ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
OVERVIEW
Blue
Eagle Lithium Inc. (“the company”) is a Nevada corporation that was incorporated on July 30, 2009. The company was
initially incorporated under the name “Wishbone Pet Products Inc.” with the intent to commence business operations
by developing, manufacturing, marketing, and selling dog waste removal devices.
Effective
July 20, 2018, the company changed its name to “Blue Eagle Lithium Inc.” and affected a 20-for-1 forward split of
its common stock by a majority vote of the shareholders on May 10, 2018. See Item 5.03 filed on Form 8-K filed July 26, 2018 for
more details. The Company changed its direction to the business of the acquisition and exploration of lithium and rare earth metal
resources. The Company’s current mandate is to identify, evaluate and develop early-stage lithium exploration opportunities
in North America, with a current focus on areas in the state of Nevada.
The
Company has not generated any revenue since inception and is not expected to generate revenue for the foreseeable future as it
engages in exploratory activities.
August
2018 Acquisition of Mineral Claims in the Railroad Valley
On
August 16, 2018, the Company acquired 200 mineral claims covering approximately 4,000 acres in the Railroad Valley of Nevada (the
“Railroad Valley Property”), pursuant to the terms and conditions of a property assignment agreement, dated August
9, 2018 (the “Assignment Agreement”), between the Company and Oriental Rainbow Group Limited (“ORG”).
The parties agreed on a purchase price for the Railroad Valley Property, which was paid in full when the Company issued and delivered
to ORG 500,000 shares of Common Stock, as well as a further issuance to Plateau Ventures LLC (“Plateau Ventures”)
of 300,000 shares of Common Stock pursuant to the following schedule: 100,000 shares of Common Stock upon the effective date of
the Assignment Agreement, 100,000 shares of Common Stock ninety (90) days following the effective date of the Assignment Agreement
and a final 100,000 shares of Common Stock one hundred and eighty (180) days following the effective date of the Assignment Agreement.
The
leases and concessions for the Railroad Valley Property were officially transferred into the Company’s name on October 5,
2018 by the Bureau of Land Management, a federal agency within the United States Department of the Interior (“BLM”).
Following such name transfer, the Company currently has a 100% working interest in 200 placer claims in Railroad Valley, Nevada,
an area the Company believes to be a highly prospective green-fields lithium brine target in the heart of the Basin and Range
geologic province. The staked claims cover approximately 4,000 acres (or approximately 1,619 hectares) over a large portion of
Railroad Valley’s dry lakebed (playa).
Additionally,
the Assignment Agreement provides Plateau Ventures with a 2% royalty on revenues derived from the sale of lithium concentrate
and other ores extracted from the property. The Company shall have the right to buy 50% of the royalty amount at any time for
$2 million from Plateau Ventures. Such payment will be paid in 90 day intervals upon completion of an inferred resource calculation
that confirms the presence on the property of a minimum 500,000 tons of lithium carbonate equivalent grading no lower than 40
parts per million (or ppm) lithium grade average on the subject properties.
August
2018 Stock Purchase Agreement
On
August 14, 2018, Rami Tabet (“Tabet”), the Company’s previous controlling stockholder and Chief Executive Officer,
and Rupert Ireland (“Ireland”) entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”),
which provided for the sale by Tabet to Ireland of 40,000,000 shares (the “Shares”) of Common Stock for a purchase
price of $100,000. The transfer of the Shares to Ireland was effective on August 14, 2018. Upon his acquisition of the Shares,
Ireland became the holder of a majority of the outstanding shares of Common Stock and the Chief Executive Officer, which is sufficient
ownership to give him the power to elect all of the members of our Board of Directors (the “Board”). Tabet owned no
shares of Common Stock immediately after giving effect to the sale of the Shares to Ireland. Mr. Tabet resigned his positions
with the Company upon consummation of the Stock Purchase Agreement.
April
2019 Agreement with RangeFront Geological
On
April 22, 2019, the Company entered into a purchase and sale agreement (the “Purchase and Sale Agreement”) with Rangefront
Consulting, LLC, DBA Rangefront Geological (“Rangefront Geological”), a geology and exploration company based in Elko,
Nevada, to purchase a 100% working interest in 50 mineral claims covering 1,000 acres in the Railroad Valley region in the State
of Nevada with an option to acquire an additional 26 mineral claims comprising of 520 acres in the Railroad Valley region in the
State of Nevada. The parties agreed on a purchase price for the 50 mineral claims by the Company issuing and delivering to Rangefront
Geological 200,000 restricted shares in Common Stock. The agreed purchase price for the additional 26 mineral claims will be a
further issuance and delivery of 100,000 restricted shares in Common Stock, which was issued and delivered on May 14, 2019.
As
part of the Purchase and Sale Agreement, the Company also agreed to pay the following (which were all paid during the period ended
July 31, 2019):
|
a)
|
County
fees of approximately $2,250, within 90 days of the Agreement
|
|
b)
|
BLM
fees of approximately $10,600, within 90 days of the Agreement
|
|
c)
|
Transfer
fees of approximately $1,000, upon payment of BLM fees
|
|
d)
|
Staking
fees of $7,500, within 15 days of the Agreement
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Moreover,
the Company agreed that RangeFront Geological shall be entitled to a royalty equal to 1.0% of revenues derived from the sale of
lithium concentrate and other ores extracted from the subject properties. The Company also has the right to buy back 50% of the
royalty amount from RangeFront at any time for $1,000,000. The Company also agreed to pay RangeFront $1,000,000 upon completion
of an inferred resource calculation that confirms the presence of a minimum 700,000 tons of lithium carbonate equivalent grading
no lower than a 40 ppm grade average of lithium on the subject properties.
Subsequently,
on May 14, 2019, pursuant to the Purchase and Sale Agreement, the Company issued 200,000 restricted shares of Common Stock to
RangeFront Geological in full payment for the 50 mineral claims. Additionally, on June 11, 2019, the Company exercised its option
to purchase the additional 26 mineral claims pursuant to the Purchase and Sale Agreement and paid RangeFront Geological an additional
$7,500 and on June 14, 2019, the Company also issued an additional 100,000 shares of restricted Common Stock to RangeFront Geological
for the acquisition of such mineral claims.
The
Company also entered into a work program with RangeFront on June 8, 2019 whereby the Company advanced $10,000 deposit to commence
Phase 1 work on the Railroad Valley 5,520 acres property. The total cost for Phase 1 is $57,800. Upon delivery of the summary
report for the Phase 1 work, the Company agreed to issue RangeFront 50,000 restricted shares of Common Stock.
From
September 2018 to March 2019, the Company commenced its baseline soil-sampling program and engaged Tekhne Research Inc. (“Tekhne
Research”) to compile a report detailing the nature and geological background of the Railroad Valley Property. Upon receiving
the report, the Company initiated its long term plan to build its database from the services of Geologix Technologies Inc., a
company experienced in the digitization of well and seismic data and the construction of technical/corporate databases. During
2019, the Company has continued surface soil and water sampling programs and has initiated a work program developed by Company
management based on the Tekhne Research report.
As
of the date of this Report, the Company’s total land package in the Railroad Valley region in the State of Nevada is approximately
5,520 acres (approximately 2,223 hectares).
Railroad
Valley Project
The
Railroad Valley properties covers an aggregate of 5,520 acres within Railroad Valley, Nevada, approximately 100 miles northeast
of Tonopah, Nye County, Nevada and can be accessed directly from US Route 6. Railroad Valley was first identified as lithium rich
by the US Geological Survey with the potential to host lithium bearing brines in its subterranean aquifers beneath the valley
floor. The property is situated in the Great Basin physiographic province of the Basin and Range tectonic province. North-south
trending mountain ranges and intramontane basins often with playas characterize the area. Elevations in the Railroad Valley playa
range from 4,725 to 4,760 feet. The highstand shoreline of the southeast side of Railroad Valley Lake at Heath Canyon is 4,860
feet. The rugged Grant and Quinn Ranges forms the eastern margin of the valley and rises to 10,945 feet above sea level at Troy
Peak, while the undulant Pancake Range west of the valley reaches 6,260 feet above sea level on Hwy 6.
The
Railroad Valley basin is a green-fields lithium target believed to be an analogue to Clayton Valley, about 124 miles to the west-southwest.
Both are typical arid, closed basins with no water outflow and a common stratigraphic history of pluvial and arid climate variations.
Railroad Valley hosts a larger playa, larger catchment area, and deeper basin fill than Clayton Valley. Similar graben fault structures
active into modern times occur in both settings which suggest the potential for tectonic isolation of potential brine aquifers
to retain brines. Surface reconnaissance soil sampling on nearby properties have returned samples of up to 275 ppm of lithium.
Similar values occur in the brine at the Albemarle Silver Peak lithium mine.
The
Railroad Valley property is accessible from Ely, Nevada by traveling approximately 48 miles southwest on US Highway 6 toward Tonopah.
A well-marked turnoff to the southeast just inside the Railroad Valley leads to a well-maintained gravel road, which was constructed
for oil extraction and ranch access along the east margin of the Railroad Valley basin and provides access west of Southern Railroad
Valley, Nevada. A former oilfield access gravel road heads a few miles northwest to the eastern side of the property. The total
distance to the property form Ely is approximately 68 miles.
During
the period ended April 30, 2019, the Company conducted baseline surface soil samples, rock samples and water samples located within
the property on four separate occasions. Each of the teams have been lead by experienced field geologists to optimize operational
data gathering and to ensure safe and efficient program delivery. A total of 65 sets of soil samples, 10 rock samples and 10 water
samples have been analyzed. As a result, the Company has initiated a work program developed by Company management based on the
findings in the Tekhne Research report. The Company’s work program is comprised of two phases. The first phase is the collation
of relevant available data in both Railroad Valley and Clayton Valley to build a propriety database with associated exclusive
geographical information system (or GIS) or 3D maps and subsequent interpretation. The Company has engaged Geologix Technologies
of Houston as its strategic technology partner to provide the Company with cutting edge digitized databases and mapping. The second
phase will focus on drilling to test targets defined in phase one. The Company will be using diamond drilling for physical properties
and geology to provide better quality core details. In concert, the technical team will compile data for the GIS database, including
geophysics, oil drilling and aerial images to provide a regional structural analysis.
Geologix
Technologies will provide a secure cloud database constructed with an asset focused, GIS compliant framework which will be utilized
to more accurately determine the optimal area to initiate boreholes. The database is currently being populated with data available
in historical public records, oil and water well records, seismic date, remote sensing data, digital elevation models and lithological
and geological maps. The database will be utilized to produce proprietary surface, sub-surface and GIS maps. The Company’s
database and proprietary maps will be used to optimize a shallow borehole drilling program in phase two. In addition, the database
will help find probable properties in the Railroad Valley neighboring target areas and possibly identify suitable lithium properties.
The
Company’s work program for the Railroad Valley property consists of the following goals within each phase, with a budget
of approximately $950,000, exclusive of contingency allowances and any applicable taxes:
Phase
1
|
1.
|
Collect
and synthesize existing oil field data (seismic, gravity and drill logs)
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|
2.
|
Audio-magnetotellurics
(or AMT) surveys
|
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3.
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Sample
playa soils
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4.
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Sample
analysis
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5.
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Geology,
field supervision and support, reports and data analysis
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Phase
2
|
1.
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Re-open
and sample five nearby wells
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|
2.
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Diamond
drilling
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3.
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Water
samples
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4.
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Geology,
field supervision and support, reports and data analysis
|
RESULTS
OF OPERATIONS
Our
financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments
relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be
unable to continue in operation. We expect we will require additional capital to meet our long term operating requirements. We
expect to raise additional capital through, among other things, the sale of equity or debt securities.
Results
of Operations for the three months and six month period ended October 31, 2019
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For the three months
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|
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For the six months
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|
|
|
ended October 31,
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|
|
ended October 31,
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2019
|
|
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2018
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|
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2019
|
|
|
2018
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Amortization
|
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$
|
592
|
|
|
$
|
395
|
|
|
$
|
1,185
|
|
|
$
|
395
|
|
Consulting fees
|
|
|
18,500
|
|
|
|
76,000
|
|
|
|
18,500
|
|
|
|
76,250
|
|
Management fees
|
|
|
79,850
|
|
|
|
148,950
|
|
|
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113,450
|
|
|
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148,950
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General & administrative expenses
|
|
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11,071
|
|
|
|
18,377
|
|
|
|
20,969
|
|
|
|
25,052
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Marketing and promotional expenses
|
|
|
-
|
|
|
|
78,873
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|
|
|
4,010
|
|
|
|
78,873
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|
Mineral exploration expenses
|
|
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51,372
|
|
|
|
32,500
|
|
|
|
61,927
|
|
|
|
32,500
|
|
Professional fees
|
|
|
18,073
|
|
|
|
17,587
|
|
|
|
38,323
|
|
|
|
20,312
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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TOTAL EXPENSES
|
|
|
179,458
|
|
|
|
372,682
|
|
|
|
258,364
|
|
|
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382,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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OPERATING LOSS
|
|
$
|
(179,458
|
)
|
|
$
|
(372,682
|
)
|
|
$
|
(258,364
|
)
|
|
$
|
(382,332
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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OTHER EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on loans
|
|
|
7,732
|
|
|
|
4,539
|
|
|
|
14,147
|
|
|
|
9,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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NET INCOME/(LOSS)
|
|
$
|
(187,190
|
)
|
|
$
|
(377,221
|
)
|
|
$
|
(272,511
|
)
|
|
$
|
(391,410
|
)
|
Three
Months Period Ended October 31, 2019
Net
Loss. During the three months period ended October 31, 2019, the Company had a net loss of $187,190 as compared to the same
period for the prior fiscal period of $377,221 net loss. The decreased loss of $190,031 was primarily due to decreased expenses
relating to consulting fees, management fees, general & administrative expenses, marketing and promotional expenses. This
was due to the new business activities of the Company in the prior year which include operational costs relating to the start
of exploratory activities, management services, start-up costs, marketing and promotional expenses and maintaining mineral rights.
Operating
Expenses. The Company’s operating expenses during the three months period ended October 31, 2019 were $179,458 compared
to $372,682 for the same period ended October 31, 2018. The decrease of $193,223 was primarily due to the decrease in the Company’s
operations relating $57,500 in consulting fees, $69,100 in corporate management fees, $78,873 in marketing and promotional expenses
and decrease of $7,307 in general and administrative expenses. The decrease relates to shares issued to consultants and management
in the prior period as well as reduced operational activities in the current year.
Six
Months Period Ended October 31, 2019
Net
loss. During the six months ended October 31, 2019, the Company had a net loss of $272,511. The loss was primarily due to
losses relating to amortization, consulting fees, management fees, general & administrative expenses, marketing and promotional
expenses, mineral exploration expenses, professional fees and interest on loans, compared to the same period for the prior fiscal
period when the Company had a net loss of $391,410. The decrease loss of $118,899 was primarily due to shares issued to consultants
and management fees.
Operating
Expenses. The Company’s operating expenses during the six months period ended October 31, 2019 were $258,364 compared
to $382,332 for the same period ended October 31, 2018. The decrease of $123,968 were primarily due to the shares issued to consultants
and management fees in the prior period ending October 31, 2018.
LIQUIDITY
AND CAPITAL RESOURCES
Six
Months Period Ended October 31, 2019
As
at October 31, 2019, our current assets were $3,660 compared to $8,302 as of April 30, 2019. As of October 31, 2019, our current
liabilities were $634,355 compared to $396,323 at April 30, 2019. Current liabilities as of October 31, 2019 were comprised of
$381,050 in loans payable, $50,000 in convertible notes payable, $73,876 in interest payable and $57,341 in accounts payable and
accrued liabilities. The Company also owe our officers and directors of $72,088 for management fees and out of pocket expenses.
The Company had working capital deficiency of $630,695 as of October 31, 2019 compared to working capital deficiency of $388,021
as of April 30, 2019.
During
the six months ended October 31, 2019, the Company issued 300,000 shares for the acquisition of 76 additional mineral properties
pursuant to an agreement with RangeFront Geological dated April 22, 2019. As a result, stockholders’ equity increased from
$246,657 as of April 30, 2019 to $332,896 as of October 31, 2019. The Company also issued an aggregate of 175,000 shares to a
consultant and a corporate executive valued at $64,750.
Cash
Flows from Operating Activities
We
have not generated positive cash flows from operating activities. For the six months period ended October 31, 2019, net cash flow
used in operating activities were $(168,545) consisting of a net loss of $272,511, an increase in accounts payable and accrued
interest of $33,032, a $5,000 increase in prepaid expenses, and $64,750 shares issued for services. For the six months period
ended October 31, 2018, net cash flow used in operating activities were $(150,387).
Cash
Flows from Investing Activities
We
have spent $36,097 and issued 300,000 common shares valued at $294,000 for the acquisition costs of the additional 76 mineral
claims as compared to spending $9,258 and issued 600,000 common shares valued at $450,000 for the acquisition costs of mineral
claims for the same comparative period for October 31, 2018.
Cash
Flows from Financing Activities
We
have financed our operations primarily from either the issuance of our shares of common stock under private placements or from
loans. In the six months period ended October 31, 2019, we received $205,000 relating to note payable proceeds. In the comparative
period for fiscal 2018, we received $150,000 in proceeds relating to issuance of 240,195 common shares.
PLAN
OF OPERATION AND FUNDING
We
anticipate that our cash expenses will increase over the next 12 months. During the next 12 months management plans on commencing
a drill program that is estimated to cost $950,000 exclusive of contingency allowance and applicable taxes. The Company has minimal
finances and accordingly there is no assurance that it will be able to seek funding to start its exploration work program. Management
anticipates that the Company will have to complete additional financings to maintain its current properties and to commence the
Company’s work program for the Railroad Valley Property. To date, the Company has not entered into any new agreements for
the acquisition of any interest in a new property. Further, the Company has no arrangements for any financing required to fund
our continued operations or the acquisition of any interest in a new property in the future. There is no assurance that it will
be able to raise the financing necessary to complete exploration of the current properties. Based on the Company’s financial
position, there is no assurance that the Company will be able to continue its business operations.
In
addition, management anticipates incurring the following expenses during the next 12 month period:
|
●
|
Management
anticipates spending approximately $25,000 in ongoing general and administrative expenses per month for the next 12 months,
for a total anticipated expenditure of $300,000 over the next 12 months. The general and administrative expenses for the year
will consist primarily of professional fees for the audit and legal work relating to the Company’s regulatory filings
throughout the year, as well as transfer agent fees, annual mineral claim fees and general office expenses.
|
|
|
|
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●
|
Management
anticipates spending approximately $50,000 in complying with the Company’s obligations as a reporting company under
the Securities Exchange Act of 1934, as amended. These expenses will consist primarily of professional fees relating to the
preparation of the Company’s financial statements and completing its annual report, quarterly report, and current report
filings with the SEC as well as maintaining an OTCQB listing.
|
As
at October 31, 2019, the Company had cash of $827 and a working capital deficit of $630,695. Accordingly, the Company will require
additional financing in the amount of $350,000 in order to fund its obligations as a reporting company under the Securities Act
of 1934, as amended (the “Act”), and its general and administrative expenses for the next 12 months.
During
the 12 months period following the date of this annual report, management anticipates that the Company will not generate any revenue.
Accordingly, the Company will be required to obtain additional financing in order to continue its plan of operations. Management
believes that debt financing will not be an alternative for funding the Company’s plan of operations as it does not have
tangible assets to secure any debt financing. Rather, management anticipates that additional funding will be in the form of equity
financing from the sale of the Company’s Common Stock. However, the Company does not have any financing arranged and cannot
provide investors with any assurance that it will be able to raise sufficient funding from the sale of its Common Stock to fund
its plan of operations. In the absence of such financing, the Company will not be able to commence its exploratory work program
and its business plan will fail. Even if the Company is successful in obtaining equity financing and acquire an interest in a
new property, additional exploration property will be required before a determination as to whether commercially exploitable mineralization
or quantities of oil or gas present. If the Company does not continue to obtain additional financing, it will be forced to abandon
its business and plan of operations.
OFF-BALANCE
SHEET ARRANGEMENTS
As
of the date of this report, we do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current
or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that are material.
RISKS
The
Company’s financial risks arising from its financial instruments are credit risk, liquidity risk, interest rate risk and
foreign exchange rate risk. The Company’s exposure to these risks and the policies on how to mitigate these risks are set
out below. Management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective
manner.
Credit
risk
Credit
risk is the risk of potential loss to the Company if the counter party to a financial instrument fails to meet is contractual
obligations. The credit risk of the Company is associated with cash and cash equivalents and restricted cash. Management does
not expect these counterparts to fail to meet their obligations.
Liquidity
risk
Liquidity
risk is the risk that the Company will not meet its obligations associated with its financial liabilities as they fall due. The
Company performs cash flow forecasting for each fiscal year to ensure there is sufficient cash available to fund its projects
and operations. As at October 31, 2019, the Company had a cash and cash equivalent balance of $827and current liabilities of $634,355.
The Company’s financial liabilities include trade and other payables which have contractual maturities of 30 days or are
due on demand or notes due within a year. At present, the Company’s operations do not generate cash flow. The Company’s
primary source of funding has been the issuance of equity securities through private placements and notes payable. Despite previous
success in completing these financings, there is no guarantee of obtaining future financings.
Interest
rate risk
Interest
rate risk is the risk that fair value or future cash flows of a financial instrument will fluctuate because of changes in the
market interest rates. The Company is currently not exposed to interest rate risk.
Foreign
exchange rate risk
Foreign
exchange rate risk is the risk that fair value or future cash flows of financial instrument will fluctuate because of changes
in foreign exchange rates. The Company’s functional currency is the United States dollar and major purchases are transacted
in United States dollars. The Company funds certain operations, exploration and administrative expenses in Canadian dollars, Euros
and UK Pounds Sterling by paying expenditures from its United States bank account. The foreign exchange rate risks on these payments
are not considered significant due to the small value of the transactions. The Company does not hedge its foreign exchange risk.
OPERATION
RISK AND UNCERTAINTIES
Operating
hazards and risks
Mineral
exploration involves many risks. The operation in which the Company has a direct or indirect interest will be subject to all the
hazards and risks normally incidental to exploration, any of which could result in work stoppage and damage to persons or property
or the environment and possible legal liability for any and all damage. Fires, power outages, labor disruptions, flooding, landslides
and the inability to obtain suitable or adequate machinery, equipment or labor are some of the risks involved in the conduct of
exploration programs.
Environmental
Factors
The
Company currently conducts exploration activities in the State of Nevada. Such activities are subject to various laws, rules and
regulations governing the protection of the environment. Such legislation imposes rigorous standards on the mining industry to
reduce or eliminate the effects of waste generated by extraction and processing operations and subsequently deposited on the ground
or emitted into the air or in the water.
All
phases of the Company’s operations are subject to environmental regulation in the jurisdiction in which it operates. Environmental
legislation is evolving in a manner which requires stricter standards and enforcement, increased fines and penalties for non-compliance,
more stringent environmental assessments of proposed properties and a heightened degree of responsibility for the companies and
their officers, directors and employees. There is no assurance that future changes in environmental regulation, if any, will not
adversely affect the Company’s operations. The cost of compliance with changes in governmental regulations has the potential
to preclude entirely the economic development of a property.
The
Company is able to conduct its exploration within the provisions of the applicable environmental legislation without undue constraint
on its ability to carry on efficient operations. The estimated annual cost of environmental compliance for all properties held
by the Company in the exploration stage is minimal and pertains primarily to carrying out diamond drilling, trenching or stripping.
Environmental hazards may exist on the Company’s properties, which hazards are unknown to the Company at present, which
have been caused by previous or existing owners or operators of the properties.
Governmental
Regulation
Exploration
activities on the Company’s properties are affected to varying degrees by government regulations relating to such matters
as environmental protection, health, safety and labor; mining law reform; restrictions on production, price controls and tax increases;
maintenance of claims; tenure; and expropriation of property. There is no assurance that future changes in such regulation, if
any, will not adversely affect the Company’s operations. Changes in such regulation could result in additional expenses
and capital expenditures, restrictions on the availability of capital, competition, reserve uncertainty, potential conflicts of
interest, title risks, dilution and restrictions and delays in operations, the extent of which cannot be predicted.
The
Company is at the exploration stage on all of its properties. Exploration on the Company’s properties requires responsible
best exploration practices to comply with company policy, government regulations, maintenance of claims and tenure. All mining
activities in Nevada, regardless of the private or public status of the land which they occurs, are regulated through the Nevada
Division of Environmental Protection’s (NDEP) Bureau of Mining Regulation and Reclamation (MBRR). The Bureau administers
the State mining laws and mine-related environmental permits. It is composed of three technical branches: Regulation, Closure
and Reclamation, all of which protects the waters of the State under the Water Pollution Control regulations. The Regulation Branch
provides permitting and inspections; the Closure Branch works with facilities at the cessation of operations to ensure that all
components are left chemically stable for the long term, and that the activities will not degrade waters of the State; and the
Reclamation Branch regulates exploration and mining operations for permits to explore and mine to reclaim the disturbance created
to a safe condition post mining land use.
If
any of the Company’s projects are advanced to the development stage, those operations will also be subject to various laws
and regulations concerning development, production, taxes, labor standards, environmental protection, mine safety and other matters.
Additional
funding requirements
Further
exploration on and any development of the Company’s projects will require additional resources and funding. The Company
currently does not have sufficient funds to fully explore and develop these projects. In addition, any positive production decision,
if achieved, would require significant funding for project engineering and construction. Accordingly, the continuing development
of the Company’s properties will depend upon the Company’s ability to obtain financing through debt financing, equity
financing, joint venture projects or other means. There is no assurance that the Company will be successful in obtaining the required
financing for these or other purposes, including for general working capital.
GOING
CONCERN
The
independent auditors’ report accompanying our audited April 30, 2019 financial statements contained an explanatory paragraph
expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared “assuming
that we will continue as a going concern,” which contemplates that we will realize our assets and satisfy our liabilities
and commitments in the ordinary course of business.
The
Company is an exploration stage company. Presently, the Company’s operations do not generate cash flow and its financial
success is dependent on management’s ability to discover economically viable mineral deposits. The mineral exploration process
can take many years and is subject to factors that are beyond the Company’s control. In order to continue as a going concern
and to meet its corporate objectives, which primarily consist of exploration work on its mineral properties, the Company will
require additional financing through debt or equity issuances or other available means. The Company had working capital deficiency
of $630,695 as of October 31, 2019. Although the Company has been partially successful in the past in obtaining financing, there
is no assurance that it will be able to obtain adequate financing in the future or that such financing will be on terms advantageous
to the Company. As described under Plan of Operation and Funding above, Management believes it may have the opportunity to raise
equity capital as required in the long term but recognizes there will be risks involved that may be beyond their control. The
annual and interim financial statements do not include any adjustments to the recoverability and classification of reduced asset
amounts and classification of liabilities that might be necessary should the Company be unable to continue operations. These adjustments
could be material. The Company is not subject to material externally-imposed capital constraints.