UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|
[X]
|
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended: April 30,
2020
|
[
]
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period from_______to_______
Commission file number 000-52055
RED
METAL RESOURCES LTD.
(Exact name of small business issuer as specified in its
charter)
|
Nevada
(State or other jurisdiction
of
incorporation or organization)
|
20-2138504
(I.R.S. Employer
Identification No.)
|
278 Bay
Street, Suite 102, Thunder Bay,
ON P7B 1R8
(Address of principal executive offices) (Zip Code)
(807)
345-7384
(Issuer’s telephone number)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange
Act during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. [X]
Yes [ ] No
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). [X] Yes [
] No
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
smaller reporting company, or an emerging growth company.
|
Large accelerated
filer [ ]
|
|
Accelerated filer
[ ]
|
|
Non-accelerated
filer [ ]
|
|
Smaller Reporting
Company [X]
|
|
|
|
Emerging Growth
Company [ ]
|
If
an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. [
]
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act). [ ] Yes [X] No
Indicate the number of shares outstanding of each of the issuer’s
classes of common stock, as of the latest practicable date. As of
June 12, 2020, the number of shares of the registrant’s common
stock outstanding was 41,218,008.
Table of Contents
ii
PART I - FINANCIAL
INFORMATION
Item 1. Financial
Statements.
RED METAL RESOURCES LTD.
CONSOLIDATED
BALANCE SHEETS
(EXPRESSED IN US DOLLARS)
(UNAUDITED)
|
|
April 30, 2020
|
|
January 31, 2020
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
Cash
|
$
|
145,197
|
|
$
|
9,865
|
|
Prepaids and
other receivables
|
|
5,690
|
|
|
5,764
|
|
Total current
assets
|
|
150,887
|
|
|
15,629
|
|
|
|
|
|
|
|
|
Equipment
|
|
705
|
|
|
798
|
|
Unproved
mineral properties
|
|
622,935
|
|
|
653,117
|
|
Total assets
|
$
|
774,527
|
|
$
|
669,544
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
Accounts
payable
|
$
|
142,558
|
|
$
|
239,098
|
|
Accrued
liabilities
|
|
81,115
|
|
|
168,927
|
|
Due to
related parties
|
|
6,931
|
|
|
7,282
|
|
Notes
payable
|
|
23,784
|
|
|
24,451
|
|
Total current
liabilities
|
|
254,388
|
|
|
439,758
|
|
|
|
|
|
|
|
|
Long-term
notes payable to related parties
|
|
882,900
|
|
|
715,842
|
|
Withholding
taxes payable
|
|
94,292
|
|
|
-
|
|
Total
liabilities
|
|
1,231,580
|
|
|
1,155,600
|
|
|
|
|
|
|
|
|
Stockholders'
deficit
|
|
|
|
|
|
|
Common
stock, $0.001 par value, authorized 500,000,000,
41,218,008 issued and outstanding
at April 30, 2020 and January 31, 2020
|
|
41,217
|
|
|
41,217
|
|
Additional
paid-in capital
|
|
9,132,068
|
|
|
9,132,068
|
|
Deficit
|
|
(9,566,820)
|
|
|
(9,584,892)
|
|
Accumulated
other comprehensive loss
|
|
(63,518)
|
|
|
(74,449)
|
|
Total
stockholders' deficit
|
|
(457,053)
|
|
|
(486,056)
|
|
Total liabilities
and stockholders' deficit
|
$
|
774,527
|
|
$
|
669,544
|
The
accompanying notes are an integral part of these unaudited interim
consolidated financial statements
F-1
RED METAL RESOURCES LTD.
CONSOLIDATED
STATEMENTS OF OPERATIONS
(EXPRESSED IN US DOLLARS)
(UNAUDITED)
|
|
For the three months ended
April 30,
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
Amortization
|
$
|
57
|
|
$
|
96
|
|
General and
administrative
|
|
13,091
|
|
|
11,274
|
|
Mineral
exploration costs
|
|
944
|
|
|
1,797
|
|
Professional
fees
|
|
10,052
|
|
|
11,598
|
|
Regulatory
|
|
7,007
|
|
|
2,622
|
|
Salaries,
wages and benefits
|
|
7,698
|
|
|
15,856
|
|
|
|
(38,849)
|
|
|
(43,243)
|
|
|
|
|
|
|
|
|
Other items
|
|
|
|
|
|
|
Foreign
exchange gain
|
|
224
|
|
|
66
|
|
Forgiveness
of debt
|
|
74,336
|
|
|
-
|
|
Interest on
notes payable
|
|
(17,639)
|
|
|
(12,729)
|
|
Net income
(loss)
|
|
18,072
|
|
|
(55,906)
|
|
|
|
|
|
|
|
|
Foreign currency
translation
|
|
10,931
|
|
|
2,677
|
|
Comprehensive
income (loss)
|
$
|
29,003
|
|
$
|
(53,229)
|
|
|
|
|
|
|
|
|
Net income (loss)
per share - basic and diluted
|
$
|
0.00
|
|
$
|
(0.00)
|
|
|
|
|
|
|
|
|
Weighted average
number of shares outstanding - basic and diluted
|
|
41,218,008
|
|
|
37,504,588
|
The
accompanying notes are an integral part of these unaudited interim
consolidated financial statements
F-2
RED METAL RESOURCES LTD.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' DEFICIT
(EXPRESSED IN US DOLLARS)
(UNAUDITED)
|
|
Common Stock
|
|
|
|
|
|
|
Number of
Shares
|
Amount
|
Additional
Paid-in
Capital
|
Accumulated
Deficit
|
Accumulated
Other
Comprehensive
Income / (Loss)
|
Total
|
|
|
|
|
|
|
|
|
|
Balance at January
31, 2019
|
37,504,588
|
$
|
37,504
|
$
|
8,968,677
|
$
|
(9,263,300)
|
$
|
6,780
|
$
|
(250,339)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for
the three months
ended April 30, 2019
|
-
|
|
-
|
|
-
|
|
(55,906)
|
|
-
|
|
(55,906)
|
|
Foreign
exchange translation
|
-
|
|
-
|
|
-
|
|
-
|
|
2,677
|
|
2,677
|
|
Balance at April
30, 2019
|
37,504,588
|
|
37,504
|
|
8,968,677
|
|
(9,319,206)
|
|
9,457
|
|
(303,568)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued
for debt
|
3,713,420
|
|
3,713
|
|
163,391
|
|
-
|
|
-
|
|
167,104
|
|
Net loss for
the nine months
ended January 31, 2020
|
-
|
|
-
|
|
-
|
|
(265,686)
|
|
-
|
|
(265,686)
|
|
Foreign
exchange translation
|
-
|
|
-
|
|
-
|
|
-
|
|
(83,906)
|
|
(83,906)
|
|
Balance at January
31, 2020
|
41,218,008
|
|
41,217
|
|
9,132,068
|
|
(9,584,892)
|
|
(74,449)
|
|
(486,056)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
for the three months
ended
April 30, 2020
|
-
|
|
-
|
|
-
|
|
18,072
|
|
-
|
|
18,072
|
|
Foreign
exchange translation
|
-
|
|
-
|
|
-
|
|
-
|
|
10,931
|
|
10,931
|
|
Balance at April
30, 2020
|
41,218,008
|
$
|
41,217
|
$
|
9,132,068
|
$
|
(9,566,820)
|
$
|
(63,518)
|
$
|
(457,053)
|
The
accompanying notes are an integral part of these unaudited interim
consolidated financial statements
F-3
RED METAL RESOURCES LTD.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(EXPRESSED IN US DOLLARS)
(UNAUDITED)
|
|
For the three months ended
April 30,
|
|
|
2020
|
|
2019
|
|
Cash flows used in
operating activities:
|
|
|
|
|
Net income
(loss)
|
$
|
18,072
|
|
$
|
(55,906)
|
|
Adjustments
to reconcile net income (loss) to net cash used in operating
activities:
|
|
|
|
|
|
|
Accrued interest on related party notes
payable
|
|
17,172
|
|
|
12,196
|
|
Accrued interest on notes payable
|
|
467
|
|
|
533
|
|
Amortization
|
|
57
|
|
|
96
|
|
Forgiveness of debt
|
|
(74,336)
|
|
|
-
|
|
|
|
|
|
|
|
|
Changes in
operating assets and liabilities:
|
|
|
|
|
|
|
Prepaids and other receivables
|
|
(200)
|
|
|
(2,195)
|
|
Accounts payable
|
|
(16,234)
|
|
|
12,320
|
|
Accrued liabilities
|
|
11,032
|
|
|
6,134
|
|
Due to related parties
|
|
3
|
|
|
-
|
|
Net cash used in
operating activities
|
|
(43,967)
|
|
|
(26,822)
|
|
|
|
|
|
|
|
|
Cash flows
provided by financing activities:
|
|
|
|
|
|
|
Cash
received on issuance of notes payable to related parties
|
|
188,922
|
|
|
35,190
|
|
Net cash provided
by financing activities
|
|
188,922
|
|
|
35,190
|
|
|
|
|
|
|
|
|
Effects of foreign
currency exchange
|
|
(9,623)
|
|
|
(1,038)
|
|
|
|
|
|
|
|
|
Increase in
cash
|
|
135,332
|
|
|
7,330
|
|
Cash,
beginning
|
|
9,865
|
|
|
8,686
|
|
Cash, ending
|
$
|
145,197
|
|
$
|
16,016
|
|
|
|
|
|
|
|
|
Supplemental
disclosures:
|
|
|
|
|
|
|
Cash paid
for:
|
|
|
|
|
|
|
Income tax
|
$
|
-
|
|
$
|
-
|
|
Interest
|
$
|
-
|
|
$
|
-
|
The
accompanying notes are an integral part of these unaudited interim
consolidated financial statements
F-4
RED METAL RESOURCES LTD.
NOTES TO THE CONDENSED
CONSOLIDATED
FINANCIAL STATEMENTS
APRIL 30, 2020
(UNAUDITED)
NOTE 1 -
ORGANIZATION AND BASIS OF PRESENTATION
Nature of
Operations
Red Metal Resources Ltd. (the “Company”) holds a 99% interest in
Minera Polymet SpA (“Polymet”) organized under the laws of the
Republic of Chile. The Company is involved in acquiring and
exploring mineral properties in Chile. The Company has not
determined whether its properties contain mineral reserves that are
economically recoverable.
Unaudited Interim Consolidated
Financial Statements
The unaudited interim consolidated financial statements of the
Company have been prepared in accordance with United States
generally accepted accounting principles (“GAAP”) for interim
financial information and the rules and regulations of the
Securities and Exchange Commission (“SEC”). They do not include all
information and footnotes required by GAAP for complete financial
statements. Except as disclosed herein, there have been no material
changes in the information disclosed in the notes to the financial
statements for the year ended January 31, 2020, included in the
Company’s Annual Report on Form 10-K, filed with the SEC. The
unaudited interim consolidated financial statements should be read
in conjunction with those financial statements included in Form
10-K. In the opinion of management, all adjustments considered
necessary for a fair presentation, consisting solely of normal
recurring adjustments, have been made. Operating results for the
three months ended April 30, 2020, are not necessarily indicative
of the results that may be expected for the year ending January 31,
2021.
NOTE 2 -
RELATED-PARTY TRANSACTIONS
The following
amounts were due to related parties as at:
|
|
April 30, 2020
|
January 31, 2020
|
|
|
|
|
|
Due to a company
owned by an officer (a)
|
$
|
108
|
$
|
110
|
|
Due to a company
controlled by directors (a)
|
|
6,823
|
|
7,172
|
|
Total due to
related parties
|
$
|
6,931
|
$
|
7,282
|
(a) Amounts are
unsecured, due on demand and bear no interest.
The following
amounts were due under the notes payable the Company issued to
related parties:
|
|
April 30, 2020
|
January 31, 2020
|
|
|
|
|
|
Note payable to
the Chief Executive Officer (“CEO”) (b)
|
$
|
487,702
|
$
|
502,575
|
|
Note payable to
the Chief Financial Officer (“CFO”) (b)
|
|
9,773
|
|
9,583
|
|
Note payable to a
company controlled by directors (b)
|
|
106,703
|
|
109,984
|
|
Note payable to a
major shareholder (c)
|
|
278,722
|
|
93,700
|
|
Total notes
payable to related parties
|
$
|
882,900
|
$
|
715,842
|
(b) Amounts are
unsecured, bear interest at 8%, and are due on or after July 31,
2021.
(c) Amounts are
unsecured and bear interest at 8%. The notes payable for a total of
$90,000 in principal are due on or after July 31, 2021, the note
payable for CAD$250,000 (USD$179,727) is payable on or after August
31, 2021.
During the
three-month period ended April 30, 2020, the Company accrued
$17,172 (April 30, 2019 - $12,196) in interest expense on the notes
payable to related parties. Other than interest accrued on the
notes payable and minor reimbursable expenses, the Company did not
incur any expenses with its related parties.
F-5
NOTE 3 -
UNPROVED MINERAL PROPERTIES
Following is the
schedule of the Company’s unproved mineral properties as at April
30, 2020 and January 31, 2020:
Mineral Claims
at April 30, 2020
|
Mineral
Claims
|
January 31,
2020
|
Additions/
Payments
|
Effect of
foreign
currency
translation
|
April 30,
2020
|
|
Farellon
Project
|
|
|
|
|
|
|
Farellon Alto
1-8
|
$
|
343,648
|
$
|
-
|
$
|
(15,880)
|
$
|
327,768
|
|
Quina
|
|
132,455
|
|
-
|
|
(6,121)
|
|
126,334
|
|
Exeter
|
|
134,530
|
|
-
|
|
(6,217)
|
|
128,313
|
|
|
|
610,663
|
|
-
|
|
(28,218)
|
|
582,415
|
|
|
|
|
|
|
|
|
|
|
|
Perth Project
|
|
42,484
|
|
-
|
|
(1,964)
|
|
40,520
|
|
|
|
|
|
|
|
|
|
|
|
Total Costs
|
$
|
653,117
|
$
|
-
|
$
|
(30,182)
|
$
|
622,935
|
Mineral Claims
at January 31, 2020
|
|
January 31,
2019
|
Additions/
Payments
|
Effect of
foreign
currency
translation
|
January 31,
2020
|
|
Farellon
Project
|
|
|
|
|
|
Farellon Alto
1-8
|
$
|
411,268
|
$
|
-
|
$
|
(67,620)
|
$
|
343,648
|
|
Quina
|
|
158,519
|
|
-
|
|
(26,064)
|
|
132,455
|
|
Exeter
|
|
109,584
|
|
50,000
|
|
(25,054)
|
|
134,530
|
|
|
|
679,371
|
|
50,000
|
|
(118,738)
|
|
610,633
|
|
|
|
|
|
|
|
|
|
|
|
Perth Project
|
|
51,178
|
|
-
|
|
(8,694)
|
|
42,484
|
|
|
|
|
|
|
|
|
|
|
|
Total Costs
|
$
|
730,549
|
$
|
50,000
|
$
|
(127,432)
|
$
|
653,117
|
NOTE 4- COMMON STOCK
Warrants
During the three-month period ended April 30, 2020, 2,500,000
warrants issued as part of April 20, 2018, private placement
expired unexercised. The Company has no warrants outstanding as at
April 30, 2020.
NOTE 5- FORGIVENESS OF DEBT
During the three-month period
ended April 30, 2020, the Company recorded $74,336 as forgiveness
of debt associated with reversal of an old debt which exceeded the
statute of limitations as promulgated under Chilean Laws (April 30,
2019 - $Nil).
NOTE 6 - WITHHOLDING TAXES PAYABLE
During the three-month period ended April 30, 2020, the Company
moved $94,292 in Chilean withholding taxes payable to long-term
debt.
NOTE 7 - SUBSEQUENT EVENTS
Subsequent to April 30, 2020, the Company entered into a loan
agreement with Mr. Jeffs, the Company’s major shareholder, for
$36,327 (CAD$50,000). The loan is unsecured, due on or after August
31, 2021, with interest payable at a rate of 8% per annum (Note
2).
F-6
Item 2. Management’s Discussion and
Analysis of Financial Condition and Results of
Operations.
Forward-Looking Statements
This Quarterly Report on Form 10-Q filed by Red Metal Resources
Ltd. contains forward-looking statements. These are statements
regarding financial and operating performance and results and other
statements that are not historical facts. The words “expect,”
“project,” “estimate,” “believe,” “anticipate,” “intend,” “plan,”
“forecast,” and similar expressions are intended to identify
forward-looking statements. Certain important risks could cause
results to differ materially from those anticipated by some of the
forward-looking statements. Some, but not all, of these risks
include, among other things:
·general economic conditions, because they may affect
our ability to raise money;
·our ability to raise enough money to continue our
operations;
·changes in regulatory requirements that adversely
affect our business;
·changes in the prices for minerals that adversely
affect our business;
·political changes in Chile, which could affect our
interests there; and/or
·other uncertainties, all of which are difficult to
predict and many of which are beyond our control.
We
caution you not to place undue reliance on these forward-looking
statements, which reflect our management’s view only as of the date
of this report. We are not obligated to update these statements or
publicly release the results of any revisions to them to reflect
events or circumstances after the date of this report or to reflect
the occurrence of unanticipated events. You should refer to, and
carefully review, the information in future documents we file with
the Securities and Exchange Commission.
General
You should read this discussion and analysis in conjunction with
our interim unaudited consolidated financial statements and related
notes included in this Form 10-Q and the audited consolidated
financial statements and related notes included in our Annual
Report on Form 10-K for the fiscal year ended January 31, 2020. The
inclusion of supplementary analytical and related information may
require us to make estimates and assumptions to enable us to fairly
present, in all material respects, our analysis of trends and
expectations with respect to our results of operations and
financial position taken as a whole. Actual results may vary from
the estimates and assumptions we make.
Overview
Red Metal Resources Ltd. (“Red Metal” or the “Company”) is a
mineral exploration company engaged in the business of mineral
exploration in Chile with the objective to explore and, if
warranted, develop mineral properties. All of our mineral
concessions are located in the III Region of Atacama, Chile. To
date we have not determined whether the concessions that comprise
our mineral properties contain mineral reserves that are
economically recoverable and have not produced revenues from our
principal business.
Consistent with our historical practices, we continue to monitor
our costs in Chile by reviewing our mineral claims to determine
whether they possess the geological indicators to economically
justify the capital to maintain or explore them. Currently, our
subsidiary, Minera Polymet SpA (“Polymet”), has two employees in
Chile and engages independent consultants on as needed basis. Most
of our support - such as vehicles, office, and equipment - is
supplied under short-term contracts. The only long-term commitments
that we have are for royalty payments on four of our mineral
concessions - Farellon Alto 1-8, Quina 1 - 56, Exeter 1 - 54, and
Che. These royalties are payable once exploitation begins. We are
also required to pay property taxes that are due annually on all
the concessions that are included in our properties.
The cost and timing of all planned exploration programs are subject
to the availability of qualified mining personnel, such as
consulting geologists, geo-technicians and drillers, and drilling
equipment. Although Chile has a well-trained and qualified mining
workforce from which to draw and few early-stage companies such as
ours are competing for the available resources, if we are unable to
find the personnel and equipment that we need when we need them and
at the prices that we have estimated today, we might have to revise
or postpone our plans.
1
Results of Operations
SUMMARY OF FINANCIAL CONDITION
Table 1 summarizes and compares our financial condition at April
30, 2020, to the year ended January 31, 2020.
Table 1: Comparison of financial condition
|
|
April 30, 2020
|
|
January 31, 2020
|
|
Working capital
deficit
|
$
|
(103,501)
|
|
$
|
(424,129)
|
|
Current assets
|
$
|
150,887
|
|
$
|
15,629
|
|
Unproved mineral
properties
|
$
|
622,935
|
|
$
|
653,117
|
|
Total current
liabilities
|
$
|
254,388
|
|
$
|
439,758
|
|
Total long-term
liabilities
|
$
|
977,192
|
|
$
|
715,842
|
|
Common stock and
additional paid in capital
|
$
|
9,173,285
|
|
$
|
9,173,285
|
|
Accumulated other
comprehensive loss
|
$
|
(63,518)
|
|
$
|
(74,449)
|
|
Deficit
|
$
|
(9,566,820)
|
|
$
|
(9,584,892)
|
Selected
Financial Results
THREE MONTHS ENDED APRIL 30, 2020 AND 2019
Our operating results for the three months ended April 30, 2020 and
2019, and the changes in the operating results between those
periods are summarized in Table 2:
Table 2: Summary of operating results
|
|
Three Months Ended
|
Percentage
|
|
|
April 30,
2020
|
April 30,
2019
|
Increase /
(Decrease)
|
|
Operating
expenses
|
$
|
(38,849)
|
$
|
(43,243)
|
(10.2)%
|
|
Other items:
|
|
|
|
|
|
|
Foreign
exchange gain
|
|
224
|
|
66
|
239.4%
|
|
Forgiveness
of debt
|
|
74,336
|
|
-
|
n/a
|
|
Interest on
notes payable
|
|
(17,639)
|
|
(12,729)
|
38.6%
|
|
Net income
(loss)
|
|
18,072
|
|
(55,906)
|
132.3%
|
|
Unrealized
foreign exchange gain
|
|
10,931
|
|
2,677
|
308.3%
|
|
Comprehensive
income (loss)
|
$
|
29,003
|
$
|
(53,229)
|
(154.5)%
|
Revenue. We did not generate any revenue during the three
months ended April 30, 2020 and 2019. Due to the exploration rather
than the production nature of our business, we do not expect to
have significant operating revenue in the foreseeable future.
Operating expenses. Our operating expenses for the three
months ended April 30, 2020 and 2019, and the changes between those
periods are summarized in Table 3.
Table 3: Detailed changes in operating expenses
|
|
Three Months Ended
|
Percentage
|
|
|
April 30,
2020
|
April 30,
2019
|
Increase /
(Decrease)
|
|
Operating
expenses
|
|
|
|
|
|
|
Amortization
|
$
|
57
|
$
|
96
|
(40.6)%
|
|
General and
administrative
|
|
13,091
|
|
11,274
|
16.1%
|
|
Mineral
exploration costs
|
|
944
|
|
1,797
|
(47.5)%
|
|
Professional
fees
|
|
10,052
|
|
11,598
|
(13.3)%
|
|
Regulatory
|
|
7,007
|
|
2,622
|
167.2%
|
|
Salaries,
wages and benefits
|
|
7,698
|
|
15,856
|
(51.5)%
|
|
Total operating
expenses
|
$
|
38,849
|
$
|
43,243
|
(10.2)%
|
2
Our operating expenses decreased by $4,394, or 10.2%, from $43,243
for the three-month period ended April 30, 2019, to $38,849 for the
three-month period ended April 30, 2020. The decrease in operating
expenses during the three-month period ended April 30, 2020, was
associated mainly with decreased salaries, wages, and benefits,
which amounted to $7,698 for the three-month period ended April 30,
2020, as compared to $15,856 we incurred during the three-month
period ended April 30, 2019 and resulted from an extended leave
without pay of one of our Chilean employees. In addition, our
professional fees and mineral and exploration fees decreased by
$1,546 and $853, respectively. These decreases were in part offset
by increased regulatory fees, which amounted to $7,007 during the
three-month period ended April 30, 2020, as compared to $2,622 for
the three-month period ended April 30, 2019, and $3,775 increase in
office expenses, which are included in our general and
administrative fees.
Other items. To continue our operations, we
were required to incur additional debt with our debt holders. Our
notes payable carry 8% annual interest, which resulted in $17,639
in interest we accrued during the three-month period ended April
30, 2020, representing a $4,910 increase as compared to $12,729 in
interest we accrued during the three-month period ended April 30,
2019. During the three-month period ended April 30, 2020, we
recorded $74,336 as forgiveness of debt associated with
reversal of an old debt which exceeded the statute of limitations
as promulgated under Chilean Laws (April 30, 2019 - $Nil). In
addition, we recorded $224 gain on foreign exchange fluctuations
(April 30, 2019- $66).
Comprehensive income/(loss). Our comprehensive income for
the three-month period ended April 30, 2020, was $29,003 as
compared to $53,229 comprehensive loss we recorded for the
three-month period ended April 30, 2019. During the three-month
period ended April 30, 2020, the comprehensive income included
$10,931 gain associated with the foreign exchange translation of
the carried balances denominated in other than our functional
currencies. During the comparative three-month period ended April
30, 2019, the comprehensive loss included $2,677 gain associated
with the foreign exchange translation of the carried balances
denominated in other than our functional currencies.
Liquidity
and Capital Resources
Table 4: Working
capital
|
|
April 30, 2020
|
January 31, 2020
|
|
Percentage
Increase /
(Decrease)
|
|
Current assets
|
$
|
150,887
|
$
|
15,629
|
|
865.4%
|
|
Current
liabilities
|
|
254,388
|
|
439,758
|
|
(42.2)%
|
|
Working capital
deficit
|
$
|
(103,501)
|
$
|
(424,129)
|
|
(75.6)%
|
As
of April 30, 2020, we had a cash balance of $145,197, our working
capital was represented by a deficit of $103,501 and cash used in
operations totaled $43,967 for the period then ended.
We
did not generate sufficient cash flows from our operating
activities to satisfy our cash requirements for the three-month
period ended April 30, 2020. The amount of cash that we have
generated from our operations to date is significantly less than
our current debt obligations, including our debt obligations under
our notes and advances payable. There is no assurance that we will
be able to generate sufficient cash from our operations to repay
the amounts owing under these notes and advances payable, or to
service our other debt obligations. If we are unable to generate
sufficient cash flow from our operations to repay the amounts owing
when due, we may be required to raise additional financing from
other sources.
Cash
Flow
Table 5 summarizes our sources and uses of cash for the nine months
ended April 30, 2020 and 2019.
Table 5: Summary of sources and uses of cash
|
|
April 30,
|
|
|
2020
|
|
2019
|
|
Net cash used in
operating activities
|
$
|
(43,967)
|
|
$
|
(26,822)
|
|
Net cash provided
by financing activities
|
|
188,922
|
|
|
35,190
|
|
Effects of foreign
currency exchange
|
|
(9,623)
|
|
|
(1,038)
|
|
Net increase in
cash
|
$
|
135,332
|
|
$
|
7,330
|
3
Net cash used in operating activities
During the three months ended April 30, 2020, we
used net cash of $43,967 in operating activities. We used $38,568
to cover our cash operating costs, $16,234 to reduce our
outstanding vendor payables, and $200 to prepay our future
expenses. These uses of cash were offset by $11,032 and $3
increases to our accrued liabilities and related party payables,
respectively.
During the three months ended April 30, 2019, we
used net cash of $26,822 in operating activities. We used $43,081
to cover our cash operating costs and $2,195 to prepay our future
expenses. These uses of cash were offset by $12,320 and $6,134
increases to our accounts payable and accrued liabilities,
respectively.
Certain non-cash changes included in the net income/(loss) for
the period
During the three-month period ended April 30, 2020,
our outstanding notes payable to related parties resulted in the
accrual of $17,172 in interest, and our notes payable to
non-related party accumulated $467 in interest. In addition, we
recorded $57 in amortization of our work truck used for Chilean
operations. During the
three-month period ended April 30, 2020, we recorded $74,336
forgiveness of debt on reversal of old debt which exceeded the
statute of limitation promulgated under Chilean Law.
During the three-month period ended April 30, 2019,
our outstanding notes payable to related parties resulted in the
accrual of $12,196 in interest, and our notes payable to
non-related party accumulated $533 in interest. In addition, we
recorded $96 in amortization of our work truck used for Chilean
operations.
Net cash provided by financing activities
During the three months ended April 30, 2020, we borrowed $188,922
(CAD$250,000) from our major shareholder. The loan is unsecured,
bears interest at 8% per annum, compounded monthly, and is payable
on or after August 31, 2021.
During the three months ended
April 30, 2019, we borrowed $35,190 (CAD$46,895) from our CEO. The
loans are unsecured, bear interest at 8% per annum, compounded
monthly, and are payable on or after July 31, 2021.
Going Concern
The consolidated financial statements included in this Quarterly
Report have been prepared on a going concern basis, which implies
that we will continue to realize our assets and discharge our
liabilities in the normal course of business. We have not generated
any significant revenues from mineral sales since inception, have
never paid any dividends and are unlikely to pay dividends or
generate significant earnings in the immediate or foreseeable
future. Our continuation as a going concern depends upon the
continued financial support of our shareholders, our ability to
obtain necessary debt or equity financing to continue operations,
and the attainment of profitable operations. Our ability to achieve
and maintain profitability and positive cash flow depends upon our
ability to locate profitable mineral claims, generate revenue from
mineral production and control our production costs. Based upon our
current plans, we expect to incur operating losses in future
periods, which we plan to mitigate by controlling our operating
costs and by sharing mineral exploration expenses through joint
venture agreements, if possible. At April 30, 2020, we had a
working capital deficit of $103,501 and accumulated losses of
$9,566,820. These factors raise substantial doubt about our ability
to continue as a going concern. We cannot assure you that we will
be able to generate significant revenues in the future. Our
consolidated interim financial statements do not give effect to any
adjustments that would be necessary should we be unable to continue
as a going concern and therefore be required to realize our assets
and discharge our liabilities in other than the normal course of
business and at amounts different from those reflected in our
financial statements.
4
Uncertainty due to Global Outbreak of COVID-19
In March of 2020, the World
Health Organization declared an outbreak of COVID-19 Global
pandemic. The COVID-19 has impacted vast array of businesses
through the restrictions put in place by most governments
internationally, including the USA, Canadian and Chilean
governments, as well as provincial and municipal governments,
regarding travel, business operations and isolation/quarantine
orders. At this time, it is unknown to what extent the impact of
the COVID-19 outbreak may have on the Company as this will depend
on future developments that are highly uncertain and that cannot be
predicted with confidence. These uncertainties arise from the
inability to predict the ultimate geographic spread of the disease,
and the duration of the outbreak, including the duration of travel
restrictions, business closures or disruptions, and
quarantine/isolation measures that are currently, or may be put, in
place world-wide to fight the virus. While the extent of the impact
is unknown, the COVID-19 outbreak may hinder the Company’s ability
to raise financing for exploration or operating costs due to
uncertain capital markets, supply chain disruptions, increased
government regulations and other unanticipated factors, all of
which may also negatively impact the Company’s business and
financial condition.
Unproved Mineral Properties
Table 6: Active properties
|
|
|
Hectares
|
|
Property
|
Percentage,
type of claim
|
Gross area
|
Net area(a)
|
|
Carrizal
Property
|
|
|
|
|
Farellón Project
|
|
|
|
|
Farellón Alto 1 - 8
|
100%, mensura
|
66
|
|
|
Quina 1 - 56
|
100%, mensura
|
251
|
|
|
Exeter 1 - 54
|
100%, mensura
|
235
|
|
|
Cecil 1 - 49
|
100%, mensura
|
228
|
|
|
Teresita
|
100%, mensura
|
1
|
|
|
Azucar 6 - 25
|
100%, mensura
|
88
|
|
|
Stamford 61 - 101
|
100%, mensura
|
165
|
|
|
Kahuna 1 - 40
|
100%, mensura
|
200
|
|
|
|
|
1,234
|
|
|
Perth
Project
|
|
|
|
|
Perth 1 al 36
|
100%, mensura
|
109
|
|
|
Lancelot I 1 al 27
|
100%, mensura in
process
|
300
|
|
|
Lancelot II
|
100%,
pedimento
|
200
|
|
|
Merlin I
|
100%,
pedimento
|
300
|
|
|
Rey Arturo 1 al 29
|
100%, mensura in
process
|
300
|
|
|
Galahad I
|
100%,
pedimento
|
300
|
|
|
Percival 4
|
100%,
pedimento
|
300
|
|
|
Tristan II
|
100%,
pedimento
|
300
|
|
|
Camelot
|
100%,
pedimento
|
300
|
|
|
|
|
2,409
|
|
|
Overlapped
claims(a)
|
|
(109)
|
3,534
|
|
|
|
|
|
|
Mateo
Property
|
|
|
|
|
Margarita
|
100%, mensura
|
56
|
|
|
Che 1 &
Che 2
|
100%, mensura
|
76
|
|
|
Irene &
Irene II
|
100%, mensura
|
60
|
|
|
|
|
192
|
|
|
Overlapped
claims(a)
|
|
(10)
|
182
|
|
|
|
|
3,716
|
(a)Certain mensura in process claims overlap other claims.
The net area is the total of the hectares we have in each property
(i.e. net of overlapped claims).
5
Capital Resources
Our ability to acquire and explore our Chilean claims is subject to
our ability to obtain the necessary funding. We expect to raise
funds through any combination of debt financing and/or sale of our
securities. We have no committed sources of capital. If we are
unable to raise funds as and when we need them, we may be required
to curtail, or even to cease, our operations.
Contingencies and Commitments
We
had no contingencies at April 30, 2020.
As
of the date of the filing this Quarterly Report, we have the
following long-term contractual obligations and commitments:
·Farellon royalty. We are committed to paying
the vendor a royalty equal to 1.5% on the net sales of minerals
extracted from the Farellon Alto 1 - 8 claim up to a total of
$600,000. The royalty payments are due monthly once exploitation
begins and are subject to minimum payments of $1,000 per
month.
·Quina royalty. We are committed to paying a
royalty equal to 1.5% on the net sales of minerals extracted from
the Quina claim. The royalty payments are due semi-annually once
commercial production begins, and are not subject to minimum
payments.
·Exeter royalty. We are committed to paying a
royalty equal to 1.5% on the net sales of minerals extracted from
the Exeter claim. The royalty payments are due semi-annually once
commercial production begins, and are not subject to minimum
payments.
·Che royalty. We are committed to paying a
royalty equal to 1% of the net sales of minerals extracted from the
claims to a maximum of $100,000 to the former owner. The royalty
payments are due monthly once exploitation begins, and are not
subject to minimum payments.
·Mineral property taxes. To keep our mineral
claims in good standing, we are required to pay mineral property
taxes of approximately $35,000 per annum.
Equity Financing
During the period covered by this Quarterly Report on Form 10-Q, we
did not engage in the financing of our operations through the
issuance of our equity securities and relied solely on the debt
financing.
Based on our operating plan, we anticipate incurring operating
losses in the foreseeable future and may require additional equity
capital to support our operations and develop our business plan.
If we succeed in completing future equity financings, the
issuance of additional shares will result in dilution to our
existing shareholders.
Debt Financing
During the three-month period ended April 30, 2020, and up to the
date of the filing of this Quarterly Report on Form 10-Q, we
borrowed a total of $225,249 (CAD$300,000) from our major
shareholder. The loans are unsecured, due on or after August
31, 2021, with interest payable at a rate of 8% per annum,
compounded monthly.
Challenges and Risks
We
do not anticipate generating any revenue over the next twelve
months, therefore, we plan to fund our operations through any
combination of equity or debt financing from the sale of our
securities, private loans, joint ventures or through the sale of
part interest in our mineral properties. Although we have succeeded
in raising funds as we needed them, we cannot assure you that this
will continue in the future. Many things, including, but not
limited to, a downturn in the state of the economy or a significant
decrease in the price of minerals, could affect the willingness of
potential investors to invest in risky ventures such as ours. We
may consider entering into additional joint venture partnerships
with other resource companies to complete mineral exploration
programs on our properties in Chile. If we enter into a joint
venture arrangement, we would likely have to assign a percentage of
our interest in our mineral claims to our joint venture partner in
exchange for the funding.
6
As
at April 30, 2020, we owed $882,900 to related parties under
long-term notes payable, which will become payable on or after July
31, 2021 and $94,292 in withholding taxes that will become payable
to Chilean tax authorities on Polymet’s payment of the
administrative fees it owes to Red Metal Resources, its parent
company. In addition to the long-term debt, we had $254,388 in
current liabilities, which are payable on demand. We do not have
the funds to pay all our current liabilities, and as such, we may
decide to offer some vendors to convert the amounts we owe them
into shares of our common stock. Because of the low price of our
common stock, the issuance of the shares to pay the debt will
likely result in dilution to the percentage of outstanding shares
of our common stock held by our existing shareholders.
Investments in and Expenditures on Mineral
Interests
Realization of our investments in mineral properties depends upon
our maintaining legal ownership, producing from the properties or
gainfully disposing of them.
Title to mineral claims involves risks inherent in the difficulties
of determining the validity of claims as well as the potential for
problems arising from the ambiguous conveyancing history
characteristic of many mineral claims. Our contracts and deeds have
been notarized, recorded in the registry of mines and published in
the mining bulletin. We review the mining bulletin regularly to
discover whether other parties have staked claims over our ground.
We have discovered no such claims. To the best of our knowledge, we
have taken the steps necessary to ensure that we have good title to
our mineral claims.
Foreign Exchange
We
are subject to foreign exchange risk associated with transactions
denominated in foreign currencies. Foreign currency risk arises
from the fluctuation of foreign exchange rates and the degree of
volatility of these rates relative to the United States dollar.
We do not believe that we have any material risk due to
foreign currency exchange.
Trends, Events or Uncertainties that May Impact Results of
Operations or Liquidity
Since we rely on sales of our securities and loans to continue our
operations, any uncertainty in the equity markets can have a
detrimental impact on our operations. Current trends in the
industry and uncertainty that exists in equity markets have
resulted in less capital available to us and less appetite for risk
by investors. Furthermore, we have found that locating other
mineral exploration companies with available funds who are willing
to engage in risky ventures such as the exploration of our
properties has become very difficult. If we are unable to raise
additional capital, we may not be able to develop our properties or
continue our operations.
Off-Balance Sheet Arrangements
We
have no off-balance sheet arrangements and no non-consolidated,
special-purpose entities.
Related-Party Transactions
During the three-month period ended April 30, 2020, and up to the
date of the filing of this Quarterly Report on Form 10-Q we have
entered into the following transactions with the directors,
executive officers, or holders of more than 5% of our common stock,
or members of their immediate families:
Loans from Caitlin L.
Jeffs
During the three-month period ended April 30, 2020, we accrued
$9,562 in interest on notes payable we issued to Ms. Jeffs for a
total owed under the USD$ notes payable of $2,482 and $485,221
(CAD$674,942) owed on account of CAD$ notes payable, which were
outstanding as at April 30, 2020. The notes payable accumulate
interest at 8% per annum compounded monthly, are unsecured and
repayable on or after July 31, 2021.
Loan from John da
Costa
During the three-month period ended April 30, 2020, we accrued $190
on $8,500 note payable we issued to Mr. da Costa, which was
outstanding as at April 30, 2020. The note payable accumulates
interest at 8% per annum compounded monthly, is unsecured and
repayable on or after July 31, 2021.
7
Transactions with
Fladgate Exploration Consulting Corporation
During the three-month period ended April 30, 2020, we accrued
$2,092 on a total of $92,806 (CAD$129,093) in notes payable we
issued to Fladgate. The notes payable accumulate interest at 8% per
annum compounded monthly, are unsecured and repayable on or after
July 31, 2021.
Loans from Richard N.
Jeffs
During the three-month period ended April 30, 2020, Mr. Jeffs
advanced us USD$188,922 (CAD$250,000) at 8% annual interest
compounded monthly and repayable on or after August 31, 2021.
During the three-month period ended April 30, 2020 we accrued
$1,855 in interest due on a total of $90,000 in notes payable we
issued to Mr. Jeffs, and $3,473 interest on the CAD$250,000 note
payable. All notes payable issued to Mr. Jeffs accumulate interest
at 8% per annum compounded monthly and are unsecured. US$ notes
payable totaling $95,556 are repayable on or after July 31, 2021,
and CAD$ note payable totaling $183,166 (CAD$252,311) is repayable
on or after August 31, 2021. Subsequent to April 30, 2020, we
borrowed an additional $36,327 (CAD$50,000) in exchange for an 8%
note payable due on or after August 31, 2020.
Critical Accounting Estimates
Preparing financial statements in conformity with the U.S.
Generally Accepted Accounting Principles requires management to
make estimates and assumptions that affect certain of the reported
amounts of assets and liabilities, disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the period. The
Company regularly evaluates estimates and assumptions. The Company
bases its estimates and assumptions on current facts, historical
experience and various other factors it believes to be reasonable
under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and
liabilities and the accrual of costs and expenses that are not
readily apparent from other sources. The actual results experienced
by the Company may differ materially and adversely from the
Company’s estimates. To the extent there are material differences
between the estimates and the actual results, future results of
operations will be affected. The most significant estimates with
regard to these financial statements relate to carrying values of
unproved mineral properties.
Financial Instruments
Our financial instruments include cash, prepaids and other
receivables, accounts payable, accrued liabilities, amounts due to
related parties and notes payable. The fair value of these
financial instruments approximates their carrying values due to
their short maturities.
Item 3. Quantitative and Qualitative
Disclosures about Market Risk.
As
a smaller reporting company, we are not required to provide this
disclosure.
Item 4. Controls and
Procedures.
(a) Disclosure Controls and Procedures
Caitlin Jeffs, our Chief Executive Officer and President, and John
da Costa, our Chief Financial Officer, have evaluated the
effectiveness of our disclosure controls and procedures (as the
term is defined in Rules 13a-15 and 15d-15 under the Securities
Exchange Act of 1934) as of the end of the quarter covered by this
report (the “Evaluation Date”). Based on their assessment, as of
the Evaluation Date, our disclosure controls and procedures are not
effective to ensure that information required to be disclosed by us
in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission’s rules
and forms due to lack of segregation of duties.
(b) Changes in Internal Control over Financial Reporting
During the quarter covered by this report, there were no changes to
our internal control over financial reporting that have materially
affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
8
PART II - OTHER
INFORMATION
Item 1. Legal
Proceedings.
We are not a party
to any pending legal proceedings and, to the best of our knowledge;
none of our properties or assets is the subject of any pending
legal proceedings.
Item 1a. Risk Factors.
We incorporate by
reference the Risk Factors included as Item 1A of our Annual Report
on Form 10-K we filed with the Securities and Exchange Commission
on April 30, 2020.
Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds.
None
Item 3. Defaults upon Senior
Securities.
None
Item 4. Mine Safety
Disclosures.
Not
applicable.
Item 5. Other
Information.
None
Item 6. Exhibits.
The following
table sets forth the exhibits either filed herewith or incorporated
by reference.
|
Exhibit
|
Description
|
|
3.1.1
|
Articles of
Incorporation(1)
|
|
3.1.2
|
Certificate of
Amendment to Articles of Incorporation(2)
|
|
3.2
|
By-laws(1)
|
|
10.1
|
Red Metal
Resources Ltd. 2011 Equity Incentive Plan(7)
|
|
10.2
|
Memorandum of
Understanding between Minera Polymet Limitada and David Marcus
Mitchel (3)
|
|
10.3
|
Irrevocable
Purchase Option Contract for Mining Property Quina 1-56 in Spanish
(4)
|
|
10.4
|
Irrevocable
Purchase Option Contract for Mining Property Quina 1-56, English
translation (4)
|
|
10.5
|
Irrevocable
Purchase Option Contract for Mining Property Exeter 1-54 in Spanish
(5)
|
|
10.6
|
Irrevocable
Purchase Option Contract for Mining Property Exeter 1-54, English
translation (5)
|
|
10.7
|
Amendment to the
Contract of Purchase and Sale of Mine Holdings dated for reference
May 9, 2008, between Minera Polymet Limitada and Compañía Minera
Romelio Alday Limitada, dated December 9, 2013; English
translation.(6)
|
|
10.8
|
Amendment to the
Contract of Purchase and Sale of Mine Holdings dated for reference
May 9, 2008, between Minera Polymet Limitada and Compañía Minera
Romelio Alday Limitada dated December 9, 2013 in
Spanish.(6)
|
|
10.9
|
Debt Settlement
Agreement between Caitlin Jeffs and Red Metal Resources Ltd. dated
January 30, 2020.(8)
|
|
31.1
|
Certification
pursuant to Rule 13a-14(a) and 15d-14(a)
|
|
31.2
|
Certification
pursuant to Rule 13a-14(a) and 15d-14(a)
|
|
32
|
Certification
pursuant to Section 1350 of Title 18 of the United States Code
|
|
101
|
The following
financial statements from the registrant’s Quarterly Report on Form
10-Q for the fiscal quarter ended April 30, 2020, formatted in
XBRL:
(i) Consolidated Balance Sheets;
(ii) Consolidated Statements of Operations;
(iii) Consolidated Statements of Stockholders’ Deficit;
(iv) Consolidated Statements of Cash Flows; and
(v) Notes to the Interim Consolidated Financial
Statements.
|
9
(1)Incorporated
by reference from the registrant’s registration statement on Form
SB-2 filed with the Securities and Exchange Commission on May 22,
2006 as file number 333-134363.
(2)Incorporated
by reference from the registrant’s Quarterly report on Form 10-Q
for the period ended October 31, 2010 and filed with the Securities
and Exchange Commission on December 13, 2010.
(3)Incorporated
by reference from the registrant’s Current Report on Form 8-K,
filed with the Securities and Exchange Commission on June 4,
2014.
(4)Incorporated
by reference from the registrant’s Current Report on Form 8-K filed
with the Securities and Exchange Commission on December 19,
2014.
(5)Incorporated
by reference from the registrant’s Current Report on Form 8-K filed
with the Securities and Exchange Commission on June 18,
2015.
(6)Incorporated
by reference from the registrant’s Annual Report on Form 10-K filed
with the Securities and Exchange Commission on May 2,
2016.
(7)Incorporated
by reference from the registrant’s registration statement on Form
S-8 filed with the Securities and Exchange Commission on September
23, 2011.
(8)Incorporated
by reference from the registrant’s Current Report on Form 8-K filed
with the Securities and Exchange Commission on January 31,
2020.
10
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: June 12,
2020
|
|
|
RED METAL
RESOURCES LTD.
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Caitlin
Jeffs
|
|
|
|
|
|
Caitlin Jeffs
Chief Executive
Officer
(Principal
Executive Officer) and President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Joao
(John) da Costa
|
|
|
|
|
|
Joao (John) da
Costa
Chief Financial
Officer
(Principal
Accounting Officer)
|
|
11
