UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended June 30, 2024
☐ TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 000-54653
AUGUSTA GOLD CORP.
(Exact name of registrant as specified in its charter)
Delaware | | 41-2252162 |
(State or other jurisdiction of | | (I.R.S. Employer |
incorporation or organization) | | Identification No.) |
| | |
Suite 555 - 999 Canada Place | | |
Vancouver, BC, Canada | | V6C 3E1 |
(Address of principal executive offices) | | (Zip Code) |
(604) 687-1717
(Registrant’s telephone number, including
area code)
Securities registered pursuant to Section 12(b)
of the Act: None.
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes
☒ No ☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| | 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 12b-2 of the Exchange Act.) Yes ☐ No ☒
Indicate the number of shares outstanding of each
of the issuer’s classes of common stock, as of the latest practicable date: 85,929,753 shares of common stock, par value $0.0001,
were outstanding on August 12, 2024.
AUGUSTA GOLD CORP.
TABLE OF CONTENTS TO FORM 10-Q
PART I. FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
AUGUSTA GOLD CORP.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2024 AND DECEMBER 31, 2023
(Expressed in US dollars)
| |
6/30/24 | | |
12/31/23 | |
Assets | |
| | |
| |
Current assets | |
| | | |
| | |
Cash | |
$ | 612,804 | | |
$ | 300,734 | |
Prepaid | |
| 112,340 | | |
| 55,999 | |
Deposits | |
| 0 | | |
| 7,028 | |
Total current assets | |
| 725,144 | | |
| 363,761 | |
| |
| | | |
| | |
Other assets | |
| | | |
| | |
Equipment, net | |
| 1,022,363 | | |
| 1,044,392 | |
Reclamation bonds | |
| 1,115,813 | | |
| 1,115,813 | |
Mineral properties, net | |
| 58,287,317 | | |
| 58,992,286 | |
Total other assets | |
| 60,425,493 | | |
| 61,152,491 | |
| |
| | | |
| | |
Total assets | |
$ | 61,150,637 | | |
$ | 61,516,252 | |
| |
| | | |
| | |
Liabilities and Stockholders’ Equity (Deficit) | |
| | | |
| | |
| |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Accounts payable | |
$ | 1,540,492 | | |
$ | 1,411,439 | |
Note payable and accrued interest - related party | |
| 29,068,577 | | |
| 25,393,879 | |
Warrant liability | |
| 14,342 | | |
| 692,949 | |
Asset retirement obligation | |
| 67,000 | | |
| 110,700 | |
Total current liabilities | |
| 30,690,411 | | |
| 27,608,967 | |
| |
| | | |
| | |
Long term liabilities | |
| | | |
| | |
Asset retirement obligation, net of current | |
| 2,367,121 | | |
| 2,971,097 | |
Warrant liability, net of current | |
| 274,373 | | |
| 417,758 | |
Total long term liabilities | |
| 2,641,494 | | |
| 3,388,855 | |
| |
| | | |
| | |
Total liabilities | |
| 33,331,905 | | |
| 30,997,822 | |
| |
| | | |
| | |
Stockholders’ equity | |
| | | |
| | |
Preferred stock, 250,000,000 shares authorized, $0.0001 par value | |
| 0 | | |
| 0 | |
Preferred stock series A, 5,000,000 shares designated and authorized, $.0001 par value; zero issued and outstanding as of 6/30/24 and 12/31/23 | |
| 0 | | |
| 0 | |
Preferred stock series B, 45,000,000 shares designated and authorized, $.0001 par value; issued and outstanding preferred stock series B shares convertible into zero shares of common stock as of 6/30/24 and 12/31/23 | |
| 0 | | |
| 0 | |
Common stock, 750,000,000 shares authorized, $ .0001 par value; 85,929,753 shares issued and outstanding as of 6/30/24 and 12/31/23 | |
| 8,593 | | |
| 8,593 | |
Additional paid in capital | |
| 64,162,062 | | |
| 63,745,580 | |
Accumulated deficit | |
| (36,351,923 | ) | |
| (33,235,743 | ) |
| |
| | | |
| | |
Total stockholders’ equity | |
| 27,818,732 | | |
| 30,518,430 | |
| |
| | | |
| | |
Total liabilities and stockholders’ equity | |
$ | 61,150,637 | | |
$ | 61,516,252 | |
Commitments and contingencies (Note 6)
See accompanying notes to consolidated financial
statements
AUGUSTA GOLD CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPRHENSIVE INCOME (LOSS)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023
(Expressed in US dollars)
| |
Three Months Ended | | |
Six Months Ended | |
| |
6/30/24 | | |
6/30/23 | | |
6/30/24 | | |
6/30/23 | |
Operating expenses | |
| | |
| | |
| | |
| |
General and administrative | |
$ | 434,266 | | |
$ | 1,196,164 | | |
$ | 1,132,701 | | |
$ | 2,511,736 | |
Lease expense | |
| 21,000 | | |
| 21,000 | | |
| 21,000 | | |
| 21,000 | |
Exploration, evaluation and project expense | |
| 836,200 | | |
| 626,426 | | |
| 1,232,458 | | |
| 1,350,696 | |
Accretion expense | |
| 71,286 | | |
| 24,915 | | |
| 101,180 | | |
| 52,822 | |
Depreciation expense | |
| 11,015 | | |
| 11,015 | | |
| 22,029 | | |
| 22,029 | |
Total operating expenses | |
| 1,373,767 | | |
| 1,879,520 | | |
| 2,509,368 | | |
| 3,958,283 | |
| |
| | | |
| | | |
| | | |
| | |
Net operating loss | |
| (1,373,767 | ) | |
| (1,879,520 | ) | |
| (2,509,368 | ) | |
| (3,958,283 | ) |
| |
| | | |
| | | |
| | | |
| | |
Revaluation of warrant liability | |
| 1,586,051 | | |
| 5,337,582 | | |
| 821,992 | | |
| 13,560,969 | |
Interest expense | |
| (751,222 | ) | |
| (631,079 | ) | |
| (1,424,697 | ) | |
| (1,257,794 | ) |
Foreign currency exchange gain (loss) | |
| 1 | | |
| 49,963 | | |
| (4,107 | ) | |
| (21,988 | ) |
Net income (loss) and comprehensive income (loss) | |
$ | (538,937 | ) | |
$ | 2,876,946 | | |
$ | (3,116,180 | ) | |
$ | 8,322,904 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted average common shares outstanding – basic | |
| 85,929,753 | | |
| 85,929,753 | | |
| 85,929,753 | | |
| 85,186,643 | |
Weighted average common shares outstanding – diluted | |
| 85,929,753 | | |
| 85,988,087 | | |
| 85,929,753 | | |
| 85,244,977 | |
| |
| | | |
| | | |
| | | |
| | |
Earnings (loss) per common share – basic | |
$ | (0.01 | ) | |
$ | 0.03 | | |
$ | (0.04 | ) | |
$ | 0.10 | |
Earnings (loss) per common share – diluted | |
$ | (0.01 | ) | |
$ | 0.03 | | |
$ | (0.04 | ) | |
$ | 0.10 | |
See accompanying notes to consolidated financial
statements
AUGUSTA GOLD CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023
(Expressed in US dollars)
| |
Common | | |
| | |
| | |
| | |
Total | |
| |
Stock | | |
| | |
Additional | | |
| | |
Stockholders’ | |
| |
Shares | | |
Common | | |
Paid In | | |
Accumulated | | |
Equity | |
| |
Issued | | |
Stock | | |
Capital | | |
Deficit | | |
(Deficit) | |
| |
| | |
| | |
| | |
| | |
| |
December 31, 2022 | |
| 79,204,606 | | |
$ | 7,920 | | |
$ | 56,375,344 | | |
$ | (39,893,753 | ) | |
$ | 16,489,511 | |
Stock based compensation | |
| 0 | | |
| 0 | | |
| 472,981 | | |
| 0 | | |
| 472,981 | |
Placement - January | |
| 6,725,147 | | |
| 673 | | |
| 7,866,753 | | |
| 0 | | |
| 7,867,426 | |
Warrant liability | |
| 0 | | |
| 0 | | |
| (1,668,671 | ) | |
| 0 | | |
| (1,668,671 | ) |
Net income | |
| | | |
| 0 | | |
| 0 | | |
| 5,445,958 | | |
| 5,445,958 | |
March 31, 2023 | |
| 85,929,753 | | |
$ | 8,593 | | |
$ | 63,046,407 | | |
$ | (34,447,795 | ) | |
$ | 28,607,205 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Stock based compensation | |
| 0 | | |
| 0 | | |
| 245,142 | | |
| 0 | | |
| 245,142 | |
Net income | |
| | | |
| 0 | | |
| 0 | | |
| 2,876,946 | | |
| 2,876,946 | |
June 30, 2023 | |
| 85,929,753 | | |
$ | 8,593 | | |
$ | 63,291,549 | | |
$ | (31,570,849 | ) | |
$ | 31,729,293 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
December 31, 2023 | |
| 85,929,753 | | |
$ | 8,593 | | |
$ | 63,745,580 | | |
$ | (33,235,743 | ) | |
$ | 30,518,430 | |
Stock based compensation | |
| 0 | | |
| 0 | | |
| 275,037 | | |
| 0 | | |
| 275,037 | |
Warrant liability | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
Net loss | |
| | | |
| 0 | | |
| 0 | | |
| (2,577,243 | ) | |
| (2,577,243 | ) |
March 31, 2024 | |
| 85,929,753 | | |
$ | 8,593 | | |
$ | 64,020,617 | | |
$ | (35,812,986 | ) | |
$ | 28,216,224 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Stock based compensation | |
| 0 | | |
| 0 | | |
| 141,445 | | |
| 0 | | |
| 141,445 | |
Net loss | |
| | | |
| 0 | | |
| 0 | | |
| (538,937 | ) | |
| (538,937 | ) |
June 30, 2024 | |
| 85,929,753 | | |
$ | 8,593 | | |
$ | 64,162,062 | | |
$ | (36,351,923 | ) | |
$ | 27,818,732 | |
See accompanying notes to consolidated financial
statements
AUGUSTA GOLD CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2024 AND 2023
(Expressed in US dollars)
| |
Six Months Ended | |
| |
6/30/24 | | |
6/30/23 | |
| |
| | |
| |
Cash flows from operating activities | |
| | |
| |
Net income (loss) | |
$ | (3,116,180 | ) | |
$ | 8,322,904 | |
Adjustments to reconcile net income (loss) to net cash used in operating activities | |
| | | |
| | |
Accretion expense | |
| 101,180 | | |
| 52,822 | |
Depreciation expense | |
| 22,029 | | |
| 22,029 | |
Revaluation of warrant liability | |
| (821,992 | ) | |
| (13,560,969 | ) |
Share based compensation | |
| 416,482 | | |
| 718,123 | |
Change in operating assets and liabilities: | |
| | | |
| | |
Prepaid expenses | |
| (56,341 | ) | |
| (31,914 | ) |
Deferred stock issuance costs | |
| 0 | | |
| 121,424 | |
Debt issuance costs | |
| 84,282 | | |
| 49,469 | |
Deposits | |
| 7,028 | | |
| 0 | |
Accounts payable | |
| 129,053 | | |
| (1,836,711 | ) |
Accrued interest | |
| 1,340,416 | | |
| 1,208,324 | |
Asset retirement obligation | |
| (43,887 | ) | |
| (106,651 | ) |
| |
| | | |
| | |
Net cash used in operating activities | |
| (1,937,930 | ) | |
| (5,041,150 | ) |
| |
| | | |
| | |
Cash flows from financing activities | |
| | | |
| | |
Proceeds from private placement of stock | |
| 0 | | |
| 8,568,651 | |
Proceeds from note payable - related party | |
| 2,250,000 | | |
| 0 | |
Share issuance costs | |
| 0 | | |
| (701,225 | ) |
Increase in surety bond collateral | |
| 0 | | |
| (1,115,813 | ) |
| |
| | | |
| | |
Net cash provided by financing activities | |
| 2,250,000 | | |
| 6,751,613 | |
| |
| | | |
| | |
Net increase in cash | |
| 312,070 | | |
| 1,710,463 | |
| |
| | | |
| | |
Cash, beginning of period | |
| 300,734 | | |
| 332,813 | |
| |
| | | |
| | |
Cash, end of period | |
$ | 612,804 | | |
$ | 2,043,276 | |
| |
| 0 | | |
| | |
Noncash investing and financing activities | |
| | | |
| | |
Interest and taxes paid | |
$ | 0 | | |
$ | 0 | |
Revaluation of asset retirement obligation | |
$ | 704,969 | | |
$ | 0 | |
Warrant liability from units placement | |
$ | 0 | | |
$ | 1,668,671 | |
See accompanying notes to consolidated financial
statements
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
Augusta
Gold Corp. (the “Company”) is a junior exploration company engaged in the acquisition and exploration of properties that may
contain gold, silver, and other metals in the United States. The Company’s target properties are those that have been the subject
of historical exploration. The Company owns, controls or has acquired mineral rights on patented claims and federal unpatented claims
in the state of Nevada for the purpose of exploration and potential development of gold, silver, and other metals. The Company plans to
review opportunities and acquire additional mineral properties with current or historic precious and base metal mineralization with meaningful
exploration potential.
The Company’s
properties do not have any reserves. The Company plans to conduct exploration and engineering evaluation programs on these properties
with the objective of ascertaining whether any of its properties contain economic concentrations of precious and base metals that are
prospective for mining.
Basis
of Presentation and Statement of Compliance
The accompanying
consolidated financial statements (the “consolidated financial statements”) have been prepared in accordance with accounting
principles generally accepted in the United States of America (“GAAP”), and pursuant to the rules and regulations of the United
States Securities and Exchange Commission (“SEC”).
Basis of Measurement
These consolidated financial
statements have been prepared on the going concern basis, under the historical cost convention, except for certain financial instruments
that are measured at fair value as described herein.
Principles
of Consolidation
The consolidated
financial statements include the accounts of Augusta Gold Corp. and its wholly owned subsidiaries, Standard Gold Corp. (“Standard
Gold”), Bullfrog Mines LLC (“Bullfrog Mines”), CR Reward, LLC (“CR Reward” or “Reward”) and
Rocky Mountain Minerals Corp. (“Rocky Mountain Minerals” or “RMM”). All significant inter-entity balances and
transactions have been eliminated in consolidation. Subsidiaries are entities the Company controls when it is exposed, or has rights,
to variable returns from its involvement in the entity and can affect those returns through its power to direct the relevant activities
of the entity. Subsidiaries are included in the consolidated financial results of the Company from the date of acquisition up to the date
of disposition or loss of control.
Going Concern and Management’s Plans
As at June 30, 2024,
the Company has a working capital deficiency of approximately $30,000,000. The ability of the Company to meet its obligations and continue
operations is dependent on its ability to obtain additional debt or equity financing. These circumstances raise substantial doubt about
the Company’s ability to continue as a going concern.
Cash,
Cash Equivalents and Concentration
The Company
considers all highly liquid investments with a maturity of three months or less when acquired to be cash equivalents. The Company places
its cash with high credit quality financial institutions in the United States and Canada. On June 30, 2024, the Company’s cash balance
was approximately $600,000. To reduce its risk associated with the failure of such financial institution, the Company will evaluate, as
needed, the rating of the financial institution in which it holds deposits.
Critical Judgements and Estimation Uncertainties
The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of assets, liabilities, and expenses. These estimates and judgements are
subject to change based on experience and new information which could result in outcomes that require a material adjustment to the carrying
amounts of assets or liabilities affecting future periods. Actual results may differ from these estimates. The estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized prospectively.
Impairment of mineral properties –
Management applies significant judgment in its assessment of mineral properties and whether there are any indications of impairment. The
Company considers both internal and external sources of information when making the impairment assessment. External sources of information
considered are changes in the Company’s economic, legal and regulatory environment, which it does not control, but affects the recoverability
of its mining assets. Internal sources of information the Company considers include the manner in which mining properties are expected
to be used and indications of economic performance.
Share-based compensation – The
fair value of share-based compensation is calculated using the Black-Scholes model. The main assumptions used in the model include the
estimated life of the option, the expected volatility of the Company’s share price, and the risk-free rate of interest. The resulting
value calculated is not necessarily the value that the holder of the option could receive in an arm’s-length transaction.
Warrant liability – The fair
value of the warrant liability is calculated using the Black-Scholes model. The main assumptions used in the model include the estimated
life of the warrant, the expected volatility of the Company’s share price, and the risk-free rate of interest. The resulting value
calculated is not necessarily the value that the holder of the warrant could receive in an arm’s-length transaction.
Asset retirement obligation – Significant
judgment is involved in the determination of future reclamation costs, inflation rates, discount rate, and the life of mine. Revisions
to these inputs may result in an adjustment to the carrying value of the obligation and the mineral properties involved.
Foreign
Currency Translation
The Company
is exposed to currency risk on transactions and balances in currencies other than the functional currency. The Company has not entered
any contracts to manage foreign exchange risk.
These consolidated
financial statements are presented in U.S. dollars (“USD”), which is the Company’s reporting currency. The functional
currency of the Company and its subsidiaries is the US dollar; therefore, the Company is exposed to currency risk from financial assets
and liabilities denominated in Canadian dollars. The Company does not consider the currency risk to be material to the future operations
of the Company and, as such, does not have a program to manage currency risk.
Transactions
in foreign currencies are recorded in the functional currency at exchange rates prevailing on the dates of the transactions. At the end
of each reporting period, monetary assets and liabilities denominated in foreign currencies are translated at the period end exchange
rates. Non-monetary items are translated at the exchange rates in effect on the date of the transactions. Foreign exchange gains and losses
arising on translation are presented in the consolidated statements of loss and comprehensive loss.
Property and Equipment
Property and equipment is stated at cost less
accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the estimated
useful lives of the assets, which range from 5 to 15 years. Additions, renewals, and betterments that significantly extend the life of
the asset are capitalized. Expenditures for repairs and maintenance are charged to expense as incurred. For assets sold or otherwise disposed
of, the cost and related accumulated depreciation and amortization are removed from the accounts, and any related gain or loss is reflected
in income for the period.
Leases
The Company has adopted Financial Accounting Standards
Board (FASB) ASU 2016-02, Leases (Topic 842), for reporting leases. Leases of 12 months or less will be accounted for similar to existing
guidance for operating leases. For leases with a lease term greater than one year, the Company recognizes a lease asset for its right
to use the underlying leased asset and a lease liability for the corresponding lease obligation.
Mineral Property
Acquisition and Exploration Costs
Mineral property exploration
costs are expensed as incurred until economic reserves are quantified. To date, the Company has not established any proven or probable
reserves on its mineral properties. Costs of lease, exploration, carrying and retaining unproven mineral lease properties are expensed
as incurred. The Company has chosen to expense all mineral exploration costs as incurred given that it is still in the exploration stage.
Once the Company has identified 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 over the estimated life of the probable-proven reserves. When the
Company has capitalized mineral properties, these properties will be periodically assessed for impairment of value and any diminution
in value. To date, the Company has not established the commercial feasibility of any exploration prospects; therefore, all exploration
costs are being expensed. Costs of property and equipment acquisitions are being capitalized.
The Company is required
to reclaim the property at the Bullfrog Project and Reward Project at the end of their useful lives. In accordance with FASB ASC 410-20,
Asset Retirement and Environmental Obligations, the Company recognized the fair value of a liability for an ARO in the amount of $1,681,947
at the Bullfrog Project and $752,174 at the Reward Project. During the period ended June 30, 2024, the Company incurred certain costs
related to the ARO estimate that had an effect on the accretion and estimated costs.
Although the ultimate
amounts for future site reclamation and remediation are uncertain, the best estimate of these obligations was based on information available,
including current legislation, third-party estimates, and management estimates. The amounts and timing of the mine closure obligations
will vary depending on several factors including future operations and the ultimate life of the mine, future economic conditions, and
changes in applicable environmental regulations.
Period end | | 6/30/2024 | | | 12/31/2023 | |
Balance, beginning of period | | $ | 3,081,797 | | | $ | 2,814,435 | |
Accretion | | | 101,180 | | | | 111,548 | |
Costs applied to ARO balance | | | (43,887 | ) | | | (59,285 | ) |
Change in estimates | | | (704,969 | ) | | | 215,099 | |
Balance, end of period (current) | | $ | 67,000 | | | $ | 110,700 | |
Balance, end of period (long term) | | $ | 2,367,121 | | | $ | 2,971,097 | |
| | | | | | | | |
Life of mine - Bullfrog Project | | | 2031 | | | | 2031 | |
Life of mine - Reward Project | | | 2029 | | | | 2029 | |
Discount rate | | | 11.5 | % | | | 3.9 | % |
Inflation rate (average) | | | 2.2 | % | | | 2.2 | % |
At June 30, 2024, the estimated future cash
flows have been determined using real cash flows and discounted using a rate of 11.5% and a total undiscounted amount for the estimated
future cash flows is $2,153,984 at the Bullfrog Project and $1,296,261 at the Reward Project. The Bullfrog and CR Reward projects
have surety bonding in place with the Bureau of Land Management for $2,282,270 and $1,161,725 respectively.
At June 30, 2023, the estimated future cash flows
have been determined using real cash flows and discounted using a rate of 4.0% and a total undiscounted amount for the estimated
future cash flows is $1,875,056 at the Bullfrog Project and $1,313,204 at the Reward Project.
Fair Value of Financial Instruments
Fair value is defined as the exchange price that
would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset
or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may
be used to measure fair value:
Level 1 - Valuation based on quoted market prices
in active markets for identical assets and liabilities.
Level 2 - Valuation based on quoted market prices
for similar assets and liabilities in active markets.
Level 3 - Valuation based on unobservable inputs
that are supported by little or no market activity, therefore requiring management’s best estimate of what market participants would
use as fair value.
The fair value of cash, deposits, accounts payable,
and notes payable approximates their carrying values due to their short term to maturity. The warrant liabilities are measured using level
3 inputs (Note 4).
Income Taxes
Income taxes are accounted for under the asset
and liability method in accordance with ASC 740, “Income Taxes”. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial carrying amounts of existing assets and liabilities and their
respective tax bases as well as operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the periods in which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment
date. Deferred tax assets are reduced by a valuation allowance to the extent that the recoverability of the asset is unlikely to be recognized.
The Company reports a liability, if any, for unrecognized
tax benefits resulting from uncertain tax positions taken, or expected to be taken, in an income tax return. The Company has elected to
classify interest and penalties related to unrecognized income tax benefits, if and when required, as part of income tax expense in the
statement of operations. No liability has been recorded for uncertain income tax positions, or related interest or penalties as of December
31, 2023 and December 31, 2022. The periods ended December 31, 2022, 2021, 2020 and 2019 are open to examination by taxing authorities.
Long Lived Assets
The Company assesses the impairment of long-lived
assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. When the Company determines
that the carrying value of long-lived assets may not be recoverable based upon the existence of one or more indicators of impairment and
the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge.
The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to
be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether
an indicator of impairment exists and in projecting cash flows.
Preferred Stock
The Company accounts for its preferred stock under
the provisions of the ASC on Distinguishing Liabilities from Equity, which sets forth the standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and equity. This standard requires an issuer to classify a financial
instrument that is within the scope of the standard 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. The Company has determined that its preferred stock does
not meet the criteria requiring liability classification as its obligation to redeem these instruments is not based on an event certain
to occur. Future changes in the certainty of the Company’s obligation to redeem these instruments could result in a change in classification.
Stock-Based Compensation
Stock-based compensation is accounted for based
on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated 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). This ASC 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.
The estimated fair value of each stock option
as of the date of grant was calculated using the Black-Scholes pricing model. The Company estimates the volatility of its common stock
at the date of grant based on Company stock price history. The Company determines the expected life based on the simplified method given
that its own historical share option exercise experience does not provide a reasonable basis for estimating expected term. The Company
uses the risk-free interest rate on the implied yield currently available on U.S. Treasury issues with an equivalent remaining term approximately
equal to the expected life of the award. The Company has never paid any cash dividends on its common stock and does not anticipate paying
any cash dividends in the foreseeable future. The shares of common stock subject to the stock-based compensation plan shall consist of
unissued shares, treasury shares or previously issued shares held by any subsidiary of the Company, and such number of shares of common
stock are reserved for such purpose.
Derivative Financial Instruments
The Company accounts for derivative instruments
in accordance with Financial Accounting Standards Board (“FASB”) ASC 815, Derivatives and Hedging (“ASC 815”),
which requires additional disclosures about the Company’s objectives and strategies for using derivative instruments, how the derivative
instruments and related hedged items are accounted for, and how the derivative instruments and related hedging items affect the financial
statements. The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risk. Terms of
convertible debt and equity instruments are reviewed to determine whether or not they contain embedded derivative instruments that are
required under ASC 815 to be accounted for separately from the host contract and recorded on the balance sheet at fair value. The fair
value of derivative liabilities, if any, is required to be revalued at each reporting date, with corresponding changes in fair value recorded
in current period operating results. Pursuant to ASC 815, an evaluation of specifically identified conditions is made to determine whether
the fair value of warrants issued is required to be classified as equity or as a derivative liability.
Certain warrants are treated as derivative financial
liabilities. The estimated fair value, based on the Black-Scholes model, is adjusted on a quarterly basis with gains or losses recognized
in the statement of loss and comprehensive loss. The Black-Scholes model is based on significant assumptions such as volatility, dividend
yield, expected term and liquidity discounts.
Earnings (Loss) per Common Share
The following
table shows basic and diluted earnings per share:
| |
Three Months Ended | | |
Six Months Ended | |
| |
6/30/2024 | | |
6/30/2023 | | |
6/30/2024 | | |
6/30/2023 | |
Basic and diluted earnings (loss) per common share | |
| | |
| | |
| | |
| |
Earnings (loss) | |
$ | (538,937 | ) | |
$ | 2,876,946 | | |
$ | (3,116,180 | ) | |
$ | 8,322,904 | |
Basic weighted average shares outstanding | |
| 85,929,753 | | |
| 85,929,753 | | |
| 85,929,753 | | |
| 85,186,643 | |
Assumed conversion of dilutive shares | |
| 0 | | |
| 58,334 | | |
| 0 | | |
| 58,334 | |
Diluted weighted average common shares outstanding, assuming conversion of common stock equivalents | |
| 85,929,753 | | |
| 85,988,087 | | |
| 85,929,753 | | |
| 85,244,977 | |
Basic earnings (loss) per common share | |
$ | (0.01 | ) | |
$ | 0.03 | | |
$ | (0.04 | ) | |
$ | 0.10 | |
Diluted earnings (loss) per common share | |
$ | (0.01 | ) | |
$ | 0.03 | | |
$ | (0.04 | ) | |
$ | 0.10 | |
Certain options and warrants and all preferred
shares were included in the computation of diluted shares outstanding for the three and six months ended June 30, 2023. The options and
warrants that were not included in the diluted weighted average shares calculation were excluded because they were “out-of-the money”.
In periods when the Company has a net loss, all common stock equivalents are excluded as they would be anti-dilutive. All options and
warrants were excluded in the diluted weighted average shares calculation because of the net loss for the three and six months ended June
30, 2024.
The following details the dilutive and anti-dilutive
shares as of June 30, 2023:
| |
Dilutive shares - In the money | | |
Anti-dilutive shares - Out of the money | | |
Total | |
Options | |
| 58,334 | | |
| 4,991,668 | | |
| 5,050,002 | |
Warrants | |
| 0 | | |
| 34,701,615 | | |
| 34,701,615 | |
Total | |
| 58,334 | | |
| 39,693,283 | | |
| 39,751,617 | |
Risks and Uncertainties
Since the formation of the Company, it has not
generated any revenue. As an early-stage company, the Company is subject to all the risks inherent in the initial organization, financing,
expenditures, complications and delays inherent in a new business. Our business is dependent upon the implementation of our business plan.
There can be no assurance that our efforts will be successful or that we will ultimately be able to generate revenue or attain profitability.
Natural resource exploration, and exploring for
gold, is a business that by its nature is very speculative. There is a strong possibility that we will not discover gold or any other
mineralization which can be mined or extracted at a profit. Even if we do discover gold or other deposits, the deposit may not be of the
quality or size necessary for us or a potential purchaser of the property to make a profit from mining it. Few properties that are explored
are ultimately developed into producing mines. Unusual or unexpected geological formations, geological formation pressures, fires, power
outages, labor disruptions, flooding, explosions, cave-ins, landslides and the inability to obtain suitable or adequate machinery, equipment
or labor are just some of the many risks involved in mineral exploration programs and the subsequent development of gold deposits.
The Company business is exploring for gold and
other minerals. If the Company discovers commercially exploitable gold or other deposits, revenue from such discoveries will not be generated
unless the gold or other minerals are actually mined.
Mining operations in the United States are subject
to many different federal, state, and local laws and regulations, including stringent environmental, health and safety laws. In the event
operational responsibility is assumed for mining our properties, the Company may be unable to comply with current or future laws and regulations,
which can change at any time. Changes to these laws may adversely affect any of the Company potential mining operations. Moreover, compliance
with such laws may cause substantial delays and require capital outlays greater than those the Company anticipates, adversely affecting
any potential mining operations. Future mining operations, if any, may also be subject to liability for pollution or other environmental
damage. The Company may choose not to be insured against this risk because of high insurance costs or other reasons.
The Company’s exploration and development
activities may be affected by existing or threatened medical pandemics, such as the novel coronavirus (COVID-19). A government may impose
strict emergency measures in response to the threat or existence of an infectious disease, such as the emergency measures imposed by governments
of many countries and states in response to the COVID-19 virus pandemic. As such, there are potentially significant economic and social
impacts of infectious diseases, including but not limited to the inability of the Company to develop and operate as intended, shortage
of skilled employees or labor unrest, inability to access sufficient healthcare, significant social upheavals or unrest, disruption to
operations, supply chain shortages or delays, travel and trade restrictions, government or regulatory actions or inactions (including
but not limited to, changes in taxation or policies, or delays in permitting or approvals, or mandated shut downs), declines in the price
of precious metals, capital markets volatility, availability of credit, loss of investor confidence and impact on economic activity in
affected countries or regions. In addition, such pandemics or diseases represent a serious threat to maintaining a skilled workforce in
the mining industry and could be a major health-care challenge for the Company. There can be no assurance that the Company or the Company’s
personnel will not be impacted by these pandemic diseases and the Company may ultimately see its workforce productivity reduced or incur
increased medical costs/insurance premiums as a result of these health risks. COVID-19 is rapidly evolving and the effects on the mining
industry and the Company are uncertain. The Company may not be able to accurately predict the impact of infectious disease, including
COVID-19, or the quantum of such risks. There can be no assurance that the Company will not be impacted by adverse consequences that may
be brought about by pandemics on global financial markets, which may reduce resources, share prices and financial liquidity and may severely
limit the financing capital available to the Company.
Recent Accounting Pronouncements
The Company is not aware of any recent accounting
pronouncements expected to have a material impact on the consolidated financial statements.
NOTE 2 - MINERAL PROPERTIES AND EQUIPMENT
| |
Mineral properties | | |
Equipment | | |
Land improvements | | |
Total | |
Cost | |
| | |
| | |
| | |
| |
As of December 31, 2022 | |
$ | 58,962,286 | | |
$ | 161,326 | | |
$ | 1,015,869 | | |
$ | 60,139,481 | |
Additions | |
| 30,000 | | |
| 0 | | |
| 0 | | |
| 30,000 | |
As of December 31, 2023 | |
| 58,992,286 | | |
| 161,326 | | |
| 1,015,869 | | |
| 60,169,481 | |
Change in ARO estimate | |
| (704,969 | ) | |
| 0 | | |
| 0 | | |
| (704,969 | ) |
Additions | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
As of June 30, 2024 | |
$ | 58,287,317 | | |
$ | 161,326 | | |
$ | 1,015,869 | | |
$ | 59,464,512 | |
| |
| | | |
| | | |
| | | |
| | |
Accumulated depreciation | |
| | | |
| | | |
| | | |
| | |
As of December 31, 2022 | |
$ | 0 | | |
$ | 65,162 | | |
$ | 23,584 | | |
$ | 88,746 | |
Depreciation expense | |
| 0 | | |
| 32,265 | | |
| 11,792 | | |
| 44,057 | |
As of December 31, 2023 | |
| 0 | | |
| 97,427 | | |
| 35,376 | | |
| 132,803 | |
Depreciation expense | |
| 0 | | |
| 16,133 | | |
| 5,896 | | |
| 22,029 | |
As of June 30, 2024 | |
$ | 0 | | |
$ | 113,560 | | |
$ | 41,272 | | |
$ | 154,832 | |
| |
| | | |
| | | |
| | | |
| | |
Net book value on June 30, 2024 | |
$ | 58,287,317 | | |
$ | 47,766 | | |
$ | 974,597 | | |
$ | 59,309,680 | |
Mineral properties consist of two main projects:
Bullfrog Gold Project, Nevada
On October 26, 2020, the Company completed its
acquisition of Bullfrog Mines pursuant to the Membership Interest Purchase Agreement (the “MIPA”) among the Company, Homestake
Mining Company of California (“Homestake”), and Lac Minerals (USA) LLC (“Lac Minerals” and together with Homestake,
the “Barrick Parties”).
The project is subject to a 2% net smelter
returns royalty (the “Barrick Royalty”) granted on all minerals produced from all of the patented and unpatented claims (subject
to the adjustments set out below), pursuant to a royalty deed, dated October 26, 2020 by and among Bullfrog Mines and the Barrick Parties
(the “Royalty Deed”).
Pursuant to the Royalty Deed, the Barrick Royalty
is reduced to the extent necessary so that royalties burdening any individual parcel or claim included in the Barrick Properties on October
26, 2020, inclusive of the Barrick Royalty, would not exceed 5.5% in the aggregate, provided that the Barrick Royalty in respect
of any parcel or claim would not be less than 0.5%, even if the royalties burdening a parcel or claim included in the Barrick Properties
would exceed 5.5%.
Reward Gold Project, Nevada
On June 13, 2022, the Company completed the acquisition
of the outstanding membership interests (collectively, the “CR Interests”) of CR Reward LLC, a wholly owned subsidiary of
Waterton (“CR Reward”), pursuant to a membership interest purchase agreement with Waterton Nevada Splitter, LLC (“Waterton”).
CR Reward holds the Reward Project located seven miles from the Company’s Bullfrog Project in Nevada.
See Note 6 Commitments for discussion of other
option agreements underlying mineral claims.
NOTE 3 - STOCKHOLDER’S EQUITY
Recent Sales of Unregistered Securities
The Company did not issue common shares for the six months ended June
30, 2024.
Convertible Preferred Stock
In August 2011, the Board of Directors designated 5,000,000 shares
of Preferred Stock as Series A Preferred Stock. Each share of Series A Preferred Stock is convertible into one share of common stock at
the option of the preferred holder. The Series A Preferred Stock is not entitled to receive dividends and does not possess redemption
rights. The Company is prohibited from effecting the conversion of the Series A Preferred Stock to the extent that, as a result of the
conversion, the holder of such shares would beneficially own more than 4.99% (or, if this limitation is waived by the holder upon
no less than 61 days prior notice to us, 9.99%) in the aggregate of the issued and outstanding shares of our common stock. The holders
of the Company’s Series A Preferred Stock are also entitled to certain liquidation preferences upon the liquidation, dissolution
or winding up of the business of the Company.
In October 2012, the Board of Directors designated 5,000,000 shares
of Preferred Stock as Series B Preferred Stock. In July 2016, the Board of Directors increased the total Series B Preferred Stock designated
to 45,000,000. Each share of Series B Preferred Stock is convertible into one share of common stock at the option of the preferred holder.
The Series B Preferred Stock is not entitled to receive dividends and does not possess redemption rights. The Company is prohibited from
effecting the conversion of the Series B Preferred Stock to the extent that, as a result of the conversion, the holder of such shares
would beneficially own more than 4.99% (which may be increased or waived upon no less than 61 days prior notice) in the aggregate
of the issued and outstanding shares of our common stock. For a period of 24 months from the issue date, the holder of Series B Preferred
Stock were entitled to price protection as determined in the subscription agreement.
As of June 30, 2024 and 2023, there were no Preferred
Stock shares outstanding.
Common Stock Options
On
February 22, 2021, the Company’s Board of Directors approved a new stock option plan (the “Plan”). The aggregate
number of shares of common stock of the Company (a “Share”) that may be reserved for issuance pursuant to the Plan shall not
exceed 10% of the number of Shares issued and outstanding from time to time. Options granted vest in accordance with terms at the
discretion of the Board.
On April 16, 2024, the
Company granted 2,800,000 options to certain directors, officers and employees. No options were granted for the twelve months ended December
31, 2023.
The Company
recognized share-based compensation expense related to stock options of $416,482 and $718,123 for the six months ended June
30, 2024 and 2023, respectively. The options are vested based on years of service, with options vesting between one and three years.
Stock
Option Activity
A summary
of the stock options as of June 30, 2024, and changes during the periods are presented below:
| | | | | | | | Weighted | | | | |
| | | | | | | | Average | | | | |
| | | | | Weighted | | | Remaining | | | | |
| | | | | Average | | | Contractual | | | Aggregate | |
| | Number of | | | Exercise | | | Life | | | Intrinsic | |
| | Options | | | Price | | | (Years) | | | Value | |
Balance at December 31, 2022 | | | 5,200,002 | | | $ | 1.56 | | | | 3.45 | | | $ | 57,468 | |
Exercised | | | 0 | | | | 0.00 | | | | 0 | | | | 0 | |
Issued | | | 0 | | | | 0.00 | | | | 0 | | | | 0 | |
Canceled | | | (190,000 | ) | | C$ | 2.02 | | | | 0 | | | | 0 | |
Balance at December 31, 2023 | | | 5,010,002 | | | $ | 1.48 | | | | 2.43 | | | | 0 | |
Exercised | | | 0 | | | | 0.00 | | | | 0 | | | | 0 | |
Issued | | | 2,800,000 | | | C$ | 1.11 | | | | 4.80 | | | | 0 | |
Canceled | | | (765,000 | ) | | C$ | 2.02 | | | | 0 | | | | 0 | |
Balance at June 30, 2024 | | | 7,045,002 | | | $ | 1.18 | | | | 3.04 | | | $ | 1,750 | |
Options exercisable at June 30, 2024 | | | 4,378,336 | | | $ | 1.88 | | | | 2.07 | | | $ | 1,750 | |
Warrant Activity
Total outstanding warrants of
30,887,574 as of June 30, 2024, were as follows:
| | Warrants Issued | | | Total | |
Warrants issued (includes expired warrants) | | | 27,433,335 | | | | 3,777,784 | | | | 3,362,573 | | | | 336,257 | | | | 300,000 | | | | 35,209,949 | |
Issued date | | | 10/26/2020 | | | | 3/4/2021 | | | | 1/20/2023 | | | | 1/20/2023 | | | | 2/26/2024 | | | | | |
Expiration date | | | 10/26/2024 | | | | 3/4/2024 | | | | 1/20/2026 | | | | 1/20/2024 | | | | 2/26/2029 | | | | | |
Exercise price (Canadian $) | | $ | 1.80 | | | $ | 2.80 | | | $ | 2.30 | | | $ | 1.71 | | | $ | 0.62 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2022 | | | 27,225,001 | | | | 3,777,784 | | | | 0 | | | | 0 | | | | 0 | | | | 31,002,785 | |
Exercised | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | |
Issued | | | 0 | | | | 0 | | | | 3,362,573 | | | | 336,257 | | | | 0 | | | | 3,698,830 | |
Expired | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | |
Balance at December 31, 2023 | | | 27,225,001 | | | | 3,777,784 | | | | 3,362,573 | | | | 336,257 | | | | 0 | | | | 34,701,615 | |
Exercised | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | |
Issued | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 300,000 | | | | 300,000 | |
Expired | | | 0 | | | | (3,777,784 | ) | | | 0 | | | | (336,257 | ) | | | 0 | | | | (4,114,041 | ) |
Balance at June 30, 2024 | | | 27,225,001 | | | | 0 | | | | 3,362,573 | | | | 0 | | | | 300,000 | | | | 30,887,574 | |
NOTE 4 - DERIVATIVE FINANCIAL INSTRUMENTS
Warrants have an exercise price in Canadian dollars
while the Company’s functional currency is US dollars. Therefore, in accordance with ASU 815 - Derivatives and Hedging, the Warrants
have a derivative liability value.
The value of the October 2020 Warrants of $11,439,156 has been calculated on the date of issuance of October 26, 2020, using Black-Scholes
valuation technique. The warrant liability was valued at $14,342 and $691,782 for the six months ended June 30, 2024 and the year ending
December 31, 2023, respectively with the following assumptions:
| | 10/26/20 | | | 12/31/23 | | | 6/30/24 | |
Fair market value of common stock | | $ | 1.26 | | | $ | 0.63 | | | $ | 0.69 | |
Exercise price | | $ | 1.38 | | | $ | 1.36 | | | $ | 1.32 | |
Term | | | 4 years | | | | 0.8 years | | | | 0.3 years | |
Volatility range | | | 68.4 | % | | | 72.7 | % | | | 47.5 | % |
Risk-free rate | | | 0.2 | % | | | 4.8 | % | | | 5.5 | % |
The value of the March 2021 Warrants of $3,306,758 has
been calculated on the date of issuance of March 4, 2021, using Black-Scholes valuation technique. The warrant liability was expired as
of June 30, 2024 and was valued at $1,167 for the year ending December 31, 2023 with the following assumptions:
| | 3/4/21 | | | 12/31/23 | | | 6/30/24 | |
Fair market value of common stock | | $ | 1.97 | | | $ | 0.63 | | | $ | 0.00 | |
Exercise price | | $ | 2.21 | | | $ | 2.12 | | | $ | 0.00 | |
Term | | | 3 years | | | | 0.2 years | | | | 0.00 | |
Volatility range | | | 72.7 | % | | | 101.2 | % | | | 0.0 | % |
Risk-free rate | | | 0.3 | % | | | 5.4 | % | | | 0.0 | % |
The value of the January 2023 Warrants of $1,762,488 has
been calculated on the date of issuance of January 20, 2023, using Black-Scholes valuation technique. The warrant liability was valued
at $274,373 and $417,758 for the six months ended June 30, 2024 and the year ending December 31, 2023, respectively with the following
assumptions:
| | 1/20/23 | | | 12/31/23 | | | 6/30/24 | |
Fair market value of common stock | | $ | 1.13 | | | $ | 0.63 | | | $ | 0.69 | |
Exercise price | | $ | 1.71 | | | $ | 1.74 | | | $ | 1.68 | |
Term | | | 3 years | | | | 2 years | | | | 1.6 years | |
Volatility range | | | 84.1 | % | | | 80.1 | % | | | 70.7 | % |
Risk-free rate | | | 3.8 | % | | | 4.2 | % | | | 4.7 | % |
NOTE 5 - RELATED PARTY
Augusta Investments
Inc.
| ● | On September 13, 2022, the Company entered into
a secured note purchase agreement (the “Purchase Agreement”) with Augusta Investments Inc. (“Augusta Investments”),
which shares a common director of Augusta Gold, to offer and sell a secured promissory note of the Company (the “Note”) in
exchange for Augusta Investments loaning the Company $22,232,561 (the “Loan”). The Loan and the issuance of the Note
occurred on September 13, 2022. The Company used the Loan to make the second payment and deferred payment to Waterton Nevada Splitter
LLC (“Waterton”) on September 13, 2022, in connection with the Company’s acquisition of its Reward gold project that
closed on June 13, 2022. |
The Note bears
interest at a rate of prime plus 3% and is for a maximum term of 12 months. The Note is secured by a first-priority, perfected security
interest in all the assets of the Company pursuant to a guarantee and security agreement (the “Security Agreement”) and certain
deeds of trust (the “Deeds of Trust”, collectively with the Purchase Agreement, the Note and the Security Agreement, the “Loan
Documents”).
The payment
of the obligations of the Company under the Note is also guaranteed by each of the subsidiaries of the Company pursuant to the Security
Agreement. The Company paid Augusta Investments an origination fee of 0.5% of the amount of the Loan on the closing of the issuance
of the Note pursuant to the Purchase Agreement.
| ● | On September 13, 2023, the Company and Augusta
Investments entered into Amendment Number One (the “Amendment”) to the Note. The Amendment amends Section 1 of the Note to
change the maturity date of the Note from September 13, 2023 to the earlier of (i) first Business Day occurring 30 days after the Lender
has provided written notice to the Company demanding payment on the entire unpaid balance of principal and all accrued and unpaid interest
thereon; (ii) the date upon which the Company makes payment in full of the entire unpaid balance of principal and all accrued and unpaid
interest; and (iii) December 13, 2023. |
| ● | On December 13, 2023, the Company and Augusta
Investments entered into Amendment Number Two (the “Amendment 2”) to the Note. Amendment 2 amends Section 1 of the Note to
change the maturity date of the Note from December 13, 2023, to March 31, 2024. In consideration for the Lender granting an extension
to the maturity date, the Company has agreed to pay to the Lender an extension fee of $33,501, which is accrued and due on the maturity
date. |
| ● | On March 27, 2024, the Company entered into Amendment
Number One (the “Purchase Agreement Amendment”) to its previously issued Purchase Agreement with Augusta Investments, pursuant
to which Augusta Investments agreed to purchase the Note in the amount of US$22,232,561. |
In connection
with entering into the Purchase Agreement Amendment, Augusta Investments loaned the Company an additional $525,000, less a $25,000 loan
origination fee, and the Company issued an amended and restated Note to Augusta Investments dated March 27, 2024 (the “Amended and
Restated Note”). The Amended and Restated Note amends the Note to provide that the principal amount due and payable thereunder will
be set forth on Schedule A thereto, as amended from time to time, by the mutual agreement of the parties. As issued on March 27, 2024,
the Amended and Restated Note is for a principal amount of $22,818,853, which includes (i) the original issue amount of the Note on September
13, 2022 of $22,126,000 (along with $106,561 of debt issuance costs), (ii) an extension fee of $33,501 on December 13, 2023, (iii) the
$500,000 loan (along with an additional $25,000 of debt issuance costs) on March 27, 2024 and (iv) the extension fee of $27,791 on March
27, 2024. The Amended and Restated Note bears interest at a rate of prime plus 3% and has an outside maturity date of June
30, 2024.
| ● | On April 26, 2024, the Company executed an amended
Schedule A (the “Amended Schedule A”) to its amended and restated secured promissory note issued to Augusta Investments Inc.
(the “Purchaser”) on September 13, 2022, as amended and restated on March 27, 2024 (the “Amended and Restated Note”).
In connection with entering into the Amended Schedule A, the Purchaser loaned the Company an additional $1,500,000 pursuant to the terms
and conditions of the Amended and Restated Note (the “Additional Loan”). As amended by the Amended Schedule A, the Amended
and Restated Note is for a principal amount of $24,318,853. |
| ● | On June 28, 2024, the Company entered into Amendment
Number One (the “June 2024 Amendment”) to its amended and restated secured promissory note issued to Augusta Investments Inc.
(the “Lender”) on September 13, 2022, as amended and restated on March 27, 2024 (the “Amended and Restated Note”). |
The June 2024
Amendment amends Section 1 of the Note to change the outside maturity date of the Amended and Restated Note from June 30, 2024, to September
30, 2024. In consideration for the Lender granting an extension to the maturity date, the Company has agreed to pay to the Lender an extension
fee of $30,399, which amount will be accrued and due on the maturity date.
In connection
with the June 2024 Amendment, the Company and the Lender executed an amended Schedule A (the “Amended Schedule A”) to the
Amended and Restated Note to add the amount of the Extension Fee to the principal amount of the Amended and Restated Note. As amended
by the Amended Schedule A, the Amended and Restated Note is for a principal amount of $24,349,251.
On February 26, 2024, the Company entered into
an unsecured note purchase agreement with Donald Taylor (the “Lender”) to offer and sell an unsecured promissory note of the
Company in exchange for the Lender loaning the Company $250,000 (along with an additional $12,500 of debt issuance fees). The note bears
interest at a rate of 14% and matures on December 31, 2024. In connection with the loan, the Company issued 300,000 warrants
(the “Warrants”) to the Lender. Each Warrant is exercisable for one share of the Company’s common stock for a period
of five years at an exercise price of C$0.62. The value of the February 2024 Warrants of $97,370 has been calculated on
the date of issuance of February 26, 2024, using Black-Scholes valuation technique.
Related Party - Augusta Investments | |
Note Payable | | |
Accrued
Interest | | |
Total | |
As of December 31, 2022 | |
$ | 22,232,561 | | |
$ | 610,761 | | |
$ | 22,843,322 | |
Additional debt issuance costs | |
| 33,501 | | |
| (33,501 | ) | |
| 0 | |
Interest expense | |
| 0 | | |
| 2,550,557 | | |
| 2,550,557 | |
As of December 31, 2023 | |
| 22,266,062 | | |
| 3,127,817 | | |
| 25,393,879 | |
Additional debt issued | |
| 2,000,000 | | |
| 0 | | |
| 2,000,000 | |
Additional debt issuance costs | |
| 83,189 | | |
| (83,189 | ) | |
| 0 | |
Interest expense | |
| 0 | | |
| 1,406,950 | | |
| 1,406,950 | |
As of June 30, 2024 | |
$ | 24,349,251 | | |
$ | 4,451,578 | | |
$ | 28,800,829 | |
Related Party - Don Taylor | |
Note Payable | | |
Accrued
Interest | | |
Total | |
As of December 31, 2023 | |
$ | 0 | | |
$ | 0 | | |
$ | 0 | |
Additional debt issued | |
| 250,000 | | |
| 0 | | |
| 250,000 | |
Additional debt issuance costs | |
| 12,500 | | |
| (12,500 | ) | |
| 0 | |
Interest expense | |
| 0 | | |
| 17,748 | | |
| 17,748 | |
As of June 30, 2024 | |
$ | 262,500 | | |
$ | 5,248 | | |
$ | 267,748 | |
Related Party - Total | |
Note Payable | | |
Accrued
Interest | | |
Total | |
As of December 31, 2022 | |
$ | 22,232,561 | | |
$ | 610,761 | | |
$ | 22,843,322 | |
Additional debt issuance costs | |
| 33,501 | | |
| (33,501 | ) | |
| 0 | |
Interest expense | |
| 0 | | |
| 2,550,557 | | |
| 2,550,557 | |
As of December 31, 2023 | |
| 22,266,062 | | |
| 3,127,817 | | |
| 25,393,879 | |
Additional debt issued | |
| 2,250,000 | | |
| 0 | | |
| 2,250,000 | |
Additional debt issuance costs | |
| 95,689 | | |
| (95,689 | ) | |
| 0 | |
Interest expense | |
| 0 | | |
| 1,424,698 | | |
| 1,424,698 | |
As of June 30, 2024 | |
$ | 24,611,751 | | |
$ | 4,456,826 | | |
$ | 29,068,577 | |
On October 26, 2020,
the Company entered into an arrangement to share office space, equipment, personnel, consultants and various administrative services with
other companies related by virtue of certain directors and management in common. These services have been provided through a management
company equally owned by each company party to the arrangement. Costs incurred by the management company are allocated and funded by the
shareholders of the management company based on time incurred and use of services. If the Company’s participation in the arrangement
is terminated, the Company will be obligated to pay its share of the rent payments for the remaining term of the office space rental agreement.
The Company was charged
for the following with respect to this arrangement for the six months ended June 30, 2024 and 2023:
| |
Six Months Ended | |
| |
| 6/30/2024 | | |
| 6/30/2023 | |
Salaries and benefits | |
$ | 106,365 | | |
$ | 228,542 | |
Office | |
| 44,193 | | |
| 52,182 | |
Operating expenses | |
| 38,989 | | |
| 51,523 | |
Total | |
$ | 189,547 | | |
$ | 332,247 | |
The Company was committed to payments for office
leases located in Toronto through 2024, however due to staffing changes, the Company no longer has a payment requirement for the office
space.
As of June 30, 2024, there were 7,045,002
options issued and outstanding to officers, directors and employees of the Company of which 6,850,002 were to related parties. There was
related party share-based compensation expense of $403,247 and $718,123 for the six months ending June 30, 2024 and 2023, respectively.
The Company entered a consulting arrangement with
Augusta Capital Corporation (“ACC”), a private company 100% beneficially held by the Company’s Executive Chairman.
ACC invoiced the Company C$183,752 and C$198,457 during the six months ended June 30, 2024 and 2023, respectively, for consulting
services.
The Chief Executive Officer had an amount due
from the Company of $645,823 and $520,825 related to accrued payroll costs as of June 30, 2024 and December 31, 2023, respectively.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
The Company has four mineral leases underlying
the Reward property, which require annual advance royalty payments according to the following schedules. These leases are out of the scope
of ASC 842 Leases, and any advance royalty paid is expensed off as exploration expenses. Once in production, each agreement attracts
payment of net smelter royalties as per the following table.
| |
Total | |
2024 | |
$ | 30,400 | |
2025 | |
$ | 10,400 | |
2026 | |
$ | 10,400 | |
2027 | |
$ | 10,900 | |
2028 | |
$ | 10,900 | |
2029 | |
$ | 10,900 | |
2030 | |
$ | 11,400 | |
2031 | |
$ | 9,000 | |
2032 | |
$ | 9,000 | |
2033 | |
$ | 9,500 | |
2034 | |
$ | 9,500 | |
2035 | |
$ | 9,500 | |
2036 | |
$ | 10,000 | |
2037 | |
$ | 10,000 | |
2038 | |
$ | 10,000 | |
Applicable NSRs | |
| 3 | % |
(1) |
All amounts of annual advance minimum royalties paid during a calendar year shall be applied toward all amounts of earned mineral production royalties payable during that calendar year. |
On July
1, 2017, RMM entered a 30-year Mineral Lease (the “Lunar Lease”) with Lunar Landing, LLC (“Lunar”) involving 24 patented
mining claims underlying part of the Bullfrog property. Lunar owns a 100% undivided interest in the mining claims. These leases
are out of the scope of ASC 842 Leases, and are expensed when paid.
Under the
Lunar Lease, RMM shall expend as minimum work commitments of $50,000 per year starting in 2017 until a cumulative of $500,000 of
expense has been incurred. If RMM fails to perform its obligations under the Lunar Lease, and in particular fails to make any payment
due to Lunar thereunder, Lunar may declare RMM in default by giving RMM written notice of default which specifies the obligation(s) which
RMM has failed to perform. If RMM fails to remedy a default in payment within fifteen (15) days of receiving the notice of default or
fails to remedy or commence to remedy any other default within thirty (30) days of receiving notice, Lunar may terminate the Lunar Lease
and RMM shall peaceably surrender possession of the properties to Lunar. Notice of default or of termination shall be in writing and served
in accordance with the Lunar Lease. RMM has made all required payments and has paid Lunar $153,000 as of June 30, 2024, and
makes lease payments on the following schedule:
Payment due July | |
Annual Payment | |
2024-2026 | |
$ | 21,000 | |
2027-2031 | |
$ | 25,000 | |
2032-2036 | |
$ | 30,000 | |
2037-2041 | |
$ | 40,000 | |
2042-2046 | |
$ | 45,000 | |
On October 29, 2014, RMM entered into an Option
Agreement (the “Mojave Option”) with Mojave Gold Mining Corporation (“Mojave”) granting RMM the right to purchase 100%
of 12 patented mining claims located in Nye County, Nevada. This property is contiguous to the Company’s Bullfrog Project
and covers approximately 156 acres, including the northeast half of the M-S pit mined by Barrick Gold in the 1990s.
Mojave granted to RMM the sole and immediate working
right and option with respect to the property until the 10th anniversary of the closing date, to earn a 100% interest in and to the
property free and clear of all charges encumbrances and claims, except a sliding scale net smelter return (or NSR) royalty.
In order to maintain in force, the working right
and option granted to RMM, and to exercise the Mojave Option, the Company issued Mojave 750,000 shares of Company common stock
and paid $16,000 to Mojave in October 2014. Subsequently, RMM paid to Mojave a total of $190,000 over the next 10 years,
with the last payment made to Mojave in October 2023. As of the date hereof, the Mojave Option has been exercised in full. This lease
is out of the scope of ASC 842 Leases, and any payment is capitalized to mineral property.
On December
9, 2020, Bullfrog Mines entered into a mining option agreement with Abitibi Royalties (USA) Inc. (“Abitibi”) granting
Bullfrog Mines the option (the “Abitibi Option”) to acquire forty-three unpatented lode mining claims to the south of the
Bullfrog deposit. The Abitibi Option was amended on December 9, 2022, to extend the exercise deadline and to increase the last payment
amount required to exercise the option. Bullfrog Mines made an initial payment to Abitibi of C$25,000 and exercised the Abitibi Option
in full on January 30, 2023, by:
| ● | Paying to Abitibi C$50,000 in cash before December 9, 2021; |
| ● | Paying to Abitibi C$78,750 in cash before January 30, 2023; and |
| ● | Granting to Abitibi a 2% net smelter royalty on the claims subject to the Abitibi Option on January 30, 2023, of which Bullfrog Mines has the option to purchase 0.5% for C$500,000 on or before December 9, 2030. |
The Company is from time to time involved in various
legal proceedings related to its business. Except as disclosed here in, management does not believe that adverse decisions in any pending
or threatened proceedings or that amounts that may be required to be paid by reason thereof will have a material adverse effect on the
Company’s financial condition or results of operations.
NOTE 7 - SEGMENTED INFORMATION
Segmented information has been compiled based
on the material mineral properties in which the Company performs exploration activities.
Expenses and mineral property carrying values
by material project for the six months ended June 30, 2024:
| |
Exploration,
evaluation
and project
expense | | |
Reclamation
bonds | | |
Mineral
properties | |
Bullfrog Gold Project | |
$ | 596,556 | | |
$ | 709,209 | | |
$ | 12,110,783 | |
Reward Project | |
| 635,902 | | |
| 406,604 | | |
| 46,176,534 | |
| |
$ | 1,232,458 | | |
$ | 1,115,813 | | |
$ | 58,287,317 | |
Expenses and mineral property carrying values
by material project for the year ended December 31, 2023:
| |
Exploration,
evaluation
and project
expense | | |
Reclamation
bonds | | |
Mineral
properties | |
Bullfrog Gold Project | |
$ | 1,677,838 | | |
$ | 709,209 | | |
$ | 12,464,306 | |
Reward Project | |
| 1,008,818 | | |
| 406,604 | | |
| 46,527,980 | |
| |
$ | 2,686,656 | | |
$ | 1,115,813 | | |
$ | 58,992,286 | |
NOTE 8 - SUBSEQUENT EVENTS
None.
ITEM 2 - MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements in this Management’s
Discussion and Analysis (“MD&A”), other than purely historical information, including estimates, projections, statements
relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based,
are “forward-looking statements”. Forward-looking statements generally can be identified by the use of forward-looking terminology
such as “may,” “would,” “expect,” “intend,” “could,” “estimate,”
“should,” “anticipate,” or “believe,” and similar expressions. Forward-looking statements are based
on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially
from the forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as
a result of new information, future events, or otherwise, except as may be required under applicable law. Readers should carefully review
the risk factors and related notes included under Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023, filed
with the Securities and Exchange Commission on March 29, 2024.
The following MD&A is intended to help
readers understand the results of our operation and financial condition, and is provided as a supplement to, and should be read in conjunction
with, our Interim Unaudited Financial Statements and the accompanying Notes to Interim Unaudited Financial Statements under Part 1, Item
1 of this Quarterly Report on Form 10-Q.
Unless otherwise indicated or unless the context
otherwise requires, all references in this document to “we,” “us,” “our,” the “Company,”
and similar expressions refer to Augusta Gold Corp., and depending on the context, its subsidiaries.
Company History and Recent Events
General Corporate Overview
The Company is an exploration stage gold company
focused on building a long-term business that delivers stakeholder value through developing the Company’s Bullfrog and Reward gold
projects and pursuing accretive merger and acquisition opportunities. We are focused on exploration and advancement of gold exploration
and potential development projects, which may lead to gold production or strategic transactions such as joint venture arrangements with
other mining companies or sales of assets for cash and/or other consideration. At present, our properties are in the exploration stage,
and we do not mine, produce or sell any mineral products and we do not currently generate cash flows from mining operations.
The Bullfrog Gold Project is located approximately
120 miles north-west of Las Vegas, Nevada and 4 miles west of Beatty, Nevada. The Reward Gold Project is located seven miles from the
Bullfrog Gold Project. The Company owns, controls or has acquired mineral rights on federal patented
and unpatented mining claims in the State of Nevada for the purpose of exploration and potential development of gold, silver, and other
metals. The Company plans to review opportunities and acquire additional mineral properties with current or historic precious and base
metal mineralization with meaningful exploration potential.
The Company is led by a management team and board
of directors with a proven track record of success in financing, exploring and developing mining assets and delivering shareholder value.
Recent Development of the Business
On June 13, 2022,
the Company closed (the “Closing”) on its previously announced membership interest purchase agreement (the “Agreement”)
with Waterton Nevada Splitter, LLC (“Waterton”) to acquire all of the outstanding membership interests (collectively, the
“CR Interests”) of CR Reward LLC, a wholly-owned subsidiary of Waterton (“CR Reward”). CR Reward holds the Reward
Project located just seven miles from the Company’s Bullfrog Project in Nevada.
The CR Interests were
acquired for the following consideration: (a) $12,500,000 in cash paid at closing; (b) the issuance of 7,800,000 shares of Augusta Gold
common stock at closing; and (c) $22,126,000 in cash paid on September 14, 2022 (comprising collectively the “Second Payment”
and the “Deferred Payment”).
Results of Operations
Three Months Ended June 30, 2024 and 2023
| |
Three Months Ended | |
| |
6/30/24 | | |
6/30/23 | |
Operating expenses | |
| | |
| |
General and administrative | |
$ | 434,266 | | |
$ | 1,196,164 | |
Lease expense | |
| 21,000 | | |
| 21,000 | |
Exploration, evaluation and project expense | |
| 836,200 | | |
| 626,426 | |
Accretion expense | |
| 71,286 | | |
| 24,915 | |
Depreciation expense | |
| 11,015 | | |
| 11,015 | |
Total operating expenses | |
| 1,373,767 | | |
| 1,879,520 | |
| |
| | | |
| | |
Net operating loss | |
| (1,373,767 | ) | |
| (1,879,520 | ) |
| |
| | | |
| | |
Revaluation of warrant liability | |
| 1,586,051 | | |
| 5,337,582 | |
Interest expense | |
| (751,222 | ) | |
| (631,079 | ) |
Foreign currency exchange gain (loss) | |
| 1 | | |
| 49,963 | |
Net income (loss) and comprehensive income (loss) | |
$ | (538,937 | ) | |
$ | 2,876,946 | |
Six Months Ended June 30, 2024 and 2023
| |
Six Months Ended | |
| |
6/30/24 | | |
6/30/23 | |
Operating expenses | |
| | |
| |
General and administrative | |
$ | 1,132,701 | | |
$ | 2,511,736 | |
Lease expense | |
| 21,000 | | |
| 21,000 | |
Exploration, evaluation and project expense | |
| 1,232,458 | | |
| 1,350,696 | |
Accretion expense | |
| 101,180 | | |
| 52,822 | |
Depreciation expense | |
| 22,029 | | |
| 22,029 | |
Total operating expenses | |
| 2,509,368 | | |
| 3,958,283 | |
| |
| | | |
| | |
Net operating loss | |
| (2,509,368 | ) | |
| (3,958,283 | ) |
| |
| | | |
| | |
Revaluation of warrant liability | |
| 821,992 | | |
| 13,560,969 | |
Interest expense | |
| (1,424,697 | ) | |
| (1,257,794 | ) |
Foreign currency exchange gain (loss) | |
| (4,107 | ) | |
| (21,988 | ) |
Net income (loss) and comprehensive income (loss) | |
$ | (3,116,180 | ) | |
$ | 8,322,904 | |
For the three months ended June 30, 2024, the
Company decreased general and administrative expenses by approximately $762,000. The change was due to the following year over year variances:
Three months ended | |
6/30/2024 | | |
6/30/2023 | | |
Variance | |
Accounting fees | |
$ | 32,000 | | |
$ | 354,000 | | |
$ | (322,000 | ) |
Legal and other professional fees | |
| 74,000 | | |
| 335,000 | | |
| (261,000 | ) |
Marketing expense | |
| 3,000 | | |
| 7,000 | | |
| (4,000 | ) |
Payroll | |
| 94,000 | | |
| 138,000 | | |
| (44,000 | ) |
Corporate expenses & rent | |
| 33,000 | | |
| 26,000 | | |
| 7,000 | |
Share based compensation | |
| 141,000 | | |
| 245,000 | | |
| (104,000 | ) |
Insurance | |
| 30,000 | | |
| 25,000 | | |
| 5,000 | |
Stock exchange fees | |
| 21,000 | | |
| 54,000 | | |
| (33,000 | ) |
Other general expenses | |
| 6,000 | | |
| 12,000 | | |
| (6,000 | ) |
Total | |
$ | 434,000 | | |
$ | 1,196,000 | | |
$ | (762,000 | ) |
For the six months ended June 30, 2024, the Company
decreased general and administrative expenses by approximately $1,379,000. The change was due to the following year over year variances:
Six months ending | |
6/30/2024 | | |
6/30/2023 | | |
Variance | |
Accounting fees | |
$ | 170,000 | | |
$ | 461,000 | | |
$ | (291,000 | ) |
Legal and other professional fees | |
| 106,000 | | |
| 702,000 | | |
| (596,000 | ) |
Marketing expense | |
| 6,000 | | |
| 15,000 | | |
| (9,000 | ) |
Payroll | |
| 231,000 | | |
| 354,000 | | |
| (123,000 | ) |
Corporate expenses & rent | |
| 83,000 | | |
| 104,000 | | |
| (21,000 | ) |
Share based compensation | |
| 416,000 | | |
| 718,000 | | |
| (302,000 | ) |
Insurance | |
| 52,000 | | |
| 63,000 | | |
| (11,000 | ) |
Stock exchange fees | |
| 57,000 | | |
| 75,000 | | |
| (18,000 | ) |
Other general expenses | |
| 12,000 | | |
| 20,000 | | |
| (8,000 | ) |
Total | |
$ | 1,133,000 | | |
$ | 2,512,000 | | |
$ | (1,379,000 | ) |
|
● |
Accounting fees decrease resulted from increase in audit fees offset by additional consulting fees needed for required regulatory filings and planning/projection activities in 2023. |
|
● |
Legal fees and professional fees decreased due to a reduction in corporate activities in 2024. |
|
● |
Marketing expenses were lower as 2023 had additional amounts that were used for company and shareholder awareness projects. |
|
● |
The payroll and corporate expenses result from the Company having an agreement to share office space, equipment, personnel, consultants and various administrative services for the Company’s head office located in Vancouver, BC, Canada. Management expects payroll costs to fluctuate based on the personnel and consultants used during the period. |
|
|
|
|
● |
The Company granted options to officers, directors and employees of the Company pursuant to the terms of the Company’s Stock Option Plan. In September 2022 the options were repriced resulting in an increase in share based compensation for that period. Certain stock options were canceled in 2023 and 2024 after termination of an employee resulting in reversal of previous share based compensation expense. The options that were issued in February 2021 were fully vested in February 2024. In addition, the February 2024 Warrants of $97,370 has been calculated on the date of issuance of February 26, 2024, using Black-Scholes valuation technique. In April 2024, 2,800,000 options were granted that vested based on years of service up to three years. |
For the three months ended June 30, 2024, the
Company increased exploration, evaluation and project expenses by approximately $210,000. The change was due to the following year over
year variances:
Three months ending | |
6/30/2024 | | |
6/30/2023 | | |
Variance | |
Consultants/Contractors | |
$ | 350,000 | | |
$ | 131,000 | | |
$ | 219,000 | |
Supplies and equipment | |
| 66,000 | | |
| 60,000 | | |
| 6,000 | |
Overhead and payroll | |
| 192,000 | | |
| 246,000 | | |
| (54,000 | ) |
Permits and fees | |
| 211,000 | | |
| 178,000 | | |
| 33,000 | |
Other | |
| 17,000 | | |
| 11,000 | | |
| 6,000 | |
Total | |
$ | 836,000 | | |
$ | 626,000 | | |
$ | 210,000 | |
For the six months ended June 30, 2024, the Company
decreased exploration, evaluation and project expenses by approximately $119,000. The change was due to the following year over year variances:
Six months ending | |
6/30/2024 | | |
6/30/2023 | | |
Variance | |
Consultants/Contractors | |
$ | 412,000 | | |
$ | 365,000 | | |
$ | 47,000 | |
Supplies and equipment | |
| 141,000 | | |
| 148,000 | | |
| (7,000 | ) |
Overhead and payroll | |
| 427,000 | | |
| 619,000 | | |
| (192,000 | ) |
Permits and fees | |
| 231,000 | | |
| 200,000 | | |
| 31,000 | |
Other | |
| 21,000 | | |
| 19,000 | | |
| 2,000 | |
Total | |
$ | 1,232,000 | | |
$ | 1,351,000 | | |
$ | (119,000 | ) |
In the second quarter of 2024, the Company continued with development
and compliance activities for the Reward and Bullfrog Projects. During the quarter, environmental baseline studies, compliance reporting,
and preparation of a feasibility level technical report for the CR Reward project were advanced. Additionally, the authorized extension
and realignment of the desert tortoise fence needed for pit development and operations was initiated.
The revaluation of the warrant liability is based on the following
outstanding warrants:
Issue Date | |
Expiration
Date | |
Outstanding Warrants | | |
Exercise Price |
October 2020 | |
October 2024 | |
| 18,125,001 | | C$ |
1.80 |
January 2023 | |
January 2026 | |
| 3,362,573 | | C$ |
2.30 |
There are an additional 9,400,000 warrants outstanding
which are not warrant liabilities and therefore have no effect on the revaluation of warrant liability (the February 2024 Warrants are
not considered a liability and do not get revalued).
Liquidity and Capital Resources
The Company has no revenue
generating operations from which it can internally generate funds. To date, the Company’s ongoing operations have been financed
by the sale of its equity securities by way of public offerings, private placements and the exercise of incentive stock options and share
purchase warrants. The Company believes that it will be able to secure additional private placements and public financing in the future,
although it cannot predict the size or pricing of any such financing. This situation is unlikely to change until such time as the Company
can develop a bankable feasibility study on one of its projects.
On January 20, 2023,
the Company closed its offering (the “Offering”) of 6,725,147 units (“Units”) of the Company at a price of C$1.71
per Unit, including the units issued pursuant to the full exercise of the over-allotment option by the underwriters in the Offering (the
“Underwriters”), for aggregate gross proceeds of approximately C$11,500,000 before deducting Offering expenses.
In connection with the
closing of the Offering, the Company entered into a Warrant Indenture dated January 20, 2023 (the “Warrant Indenture”) with
Endeavor Trust Corporation, as the warrant agent, pursuant to which the Company issued Warrants to purchase up to a maximum of 3,362,573
Warrant Shares. Each Warrant is exercisable at any time after January 20, 2023, and prior to January 20, 2026.
As compensation in connection
to the Offering, the Company paid the Underwriters cash compensation equal to 5.0% of the aggregate gross proceeds of the Offering and
issued to the Underwriters 336,257 common stock purchase warrants (the “Compensation Warrants”). Each Compensation Warrant
is exercisable for one share of common stock (each, a “Compensation Warrant Share”) for a period of 12 months following the
closing of the Offering at a price of C$1.71 per Compensation Warrant Share.
Liquidity
As of June 30, 2024, the Company had total liquidity
of $613,000 in cash and cash equivalents. The Company had negative working capital of $30,000,000 and an accumulated deficit of $36,000,000.
For the six months ended June 30, 2024, the Company had negative operating cash flows before changes in working capital of $3,400,000
and a net loss of $3,100,000.
As of June
30, 2023, the Company had total liquidity of $2,000,000 in cash and cash equivalents. The Company had negative working capital of $23,000,000
and an accumulated deficit of $31,600,000. For the six months ended June 30, 2023, the Company had negative operating cash flows before
changes in working capital of $4,400,000 and a net income of $8,300,000.
The Company
expects that it will operate at a loss for the foreseeable future and believes the current cash and cash equivalents and working capital
will be sufficient for it to maintain its currently held properties, fund its planned exploration, and fund its currently anticipated
general and administrative costs for at least the next 12 months from the date of this report. However, the Company does expect that it
will be required to raise additional funds through public or private equity financings in the future to continue in business in the future
past the immediate 12-month period. Should such financing not be available in that timeframe, the Company will be required to reduce its
activities and will not be able to carry out all of its presently planned exploration and, if warranted, development activities on its
currently anticipated scheduling.
Capital Management
The Company’s objectives when managing capital
are to safeguard the Company’s ability to continue as a going concern in order to pursue the development and exploration of its
mineral properties and to maintain a flexible capital structure, which optimizes the costs of capital to an acceptable risk.
As of June 30, 2024, the capital structure of
the Company consists of 85,929,753 shares of common stock, par value $0.0001. The Company manages the capital structure and adjusts it
in response to changes in economic conditions, its expected funding requirements, and risk characteristics of the underlying assets. The
Company’s funding requirements are based on cash forecasts. In order to maintain or adjust the capital structure, the Company may
issue new debt, new shares and/or consider strategic alliances. Management reviews its capital management approach on a regular basis.
The Company is not subject to any externally imposed capital requirements.
Contractual obligations and commitments
The Company’s contractual obligations and
commitments as of June 30, 2024, and their approximate timing of payment are as follows:
Payment due July | |
Annual Payment | |
2024-2026 | |
$ | 21,000 | |
2027-2031 | |
$ | 25,000 | |
2032-2036 | |
$ | 30,000 | |
2037-2041 | |
$ | 40,000 | |
2042-2046 | |
$ | 45,000 | |
Off Balance Sheet Arrangements
We do not engage in any activities involving variable interest entities
or off-balance sheet arrangements.
Critical Accounting Policies and Use of Estimates
Stock based compensation is measured at grant
date, based on the fair value of the award, and is recognized as an expense over the employee’s requisite service period. We estimate
the fair value of each stock option as of the date of grant using the Black-Scholes pricing model. The Company determines the expected
life based on historical experience with similar awards, giving consideration to the contractual terms, vesting schedules and post-vesting
forfeitures. The Company uses the risk-free interest rate on the implied yield currently available on U.S. Treasury issues with an equivalent
remaining term approximately equal to the expected life of the award. The Company has never paid any cash dividends on its common stock
and does not anticipate paying any cash dividends in the foreseeable future.
Mineral property exploration costs are expensed
as incurred until such time as economic reserves are quantified. To date, the Company has not established any proven or probable reserves
on its mineral properties. Costs of lease, exploration, carrying and retaining unproven mineral lease properties are expensed as incurred.
The Company has chosen to expense all mineral exploration costs as incurred given that it is still in the exploration stage. Once the
Company has identified 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 over the estimated life of the probable-proven reserves. When the Company
has capitalized mineral properties, these properties will be periodically assessed for impairment of value and any diminution in value.
To date, the Company has not established the commercial feasibility of any exploration prospects; therefore, all exploration costs are
being expensed. Costs of property acquisitions are being capitalized, and a required payment of $20,000 was made in 2018 to Mojave Gold
Mining Corporation (“Mojave”) as part of the Option to Purchase Agreement (“Option”).
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES AND MARKET RISK
Not Applicable.
ITEM 4 - CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As required by Rule 13a-15 under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) our management conducted an evaluation of the effectiveness of the design
and operation of our disclosure controls and procedures as of June 30, 2024.
Disclosure controls and procedures refer to controls
and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange
Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such
information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate,
to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving
the desired control objectives, and management is required to apply its judgment in evaluating and implementing possible controls and
procedures.
Our management does not expect that our disclosure
controls and procedures will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide
only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system
must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because
of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and
instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can
be faulty, and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based in part upon
certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions.
With respect to the quarterly period ending June
30, 2024, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design
and operations of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act.
Based upon our evaluation regarding the quarterly period ending June 30, 2024, our management, including our chief executive officer and
chief financial officer, has concluded that its disclosure controls and procedures were effective in
ensuring that: (i) information required to be disclosed by us in reports that we file or submit to the SEC under the Exchange Act
is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and (ii) material
information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including
our CEO and CFO, as appropriate, to allow for accurate and timely decisions regarding required disclosure.
Changes in Internal Controls
There have been no changes in the Company’s
internal control over financial reporting during the three months ended June 30, 2024, that have materially affected, or are reasonably
likely to materially affect, the Company’s internal controls over financial reporting.
PART II. OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
We know of no material, active or pending legal
proceedings against the Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings
in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material
interest adverse to our interest.
ITEM 1A - RISK FACTORS
There have been no material changes to the risk
factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. The
risks described in our Annual Report and as otherwise herein are not the only risks facing us. Additional risks and uncertainties not
currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition,
cash flows, and/or future results.
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - MINE SAFETY DISCLOSURES
Pursuant to Section 1503(a)
of the United States Dodd-Frank Wall Street Reform and Consumer Protection Act of 2011 (the “Dodd-Frank Act”),
issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to
disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations,
related assessments and legal actions, and mining-related fatalities under the regulation of the Federal Mine Safety and Health Administration
(“MSHA”) under the United States Federal Mine Safety and Health Act of 1977 (the “Mine Act”).
During the three months ended June 30, 2024, we had no U.S. properties subject to regulation by the MSHA under the Mine Act and consequently
no disclosure is required under Section 1503(a) of the Dodd-Frank Act.
ITEM 5 - OTHER INFORMATION
(a) None.
(b) None.
(c) During the quarter ended June 30, 2024, none
of our directors or officers adopted, modified, or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1
trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
ITEM 6 – EXHIBITS
Exhibit
Number |
|
Description |
|
|
|
3.1 |
|
Articles of Incorporation (incorporated by reference with Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 12, 2023) |
3.2 |
|
Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed with the SEC on October 12, 2023) |
4.1 |
|
Form of Warrant from October 2020 Private Placement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on October 15, 2020) |
4.2 |
|
Form of Warrant from March 2021 Private Placement (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the SEC on March 5, 2021) |
4.3 |
|
Form of Warrant Indenture dated January 20, 2023 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the SEC on January 20, 2023) |
4.4 |
|
Form of Compensation Warrant Certificate (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed with the SEC on January 20, 2023) |
4.5 |
|
Form of Warrant dated February 26, 2024 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the SEC on March 1, 2024) |
10.1 |
|
The Amended Schedule A, as amended on April 26, 2024, to its amended and restated secured promissory note issued to Augusta Investments Inc. on September 13, 2022, as amended and restated on March 27, 2024 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 26, 2024) |
10.2 |
|
Amendment Number One dated June 28, 2024, to its amended and restated secured promissory note issued to Augusta Investments Inc. on September 13, 2022, as amended and restated on March 27, 2024 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on July 5, 2024) |
10.3 |
|
The Amended Schedule A, as amended on June 28, 2024, to its amended and restated secured promissory note issued to Augusta Investments Inc. on September 13, 2022, as amended and restated on March 27, 2024 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on July 5, 2024) |
31.1 |
|
Certification of Chief Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* |
31.2 |
|
Certification of Chief Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* |
32.1 |
|
Certification of Chief Executive Officer filed pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* |
32.2 |
|
Certification of Chief Financial Officer filed pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* |
101.INS |
|
Inline XBRL Instance Document* |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document* |
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document* |
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document* |
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document* |
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document* |
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)* |
SIGNATURE
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.
Date: August 12, 2024 |
AUGUSTA GOLD CORP. |
|
|
|
|
By: |
/s/ Donald R. Taylor |
|
|
Name: |
Donald R. Taylor |
|
|
Title: |
President and Chief Executive Officer (Principal Executive Officer) |
Date: August 12, 2024 |
AUGUSTA GOLD CORP. |
|
|
|
|
By: |
/s/ Tyler Minnick |
|
|
Name: |
Tyler Minnick |
|
|
Title: |
Interim Chief Financial Officer (Interim Principal Financial and Accounting Officer) |
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I, Donald R. Taylor, certify that:
In connection with the Quarterly
Report on Form 10-Q of Augusta Gold Corp. (the “Company”), for the fiscal quarter ended June 30, 2024, as filed with the Securities
and Exchange Commission on the date hereof (the “Report”), I, Donald R. Taylor, Chief Executive Officer of the Company, hereby
certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
1. The
Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The
information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the
Company.
In connection with the Quarterly
Report on Form 10-Q of Augusta Gold Corp. (the “Company”), for the fiscal quarter ended June 30, 2024, as filed with the Securities
and Exchange Commission on the date hereof (the “Report”), I, Ty Minnick, Interim Chief Financial Officer of the Company,
hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
1. The
Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and