NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY
31, 2021
NOTE
1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Organization
U.S.
Gold Corp., formerly known as Dataram Corporation (the “Company”), was originally incorporated in the State of New Jersey
in 1967 and was subsequently re-incorporated under the laws of the State of Nevada in 2016. Effective June 26, 2017, the Company changed
its name to U.S. Gold Corp. from Dataram Corporation.
On
June 13, 2016, Gold King Corp. (“Gold King”), a private Nevada corporation, entered into an Agreement and Plan of Merger
(the “Gold King Merger Agreement”) with the Company, the Company’s wholly-owned subsidiary Dataram Acquisition Sub,
Inc., a Nevada corporation (“Acquisition Sub”), and all of the principal shareholders of Gold King. Upon closing of the transactions
contemplated under the Gold King Merger Agreement (the “Gold King Merger”), Gold King merged with and into Acquisition Sub
with Gold King as the surviving corporation and became a wholly-owned subsidiary of the Company. The Gold King Merger was treated as
a reverse acquisition and recapitalization, and the business of Gold King became the business of the Company. The financial statements
are those of Gold King (the accounting acquirer) prior to the merger and include the activity of the Company (the legal acquirer) from
the date of the Gold King Merger. Gold King is a gold and precious metals exploration company pursuing exploration and development opportunities
primarily in Nevada and Wyoming. The Company has a wholly owned subsidiary, U.S. Gold Acquisition Corporation, formerly Dataram Acquisition
Sub, Inc. (“U.S. Gold Acquisition”), a Nevada corporation which was formed in April 2016.
On
May 23, 2017, the Company closed the Gold King Merger with Gold King. The Gold King Merger constituted a change of control and the majority
of the board of directors changed with the consummation of the Gold King Merger. The Company issued shares of common stock to Gold King
which represented approximately 90% of the combined company.
On
September 10, 2019, the Company, 2637262 Ontario Inc., a corporation incorporated under the laws of the Province of Ontario (“NumberCo”),
and all of the shareholders of NumberCo (the “NumberCo Shareholders”), entered into a Share Exchange Agreement (the “Share
Exchange Agreement”), pursuant to which, among other things, the Company agreed to issue to the NumberCo Shareholders 200,000 shares
of the Company’s common stock in exchange for all of the issued and outstanding shares of NumberCo, with NumberCo becoming a wholly-owned
subsidiary of the Company.
On
March 17, 2020, the board of directors (the “Board”) of the Company approved a 1-for-10 reverse stock split of the Company’s
issued and outstanding shares of common stock (the “Reverse Stock Split”), and on March 18, 2020, the Company filed with
the Secretary of State of the State of Nevada a Certificate of Amendment to its Articles of Incorporation to effect the Reverse Stock
Split. The Reverse Stock Split became effective as of 5:00 p.m. Eastern Time on March 19, 2020, and the Company’s common stock
began trading on a split-adjusted basis when the market opened on March 20, 2020. Accordingly, all common stock and per share data are
retrospectively restated to give effect of the split for all periods presented herein.
On
August 10, 2020, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Gold King Acquisition
Corp. (“Acquisition Corp.”), a wholly owned subsidiary of the Company, Northern Panther Resources Corporation (“Northern
Panther” or “NPRC”) and the Stockholder Representative named therein, pursuant to which Acquisition Corp. merged with
and into NPRC, with NPRC surviving as a wholly-owned subsidiary of the Company.
None
of the Company’s properties contain proven and probable reserves and all of the Company’s activities are exploratory in nature.
Unless
the context otherwise requires, all references herein to the “Company” refer to U.S. Gold Corp. and its consolidated subsidiaries.
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of presentation and principles of consolidation
The
accompanying interim unaudited condensed consolidated financial statements have been prepared by the Company in accordance with accounting
principles generally accepted in the United States of America (“U.S. GAAP”), the instructions to Form 10-Q, and the rules
and regulations of the United States Securities and Exchange Commission (the “SEC”) for interim financial information, which
includes the unaudited condensed consolidated financial statements and presents the unaudited condensed consolidated financial statements
of the Company and its wholly-owned subsidiaries as of July 31, 2021. All intercompany transactions and balances have been eliminated.
The accounting policies and procedures used in the preparation of these unaudited condensed consolidated financial statements have been
derived from the audited financial statements of the Company for the year ended April 30, 2021, which are contained in the Form 10-K
filed on July 29, 2021. The unaudited condensed consolidated balance sheet as of July 31, 2021 was derived from those financial statements.
It is management’s opinion that all material adjustments (consisting of normal recurring adjustments) have been made, which are
necessary for a fair financial statement presentation. Operating results during the three months ended July 31, 2021 are not necessarily
indicative of the results to be expected for the year ending April 30, 2022.
U.S.
GOLD CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY
31, 2021
Use
of Estimates and Assumptions
In
preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts
of assets and liabilities as of the date of the consolidated balance sheet, and revenues and expenses for the period then ended. Actual
results may differ significantly from those estimates. Significant estimates made by management include, but are not limited to, valuation
of mineral rights, stock-based compensation, the fair value of common and preferred stock, valuation of warrants, asset retirement obligations
and the valuation of deferred tax assets and liabilities.
Fair
Value Measurements
The
Company has adopted Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures”
(“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition
for fair value to be applied in accordance with U.S. GAAP, which requires the use of fair value measurements, establishes a framework
for measuring fair value and expands disclosure about such fair value measurements.
ASC
820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the
use of observable inputs and minimize the use of unobservable inputs.
These
inputs are prioritized below:
Level
1:
|
Observable
inputs such as quoted market prices in active markets for identical assets or liabilities.
|
Level
2:
|
Observable
market-based inputs or unobservable inputs that are corroborated by market data.
|
Level
3:
|
Unobservable
inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.
|
The
Company analyzes all financial instruments with features of both liabilities and equity under the Financial Accounting Standard Board’s
(“FASB”) accounting standard for such instruments. Under this standard, financial assets and liabilities are classified in
their entirety based on the lowest level of input that is significant to the fair value measurement.
At
July 31, 2021 and April 30, 2021, the Company had no financial instruments or liabilities accounted for at fair value on a recurring
basis or nonrecurring basis.
Prepaid
expenses and other current assets
Prepaid
expenses and other current assets of $834,746 and $430,360 at July 31, 2021 and April 30, 2021, respectively, consist primarily of costs
paid for future services which will occur within a year. Prepaid expenses principally include prepayments in cash and equity instruments
for consulting, public relations, business advisory services, insurance premiums, mining claim fees, drilling fees, and mineral lease
fees which are being amortized over the terms of their respective agreements.
Property
Property
is carried at cost. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized.
When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains
or losses are included in income in the year of disposition. Depreciation is calculated on a straight-line basis over the estimated useful
life of the assets, generally ten years.
U.S.
GOLD CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY
31, 2021
Impairment
of long-lived assets
The
Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the
assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted
future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s
estimated fair value and its book value. The Company did not recognize any impairment during the periods ended July 31, 2021 and April
30, 2021.
Mineral
Rights
Costs
of leasing, exploring, carrying and retaining unproven mineral lease properties are expensed as incurred. The Company expenses all mineral
exploration costs as incurred as it is still in the exploration stage. If the Company identifies proven and probable reserves in its
investigation of its properties and upon development of a plan for operating a mine, it would enter the development stage and capitalize
future costs until production is established.
When
a property reaches the production stage, the related capitalized costs will be amortized on a units-of-production basis over the proven
and probable reserves following the commencement of production. The Company assesses the carrying costs of the capitalized mineral properties
for impairment under ASC 360-10, “Impairment of Long-Lived Assets”, and evaluates its carrying value under ASC 930-360, “Extractive
Activities—Mining”, annually. An impairment is recognized when the sum of the expected undiscounted future cash flows is
less than the carrying amount of the mineral properties. Impairment losses, if any, are measured as the excess of the carrying amount
of the mineral properties over its estimated fair value.
To
date, the Company has not established the commercial feasibility of any exploration prospects; therefore, all exploration costs are being
expensed.
ASC
930-805, “Extractive Activities—Mining: Business Combinations” (“ASC 930-805”), states that mineral rights
consist of the legal right to explore, extract, and retain at least a portion of the benefits from mineral deposits. Mining assets include
mineral rights.
Acquired
mineral rights are considered tangible assets under ASC 930-805. ASC 930-805 requires that mineral rights be recognized at fair value
as of the acquisition date. As a result, the direct costs to acquire mineral rights are initially capitalized as tangible assets. Mineral
rights include costs associated with acquiring patented and unpatented mining claims.
ASC
930-805 provides that in measuring the fair value of mineral assets, an acquirer should take into account both:
●
The value beyond proven and probable reserves (“VBPP”) to the extent that a market participant would include VBPP in determining
the fair value of the assets.
●
The effects of anticipated fluctuations in the future market price of minerals in a manner that is consistent with the expectations of
market participants.
Leases
to explore for or use of natural resources are outside the scope of ASU 2016-02, “Leases”.
Share-Based
Compensation
Share-based
compensation is accounted for based on the requirements of ASC 718, “Compensation—Stock Compensation” (“ASC 718”),
which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award
of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively,
the vesting period). ASC 718 also requires measurement of the cost of employee and director services received in exchange for an award
based on the grant-date fair value of the award. Pursuant to ASC 505, “Equity—Equity Based Payments to Non-Employees”
(“ASC 505-50”), for share-based payments to consultants and other third parties, compensation expense is determined at the
measurement date, which is the grant date. Until the measurement date is reached, the total amount of compensation expense remains uncertain.
ASU
2018-07 applies to all share-based payment transactions in which the grantor acquires goods and services to be used or consumed in its
own operations by issuing share-based payment awards. ASU 2018-07 also clarifies that Topic 718 does not apply to share-based payments
used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers
as part of a contract accounted for under ASC 606. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018, including
interim periods within those fiscal years, with early adoption permitted, but no earlier than adoption of ASC 606. The Company chose
to early adopt ASU 2018-07 in July 2018. The adoption of this standard did not have a material effect on the Company’s consolidated
financial statements and related disclosures.
U.S.
GOLD CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY
31, 2021
Accounting
for Warrants
Warrants
are accounted for in accordance with the applicable accounting guidance provided in ASC 815, “Derivatives and Hedging” (“ASC
815”) as either derivative liabilities or as equity instruments, depending on the specific terms of the agreements. The Company
classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) give the Company a choice of
net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or
liabilities any contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs
and if that event is outside the control of the Company) or (ii) give the counterparty a choice of net-cash settlement or settlement
in shares (physical settlement or net-share settlement). Instruments that are classified as liabilities are recorded at fair value at
each reporting period, with any change in fair value recognized as a component of change in fair value of derivative liabilities in the
consolidated statements of operations.
The
Company assessed the classification of its outstanding common stock purchase warrants as of the date of issuance and determined that
such instruments met the criteria for equity classification under the guidance in ASU 2017-11 “Earnings Per Share (Topic 260);
Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments
with Down Round Feature”. The Company has no outstanding warrants that contain a “down round” feature under Topic 815
of ASU 2017-11.
Convertible
Preferred Stock
The
Company accounts for its convertible preferred stock under the provisions of ASC 480, “Distinguishing Liabilities from Equity”
(“ASC 480”), which sets forth the standards for how an issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. ASC 480 requires an issuer to classify a financial instrument that is within the scope
of ASC 480 as a liability if such financial instrument embodies an unconditional obligation to redeem the instrument at a specified date
and/or upon an event certain to occur. During the periods ended July 31, 2021 and April 30, 2021, the Company’s convertible preferred
shares were accounted for as equity, with no liability recorded. There was no outstanding preferred stock as of July 31, 2021.
Convertible
Instruments
The
Company bifurcates conversion options from their host instruments and accounts for them as free-standing derivative financial instruments
according to certain criteria. The criteria includes circumstances in which (a) the economic characteristics and risks of the embedded
derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid
instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise
applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate
instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this
rule when the host instrument is deemed to be conventional as that term is described under applicable U.S. GAAP.
When
the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records,
when necessary, a beneficial conversion feature (“BCF”) related to the issuance of convertible debt and equity instruments
that have conversion features at fixed rates that are in-the-money when issued, and the fair value of warrants issued in connection with
those instruments. The BCF for the convertible instruments is recognized and measured by allocating a portion of the proceeds to warrants,
based on their relative fair value, and as a reduction to the carrying amount of the convertible instrument equal to the intrinsic value
of the conversion feature. The discounts recorded in connection with the BCF and warrant valuation are recognized (a) for convertible
debt as interest expense over the term of the debt, using the effective interest method or (b) for convertible preferred stock as dividends
at the time the stock first becomes convertible.
U.S.
GOLD CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY
31, 2021
Remediation
and Asset Retirement Obligation
Asset
retirement obligations (“ARO”), consisting primarily of estimated reclamation costs at the Company’s CK Gold, Keystone
and Maggie Creek properties, are recognized in the period incurred and when a reasonable estimate can be made, and recorded as liabilities
at fair value. Such obligations, which are initially estimated based on discounted cash flow estimates, are accreted to full value over
time through charges to accretion expense. Corresponding asset retirement costs are capitalized as part of the carrying amount of the
related long-lived asset and depreciated over the asset’s remaining useful life. AROs are periodically adjusted to reflect changes
in the estimated present value resulting from revisions to the estimated timing or amount of reclamation and closure costs. The Company
reviews and evaluates its AROs annually or more frequently at interim periods if deemed necessary.
Foreign
Currency Transactions
The
reporting and functional currency of the Company is the U.S. dollar. Transactions denominated in foreign currencies are translated into
the functional currency at the exchange rates prevailing on the transaction dates. Assets and liabilities denominated in foreign currencies
are translated into the functional currency at the exchange rates prevailing at the balance sheet date with any transaction gains and
losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency included
in the results of operations as incurred. Translation adjustments, and transaction gains or losses, have not had, and are not expected
to have, a material effect on the results of operations of the Company and are included in general and administrative expenses.
Leases
On
January 1, 2019, the Company adopted ASC Topic 842, Leases (Topic 842), the Company has elected the ‘package of practical expedients’,
which permit it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial
direct costs. In addition, the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 month or less. Operating
lease right of use assets (“ROU”) assets represents the right to use the leased asset for the lease term and operating lease
liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date.
As most leases do not provide an implicit rate, the Company use an incremental borrowing rate based on the information available at the
adoption date in determining the present value of future payments. Lease expense for minimum lease payments is amortized on a straight-line
basis over the lease term and is included in general and administrative expenses in the statements of operations.
Income
Taxes
The
Company accounts for income taxes pursuant to the provision of ASC 740-10, “Accounting for Income Taxes” (“ASC 740-10”),
which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach
requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between
the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets
for which management believes it is more likely than not that the net deferred asset will not be realized.
The
Company follows the provision of ASC 740-10, “Accounting for Uncertain Income Tax Positions” (“ASC 740-10”).
When tax returns are filed, there may be uncertainty about the merits of positions taken or the amount of the position that would be
ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements
in the period during which, based on all available evidence, management believes it is more likely than not that the position will be
sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or
aggregated with other positions.
Tax
positions that meet the more likely than not recognition threshold are measured at the largest amount of tax benefit that is more than
50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefit associated with
tax positions taken that exceed the amount measured as described above should be reflected as a liability for uncertain tax benefits
in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon
examination. The Company believes its tax positions are all more likely than not to be upheld upon examination. As such, the Company
has not recorded a liability for uncertain tax benefits or for any related interest and penalties.
The
Company has adopted ASC 740-10-25, “Definition of Settlement”, which provides guidance on how an entity should determine
whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a
tax position can be effectively settled upon the completion and examination by a taxing authority without being legally extinguished.
For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position
is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations
remains open. The federal and state income tax returns of the Company are subject to examination by the Internal Revenue Service and
state taxing authorities, generally for three years after they are filed.
U.S.
GOLD CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY
31, 2021
Recent
Accounting Pronouncements
Accounting
standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material
effect on the financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have
an effect on or are unrelated to its financial condition, results of operations, cash flows or disclosures.
In
August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt - Debt with Conversion and Other Options (Subtopic
470-20) and Derivatives and Hedging Contracts in Entity’s Own Equity (Subtopic 815-40), which eliminates the beneficial conversion
and cash conversion accounting models for convertible instruments, amends the accounting for certain contracts in an entity’s own
equity that are currently accounted for as derivatives because of specific settlement provisions, and modifies how particular convertible
instruments and certain contracts that may be settled in cash or shares impact the diluted EPS calculation. The standard is effective
for annual periods beginning after December 15, 2021, and interim periods within those reporting periods. Early adoption is permitted,
but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those reporting periods. The standard
can be adopted under the modified retrospective method or the full retrospective method. The Company expects that this guidance will
not have a material impact on the Company’s condensed consolidated financial statements.
In
October 2020, the FASB issued ASU 2020-09, Debt (Topic 470) - Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762, or ASU
2020-09, to reflect the SEC’s amended disclosure rules for guaranteed debt securities offerings. The final rule amends the disclosure
requirements in SEC Regulation S-X, Rule 3-10, which require entities to separately present financial statements for subsidiary issuers
and guarantors of registered debt securities unless certain exceptions are met. The amended rule allows entities to provide summarized
financial information of the parent company and its issuers and guarantors on a combined basis either in a note to the financial statements
or as part of management’s discussion and analysis. ASU 2020-09 is effective for filings on or after January 4, 2021, with early
adoption permitted. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial
statements.
In
May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt–Modifications and Extinguishments (Subtopic 470-50),
Compensation–Stock Compensation (Topic 718), and Derivatives and Hedging–Contracts in Entity’s Own Equity (Subtopic
815-40). This ASU reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified
written call options (for example, warrants) that remain equity classified after modification or exchange. This ASU provides guidance
for a modification or an exchange of a freestanding equity-classified written call option that is not within the scope of another Topic.
It specifically addresses: (1) how an entity should treat a modification of the terms or conditions or an exchange of a freestanding
equity-classified written call option that remains equity classified after modification or exchange; (2) how an entity should measure
the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after
modification or exchange; and (3) how an entity should recognize the effect of a modification or an exchange of a freestanding equity-classified
written call option that remains equity classified after modification or exchange. This ASU will be effective for all entities for fiscal
years beginning after December 15, 2021. An entity should apply the amendments prospectively to modifications or exchanges occurring
on or after the effective date of the amendments. Early adoption is permitted, including adoption in an interim period. The Company is
currently evaluating the effect the adoption of this ASU will have on the condensed consolidated financial statements.
NOTE
3 — GOING CONCERN
The
accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course of business. As of July 31, 2021, the Company had cash
of approximately $10.8 million, working capital of approximately $10.3 million and an accumulated deficit of approximately $47.5 million.
The Company had a net loss and cash used in operating activities of approximately $3.5 million and $2.9 million, respectively, for the
three months ended July 31, 2021. As a result of the utilization of cash in its operating activities, and the development of its assets,
the Company has incurred losses since it commenced operations. The Company’s primary source of operating funds since inception
has been equity financings. As of the date of filing the Form 10-Q for the period ended July 31, 2021, the Company had sufficient cash
to fund its operations for approximately 6 to 9 months and expects that it would be required to raise additional funds to fund its operations
thereafter. The ongoing COVID-19 pandemic has and may continue to adversely impact the Company’s business, as the Company’s
operations are based in and rely on third parties located in areas affected by the pandemic. These matters raise substantial doubt about
the Company’s ability to continue as a going concern for the twelve months following the issuance of these financial statements.
U.S.
GOLD CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY
31, 2021
The
unaudited consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset
amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE
4 — MINERAL RIGHTS
As
of the date of these consolidated financial statements, the Company has not established any proven or probable reserves on its mineral
properties and has incurred only acquisition costs and exploration costs.
As
of the dates presented, mineral properties consisted of the following:
SCHEDULE OF MINERAL PROPERTIES
|
|
July 31, 2021
|
|
|
April 30, 2021
|
|
CK Gold Project
|
|
$
|
3,091,738
|
|
|
$
|
3,091,738
|
|
Keystone Project
|
|
|
1,028,885
|
|
|
|
1,028,885
|
|
Maggie Creek Project
|
|
|
1,986,607
|
|
|
|
1,986,607
|
|
Challis Gold Project
|
|
|
10,249,632
|
|
|
|
10,249,632
|
|
Total
|
|
$
|
16,356,862
|
|
|
$
|
16,356,862
|
|
NOTE
5 — PROPERTY AND EQUIPMENT
As
of the dates presented, property consisted of the following:
SCHEDULE OF PROPERTY AND EQUIPMENT
|
|
July 31, 2021
|
|
|
April 30, 2021
|
|
Site costs
|
|
$
|
169,803
|
|
|
$
|
169,803
|
|
Computer equipment
|
|
|
7,265
|
|
|
|
3,498
|
|
Vehicle
|
|
|
39,493
|
|
|
|
39,493
|
|
Total
|
|
|
216,561
|
|
|
|
212,794
|
|
Less: accumulated depreciation
|
|
|
(48,521
|
)
|
|
|
(40,572
|
)
|
Total
|
|
$
|
168,040
|
|
|
$
|
172,222
|
|
For
the three months ended July 30, 2021 and 2020, depreciation expense amounted to $7,949 and $4,200, respectively.
NOTE
6 — ASSET RETIREMENT OBLIGATION
In
conjunction with various permit approvals permitting the Company to undergo exploration activities at the CK Gold, Keystone and Maggie
Creek projects, the Company has recorded an ARO based upon the reclamation plans submitted in connection with the various permits. The
following table summarizes activity in the Company’s ARO for the periods presented:
SCHEDULE OF ASSET RETIREMENT OBLIGATION
|
|
July 31, 2021
|
|
|
April 30, 2021
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
$
|
204,615
|
|
|
$
|
168,392
|
|
Addition and changes in estimates
|
|
|
-
|
|
|
|
18,746
|
|
Accretion expense
|
|
|
4,934
|
|
|
|
17,477
|
|
Balance, end of period
|
|
$
|
209,549
|
|
|
$
|
204,615
|
|
For
the three months ended July 31, 2021 and 2020, accretion expense amounted to $4,934 and $4,060, respectively.
U.S.
GOLD CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY
31, 2021
NOTE
7 – OPERATING LEASE RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES
On
May 1, 2021, the Company entered into a lease agreement for its lease facility in Cheyenne, Wyoming. The term of the lease is for a two-year
period from May 2021 to May 2023 starting with a monthly base rent of $1,667. The Company has an option to renew the lease for an additional
three years beyond the primary term. The Company typically excludes options to extend the lease in a lease term unless it is reasonably
certain that the Company will exercise the option and when doing so is in the Company’s sole discretion. The base rent is subject
to an annual increase as defined in the lease agreement. In addition to the monthly base rent, the Company is charged separately for
common area maintenance which is considered a non-lease component. These non-lease component payments are expensed as incurred and are
not included in operating lease assets or liabilities.
During
the three months ended July 31, 2021, lease expenses of $4,281 was included in general and administrative expenses as reflected in the
accompanying unaudited condensed consolidated statements of operations.
Right-of-
use assets are summarized below:
SCHEDULE OF SUPPLEMENTAL BALANCE SHEET INFORMATION RELATED TO LEASES
|
|
July 31,
2021
|
|
|
April 30,
2021
|
|
Operating lease
|
|
$
|
33,108
|
|
|
$
|
-
|
|
Operating
Lease liabilities are summarized below:
|
|
July 31,
2021
|
|
|
April 30,
2021
|
|
Operating lease, current portion
|
|
$
|
18,153
|
|
|
$
|
-
|
|
Operating lease, long term portion
|
|
|
14,955
|
|
|
|
-
|
|
Total lease liability
|
|
$
|
33,108
|
|
|
$
|
-
|
|
The
weighted average remaining lease term for the operating lease is 1.75 years and the weighted average incremental borrowing rate is 8.0%
at July 31, 2021.
The
following table includes supplemental cash and non-cash information related to the Company’s lease:
SCHEDULE OF SUPPLEMENTAL CASH FLOW AND NON-CASH INFORMATION RELATED TO LEASES
|
|
2021
|
|
|
2020
|
|
|
|
Three Months Ended July 31,
|
|
|
|
2021
|
|
|
2020
|
|
Cash paid for amounts included in the measurement of lease liabilities
|
|
|
|
|
|
|
|
|
Operating cash flows from operating lease
|
|
$
|
5,000
|
|
|
$
|
-
|
|
Lease assets obtained in exchange for new operating lease liabilities
|
|
$
|
37,388
|
|
|
$
|
-
|
|
Minimum
lease payments under non-cancelable operating leases at July 31, 2021 are as follows:
SCHEDULE OF FUTURE MINIMUM PAYMENTS REQUIRED UNDER NON-CANCELABLE OPERATING LEASES
|
|
|
|
|
Year ended April 30, 2022
|
|
|
15,000
|
|
Year ended April 30, 2023
|
|
|
20,600
|
|
Total
|
|
$
|
35,600
|
|
Less: imputed interest
|
|
|
(2,492
|
)
|
Total present value of lease liability
|
|
$
|
33,108
|
|
U.S.
GOLD CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY
31, 2021
NOTE
8 — RELATED PARTY TRANSACTIONS
On
April 16, 2019, the Company entered into a one-year consulting agreement with a director of the Company for providing services related
to investor and strategic introduction to potential industry partners. In consideration for these services, the consultant was paid $3,750
per month in cash, and total shares of the Company’s common stock with a value of $45,000. In April 2019, the Company issued 4,592
shares of the Company’s common stock, valued at $45,000 at the market price on the dates of grant, in connection with this consulting
agreement. On January 7, 2021, the Company entered into another one-year agreement (“January 2021 Agreement”) with the director
providing for an annual fee of $86,000 consisting of shares of the Company’s common stock with a value of $50,000 and cash payments
of $36,000, which is paid $3,000 per month. In January 2021, the Company issued 3,222 shares of common stock pursuant to the January
2021 Agreement. The Company paid consulting fees to such director of $9,000 and $3,750 in cash during the three months ended July 31,
2021 and 2020, respectively.
On
March 19, 2021, the Company and Edward Karr, the Company’s former Executive Chairman, agreed by mutual understanding, that Mr.
Karr’s employment as an officer and employee, and his service as a member of the board of directors, of the Company was terminated,
effective March 19, 2021. In connection with Mr. Karr’s departure, the Company entered into a General Release and Severance Agreement
with Mr. Karr, as amended, pursuant to which Mr. Karr provided certain transition services to the Company through the Separation Date.
Pursuant to the Separation Agreement, Mr. Karr is entitled to receive any equity awards granted to Mr. Karr by the Company. Additionally,
on March 19, 2021, the Company entered into a one-year agreement (“March 2021 Agreement”) for general corporate advisory
services to be provided by Mr. Karr for an annual fee of $180,000 consisting of shares of the Company’s common stock with a value
of $60,000 and cash payments of $120,000, which is paid $10,000 per month. The Company paid consulting fees to Mr. Karr of $30,000 in
cash during the three months ended July 31, 2021 and recorded accrued expenses of $22,500 in connection with the March 2021 consulting
agreement and reflected in accounts payable and accrued liabilities in the accompanying unaudited consolidated balance sheets.
NOTE
9 — STOCKHOLDERS’ EQUITY
As
of July 31, 2021, authorized capital stock consisted of 200,000,000 shares of common stock, par value $0.001 per share, and 50,000,000
shares of “blank check” preferred stock, par value $0.001 per share, of which 1,300,000 shares are designated as Series A
Convertible Preferred Stock, 400,000 shares are designated as Series B Convertible Preferred Stock, 45,002 shares are designated as Series
C Convertible Preferred Stock, 7,402 shares are designated as Series D Convertible Preferred Stock, 2,500 shares are designated as Series
E Convertible Preferred Stock, 1,250 shares are designated as Series F Preferred Stock, 127 shares are designated as Series G Preferred
Stock, 106,894 shares are designated as Series H Preferred Stock, and 921,666 shares are designated as Series I Preferred Stock. The
Company’s Board has the authority, without further action by the stockholders, to issue shares of preferred stock in one or more
series and to fix the rights, preferences, privileges and restrictions granted to or imposed upon the preferred stock.
Common
Stock Issued, Restricted Stock Awards, and RSU’s Granted for Services
On
June 1, 2021, the Company granted 2,097 RSU’s to a consultant for consulting services rendered. The 2,097 RSU’s had a fair
value of $25,000 or $11.92 per share of common stock based on the quoted trading price on the date of grant. The RSU’s fully vested
and expensed immediately.
On
June 9, 2021, the Company issued 25,000 shares of common stock to a consultant in connection with an investor relations agreement for
services to be rendered from April 2021 to April 2022. The 25,000 shares of common stock had a fair value of $258,500, or $10.34 per
share, based on the quoted trading price on the date of grant, to be amortized over the term of the consulting agreement.
On
July 19, 2021, the Company granted 15,322 RSU’s to an employee pursuant to his employment agreement. The 15,322 RSU’s had
a fair value of $150,000 or $9.79 per share of common stock based on the quoted trading price on the date of grant. The RSU’s vested
25% on the date of issuance, and the remaining shall vest one-third over a three-year period from the date of issuance.
Total
stock compensation expense for awards issued for services of $232,443 and $20,218 was expensed for the three months ended July 31, 2021
and 2020, respectively. A balance of $1,953,292 remains to be expensed over future vesting periods related to unvested restricted stock
units issued for services.
U.S.
GOLD CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY
31, 2021
Equity
Incentive Plan
In
August 2017, the Board approved the Company’s 2017 Plan including the reservation of 165,000 shares of common stock thereunder.
On
August 6, 2019, the Board approved and adopted, subject to stockholder approval, the 2020 Plan. The 2020 Plan reserves 330,710 shares
for future issuance to officers, directors, employees and contractors as directed from time to time by the Compensation Committee of
the Board. The 2020 Plan was approved by a vote of stockholders at the 2019 annual meeting. With the approval and effectivity of the
2020 Plan, no further grants will be made under the 2017 Plan. On August 31, 2020, the Board approved and adopted, subject to stockholder
approval, an amendment (the “2020 Plan Amendment”) to the 2020 Plan. The 2020 Plan Amendment increased the number of shares
of common stock available for issuance pursuant to awards under the 2020 Plan by an additional 836,385, to a total of 1,167,095 shares
of the Company’s common stock. The 2020 Plan Amendment was approved by the Company’s stockholders on November 9, 2020.
Stock
options
The
following is a summary of the Company’s stock option activity during the periods ended July 31, 2021 and April 30, 2021:
SCHEDULE
OF STOCK OPTION ACTIVITY
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted Average
Remaining
Contractual
Life
(Years)
|
|
Balance at April 30, 2021
|
|
|
95,000
|
|
|
$
|
14.63
|
|
|
|
1.57
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Forfeited
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Cancelled
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Balance at July 31, 2021
|
|
|
95,000
|
|
|
|
14.63
|
|
|
|
1.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at end of period
|
|
|
95,000
|
|
|
$
|
14.63
|
|
|
|
|
|
Options expected to vest
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
Weighted average fair value of options granted during the period
|
|
|
|
|
|
$
|
—
|
|
|
|
|
|
At
July 31, 2021 and April 30, 2021, the aggregate intrinsic value of options outstanding and exercisable were de minimis for each
period.
Stock-based
compensation for stock options recorded in the unaudited consolidated statements of operations totaled $0 and $51,262 for the three months
ended July 31, 2021 and 2020, respectively. There were no unvested options remaining.
Stock
Warrants
A
summary of the Company’s outstanding warrants to purchase shares of common stock as of July 31, 2021 and changes during the period
ended as presented below:
SCHEDULE
OF STOCK WARRANT ACTIVITY
U.S.
GOLD CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY
31, 2021
|
|
Number of Warrants
|
|
|
Weighted Average
Exercise
Price
|
|
|
Weighted Average Remaining Contractual
Life
(Years)
|
|
Warrants with no Class designation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at April 30, 2021
|
|
|
1,428,794
|
|
|
$
|
12.00
|
|
|
|
4.08
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Forfeited
|
|
|
(142,972
|
)
|
|
|
32.17
|
|
|
|
—
|
|
Canceled
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Balance at July 31, 2021
|
|
|
1,285,822
|
|
|
|
9.76
|
|
|
|
4.33
|
|
Class A Warrants:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at April 30, 2021
|
|
|
109,687
|
|
|
|
11.40
|
|
|
|
3.22
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Forfeited
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Canceled
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Balance at July 31, 2021
|
|
|
109,687
|
|
|
|
11.40
|
|
|
|
2.97
|
|
Total Warrants Outstanding at July 31, 2021
|
|
|
1,395,509
|
|
|
$
|
9.89
|
|
|
|
4.22
|
|
Warrants exercisable at end of period
|
|
|
891,951
|
|
|
$
|
7.29
|
|
|
|
|
|
Weighted average fair value of warrants granted during the period
|
|
|
|
|
|
$
|
—
|
|
|
|
|
|
As
of July 31, 2021, the aggregate intrinsic value of warrants outstanding and exercisable was $3,140,800.
NOTE
10 — NET LOSS PER COMMON SHARE
Net
loss per share of common stock is calculated in accordance with ASC 260, “Earnings Per Share”. Basic loss per share is computed
by dividing net loss available to common stockholder, by the weighted average number of shares of common stock outstanding during the
period. The following were excluded from the computation of diluted shares outstanding as they would have had an anti-dilutive impact
on the Company’s net loss. In periods where the Company has a net loss, all dilutive securities are excluded.
SCHEDULE
OF ANTIDILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE
|
|
July 31, 2021
|
|
|
July 31, 2020
|
|
Common stock equivalents:
|
|
|
|
|
|
|
|
|
Restricted stock units
|
|
|
355,873
|
|
|
|
32,500
|
|
Stock options
|
|
|
95,000
|
|
|
|
100,000
|
|
Stock warrants
|
|
|
1,395,509
|
|
|
|
746,753
|
|
Total
|
|
|
1,846,382
|
|
|
|
879,253
|
|
NOTE
11 — COMMITMENTS AND CONTINGENCIES
Mining
Leases
The
CK Gold property position consists of two State of Wyoming Metallic and Non-metallic Rocks and Minerals Mining Leases. These leases were
assigned to the Company in July 2014 through the acquisition of the CK Gold Project. Leases to explore for or use of natural resources
are outside the scope of ASU 2016-02 “Leases”. There are no lease contracts for office space or other Company expenses which
qualify for treatment as capital assets under ASU 2016-02.
The
Company’s rights to the CK Gold Project arise under two State of Wyoming mineral leases; 1) State of Wyoming Mining Lease No. 0-40828,
consisting of 640 acres, and 2) State of Wyoming Mining Lease No. 0-40858 consisting of 480 acres.
Lease
0-40828 was renewed in February 2013 for a second ten-year term and Lease 0-40858 was renewed for its second ten-year term in February
2014. Each lease requires an annual payment of $2.00 per acre. In connection with the Wyoming Mining Leases, the following production
royalties must be paid to the State of Wyoming, although once the project is in operation, the Board of Land Commissioners has the authority
to reduce the royalty payable to the State of Wyoming:
SCHEDULE
OF ROYALTY PAYABLE
FOB Mine Value per Ton
|
|
Percentage Royalty
|
|
$00.00 to $50.00
|
|
|
5
|
%
|
$50.01 to $100.00
|
|
|
7
|
%
|
$100.01 to $150.00
|
|
|
9
|
%
|
$150.01 and up
|
|
|
10
|
%
|
U.S.
GOLD CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY
31, 2021
The
future minimum lease payments at July 31, 2021 under these mining leases are as follows, each payment to be made in the fourth quarter
of the respective fiscal years:
SCHEDULE
OF FUTURE MINIMUM LEASE PAYMENTS
|
|
|
|
|
Fiscal 2022
|
|
$
|
2,240
|
|
Fiscal 2023
|
|
|
2,240
|
|
Fiscal 2024
|
|
|
960
|
|
Total
|
|
$
|
5,440
|
|
The
Company may renew each lease for a third ten-year term, which will require one annual payment of $3.00 per acre for the first year and
$4.00 per acre for each year thereafter.
Maggie
Creek option:
The
Maggie Creek option agreement grants the Company the exclusive right and option to earn-in and acquire up to 50% undivided interest in
a property called Maggie Creek, located in Eureka County, Nevada by completing the Initial Earn-in over a seven-year period, as amended:
SCHEDULE
OF RIGHT AND OPTION TO EARN-IN AND ACQUIRE UNDIVIDED INTEREST
|
|
|
|
|
First agreement year
|
|
$
|
-
|
|
Second agreement year
|
|
|
300,000
|
|
Third agreement year
|
|
|
500,000
|
|
Fourth agreement year
|
|
|
700,000
|
|
Fifth agreement year
|
|
|
1,000,000
|
|
Sixth agreement year
|
|
|
1,000,000
|
|
Seventh agreement year
|
|
|
1,000,000
|
|
|
|
|
$4,500,000
|
|
Once
the Initial Earn-in has been met, the Company is required to pay an additional $250,000 to the counterparty to vest the Company’s
50% interest in the Maggie Creek property.
NPRC
option:
Pursuant
to the Merger, the Company acquired from NPRC a mineral property called Challis Gold located in Idaho pursuant to an option agreement
dated in February 2020 which was later amended in June 2020.
The
annual advance minimum royalty payments at April 30, 2021 under the option agreement are as follows, each payment to be made in the beginning
on the first anniversary of the effective date of this option agreement and continuing until the tenth anniversary:
SCHEDULE OF ADVANCE MINIMUM ROYALTY PAYMENTS
|
|
|
|
|
Fiscal 2022
|
|
$
|
25,000
|
|
Fiscal 2023
|
|
|
25,000
|
|
Fiscal 2024
|
|
|
25,000
|
|
Fiscal 2025
|
|
|
25,000
|
|
Fiscal 2026 and thereafter
|
|
|
150,000
|
|
Total
|
|
$
|
250,000
|
|
100%
of the advance minimum royalty payments will be applied to the royalty credits.
Legal Matters
From time to time the Company may be involved
in claims and legal actions that arise in the ordinary course of business. To the Company’s knowledge, there are no material pending
legal proceedings to which the Company is a party or of which any of the Company’s property is the subject.
NOTE
12 — SUBSEQUENT EVENTS
Exploration
Access and Option to Lease Agreement
On
August 25, 2021 (“Effective Date”), the Company entered into an Exploration Access and Option to Lease Agreement (the “Agreement”)
with a private-party landowner (the “Landowner”) whereby the Landowner granted the Company an option (the “Option”)
to lease and right of way on a property located in Laramie County, Wyoming. The Company may exercise the Option for five years (“Option
Term”) from the Effective Date. During the Option, the Landowner granted non-exclusive rights (the “Exploration Access Rights”)
to the Company to use the surface of the property for an annual exploration and access right payment of $10,000, thirty days after the
effective date and each year on the anniversary of the Effective Date during the Option Term until such time the Option is exercised
or expires. The Company is also required to pay an annual Option payment of $35,780 for the lease and $6,560 for the right of way within
thirty days after the Effective Date and each year on the anniversary of the Effective Date during the Option Term until such time the
Option is exercise by the Company or expires.
U.S.
GOLD CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY
31, 2021
At
any time during the Option Term, the Company may exercise the Option by providing a written notice to the Landowner and the Company shall
pay a one-time right of way payment of $26,240 at closing and shall execute a lease agreement. The exclusive option to lease (the “Lease”)
and right of way (the “Right of Way”) is for a term of ten years with the right to extend for an additional ten years and
requires an annual lease payment of $50,000, compensation for loss of grazing of $40.00 per acre impacted land and annual Right of Way
payments of $13,120.
In
consideration for the option rights, lease rights and right of way rights under this Agreement, the Company agreed to grant the Landowner
shares of the Company’s common stock worth $50,000, which shares will not vest until the Company executes the Lease.
At
any time during the Option Term, the Company may terminate this Agreement by providing a written notice to the Landowner. Upon termination,
the Landowner is entitled to retain any payments already made and the Company shall have no further obligation after the date of termination.
The Agreement, including the Option and the Exploration Access Rights, may be extended for a period of five years upon written notice
from the Company. In the absence of such notice, the Agreement shall automatically terminate at the end of the Option Term.