UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
FORM 10-Q
|
[X]
|
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended:
October 31,
2019
|
[ ]
|
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period
from_______to_______
Commission file number
000-52055
RED METAL
RESOURCES LTD.
(Exact name of small business issuer
as specified in its charter)
|
Nevada
(State or other
jurisdiction
of incorporation or
organization)
|
20-2138504
(I.R.S. Employer
Identification No.)
|
278 Bay
Street, Suite 102, Thunder Bay, ON P7B 1R8
(Address of principal executive
offices) (Zip Code)
(807)
345-7384
(Issuer’s telephone number)
Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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. [X] Yes [ ]
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
(§232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and
post such files). [X] Yes [ ] No
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, smaller reporting company, or an emerging
growth company.
|
Large accelerated filer [ ]
|
|
Accelerated filer [ ]
|
|
Non-accelerated filer [ ]
|
|
Smaller Reporting Company [X]
|
|
|
|
Emerging Growth Company [ ]
|
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 pursuant to Section 13(a)
of the Exchange Act. [ ]
Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the
Act). [ ] Yes [X] No
Indicate the number of shares
outstanding of each of the issuer’s classes of common stock, as of
the latest practicable date. As of December 16, 2019, the number of
shares of the registrant’s common stock outstanding was
37,504,588.
Table of Contents
ii
PART I
- FINANCIAL INFORMATION
Item 1.
Financial Statements.
RED METAL RESOURCES
LTD.
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN US
DOLLARS)
|
|
October 31, 2019
|
|
January 31, 2019
|
|
|
(Unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
Current assets
|
|
|
|
|
Cash
|
$
|
4,300
|
|
$
|
8,686
|
|
Prepaids and other receivables
|
|
25,466
|
|
|
1,838
|
|
Total current assets
|
|
29,766
|
|
|
10,524
|
|
|
|
|
|
|
|
|
Equipment
|
|
949
|
|
|
1,305
|
|
Unproved mineral properties
|
|
728,818
|
|
|
730,549
|
|
Total assets
|
$
|
759,533
|
|
$
|
742,378
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
DEFICIT
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
Accounts payable
|
$
|
239,603
|
|
$
|
216,926
|
|
Accrued liabilities
|
|
136,070
|
|
|
133,383
|
|
Due to related parties
|
|
7,319
|
|
|
1,849
|
|
Notes payable
|
|
26,327
|
|
|
27,019
|
|
Total current liabilities
|
|
409,319
|
|
|
379,177
|
|
|
|
|
|
|
|
|
Long-term notes to related
parties
|
|
839,409
|
|
|
613,540
|
|
Total liabilities
|
|
1,248,728
|
|
|
992,717
|
|
|
|
|
|
|
|
|
Stockholders' deficit
|
|
|
|
|
|
|
Common stock, $0.001 par value, authorized
500,000,000,
37,504,588 issued and
outstanding at October 31, 2019
and January 31, 2019
|
|
37,504
|
|
|
37,504
|
|
Additional paid-in capital
|
|
8,968,677
|
|
|
8,968,677
|
|
Deficit
|
|
(9,458,961)
|
|
|
(9,263,300)
|
|
Accumulated other comprehensive income
(loss)
|
|
(36,415)
|
|
|
6,780
|
|
Total stockholders' deficit
|
|
(489,195)
|
|
|
(250,339)
|
|
Total liabilities and stockholders'
deficit
|
$
|
759,533
|
|
$
|
742,378
|
The accompanying notes are an integral
part of these unaudited interim consolidated financial
statements
F-1
RED METAL RESOURCES
LTD.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(EXPRESSED IN US
DOLLARS)
(UNAUDITED)
|
|
|
Three Months Ended
October 31,
|
|
Nine Months Ended
October 31,
|
|
|
|
2019
|
2018
|
|
2019
|
2018
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
Amortization
|
|
$
|
78
|
$
|
113
|
|
$
|
262
|
$
|
388
|
|
Consulting fees
|
|
|
-
|
|
-
|
|
|
-
|
|
30,000
|
|
General and administrative
|
|
|
22,621
|
|
17,631
|
|
|
47,792
|
|
40,587
|
|
Mineral exploration costs
|
|
|
6,380
|
|
2,105
|
|
|
12,487
|
|
14,510
|
|
Professional fees
|
|
|
10,311
|
|
9,951
|
|
|
35,151
|
|
25,453
|
|
Rent
|
|
|
-
|
|
-
|
|
|
-
|
|
5,329
|
|
Regulatory
|
|
|
750
|
|
874
|
|
|
5,228
|
|
5,350
|
|
Salaries, wages and benefits
|
|
|
16,797
|
|
15,590
|
|
|
49,779
|
|
52,888
|
|
|
|
|
(56,937)
|
|
(46,264)
|
|
|
(150,699)
|
|
(174,505)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other items
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange gain
|
|
|
17
|
|
339
|
|
|
110
|
|
4,166
|
|
Forgiveness of debt
|
|
|
-
|
|
-
|
|
|
-
|
|
162,723
|
|
Interest on notes payable
|
|
|
(16,923)
|
|
(10,755)
|
|
|
(45,072)
|
|
(67,827)
|
|
Net loss
|
|
|
(73,843)
|
|
(56,680)
|
|
|
(195,661)
|
|
(75,443)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized foreign exchange gain
(loss)
|
|
|
(17,819)
|
|
(32,534)
|
|
|
(43,195)
|
|
11,497
|
|
Comprehensive loss
|
|
$
|
(91,662)
|
$
|
(89,214)
|
|
$
|
(238,856)
|
$
|
(63,946)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share - basic and diluted
|
|
$
|
(0.00)
|
$
|
(0.00)
|
|
$
|
(0.01)
|
$
|
(0.00)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares
outstanding - basic and diluted
|
|
|
37,504,588
|
|
37,504,588
|
|
|
37,504,588
|
|
36,781,145
|
The accompanying notes are an integral
part of these unaudited interim consolidated financial
statements
F-2
RED METAL RESOURCES
LTD.
CONSOLIDATED STATEMENT OF STOCKHOLDERS'
DEFICIT
(EXPRESSED IN US
DOLLARS)
(UNAUDITED)
|
|
Common Stock Issued
|
|
|
Accumulated
|
|
|
|
|
|
Additional
|
|
Other
|
|
|
|
Number of
|
|
Paid-in
|
Accumulated
|
Comprehensive
|
|
|
|
Shares
|
Amount
|
Capital
|
Deficit
|
Income / (Loss)
|
Total
|
|
|
|
|
|
|
|
|
|
Balance at January
31, 2018
|
35,004,588
|
$
|
35,004
|
$
|
6,803,833
|
$
|
(9,129,238)
|
$
|
(20,348)
|
$
|
(2,310,749)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued for
cash
|
2,500,000
|
|
2,500
|
|
185,000
|
|
-
|
|
-
|
|
187,500
|
|
Extinguishment of
related party debt
|
-
|
|
-
|
|
1,979,844
|
|
-
|
|
-
|
|
1,979,844
|
|
Net loss for the
nine months ended
October 31,
2018
|
-
|
|
-
|
|
-
|
|
(75,443)
|
|
-
|
|
(75,443)
|
|
Foreign exchange
translation
|
-
|
|
-
|
|
-
|
|
-
|
|
11,497
|
|
11,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at October
31, 2018
|
37,504,588
|
|
37,504
|
|
8,968,677
|
|
(9,204,681)
|
|
(8,851)
|
|
(207,351)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the
three months ended
January 31,
2019
|
-
|
|
-
|
|
-
|
|
(58,619)
|
|
-
|
|
(58,619)
|
|
Foreign exchange
translation
|
-
|
|
-
|
|
-
|
|
-
|
|
15,631
|
|
15,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January
31, 2019
|
37,504,588
|
|
37,504
|
|
8,968,677
|
|
(9,263,300)
|
|
6,780
|
|
(250,339)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the
nine months ended
October 31,
2019
|
-
|
|
-
|
|
-
|
|
(195,661)
|
|
-
|
|
(195,661)
|
|
Foreign exchange
translation
|
-
|
|
-
|
|
-
|
|
-
|
|
(43,195)
|
|
(43,195)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at October
31, 2019
|
37,504,588
|
$
|
37,504
|
$
|
8,968,677
|
$
|
(9,458,961)
|
$
|
(36,415)
|
$
|
(489,195)
|
The accompanying notes are an integral
part of these unaudited interim consolidated financial
statements
F-3
RED METAL RESOURCES
LTD.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(EXPRESSED IN US
DOLLARS)
(UNAUDITED)
|
|
For the Nine Months
Ended
October 31,
|
|
|
2019
|
2018
|
|
|
|
|
|
Cash flows used in operating
activities:
|
|
|
|
Net loss
|
$
|
(195,661)
|
$
|
(75,443)
|
|
Adjustments to reconcile net loss to net
cash used in operating activities:
|
|
|
|
|
|
Accrued interest on related
party notes payable
|
|
43,469
|
|
58,653
|
|
Accrued interest on related
party payables
|
|
-
|
|
7,259
|
|
Accrued interest on notes
payable
|
|
1,603
|
|
2,012
|
|
Amortization
|
|
262
|
|
388
|
|
Forgiveness of debt
|
|
-
|
|
(162,723)
|
|
|
|
|
|
|
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
Prepaids and other
receivables
|
|
(24,818)
|
|
281
|
|
Accounts payable
|
|
33,897
|
|
(7,544)
|
|
Accrued liabilities
|
|
12,036
|
|
(52,093)
|
|
Due to related
parties
|
|
5,448
|
|
37,037
|
|
Cash paid for interest on notes
payable
|
|
-
|
|
(4,646)
|
|
Net cash used in operating activities
|
|
(123,764)
|
|
(196,819)
|
|
|
|
|
|
|
|
Cash flows used in investing
activities:
|
|
|
|
|
|
Acquisition of unproved mineral
properties
|
|
(61,799)
|
|
(47,977)
|
|
Net cash used in investing activities
|
|
(61,799)
|
|
(47,977)
|
|
|
|
|
|
|
|
Cash flows provided by financing
activities:
|
|
|
|
|
|
Cash received on issuance of notes payable
to related parties
|
|
182,212
|
|
64,537
|
|
Issuance of common stock for private
placements
|
|
-
|
|
187,500
|
|
Cash paid for notes payable
|
|
-
|
|
(2,130)
|
|
Net cash provided by financing
activities
|
|
182,212
|
|
249,907
|
|
|
|
|
|
|
|
Effects of foreign currency exchange
|
|
(1,035)
|
|
(2,902)
|
|
|
|
|
|
|
|
Increase (decrease) in cash
|
|
(4,386)
|
|
2,209
|
|
Cash, beginning
|
|
8,686
|
|
2,392
|
|
Cash, ending
|
$
|
4,300
|
$
|
4,601
|
|
|
|
|
|
|
|
Supplemental disclosures:
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
Income tax
|
$
|
-
|
$
|
-
|
|
Interest
|
$
|
-
|
$
|
4,646
|
The accompanying notes are an integral
part of these unaudited interim consolidated financial
statements
F-4
RED METAL RESOURCES
LTD.
NOTES
TO THE CONDENSED FINANCIAL STATEMENTS
OCTOBER 31, 2019
(UNAUDITED)
NOTE 1 - ORGANIZATION AND BASIS OF
PRESENTATION
Nature of Operations
Red Metal Resources Ltd. (the “Company”) holds a
99% interest in Minera Polymet SpA (“Polymet”) under the laws of
the Republic of Chile. The Company is involved in acquiring and
exploring mineral properties in Chile. The Company has not
determined whether its properties contain mineral reserves that are
economically recoverable.
Unaudited Interim Consolidated Financial
Statements
The unaudited interim consolidated financial
statements of the Company have been prepared in accordance with
United States generally accepted accounting principles (“GAAP”) for
interim financial information and the rules and regulations of the
Securities and Exchange Commission (“SEC”). They do not include all
information and footnotes required by GAAP for complete financial
statements. Except as disclosed herein, there have been no material
changes in the information disclosed in the notes to the financial
statements for the year ended January 31, 2019, included in the
Company’s Annual Report on Form 10-K, filed with the SEC. The
unaudited interim consolidated financial statements should be read
in conjunction with those financial statements included in Form
10-K. In the opinion of management, all adjustments considered
necessary for a fair presentation, consisting solely of normal
recurring adjustments, have been made. Operating results for the
three and nine months ended October 31, 2019, are not necessarily
indicative of the results that may be expected for the year ending
January 31, 2020.
NOTE 2 - RELATED-PARTY
TRANSACTIONS
The following amounts were due to related parties
as at:
|
|
October 31, 2019
|
January 31, 2019
|
|
|
|
|
|
Due to a company owned by an officer
(a)
|
$
|
107
|
$
|
25
|
|
Due to a company controlled by directors
(b)
|
|
7,212
|
|
1,824
|
|
Total due to related parties
|
$
|
7,319
|
$
|
1,849
|
(a) Amounts are unsecured, due on demand and bear
no interest.
(b) Amounts are unsecured, due on demand, and
prior to forgiveness of debt on July 31, 2018, bore interest at
10%; subsequent to forgiveness of debt no interest is being accrued
on the amounts owed to the company controlled by
directors.
During the nine-month period ended October 31,
2019, the Company did not accrue any interest on the amounts
payable to related parties (October 31, 2018 - $7,259).
The following amounts were due under the notes
payable the Company issued to related parties:
|
|
October 31, 2019
|
January 31, 2019
|
|
|
|
|
|
Note payable to the Chief Executive Officer
(“CEO”) (c)
|
$
|
644,589
|
$
|
502,448
|
|
Note payable to the Chief Financial Officer
(“CFO”) (c)
|
|
9,392
|
|
8,849
|
|
Note payable to a company controlled by directors
(c)
|
|
108,393
|
|
102,243
|
|
Note payable to a major shareholder (c)
|
|
77,035
|
|
--
|
|
Total notes payable to related parties
|
$
|
839,409
|
$
|
613,540
|
(c) Amounts are unsecured, bear interest at 8%,
and are due on or after July 31, 2021.
During the nine-month period ended October 31,
2019, the Company accrued $43,469 (October 31, 2018 - $58,653) in
interest expense on the notes payable to related
parties.
F-5
Transactions with Related
Parties
During the nine-month periods ended October
31, 2019 and 2018, the Company incurred the following expenses with
related parties:
|
|
October 31,
2019
|
October 31,
2018
|
|
|
|
|
|
Consulting fees paid or accrued to a company owned
by the CFO
|
$
|
-
|
$
|
30,000
|
|
Rent fees paid or accrued to a company controlled
by a major shareholder
|
$
|
-
|
$
|
5,184
|
NOTE 3 - UNPROVED MINERAL
PROPERTIES
Following is the schedule of the Company’s
unproved mineral properties as at October 31, 2019:
|
Mineral Claims
|
January 31,
2019
|
Acquisition fees
and
property taxes
paid
|
Effect of
foreign
currency
translation
|
October 31,
2019
|
|
Farellon Project
|
|
|
|
|
|
Farellon Alto 1-8
|
$
|
411,268
|
$
|
3,519
|
$
|
(33,939)
|
$
|
380,848
|
|
Quina
|
|
158,519
|
|
1,788
|
|
(13,107)
|
|
147,200
|
|
Exeter
|
|
109,584
|
|
51,674
|
|
(11,886)
|
|
149,372
|
|
|
|
679,371
|
|
56,981
|
|
(58,932)
|
|
677,420
|
|
|
|
|
|
|
|
|
|
|
|
Perth Project
|
|
51,178
|
|
4,818
|
|
(4,598)
|
|
51,398
|
|
|
|
|
|
|
|
|
|
|
|
Total Costs
|
$
|
730,549
|
$
|
61,799
|
$
|
(63,530)
|
$
|
728,818
|
On May 13, 2019, the Company made the fifth and
the final option payment of $50,000 to acquire a 100% interest in
the Exeter Claim. The funds to make the option payment were
advanced to the Company by its CEO and director in exchange for a
note payable which accumulates interest at 8% per annum compounded
monthly, is unsecured and payable on or after July 31,
2021.
NOTE 4- COMMON STOCK
Warrants
At October 31, 2019, the Company had 2,500,000
warrants issued and exercisable. Each warrant entitles its holder
to purchase one common share for a period of two years expiring on
April 20, 2020, at an exercise price of $0.1875 per share. The
Company may accelerate the expiration date of the warrants if the
daily volume weighted average share price of the Company’s common
shares equals to or is greater than CAD$0.30 as posted on the
Canadian Securities Exchange, or USD$0.225 as posted on the OTC
Link alternative trading system (or such other stock exchange as
the Company’s common shares are then trading on) for ten
consecutive trading days.
NOTE 5- SUBSEQUENT EVENTS
Subsequent to October 31, 2019, the Company
entered into two loan agreements with Caitlin Jeffs, the Company’s
CEO, for $11,344 (CAD$15,000) and $1,125, respectively. Both loans
are unsecured, accrue interest at 8% per annum compounded monthly,
and are payable on or after July 31, 2021.
F-6
Item 2.
Management’s Discussion and Analysis of Financial Condition and
Results of Operations.
Forward-Looking
Statements
This Quarterly Report on Form 10-Q
filed by Red Metal Resources Ltd. contains forward-looking
statements. These are statements regarding financial and operating
performance and results and other statements that are not
historical facts. The words “expect,” “project,” “estimate,”
“believe,” “anticipate,” “intend,” “plan,” “forecast,” and similar
expressions are intended to identify forward-looking statements.
Certain important risks could cause results to differ materially
from those anticipated by some of the forward-looking statements.
Some, but not all, of these risks include, among other
things:
·general economic
conditions, because they may affect our ability to raise
money;
·our ability to raise
enough money to continue our operations;
·changes in regulatory
requirements that adversely affect our business;
·changes in the prices
for minerals that adversely affect our business;
·political changes in
Chile, which could affect our interests there;
and/or
·other uncertainties, all
of which are difficult to predict and many of which are beyond our
control.
We caution you not to place undue
reliance on these forward-looking statements, which reflect our
management’s view only as of the date of this report. We are not
obligated to update these statements or publicly release the
results of any revisions to them to reflect events or circumstances
after the date of this report or to reflect the occurrence of
unanticipated events. You should refer to, and carefully review,
the information in future documents we file with the Securities and
Exchange Commission.
General
You should read this discussion and
analysis in conjunction with our interim unaudited consolidated
financial statements and related notes included in this Form 10-Q
and the audited consolidated financial statements and related notes
included in our Annual Report on Form 10-K for the fiscal year
ended January 31, 2019. The inclusion of supplementary analytical
and related information may require us to make estimates and
assumptions to enable us to fairly present, in all material
respects, our analysis of trends and expectations with respect to
our results of operations and financial position taken as a whole.
Actual results may vary from the estimates and assumptions we
make.
Overview
Red Metal Resources Ltd. (“Red Metal”
or the “Company”) is a mineral exploration company engaged in
locating, and eventually developing, mineral resources in Chile.
Our business strategy is to identify, acquire and explore
prospective mineral claims with a view to either developing them
ourselves or, more likely, finding a joint venture partner with the
mining experience and financial means to undertake the development.
All our claims are in the Candelaria IOCG belt in the Chilean
Coastal Cordillera.
Consistent with our historical
practices, we continue to monitor our costs in Chile by reviewing
our mineral claims to determine whether they possess the geological
indicators to economically justify the capital to maintain or
explore them. Currently, our subsidiary, Minera Polymet SpA, has
two employees in Chile and engages independent consultants on as
needed basis. Most of our support - such as vehicles, office, and
equipment - is supplied under short-term contracts. The only
long-term commitments that we have are for royalty payments on four
of our mineral claims - Farellon Alto 1-8, Quina 1 - 56, Exeter 1 -
54, and Che. These royalties are payable once exploitation begins.
We are also required to pay property taxes that are due annually on
all the claims that are included in our properties.
The cost and timing of all planned
exploration programs are subject to the availability of qualified
mining personnel, such as consulting geologists, geo-technicians
and drillers, and drilling equipment. Although Chile has a
well-trained and qualified mining workforce from which to draw and
few early-stage companies such as ours are competing for the
available resources, if we are unable to find the personnel and
equipment that we need when we need them and at the prices that we
have estimated today, we might have to revise or postpone our
plans.
1
Results of Operations
SUMMARY OF FINANCIAL
CONDITION
Table 1 summarizes and compares our
financial condition at October 31, 2019, to the year ended January
31, 2019.
Table 1: Comparison of financial
condition
|
|
October 31,
2019
|
|
January 31,
2019
|
|
Working capital deficit
|
$
|
(379,553)
|
|
$
|
(368,653)
|
|
Current assets
|
$
|
29,766
|
|
$
|
10,524
|
|
Unproved mineral properties
|
$
|
728,818
|
|
$
|
730,549
|
|
Total current liabilities
|
$
|
409,319
|
|
$
|
379,177
|
|
Total long-term liabilities
|
$
|
839,409
|
|
$
|
613,540
|
|
Common stock and additional paid in
capital
|
$
|
9,006,181
|
|
$
|
9,006,181
|
|
Accumulated other comprehensive income
(loss)
|
$
|
(36,415)
|
|
$
|
6,780
|
|
Deficit
|
$
|
(9,458,961)
|
|
$
|
(9,263,300)
|
Selected
Financial Results
THREE AND NINE MONTHS ENDED OCTOBER
31, 2019 AND 2018
Our operating results for the three
and nine months ended October 31, 2019 and 2018, and the changes in
the operating results between those periods are summarized in Table
2:
Table 2: Summary of operating
results
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
October 31,
2019
|
October 31,
2018
|
Percentage
Increase /
(Decrease)
|
October 31,
2019
|
October 31,
2018
|
Percentage
Increase /
(Decrease)
|
|
Operating
expenses
|
$
|
(56,937)
|
$
|
(46,264)
|
23.1%
|
$
|
(150,699)
|
$
|
(174,505)
|
(13.6)%
|
|
Other items:
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
exchange gain
|
|
17
|
|
339
|
(95.0)%
|
|
110
|
|
4,166
|
(97.4)%
|
|
Forgiveness of debt
|
|
-
|
|
-
|
n/a
|
|
-
|
|
162,723
|
(100)%
|
|
Interest on notes payable
|
|
(16,923)
|
|
(10,755)
|
57.4%
|
|
(45,072)
|
|
(67,827)
|
(33.5)%
|
|
Net loss
|
|
(73,843)
|
|
(56,680)
|
30.3%
|
|
(195,661)
|
|
(75,443)
|
159.3%
|
|
Unrealized foreign
exchange gain (loss)
|
|
(17,819)
|
|
(32,534)
|
(45.2)%
|
|
(43,195)
|
|
11,497
|
(475.7)%
|
|
Comprehensive
loss
|
$
|
(91,662)
|
$
|
(89,214)
|
2.7%
|
$
|
(238,856)
|
$
|
(63,946)
|
273.5%
|
Revenue. We did not generate
any revenue during the three and nine months ended October 31, 2019
and 2018. Due to the exploration rather than the production nature
of our business, we do not expect to have significant operating
revenue in the foreseeable future.
Operating expenses. Our
operating expenses for the three and nine months ended October 31,
2019 and 2018, and the changes between those periods are summarized
in Table 3.
Table 3: Detailed changes in operating
expenses
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
October 31,
2019
|
October 31,
2018
|
Percentage
Increase /
(Decrease)
|
October 31,
2019
|
October 31,
2018
|
Percentage
Increase /
(Decrease)
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
|
$
|
78
|
$
|
113
|
(31.0)%
|
$
|
262
|
$
|
388
|
(32.5)%
|
|
Consulting fees
|
|
-
|
|
-
|
n/a
|
|
-
|
|
30,000
|
(100.0)%
|
|
General and administrative
|
|
22,621
|
|
17,631
|
28.3%
|
|
47,792
|
|
40,587
|
17.8%
|
|
Mineral exploration costs
|
|
6,380
|
|
2,105
|
203.1%
|
|
12,487
|
|
14,510
|
(13.9)%
|
|
Professional fees
|
|
10,311
|
|
9,951
|
3.6%
|
|
35,151
|
|
25,453
|
38.1%
|
|
Rent
|
|
-
|
|
-
|
n/a
|
|
-
|
|
5,329
|
(100.0)%
|
|
Regulatory
|
|
750
|
|
874
|
(14.2)%
|
|
5,228
|
|
5,350
|
(2.3)%
|
|
Salaries, wages and benefits
|
|
16,797
|
|
15,590
|
7.7%
|
|
49,779
|
|
52,888
|
(5.9)%
|
|
Total operating
expenses
|
$
|
56,937
|
$
|
46,264
|
23.1%
|
$
|
150,699
|
$
|
174,505
|
(13.6)%
|
2
Our operating expenses increased by
$10,673, or 23.1%, from $46,264 for the three-month period ended
October 31, 2018, to $56,937 for the three-month period ended
October 31, 2019. The increase in operating expenses during the
three-month period ended October 31, 2019, was associated mainly
with increased general and administrative expenses, which increased
by $4,990, from $17,631 we incurred during the three-month period
ended October 31, 2018, to $22,621 for the three months ended
October 31, 2019, and which consisted of $14,070 in office expenses
(2019 - $3,385), automobile expenses of $1,407 (2019 - $3,286),
administrative fees of $6,533 (2019 - $8,323), travel and
entertainment expenses of $86 (2019 - $1,817), and bank charges and
Chilean value added taxes of $525 (2019 - $820). In addition, our
mineral exploration expenses increased by $4,275, from $2,105 for
the three-month period ended October 31, 2018, to $6,380 for the
three-month period ended October 31, 2019, our salaries, wages, and
benefits increased by $1,207, from $15,590 for the three-month
period ended October 31, 2018, to $16,797 for the three-month
period ended October 31, 2019, and our professional fees increased
by $360 from $9,951 for the three-month period ended October 31,
2018, to $10,311 for the three-month period ended October 31,
2019.
The above increases were offset by
decreases in regulatory fees from $874 for the three-month period
ended October 31, 2018, to $750 for the three-month period ended
October 31, 2019, and a decrease in amortization expense from $113
for the three-month period ended October 31, 2018, to $78 for the
three-month period ended October 31, 2019.
The most significant year-to-date
changes in our operating expenses were as follows;
·We did not incur any
expenses associated with consulting fees and rent of our office, as
opposed to $30,000 we incurred during the comparative nine-month
period ended October 31, 2018, for consulting, and $5,329 we
incurred on account of office rental fees. The reduction was
associated with our efforts to control our operating
costs.
·Our general and
administrative expenses increased by 17.8%, or $7,205 to $47,792
during the nine-month period ended October 31, 2019, as compared to
$40,587 we incurred in general and administrative expenses during
the comparative period ended October 31, 2018. The increase was
associated mostly with increased office expenses, which amounted to
$15,238 (2019 - $7,777), automobile expenses of $3,288 (2019 -
$5,254), and administrative fees of $21,558 (2019 - $22,329). These
increases were in part offset by increased advertising and
promotion fees of $2,845 (2019 - $341) and travel and entertainment
fees of $2,318 (2019 - $1,871).
·Our mineral and
exploration expenses decreased by $2,023, or 13.9%; from $14,510 we
incurred during the nine-month period ended October 31, 2018, to
$12,487 we incurred during the nine-month period ended October 31,
2019. The higher mineral exploration expenses during the
comparative nine-month period ended October 31, 2018, were
associated with the payment of 2017/18 and 2018/19 property taxes
and late payment fees for the claims that comprise our Mateo
Property and for the Cecil claim, which is included in our Farellon
Property; these claims were impaired during our Fiscal 2016,
however, we retain ownership of these claims. During the nine-month
period ended October 31, 2019, we paid our 2019/20 property taxes
on the same claims; since our tax payments were up-to-date we were
not required to pay any additional fees or
penalties.
·During the nine-month
period ended October 31, 2019, our salaries paid to the staff
employed through our Chilean subsidiary decreased by 5.9% to
$49,779 from $52,888 we incurred during the nine-month period ended
October 31, 2018. The decrease was associated with fluctuation of
foreign exchange rates between Chilean Peso and the US
dollar.
·Our professional fees
increased by $9,698, or 38.1%, from $25,453 we incurred during the
nine-month period ended October 31, 2018, to $35,151 we incurred
during the nine-month period ended October 31, 2019. The change was
associated mainly with increased legal fees paid by our Chilean
subsidiary for property documentation and other regulatory
requirements.
Other items.
During the second quarter of our Fiscal 2019 we finalized
negotiations with several arms-length debt holders, who agreed to
forgive, partially or in full, the debt we owed to them. As a
result of these negotiations, we recorded $124,512 in
extinguishment of debt by arms-length debt holders. In addition,
the extinguishment of debt included $38,211 associated with
reversal of old debt which exceeded the statute of limitation. We
did not have similar transactions during the nine-month period
ended October 31, 2019.
3
During the second
quarter of our Fiscal 2019 our related parties agreed to
restructure debt we owed to them as at July 31, 2018, by forgiving
a total of $ 1,979,844, and extending the due date of the remaining
$479,995 to July 31, 2021. Forgiveness of debt and restructuring of
loans with related parties resulted in decrease to interest expense
from $67,827 we incurred for the nine months ended October 31,
2018, to $45,072 we accrued during the nine-month period ended
October 31, 2019. Due to incurring additional debt following July
31, 2018, debt restructure, our interest expenses for the
three-month period ended October 31, 2019 increased by 57.4% from
$10,755 we accrued for the three months ended October 31, 2018, to
$16,923 in interest expense we accrued during the three-month
period ended October 31, 2019.
Comprehensive loss. Our
comprehensive loss for the three-month period ended October 31,
2019, was $91,662 as compared to $89,214 we recorded for the
three-month period ended October 31, 2018. During the three-month
period ended October 31, 2019, the comprehensive loss included
$17,819 loss associated with the foreign exchange translation of
the carried balances denominated in other than our functional
currencies. During the comparative three-month period ended October
31, 2018, the comprehensive loss included $32,534 loss associated
with the foreign exchange translation of the carried balances
denominated in other than our functional currencies.
Our comprehensive loss for the
nine-month period ended October 31, 2019, was $238,856 as compared
to the comprehensive loss of $63,946 we recorded for the nine-month
period ended October 31, 2018. During the nine-month period ended
October 31, 2019, the comprehensive loss included $43,195 loss
associated with the foreign exchange translation of the carried
balances denominated in other than our functional currencies.
During the comparative nine-month period ended October 31, 2018,
the comprehensive loss included $11,497 gain associated with the
foreign exchange translation of the carried balances denominated in
other than our functional currencies.
Liquidity and
Capital Resources
Table 4: Working capital
|
|
October 31, 2019
|
January 31, 2019
|
|
Percentage
Increase
|
|
Current assets
|
$
|
29,766
|
$
|
10,524
|
|
182.8%
|
|
Current liabilities
|
|
409,319
|
|
379,177
|
|
7.9%
|
|
Working capital deficit
|
$
|
(379,553)
|
$
|
(368,653)
|
|
3.0%
|
As of October 31, 2019, we had a cash
balance of $4,300, our working capital was represented by a deficit
of $379,553 and cash used in operations totaled $123,764 for the
period then ended.
We did not generate sufficient cash
flows from our operating activities to satisfy our cash
requirements for the nine-month period ended October 31, 2019. The
amount of cash that we have generated from our operations to date
is significantly less than our current debt obligations, including
our debt obligations under our notes and advances payable. There is
no assurance that we will be able to generate sufficient cash from
our operations to repay the amounts owing under these notes and
advances payable, or to service our other debt obligations.
If we are unable to generate sufficient cash flow from our
operations to repay the amounts owing when due, we may be required
to raise additional financing from other sources.
Cash
Flow
Table 5 summarizes our sources and
uses of cash for the nine months ended October 31, 2019 and
2018.
Table 5: Summary of sources and uses
of cash
|
|
October 31,
|
|
|
2019
|
|
2018
|
|
Net cash used in operating activities
|
$
|
(123,764)
|
|
$
|
(196,819)
|
|
Net cash used in investing activities
|
|
(61,799)
|
|
|
(47,977)
|
|
Net cash provided by financing
activities
|
|
182,212
|
|
|
249,907
|
|
Effects of foreign currency exchange
|
|
(1,035)
|
|
|
(2,902)
|
|
Net increase (decrease) in cash
|
$
|
(4,386)
|
|
$
|
2,209
|
4
Net cash used in operating
activities
During the nine months ended October
31, 2019, we used net cash of $123,764 in operating activities. We
used $150,327 to cover our cash operating costs, and $24,818 to
prepay our future expenses and increase our GST receivable. These
uses of cash were offset by $33,897 and $5,448 increases to our
accounts payable and amounts due to related parties, respectively,
and by $12,036 increase in our accrued liabilities, which were
mainly associated with an accrual of estimated penalty that we
expect to be assessed by the Canada Revenue Agency for late filing
of the Canadian tax returns.
During the nine months
ended October 31, 2018, we used net cash of $196,819 in operating
activities. We used $169,854 to cover our cash operating costs,
$7,544 and $52,093 to decrease our accounts payable and accrued
liabilities, respectively, and $4,646 to pay back accrued interest
on a non-related party loan. These uses of cash were offset
by an increase to the amounts we owed to our related parties of
$37,037 and, to a minor extent, with $281 decrease in our prepaid
expenses and other receivables.
Certain non-cash changes included
in the net loss for the period
During the nine-month period ended
October 31, 2019, our outstanding notes payable to related parties
resulted in the accrual of $43,469 in interest, and our notes
payable to non-related party accumulated $1,603 in interest. In
addition, we recorded $262 in amortization of our work truck used
for Chilean operations.
During the nine months
ended October 31, 2018, our outstanding notes payable to related
parties resulted in the accrual of $58,653 in interest, and our
notes payable to non-related party accumulated $2,012 in interest.
In addition, we recorded $7,259 in interest associated with unpaid
trade accounts payable with related parties, and $388 in
amortization.
During the second
quarter of our Fiscal 2019, we finalized negotiations with several
arms-length debt holders, who agreed to forgive, partially or in
full, the debt we owed to them. As a result of these negotiations,
we recorded $124,512 in extinguishment of debt by arms-length debt
holders. In addition, the extinguishment of debt included $38,211
associated with reversal of old debt which exceeded the statute of
limitation.
Net cash used in investing
activities
During the nine months
ended October 31, 2019, we spent $11,799 paying 2019/20 mineral
property taxes on exploration claims comprising our Perth and
Farellon Properties. In addition, we used $50,000 to make the fifth
and final option payment pursuant to our option agreement to
acquire the Exeter claim.
During the nine months
ended October 31, 2018, we spent $22,977 paying 2017/18 mineral
property taxes which remained unpaid during our Fiscal 2018, and
2018/19 mineral property taxes on exploration claims comprising our
Perth and Farellon Properties. In addition, we used $25,000 to make
the fourth option payment pursuant to our option agreement to
acquire the Exeter claim.
Net cash provided by financing
activities
During the nine months
ended October 31, 2019, we borrowed $54,277 (CAD$72,095) and
$52,935 from our CEO. During the same period we borrowed $75,000
from Mr. Richard Jeffs, our major shareholder. The loans are
unsecured, bear interest at 8% per annum, compounded monthly, and
are payable on or after July 31, 2021.
During the nine months ended October 31, 2018, we
received $187,500 on subscription to 2,500,000 units of our common
stock at $0.075 per unit. During the nine months ended October 31,
2018, we borrowed $895 and $63,642 (CAD$82,036) from our CEO. The
loans are unsecured, payable on demand and bear interest at 8% per
annum, compounded monthly. During the same period we repaid $2,130
in notes payable to an arms-length party.
During the nine-month
period ended October 31, 2018, we finalized negotiations with our
related parties who agreed to restructure the debt we owed to them
as at July 31, 2018. As a result of these negotiations, our related
parties agreed to forgive us the debt totaling $1,979,844, which
was comprised of $456,369 in principal under the notes payable we
issued to Mr. Jeffs, our major shareholder, $317,420 in interest
accrued on the notes payable we issued to Mr. Jeffs, Ms. Jeffs, our
CEO, Fladgate Exploration Consulting Corporation (“Fladgate”), the
Company of which Ms. Jeffs and Mr. Thompson are principals, and Mr.
da Costa, our CFO. In addition, our related parties also
agreed
5
to forgive a total of
$1,206,055 we owed them on account of services they have provided
to the Company. Remaining $479,995 in notes payable we issued to
Ms. Jeffs, Fladgate, and Mr. da Costa, have been amended to extend
the repayment period to no less than three years, or July 31, 2021;
all other terms of the notes payable remained
substantially unchanged.
Going Concern
The consolidated financial statements
included in this Quarterly Report have been prepared on a going
concern basis, which implies that we will continue to realize our
assets and discharge our liabilities in the normal course of
business. We have not generated any significant revenues from
mineral sales since inception, have never paid any dividends and
are unlikely to pay dividends or generate significant earnings in
the immediate or foreseeable future. Our continuation as a going
concern depends upon the continued financial support of our
shareholders, our ability to obtain necessary debt or equity
financing to continue operations, and the attainment of profitable
operations. Our ability to achieve and maintain profitability and
positive cash flow depends upon our ability to locate profitable
mineral claims, generate revenue from mineral production and
control our production costs. Based upon our current plans, we
expect to incur operating losses in future periods, which we plan
to mitigate by controlling our operating costs and by sharing
mineral exploration expenses through joint venture agreements, if
possible. At October 31, 2019, we had a working capital
deficit of $379,553 and accumulated losses of $9,458,961. These
factors raise substantial doubt about our ability to continue as a
going concern. We cannot assure you that we will be able to
generate significant revenues in the future. Our consolidated
interim financial statements do not give effect to any adjustments
that would be necessary should we be unable to continue as a going
concern and therefore be required to realize our assets and
discharge our liabilities in other than the normal course of
business and at amounts different from those reflected in our
financial statements.
Unproved Mineral
Properties
Table 6: Active properties
|
|
|
Hectares
|
|
Property
|
Percentage, type
of claim
|
Gross area
|
Net area (a)
|
|
Farellon
|
|
|
|
|
Farellon Alto 1 - 8 claim
|
100%, mensura
|
66
|
|
|
Quina 1
- 56 claim
|
100%, mensura
|
251
|
|
|
Exeter
1 - 54 claim
|
100%, mensura
|
235
|
|
|
Cecil 1
- 49 claim
|
100%, mensura
|
228
|
|
|
Teresita claim
|
100%, mensura
|
1
|
|
|
Azucar
6 - 25 claim
|
100%, mensura
|
88
|
|
|
Stamford 61 - 101 claim
|
100%, mensura
|
165
|
|
|
Kahuna
1 - 40 claim
|
100%, mensura
|
200
|
|
|
|
|
1,234
|
1,234
|
|
Perth
|
|
|
|
|
Perth 1 al 36 claim
|
100%, mensura
|
109
|
|
|
Lancelot I 1 al 27 claim
|
100%, mensura in
process
|
300
|
|
|
Lancelot II
|
100%, pedimento
|
200
|
|
|
Merlin I
|
100%, pedimento
|
300
|
|
|
Rey Arturo 1 al 29 claim
|
100%, mensura in
process
|
300
|
|
|
Galahad I
|
100%, pedimento
|
300
|
|
|
Percival
|
100%, pedimento
|
300
|
|
|
Tristan II
|
100%, pedimento
|
300
|
|
|
Camelot
|
100%, pedimento
|
300
|
|
|
|
|
2,409
|
|
|
Overlapped claims (a)
|
|
(109)
|
2,300
|
|
|
|
|
|
|
Mateo
|
|
|
|
|
Margarita claim
|
100%, mensura
|
56
|
|
|
Che 1
& 2 claims
|
100%, mensura
|
76
|
|
|
Irene
& Irene II claims
|
100%, mensura
|
60
|
|
|
Mateo 4
and 5 claims
|
100%, mensura
|
600
|
|
|
Mateo
1, 2, 3, 10A, 10B, 12, 13 claims
|
100%, mensura in
process
|
861
|
|
|
|
|
1,653
|
|
|
Overlapped claims (a)
|
|
(469)
|
1,184
|
|
|
|
|
4,718
|
(a) Certain mensura
in process claims overlap other claims. The net area is the total
of the hectares we have in each property (i.e. net of overlapped
claims).
6
Farellon Property. Lease Agreement
for Farellon Alto 1-8
On August 22, 2018, we
entered into a lease agreement (the “Lease Agreement”) with Mr.
Lucas Godoy Ocayo (the “Lessee”) to lease out our Farellon Alto 1-8
property (the “Property”) in exchange for a 15% royalty on gross
smelter returns of Cobalt extracted from the Property and a 10%
royalty on gross smelter returns received from all other minerals
extracted from the Property. The Lease Agreement was subject to
minimum monthly royalty payments of $1,500, which the Lessee was
originally required to start making on November 22, 2018. As at the
date of the filing of this Quarterly Report on Form 10-Q, we have
agreed to terminate the Lease Agreement following the request we
received from the Lessee, who has made certain improvements to the
road infrastructure on the Property, however, was not able to
commence their mining operations.
Farellon Property. Option to
Acquire Exeter Claim
On June 3, 2015, we entered into an
option agreement, made effective on June 15, 2015, with Minera
Stamford S.A., to earn 100% interest in a mining claim Exeter 1-54
(the “Exeter Claim”). In order to acquire 100% interest in the
Exeter Claim, we were required to pay a total of $150,000 as
detailed in the following schedule:
|
|
Option Payment
|
|
Upon execution of the Option Agreement
(paid)
|
$
|
25,000
|
|
On or before May 12, 2016 (paid)
|
|
25,000
|
|
On or before May 12, 2017 (paid)
|
|
25,000
|
|
On or before May 12, 2018 (paid)
|
|
25,000
|
|
On or before May 12, 2019 (paid)
|
|
50,000
|
|
Total
|
$
|
150,000
|
On May 13, 2019, we made our final
cash payment of $50,000 to acquire a 100% interest in Exeter Claim.
The vendor retains a 1.5% royalty from net smelter returns (“NSR”)
on the Exeter claim, which we have the right to buy out for a
one-time payment of $750,000.
Capital
Resources
Our ability to acquire and explore our
Chilean claims is subject to our ability to obtain the necessary
funding. We expect to raise funds through any combination of debt
financing and/or sale of our securities. We have no committed
sources of capital. If we are unable to raise funds as and when we
need them, we may be required to curtail, or even to cease, our
operations.
Contingencies and
Commitments
We had no contingencies at October 31,
2019.
As of the date of the filing this
Quarterly Report, we have the following long-term contractual
obligations and commitments:
·Farellon royalty.
We are committed to paying the vendor a royalty equal to 1.5% on
the net sales of minerals extracted from the Farellon Alto 1 - 8
claim up to a total of $600,000. The royalty payments are due
monthly once exploitation begins and are subject to minimum
payments of $1,000 per month.
·Quina royalty. We
are committed to paying a royalty equal to 1.5% on the net sales of
minerals extracted from the Quina claim. The royalty payments are
due semi-annually once commercial production begins, and are not
subject to minimum payments.
·Exeter royalty.
We are committed to paying a royalty equal to 1.5% on the net sales
of minerals extracted from the Exeter claim. The royalty payments
are due semi-annually once commercial production begins, and are
not subject to minimum payments.
·Che royalty. We
are committed to paying a royalty equal to 1% of the net sales of
minerals extracted from the claims to a maximum of $100,000 to the
former owner. The royalty payments are due monthly once
exploitation begins, and are not subject to minimum
payments.
7
·Mineral property
taxes. To keep our mineral claims in good standing, we are
required to pay mineral property taxes of approximately $35,000 per
annum.
Equity
Financing
During the period covered by this
Quarterly Report on Form 10-Q, we did not engage in the financing
of our operations through the issuance of our equity securities and
relied solely on the debt financing.
Based on our operating plan, we
anticipate incurring operating losses in the foreseeable future and
may require additional equity capital to support our operations and
develop our business plan. If we succeed in completing future
equity financings, the issuance of additional shares will result in
dilution to our existing shareholders.
Debt
Financing
During the nine-month period ended
October 31, 2019, and up to the date of the filing of this
Quarterly Report on Form 10-Q, we borrowed a total of $194,681 from
related parties. The loans are unsecured, due on or after
July 31, 2021, with interest payable at a rate of 8% per annum,
compounded monthly.
Challenges and
Risks
We do not anticipate generating any
revenue over the next twelve months, therefore, we plan to fund our
operations through any combination of equity or debt financing from
the sale of our securities, private loans, joint ventures or
through the sale of part interest in our mineral properties.
Although we have succeeded in raising funds as we needed them, we
cannot assure you that this will continue in the future. Many
things, including, but not limited to, a downturn in the state of
the economy or a significant decrease in the price of minerals,
could affect the willingness of potential investors to invest in
risky ventures such as ours. We may consider entering into
additional joint venture partnerships with other resource companies
to complete mineral exploration programs on our properties in
Chile. If we enter into a joint venture arrangement, we would
likely have to assign a percentage of our interest in our mineral
claims to our joint venture partner in exchange for the
funding.
As at October 31, 2019, we owed
$839,409 to related parties under long-term notes payable, which
will become payable on or after July 31, 2021. In addition to the
long-term debt, we had $409,319 in current liabilities, which are
payable on demand. We do not have the funds to pay all our current
liabilities, and as such, we may decide to offer some vendors to
convert the amounts we owe them into shares of our common stock.
Because of the low price of our common stock, the issuance of the
shares to pay the debt will likely result in dilution to the
percentage of outstanding shares of our common stock held by our
existing shareholders.
Investments in and Expenditures
on Mineral Interests
Realization of our investments in
mineral properties depends upon our maintaining legal ownership,
producing from the properties or gainfully disposing of
them.
Title to mineral claims involves risks
inherent in the difficulties of determining the validity of claims
as well as the potential for problems arising from the ambiguous
conveyancing history characteristic of many mineral claims. Our
contracts and deeds have been notarized, recorded in the registry
of mines and published in the mining bulletin. We review the mining
bulletin regularly to discover whether other parties have staked
claims over our ground. We have discovered no such claims. To the
best of our knowledge, we have taken the steps necessary to ensure
that we have good title to our mineral claims.
Foreign
Exchange
We are subject to foreign exchange
risk associated with transactions denominated in foreign
currencies. Foreign currency risk arises from the fluctuation
of foreign exchange rates and the degree of volatility of these
rates relative to the United States dollar. We do not believe
that we have any material risk due to foreign currency
exchange.
8
Trends, Events or Uncertainties
that May Impact Results of Operations or
Liquidity
Since we rely on sales of our
securities and loans to continue our operations, any uncertainty in
the equity markets can have a detrimental impact on our operations.
Current trends in the industry and uncertainty that exists in
equity markets have resulted in less capital available to us and
less appetite for risk by investors. Furthermore, we have
found that locating other mineral exploration companies with
available funds who are willing to engage in risky ventures such as
the exploration of our properties has become very difficult.
If we are unable to raise additional capital, we may not be
able to develop our properties or continue our
operations.
Off-Balance Sheet
Arrangements
We have no off-balance sheet
arrangements and no non-consolidated, special-purpose
entities.
Related-Party
Transactions
During the nine-month period ended
October 31, 2019, and up to the date of the filing of this
Quarterly Report on Form 10-Q we have entered into the following
transactions with the directors, executive officers, or holders of
more than 5% of our common stock, or members of their immediate
families:
Loans
from Caitlin L. Jeffs
During the nine-month period ended
October 31, 2019, we borrowed from Caitlin L. Jeffs, our Chief
Executive Officer, Secretary, and a member of our Board of
Directors, a total of $107,212. The loans are subject to 8% annual
interest compounded monthly, are unsecured and due on or after July
31, 2021. Subsequent to October 31, 2019, Ms. Jeffs advanced us
further $12,469 at 8% annual interest compounded monthly and
repayable on or after July 31, 2021. We used these funds to pay the
final option payment to acquire Exeter Claim and to support our
operating activities. During the nine-month period ended October
31, 2019, we accrued $34,671 in interest on notes payable we issued
to Ms. Jeffs for a total owed under the USD notes payable of
$164,679 and $479,910 (CAD$631,561) owed on account of CAD$ notes
payable, which were outstanding as at October 31, 2019.
Loan
from John da Costa
During the nine-month period ended
October 31, 2019, we accrued $544 on $8,500 note payable we issued
to Mr. da Costa, which was outstanding as at October 31, 2019. The
note payable accumulates interest at 8% per annum compounded
monthly, is unsecured and repayable on or after July 31,
2021.
Transactions with
Fladgate Exploration Consulting Corporation
During the nine-month period ended
October 31, 2019, we accrued $6,219 on a total of $98,095
(CAD$129,093) in notes payable we issued to Fladgate. The notes
payable accumulate interest at 8% per annum compounded monthly, are
unsecured and repayable on or after July 31, 2021.
Loans
from Richard N. Jeffs
During the nine-month period ended
October 31, 2019, Mr. Jeffs advanced us $75,000 at 8% annual
interest compounded monthly and repayable on or after July 31,
2021. As at October 31, 2019, we accrued $2,035 in interest on
these notes payable.
Critical Accounting
Estimates
Preparing financial statements in
conformity with the U.S. Generally Accepted Accounting Principles
requires management to make estimates and assumptions that affect
certain of the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the period. The Company regularly evaluates
estimates and assumptions. The Company bases its estimates and
assumptions on current facts, historical experience and various
other factors it believes to be reasonable under the circumstances,
the results of which form the basis for making judgments about the
carrying values of assets and liabilities and the accrual of costs
and expenses that are not readily apparent from other sources. The
actual results experienced by the Company may differ materially and
adversely from the Company’s estimates. To the extent there are
material differences between the estimates and the actual
results,
9
future results of operations will be
affected. The most significant estimates with regard to these
financial statements relate to carrying values of unproved mineral
properties.
Financial
Instruments
Our financial instruments include
cash, prepaids and other receivables, accounts payable, accrued
liabilities, amounts due to related parties and notes payable. The
fair value of these financial instruments approximates their
carrying values due to their short maturities.
Item 3.
Quantitative and Qualitative Disclosures about Market
Risk.
As a smaller reporting company, we are
not required to provide this disclosure.
Item 4.
Controls and Procedures.
(a) Disclosure Controls and
Procedures
Caitlin Jeffs, our Chief Executive
Officer and President, and John da Costa, our Chief Financial
Officer, have evaluated the effectiveness of our disclosure
controls and procedures (as the term is defined in Rules 13a-15 and
15d-15 under the Securities Exchange Act of 1934) as of the end of
the quarter covered by this report (the “Evaluation Date”). Based
on their assessment, as of the Evaluation Date, our disclosure
controls and procedures are not effective to ensure that
information required to be disclosed by us in the reports that we
file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the
Securities and Exchange Commission’s rules and forms due to lack of
segregation of duties.
(b) Changes in Internal Control
over Financial Reporting
During the quarter covered by this
report, there were no changes to our internal control over
financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal control over
financial reporting.
10
PART II
- OTHER INFORMATION
Item 1.
Legal Proceedings.
We are not a party to any pending legal
proceedings and, to the best of our knowledge; none of our
properties or assets is the subject of any pending legal
proceedings.
Item
1a. Risk Factors.
We incorporate by reference the Risk Factors
included as Item 1A of our Annual Report on Form 10-K we filed with
the Securities and Exchange Commission on May 16, 2019.
Item 2.
Unregistered Sales of Equity Securities and Use of
Proceeds.
None
Item 3.
Defaults upon Senior Securities.
None
Item 4.
Mine Safety Disclosures.
Not applicable.
Item 5.
Other Information.
None
Item 6.
Exhibits.
The following table sets forth the exhibits either
filed herewith or incorporated by reference.
|
Exhibit
|
Description
|
|
3.1.1
|
Articles of Incorporation(1)
|
|
3.1.2
|
Certificate of Amendment to Articles of
Incorporation(2)
|
|
3.2
|
By-laws(1)
|
|
10.1
|
Red Metal Resources Ltd. 2011 Equity Incentive
Plan(8)
|
|
10.2
|
Memorandum of Understanding between Minera Polymet
Limitada and David Marcus Mitchel (3)
|
|
10.3
|
Irrevocable Purchase Option Contract for Mining
Property Quina 1-56 in Spanish (4)
|
|
10.4
|
Irrevocable Purchase Option Contract for Mining
Property Quina 1-56, English translation (4)
|
|
10.5
|
Irrevocable Purchase Option Contract for Mining
Property Exeter 1-54 in Spanish (5)
|
|
10.6
|
Irrevocable Purchase Option Contract for Mining
Property Exeter 1-54, English translation (5)
|
|
10.7
|
Amendment to the Contract of Purchase and Sale of
Mine Holdings dated for reference May 9, 2008, between Minera
Polymet Limitada and Compañía Minera Romelio Alday Limitada, dated
December 9, 2013; English translation.(6)
|
|
10.8
|
Amendment to the Contract of Purchase and Sale of
Mine Holdings dated for reference May 9, 2008, between Minera
Polymet Limitada and Compañía Minera Romelio Alday Limitada dated
December 9, 2013 in Spanish.(6)
|
|
10.9
|
Letter of Intent between Red Metal Resources Ltd.
and TomaGold Corporation dated for reference September 16,
2016(7)
|
|
10.10
|
Letter of Intent between Red Metal Resources Ltd.
and Power Americas Minerals Corp. dated for reference February 28,
2017(9)
|
11
|
Exhibit
|
Description
|
|
10.11
|
Lease Agreement for Mining Activities Within
Farellon Alto Uno Al Ocho dated for reference August 22, 2018,
between Minera Polymet Spa and Lucas Godoy Ocayo in Spanish
(10)
|
|
10.12
|
Lease Agreement for Mining Activities Within
Farellon Alto Uno Al Ocho dated for reference August 22, 2018,
between Minera Polymet Spa and Lucas Godoy Ocayo; English
translation(10)
|
|
31.1
|
Certification pursuant to Rule 13a-14(a) and
15d-14(a)
|
|
31.2
|
Certification pursuant to Rule 13a-14(a) and
15d-14(a)
|
|
32
|
Certification pursuant to Section 1350 of Title 18
of the United States Code
|
|
101
|
The following financial statements from the
registrant’s Quarterly Report on Form 10-Q for the fiscal quarter
ended July 31, 2019, formatted in XBRL:
(i)Consolidated
Balance Sheets;
(ii)Consolidated
Statements of Operations;
(iii)Consolidated
Statement of Stockholders’ Deficit;
(iv)Consolidated
Statements of Cash Flows; and
(v)Notes
to the Interim Consolidated Financial Statements.
|
(1)Incorporated
by reference from the registrant’s registration statement on Form
SB-2 filed with the Securities and Exchange Commission on May 22,
2006 as file number 333-134363.
(2)Incorporated
by reference from the registrant’s Quarterly report on Form 10-Q
for the period ended October 31, 2010 and filed with the Securities
and Exchange Commission on December 13, 2010.
(3)Incorporated
by reference from the registrant’s Current Report on Form 8-K,
filed with the Securities and Exchange Commission on June 4,
2014.
(4)Incorporated
by reference from the registrant’s Current Report on Form 8-K filed
with the Securities and Exchange Commission on December 19,
2014.
(5)Incorporated
by reference from the registrant’s Current Report on Form 8-K filed
with the Securities and Exchange Commission on June 18,
2015.
(6)Incorporated
by reference from the registrant’s Annual Report on Form 10-K filed
with the Securities and Exchange Commission on May 2,
2016.
(7)Incorporated
by reference from the registrant’s Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 22,
2016.
(8)Incorporated
by reference from the registrant’s registration statement on Form
S-8 filed with the Securities and Exchange Commission on September
23, 2011.
(9)Incorporated
by reference from the registrant’s Current Report on Form 8-K filed
with the Securities and Exchange Commission on March 6,
2017.
(10)Incorporated
by reference from the registrant’s Quarterly report on Form 10-Q
for the period ended October 31, 2018 and filed with the Securities
and Exchange Commission on December 17, 2018.
12
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.
Dated: December 16, 2019
|
|
|
RED METAL RESOURCES LTD.
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Caitlin
Jeffs
|
|
|
|
|
|
Caitlin Jeffs, Chief Executive Officer and
President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Joao
(John) da Costa
|
|
|
|
|
|
Joao (John) da Costa, Chief Financial
Officer
|
|
13
