prospectus.
We have not made any arrangements to place funds received from share subscriptions in an escrow, trust or similar account. Any funds raised from the offering will be immediately available to us for our immediate use. Accordingly, if we file for bankruptcy protection or a petition for involuntary bankruptcy is filed by creditors against us, your funds will become part of the bankruptcy estate and administered according to the bankruptcy laws. If a creditor sues us and obtains a judgment against us, the creditor could garnish the bank account and take possession of the subscriptions. As such, it is possible that a creditor could attach your subscription. If that happens, you will lose your investment and your funds will be used to pay creditors.
As there is no existing market for our common stock, the Selling Stockholders will sell their shares of common stock at the fixed price of $0.15 per share until our shares are listed on a national securities exchange or quoted on the OTC Bulletin Board, OTCQX or OTCQB, at which time they may sell the shares at the prevailing market prices or at privately negotiated prices. If the Selling Stockholders were to sell all 62,912,797 Secondary Offering shares at the fixed price of $0.15 per share, the Selling Stockholders would realize gross proceeds of $9,436,919.55. Because it is impossible to estimate the total amount of any sales commissions or other costs associated with such sales, it is impossible to estimate the net proceeds to be received by the Selling Stockholders in such a case. Thereafter, the Selling Stockholders may offer their shares at prevailing market prices or at privately negotiated prices. Because such prices are currently unknown, it is impossible to determine the Selling Stockholders' net proceeds of all of their shares of common stock are sold. Each of the Selling Stockholders may be deemed to be an "underwriter" as such term is defined in the Securities Act of 1933, as amended (the "Securities Act").
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
We are an emerging growth company under federal securities laws and will be subject to reduced public company reporting requirements.
Investing in our common stock involves a high degree of risk. Before buying any shares, you should carefully read the discussion of material risks of investing in our common stock in "Risk Factors" beginning on page 7 of this prospectus.
We may amend or supplement this prospectus from time to time by filing amendments or supplements as required and will provide investors with all such subsequent material information. You should read the entire Prospectus and any amendments or supplements we provide carefully.
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The date of this prospectus is ____________, 2018
The following table of contents has been designed to help you find information contained in this prospectus. We encourage you to read the entire prospectus.
TABLE OF CONTENTS
SUMMARY FINANCIAL INFORMATION
The tables and information below are derived from our audited financial statements for the year ended December 31, 2017, and our unaudited financial statements for the quarterly period ended March 31, 2018. Our accumulated deficit as at December 31, 2017, and March 31, 2018, was $11,568,937, and $11,607,203, respectively.
Financial Summary
December 31, 2017
Cash and Deposits
$ 4,105
Total Assets
$ 63,731
Total Liabilities
$ 833,003
Total Stockholders Equity (Deficit)
$ ( 769,272)
Financial Summary
March 31, 2018
Cash and Deposits
$ 7,228
Total Assets
$ 52,864
Total Liabilities
$ 838,230
Total Stockholders Equity (Deficit)
$ ( 785,366)
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RISK FACTORS
An investment in our common stock involves a number of very significant risks. You should carefully consider the following known material risks and uncertainties in addition to other information in this prospectus in evaluating our company and its business before purchasing shares of our company's common stock. You could lose all or part of your investment due to any of these risks.
RISKS RELATING TO OUR COMPANY
Our auditors have expressed substantial doubt about our ability to continue as a going concern.
Our audited financial statements for the year ended December 31, 2016 and 2017 were prepared assuming that we will continue our operations as a going concern. We were incorporated on July 10, 2009, and do not have a history of earnings. As a result, our independent accountants in their audit report have expressed substantial doubt about our ability to continue as a going concern. Continued operations are dependent on our ability to complete equity or debt financings or generate profitable operations. Such financings may not be available or may not be available on reasonable terms. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty.
The proceeds of this offering, if any, may not be sufficient to fund planned operations and may not even cover the costs of the offering and you may lose your entire investment.
Funds raised in this offering may not be sufficient to fund our planned operations and may not cover the costs of the offering. We are offering a maximum of 5,000,000 shares of our common stock at a fixed price of $0.15 per share for the duration of the offering; however, there is no minimum to our offering. Funds we raise in this offering, if any, may not be sufficient to fund our planned operations and may not even cover the costs of this offering. If we are not able to raise any funds in this offering, our company will be in a worse financial position then prior to commencement of the offering as we will still incur the costs of this offering. If we do not raise sufficient funds in this offering to fund our operations or even cover the costs of this offering, you may lose your entire investment.
There is uncertainty regarding our ability to continue as a going concern, indicating the possibility that we may be required to curtail or discontinue our operations in the future. If we discontinue our operations, you may lose all of your investment.
We have an accumulated deficit of $11,607,203_from our inception on July 10, 2009 to March 31, 2018 and have completed only the preliminary exploration stages of our business plan. We anticipate incurring additional losses before realizing any revenues and will depend on additional financing in order to meet our continuing obligations and ultimately, to attain profitability. We anticipate that our current cash assets will be extinguished by December 31, 2018. The financial statements do not include any adjustments that might result from the uncertainty about our ability to continue our business. If we are unable to obtain additional financing from outside sources and eventually produce enough revenues, we may be forced to sell our assets, or curtail or discontinue our operations. If this happens, you could lose all or part of your investment.
We are in an early stage of development. If we are not able to develop out business as anticipated, we may not be able to generate revenues or achieve profitability and you may lose your investment.
We were incorporated on July 10, 2009. We have no production, no customers, and we have not earned any revenues to date. Our business prospects are difficult to predict because of our limited operating history, early stage of development, and unproven business strategy. Our primary business activities will be focused on exploration of the mining interests. Although we believe that our business plan has significant profit potential, we may not attain profitable operations and our management may not succeed in realizing our business objectives. If we are not able to develop out business as anticipated, we may not be able to generate revenues or achieve profitability and you may lose your investment.
We expect to suffer losses in the immediate future that may cause us to curtail or discontinue our operations.
We expect to incur operating losses in future periods. These losses will occur because we do not yet have any revenues to offset the expenses associated with the development of mining properties, and our business operations, generally. We cannot guarantee that we will ever be successful in generating revenues in the future. We recognize that if we are unable to generate revenues, we will not be able to earn profits or continue operations. There is no history upon which
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to base any assumption as to the likelihood that we will prove successful, and we can provide investors with no assurance that we will generate any operating revenues or ever achieve profitable operations. If we are unsuccessful in addressing these risks, our business will almost certainly fail.
We may not be able to execute our business plan or stay in business without additional funding.
Our ability to generate future operating revenues depends in part on whether we can obtain the financing necessary to implement our business plan. We will likely require additional financing through the issuance of debt and/or equity in order to establish profitable operations, and such financing may not be forthcoming. As widely reported, the gold markets have been depressed in recent years. If such conditions and constraints continue or if there is no investor appetite to finance our business, we may not be able to acquire additional financing through credit markets or equity markets. Even if additional financing is available, it may not be available on terms favorable to us. At this time, we have not identified or secured sources of additional financing. Our failure to secure additional financing when it becomes required will have an adverse effect on our ability to remain in business.
The loss of the services of Benedetto Fuschino, our President and Chief Executive Officer, Dino Micacchi Chief Financial Officer, or our failure to timely identify and retain competent personnel could negatively impact our ability to develop our properties.
The development of our business will continue to place a significant strain on our limited personnel, management, and other resources. Our future success depends upon the continued services of our executive officers who are developing our business, and on our ability to identify and retain competent consultants and employees with the skills required to execute our business objectives. The loss of the services of Benedetto Fuschino, our President and Chief Executive Officer, Dino Micacchi, or our failure to timely identify and retain competent personnel could negatively impact our ability to develop our website and sell our services, which could adversely affect our financial results and impair our growth.
We are a mineral exploration business in the development stage, with no experience in the market, and failure to successfully compensate for this inexperience may adversely impact our operations and financial position.
By industry standards, there are generally four types of mining companies. We are considered an exploration stage company. Typically, an exploration stage mining company is focused on exploration to identify new, commercially viable gold deposits. Junior mining companies typically have proven and probable reserves of less than one million ounces of gold, generally produce less than 100,000 ounces of gold annually, and/or are in the process of trying to raise enough capital to fund the remainder of the steps required to move from a staked claim to production. Mid-tier and large mining senior companies may have several projects in production plus several million ounces of gold in reserve.
As a mineral exploration business in a highly competitive industry, we have little operating history, few substantial tangible assets, no customer base and no revenue to date. This makes it difficult to evaluate our future performance and prospects. Our prospects must be considered in light of the risks, expenses, delays and difficulties frequently encountered in establishing a business in an industry characterized by intense competition, including:
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our business model and strategy are still evolving and are continually being reviewed and revised;
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we may not be able to raise the capital required to develop our initial customer base and reputation;
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we may not be able to successfully implement our business model and strategy; and
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our management consists of two people: Benedetto Fuschino who serves as our President and Director, and Dino Micacchi who serves as our Chief Financial Officer, Secretary/Treasurer and Director.
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We cannot be sure that we will be successful in meeting these challenges and addressing these risks and uncertainties. If we are unable to do so, our business will not be successful and the value of your investment in our company will decline.
Our failure to protect our mineral property rights may significantly impair our competitive advantage.
Our success and ability to compete depend in large part upon protecting our mineral property rights. We rely on a combination of fund raising and deferred financing to protect our property rights. The steps we have taken may not be sufficient to prevent the expiration of these rights.
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We may face costly claims against our mineral property rights, the result of which would decrease the amount of cash we would anticipate to operate and complete our business plan.
We anticipate that from time to time we could receive communications from third parties asserting that they have certain property rights. If anticipated claims arise, we will evaluate their merits. Any claims brought by third parties could result in protracted and costly litigation, which could result in substantial cost to us and diversion of our resources, may be necessary to enforce our property rights or to defend us against claims by others. Any litigation could have a material adverse effect on our business, financial condition and results of operations.
We will incur costs associated with SEC reporting compliance, which may significantly affect our financial condition.
The Company made the decision to become an SEC "reporting company" in order to comply with applicable laws and regulations. We will incur certain costs of compliance with applicable SEC reporting rules and regulations including, but not limited to attorneys' fees, accounting and auditing fees, other professional fees, financial printing costs and Sarbanes-Oxley compliance costs in an amount estimated at approximately $25,000 per year. On balance, the Company determined that the incurrence of such costs and expenses was preferable to the Company being in a position where it had very limited access to additional capital funding.
Historically, we have not been timely in meeting our required periodic reporting requirements under the Securities Exchange Act of 1934, as amended. As a result, we will be ineligible to use Form S-3 or Form S-4 for a period of time. This may adversely affect our ability to engage in certain types of corporate acquisition and capital-raising transactions.
As a result of our delayed filing of certain of our periodic reports, we will be ineligible to register our securities on Form S-3 or Form S-4 for sale by us or resale by other security holders until we have timely filed all periodic reports under the Securities Exchange Act of 1934 for a period of time. In the meantime, we have the ability to use Form S-1 to raise capital or complete acquisitions. The need to use Form S-1, and the inability to use Form S-3 or Form S-4, could increase our transaction costs and adversely affect our ability to engage in certain types of corporate acquisition and capital-raising transactions until we regain our S-3/S-4 eligibility.
The nature of mineral exploration and production activities involves a high degree of risk and the possibility of uninsured losses that could materially and adversely affect our operations.
Exploration for minerals is highly speculative and involves greater risk than many other businesses. Many exploration programs do not result in the discovery of mineralization and any mineralization discovered may not be of sufficient quantity or quality to be profitably mined. Few properties that are explored are ultimately advanced to the stage of producing mines. Our future exploration efforts will be subject to all of the operating hazards and risks normally incident to exploring for and developing mineral properties, including, but not limited to:
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Economically insufficient mineralized material;
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Fluctuations in production costs that may make mining uneconomical;
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Labor disputes;
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Unanticipated variations in grade and other geologic problems;
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Environmental hazards;
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Water conditions;
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Troublesome surface or underground conditions;
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Industrial accidents;
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Metallurgical and other processing problems;
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Mechanical and equipment performance problems;
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Failure of pit walls or dams;
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Unusual or unexpected rock formations;
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Personal injury, fire, flooding, cave-ins, and landslides; and
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Decrease in reserves due to a lower gold price.
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Any of these risks can materially and adversely affect, among other things, the development of mineral properties, production quantities and rates, costs and expenditures, and production commencement dates. We currently have no insurance to guard against any of these risks. If we determine that capitalized costs associated with any of our mineral interests are not likely to be recovered, we would incur a write-down of our investment in these interests. All of these factors may result in losses proportionate to amounts spent, which may not be recoverable.
The potential profitability of mineral ventures depends in part upon factors beyond our control and even if we discover and exploit mineral deposits, we may never become commercially viable and we may be forced to cease operations.
The commercial feasibility of mineral properties is dependent upon many factors beyond our control, including the existence and size of mineral deposits in the properties we explore, the proximity and capacity of processing equipment, market fluctuations of prices, taxes, royalties, land tenure, allowable production, and environmental regulation. These factors cannot be accurately predicted and any one or more of these factors may result in our Company not receiving an adequate return on invested capital. These factors may have material and negative effects on our financial performance and our ability to continue operations.
Mineral exploration and development activities are subject to comprehensive regulation, which may cause substantial delays or require capital outlays in excess of those anticipated, causing an adverse effect on our company.
Mineral exploration and development activities are subject to various laws, regulations and policies governing prospecting, mine development, mineral production, removal and transport of natural resources, as well as discharge of materials into the environment. Mining activities are also subject to various regulations regarding taxation, import and export, labor standards, occupational health standards, safety standards, waste disposal, toxic substances, land use, water use, environmental protection, and other matters.
Permits from various foreign, federal, state, provincial and local governmental authorities are required for mining operations to be conducted, and no assurance can be given that such permits will be successfully obtained. Environmental and other legal standards imposed by governmental authorities may be changed, and any such change may prevent us from conducting planned activities, or increase our costs of doing so, which could have material adverse effects on our business. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus causing an adverse effect on our business operations. Additionally, we may be subject to liability for pollution or other environmental damages, which we may not be able to insure against due to prohibitive premium costs and other financial and practical considerations. Any laws, regulations, or policies of any government body or regulatory agency may be changed, applied, or interpreted in a manner which will alter and negatively affect our ability to carry on our business. We cannot assure you that new rules and regulations will not be enacted, or that existing rules and regulations will not be applied in a manner which could limit or curtail our exploration or development activities on our properties.
We believe that we are in compliance with all material laws and regulations that currently apply to our activities, but there can be no assurance that we can continue to remain in compliance. Further, there can be no assurance that we will be able to obtain or maintain all permits necessary for our future operations, or that we will be able to obtain them on reasonable terms. To the extent such necessary approvals are required and are not obtained, we may be delayed or prohibited from proceeding with planned exploration or development of our mineral properties.
RISKS ASSOCIATED WITH OUR SECURITIES
Due to the lack of a trading market for our securities, you may have difficulty selling any shares you purchase in this offering.
Our common stock is not quoted on any public market. There is no assurance that a significant trading market will develop, or, if developed, that it will be sustained. Consequently, a purchaser of our common stock may find it difficult to resell the securities offered herein should the purchaser desire to do so when eligible for public resale.
The Company intends to apply for quotation of its common stock on a national securities exchange, the OTC Bulletin Board, OTCQX or OTCQB, although there can be no assurance that we will be successful in this regard. The OTCQB is a regulated quotation service that displays real-time quotes, last sale prices and volume information in over-the-counter securities. The OTCQB is not an issuer listing service, market or exchange. Although the OTCQB does not have any listing requirements per se, to be eligible for quotation on the OTCQB, issuers must remain current
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in their filings with the SEC or applicable regulatory authority. Market makers are not permitted to begin quotation of a security whose issuer does not meet this filing requirement. If no market is ever developed for our common stock, it will be difficult for you to sell any shares you purchase in this offering. In such a case, you may find that you are unable to achieve any benefit from your investment or liquidate your shares without considerable delay, if at all.
Because there is no escrow, trust or similar account, the offering proceeds could be seized by creditors or by a trustee in bankruptcy, in which case investors would lose their entire investment.
Any funds that we raise from our offering of 5,000,000 shares of common stock will be immediately available for our use and will not be returned to investors. We do not have any arrangements to place the funds received from our offering of 5,000,000 shares of common stock in an escrow, trust or similar account. Accordingly, if we file for bankruptcy protection or a petition for involuntary bankruptcy is filed by creditors against us, your funds will become part of the bankruptcy estate and administered according to the bankruptcy laws. If a creditor sues us and obtains a judgment against us, the creditor could garnish the bank account and take possession of the subscription funds. As such, it is possible that a creditor could attach your subscription funds. If that happens, you will lose your investment and your funds will be used to pay creditors.
Our common stock will be subject to the "penny stock" rules of the SEC which will make transactions in our stock cumbersome and may reduce the value of an investment in our stock.
Under U.S. federal securities legislation, our common stock will likely constitute "penny stock" if and when is quoted on a national securities exchange, the OTC Bulletin Board, OTCQX or OTCQB. Penny stock is any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require that a broker or dealer approve a potential investor's account for transactions in penny stocks, and the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve an investor's account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience objectives of the person, and make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the Commission relating to the penny stock market, which, in highlight form sets forth the basis on which the broker or dealer made the suitability determination. Brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
We may, in the future, issue additional common shares, which would reduce investors' percent of ownership and may dilute our share value.
Our Articles of Incorporation authorize the issuance of 400,000,000 shares of common stock and 100,000,000 shares of preferred stock. As of the date of this prospectus, the Company had 121,502,276 shares of common stock, and 240,000 shares of preferred stock, issued and outstanding. Accordingly, we may issue up to an additional 278,497,724 shares of common stock and 99,760,000 shares of preferred stock. The future issuance of common stock or preferred stock may result in substantial dilution in the percentage of our common stock held by our then existing shareholders. We may value any common stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, and might have an adverse effect on any trading market for our common stock.
Our insiders beneficially own a significant portion of our stock, and accordingly, may have control over stockholder matters, our business and management.
As of the date of this prospectus, the directors, Benedetto Fuschino and Dino Micacchi as a group beneficially own 26,497,127 shares of our common stock in the aggregate, or 21.8% of our issued and outstanding shares of common stock .As a result, the directors, alone, will have significant influence to:
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elect or defeat the election of our directors;
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amend or prevent amendment of our articles of incorporation or bylaws;
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effect or prevent a merger, sale of assets or other corporate transaction; and
|
·
|
affect the outcome of any other matter submitted to the stockholders for vote.
|
Moreover, because of the significant ownership position held by our directors, new investors may not be able to effect a change in our business or management, and therefore, shareholders would have no recourse as a result of decisions made by management.
In addition, sales of significant amounts of shares held by our sole director, or the prospect of these sales, could adversely affect the market price of our common stock. Our directors stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.
We are selling this offering without an underwriter and may be unable to sell any shares.
This offering is self-underwritten, that is, we are not going to engage the services of an underwriter to sell the shares; we intend to sell our shares through our President and Chief Operating Officer, Benedetto Fuschino, who will receive no commissions. He will offer the shares to friends, family members, and business associates; however, there is no guarantee that he will be able to sell any of the shares. Unless he is successful in selling all of the shares and we receive the proceeds from this offering, we may have to seek alternative financing to implement our business plan.
State securities laws may limit secondary trading, which may restrict the states in which and conditions under which you can sell the shares offered by this prospectus.
Secondary trading in common stock sold in this offering will not be possible in any state until the common stock is qualified for sale under the applicable securities laws of the state or there is confirmation that an exemption, such as listing in certain recognized securities manuals, is available for secondary trading in the state. If we fail to register or qualify, or to obtain or verify an exemption for the secondary trading of, the common stock in any particular state, the common stock could not be offered or sold to, or purchased by, a resident of that state. In the event that a significant number of states refuse to permit secondary trading in our common stock, the liquidity for the common stock could be significantly impacted thus causing you to realize a loss on your investment.
The Company does not intend to seek registration or qualification of its shares of common stock that are the subject of this offering in any state or territory of the United States. Aside from a "secondary trading" exemption, other exemptions under state law and the laws of US territories may be available to purchasers of the shares of common stock sold in this offering,
Anti-takeover effects of certain provisions of Nevada state law hinder a potential takeover of our company.
Though not now, in the future we may become subject to Nevada's control share law. A corporation is subject to Nevada's control share law if it has more than 200 stockholders, at least 100 of whom are stockholders of record and residents of Nevada, and it does business in Nevada or through an affiliated corporation. The law focuses on the acquisition of a "controlling interest" which means the ownership of outstanding voting shares sufficient, but for the control share law, to enable the acquiring person to exercise the following proportions of the voting power of the corporation in the election of directors:
(i) one-fifth or more but less than one-third, (ii) one-third or more but less than a majority, or (iii) a majority or more. The ability to exercise such voting power may be direct or indirect, as well as individual or in association with others.
The effect of the control share law is that the acquiring person, and those acting in association with it, obtains only such voting rights in the control shares as are conferred by a resolution of the stockholders of the corporation, approved at a special or annual meeting of stockholders. The control share law contemplates that voting rights will be considered only once by the other stockholders. Thus, there is no authority to strip voting rights from the control shares of an acquiring person once those rights have been approved. If the stockholders do not grant voting rights to the control shares acquired by an acquiring person, those shares do not become permanent non-voting shares. The acquiring person is free to sell its shares to others. If the buyers of those shares themselves do not acquire a controlling interest, their shares do not become governed by the control share law.
9
If control shares are accorded full voting rights and the acquiring person has acquired control shares with a majority or more of the voting power, any stockholder of record, other than an acquiring person, who has not voted in favor of approval of voting rights is entitled to demand fair value for such stockholder's shares.
Nevada's control share law may have the effect of discouraging takeovers of the corporation.
In addition to the control share law, Nevada has a business combination law which prohibits certain business combinations between Nevada corporations and "interested stockholders" for three years after the "interested stockholder" first becomes an "interested stockholder," unless the corporation's board of directors approves the combination in advance. For purposes of Nevada law, an "interested stockholder" is any person who is (i) the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the outstanding voting shares of the corporation, or (ii) an affiliate or associate of the corporation and at any time within the three previous years was the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the then outstanding shares of the corporation. The definition of the term "business combination" is sufficiently broad to cover virtually any kind of transaction that would allow a potential acquirer to use the corporation's assets to finance the acquisition or otherwise to benefit its own interests rather than the interests of the corporation and its other stockholders.
The effect of Nevada's business combination law is to potentially discourage parties interested in taking control of our company from doing so if it cannot obtain the approval of our board of directors.
Because we do not intend to pay any cash dividends on our common stock, our stockholders will not be able to receive a return on their shares unless they sell them.
We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them. Stockholders may never be able to sell shares when desired. Before you invest in our securities, you should be aware that there are various risks. You should consider carefully these risk factors, together with all of the other information included in this annual report before you decide to purchase our securities. If any of the following risks and uncertainties develop into actual events, our business, financial condition or results of operations could be materially adversely affected.
USE OF PROCEEDS
Our public offering of 5,000,000 is being made on a self-underwritten basis: no minimum number of shares must be sold in order for the offering to proceed. The net proceeds to us from the sale of up to 5,000,000 shares offered at a public offering price fixed at $0.15 per share will vary depending upon the total number of shares sold. Regardless of the number of shares sold, we expect to incur offering expenses estimated at $50,768 for legal, accounting, printing and other costs in connection with this offering (see "Other Expenses of Issuance and Distribution" in Part II). We will not receive any proceeds from the sale of shares by the Selling Stockholders. We will not maintain an escrow account for the receipt of proceeds from the sale of our shares.
The following table sets forth the uses of proceeds from the primary offering would be used assuming the sale of 25%, 50%, 75% and 100%, respectively, of the securities offered for sale by the Company. There is no assurance that we will raise the full $750,000 as anticipated.
10
See accompanying notes to the unaudited condensed interim financial statements.
82
Joshua Gold Resources Inc.
(An Exploration Stage Company)
Unaudited Condensed Interim Statement of Cash Flows
|
| |
|
Three months ended March 31, 2018
|
Three months ended March 31, 2017
|
CASH FLOWS FOR CONTINUING OPERATIONS
|
|
|
OPERATING ACTIVITIES
|
|
|
Loss from continuing operations
|
$ (38,266)
|
$ (1,047,619)
|
Adjustments for non-cash items:
|
|
|
Depreciation
|
-
|
-
|
Accrued interest
|
-
|
-
|
Loss on impairment of mineral properties
|
-
|
992,461
|
Stock issued for services
|
-
|
25,000
|
Deferred Premium on flow through shares
|
-
|
-
|
Stock based compensation
|
25,000
|
25,000
|
Adjustments for changes in working capital:
|
|
|
Accounts receivable and other assets
|
13,990
|
-
|
Accounts payable and accrued liabilities
|
5,228
|
(33,375)
|
NET CASH USED IN OPERATING ACTIVITIES
|
5,952
|
(38,533)
|
FINANCING ACTIVITIES
|
|
|
Advances from stockholders
|
-
|
40,000
|
Proceeds on issuance of capital stock
|
-
|
40,000
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
-
|
80,000
|
INVESTING ACTIVITIES
|
|
|
Mineral rights
|
-
|
(10,000)
|
NET CASH USED IN INVESTING ACTIVITIES
|
-
|
(10,000)
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH
|
(2,829)
|
791
|
NET (DECREASE) INCREASE IN CASH
|
3,123
|
32,258
|
CASH, BEGINNING OF PERIOD
|
4,105
|
3,684
|
CASH, END OF PERIOD
|
$ 7,228
|
$ 35,942
|
SUPPLLEMENTARY CASH FLOW INFORMATION
|
|
|
Income taxes paid
|
$ -
|
$ -
|
Interest paid
|
$ -
|
$ -
|
Stock issuances to acquire mineral properties
|
$ -
|
$ 985,000
|
See accompanying notes to the unaudited condensed interim financial statements
83
Joshua Gold Resources Inc.
(An Exploration Stage Company)
Notes to Unaudited Condensed Interim Financial Statements
For the three-month periods ended March 31, 2018 and 2017
1.
Nature of Operations
Joshua Gold Resources Inc. (referred to herein as Joshua, or the Company) was incorporated on July 10, 2009 in the State of Nevada, USA.
The Company operates as a mineral exploration business headquartered at 35 Perry Street, Unit 2, Woodstock, Ontario, Canada. Its principal business activity is the acquisition, exploration and development of mineral property interests in Canada. The Company is considered to be in the exploration stage and substantially all of the Companys efforts are devoted to financing and developing these property interests.
The Company has the rights to six mineral properties in Ontario and in the Northwest Territories, Canada. There has been no determination whether the Companys interests in unproven mineral properties contain mineral reserves, which are economically recoverable.
Going Concern
The unaudited condensed interim financial statements have been prepared on a going concern basis. The going concern basis of presentation assumes that the Company will continue operations for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of operation.
The Company has incurred a net loss of $38,266 for the period ended March 31, 2018, and a working capital deficit of $785,366. As an exploration stage entity, the Company has not yet commenced its mining operations and accordingly does not have any revenue. This casts substantial doubt on the Companys ability to continue as a going concern unless it can begin to generate net profit and raise adequate financing.
The Company has been seeking additional debt or equity financing to support its operations until it becomes cash flow positive. There can be no assurances that action and plan such as above will be sufficient for the Company to continue operating as a going concern.
The unaudited condensed interim financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts classified as liabilities that might be necessary should the Company be unable to continue in existence. These adjustments could be material.
2.
Significant Accounting Policies
The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10Q and Rule 10 of Regulation SX. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America. However, in the opinion of the management of the Company, all adjustments necessary for a fair presentation of the financial position and operating results have been included in these statements. These unaudited condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Companys Annual Report on Form 10K for the fiscal year ended December 31, 2017, as filed with the SEC on April 23, 2018. Operating results for the three months ended March 31, 2018 are not necessarily indicative of the results that may be expected for any subsequent quarters or for the year ending December 31, 2018.
84
Joshua Gold Resources Inc.
(An Exploration Stage Company)
Notes to Unaudited Condensed Interim Financial Statements
For the three-month periods ended March 31, 2018 and 2017
2.
Significant Accounting Policies - continued
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Some of the Company's more significant estimates include those related to uncollectible receivables, the fair value of stock-based compensation and other equity instruments, and the recoverability of mineral properties. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the period in which they become known.
Fair Value of Financial Instruments
In accordance with ASC 820,
Fair Value Measurement,
fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date.
In determining fair value, the Company uses various valuation approaches. A fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Fund. Unobservable inputs reflect the Company assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
The fair value hierarchy is categorized into three levels based on the inputs as follows:
|
| |
|
Level 1 -
|
Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
|
Level 2 -
|
Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
|
|
Level 3 -
|
Inputs to the valuation methodology are unobservable and significant to the fair value.
|
Income Taxes
The Company accounts for income taxes pursuant to ASC 740,
Income Taxes
. Deferred tax assets and liabilities are recorded for differences between the financial statements and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is recorded for the amount of income tax payable or refundable for the period increased or decreased by the change in deferred tax assets and liabilities during the period.
85
Joshua Gold Resources Inc.
(An Exploration Stage Company)
Notes to Unaudited Condensed Interim Financial Statements
For the three-month periods ended March 31, 2018 and 2017
2.
Significant Accounting Policies continued
Stock-based Compensation
The Company accounts for Stock-Based Compensation in accordance with ASC 718,
Compensation Stock Compensation
. ASC 718 establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entitys equity instruments or that may be settled by the issuance of those equity instruments.
ASC 718 focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. ASC 718 requires that the compensation cost relating to share-based payment transactions be recognized in the financial statements measured based on the fair value of the equity or liability instruments issued, when granted in exchange for employee services.
Awards granted to non-employees fall under ASC 505-50 and are recognized based on the fair value of the goods or services received or the equity instruments, whichever is more reliable.
Net Earnings (Loss) Per Share
The Company accounts for earnings (loss) per share pursuant ASC 260,
Earnings Per Share
, which requires disclosure on the financial statements of basic and diluted earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the year. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to stock options and warrants for each year. The weighted average number of shares outstanding has been adjusted for the effects of stock dividends, stock splits, and reverse stock splits.
There were no dilutive financial instruments for the periods ended March 31, 2018 and 2017.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying consolidated financial statements, other than those disclosed in the Companys Annual Report on Form 10-K filed with the SEC on April 23, 2018.
86
Joshua Gold Resources Inc.
(An Exploration Stage Company)
Notes to Unaudited Condensed Interim Financial Statements
For the three-month periods ended March 31, 2018 and 2017
3.
Mineral Property Interests
|
| |
Balance at January 1, 2017 (a) (b)
|
|
$ 1
|
Rollo Property (c)
|
|
25,000
|
Janes Reef Property (d)
|
|
16,000
|
Asquith Property (e)
|
|
10,000
|
C1 Mortimer Property (f)
|
|
941,461
|
Impairment charge
|
|
(992,461)
|
Balance at December 31, 2017 and March 31, 2018
|
|
$ 1
|
a)
Carson Property
On December 23, 2010, the Company entered into a mineral property acquisition agreement with 2214098 Ontario Ltd. pursuant to which the Company acquired the mining lease to the Carson Property. Under the acquisition agreement, the Company was required to pay:
1.
Cash consideration of $99,060 (CDN$100,000) to be paid according to an installment schedule between April 30, 2011 and December 31, 2015;
2.
Equity consideration of 1,000,000 shares of common stock to be issued on or before March 30, 2011; and
3.
Royalty of 3% of all net smelter returns upon commencement of commercial production of the property.
The Carson Property is 1,812 acres in area and is located north by north-west of the City of Yellowknife, in the Northwest Territories, Canada. The Companys interest in the property consists of a 21 year mining lease, which expires on June 30, 2024 and for which the Company was responsible for making annual lease payment of $1,141, in order to keep the lease in good standing.
On December 13, 2012, the Company terminated its acquisition agreement for the Carson Property with 2214098 Ontario Ltd. Under the terms of the agreement, the Company returned the property to the vendor, and both parties are released from any further obligation under the agreement.
87
Joshua Gold Resources Inc.
(An Exploration Stage Company)
Notes to Unaudited Condensed Interim Financial Statements
For the three-month periods ended March 31, 2018 and 2017
3.
Mineral Property Interests - continued
a)
Carson Property - continued
The Company had reflected the termination as a loss on disposal of mineral property on the statement of operations of $112,686 for the year ended December 31, 2012.
During 2016, the Company reacquired the Carson Property in exchange for 300,000 shares of common stock to be issued valued at $15,000.
In 2016 the Company recognized an impairment charge of $15,000 on the carrying value of the Carson Property based on the substantial doubt of the Companys ability to raise adequate financing.
b)
Kenty Gold Property
McClay Conveyed Property
. On October 4, 2012, the Company entered into and closed a mineral property acquisition
agreement (the McClay Agreement) with Brian McClay, a British Columbia, Canada resident (McClay), pursuant to which McClay agreed to sell to the Company an undivided one hundred percent (100%) interest in and to certain mineral interests found on the Kenty Gold Property located in the Townships of Swayze and Dore, Ontario, Canada (the McClay Conveyed Property).
As consideration for the sale of the McClay Conveyed Property, the Company agreed to deliver the following to McClay in the manner set forth below:
(a)
Closing Date
. CDN$50,000 within three (3) business days following the closing date.
(b)
February 4, 2013
.
(i)
CDN$100,000 on or before February 4, 2013; and
(ii)
200,000 common shares of Company on or before February 4, 2013.
(c)
April 4, 2013
.
(i)
CDN$150,000 on or before April 4, 2013; and
(ii)
200,000 common shares of Company on or before April 4, 2013.
(d)
October 4, 2013
.
(i)
CDN$300,000 on or before October 4, 2013; and
(ii)
250,000 common shares of Company on or before October 4, 2013.
(e)
April 4, 2014
.
(i)
CDN$300,000 on or before April 4, 2014; and
(ii)
250,000 common shares of Company on or before April 4, 2014.
(f)
October 4, 2014
.
(i)
CDN$300,000 on or before October 4, 2014; and
(ii)
250,000 common shares of Company on or before October 4, 2014.
(g)
April 4, 2015
.
(i)
CDN$300,000 on or before April 4, 2015; and
(ii)
550,000 common shares of Company on or before April 4, 2015.
(h)
Reserve
. Upon completion of a NI 43-101 compliant Indicated Reserve of 1,000,000 Troy Ounces of Gold (Aurum Metal) on the McClay Conveyed Property, Company shall pay CDN$1,000,000 to McClay.
(i)
Production
.
(i)
Upon production of 1,000,000 Troy Ounces of Gold (Aurum Metal) from the McClay Conveyed Property, Company shall pay CDN$1,000,000 to McClay.
(ii)
Upon production of 3,000,000 Troy Ounces of Gold (Aurum Metal) from the McClay Conveyed Property, Company shall pay CDN$2,000,000 to McClay.
(iii)
Upon production of 5,000,000 Troy Ounces of Gold (Aurum Metal) from the McClay Conveyed Property, Company shall pay CDN$2,000,000 to McClay.
(j)
Early Buyout Option
. Company shall have the option of early buyout within one year of execution for a cash payment of CDN$750,000 and 750,000 common shares of Company.
88
Joshua Gold Resources Inc.
(An Exploration Stage Company)
Notes to Unaudited Condensed Interim Financial Statements
For the three-month periods ended March 31, 2018 and 2017
3.
Mineral Property Interests - continued
b)
Kenty Gold Property continued
In addition, upon the Commencement of Commercial Production (as defined in the McClay Agreement), the Company shall pay to McClay a royalty in an amount equal to three percent (3%) of all Net Smelter Returns (as defined in the McClay Agreement) on minerals mined from the McClay Conveyed Property (the Seller NSR) on the terms and conditions as set out in the McClay Agreement. Notwithstanding the foregoing, at any point in time following the closing date and upon the Companys sole election, McClay shall sell to Company fifty percent (50%) of the Seller NSR for a purchase price of CDN$1,500,000.
During 2014, the Company recognized an impairment charge of $1,975,999 on the carrying value of the Kenty Property based on the substantial doubt of the Companys ability to raise adequate financing to further develop and explore this property.
As at December 31, 2016, a third party has filed a claim in the Ontario Superior Court of Justice, against the Company. The Company and its legal counsel have determined that the claim is without merit. The third party has made application claiming 100% ownership of the Kenty Property. The Company has responded in the Ontario Superior Court of Justice, with a counter application claiming the property was acquired from the Vendors, who at the time had an undivided 100% interest in the property. The Company has also claimed damages in the amount of CDN$1,000,000.
c)
Rollo Property
In 2017, the Company entered into a mineral property acquisition agreement pursuant to which the Company acquired the mining lease to the Rollo Property. Under the acquisition agreement, the Company is required to pay:
1.
Equity consideration of 250,000 shares of common stock to be issued at $0.10 per share.
In 2017 the Company issued 250,000 shares of common stock in satisfaction of the purchase price for a total of $25,000.
In 2017, the Company recognized an impairment charge of $25,000 on the carrying value of the Rollo Property based on the substantial doubt of the Companys ability to raise adequate financing to further develop and explore this property.
d)
Janes Reef Property
In 2017, the Company entered into a mineral property acquisition agreement, pursuant to which the Company acquired the mining lease to the Janes Reef Property. Under the acquisition agreement, the Company is required to pay:
1.
Equity consideration of 160,000 shares of common stock to be issued at $0.10 per share.
In 2017, the Company issued 160,000 shares of common stock in satisfaction of the purchase price for a total of $16,000.
In 2017, the Company recognized an impairment charge of $16,000 on the carrying value on the Janes Reef Property based on the substantial doubt of the Companys ability to raise adequate financing to further develop and explore this property.
89
Joshua Gold Resources Inc.
(An Exploration Stage Company)
Notes to Unaudited Condensed Interim Financial Statements
For the three-month periods ended March 31, 2018 and 2017
3.
Mineral Property Interests - continued
e)
Asquith Property
In 2017, the Company entered into a mineral property acquisition agreement. pursuant to which the Company acquired the mining lease to the Asquith Property. Under the acquisition agreement, the Company is required to pay:
1.
Equity consideration of 100,000 shares of common stock to be issued at $0.10 per share.
In 2017, the Company issued 100,000 shares of common stock in satisfaction of the purchase price for a total of $10,000.
In 2017, the Company recognized an impairment charge of $10,000 on the carrying value on the Asquith Property based on the substantial doubt of the Companys ability to raise adequate financing to further develop and explore this property.
f)
C1 Mortimer Property
In January 2017, the Company entered into a Joint Venture Agreement whereby it has an Option to acquire a fifty per cent (50%) interest in a claim known as the C1- Mortimer property. In order to earn the fifty per cent interest the Company must:
1.
Pay $10,000 CDN upon signing;
2.
Pay 10 million shares of common stock of the Company to the prospectors pro rata upon signing, which was reduced to 9,850,000 shares of common stock, of which 8,840,000 were issued and the remaining are included in stock to be issued.
3.
Spend five hundred thousand ($500,000) on mineral exploration on the property within 30 months of the signing anniversary.
4.
Grant Larry Silo first right of refusal on all exploration work.
5.
Pay the prospector owners, pro rata, CDN$750,000, within 30 months of the signing anniversary.
The current owner prospectors will retain a three per cent (3%) Net Smelter Royalty on the property.
On June 2, 2017, the payment of CDN$10,000 was changed to a payment of CDN$5,000 on June 5, 2017, plus CDN$5,000 paid on July 7, 2017. Total consideration of shares and these payments translated into USD amounted to $941,460. The Company recognized an impairment charge of $941,460 on the carrying value based on the substantial doubt of the Companys ability to raise adequate financing to further develop and explore this property.
90
Joshua Gold Resources Inc.
(An Exploration Stage Company)
Notes to Unaudited Condensed Interim Financial Statements
For the three-month periods ended March 31, 2018 and 2017
4.
Advances From Stockholders
The Company has advances from related stockholders and various individuals and corporations who are not related parties.
|
| |
|
March 31,
2018
|
December 31, 2017
|
|
|
|
Due to Ben Ward
former CEO
|
$74,861
|
$74,861
|
During the year ended December 31, 2016, Ben Ward, the former CEO of the Company transferred personal shareholdings to a vendor of the Company and assumed the debt previously owed to the vendor. The amount is non-interest bearing, unsecured and has no specified terms of repayment.
|
|
|
|
|
|
Due to David Mason
former Director and Consultant
|
52,690
|
54,500
|
On February 18, 2013, the Company entered into a short term loan agreement with David Mason, at the time a director of the Company, in the amount of CDN$25,000, with 7,500 common shares. The loan was formerly interest bearing at 1% compounded monthly, with an original maturity of April 18, 2013 and if unpaid thereafter bearing interest at 22.5%. The loan is secured by a 10% interest in the C1 Mortimer property, which the Company no longer owns, or 150,000 common stock. As the maturity has passed, the amount plus accrued interest is now due on demand. Interest expense on the loan was CDN$12,287 ($9,154) in 2017 and CDN$10,250 ($7,737) in 2016, which is included in the amount of the loan.
|
|
|
|
|
|
Due to Benedetto Fuschino
, President and CEO of the Company and to a company under his control. The amounts are non-interest bearing, unsecured and have no terms of repayment.
|
68,876
|
69,674
|
|
|
|
Due to Scott Keevil
, stockholder and consultant to the Company, due to a company under his control. The amounts of the advances totalled CDN$10,000, these amounts are non-interest bearing, unsecured and have no terms of repayment.
|
7,733
|
7,966
|
|
|
|
Due to Dino Micacchi,
stockholder and CFO of the Company, due to a company under his control. The amounts are non-interest bearing, unsecured and have no terms of repayment.
|
3,784
|
3,784
|
Long-Term Debt
|
$207,944
|
$210,785
|
91
Joshua Gold Resources Inc.
(An Exploration Stage Company)
Notes to Unaudited Condensed Interim Financial Statements
For the three-month periods ended March 31, 2018 and 2017
5.
Due On Mineral Rights Acquisitions
|
| |
|
March 31,
2018
|
December 31, 2017
|
|
|
|
Due to Hadrian Ventures re: Kenty Property
|
$38,665
|
$37,238
|
The Hadrian Ventures Loan is unsecured and has no set terms of repayment. Hadrian Ventures is controlled by Scott Keevil, stockholder and consultant to the Company.
6.
Capital Stock
a)
Common Stock
For the three months March 31, 2018, the Company issued no shares of common stock.
Stock To Be Issued
For the three months ended March 31, 2018, 500,000 shares became issuable to directors and officers of the Company for services rendered. These transactions have been recorded as stock-based compensation having a total value of $25,000 within shares to be issued.
As at March 31, 2018 a further 7,238,725 have yet to be issued for services at the transaction price ranging from $0.05 to $0.15 per share for a total of $1,657,192. Of these 1,628,376 were for settlement of shareholder loans owed by the Company totaling $81,418, 500,000 were for acquisition of mineral rights totaling $50,000 and 3,637,039 were due to Directors and Officers of the Company services totaling $181,851 with the balance yet to be issued have been recorded in the current and prior periods.
b)
Preferred Stock
The Company has authorized Class A preferred stock available to be issued for $1.00 per share, are non-participating and non-voting and accrue cumulative dividends at the rate of 10% per annum. The Company may retract the stock at any time upon the payment of $1.00 per share plus any unpaid dividends. In the event of any wind-up of the Company, the Class A preferred stock has a priority distribution of $1.00 per share plus any unpaid dividends before any distribution to the common stockholders.
c)
Dividends
As at March 31, 2018, the Company was in arrears in dividends on preferred shares. The balance of dividends payable of $255,754 (2017 - $,255,754) includes dividends of $176,400 (2017 - $158,400) and accrued interest of $52,285 (2017 - $ 52,285), accrued at 10.0% interest compounded annually.
Preferred dividends for the three months ended March 31, 2018 had an effect of $0.00 and $0.00, respectively on loss per share available to common stockholders.
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6.
Capital Stock continued
d)
Warrants
The Company has no warrants outstanding as of March 31, 2018.
e)
Stock-Based Compensation
The Company incurred stock-based compensation expense in connection with its compensation agreements for its directors and officers. Under these agreements, common stock may be issued as a signing bonus or at certain benchmark dates within an individuals period of service. Stock-based compensation is calculated as the fair value of the stock issued or to be issued to an individual at the time the employment contract was signed and is recorded at the time becomes owing to the individual. Stock issued to a director, manager, or employee may be deferred in the event that their contract requires the individual to remain employed with the Company for a specified time period after issuance.
For the three months ended March 31, 2018, the Companys 500,000 shares became issuable in connection with stock-based compensation arrangements.
These shares were valued at $0.05 per share and resulted in compensation expense of $25,000. These fees were recorded as a component of consulting fees in the amount of $25,000 on the statements of operations and comprehensive loss.
7.
Related Party Transactions
The following transactions with related parties were in the normal course of operations and were measured at the exchange value which represented the amount of consideration established and agreed to by the parties.
Refer to Notes 6(a) and 6(d) for the disclosure of stock-based compensation to the CEO and CFO of the Company.
Refer to Notes 4 and 6(b) related to advances from stockholders and debt settlements with related parties.
Refer to Note 6(a) related to the shares to be returned for cancellation by Penny Currah and Dino Fuschino, both existing stockholders of the Company with familiar relationships to management and consultants of the Company.
Receivable from Related Parties as at March 31, 2018 and December 31, 2017:
|
| |
|
March 31, 2018
|
December 31, 2017
|
Receivable from Benedetto Fuschino (i)
|
$ 10,698
|
$ 10,698
|
Receivable from Sabine Frisch for stock to be issued, Sabine Frisch is the wife of Scott Keevil a stockholder and consultant to the Company.
|
19,000
|
19,000
|
Receivable from related parties
|
$29,698
|
$ 29,698
|
(ii)
Refer to Note 4 which shows $69,674 owed to Benedetto Fuschino and a company controlled by him, although there is no intention to net settle, overall his position is a net payable.
8.
Financial Instruments
Fair Values
The Companys financial instruments consist of cash, notes receivable, accounts payable and accrued liabilities, dividends payable, advances from stockholders, and amounts due on mineral rights acquisition. The fair values of these financial instruments approximate their carrying values due to the short-term maturity of these instruments. The Companys only financial instruments carried at fair value on the unaudited condensed interim balance sheet is cash, which is classified at Level 1 and is measured using quoted market prices. Furthermore, there were no transfers of financial instruments between Levels 1, 2, and 3 during the three month period ended March 31, 2018.
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8.
Financial Instruments - continued
Foreign Currency Risk
Foreign currency risk is the risk that changes in the rates of exchange on foreign currencies will impact the financial position or cash flows of the Company. The Companys functional currency is the Canadian dollar, thus the Company is exposed to foreign currency risks in relation to certain payables that are to be settled in US funds. Management monitors its foreign currency exposure regularly to minimize the risk of an adverse impact on its cash flows.
Concentration of Credit Risk
Concentration of credit risk is the risk of loss in the event that certain counterparties are unable to fulfill its obligations to the Company. The Company limits its exposure to credit loss on its cash by placing its cash with high credit quality financial institutions. The Company does not have any cash in excess of federally insured limits. Sales taxes receivable are due from the Canadian government and notes receivable are due from stockholders with whom the Company also has advances payable. Subscriptions receivable are collateralized by the shares for which the subscriptions are paid.
Liquidity Risk
Liquidity risk is the risk that the Companys cash flows from operations will not be sufficient for the Company to continue operating and discharge is liabilities. The Company is exposed to liquidity risk as its continued operation is dependent upon its ability to obtain financing, either in the form of debt or equity, or achieving profitable operations in order to satisfy its liabilities as they come due.
Market Risk
Market risk is the risk that fluctuations in the market prices of minerals will impact the Companys future cash flows. The Company is exposed to market risk on the price of gold, which will determine its ability to build and achieve profitable operations, the amount of exploration and development work that the Company will be able to perform, and the number of financing opportunities that will be available. Management believes that it would be premature at this point to enter into any hedging or forward contracts to mitigate its exposure to specific market price risks.
9.
Subsequent Events
On June 20, 2017 the Company announced that it has entered into an Offer of Settlement with the United States Securities and Exchange Commission (the SEC), under which it has stipulated that the Companys Securities and Exchange Act of 1934, as amended (the Exchange Act), registration will be revoked, directly, by reason of the Companys failure to file the reports it was required to file with the SEC since the period ended September 30, 2013. The Offer of Settlement was made following the SECs institution of an action to revoke the Companys registration under the Exchange Act pursuant to Section 12(j) thereof, on or about May 24, 2017. On April 23, 2018, the Company filed a new registration statement with the SEC, and if and when such registration statement is declared effective, to request a U.S. registered broker-dealer to submit a Form 211 with FINRA on its behalf in order to be cleared for quotations of the Companys common stock in the future. While the revocation is in effect, no public trading of the Companys common stock is allowed under applicable law. The Companys reporting issues started with the SEC revoking the privilege of two of the partners of our former auditing firm in 2014, which resulted in the Company being unable to rely on the financial statements audited by this firm for the fiscal years ended December 31, 2012, and 2011, and which required us to re-audit the financial statements for those years, among other potential periods. The Company has included the required December 31, 2017 and 2016, audited financial statements with the new registration.
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PART II INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The expenses relating to the registration of the securities will be borne by the Registrant. Such expenses are estimated below. The following table sets forth an itemized statement of all cash expenses in connection with the issuance and distribution of the securities being registered:
|
|
|
| |
SEC registration fee
|
|
$
|
1,268.27
|
|
Blue sky fees and expenses*
|
|
|
2,500
|
|
Printing and related expenses*
|
|
|
1,500
|
|
Legal fees*
|
|
|
20,000
|
|
Accounting fees and expenses*
|
|
|
20,000
|
|
Transfer Agent fees*
|
|
|
2,500
|
|
Miscellaneous*
|
|
|
3,000
|
|
TOTAL
|
|
$
|
50,768.27
|
|
Item 14. Indemnification of Directors and Officers.
Section 78.7502(1) of the Nevada Revised Statutes ("NRS") authorizes a Nevada corporation to indemnify any director, officer, employee or corporate agent "who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation" due to his or her corporate role. Section 78.7502(1) extends this protection "against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with any action, suit or proceeding if he or she acted in good faith and in a manner that he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful."
Section 78.7502(2) of the NRS also authorizes indemnification of the reasonable defense or settlement expenses of a corporate director, officer, employee or agent who is sued, or is threatened with a suit, by or in the right of the corporation. The party must have been acting in good faith and with the reasonable belief that his or her actions were not opposed to the corporation's best interests. Unless the court rules that the party is reasonably entitled to indemnification, the party seeking indemnification must not have been found liable to the corporation.
To the extent that a corporate director, officer, employee or agent is successful on the merits or otherwise in defending any action or proceeding referred to in Section 78.7502(1) or 78.7502(2), Section 78.7502(3) of the NRS requires that he or she be indemnified "against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense."
Section 78.751(1) of the NRS limits indemnification under Sections 78.7502(1) and 78.7502(2) to situations in which either (1) the stockholders, (2) the majority of a disinterested quorum of directors, or (3) independent legal counsel determine that indemnification is proper under the circumstances.
Pursuant to Section 78.751(2) of the NRS, the corporation may advance an officer's or director's expenses incurred in defending any action or proceeding upon receipt of an undertaking. Section 78.751(3)(a) provides that the rights to indemnification and advancement of expenses shall not be deemed exclusive of any other rights under any bylaw, agreement, stockholder vote or vote of disinterested directors. Section 78.751(3)(b) extends the rights to indemnification and advancement of expenses to former directors, officers, employees and agents, as well as their heirs, executors, and administrators.
Regardless of whether a director, officer, employee or agent has the right to indemnity, Section 78.752 allows the corporation to purchase and maintain insurance on his or her behalf against liability resulting from his or her corporate role.
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Our Bylaws provide for the indemnification of officers, directors and other agents acting on our behalf to an extent consistent with applicable provisions of the NRS.
Additionally, in the future, we may purchase and maintain insurance on behalf of Joshua Gold and any person who is or was a director or officer against any loss arising from any claim asserted against him or her and incurred by him or her in that capacity, subject to certain exclusions and limits of the amount of coverage we ultimately obtain. Neither our Bylaws nor our Articles of Incorporation include any specific indemnification provisions for our officers or directors against liability under the Securities Act. Additionally, insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
Item 15. Recent Sales of Unregistered Securities.
The following table provides information about all shares of common stock that Joshua Gold has sold during the calendar years ended December 31, 2015, 2016, and 2017, which were not registered under the Securities Act: