UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended January 31, 2020

 

OR

 

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to __________

 

Commission file number 000-501191

 

DAKOTA LOGO.JPG  

 

Dakota Territory Resource Corp

(Exact Name of Registrant as Specified in its charter)

 

Nevada

 

98-0201259

(State or other jurisdiction of incorporation

or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

10580 N. McCarran Blvd., Building 115-208

Reno, Nevada

 

89503

(Address of principal executive offices)

 

(Zip Code)

 

(775) 747-0667

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

Trading Symbol

Name of each Exchange on which registered

Common Stock

DTRC

OTC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [   ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [   ]


1


 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

[   ]

Accelerated filer

[   ]

Non-accelerated filer

[   ]

Smaller reporting company

[X]

(Do not check if a smaller reporting company)

 

Emerging growth company

[   ]

 

 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes [   ] No [X]

 

Number of shares of issuer’s common stock outstanding at January 22, 2020: 65,416,787


2


 

 

DAKOTA TERRITORY RESOURCES CORP

SEPTEMBER 30, 2019

(UNAUDITED)

TABLE OF CONTENTS

 

 

 

Page

 

Part I

 

Item 1

Financial Statements (unaudited)

3

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

12

Item 3

Quantitative and Qualitative Disclosures About Market Risk

17

Item 4

Controls and Procedures

17

 

 

 

 

Part II

 

Item 1

Legal Proceedings

18

Item 1A

Risk Factors

18

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

18

Item 3

Defaults upon Senior Securities

18

Item 4

Mine Safety Disclosure

18

Item 5

Other Information

18

Item 6

Exhibits

19

Signatures

20


3


 

 

DAKOTA TERRITORY RESOURCE CORP

BALANCE SHEETS

(Unaudited)

 

 

 

December 31,

2019

 

March 31,

2019

ASSETS

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

Cash and cash equivalents

$

27,121

$

152,590

Prepaid expenses and other current assets

 

70,427

 

8,851

Total current assets

 

97,548

 

161,441

 

 

 

 

 

Mineral properties

 

216,104

 

216,104

 

 

 

 

 

TOTAL ASSETS

$

313,652

$

377,545

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

Accounts payable and accrued liabilities

$

265,210

$

325,896

Accounts payable, related party

 

1,870,410

 

1,600,659

Line of credit

 

31,416

 

35,165

Note payable to related party

 

325,645

 

325,645

Total current liabilities

 

2,492,681

 

2,287,365

Total liabilities

 

2,492,681

 

2,287,365

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

SHAREHOLDERS' DEFICIT

 

 

 

 

Preferred stock, par value $0.001; 10,000,000 shares authorized, no

 

 

 

 

shares issued and outstanding as of December 31, 2019 and

 

 

 

 

March 31, 2019, respectively

 

-

 

-

Common stock, par value $0.001; 300,000,000 shares authorized,

 

 

 

 

65,416,787 and 59,566,787 shares issued and outstanding as of

 

 

 

 

December 31, 2019 and March 31, 2019, respectively

 

65,417

 

63,217

Additional paid-in capital

 

2,644,130

 

2,391,945

Accumulated deficit

 

(4,888,576)

 

(4,364,982)

Total shareholders' deficit

 

(2,179,029)

 

(1,909,820)

 

 

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT

$

313,652

$

377,545

 

 

 

 

 

The accompanying notes are an integral part of these financial statements.


4


 

 

DAKOTA TERRITORY RESOURCE CORP

STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Nine Months ended

December 31st

 

Three Months ended

December 31st

 

 

2019

 

2018

 

2019

 

2018

OPERATING EXPENSES

 

 

 

 

 

 

 

 

Exploration costs

$

63,008

$

33,367

$

23,850

$

11,512

General and administrative expenses

 

451,233

 

402,776

 

164,773

 

108,117

 

 

 

 

 

 

 

 

 

Total operating expenses

 

514,241

 

436,143

 

188,623

 

119,629

 

 

 

 

 

 

 

 

 

LOSS FROM OPERATIONS

 

(514,241)

 

(436,143)

 

(188,623)

 

(119,629)

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

Interest expense

 

(9,353)

 

(25,082)

 

(3,144)

 

(8,260)

Total other income (expense)

 

(9,353)

 

(25,082)

 

(3,144)

 

(8,260)

 

 

 

 

 

 

 

 

 

NET LOSS

$

(523,594)

$

(461,225)

$

(191,767)

$

(127,889)

 

 

 

 

 

 

 

 

 

Net loss per share:

 

 

 

 

 

 

 

 

Basic and diluted net loss per share

$

(0.01)

$

(0.01)

$

(0.00)

$

(0.00)

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

Basic and diluted

 

63,708,787

 

60,203,332

 

65,172,222

 

60,616,787

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these financial statements.


5


 

 

DAKOTA TERRITORY RESOURCE CORP

STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Nine Months Ended

December 31,

 

 

2019

 

2018

Net loss

$

(523,594)

$

(461,225)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

used in operating activities:

 

 

 

 

Stock-based compensation

 

47,718

 

108,991

Changes in current assets and current liabilities:

 

 

 

 

Prepaid expenses and other assets

 

(4,909)

 

(5,529)

Accounts payable & accrued liabilities

 

(60,686)

 

31,744

Accounts payable, related party

 

269,751

 

220,313

Net cash used in operating activities

 

(271,720)

 

(105,706)

 

 

 

 

 

Cash Flows From Financing Activities:

 

 

 

 

Proceeds from the issuance of note payable - related party

 

-

 

17,500

Proceeds from the issuance of common stock

 

150,000

 

75,000

Proceeds from (repayments of) line of credit

 

(3,749)

 

(1,191)

Net cash provided by financing activities

 

146,251

 

91,309

 

 

 

 

 

Net change in cash

 

(125,469)

 

(14,397)

Cash and Cash Equivalents, Beginning of Period

 

152,590

 

19,981

 

 

 

 

 

Cash and Cash Equivalents, End of Period

$

27,121

$

5,584

 

 

 

 

 

Supplemental Disclosure of Cashflow Information

 

 

 

 

 

 

 

 

 

Interest paid

$

-

$

-

Taxes paid

$

-

$

-

 

 

 

 

 

Supplemental Disclosure of Non cash Investing and Financing Activities

 

 

 

 

 

 

 

 

 

Common stock issued for assets

$

85,000

$

-

 

 

 

 

 

The accompanying notes are an integral part of these financial statements


6


 

 

DAKOTA TERRITORY RESOURCE CORP

STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT

For the period ended December 31, 2019 and March 31, 2019

(Unaudited)

 

 

Preferred Stock

 

Common Stock

 

 

 

 

 

 

 

10,000,000 shares

authorized

 

300,000,000 shares

authorized

 

 

 

 

 

 

 

Shares

Issued

 

Par

Value

$0.001

per

share

 

Shares

Issued

 

Par

Value

$0.001

per

share

 

Additional

Paid-In

Capital

 

Accumulated

Deficit

 

Total

Shareholders'

Deficit

BALANCE, March 31, 2018

-

$

-

 

59,566,787

$

59,567

$

1,955,036

$

(4,384,421)

$

(2,369,818.00)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock issued for services

-

 

-

 

600,000

 

600

 

134,959

 

-

 

135,559

Cash received for stock subscription

-

 

-

 

3,050,000

 

3,050

 

301,950

 

-

 

305,000

Net income

-

 

-

 

-

 

-

 

-

 

19,439

 

19,439

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE, March 31, 2019

-

 

-

 

63,216,787

 

63,217

 

2,391,945

 

(4,364,982)

 

(1,909,820)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock issued for services

-

 

-

 

700,000

 

700

 

103,685

 

-

 

104,385

Cash received for stock subscription

-

 

-

 

1,500,000

 

1,500

 

148,500

 

-

 

150,000

Net loss

-

 

-

 

-

 

-

 

-

 

(523,594)

 

(523,594)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE, December 31, 2019

-

$

-

 

65,416,787

$

65,417

$

2,644,130

$

(4,888,576)

$

(2,179,029)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these financial statements


7


 

 

 

DAKOTA TERRITORY RESOURCES CORP

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2019

(UNAUDITED)

 

Note 1—Basis of Presentation

 

The accompanying unaudited interim financial statements of Dakota Territory Resource Corp. (“we”, “us”, “our”, the “Company”, the “Corporation”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in our annual report on Form 10-K, for the year ended March 31, 2019 as filed with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal year ended March 31, 2019 as reported in our annual report on Form 10-K, have been omitted.

 

The Company’s absence of revenues, recurring losses from operations, and its need for significant additional financing in order to fund its projected loss in 2020 raise substantial doubt about its ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Note 2—Related Party Transactions

 

Effective October 1, 2005, we began paying a management consulting fee to Minera Teles Pires Inc., a company controlled by the Chief Geological Officer (“CGO”) and director of the Company. The agreement provides a fixed fee of $10,000 per month of which $5,000 is paid and the other $5,000 deferred until financing is obtained by us. Additionally, the agreement provides for a payment of $1,500 per month for office rent and expenses. During the nine months ended December 31, 2019, we incurred approximately $103,500 in management fees and rent from Minera Teles Pires Inc. As of December 31, 2019, we owed Minera Teles Pires approximately $929,000 for management fees and out of pocket expenses.

 

Effective February 24, 2012, we began paying consulting fees to Jerikodie, Inc., a company controlled by our CEO, President and a director of the Company. The agreement provides a fixed fee of $9,000 per month plus approved expenses. During the nine months ended December 31, 2019, we incurred approximately $81,000 in consulting fees from Jerikodie, Inc. As of December 31, 2019, we owed Jerikodie, Inc. approximately $710,000 for consulting fees and out of pocket expenses.

 

On March 19, 2013, the Company entered into an agreement with Wm Chris Mathers to compensate Mr. Mathers as the Company’s CFO. Mr. Mathers monthly compensation is $3,000. During the nine months ended December 31, 2019, we incurred $27,000 in cash compensation to Mr. Mathers. As of December 31, 2019, we owed Mr. Mathers $151,000.

 

Note 3—Mineral Properties

 

On September 26, 2012, the Company was re-organized with North Homestake Mining Company. With this re-organization, the Company acquired 84 unpatented lode mining claims covering approximately 1,600 acres known as the Blind Gold Property located in the Black Hills of South Dakota.

 

On December 28, 2012, the Company acquired 57 unpatented lode mining claims covering approximately 853 acres known as the West False Bottom Creek and Paradise Gulch Claim Group, the City Creek Claims Group, and the Homestake Paleoplacer Claims Group, all located in the Black Hills of South Dakota. The West False Bottom Creek and Paradise Gulch Claims were contiguous to the Blind Gold Property and have been incorporated into the Blind Gold Property. The purchase price was 1,000,000 restricted common shares valued at $0.15 per share, or $150,000

 

On February 24, 2014 the Company acquired surface and mineral title to the 26.16 acres of the Squaw and Rubber Neck Lodes that comprise Mineral Survey 1706 in the Black Hills of South Dakota. Located immediately to the north and adjoining the Company’s Paleoplacer Property, Mineral Survey 1706 was explored by Homestake Mining Company in the late 1980’s. The Company is required to make annual lease payments of $8,000 for a period of 5 years, of which $8,000 was due upon execution of the agreement. The Company has an option to purchase the mineral property for $120,000.


8


 

 

DAKOTA TERRITORY RESOURCES CORP

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2019

(UNAUDITED)

 

Note 3—Mineral Properties (Continued)

 

On March 3, 2014, the Company completed the acquisition of approximately 565.24 mineral acres in the Northern Black Hills of South Dakota. The acquisition increased our mineral interests in the Homestake District by nearly 23%, to over 3,057 acres. As part of the property acquisition, the Company purchased an additional 64.39 mineral acres located immediately southwest and contiguous to our Paleoplacer Property, including mineral title to the historic Gustin, Minerva and Deadbroke Gold Mines. The three mines were the last of a string of mines that produced ores from fossil gold placers derived from the Homestake Lode and are located at the point where the channel disappears under the cover of younger sedimentary and intrusive rocks approximately one mile north of the Homestake Open Cut source. With this acquisition the Company consolidated and extended the Paleoplacer Property position to a distance extending approximately 3,100 feet along the south to north trend of the channel. The purchase price of the mineral interests was $33,335.

 

On April 5, 2017 the Company acquired options to purchase a combination of surface and mineral titles to 284 acres in the Homestake District of the Northern Black Hills of South Dakota. The acquisition included 61 acres located immediately south and contiguous with our City Creek Property; 82 acres located approximately one half mile south of our Blind Gold Property at the western fringe of the historic Maitland Gold Mine; and 141 acres located immediately north and contiguous to our Homestake Paleoplacer Property. The Company is required to make annual lease payments totaling $20,000 for a period of 5 years, of which $20,000 was due upon execution of the agreement. The Company has an option to purchase the mineral properties for total price of $626,392. As of March 31, 2019 the Company is current on all required annual lease payments.

 

In November 2018, we acquired 42 unpatented lode mining claims covering approximately 718 acres located immediately to the north and adjacent to the Company’s City Creek Property. The acquisition was based on recently completed inversion modeling of its geophysical survey data. Through this staking, the City Creek project area was expanded from approximately 449 acres to 1,167 acres and the Company’s overall land holdings in the Homestake District were increased from 3,341 acres to approximately 4,059 acres in total.

 

On May 7, 2019, the Company entered into a new five-year Lease with Option to Purchase Agreement for the Squaw and Rubber Neck Lodes that comprise Mineral Survey 1706, which is a key component of the Company’s overall Homestake Paleoplacer Property in the Black Hills of South Dakota.

 

On October 1, 2019 we increased our land holdings through the staking of 106 unpatented lode mining claims covering approximately 2,050 acres, near the historic Tinton placer gold camp. The Company’s Tinton claim group lies approximately 10 miles west of the Homestake Gold Mine, where sizeable paleoplacer and modern placer gold deposits were derived from the iron-formation hosted gold source. The Tinton Property acquisition increased the Company’s already sizeable property portfolio in the Black Hills to over 6,100 acres of brownfields gold exploration property.

 

The Company plans to commence an exploratory program on these mineral properties as soon as financing can be arranged.

 

 

 

March 31,

 

December 31,

 

 

2019

 

2019

Capitalized costs

$

216,104

$

216,104

Accumulated amortization

 

-

 

-

Impairment

 

-

 

-

Capitalized costs, net

$

216,104

$

216,104


9


 

 

DAKOTA TERRITORY RESOURCES CORP

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2019

(UNAUDITED)

 

Note 4—Notes Payable

 

Notes Payable to Related Party

 

The Company had 11 notes payable to its President pursuant to advances which had historically been made by the President. The notes were dated between March 2011 and August 2012, were unsecured, ranged in amount from $10,000 to $50,000, and bore interest at 12% per annum. These notes were re-structured and combined on March 27, 2013 into a single promissory note payable (the “New Note”). In conjunction with this restructuring, the President forgave accrued interest totaling $57,817 (recorded as an equity transaction). The New Note is unsecured, has a principal amount of $265,000, and bears interest at 4% per annum. The Company will apply 10% of the gross proceeds from any equity financing in an amount exceeding $0.5 million (whether one or more transactions) from and after the date hereof to prepay principal and accrued interest. All remaining unpaid principal and interest was due at December 31, 2019 and remains unpaid.

 

On August 26, 2016, the Company issued a note payable in the amount of $25,000 to Minera Teles Pires Inc., a Company controlled by our President, for the purpose of funding ongoing operating expenses. The note bears annual interest of 3% and was due and payable on October 26, 2016. The Company paid $21,855 in principle during the year ended March 31, 2018. The remainder of the loan of $3,145 is outstanding as of the date of this filing.

 

On September 15, 2016, the Company issued a note payable in the amount of $30,000 to Minera Teles Pires Inc., a Company controlled by our President, for the purpose of funding ongoing operating expenses. The note bears annual interest of 4% and was due and payable on December 14, 2016. This loan remains outstanding as of the date of this filing.

 

On August 10, 2018, the Company issued a note payable in the amount of $20,500 to Jerikodie, Inc., a Company controlled by our President and CEO, for the purpose of funding ongoing operating expenses. This loan remains outstanding as of the date of this filing.

 

Note 5—Line of Credit

 

The Company executed a Line of Credit with Wells Fargo Bank in California. The Line of Credit allows the Company to borrow up to $47,500. The Line of Credit bears interest at 7.75% per annum, is unsecured, and due on demand. The balance on this Line of Credit at December 31, 2019 was approximately $31,400.

 

Note 6—Common Stock

 

Our authorized capital stock consists of 300,000,000 shares of common stock, with a par value of $0.001 per share, and 10,000,000 preferred shares with a par value of $0.001 per share.

 

During the nine months ended December 31, 2019, we issued 1 million shares to a director for services as a consultant to the Company.

 

During the nine months ended December 31, 2019, the Company sold 1million shares to a charitable trust in the amount of $100,000.

 

During the nine months ended December 31, 2019, the Company issued 300,000 5-year options with an exercise price of $0.08 per share to an individual for geological services valued at $13,026.

 

During the nine months ended December 31, 2019, the Company issued 500,000 shares of common stock, with a par value of $0.001 per share for cash in the amount of $50,000 and a warrant to purchase up to 500,000 shares of common stock. These warrants expire on December 9, 2020.

 

At December 31, 2019, the total issued and outstanding shares of our common stock were 65,416,787.


10


 

 

DAKOTA TERRITORY RESOURCES CORP

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2019

(UNAUDITED)

 

Note 6—Common Stock (Continued)

 

Common Stock Options and Warrants

 

A summary of the Company's stock option activity and related information for the period ended December 31, 2019 is as follows:

 

 

 

Options

 

Price Range

 

Weighted Average

Remaining Life

(Years)

Outstanding March 31, 2019

 

8,450,000

$

0.08

 

6.06

Granted

 

800,000

 

0.09

 

2.31

Cancelled/Expired

 

-

 

-

 

-

Exercised

 

-

 

-

 

-

Outstanding and exercisable December 31, 2019

 

9,250,000

$

0.08

 

4.64

 

A summary of the Company's stock warrant activity and related information for the period ended December 31, 2019 is as follows:

 

 

 

Warrants

 

Price Range

 

Weighted Average

Remaining Life

(Years)

Outstanding March 31, 2019

 

3,050,000

$

0.10

 

0.75

Granted

 

500,000

 

0.10

 

1.14

Cancelled/Expired

 

(750,000)

 

0.10

 

-

Exercised

 

-

 

-

 

-

Outstanding and exercisable September 30, 2019

 

2,800,000

$

$ 0.10

 

0.25


11


 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

In this Quarterly Report on Form 10-Q, unless the context requires otherwise, references to “Dakota Territory Resource Corp,” "the Corporation" “we,” “our” or “us” refer to Dakota Territory Resource Corp. You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing elsewhere in this quarterly report. This Quarterly Report on Form 10-Q may also contain statistical data and estimates we obtained from industry publications and reports generated by third parties. Although we believe that the publications and reports are reliable, we have not independently verified their data.

 

FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q and the exhibits attached hereto contain “forward-looking statements”. Such forward-looking statements concern our anticipated results and developments in our operations in future periods, planned exploration and development of our properties, plans related to our business and other matters that may occur in the future. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as “expects” or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “estimates” or “intends”, or stating that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q, include, but are not limited to:

 

the progress, potential and uncertainties of our 2019-2020 exploration program at our properties located in the Homestake District of the Black Hills of South Dakota (the “Project”); 

 

the success of getting the necessary permits for future drill programs and future project exploration; 

 

expectations regarding the ability to raise capital and to continue our exploration plans on our properties; and 

 

plans regarding anticipated expenditures at the Project. 

 

Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors which could cause actual events or results to differ from those expressed or implied by the forward-looking statements, including, without limitation:

 

risks associated with lack of defined resources that are not SEC Guide 7 Compliant Reserves, and may never be; 

 

risks associated with our history of losses and need for additional financing; 

 

risks associated with our limited operating history; 

 

risks associated with our properties all being in the exploration stage; 

 

risks associated with our lack of history in producing metals from our properties; 

 

risks associated with our need for additional financing to develop a producing mine, if warranted; 

 

risks associated with our exploration activities not being commercially successful; 

 

risks associated with ownership of surface rights at our Project; 

 

risks associated with increased costs affecting our financial condition; 

 

risks associated with a shortage of equipment and supplies adversely affecting our ability to operate; 

 

risks associated with mining and mineral exploration being inherently dangerous; 

 

risks associated with mineralization estimates; 

 

risks associated with changes in mineralization estimates affecting the economic viability of our properties; 


12


 

 

risks associated with uninsured risks; 

 

risks associated with mineral operations being subject to market forces beyond our control; 

 

risks associated with fluctuations in commodity prices; 

 

risks associated with permitting, licenses and approval processes; 

 

risks associated with the governmental and environmental regulations; 

 

risks associated with future legislation regarding the mining industry and climate change; 

 

risks associated with potential environmental lawsuits; 

 

risks associated with our land reclamation requirements; 

 

risks associated with gold mining presenting potential health risks; 

 

risks related to title in our properties 

 

risks related to competition in the gold mining industries; 

 

risks related to economic conditions; 

 

risks related to our ability to manage growth; 

 

risks related to the potential difficulty of attracting and retaining qualified personnel; 

 

risks related to our dependence on key personnel; 

 

risks related to our United States Securities and Exchange Commission (the “SEC”) filing history; and 

 

risks related to our securities. 

 

This list is not exhaustive of the factors that may affect our forward-looking statements. Although we have attempted to identify important factors that could cause actual results to differ materially from those described in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Except as required by law, we disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. We qualify all the forward-looking statements contained in this Quarterly Report by the foregoing cautionary statements.

 

This Management’s Discussion and Analysis should be read in conjunction with the financial statements of Dakota Territory Resource Corp. and notes thereto as set forth herein. Readers are also urged to carefully review and consider the various disclosures made by us, which attempt to advise interested parties of the factors which affect our business, including without limitation, the disclosures made under “Risk Factors.”

 

Our audited financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.


13


 

 

Overview

 

We are an exploration stage company engaged in the business of the acquisition and exploration of mineral properties. Dakota Territory maintains 100% ownership of three mineral properties located in the Black Hills of South Dakota, including the Blind Gold, City Creek and Homestake Paleoplacer Properties, all of which are located in the heart of the Homestake District and cover a total of approximately 4,059 acres. We currently have limited operations and have not established that any of our projects or properties contain any proven or probable reserves under SEC Industry Guide 7.

 

On March 9, 2012 the Company entered into an agreement with North Homestake Mining Company to exchange common stock to affect the acquisition of North Homestake’s gold exploration properties located in South Dakota. The Agreement was completed on September 26, 2012 and the Company concurrently effected a 10 for 1 reverse stock split. The merger was recorded as a reverse recapitalization and the issuances of common stock were recorded as a reclassification between paid-in capital and par value of Common Stock. North Homestake Mining Company was incorporated in the State of Nevada on April 12, 2011.

 

On December 31, 2012, the Company completed an agreement to acquire 57 unpatented lode mining claims covering approximately 853 acres in the Black Hills of South Dakota in exchange for 1,000,000 shares of the Company’s common stock, which was valued at $0.15 per share on the transaction date.

 

On February 24, 2014 the Company acquired surface and mineral title to the 26.16 acres of the Squaw and Rubber Neck Lodes that comprise Mineral Survey 1706 in the Black Hills of South Dakota. The property is located immediately to the north and adjoining the Company’s Paleoplacer Property.

 

On March 3, 2014, we completed an acquisition of approximately 565.24 mineral acres in the Northern Black Hills of South Dakota. The acquisition increased our mineral interests in the Homestake District by nearly 23%, to over 3,057 acres. As part of the property acquisition, we purchased an additional 64.39 mineral acres located immediately southwest and contiguous to our Paleoplacer Property, including mineral title to the historic Gustin, Minerva and Deadbroke Gold Mines.

 

On April 5, 2017 we acquired of a combination of surface and mineral title to 284 acres in the Homestake District of the Northern Black Hills of South Dakota. The acquisition included 61 acres located immediately south and contiguous with our City Creek Property; 82 acres located approximately one half mile south of our Blind Gold Property at the western fringe of the historic Maitland Gold Mine; and 141 acres located immediately north and contiguous to our Homestake Paleoplacer Property.

 

On November 19, 2018 the Company acquired 42 unpatented lode mining claims covering approximately 718 acres located immediately to the north and adjacent to the Company’s City Creek Property. The acquisition was based on recently completed inversion modeling of our geophysical survey data. Through this staking, the City Creek project area was expanded from approximately 449 acres to 1,167 acres.

 

On May 7, 2019, the Company entered into a new five-year Lease with Option to Purchase Agreement for the Squaw and Rubber Neck Lodes that comprise Mineral Survey 1706, which is a key component of the Company’s overall Homestake Paleoplacer Property in the Black Hills of South Dakota.

 

There is substantial doubt about our ability to continue as a going concern as the continuation of our business is dependent upon obtaining further long-term financing, successful exploration and development of our property interests and, finally, achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

 

Current Plan of Operations

 

Our planned operations during fiscal 2020 are focussed on advancing our Blind Gold, City Creek and Homestake Paleoplacer gold exploration properties and to continue to build on our overall property position in the Homestake District of the Black Hills of South Dakota.

 

We are planning to fly a broad high definition airborne geophysical survey to enhance our current drill targets, as well as to screen other areas of interest within the district. We have budgeted for several field sampling /mapping programs and to perform preliminary metallurgical test work at the Homestake Paleoplacer Property. We have planned to complete site preparations, and to conduct our first drill program on the Paleoplacer Property. Additionally, our budget provides for the commencement of necessary permit work for the Blind Gold and City Creek Properties and provides for our general operating expenses and the maintenance of the Company’s Mining Claims and leases.


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Table: Fiscal Year 2020 Proposed

Exploration Expenditures (000)

General & administrative

$ 600

Airborne survey

$ 475

Field programs/Met Testing/Data

$ 90

Drilling/Drill Support/Site Work

$ 158

Permitting & Environmental

$ 185

Property Holding /Acquisition

$ 265

TOTAL

$1,773

 

Our operations for fiscal year 2020 are planned and budgeted at approximately $1.773 million. Our current working capital will not be sufficient to cover our estimated capital requirements during the next twelve-month period and we will therefore be required to raise additional funds in the amount of approximately $1.75 million through the issuance of equity securities or through debt financing. There can be no assurance that we will be successful in raising the required capital or that actual cash requirements will not exceed our estimates.

 

Since we are an exploration stage company and have not generated revenues to date, our cash flow projections are subject to numerous contingencies and risk factors beyond our control, including exploration and development risks, competition from well-funded competitors, and our ability to manage growth. We can offer no assurance that our expenses will not exceed our projections.

 

Liquidity and Capital Resources

 

As of December 31, 2019, we had a working capital deficit of approximately $2.395 Million and our accumulated deficit as of December 31, 2019 was approximately $4,889,000. We had a net loss for the nine months ended December 31, 2019 of approximately $524,000.

 

During our fiscal year ending March 31, 2020, we had planned to spend approximately $897,000 for diamond drilling, $23,000 for field programs and $90,000 for assays, as well as approximately $691,000 for expenses related to exploration programs. The timing of these expenditures is dependent upon a number of factors, including financing and the availability of drill contractors. We estimate that general and administrative expenses during fiscal year ending March 31, 2020 will be approximately $600,000 to include payroll, legal and accounting services and other general and other expenses necessary to conduct our operations.

 

We have no employees. Our management, all of whom are consultants, conduct our operations. We do not expect any material changes in the number of employees over the next twelve-month period. Given the early stage of our exploration properties, we intend to continue to outsource our professional and personnel requirements by retaining consultants on an as needed basis. However, if we are successful in our initial and any subsequent drilling programs, we may retain employees.

 

We currently do not have sufficient funds to complete exploration and development work on our properties, which means that we will be required to raise additional capital, enter into joint venture relationships or find alternative means to finance placing one or more of our properties into commercial production, if warranted. Failure to obtain sufficient financing may result in the delay or indefinite postponement of exploration and development or production on one or more of our properties and any properties we may acquire in the future or even a loss of property interests. We cannot be certain that additional capital or other types of financing will be available when needed or that, if available, the terms of such financing will be favorable or acceptable to us. Our ability to arrange additional financing in the future will depend, in part, on the prevailing capital market conditions as well as our business performance.

 

Going Concern

 

The unaudited financial statements accompanying the report have been prepared on a going concern basis, which implies that our company will continue to realize its assets and discharge it liabilities and commitments in the normal course of business. Our company has not generated revenues since inception and it’s unlikely to pay cash dividends or generate earnings in the immediate or foreseeable future. The continuation of our company as a going concern is dependent upon the continued financial support from related party advances, the ability of our company to obtain necessary equity financing to achieve our operating objectives, and the attainment of profitable operations. As of December 31, 2019, we had cash of approximately $27,000. In addition to funding our general and administrative expenses, we are obligated to address our current obligations totaling approximately $2.5Million. This includes current obligation amounts for accounts payable – related party of approximately $1,870,000 and notes payable – related party of approximately $326,000.


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These circumstances raise substantial doubt about our ability to continue as a going concern, as described in Note 1 of our December 31, 2019 unaudited financial statements. The financial statements do not include any adjustments that might result from the outcome of that uncertainty. The continuation of our business is dependent upon obtaining further long-term financing, successful exploration and development of our property interests and, finally, achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

 

There are no assurances that we will be able to obtain further funds required for our continued operations. We are pursuing various financing alternatives to meet our immediate and long-term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will be forced to scale down or perhaps even cease the operation of our business.

 

Results of Operations

 

Nine months ended December 31, 2019 and 2018

 

We had no operating revenues for the nine months ended December 31, 2019 and 2018. We are not currently profitable. As a result of ongoing operating losses, we had an accumulated deficit of approximately $4,889,000 as of December 31, 2019.

 

Our exploration costs were approximately $63,000 and $33,000 for the nine months ended December 31, 2019 and 2018, respectively. Our general and administrative expenses for the nine months ended December 31, 2019 were approximately $451,000 and approximately $403,000 for the nine months ended December 31, 2018. Our general and administrative expenditures were primarily for legal, accounting & professional fees, investor relations and other general and administrative expenses necessary for our operations.

 

We had losses from operations for the nine months ended December 31, 2019 and 2018 totaling approximately $514,000 and $436,000, respectively, and a net loss for the nine months ended December 31, 2019 and 2018 totaling approximately $524,000 and $461,000, respectively. We accrued interest expense on notes payable totaling approximately $9,000 and $25,000, respectively, for the nine months ended December 31, 2019 and 2018.

 

Three months ended December 31, 2019 and 2018

 

We had no operating revenues for the three months ended December 31, 2019 and 2018. We are not currently profitable. As a result of ongoing operating losses, we had an accumulated deficit of approximately $4,889,000 as of December 31, 2019.

 

Our exploration costs were approximately $24,000 and $12,000 for the three months ended December 31, 2019 and 2018, respectively. Our general and administrative expenses for the three months ended December 31, 2019 were approximately $165,000 and approximately $108,000 for the three months ended December 31, 2018. Our general and administrative expenditures were primarily for legal, accounting & professional fees, investor relations and other general and administrative expenses necessary for our operations.

 

We had a net loss from operations for the three months ended December 31, 2019 and 2018 totaling approximately $189,000 and $120,000, respectively. We accrued interest on notes payable totaling approximately $3,000 and $8,000 for the three months ended December 31, 2019 and 2018, respectively. We had a net loss for the three months ended December 31, 2019 and 2018 totaling approximately $192,000 and $128,000, respectively.

 

Off-Balance Sheet Arrangements

 

For the fiscal years ended August 31, 2019 and 2018, we have off-balance sheet arrangements for annual payments in relation to the mineral leases as disclosed in foot note 3 of the financial statements.

 

Critical Accounting Estimates

 

Management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. Preparation of financial statements requires management to make assumptions, estimates and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and the related disclosures of contingencies. Management bases its estimates on various assumptions and historical experience, which are believed to be reasonable; however, due to the inherent nature of estimates, actual results may differ significantly due to changed conditions or assumptions. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are fairly presented in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. Management believes that the following critical accounting estimates and judgments have a significant impact on our financial statements; Valuation of options granted to Directors and Officers using the Black-Scholes model, and fair value of mineral properties.


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Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable.

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

At the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision of and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operations of our disclosure controls and procedures (as defined in Rule 13a – 15(e) and Rule 15d – 15(e) under the Exchange Act). Based on that evaluation the CEO and CFO have concluded that as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were not effective in ensuring that: (i) information required to be disclosed by us in our reports that we file or submit to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and (ii) material information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow for accurate and timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There were no changes to our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially effect, our internal controls over financial reporting.


17


 

 

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

None

 

Item 1A. Risk Factors

 

There have been no material changes from the risk factors as previously disclosed in our Form 10-K for the year ended March 31, 2019.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

Except as set forth below, all unregistered sales of equity securities during the period covered by this Quarterly Report were previously disclosed in our current reports on Form 8-K or quarterly reports on Form 10-Q.

 

Date

 

Description

 

Number

 

Purchaser

 

Proceeds ($)

 

Consideration

 

Exemption (A)

December 2019

 

Common Stock

 

500,000(1)

 

Investor

 

$50,000

 

Investor

 

Sec. 4(a)(2)

December 2019

 

Common Stock Warrants

 

500,000(2)

 

Investor

 

$Nil

 

Investor

 

Sec. 4(a)(2)

 

(A)With respect to sales designated by “Sec. 4(a)(2),” these shares were issued pursuant to the exemption from registration contained in to Section 4(a)(2) of the Securities Act as privately negotiated, isolated, non-recurring transactions not involving any public offer or solicitation. Each purchaser represented that such purchaser’s intention to acquire the shares for investment only and not with a view toward distribution. None of the securities were sold through an underwriter and accordingly, there were no underwriting discounts or commissions involved. 

 

(1)The Company sold 500,000 shares of Common Stock to an individual for $50,000,  

 

(2)The Company granted this individual 500,000 Common Stock Warrants through a Private Placement. 

 

Item 3. Defaults upon Senior Securities

 

Not applicable.

 

Item 4. Mine Safety Disclosure

 

Pursuant to Section 1503(a) of the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act (The “Dodd-Frank Act”), issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities. During the quarter ended June 30, 2017, our U.S. exploration properties were not subject to regulation by the Federal Mine Safety and Health Administration (“MSHA”) under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”).

 

Item 5. Other Information

 

None.


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Item 6. Exhibits.

 

The following exhibits are attached hereto or are incorporated by reference:

 

Exhibit Number

 

Description

3.1 (i), (ii)

 

Articles and Bylaws incorporated by reference from our Registration Statement on Form 10-SB filed on February 27, 2003.

3.2

 

Certificate of Amendment to the Articles of Incorporation dated June 2, 2005 incorporated by reference from our quarterly report on Form 10-QSB filed on November 17, 2006.

3.3

 

Certificate of Change dated June 2, 2005 incorporated by reference from our quarterly report on Form 10-QSB filed on November 17, 2006.

3.4

 

Certificate of Amendment to the Articles of Incorporation incorporated by reference from our annual report on Form 10-KSB filed on July 14, 2006

3.5

 

Certificate of Change incorporated by reference from our annual report on Form 10-KSB filed on July 14, 2006.

3.6

 

Articles of Incorporation of Urex Energy Corp. incorporated by reference from our annual report on Form 10-KSB filed on July 14, 2006.

3.7

 

Articles of Merger incorporated by reference from our Current Report on Form 8-K filed on July 5, 2006.

3.8

 

Certificate of Change incorporated by reference from our Current Report on Form 8-K filed on July 5, 2006.

3.9

 

Certificate of Correction with respect to the Certificate of Change incorporated by reference from our Current Report on Form 8-K filed on July 5, 2006.

3.10

 

Certificate of Correction with respect to the Articles of Merger incorporated by reference from our Current Report on Form 8-K filed on July 5, 2006.

3.11

 

Amended Articles and Plan of Merger filed on September 14, 2012 incorporated by reference from our Current Report on Form 8-K filed on October 3, 2012.

16.1

 

Letter from PLS, CPA dated April 2, 2013 incorporated by reference from our Current Report on Form 8-K filed on April 5, 2013.

14.1

 

Our Code of Ethics adopted April 26, 2013 incorporated by reference from our annual report on Form 10-K filed on July 1, 2013.

31.1*

 

Section 302 Certification of Gerald Aberle, Chief Executive Officer

31.2*

 

Section 302 Certification of Wm. Chris Mathers, Chief Financial Officer

32.1*

 

Section 906 Certification of Gerald Aberle, Chief Executive Officer

32.2*

 

Section 906 Certification of Wm. Chris Mathers, Chief Financial Officer

 

*Filed herewith


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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

DAKOTA TERRITORY RESOURCE CORP.

 

/s/ Gerald Aberle

By: Gerald Aberle, duly authorized officer

Chief Executive Officer and Principal Executive Officer

Dated: February 3, 2020

 

/s/ Wm. Chris Mathers

By: Wm. Chris Mathers, duly authorized officer

Chief Financial Officer and Principal Accounting Officer

Dated: February 3, 2020


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