UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended January 31, 20202021
OR
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________to _____________
Commission file number: 1-08266001-08266
U.S. GOLD CORP.
(Exact Name of Registrant as Specified in its Charter)
| Nevada | 22-1831409 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| 1910 E. Idaho Street, Suite 102-Box 604, Elko, NV | 89801 | |
| (Address of Principal Executive Offices) | (Zip Code) |
(800) 557-4550
(Registrant’s Telephone Number, including Area Code)
| (800) 557-4550 |
| (Registrant’s Telephone Number, including Area Code) |
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common Stock | USAU | Nasdaq Capital Market |
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the pastpreceding 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 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). [X] 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 [X] 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 Exchange Act). [ ] Yes [X] No
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. Common Stock ($0.001 par value): As of March 12, 2020,16, 2021, there were 24,464,6217,059,223 shares outstanding.
U.S. GOLD CORP.
FORM 10-Q
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS
Some information contained in or incorporated by reference into this Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995. Such forward-looking statements concern our anticipated results and developments in our operations in future periods, planned exploration and development of our properties, plans related to our business and other matters that may occur in the future. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management. These statements include, but are not limited to, comments regarding:
| ● | our plans to conduct | |
| 2021, | ||
| ● | the impact of COVID-19 on our | |
| exploration activities, | ||
| ● | the conclusions of additional exploration programs and related studies, | |
| ● | expectations and the timing and budget for exploration and future exploration of our properties, | |
| ● | our planned expenditures during our fiscal year ended April 30, | |
| ● | our estimates of the cost of future permitting changes and additional bonding requirements, | |
| ● | future exploration plans and expectations related to our properties, | |
| ● | our ability to fund our business with our current cash reserves based on our currently planned activities, | |
| ● | our expected cash needs and the availability and plans with respect to future financing, | |
| ● | statements concerning our financial condition, | |
| ● | our anticipation of future environmental and regulatory impacts, | |
| ● | our business and operating strategies, and | |
| ● | statements related to operating and legal risks. |
We use the words “anticipate,” “continue,” “likely,” “estimate,” “expect,” “may,” “could,” “will,” “project,” “should,” “believe” and variations of such words and similar expressions to identify forward-looking statements. Statements that contain these words discuss our future expectations and plans, or state other forward-looking information. Although we believe the expectations and assumptions reflected in those forward-looking statements are reasonable, we cannot assure you that these expectations and assumptions will prove to be correct. Our actual results could differ materially from those expressed or implied in these forward-looking statements as a result of various factors, including the risk factors described in this report and in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended April 30, 2019.2020.
Many of these factors are beyond our ability to control or predict. Although we believe that the expectations reflected in our forward-looking statements are based on reasonable assumptions, such expectations may prove to be materially incorrect due to known and unknown risk and uncertainties. You should not unduly rely on any of our forward-looking statements. These statements speak only as of the date of this report.Quarterly Report. Except as required by law, we are not obligated to publicly release any revisions to these forward-looking statements to reflect future events or developments. All subsequent written and oral forward-looking statements attributable to us and persons acting on our behalf are qualified in their entirety by the cautionary statements contained in this section and elsewhere in this report.Quarterly Report.
U.S. GOLD CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| January 31, | April 30, | |||||||||||||||
| 2021 | 2020 | |||||||||||||||
| January 31, 2020 | April 30, 2019 | |||||||||||||||
| ASSETS | ||||||||||||||||
| CURRENT ASSETS: | ||||||||||||||||
| Cash | $ | 1,206,044 | $ | 2,197,181 | $ | 13,992,772 | $ | 2,749,957 | ||||||||
| Income tax receivable | 219,072 | 219,072 | ||||||||||||||
| Prepaid expenses and other current assets | 545,559 | 613,261 | 368,119 | 212,718 | ||||||||||||
| Total current assets | 1,751,603 | 2,810,442 | 14,579,963 | 3,181,747 | ||||||||||||
| NON - CURRENT ASSETS: | ||||||||||||||||
| Property, net | 68,307 | 74,929 | 173,258 | 133,371 | ||||||||||||
| Reclamation bond deposit | 355,556 | 339,447 | 389,556 | 355,556 | ||||||||||||
| Mineral rights | 6,163,559 | 4,176,952 | 16,356,862 | 6,163,559 | ||||||||||||
| Total non - current assets | 6,587,422 | 4,591,328 | 16,919,676 | 6,652,486 | ||||||||||||
| Total assets | $ | 8,339,025 | $ | 7,401,770 | $ | 31,499,639 | $ | 9,834,233 | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
| CURRENT LIABILITIES: | ||||||||||||||||
| Accounts payable | $ | 60,376 | $ | 112,303 | ||||||||||||
| Accounts payable and accrued liabilities | $ | 572,190 | $ | 154,381 | ||||||||||||
| Accounts payable - related parties | 17,603 | 42,539 | - | 3,459 | ||||||||||||
| Accrued liabilities | - | 5,367 | ||||||||||||||
| Total current liabilities | 77,979 | 160,209 | 572,190 | 157,840 | ||||||||||||
| LONG- TERM LIABILITIES | ||||||||||||||||
| Asset retirement obligation | 95,412 | 88,746 | 194,717 | 168,392 | ||||||||||||
| Total liabilities | 173,391 | 248,955 | 766,907 | 326,232 | ||||||||||||
| Commitments and Contingencies | ||||||||||||||||
| STOCKHOLDERS’ EQUITY : | ||||||||||||||||
| Preferred stock, $0.001 par value; 50,000,000 authorized | ||||||||||||||||
| Convertible Series F Preferred stock ($0.001 Par Value; 1,250 Shares Authorized; 270 and none issued and outstanding as of January 31, 2020 and April 30, 2019; liquidation preference of $540,000) | - | - | ||||||||||||||
| Common stock ($0.001 Par Value; 200,000,000 Shares Authorized;24,439,478 and 19,860,625 shares issued and outstanding as of January 31, 2020 and April 30, 2019) | 24,439 | 19,861 | ||||||||||||||
| Convertible Series F Preferred stock ($0.001 Par Value; 1,250 Shares Authorized; none issued and outstanding as of January 31, 2021 and April 30, 2020) | - | - | ||||||||||||||
| Convertible Series G Preferred stock ($0.001 Par Value; 127 Shares Authorized; none and 57 issued and outstanding as of January 31, 2021 and April 30, 2020) | - | - | ||||||||||||||
| Convertible Series H Preferred stock ($0.001 Par Value; 106,894 Shares Authorized; none issued and outstanding as of January 31, 2021 and April 30, 2020; no liquidation preference) | - | - | ||||||||||||||
| Convertible Series I Preferred stock ($0.001 Par Value; 921,666 Shares Authorized; none issued and outstanding as of January 31, 2021 and April 30, 2020; no liquidation preference) | - | - | ||||||||||||||
| Common stock ($0.001 Par Value; 200,000,000 Shares Authorized; 5,869,751 and 2,903,393 shares issued and outstanding as of January 31, 2021 and April 30, 2020) | 5,870 | 2,903 | ||||||||||||||
| Common stock to be issued 794,136 shares at January 31, 2021 | 794 | - | ||||||||||||||
| Additional paid-in capital | 38,913,440 | 33,408,056 | 71,816,386 | 41,093,050 | ||||||||||||
| Accumulated deficit | (30,772,245 | ) | (26,275,102 | ) | (41,090,318 | ) | (31,587,952 | ) | ||||||||
| Total stockholders’ equity | 8,165,634 | 7,152,815 | 30,732,732 | 9,508,001 | ||||||||||||
| Total liabilities and stockholders’ equity | $ | 8,339,025 | $ | 7,401,770 | $ | 31,499,639 | $ | 9,834,233 | ||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
U.S. GOLD CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| For the Three Months Ended | For the Three Months Ended | For the Nine MonthsEnded | For the Nine MonthsEnded | |||||||||||||
| January 31, 2020 | January 31, 2019 | January 31, 2020 | January 31, 2019 | |||||||||||||
| Net revenues | $ | - | $ | - | $ | - | $ | - | ||||||||
| Operating expenses: | ||||||||||||||||
| Compensation and related taxes - general and administrative | 591,290 | 318,771 | 1,168,736 | 1,545,967 | ||||||||||||
| Exploration costs | 62,810 | 737,164 | 1,201,559 | 2,503,277 | ||||||||||||
| Professional and consulting fees | 407,115 | 476,604 | 1,873,501 | 1,644,607 | ||||||||||||
| General and administrative expenses | 118,705 | 102,809 | 473,343 | 423,309 | ||||||||||||
| Loss (gain) from foreign currency transactions | 611 | - | (923 | ) | - | |||||||||||
| Total operating expenses | 1,180,531 | 1,635,348 | 4,716,216 | 6,117,160 | ||||||||||||
Loss before benefit (provision) for income taxes | (1,180,531 | ) | (1,635,348 | ) | (4,716,216 | ) | (6,117,160 | ) | ||||||||
Benefit (provision) for income taxes | 219,073 | (438,145 | ) | 219,073 | (438,145 | ) | ||||||||||
| Net loss | (961,458 | ) | (2,073,493 | ) | (4,497,143 | ) | (6,555,305 | ) | ||||||||
| Deemed dividend related to beneficial conversion feature of series F preferred stock | - | - | (2,022,712 | ) | - | |||||||||||
| Net loss applicable to U.S. Gold Corp. common shareholders | $ | (961,458 | ) | $ | (2,073,493 | ) | $ | (6,519,855 | ) | $ | (6,555,305 | ) | ||||
| Net Loss per common share, basic and diluted | $ | (0.04 | ) | $ | (0.11 | ) | $ | (0.29 | ) | $ | (0.36 | ) | ||||
Weighted average common shares outstanding - basic and diluted | 24,013,495 | 18,757,263 | 22,247,149 | 18,173,054 | ||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
U.S. GOLD CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE NINE MONTHS ENDED JANUARY 31, 2020 AND 2019OPERATIONS
| Preferred Stock - Series F | Common Stock | Additional | Total | |||||||||||||||||||||||||
| $0.001 Par Value | $0.001 Par Value | Paid-in | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance, May 1, 2019 | - | $ | - | 19,860,625 | $ | 19,861 | # | $ | 33,408,056 | $ | (26,275,102 | ) | $ | 7,152,815 | ||||||||||||||
| Issuance of preferred stock and warrants for cash, net of offering cost | 1,250 | 1 | - | - | 2,401,201 | - | 2,401,202 | |||||||||||||||||||||
| Conversion of preferred stock into common stock | (616 | ) | - | 1,080,707 | 1,080 | (1,080 | ) | - | - | |||||||||||||||||||
| Issuance of common stock for services | - | - | 21,534 | 21 | 24,979 | - | 25,000 | |||||||||||||||||||||
| Issuance of common stock for accrued services | - | - | 10,684 | 11 | 12,489 | - | 12,500 | |||||||||||||||||||||
| Stock options granted for services | - | - | - | - | 52,214 | - | 52,214 | |||||||||||||||||||||
| Stock-based compensation in connection with restricted common stock unit grants | - | - | - | - | 52,682 | - | 52,682 | |||||||||||||||||||||
| Cancellation of common stock | - | - | (85,000 | ) | (85 | ) | 85 | - | - | |||||||||||||||||||
| Net loss | - | - | - | - | - | (1,308,599 | ) | (1,308,599 | ) | |||||||||||||||||||
| Balance, July 31, 2019 | 634 | 1 | 20,888,550 | 20,888 | # | 35,950,626 | (27,583,701 | ) | 8,387,814 | |||||||||||||||||||
| Conversion of preferred stock into common stock | (364 | ) | (1 | ) | 638,596 | 639 | (638 | ) | - | - | ||||||||||||||||||
| Issuance of common stock in connection with the share exchange agreement | - | - | 2,000,000 | 2,000 | 2,018,000 | - | 2,020,000 | |||||||||||||||||||||
| Stock options granted for services | - | - | - | - | 52,213 | - | 52,213 | |||||||||||||||||||||
Stock-based compensation in connection with restricted common stock award grants and restricted common stock unit grants | - | - | 335,000 | 335 | 392,763 | - | 393,098 | |||||||||||||||||||||
| Net loss | - | - | - | - | - | (2,227,086 | ) | (2,227,086 | ) | |||||||||||||||||||
| Balance, October 31, 2019 | 270 | - | 23,862,146 | 23,862 | # | 38,412,964 | (29,810,787 | ) | 8,626,039 | |||||||||||||||||||
| Issuance of common stock for services | - | - | 503,609 | 503 | 418,195 | - | 418,698 | |||||||||||||||||||||
| Issuance of common stock for accrued services | - | - | 17,936 | 18 | 14,385 | - | 14,403 | |||||||||||||||||||||
| Stock options granted for services | - | - | - | - | 40,357 | - | 40,357 | |||||||||||||||||||||
Stock-based compensation in connection with restricted common stock award grants and restricted common stock unit grants | - | - | 55,787 | 56 | 27,539 | - | 27,595 | |||||||||||||||||||||
| Net loss | - | - | - | - | - | (961,458 | ) | (961,458 | ) | |||||||||||||||||||
| Balance, January 31, 2020 | 270 | $ | - | 24,439,478 | $ | 24,439 | # | $ | 38,913,440 | $ | (30,772,245 | ) | $ | 8,165,634 | ||||||||||||||
| Preferred Stock - Series F | Common Stock | Additional | Total | |||||||||||||||||||||||||
| $0.001 Par Value | $0.001 Par Value | Paid-in | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance, May 1, 2018 | - | $ | - | 17,590,574 | $ | 17,591 | $ | 30,911,222 | $ | (18,228,552 | ) | $ | 12,700,261 | |||||||||||||||
| Issuance of common stock for services | - | - | 19,319 | 19 | 76,489 | - | 76,508 | |||||||||||||||||||||
| Issuance of common stock for accrued services | - | - | 9,191 | 9 | 12,491 | - | 12,500 | |||||||||||||||||||||
| Stock options granted for services | - | - | - | - | 33,636 | - | 33,636 | |||||||||||||||||||||
| Net loss | - | - | - | - | - | (1,481,504 | ) | (1,481,504 | ) | |||||||||||||||||||
| Balance, July 31, 2018 | - | - | 17,619,084 | 17,619 | 31,033,838 | (19,710,056 | ) | 11,341,401 | ||||||||||||||||||||
| Issuance of common stock for services | - | - | 532,600 | 533 | 697,623 | - | 698,156 | |||||||||||||||||||||
| Stock options granted for services | - | - | - | - | 57,874 | - | 57,874 | |||||||||||||||||||||
| Net loss | - | - | - | - | - | (3,000,308 | ) | (3,000,308 | ) | |||||||||||||||||||
| Balance, October 31, 2018 | - | - | 18,151,684 | 18,152 | 31,789,335 | (22,710,364 | ) | 9,097,123 | ||||||||||||||||||||
| Issuance of common stock for cash, net of issuance costs | - | - | 235,071 | 235 | 178,637 | - | 178,872 | |||||||||||||||||||||
| Issuance of common stock for salaries | - | - | 91,268 | 91 | 99,909 | - | 100,000 | |||||||||||||||||||||
| Issuance of common stock for exploration expenses | - | - | 199,159 | 199 | 183,027 | - | 183,226 | |||||||||||||||||||||
| Issuance of common stock for services | - | - | 448,081 | 448 | 78,120 | - | 78,568 | |||||||||||||||||||||
| Stock options granted for services | - | - | - | - | 114,216 | - | 114,216 | |||||||||||||||||||||
| Net loss | - | - | - | - | - | (2,073,493 | ) | (2,073,493 | ) | |||||||||||||||||||
| Balance, January 31, 2019 | - | $ | - | 19,125,263 | $ | 19,125 | $ | 32,443,244 | $ | (24,783,857 | ) | $ | 7,678,512 | |||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
U.S. GOLD CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Nine Months | For the Nine Months | |||||||
| Ended | Ended | |||||||
| January 31, 2020 | January 31, 2019 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (4,497,143 | ) | $ | (6,555,305 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 6,622 | 4,602 | ||||||
| Accretion | 6,666 | 4,854 | ||||||
| Stock based compensation | 1,061,857 | 1,333,574 | ||||||
| Amortization of prepaid stock based expenses | 145,210 | 183,226 | ||||||
| Deferred income taxes | - | 438,145 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | (77,508 | ) | 244,542 | |||||
| Reclamation bond deposit | (16,109 | ) | (254,019 | ) | ||||
| Accounts payable | (177,597 | ) | (60,311 | ) | ||||
| Accounts payable - related parties | 1,967 | 29,089 | ||||||
| Accrued liabilities | (5,367 | ) | - | |||||
| NET CASH USED IN OPERATING ACTIVITIES | (3,551,402 | ) | (4,631,603 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Net proceeds received in connection with the share exchange agreement | 159,063 | - | ||||||
| NET CASH PROVIDED BY INVESTING ACTIVITIES | 159,063 | - | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Issuance of preferred stock and warrants, net of issuance cost | 2,401,202 | - | ||||||
| Issuance of common stock, net of offering costs | - | 178,872 | ||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 2,401,202 | 178,872 | ||||||
| NET DECREASE IN CASH | (991,137 | ) | (4,452,731 | ) | ||||
| CASH - beginning of period | 2,197,181 | 7,646,279 | ||||||
| CASH - end of period | $ | 1,206,044 | $ | 3,193,548 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Cash paid for: | ||||||||
| Interest | $ | - | $ | - | ||||
| Income taxes | $ | - | $ | - | ||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Increase in asset retirement obligation | $ | - | $ | 81,885 | ||||
| Issuance of common stock for accrued services | $ | 26,903 | $ | 12,500 | ||||
| Deemed dividends - Series F preferred stock | $ | 2,022,712 | $ | - | ||||
| Issuance of common stock in connection with the share exchange agreement | $ | 2,020,000 | $ | - | ||||
| Assumption of liabilities in connection with the share exchange agreement | $ | 125,670 | $ | - | ||||
| Increase in mineral properties in connection with the share exchange agreement | $ | 1,986,607 | $ | - | ||||
| Issuance of common stock for prepaid services | $ | - | $ | 174,616 | ||||
| For the Three Months | For the Three Months | For the Nine Months | For the Nine Months | |||||||||||||
| Ended | Ended | Ended | Ended | |||||||||||||
| January 31, 2021 | January 31, 2020 | January 31, 2021 | January 31, 2020 | |||||||||||||
| Net revenues | $ | - | $ | - | $ | - | $ | - | ||||||||
| Operating expenses: | ||||||||||||||||
| Compensation and related taxes - general and administrative | 1,241,185 | 591,290 | 2,523,210 | 1,168,736 | ||||||||||||
| Exploration costs | 1,307,506 | 62,810 | 3,106,065 | 1,201,559 | ||||||||||||
| Professional and consulting fees | 895,741 | 407,115 | 3,200,741 | 1,873,501 | ||||||||||||
| General and administrative expenses | 256,148 | 119,316 | 672,350 | 472,420 | ||||||||||||
| Total operating expenses | 3,700,580 | 1,180,531 | 9,502,366 | 4,716,216 | ||||||||||||
| Loss from operations | (3,700,580 | ) | (1,180,531 | ) | (9,502,366 | ) | (4,716,216 | ) | ||||||||
| Loss before benefit (provision) for income taxes | (3,700,580 | ) | (1,180,531 | ) | (9,502,366 | ) | (4,716,216 | ) | ||||||||
| Benefit (provision) for income taxes | - | 219,073 | - | 219,073 | ||||||||||||
| Net loss | (3,700,580 | ) | (961,458 | ) | (9,502,366 | ) | (4,497,143 | ) | ||||||||
| Deemed dividend related to beneficial conversion feature of preferred stock | - | - | (5,530,004 | ) | (2,022,712 | ) | ||||||||||
| Net loss applicable to U.S. Gold Corp. common shareholders | $ | (3,700,580 | ) | $ | (961,458 | ) | $ | (15,032,370 | ) | $ | (6,519,855 | ) | ||||
| Net Loss per common share, basic and diluted | $ | (0.67 | ) | $ | (0.40 | ) | $ | (3.78 | ) | $ | (2.93 | ) | ||||
| Weighted average common shares outstanding - basic and diluted | 5,493,764 | 2,401,350 | 3,974,487 | 2,224,715 | ||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
U.S. GOLD CORP. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2021 AND 2020
| Preferred Stock - Series F | Preferred Stock - Series G | Preferred Stock - Series H | Preferred Stock - Series I | Common Stock | Common Stock to be issued | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| $0.001 Par Value | $0.001 Par Value | $0.001 Par Value | $0.001 Par Value | $0.001 Par Value | $0.001 Par Value | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance, April 30, 2020 | - | $ | - | 57 | $ | - | - | $ | - | - | $ | - | 2,903,393 | $ | 2,903 | - | $ | - | $ | 41,093,050 | $ | (31,587,952 | ) | $ | 9,508,001 | |||||||||||||||||||||||||||||||||||
| Conversion of preferred stock into common stock | - | - | (57 | ) | - | - | - | - | - | 20,357 | 21 | - | - | (21 | ) | - | - | |||||||||||||||||||||||||||||||||||||||||||
| Stock options granted for services | - | - | - | - | - | - | - | - | - | - | - | - | 51,262 | - | 51,262 | |||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation in connection with restricted common stock award grants and restricted common stock unit grants | - | - | - | - | - | - | - | - | 1,875 | 2 | - | - | 20,216 | - | 20,218 | |||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | (957,120 | ) | (957,120 | ) | |||||||||||||||||||||||||||||||||||||||||||
| Balance, July 31, 2020 | - | - | - | - | - | - | - | - | 2,925,625 | 2,926 | - | - | 41,164,507 | (32,545,072 | ) | 8,622,361 | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of preferred stock and warrants, net of issuance cost | - | - | - | - | - | - | 921,666 | 922 | - | - | - | - | 5,529,082 | - | 5,530,004 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for services | - | - | - | - | - | - | - | - | 147,341 | 147 | - | - | 1,442,055 | - | 1,442,202 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of preferred stock and common stock in connection with the Share Exchange Agreement | - | - | - | - | 106,894 | 107 | - | - | 581,053 | 581 | - | - | 12,640,292 | - | 12,640,980 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for exercise of warrants | - | - | - | - | - | - | - | - | 10,000 | 10 | - | - | 69,990 | - | 70,000 | |||||||||||||||||||||||||||||||||||||||||||||
| Stock options granted for services | - | - | - | - | - | - | - | - | - | - | - | - | 137,650 | - | 137,650 | |||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation in connection with restricted common stock award grants and restricted common stock unit grants | - | - | - | - | - | - | - | - | - | - | - | - | 77,250 | - | 77,250 | |||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | (4,844,666 | ) | (4,844,666 | ) | |||||||||||||||||||||||||||||||||||||||||||
| Balance, October 31, 2020 | - | - | - | - | 106,894 | 107 | 921,666 | 922 | 3,664,019 | 3,664 | - | - | 61,060,826 | (37,389,738 | ) | 23,675,781 | ||||||||||||||||||||||||||||||||||||||||||||
| Conversion of preferred stock into common stock | - | - | - | - | (106,894 | ) | (107 | ) | (921,666 | ) | (922 | ) | 1,990,606 | 1,991 | - | - | (962 | ) | - | - | ||||||||||||||||||||||||||||||||||||||||
| Common stock to be issued for cash | - | - | - | - | - | - | - | - | - | - | 794,136 | 794 | 8,370,373 | - | 8,371,167 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for services | - | - | - | - | - | - | - | - | 7,688 | 8 | - | - | 1,590 | - | 1,598 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for prepaid services | - | - | - | - | - | - | - | - | 5,009 | 5 | - | - | 56,245 | - | 56,250 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for exercise of warrants | - | - | - | - | - | - | - | - | 202,429 | 202 | - | - | 1,179,794 | - | 1,179,996 | |||||||||||||||||||||||||||||||||||||||||||||
| Stock options granted for services | - | - | - | - | - | - | - | - | - | - | - | - | 2,925 | - | 2,925 | |||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation in connection with restricted common stock award grants and restricted common stock unit grants | - | - | - | - | - | - | - | - | - | - | - | - | 1,145,595 | - | 1,145,595 | |||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | (3,700,580 | ) | (3,700,580 | ) | |||||||||||||||||||||||||||||||||||||||||||
| Balance, January 31, 2021 | - | $ | - | - | $ | - | - | $ | - | - | $ | - | 5,869,751 | $ | 5,870 | 794,136 | $ | 794 | $ | 71,816,386 | $ | (41,090,318 | ) | $ | 30,732,732 | |||||||||||||||||||||||||||||||||||
| Preferred Stock - Series F | Preferred Stock - Series G | Preferred Stock - Series H | Preferred Stock - Series I | Common Stock | Common Stock to be issued | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| $0.001 Par Value | $0.001 Par Value | $0.001 Par Value | $0.001 Par Value | $0.001 Par Value | $0.001 Par Value | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||||||||||||||||||||||||||
| Balance, April 30, 2019 | - | $ | - | - | $ | - | - | $ | - | - | $ | - | 1,986,063 | $ | 1,986 | $ | - | - | $ | 33,425,931 | $ | (26,275,102 | ) | $ | 7,152,815 | |||||||||||||||||||||||||||||||||||
| Issuance of preferred stock and warrants for cash, net of offering cost | 1,250 | 1 | - | - | - | - | - | - | - | - | - | - | 2,401,201 | - | 2,401,202 | |||||||||||||||||||||||||||||||||||||||||||||
| Conversion of preferred stock into common stock | (616 | ) | - | - | - | - | - | - | - | 108,071 | 108 | - | - | (108 | ) | - | - | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for services | - | - | - | - | - | - | - | - | 2,153 | 2 | - | - | 24,998 | - | 25,000 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for accrued services | - | - | - | - | - | - | - | - | 1,068 | 1 | - | - | 12,499 | - | 12,500 | |||||||||||||||||||||||||||||||||||||||||||||
| Stock options granted for services | - | - | - | - | - | - | - | - | - | - | - | - | 52,214 | - | 52,214 | |||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation in connection with restricted common stock unit grants | - | - | - | - | - | - | - | - | - | - | - | - | 52,682 | - | 52,682 | |||||||||||||||||||||||||||||||||||||||||||||
| Cancellation of common stock | - | - | - | - | - | - | - | - | (8,500 | ) | (9 | ) | - | - | 9 | - | - | |||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | (1,308,599 | ) | (1,308,599 | ) | |||||||||||||||||||||||||||||||||||||||||||
| Balance, July 31, 2019 | 634 | 1 | - | - | - | - | - | - | 2,088,855 | 2,088 | - | - | 35,969,426 | (27,583,701 | ) | 8,387,814 | ||||||||||||||||||||||||||||||||||||||||||||
| Conversion of preferred stock into common stock | (364 | ) | (1 | ) | - | - | - | - | - | - | 63,860 | 64 | - | - | (63 | ) | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for services | - | - | - | - | - | - | - | - | 200,000 | 200 | - | - | 2,019,800 | - | 2,020,000 | |||||||||||||||||||||||||||||||||||||||||||||
| Stock options granted for services | - | - | - | - | - | - | - | - | - | - | - | - | 52,213 | - | 52,213 | |||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation in connection with restricted common stock unit grants | - | - | - | - | - | - | - | - | 33,500 | 34 | - | - | 393,064 | - | 393,098 | |||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | (2,227,086 | ) | (2,227,086 | ) | |||||||||||||||||||||||||||||||||||||||||||
| Balance, October 31, 2019 | 270 | - | - | - | - | - | - | - | 2,386,215 | 2,386 | - | - | 38,434,440 | (29,810,787 | ) | 8,626,039 | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for services | - | - | - | - | - | - | - | - | 503,609 | 503 | - | - | 418,195 | - | 418,698 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for accrued services | - | - | - | - | - | - | - | - | 17,936 | 18 | - | - | 14,385 | - | 14,403 | |||||||||||||||||||||||||||||||||||||||||||||
| Stock options granted for services | - | - | - | - | - | - | - | - | - | - | - | - | 40,357 | - | 40,357 | |||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation in connection with restricted common stock award grants and restricted common stock unit grants | - | - | - | - | - | - | - | - | 55,787 | 56 | - | - | 27,539 | - | 27,595 | |||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | (961,458 | ) | (961,458 | ) | |||||||||||||||||||||||||||||||||||||||||||
| Balance, January 31, 2020 | 270 | $ | - | - | $ | - | - | $ | - | - | $ | - | 2,963,547 | $ | 2,963 | $ | - | - | $ | 38,934,916 | $ | (30,772,245 | ) | $ | 8,165,634 | |||||||||||||||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
U.S. GOLD CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Nine Months | For the Nine Months | |||||||
| Ended | Ended | |||||||
| January 31, 2021 | January 31, 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (9,502,366 | ) | $ | (4,497,143 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 16,456 | 6,622 | ||||||
| Accretion | 12,973 | 6,666 | ||||||
| Stock based compensation | 2,878,700 | 1,061,857 | ||||||
| Abandonment of mineral properties | 56,329 | - | ||||||
| Amortization of prepaid stock based expenses | 9,375 | 145,210 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | (108,526 | ) | (77,508 | ) | ||||
| Reclamation bond deposit | (34,000 | ) | (16,109 | ) | ||||
| Accounts payable and accrued liabilities | 309,156 | (182,964 | ) | |||||
| Accounts payable - related parties | (3,459 | ) | 1,967 | |||||
| NET CASH USED IN OPERATING ACTIVITIES | (6,365,362 | ) | (3,551,402 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property and equipment | (42,991 | ) | - | |||||
| Proceeds received in connection with the share exchange agreement | 2,500,000 | 159,063 | ||||||
| NET CASH PROVIDED BY INVESTING ACTIVITIES | 2,457,009 | 159,063 | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Issuance of preferred stock and warrants, net of issuance cost | 5,530,004 | 2,401,202 | ||||||
| Common stock to be issued for cash | 8,371,167 | - | ||||||
| Issuance of common stock for exercise of warrants | 1,249,997 | - | ||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 15,151,168 | 2,401,202 | ||||||
| NET INCREASE (DECREASE) IN CASH | 11,242,815 | (991,137 | ) | |||||
| CASH - beginning of period | 2,749,957 | 2,197,181 | ||||||
| CASH - end of period | $ | 13,992,772 | $ | 1,206,044 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Cash paid for: | ||||||||
| Interest | $ | - | $ | - | ||||
| Income taxes | $ | - | $ | - | ||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Issuance of common stock for accrued services | $ | - | $ | 26,903 | ||||
| Issuance of common stock for prepaid services | $ | 56,250 | $ | - | ||||
| Deemed dividends - Series F preferred stock | $ | - | $ | 2,022,712 | ||||
| Deemed dividends - Series I preferred stock | $ | 5,530,004 | $ | - | ||||
| Issuance of common stock in connection with conversion of preferred stock | $ | 21 | $ | 2,020,000 | ||||
| Assumption of liabilities in connection with the share exchange agreement | $ | 108,652 | $ | 125,670 | ||||
| Increase in acquisition of mineral properties in connection with the share exchange agreement | $ | 10,249,632 | $ | 1,986,607 | ||||
| Increase in asset retirement cost and obligation | $ | 13,352 | $ | - | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
U.S. GOLD CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 20202021
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Organization
U.S. Gold Corp., formerly known as Dataram Corporation (the “Company”), was originally incorporated in the State of New Jersey in 1967 and was subsequently re-incorporated under the laws of the State of Nevada in 2016. Effective June 26, 2017, the Company changed its name to U.S. Gold Corp. from Dataram Corporation. None of the Company’s properties contain proven and probable reserves and all of the Company’s activities are exploratory in nature.
On June 13, 2016, Gold King Corp. (“Gold King”), a private Nevada corporation, entered into an Agreement and Plan of Merger (the “Merger“Gold King Merger Agreement”) with the Company, the Company’s wholly-owned subsidiary Dataram Acquisition Sub, Inc., a Nevada corporation (“Acquisition Sub”), and all of the principal shareholders of Gold King (the “Gold King Shareholders”).King. Upon closing of the transactions contemplated under the Gold King Merger Agreement (the “Merger”“Gold King Merger”), Gold King merged with and into Acquisition Sub with Gold King as the surviving corporation and became a wholly-owned subsidiary of the Company. The Gold King Merger was treated as a reverse acquisition and recapitalization, and the business of Gold King became the business of the Company. The financial statements are those of Gold King (the accounting acquirer) prior to the merger and include the activity of the Company (the legal acquirer) from the date of the Gold King Merger. Gold King is a gold and precious metals exploration company pursuing exploration and development opportunities primarily in Nevada and Wyoming. The Company has a wholly owned subsidiary, U.S. Gold Acquisition Corporation, formerly Dataram Acquisition Sub, Inc. (“U.S. Gold Acquisition”), a Nevada corporation which was formed in April 2016.
On May 23, 2017, the Company closed the Gold King Merger with Gold King. The Gold King Merger constituted a change of control and the majority of the Boardboard of Directorsdirectors changed with the consummation of the Gold King Merger. The Company issued shares of common stock to Gold King which represented approximately 90% of the combined company.
On September 10, 2019, the Company, 2637262 Ontario Inc., a corporation incorporated under the laws of the Providence of Ontario (“NumberCo”), and all of the shareholders of NumberCo (the “NumberCo Shareholders”), entered into a Share Exchange Agreement (the “Share Exchange Agreement”), pursuant to which, among other things, the Company agreed to issue to the NumberCo Shareholders 2,000,000200,000 shares of the Company’s common stock in exchange for all of the issued and outstanding shares of NumberCo, with NumberCo becoming a wholly-owned subsidiary of the Company.
On March 17, 2020, the board of directors (the “Board”) of the Company approved a 1-for-10 reverse stock split of the Company’s issued and outstanding shares of common stock (the “Reverse Stock Split”), and on March 18, 2020, the Company filed with the Secretary of State of the State of Nevada a Certificate of Amendment to its Articles of Incorporation to effect the Reverse Stock Split. The Reverse Stock Split became effective as of 5:00 p.m. Eastern Time on March 19, 2020, and the Company’s common stock began trading on a split-adjusted basis when the market opened on March 20, 2020. Accordingly, all common stock and per share data are retrospectively restated to give effect of the split for all periods presented herein.
On August 10, 2020, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Gold King Acquisition Corp. (“Acquisition Corp.”), a wholly owned subsidiary of the Company, Northern Panther Resources Corporation (“Northern Panther” or “NPRC”) and the Stockholder Representative named therein, pursuant to which Acquisition Corp. merged with and into NPRC, with NPRC surviving as a wholly-owned subsidiary of the Company (see Note 4).
None of the Company’s properties contain proven and probable reserves and all of the Company’s activities are exploratory in nature.
Unless the context otherwise requires, all references herein to the “Company” refer to U.S. Gold Corp. and its consolidated subsidiaries.
U.S. GOLD CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2021
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentationpresentation and Principlesprinciples of Consolidationconsolidation
The accompanying interim unaudited condensed consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), the instructions to Form 10-Q, and the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) for interim financial information, which includes the unaudited condensed consolidated financial statements and presents the unaudited condensed consolidated financial statements of the Company and its wholly-owned subsidiaries as of January 31, 2020.2021. All intercompany transactions and balances have been eliminated. The accounting policies and procedures used in the preparation of these unaudited condensed consolidated financial statements have been derived from the audited financial statements of the Company for the year ended April 30, 2019,2020, which are contained in the Form 10-K filed on July 26, 2019.13, 2020. The unaudited condensed consolidated balance sheet as of April 30, 20192020 was derived from those financial statements. It is management’s opinion that all material adjustments (consisting of normal recurring adjustments) have been made, which are necessary for a fair financial statement presentation. Operating results forduring the three-three and nine-month periodsnine months ended January 31, 20202021 are not necessarily indicative of the results to be expected for the year ending April 30, 2020.
U.S. GOLD CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 20202021.
Use of Estimates and Assumptions
In preparing the unaudited condensed consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the condensed consolidated balance sheet, and revenues and expenses for the period then ended. Actual results may differ significantly from those estimates. Significant estimates made by management include, but are not limited to, valuation of mineral rights, stock-based compensation, the fair value of common and preferred stock, valuation of warrants, asset retirement obligations and the valuation of deferred tax assets and liabilities.
Revision of Financial Statements
During the three months ended October 31, 2019, the Company determined that it had improperly classified a deemed dividend related to the Company’s preferred stock within its stockholders’ equity section of its balance sheet during the three months ended July 31, 2019. This resulted in an overstatement of additional paid-in capital by the amount of the deemed dividend, and a corresponding understatement of accumulated deficit. The Company reclassified the deemed dividend for the six-month period ended October 31, 2019. The Company assessed the materiality of the misstatements in accordance with Staff Accounting Bulletin No.99, “Materiality” and No. 108, “Quantifying Misstatements”, and concluded that this error was not qualitatively material on the Company’s consolidated balance sheets, and statement of stockholders’ deficit. There was no effect on the statements of cash flows, statements of operations, and net loss for the periods then ended.
The effect of this reclassification on the line items within the Company’s consolidated financial statements as of July 31, 2019, was as follows:
| July 31, 2019 As Previously Reported | Reclassification | As Reclassified | ||||||||||
| Additional Paid-in Capital | $ | 37,973,338 | $ | (2,022,712 | ) | $ | 35,950,626 | |||||
| Accumulated Deficit | (29,606,413 | ) | 2,022,712 | (27,583,701 | ) | |||||||
| Total Equity | $ | 8,387,814 | $ | - | $ | 8,387,814 | ||||||
Reclassifications
Certain prior period amounts may be reclassified to conform to the current period presentation. Any reclassified amounts have no impact on the Company’s previously reported financial position or results of operations.
Fair Value Measurements
The Company has adopted Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied in accordance with U.S. GAAP, which requires the use of fair value measurements, establishes a framework for measuring fair value and expands disclosure about such fair value measurements.
ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.
These inputs are prioritized below:
| Level 1: | Observable inputs such as quoted market prices in active markets for identical assets or liabilities. |
| Level 2: | Observable market-based inputs or unobservable inputs that are corroborated by market data. |
| Level 3: | Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions. |
The Company analyzes all financial instruments with features of both liabilities and equity under the Financial Accounting Standard Board’s (“FASB”) accounting standard for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
At January 31, 2021 and April 30, 2020, the Company had no financial instruments or liabilities accounted for at fair value on a recurring basis or nonrecurring basis.
Prepaid expenses and other current assets
Prepaid expenses and other current assets of $368,119 and $212,718 at January 31, 2021 and April 30, 2020, respectively, consist primarily of costs paid for future services which will occur within a year. Prepaid expenses principally include prepayments in cash and equity instruments for consulting, public relations, and business advisory services, insurance premiums, mining claim fees, drilling fees, and mineral lease fees which are being amortized over the terms of their respective agreements.
Property
Property is carried at cost. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. Depreciation is calculated on a straight-line basis over the estimated useful life of the assets, generally ten years.
U.S. GOLD CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 20202021
At January 31, 2020 and April 30, 2019, the Company had no assets or liabilities accounted for at fair value on a recurring basis or nonrecurring basis.
Impairment of Long-lived Assetslong-lived assets
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. NoThe Company did not recognize any impairment of long-lived assets was recorded during the nine monthsperiods ended January 31, 2021 and April 30, 2020.
Mineral Rights
Costs of leasing, exploring, carrying and retaining unproven mineral lease properties are expensed as incurred. The Company expenses all mineral exploration costs as incurred as it is still in the exploration stage. If the Company identifies proven and probable reserves in its investigation of its properties and upon development of a plan for operating a mine, it would enter the development stage and capitalize future costs until production is established.
When a property reaches the production stage, the related capitalized costs will be amortized on a units-of-production basis over the proven and probable reserves following the commencement of production. The Company assesses the carrying costs of the capitalized mineral properties for impairment under ASC 360-10, “Impairment of Long-Lived Assets”, and evaluates its carrying value under ASC 930-360, “Extractive Activities—Mining”, annually. An impairment is recognized when the sum of the expected undiscounted future cash flows is less than the carrying amount of the mineral properties. Impairment losses, if any, are measured as the excess of the carrying amount of the mineral properties over its estimated fair value.
To date, the Company has not established the commercial feasibility of any exploration prospects; therefore, all exploration costs are being expensed.
ASC 930-805, “Extractive Activities—Mining: Business Combinations” (“ASC 930-805”), states that mineral rights consist of the legal right to explore, extract, and retain at least a portion of the benefits from mineral deposits. Mining assets include mineral rights.
Acquired mineral rights are considered tangible assets under ASC 930-805. ASC 930-805 requires that mineral rights be recognized at fair value as of the acquisition date. As a result, the direct costs to acquire mineral rights are initially capitalized as tangible assets. Mineral rights include costs associated with acquiring patented and unpatented mining claims.
ASC 930-805 provides that in measuring the fair value of mineral assets, an acquirer should take into account both:
● The value beyond proven and probable reserves (“VBPP”) to the extent that a market participant would include VBPP in determining the fair value of the assets.
● The effects of anticipated fluctuations in the future market price of minerals in a manner that is consistent with the expectations of market participants.
Leases to explore for or use of natural resources are outside the scope of ASU 2016-02, “Leases”.
Share-Based Compensation
Share-based compensation is accounted for based on the requirements of ASC 718, “Compensation—Stock Compensation’Compensation” (“ASC 718”), which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). ASC 718 also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award. Pursuant to ASC 505, “Equity—Equity Based Payments to Non-Employees” (“ASC 505-50”), for share-based payments to consultants and other third parties, compensation expense is determined at the measurement date, which is the grant date. Until the measurement date is reached, the total amount of compensation expense remains uncertain.
U.S. GOLD CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2020
In June 2018, the FASB issuedAccounting Standards Update (“ASU”) 2018-07, “Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” (“ASU 2018-07”), which expands the scope of Topic 718 to include all share-based payment transactions for acquiring goods and services from non-employees. ASU 2018-07 specifies that Topic 718 applies to all share-based payment transactions in which the grantor acquires goods and services to be used or consumed in its own operations by issuing share-based payment awards. ASU 2018-07 also clarifies that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under ASC 606. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted, but no earlier than adoption of ASC 606. The Company chose to early adopt ASU 2018-07 in July 2018. The adoption of this standard did not have a material effect on the Company’s consolidated financial statements and related disclosures.
U.S. GOLD CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2021
Accounting for Warrants
Warrants are accounted for in accordance with the applicable accounting guidance provided in ASC 815, “Derivatives and Hedging” (“ASC 815”) as either derivative liabilities or as equity instruments, depending on the specific terms of the agreements. The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside the control of the Company) or (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). Instruments that are classified as liabilities are recorded at fair value at each reporting period, with any change in fair value recognized as a component of change in fair value of derivative liabilities in the consolidated statements of operations.
The Company assessed the classification of its outstanding common stock purchase warrants as of the date of issuance and determined that such instruments met the criteria for equity classification under the guidance in ASU 2017-11 “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Feature”. The Company has no outstanding warrants that contain a “down round” feature under Topic 815 of ASU 2017-11.
Convertible Preferred Stock
The Company accounts for its convertible preferred stock under the provisions of ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”), which sets forth the standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. ASC 480 requires an issuer to classify a financial instrument that is within the scope of ASC 480 as a liability if such financial instrument embodies an unconditional obligation to redeem the instrument at a specified date and/or upon an event certain to occur. During the periods ended January 31, 20202021 and April 30, 2019,2020, the Company’s outstanding convertible preferred shares were accounted for as equity, with no liability recorded.
Convertible Instruments
The Company bifurcates conversion options from their host instruments and accounts for them as free standing derivative financial instruments according to certain criteria. The criteria includes circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule when the host instrument is deemed to be conventional as that term is described under applicable U.S. GAAP.
U.S. GOLD CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2020
When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, a beneficial conversion feature (“BCF”) related to the issuance of convertible debt and equity instruments that have conversion features at fixed rates that are in-the-money when issued, and the fair value of warrants issued in connection with those instruments. The BCF for the convertible instruments is recognized and measured by allocating a portion of the proceeds to warrants, based on their relative fair value, and as a reduction to the carrying amount of the convertible instrument equal to the intrinsic value of the conversion feature. The discounts recorded in connection with the BCF and warrant valuation are recognized (a) for convertible debt as interest expense over the term of the debt, using the effective interest method or (b) for convertible preferred stock as dividends at the time the stock first becomes convertible.
The bifurcation of the Company’s outstanding Series F Convertible Preferred shares during the three and nine months ended January 31, 2020 was $0 and $2,022,712, respectively, was accounted for as a deemed dividend to holders of the Series F Convertible Preferred shares for the respective quarterly periods and increased the net loss applicable to common shareholders.
Remediation and Asset Retirement Obligation
Asset retirement obligations (“ARO”), consisting primarily of estimated reclamation costs at the Company’s Copper KingCK Gold and Keystone properties, are recognized in the period incurred and when a reasonable estimate can be made, and recorded as liabilities at fair value. Such obligations, which are initially estimated based on discounted cash flow estimates, are accreted to full value over time through charges to accretion expense. Corresponding asset retirement costs are capitalized as part of the carrying amount of the related long-lived asset and depreciated over the asset’s remaining useful life. AROs are periodically adjusted to reflect changes in the estimated present value resulting from revisions to the estimated timing or amount of reclamation and closure costs. The Company reviews and evaluates its AROs annually or more frequently at interim periods if deemed necessary.
U.S. GOLD CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2021
Foreign Currency Transactions
The reporting and functional currency of the Company is the U.S. dollar. Transactions denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing on the transaction dates. Assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the balance sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency included in the results of operations as incurred. Transaction gains or losses have not had, and are not expected to have, a material effect on the results of operations of the Company.Company and are included in general and administrative expenses.
Income Taxes
The Company accounts for income taxes pursuant to the provision of ASC 740-10, “Accounting for Income Taxes” (“ASC 740-10”), which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.
The Company follows the provision of ASC 740-10, “Accounting for Uncertain Income Tax Positions” (“ASC 740-10”). When tax returns are filed, there may be uncertainty about the merits of positions taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions.
Tax positions that meet the more likely than not recognition threshold are measured at the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefit associated with tax positions taken that exceed the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all more likely than not to be upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.
U.S. GOLD CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2020
The Company has adopted ASC 740-10-25, “Definition of Settlement”, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion and examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. The federal and state income tax returns of the Company are subject to examination by the Internal Revenue Service and state taxing authorities, generally for three years after they are filed.
The Unaudited Condensed StatementsConsolidated Balance Sheets include a tax refund receivable of Operations for$219,072 as of the three- and nine-month periods ended January 31, 2021 and April 30, 2020, include a tax refund of $219,073 under the Tax Cuts and Jobs Act of 2017 for carryovers of previously paid alternative minimum tax by Dataram Corporation. Receipt of this refund resulted in a difference in the statutory tax rate as compared to the effective tax rate for each of the three- and nine-month periods ended January 31, 2020.
Recent Accounting Pronouncements
In August 2018, the FASB issuedASU2018-13, “Changes to Disclosure Requirements for Fair Value Measurements”, which will improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company will evaluate the impact of this standard on the Company’s financial statements prior to May 1, 2020, the beginning of the Company’s first fiscal year for which the standard will be in effect.
Other accountingAccounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material effect on the financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an effect on or are unrelated to its financial condition, results of operations, cash flows or disclosures.
U.S. GOLD CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2021
In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes.” This guidance, among other provisions, eliminates certain exceptions to existing guidance related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. This guidance also requires an entity to reflect the effect of an enacted change in tax laws or rates in its effective income tax rate in the first interim period that includes the enactment date of the new legislation, aligning the timing of recognition of the effects from enacted tax law changes on the effective income tax rate with the effects on deferred income tax assets and liabilities. Under existing guidance, an entity recognizes the effects of the enacted tax law change on the effective income tax rate in the period that includes the effective date of the tax law. ASU 2019-12 is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. The Company is evaluating the impact on its consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging Contracts in Entity’s Own Equity (Subtopic 815-40), which eliminates the beneficial conversion and cash conversion accounting models for convertible instruments, amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions, and modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS calculation. The standard is effective for annual periods beginning after December 15, 2021, and interim periods within those reporting periods. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those reporting periods. The standard can be adopted under the modified retrospective method or the full retrospective method. The guidance will not have a material impact on its consolidated financial statements.
In October 2020, the FASB issued ASU 2020-09, Debt (Topic 470) - Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762, or ASU 2020-09, to reflect the SEC’s amended disclosure rules for guaranteed debt securities offerings. The final rule amends the disclosure requirements in SEC Regulation S-X, Rule 3-10, which require entities to separately present financial statements for subsidiary issuers and guarantors of registered debt securities unless certain exceptions are met. The amended rule allows entities to provide summarized financial information of the parent company and its issuers and guarantors on a combined basis either in a note to the financial statements or as part of management’s discussion and analysis. ASU 2020-09 is effective for filings on or after January 4, 2021, with early adoption permitted. Upon adoption, the guidance did not have a material impact on its consolidated financial statements.
NOTE 3 — GOING CONCERN
The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As of January 31, 2020,2021, the Company had cash of approximately $1.2$14.0 million, working capital of approximately $1.7$14.0 million and an accumulated deficit of approximately $30.8$41.1 million. The Company had a net loss and cash used in operating activities of approximately $4.5$9.5 million and $3.6$6.4 million, respectively, duringfor the nine-month period ended January 31, 2020.2021. As a result of the utilization of cash in its operating activities, and the development of its assets, the Company has incurred losses since it commenced operations. The Company’s primary source of operating funds since inception has been equity financings. As of the date of the filing of the quarterly report for the interim period January 31, 2020,2021, the Company had sufficient cash to fund its operations for approximately 69 to 12 months and expects that it willwould be required to raise additional funds to fund its operations thereafter. The ongoing COVID-19 pandemic has and may continue to adversely impact the Company’s business, as the Company’s operations are based in and rely on third parties located in areas affected by the pandemic. These matters raise substantial doubt about the Company’s ability to continue as a going concern for the twelve months following the issuance of these financial statements.
On June 19, 2019,Additionally, on January 28, 2021, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain institutional and accredited investors (the “Purchasers”) and such transaction closed on February 1, 2021. Pursuant to the Purchase Agreement, the Company issued and sold 1,250 Series F Preferred units forto the Purchasers (i) in a registered direct offering (the “Offering”) an aggregate purchase price of $2,500,000 (see Note 8), which the Company believes may not be indicative914,136 shares of the Company’s abilitycommon stock at a price of $10.54 per share and (ii) in a concurrent private placement warrants to raise additional fundspurchase an aggregate of 457,068 shares of common stock at an exercise price of $14.50 per share for operations, due to a further downturn in equity markets for companies in its industry. There can be no assurance thataggregate gross proceeds from the Offering of approximately $9.6 million (see Note 11). As of January 31, 2021, certain of these investors completed and funded their subscription agreements, consequently, the Company willrecorded 794,136 common stock to be able to raiseissued valued at par value of $794 and additional paid in capital or ifof $8,370,373 as of January 31, 2021 until which time the terms will be favorable.Company could administratively issue the shares.
U.S. GOLD CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2021
The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 4 — MINERAL RIGHTS
Copper King ProjectAs of the date of these consolidated financial statements, the Company has not established any proven or probable reserves on its mineral properties and has incurred only acquisition costs and exploration costs.
The Company owns the Copper King gold and copper development project (the “Copper King Project”), which is comprised of two State of Wyoming Metallic and Non-metallic Rocks and Minerals Mining Leases covering an area of approximately 1.8 square miles located in the Silver Crown Mining District of southeast Wyoming.
U.S. GOLD CORP. AND SUBSIDIARIESNorthern Panther Merger Agreement
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2020
On July 2, 2014,August 10, 2020, the Company entered into an Asset Purchasethe Merger Agreement wherebywith Acquisition Corp., NPRC and the Stockholder Representative named therein, pursuant to which Acquisition Corp. merged with and into NPRC, with NPRC surviving as a wholly-owned subsidiary of the Company acquired certain mining leases and other mineral rights comprising(such transaction, the Copper King Project. The purchase price consisted of (a) cash payment in“Merger”).
At the amount of $1.5 million and (b) closing shares calculated at 50% of the issuedMerger, which occurred on August 11, 2020, the shares of common stock of NPRC outstanding immediately prior to the Merger (other than shares held as treasury stock) were converted into and outstandingrepresent the right to receive (i) 581,053 shares of the Company’s common stock and valued at $1.5 million. In accordance with ASC 360-10, “Property, Plant, and Equipment”, assets are recognized based on their cost to the acquiring entity, which generally includes the transaction costs of the asset acquisition. Accordingly, the Company recorded a total cost of the acquired mineral properties of $3,091,738, which includes the purchase price ($3,000,000) and related transaction costs.
Keystone Project
The Company, through its wholly-owned subsidiary, U.S. Gold Acquisition, acquired the mining claims comprising the Keystone Project on May 27, 2016 from Nevada Gold Ventures, LLC (“Nevada Gold”) and Americas Gold Exploration, Inc. under the terms of a Purchase and Sale Agreement. At the time of purchase, the Keystone Project consisted of 284 unpatented lode mining claims situated in Eureka County, Nevada. The purchase price for the Keystone Project consisted of the following: (a) cash payment in the amount of $250,000, (b) 462,500(ii) 106,894 shares of the Company’s Series H Convertible Preferred Stock, par value $0.001 per share (the “Series H Preferred Stock” and, together with the common stock, and (c)the “Merger Consideration”), which Series H Preferred Stock was convertible into common stock on a 1 for 10 basis (see Notes 8). On November 13, 2020, the Company issued an aggregate of 231,458 five-year options to purchase shares of the Company’s common stock at an exercise price of $3.60 per share.
The Company valued the shares of common stock at the fair value of $555,000 or $1.20 per share of common stock based on the contemporaneous sale of its preferred stock in a private placement at $0.10 per common share. The options were valued at $184,968. The options vested over a period of two years whereby 1/24 of the options vested and became exercisable each month for the 24 months following the closing of the acquisition. The options are non-forfeitable and are not subject to obligations or service requirements.
Accordingly, the Company recorded a total cost of the acquired mineral properties of $1,028,885 which includes the purchase price ($989,968) and related transaction cost ($38,917). Some of the Keystone Project claims are subject to pre-existing net smelter royalty (“NSR”) obligations. In addition, under the terms of the Purchase and Sale Agreement, Nevada Gold retained additional NSR rights of 0.5% with regard to certain claims and 3.5% with regard to certain other claims. Under the terms of the Purchase and Sale Agreement, the Company may buy down one percent (1%) of the royalty from Nevada Gold at any time through the fifth anniversary of the closing date for $2,000,000. In addition, the Company may buy down an additional one percent (1%) of the royalty anytime through the eighth anniversary of the closing date for $5,000,000.
Gold Bar North Project
In August 2017, the Company closed on a transaction under a purchase and sale agreement executed in June 2017 with Nevada Gold and the Company’s wholly-owned subsidiary, U.S. Gold Acquisition Corporation, a Nevada corporation, pursuant to which Nevada Gold sold and U.S. Gold Acquisition Corporation purchased all rights, title and interest in the Gold Bar North Property, a gold development project located in Eureka County, Nevada. The purchase price for the Gold Bar North Property was: (a) cash payment in the amount of $20,479, which was paid in August 2017, and (b) 15,000 shares of common stock of the Company, which were issued in August 2017, valued at $35,850.
Maggie Creek Project
On September 10, 2019, the Company, NumberCo and the NumberCo Shareholders, entered into the Share Exchange Agreement, pursuant to which, among other things, the Company agreed to issue to the NumberCo Shareholders 2,000,0001,068,940 shares of the Company’s common stock in exchange for the conversion of all of the issued and106,894 outstanding shares of NumberCo, with NumberCo becoming a wholly owned subsidiary of the Company (see Note 1).
NumberCo owns all of the issued and outstanding shares of Orevada Metals Inc. (“Orevada”), a corporation under the laws of the state of Nevada. At the time of acquisition, the Company acquired from NumberCo cash of $159,063, and assumed liabilities consisting of accounts payable totaling $125,670. As a result, the Company acquired Orevada’s right to an option agreement dated in February 2019 (the “Option Agreement”). The Option Agreement grants Orevada the exclusive right and option to earn-in and acquire up to 50% undivided interest in a property called Maggie Creek, located in Eureka County, Nevada by completing a $4.5 million in exploration and development expenditures (“Initial Earn-in”) and payment to Renaissance Exploration, Inc. (“Renaissance”), the grantor, of $250,000. Orevada may elect within 60 days after making the $250,000 payment, to increase its interest by an additional 20% (total interest of 70%) by producing a feasibility study by the end of the ninth year of the Option Agreement. One of the directors of the Company, Mr. Tim Janke, is also a director of Renaissance, a company which is not under common control.
U.S. GOLD CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2020Series H Preferred Stock.
Pursuant to ASU 2017-01 and ASC 805, each titled “Business Combinations”, the Company analyzed the Share ExchangeMerger Agreement to determine if the Company acquired a business or acquired assets. Based on this analysis, it was determined that the Company acquired assets primarily consisting of 1) cash and 2) mineral rights on a gold exploration project in Idaho called the right to an Option AgreementChallis Gold exploration project. The Company excluded the cash received in the determination of the gross assets and concluded that the right to the Option Agreementmineral right- Challis Gold project represents substantially all of the fair value of the gross assets acquired. If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the asset is not considered a business.
The monetary value of the 2,000,000 shares issued to the NumberCo Shareholders is deemed by the Company to be $2,020,000. In accordance with ASC 805-50-30 “Business Combinations”, the Company determined that if the consideration paid is not in the form of cash, the measurement may be based on either (i) the cost which is measured based on the fair value of the consideration given or (ii) the fair value of the assets (or net assets) acquired, whichever is more clearly evident and thus more reliably measurable.
The 2,000,000 Accordingly, the total consideration given consist of the shares issued to the NumberCo Shareholders wereof common stock and common stock equivalents of 1,650,000 shares, valued at $2,020,000, or $1.01 per share, the fair value ofVolume Weighted Average Price for the Company’s common stock based on the quoted trading price on30-day period immediately prior to the date of the Share ExchangeMerger Agreement (see Note 8). No goodwill was recorded as the Share Exchange Agreement was accounted for as an asset purchase.of $7.6612 per share of common stock, or $12,640,980. Net assets purchased consist of:
The relative fair value of the assets acquired and liabilities assumed were based on management’s estimates of the fair values on September 10, 2019, the date of the Share Exchange Agreement. Based upon the purchase price allocation, the following table summarizes the estimated relative fair value of the assets acquired and liabilities assumed at the date of acquisition:
| Cash | $ | 159,063 | ||
| Mineral property – Maggie Creek | 1,986,607 | |||
| Total assets acquired at fair value | 2,145,670 | |||
| Total Liabilities assumed at fair value | (125,670 | ) | ||
| Total purchase consideration | $ | 2,020,000 |
As of the date of these unaudited condensed consolidated financial statements, the Company has not established any proven or probable reserves on its mineral properties and has incurred only acquisition costs and exploration costs.
| Cash – US Dollars | $ | 2,500,000 | ||
| Intangible assets – (mineral rights) Challis Gold Project | 10,249,632 | |||
| Total assets acquired at fair value | 12,749,632 | |||
| Total Liabilities assumed at fair value – US Dollars | (108,652 | ) | ||
| Total purchase consideration | $ | 12,640,980 |
As of the dates presented, mineral properties consisted of the following:
| January 31, 2020 | April 30, 2019 | |||||||
| (unaudited) | ||||||||
| Copper King Project | $ | 3,091,738 | $ | 3,091,738 | ||||
| Keystone Project | 1,028,885 | 1,028,885 | ||||||
| Gold Bar North Project | 56,329 | 56,329 | ||||||
| Maggie Creek Project | 1,986,607 | - | ||||||
| Total | $ | 6,163,559 | $ | 4,176,952 | ||||
NOTE 5 — PROPERTY
As of the dates presented, property consisted of the following:
| January 31, 2020 | April 30, 2019 | |||||||
| (unaudited) | ||||||||
| Site costs | $ | 81,885 | $ | 81,885 | ||||
| Less: accumulated depreciation | (13,578 | ) | (6,956 | ) | ||||
| Total | $ | 68,307 | $ | 74,929 | ||||
For the three months ended January 31, 2020 and 2019, depreciation expense amounted to $2,098 and $1,776, respectively. For the nine months ended January 31, 2020 and 2019, depreciation expense amounted to $6,622 and $4,602, respectively.
| January 31, 2021 | April 30, 2020 | |||||||
| CK Gold Project | $ | 3,091,738 | $ | 3,091,738 | ||||
| Keystone Project | 1,028,885 | 1,028,885 | ||||||
| Gold Bar North Project | - | 56,329 | ||||||
| Maggie Creek Project | 1,986,607 | 1,986,607 | ||||||
| Challis Gold Project | 10,249,632 | - | ||||||
| Total | $ | 16,356,862 | $ | 6,163,559 | ||||
U.S. GOLD CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2021
During the nine months ended January 31, 2021, the Company did not renew the mineral claims on the Gold Bar North mineral properties and as such the Company recorded an abandonment expense of $56,329 included in general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations.
NOTE 5 — PROPERTY AND EQUIPMENT
As of the dates presented, property consisted of the following:
| January 31, 2021 | April 30, 2020 | |||||||
| Site costs | $ | 164,409 | $ | 151,057 | ||||
| Computer equipment | 3,498 | - | ||||||
| Vehicle | 39,493 | - | ||||||
| Total | 207,400 | 151,057 | ||||||
| Less: accumulated depreciation | (34,142 | ) | (17,686 | ) | ||||
| Total | $ | 173,258 | $ | 133,371 | ||||
For the three months ended January 31, 2021 and 2020, depreciation expense amounted to $6,740 and $2,098, respectively. For the nine months ended January 31, 2021 and 2020, depreciation expense amounted to $16,456 and $6,622, respectively.
NOTE 6 — ASSET RETIREMENT OBLIGATION
In conjunction with various permit approvals permitting the Company to undergo exploration activities at the Copper KingCK Gold Project and Keystone Project, the Company has recorded an ARO based upon the reclamation plans submitted in connection with the various permits. The following table summarizes activity in the Company’s ARO for the periods presented:
| January 31, 2020 | January 31, 2019 | January 31, 2021 | April 30, 2020 | |||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| Balance, beginning of nine-month period | $ | 88,746 | $ | 81,885 | ||||||||||||
| Balance, beginning of period | $ | 168,392 | $ | 88,746 | ||||||||||||
| Addition and changes in estimates | - | - | 13,352 | 69,172 | ||||||||||||
| Accretion expense | 6,666 | 4,854 | 12,973 | 10,474 | ||||||||||||
| Balance, end of period | $ | 95,412 | $ | 86,739 | $ | 194,717 | $ | 168,392 | ||||||||
For the three months ended January 31, 20202021 and 2019,2020, accretion expense amounted to $2,335$4,585 and $2,133,$2,335, respectively. For the nine months ended January 31, 20202021 and 2019,2020, accretion expense amounted to $6,666$12,973 and $4,854,$6,666, respectively.
NOTE 7 — RELATED PARTY TRANSACTIONS
On April 16, 2019, the Company entered into a one-year consulting agreement with a director of the Company for providing services related to investor and strategic introduction to potential industry partners. In consideration for the services, the consultant was paid $3,750 per month in cash, and total shares of the Company’s common stock with a value of $45,000. In April 2019, the Company issued 4,592 shares of the Company’s common stock, valued at $45,000 at the market price on the dates of grant, in connection with this consulting agreement. On January 7, 2021, the Company entered into another one-year agreement with the director providing for an annual fee of $86,000 consisting of shares of the Company’s common stock with a value of $50,000 and cash payments of $36,000, paid $3,000 per month. The Company paid consulting fees to such director of $3,000 and $11,250 in cash during the three months ended January 31, 2021 and 2020, respectively. The Company paid consulting fees to such director of $6,750 and $33,750 in cash during the nine months ended January 31, 2021 and 2020, respectively. As of January 31, 2021, the Company recorded accrued expenses of $4,167 in connection with the January 7, 2021 consulting agreement and reflected in accounts payable and accrued liabilities in the accompanying unaudited condensed consolidated balance sheets.
Accounts payable to related parties as of January 31, 20202021 and April 30, 20192020 was $17,603$0 and $42,539,$3,459, respectively, and was reflected as accounts payable – related party in the accompanying unaudited condensed consolidated balance sheets. The related party to which accounts were payable as of January 31,April 30, 2020 was the former Chief Financial Officer, who was owed a total of $17,603 (includes $5,158$3,459 (including $2,700 payable in shares of common stock). The related parties to which accounts were payable as of April 30, 2019 were the former Vice President-Head of Exploration, who was owed $12,500 payable in shares of common stock and the Chief Financial Officer, who was owed a total of $30,039 (includes $14,403 payable in shares of common stock). The amounts payable in shares of common stock to these two related parties were fully vested at the date of issuance.
On September 10, 2019, the Company acquired from Orevada its right to an option agreement dated in February 2019 (see Note 4). One of the board of directors of the Company, Mr. Tim Janke, is also a director of Renaissance.
NOTE 8 — STOCKHOLDERS’ EQUITY
Equity Incentive Plan
In August 2017, the Company’s Board of Directors approved the Company’s 2017 Equity Incentive Plan (the “2017 Plan”) including the reservation of 1,650,000 shares of common stock thereunder.
On August 6, 2019, the Board of Directors of the Company approved and adopted, subject to stockholder approval, the U.S. Gold Corp. 2020 Stock Incentive Plan (the “2020 Plan”). The 2020 Plan reserves 3,307,104 shares for future issuance to officers, directors, employees and contractors as directed from time to time by the Compensation Committee of the Board of Directors. The Board directed that the 2020 Plan be submitted to the Company’s stockholders for their approval at the 2019 Annual Meeting of Stockholders of the Company (the “Annual Meeting”), which was held on September 18, 2019. The 2020 Plan was approved by a vote of stockholders at the Annual Meeting. With the approval and effectivity of the 2020 Plan, no further grants will be made under the 2017 Plan.
Series F Convertible Preferred Stock
On June 19, 2019, the Company filed a Certificate of Designations, Preferences and Rights of the Series F Preferred (the “Certificate of Designations”) with the Secretary of State of the State of Nevada amending its articles of incorporation to establish a class of Series F Preferred Stock and the number, relative rights, preferences and limitations thereof. Pursuant to the Certificate of Designations, 1,250 shares of preferred stock have been designated as Series F Preferred Stock, and each of the shares of Series F Preferred Stock initially is convertible, at the election of the holder, into a number of shares of the Company’s common stock equal to the stated value of the Series F Preferred Stock, which is $2,000, subject to specified adjustments, divided by the conversion price, which is $1.14 per share, subject to specified adjustments as further adjusted in the event of stock split, stock dividends, and recapitalization or otherwise (the “Conversion Price”). Based on the initial Conversion Price, approximately 2,193,750 shares of common stock would be issuable upon conversion of all of the Series F Preferred Stock to be sold pursuant to the Purchase Agreement (as defined herein).
U.S. GOLD CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 20202021
NOTE 8 — STOCKHOLDERS’ EQUITY
As of January 31, 2021, authorized capital stock consisted of 200,000,000 shares of common stock, par value $0.001 per share, and 50,000,000 shares of “blank check” preferred stock, par value $0.001 per share, of which 1,300,000 shares are designated as Series A holder ofConvertible Preferred Stock, 400,000 shares are designated as Series B Convertible Preferred Stock, 45,002 shares are designated as Series C Convertible Preferred Stock, 7,402 shares are designated as Series D Convertible Preferred Stock, 2,500 shares are designated as Series E Convertible Preferred Stock, 1,250 shares are designated as Series F Preferred Stock, shall have no right127 shares are designated as Series G Preferred Stock, 106,894 shares are designated as Series H Preferred Stock, and 921,666 shares are designated as Series I Preferred Stock. The Company’s Board has the authority, without further action by the stockholders, to convert any portionissue shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions granted to or imposed upon the preferred stock.
Series G Convertible Preferred Stock
During the nine months ended January 31, 2021, the Company issued an aggregate of 20,357 shares of the Company’s common stock in exchange for the conversion of 57 shares of Series G Preferred Stock. As of January 31, 2021, all Series G Preferred Stock had converted and there were no shares of Series G Preferred Stock outstanding.
Series H Convertible Preferred Stock
Northern Panther Merger Agreement
On August 10, 2020, the Company entered into the Merger Agreement with Acquisition Corp., NPRC and the Stockholder Representative named therein, pursuant to which the Company agreed to issue (i) 581,053 shares of the Company’s common stock, and (ii) 106,894 shares of the Company’s Series H Preferred Stock in exchange for all the issued and outstanding shares of NPRC with NPRC becoming a wholly owned subsidiary of the Company. The Merger closed on August 11, 2020 (see Note 4).
On August 11, 2020, the Company filed a Certificate of Designations, Preferences and Rights of the Series H Preferred Stock with the Secretary of State of the State of Nevada amending its Articles of Incorporation to establish the Series H Preferred Stock and the number, relative rights, preferences and limitations thereof. Pursuant to the extent that, after giving effect toCertificate of Designations, 106,894 shares of preferred stock have been designated as Series H Preferred Stock.
The Series H Preferred Stock was convertible into common stock on a 1 for 10 basis upon the receipt of the approval by the requisite vote of the Company’s stockholders at the Company’s 2020 annual meeting, which was held on November 9, 2020. The Company’s stockholders approved such conversion on November 9, 2020. On November 13, 2020, the holder would beneficially ownCompany issued an aggregate of 1,068,940 shares of the Company’s common stock in excessexchange for the conversion of 4.99% (or, atall 106,894 outstanding shares of Series H Preferred Stock.
In connection with the electionMerger, Luke Norman Consulting Ltd. received a finder’s fee equal to the quotient of (a) 5% of the purchase value for the Merger and (b) the 30-day Volume Weighted Average Price (“VWAP”) of a holder after providing 61 days’share of the Company’s common stock as reported on the Nasdaq Capital Market prior written notice to the Company, 9.99%)execution Merger Agreement, which was paid in 82,500 shares of restricted common stock on August 11, 2020.
Total consideration given consist of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares ofand common stock upon such conversion. Holdersequivalents of 1,650,000 shares, valued at the Series F Preferred Stock shall be entitled to receive dividends when and as declared byVolume Weighted Average Price for the Board of Directors, from time to time, and shall participate on an “as converted” basis with all dividends declared on the Company’s common stock.
The Series F Preferred Stock has no redemption provisions. In the event of the Company’s liquidation, the holders of the Series F Preferred Stock would be entitled to receive in cash out of the assets of the Company, after payment of the liquidation preference for any outstanding shares of senior preferred stock, but before any amount is paid to the holders of any of shares of junior stock and pari passu with any parity stock then outstanding, an amount per share equal the greater of (A) the stated value thereof on the date of such payment and (B) the amount per share such holder would receive if such holder converted such Series F Preferred Stock into common stock30-day period immediately prior to the date of such payment.
Except as required by law or the Company’s ArticlesMerger Agreement of Incorporation, including certain protective provisions in the Certificate of Designations, holders of the Series F Preferred Stock have the same voting rights as holders$7.6612 per share of common stock, voting together as one class on an as-converted basis based on a conversion price equal to $1.14, subject to beneficial ownership limitations.or $12,640,980.
On June 19, 2019,Series I Convertible Preferred Stock
Securities Purchase Agreement
In connection with the Merger, on August 10, 2020, the Company sold, under the terms ofentered into a securities purchase agreement (the “Purchase Agreement”“SPA”), 1,250 Series F Preferred units for with certain investors, pursuant to which the Company sold to such investors in a private placement (i) an aggregate purchase price of $2,500,000, or $2,000 per unit. Each unit consisted of one (1) share of 0% Series F Preferred Stock and 878 Class X Warrants on a registered basis and 1,755 Class A Warrants on an unregistered basis. The Company sold a total of 1,250921,666 shares of Series F Preferred Stock, 2,193,750 Class A Warrants and 1,097,500 Class X Warrants under the Purchase Agreement. Each share of Series F Preferred Stock, at the option of the holder at any time, may be converted into the number of shares of common stock of the Company determined by dividing the $2,000 (the stated value per share of the Series F Preferred Stock) by a conversion price of $1.14 per share (approximately 2,193,750 shares of common stock), subject to adjustment. Each Class X Warrant is exercisable to acquire one share of the Company’s common stockSeries I Convertible Preferred Stock, par value $0.001 per share (the “Series I Preferred Stock”) and one Class Y Warrant at(ii) warrants to purchase an exercise priceaggregate of $1.14, for a period921,666 shares of six (6) months from the date of issuance. Each Class Y Warrant is exercisable to acquire one share of the Company’s common stock at an exercise price of $1.14$6.00 per share commencing six (6) months fromfor aggregate consideration of $5,530,004.
U.S. GOLD CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2021
On August 11, 2020, the dateCompany filed a Certificate of issuance (the “Initial Exercise Date”)Designation of Rights, Powers, Preferences, Privileges and will expire on a date that is the five (5) year anniversaryRestrictions of the Initial Exercise Date. Each Class A WarrantSeries I Preferred Stock (the “Series I Certificate of Designation”) with the Secretary of State of the State of Nevada amending its Articles of Incorporation to establish the Series I Preferred Stock and the number, relative rights, powers, preferences, privileges and restrictions thereof. Pursuant to the Series I Certificate of Designations, 921,666 shares of preferred stock have been designated as Series I Preferred Stock. The Series I Preferred Stock has substantially the same terms as the Series H Preferred Stock, except that each share of Series I Preferred Stock is exercisable to acquireconvertible into one share of common stock. The Warrants are exercisable in whole or in part at any time, from time to time following the initial exercise date, and terminate five years following the issuance. The sale of the Series I Preferred Stock and warrants under the SPA closed on August 11, 2020. The conversion of the Series I Preferred Stock and the warrants into common stock was subject to the Company’s stockholders’ approval, which was received on November 9, 2020. On November 17, 2020, the Company issued an aggregate of 921,666 shares of the Company’s common stock at an exercise pricein exchange for the conversion of $1.14 per share, commencing six (6) months from the date of issuance and will expire on a date that is the five (5) year anniversary of the date of issuance. In aggregate, if all of the921,666 outstanding shares of common stock are issued on conversion of the Series FI Preferred Stock and exercise of the Class A, Class X and Class Y warrants, the Company would issue a total of 6,582,500 shares of common stock. The warrant holders may elect to exercise the warrants via cashless exercise if there is no effective registration statement registering the warrants pursuant to the terms of each respective warrant certificate. The offering pursuant to which the Series F Preferred units were sold closed on June 20, 2019, subject to the satisfaction of customary closing conditions.Stock.
The fair value of the Series FI Preferred Stock and warrants if converted on the date of issuance was greater than the value allocated to the Series FI Preferred Stock and warrants. As a result, the Company recorded a BCF of approximately $2.0$5.5 million that the Company recognized as deemed dividend to the preferred stockholdersholders of Series I Preferred Stock and accordingly, an adjustment to net loss to arrive at net loss available to common stockholders and a corresponding increase in additional paid in capital upon issuance of the Series FI Preferred Stock and warrants. The Company accounted for the deemed dividend resulting from the issuance of Series FI Preferred Stock and warrants using the relative fair value method (see Note 2).method.
Common Stock Issued, Restricted Stock Awards, and RSUs Granted for Services
On April 30, 2020, the Company granted four former directors of the Company an aggregate of 1,875 shares of restricted stock for board services pursuant to respective restricted stock award agreements. The Purchaseshares of restricted stock vested immediately on the date of grant. The total 1,875 shares of restricted stock had a fair value of $9,581, or $5.11 per share, based on the quoted trading price on the date of grant, which was fully vested and expensed immediately. These shares were issued on May 5, 2020.
On July 31, 2020, the Company granted four former directors of the Company an aggregate of 1,875 shares of restricted stock for board services pursuant to respective restricted stock award agreements. The shares of restricted stock vested immediately on the date of grant. The total 1,875 shares of restricted stock had a fair value of $15,244, or $8.13 per share, based on the quoted trading price on the date of grant, which was fully vested and expensed immediately. These shares were issued in August 2020.
On August 11, 2020, the Company issued 82,500 shares of restricted common stock to a consultant for finder’s fee related to the Merger. The 82,500 shares of common stock had a fair value of $786,225, or $9.53 per share, based on the quoted trading price on the date of grant, which was fully vested and expensed immediately.
On September 16, 2020, the Company and David Rector, the Company’s former Chief Operating Officer, agreed by mutual understanding that Mr. Rector’s employment as an officer and employee of the Company would terminate, effective as of October 31, 2020 (the “Separation Date”). In connection with Mr. Rector’s departure, the Company entered into a General Release and Severance Agreement includes customary representations, warrantieswith Mr. Rector (the “Separation Agreement”), pursuant to which Mr. Rector provided certain transition services to the Company from the Separation Date until December 31, 2020. Pursuant to the Separation Agreement, Mr. Rector received (i) a prorated annual bonus for the 2020 calendar year and covenantsthrough the Separation Date equal to $150,000 (the “Prorated Bonus”), which was paid in the number of fully vested shares of restricted common stock of the Company equal to the Prorated Bonus determined based on the common stock’s fair market value on the date of grant, and subject to the terms and conditions of the Company’s 2020 Stock Incentive Plan (the “2020 Plan”) and the Company’s standard form Restricted Stock Award Agreement; and (ii) any equity awards granted to Mr. Rector by the Company pursuant to its 2014 Equity Incentive Plan (the “2014 Plan”), 2017 Equity Incentive Plan (the “2017 Plan”), or 2020 Plan (the 2014 Plan, 2017 Plan, and provides for indemnification2020 Plan are collectively referred to herein as, the “Equity Plans”) during the term of Mr. Rector’s employment, were 100% vested and retained by Mr. Rector, notwithstanding any terms in an award agreement or plan document regarding forfeiture of such awards under the Equity Plans upon termination of employment provided that the foregoing did not in any way extend the awards beyond their original term. The $150,000 bonus was paid in 18,502 shares of restricted common stock and had a fair value of $150,000, or $8.11 per share, based on the quoted trading price on the date of grant, which were fully vested and expensed immediately. Additionally, the Company recognized stock-based compensation of $77,250 due to the accelerated vesting of the purchasers against certain liabilities, including liabilities incurred as a result of or relating to any breach of the representations, warranties, covenants or agreements made by the Company in the Purchase Agreement. The Company assessed the classification of these common7,500 restricted stock purchase warrants and determined that such instruments met the criteria for equity classification under the guidance in ASC 815.
During the three months ended July 31, 2019,units granted on September 18, 2019. Accordingly, the Company issued an aggregate of 1,080,7077,500 shares ofin November 2020 in connection with the Company’s commonvested 7,500 restricted stock in exchange for the conversion of 616 shares of the Company’s Series F Preferred Stock.
During the three months ended October 31, 2019, the Company issued an aggregate of 638,596 shares of the Company’s common stock in exchange for the conversion of 364 shares of the Company’s Series F Preferred Stock.units.
U.S. GOLD CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 20202021
Common Stock Issued for Accrued ServicesOn September 17, 2020, the Compensation Committee of the Board awarded five directors of the Company an aggregate of 12,500 shares of restricted common stock. The shares of restricted common stock vested immediately on the date of grant. The total 12,500 shares of restricted common stock had a fair value of $140,125, or $11.21 per share, based on the quoted trading price on the date of grant, which was fully vested and expensed immediately. These shares were issued in November 2020.
On May 6, 2019,September 17, 2020, the Company paid an accrued service liabilityissued 30,107 shares of restricted common stock to its formerEdward Karr, then Chief GeologistExecutive Officer, and now Executive Chairman, as bonus in connection with the consummation of the acquisition by the Company of the NPRC (see Note 4). The Company agreed to pay Mr. Karr a bonus in the amount of $12,500 by issuing 10,684$450,000 payable as follows: (i) 75% or $337,500 of the bonus payable in fully vested shares of restricted common stock atand (ii) the remaining 25% or $112,500 in cash which was paid in October 2020. The $337,500 bonus was paid in 30,107 shares of restricted common stock and had a fair value of $337,500, or $11.21 per share, based on the quoted trading price on the date of $1.17grant, which was fully vested and expensed immediately.
On October 31, 2020, the Company granted four former directors of the Company an aggregate of 1,875 shares of restricted common stock for board services. The shares of restricted common stock vested immediately on the date of grant. The total 1,875 shares of restricted common stock had a fair value of $15,206, or $8.11 per share of common stock, based on the quoted trading price on the date of grant. In connection with this issuance, the Company reduced accrued salaries by $12,500 during the nine months ended January 31,grant, which was fully vested and expensed immediately. These shares were issued in November 2020.
On November 26, 2019,October 31, 2020, the Company paid an accrued service liability to its former Chief Financial Officer in the amount of $14,403 and stock-basedfor accounting fees of $3,881services rendered from February 2020 to September 2020 by issuing 22,7671,857 shares of restricted common stock at aan average price of $0.80$7.08 per share of common stock based on the quoted trading priceprices on the date of grant.grants. In connection with this issuance, the Company reduced accrued expenses by $14,403 and recorded stock-based accounting fees of $3,881$13,145 during the quarternine months ended January 31, 2020.2021. The restricted common sharesstock issued to this officerthe former Chief Financial Officer were fully vested at the date of issuance.
Common Stock Issued for Salaries
Between May 2019 and June 2019, On November 9, 2020, the Company issued an aggregate of 21,534 shares of common stock to satisfy a stock payable to its former Chief Geologist for services rendered between May 2019 and June 2019. The shares were valued at $25,000 using a share price ranging from $1.03 to $1.33 on the dates of grant.
Common Stock Issued, Restricted Stock Awards, and RSUs Granted for Services
On September 30, 2018, the Company issued an aggregate of 1,000,000 shares of restricted stock to officers, directors, employees and consultants for services rendered. The shares vest 50% on the date of issuance and 50% on the one-year anniversary of the date of issuance. The 1,000,000 shares of restricted stock had a fair value of $990,000 and will be expensed over the vesting period. Additionally, on November 10, 2017, 12,000 shares of restricted stock that vest two years from issue date were issued to a director, and on February 20, 2018, 150,000 shares of restricted stock that vest ratably over 12 months were issued to a consultant, bringing the total of restricted shares issued to 1,162,000. During the three months ended July 31, 2019, the Company intended to cancel an aggregate of 85,000 unvested shares of the Company’s common stock due to termination of employee relationships; however, during the quarter ended October 31, 2019, prior to cancelation of the shares, and after consultations with these former employees and Company counsel, the Company changed its position relative to the 85,000 shares and declared them vested. As a result of the vesting, the Company recognized operating expenses of $84,150.
On September 18, 2019, the Compensation Committee of the Board of Directors awarded Edward Karr, the Company’s Chief Executive Officer, President and Director, 200,000 performance-based restricted stock units (“RSUs”), David Rector, the Company’s Chief Operating Officer, 75,000 performance-based RSUs and an employee of the Company 50,000 performance-based RSUs pursuant to respective restricted stock unit award agreements. The RSUs will vest upon the earlier to occur of (i) a Change in Control (as defined in the 2020 Plan), or (ii) a material discovery of a mineral deposit, as determined by the Compensation Committee of the Board of Directors in its sole discretion.The total 325,000 RSUs had a fair value of $334,750 or $1.03 per share based on the quoted trading price on the date of grant and will be expensed upon the occurrence of the vesting term.
Additionally, on September 18, 2019, the Compensation Committee of the Board of Directors awarded five directors of the Company an aggregate of 250,000 shares of restricted stock pursuant to respective restricted stock award agreements. The shares of restricted stock vested immediately on the date of grant.The total 250,000 shares of restricted stock had a fair value of $257,500 or $1.03 per share based on the quoted trading price on the date of grant, which was expensed immediately.
On November 26, 2019, the Company issued 21,000188 shares of restricted common stock to a consultant for investor relations-relateddirector services rendered. from November 1 to November 9, 2020. The 21,000total 188 shares of restricted common stock had a fair value of $18,297,$1,598, or $0.87$8.50 per share, based on the quoted trading price on the date of grant, which was fully vested and expensed immediately.
On November 26, 2019,December 8, 2020, the Company entered into a one-year consulting agreements for investor relation services under which it was required to pay for services either in cash or shares of the Company’s common stock. On December 8, 2020, the Company issued 37,0375,009 shares at a fair value of $56,250 or $11.23 per share of common stock based on the quoted trading prices on the date of grant. The Company recognized stock-based compensation of $9,375 during the nine months ended January 31, 2021 and recorded prepaid stock-based expense of $46,875 at January 31, 2021 to be amortized over the term of the consulting agreement.
On December 9, 2020, the Company granted an aggregate of 304,464 restricted stock units to a consultantthree officers, and one employee of the Company for services to be rendered. The sharesrestricted stock units vested 25% on the date of issuance and 25% vest over a six-month period.on each of the first, second and third anniversaries of the date of grant. The 37,037 shares of304,464 restricted stock units had a fair value of $29,848,$3,413,041 or $0.81$11.21 per share of common stock based on the quoted trading price on the date of grant and will be expensed over the vesting period.
On December 9, 2020, the Company granted an aggregate of 13,392 restricted stock units to three directors of the Company for services rendered. The 13,392 restricted stock units had a fair value of $150,124 or $11.21 per share of common stock based on the quoted trading price on the date of grant. The restricted stock units fully vested and expensed immediately.
Total stock compensation expense for awards issued for services of $1,145,595 and $27,596 was expensed for the three months ended January 31, 2021 and 2020, respectively. Total stock compensation expense for awards issued for services of $1,243,063 and $138,322 was expensed for the nine months ended January 31, 2021 and 2020, respectively. A balance of $2,675,071 remains to be expensed over future vesting periods related to unvested restricted stock units issued for services.
Common Stock issued for exercise of Stock Warrants
In October 2020, the Company issued 10,000 shares of common stock for the exercise of stock warrants and received proceeds of $70,000.
U.S. GOLD CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 20202021
On January 14,In November and December 2020,the Compensation Committee of the Board of Directors awardedCompany issued an aggregate of 477,778 restricted168,571 shares of common shares toEdward Karr,stock for the Company’s Chief Executive Officer,exercise of stock warrants and David Rector, the Company’s Chief Operating Officer as 2019 Executive Bonus Awards.The total 477,778 restricted common shares stock had a fair valuereceived proceeds of $396,520, or $0.83 per share, based on the quoted trading price on the date of grant, which was fully vested and expensed immediately.$1,179,997.
On January 6,In December 2020,the Compensation Committee of the Board of Directors awarded four directors of the Company an aggregate of 18,750issued 33,858 shares of restrictedcommon stock pursuant to respective restricted stock award agreements. The shares of restricted stock vested immediately on the date of grant.The total 18,750 shares of restricted stock had a fair value of $17,438, or $0.93 per share, based on the quoted trading price on the date of grant, which was fully vested and expensed immediately.
A total of $27,596 and $473,375, and $138,322 and $751,486, was expensed for the three and nine months ended January 31, 2020 and 2019, respectively. A balancecashless exercise of $354,649 remains to be expensed over future vesting periods.109,688 stock warrants.
Common Stock Issued Pursuant to Share Exchange Agreementbe issued for cash
On September 10, 2019,January 28, 2021, the Company NumberCoentered the Purchase Agreement with the Purchasers and such transaction closed on February 1, 2021. Pursuant to the NumberCo Shareholders, entered into the Share ExchangePurchase Agreement, pursuant to which, among other things, the Company agreed to issueissued and sold to the NumberCo Shareholders 2,000,000Purchasers (i) in the Offering an aggregate of 914,136 shares of the Company’s common stock at a price of $10.54 per share and (ii) in exchangea concurrent private placement warrants to purchase an aggregate of 457,068 shares of common stock at an exercise price of $14.50 per share for allaggregate gross proceeds from the Offering of approximately $9.6 million (see Note 11). As of January 31, 2021, certain of these investors completed and funded their subscription agreements, consequently, the Company recorded 794,136 common stock to be issued valued at par value of $794 and additional paid in capital of $8,370,373 as of January 31, 2021 until which time the Company could administratively issue the shares.
Equity Incentive Plan
In August 2017, the Board approved the Company’s 2017 Plan including the reservation of 165,000 shares of common stock thereunder.
On August 6, 2019, the Board approved and adopted, subject to stockholder approval, the 2020 Plan. The 2020 Plan reserves 330,710 shares for future issuance to officers, directors, employees and contractors as directed from time to time by the Compensation Committee of the issuedBoard. The 2020 Plan was approved by a vote of stockholders at the 2019 annual meeting. With the approval and outstandingeffectivity of the 2020 Plan, no further grants will be made under the 2017 Plan. On August 31, 2020, the Board approved and adopted, subject to stockholder approval, an amendment (the “2020 Plan Amendment”) to the 2020 Plan. The 2020 Plan Amendment increased the number of shares of NumberCo, with NumberCo becomingcommon stock available for issuance pursuant to awards under the 2020 Plan by an additional 836,385, to a wholly owned subsidiarytotal of the Company. The 2,000,0001,167,095 shares issued to the NumberCo Shareholders were valued at $2,020,000, or $1.01 per share, the fair value of the Company’s common stock basedstock. The 2020 Plan Amendment was approved by the Company’s stockholders on the quoted trading price on the date of the Share Exchange Agreement (see Note 4).November 9, 2020.
Stock Optionsoptions
AThe following is a summary of the Company’s outstanding stock options as ofoption activity during the periods ended January 31, 20202021 and changes during the nine-month period then ended are presented below:April 30, 2020:
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | |||||||||||||||||||
| Balance at April 30, 2019 | 1,456,458 | $ | 1.80 | 3.29 | ||||||||||||||||||||
| Balance at April 30, 2020 | 100,000 | $ | 14.31 | 2.87 | ||||||||||||||||||||
| Granted | 50,000 | 0.81 | 9.82 | — | — | — | ||||||||||||||||||
| Exercised | — | — | — | — | — | — | ||||||||||||||||||
| Forfeited | (506,458 | ) | 2.44 | — | — | — | — | |||||||||||||||||
| Canceled | — | — | — | |||||||||||||||||||||
| Balance at January 31, 2020 | 1,000,000 | $ | 1.43 | 3.11 | ||||||||||||||||||||
| Cancelled | (5,000 | ) | — | — | ||||||||||||||||||||
| Balance at January 31, 2021 | 95,000 | 14.63 | 1.81 | |||||||||||||||||||||
| Options exercisable at end of period | 741,666 | $ | 1.46 | 93,750 | $ | 14.65 | ||||||||||||||||||
| Options expected to vest | 258,334 | $ | 1.34 | 1,250 | $ | 13.40 | ||||||||||||||||||
| Weighted average fair value of options granted during the period | $ | — | $ | - | ||||||||||||||||||||
As ofAt January 31, 2021 and April 30, 2020, the aggregate intrinsic value of options outstanding and exercisable was $0.
On November 26, 2019, the Company granted 50,000 options to purchase the Company’s common stock to the Company’s Chief Financial Officer. The options have a term of 10 years from the date of grant and are exercisable at an exercise price of $0.81. The options vest over 24 months at 2,083 options per month. The Company accountedwere de minimus for the 50,000 options by using a Black-Scholes option pricing model with the following assumptions: stock price of $0.81 per share (based on the quoted trading price on the dates of grant), volatility of 72%, expected term of 10 years, and a risk-free interest rate of 1.74%.
Stock-based compensation for stock options has been recorded in the unaudited condensed consolidated statements of operations and totaled $40,357 and $292,422 for the three months ended January 31, 2020 and 2019, respectively, and $144,785 and $304,119 for the nine months ended January 31, 2020 and 2019, respectively. A balance of $265,313 remains to be expensed over future vesting periods.each period.
U.S. GOLD CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2021
In September 2020, the Board approved the acceleration of the vesting terms of the 50,000 stock options granted to Edward Karr, Executive Chairman of the Company, and 25,000 stock options granted to David Rector, former Chief Operating Officer of the Company on December 21, 2017 and therefore the total 75,000 stock options are fully vested. Additionally, the Board of Directors of the Company approved to extend the exercise period of the stock options granted to Mr. Rector and three former directors, to December 21, 2022, the original termination date of the respective stock option agreements. The Company recognized stock-based compensation of $133,439 due to the accelerated vesting of the 75,000 fully vested stock options granted on December 21, 2017.
Stock-based compensation for stock options recorded in the unaudited consolidated statements of operations totaled $2,925 and $40,357 for the three months ended January 31, 2021 and 2020, respectively. Stock-based compensation for stock options recorded in the unaudited consolidated statements of operations totaled $191,836 and $144,785 for the nine months ended January 31, 2021 and 2020, respectively. A balance of $2,924 remains to be expensed over future vesting periods.
Stock Warrants
In relation to the issuanceA summary of the Series F Convertible Preferred Shares,Company’s outstanding warrants to purchase shares of common stock as of January 31, 2021 and changes during the nine months ended are presented below:
| Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | ||||||||||
| Warrants with no Class designation: | ||||||||||||
| Balance at April 30, 2020 | 527,378 | $ | 14.83 | 3.73 | ||||||||
| Granted | 921,666 | 6.00 | 5.00 | |||||||||
| Exercised | (178,571 | ) | 7.00 | 4.16 | ||||||||
| Forfeited | — | — | — | |||||||||
| Canceled | — | — | — | |||||||||
| Balance at January 31, 2021 | 1,270,473 | 9.52 | 3.94 | |||||||||
| Class A Warrants: | ||||||||||||
| Balance at April 30, 2020 | 219,375 | 11.40 | 4.22 | |||||||||
| Granted | — | — | — | |||||||||
| Exercised | (109,688 | ) | 11.40 | 3.47 | ||||||||
| Forfeited | — | — | — | |||||||||
| Canceled | — | — | — | |||||||||
| Balance at January 31, 2021 | 109,687 | 11.40 | 3.47 | |||||||||
| Total Warrants Outstanding at January 31, 2021 | 1,380,160 | $ | 9.67 | 3.90 | ||||||||
| Warrants exercisable at end of period | 1,380,160 | $ | 9.67 | |||||||||
| Weighted average fair value of warrants granted during the period | $ | 9.09 | ||||||||||
As of January 31, 2021, the aggregate intrinsic value of warrants outstanding and exercisable was $5,311,612.
In October 2020, the Company issued 2,193,750 Class A Warrants10,000 shares of common stock for the exercise of stock warrants and 1,097,500 Class X Warrants.received proceeds of $70,000.
In November and December 2020, the Company issued an aggregate of 168,571 shares of common stock for the exercise of stock warrants and received proceeds of $1,179,997.
In December 2020, the Company issued 33,858 shares of common stock for the cashless exercise of 109,688 stock warrants.
U.S. GOLD CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2021
Pursuant to the SPA, the Company issued 921,666 warrants which are exercisable in whole or in part at any time, from time to time following the initial exercise date, and terminate five years following the issuance. The fair value of the warrants was $2,022,712,$5,530,004, as measured on the date of the issuance with a Black-Scholes pricing model using the assumptions noted in the following table:
| Warrants Issued During the Nine Months Ended January 31, 2020 | Warrants Issued During the Nine Months Ended January 31, 2021 | |||||||
| Expected volatility | 46% - 74 | % | 169.0 | % | ||||
| Stock price on date of grant | $ | 1.14 | $ | 9.53 | ||||
| Exercise price | $ | 1.14 | $ | 6.00 | ||||
| Expected dividends | - | - | ||||||
| Expected term (in years) | 0.5 - 5 | 5.00 | ||||||
| Risk-free rate | 1.77% - 2.11 | % | 0.27 | % | ||||
| Expected forfeiture rate | 0 | % | 0 | % | ||||
Each Class A Warrant is exercisable to acquire one shareThe fair value of the Company’s common stock at an exercise price of $1.14 per share, commencing six (6) months from the date of issuancewarrants was credited to Additional paid-in capital, and will expirealso represented a deemed dividend to those shareholders, which was charged to Additional paid-in capital, therefore with no effect on a date that is the five (5) year anniversary of the date of issuance. Each Class X Warrant was exercisable to acquire one share of the Company’s common stock and one Class Y Warrant at an exercise price of $1.14, for a period of six (6) months from the date of issuance. Each Class Y Warrant is exercisable to acquire one share of the Company’s common stock at an exercise price of $1.14 per share, commencing on the Initial Exercise Date and will expire on a date that is the five (5) year anniversary of the Initial Exercise Date.
A summary of the Company’s outstanding warrants to purchase shares of common stock as of January 31, 2020 and changes during the nine-month period then ended are presented below:
| Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | ||||||||||
| Warrants with no Class designation: | ||||||||||||
| Balance at April 30, 2019 | 1,702,359 | $ | 3.12 | 2.25 | ||||||||
| Granted | — | — | — | |||||||||
| Exercised | — | — | — | |||||||||
| Forfeited | — | — | — | |||||||||
| Canceled | — | — | — | |||||||||
| Balance at January 31, 2020 | 1,702,359 | 3.12 | 1.49 | |||||||||
| Class A Warrants: | ||||||||||||
| Balance at April 30, 2019 | — | — | — | |||||||||
| Granted | 2,193,750 | 1.14 | 5.00 | |||||||||
| Exercised | — | — | — | |||||||||
| Forfeited | — | — | — | |||||||||
| Canceled | — | — | — | |||||||||
| Balance at January 31, 2020 | 2,193,750 | 1.14 | 4.46 | |||||||||
| Class X Warrants: | ||||||||||||
| Balance at April 30, 2019 | — | — | — | |||||||||
| Granted | 1,097,500 | 1.14 | 0.50 | |||||||||
| Exercised | — | — | — | |||||||||
| Forfeited, with no financial effect | (1,097,500 | ) | 1.14 | — | ||||||||
| Canceled | — | — | — | |||||||||
| Balance at January 31, 2020 | - | - | - | |||||||||
U.S. GOLD CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2020
| Class Y Warrants: | ||||||||||||
| Balance at April 30, 2019 | — | — | — | |||||||||
| Granted | — | — | — | |||||||||
| Exercised | — | — | — | |||||||||
| Forfeited | — | — | — | |||||||||
| Canceled | — | — | — | |||||||||
| Balance at January 31, 2020 | — | — | — | |||||||||
| Warrant Outstanding at January 31, 2020 | 3,896,109 | $ | 2.01 | 3.17 | ||||||||
| Warrants exercisable at end of period | 3,896,109 | $ | 2.01 | |||||||||
| Weighted average fair value of warrants granted during the period | $ | 0.52 | ||||||||||
As of January 31, 2020, the aggregate intrinsic value of warrants outstanding and exercisable was $0.account.
NOTE 9 — NET LOSS PER COMMON SHARE
Net loss per share of common sharestock is calculated in accordance with ASC 260, “Earnings Per Share”. Basic loss per share is computed by dividing net loss available to common stockholdersstockholder, by the weighted average number of shares of common stock outstanding during the period. The following were excluded from the computation of diluted shares outstanding as they would have had an anti-dilutive effectimpact on the Company’s net loss. In periods where the Company has a net loss, all dilutive securities are excluded.
| Three and Nine Months Ended January 31, 2020 | Three and Nine Months Ended January 31, 2019 | January 31, 2021 | January 31, 2020 | |||||||||||||
| Common stock equivalents: | ||||||||||||||||
| Preferred stock | 473,684 | - | - | 473,684 | ||||||||||||
| Restricted stock units | 349,691 | 524,500 | 342,856 | 349,691 | ||||||||||||
| Stock options | 1,000,000 | 1,456,458 | 95,000 | 1,000,000 | ||||||||||||
| Stock warrants | 3,896,109 | 1,702,359 | 1,380,160 | 3,896,109 | ||||||||||||
| Total | 5,719,484 | 3,683,317 | 1,818,016 | 5,719,484 | ||||||||||||
NOTE 10 — COMMITMENTS AND CONTINGENCIES
Mining Leases
The Copper KingCK Gold property position consists of two State of Wyoming Metallic and Non-metallic Rocks and Minerals Mining Leases. These leases were assigned to the Company in July 2014 through the acquisition of the Copper KingCK Gold Project. Leases to explore for or use of natural resources are outside the scope of ASU 2016-02 “Leases”. There are no lease contracts for office space or other Company expenses which qualify for treatment as capital assets under ASU 2016-02.
The Company’s rights to the Copper KingCK Gold Project arise under two State of Wyoming mineral leases; 1) State of Wyoming Mining Lease No. 0-40828, consisting of 640 acres, and 2) State of Wyoming Mining Lease No. 0-40858 consisting of 480 acres.
Lease 0-40828 was renewed in February 2013 for a second ten-year term and Lease 0-40858 was renewed for its second ten-year term in February 2014. Each lease requires an annual payment of $2.00 per acre. In connection with the Wyoming Mining Leases, the following production royalties must be paid to the State of Wyoming, although once the project is in operation, the Board of Land Commissioners has the authority to reduce the royalty payable to the State of Wyoming:
| FOB Mine Value per Ton | Percentage Royalty | |||
| $00.00 to $50.00 | 5 | % | ||
| $50.01 to $100.00 | 7 | % | ||
| $100.01 to $150.00 | 9 | % | ||
| $150.01 and up | 10 | % | ||
U.S. GOLD CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 20202021
The future minimum lease payments at January 31, 2021 under these mining leases are as follows, each payment to be made in the fourth quarter of the respective fiscal years. The Fiscal 2020 payment was made during the quarter ended January 31, 2020:years:
| Fiscal 2021 | $ | 2,240 | ||||||
| Fiscal 2022 | 2,240 | $ | 2,240 | |||||
| Fiscal 2023 | 2,240 | 2,240 | ||||||
| Fiscal 2024 and thereafter | 960 | |||||||
| Fiscal 2024 | 960 | |||||||
| $ | 7,680 | $ | 5,440 | |||||
The Company may renew each lease for a third ten-year term, which will require one annual payment of $3.00 per acre for the first year and $4.00 per acre for each year thereafter.
OrevadaMaggie Creek option:
Pursuant to the acquisition of NumberCo on September 10, 2019, the Company acquired from Orevada its right to the Option Agreement. The Maggie Creek option agreement grants Orevadathe Company the exclusive right and option to earn-in and acquire up to 50% undivided interest in a property called Maggie Creek, located in Eureka County, Nevada by completing the Initial Earn-in over a seven-year period:period, as amended:
| First agreement year | $ | 100,000 | $ | - | ||||
| Second agreement year | 200,000 | 300,000 | ||||||
| Third agreement year | 500,000 | 500,000 | ||||||
| Fourth agreement year | 700,000 | 700,000 | ||||||
| Fifth agreement year | 1,000,000 | 1,000,000 | ||||||
| Sixth agreement year | 1,000,000 | 1,000,000 | ||||||
| Seventh agreement year | 1,000,000 | 1,000,000 | ||||||
| $ | 4,500,000 | $ | 4,500,000 | |||||
Once the Initial Earn-in has been met, the Company is required to pay an additional $250,000 to the counter-party to vest the Company’s 50% interest in the Maggie Creek property.
NPRC option:
Pursuant to the Merger (see Note 4), the Company acquired from NPRC a mineral property called Challis Gold located in Idaho pursuant to an option agreement dated in February 2020 which was later amended in June 2020.
The Initial Earn-in is vested by paying $250,000annual advance minimum royalty payments at January 31, 2021 under the option agreement are as follows, each payment to Renaissance Exploration, Inc. atbe made in the endbeginning on the first anniversary of the Initial Earn-in period.effective date of this option agreement and continuing until the tenth anniversary:
| Fiscal 2022 | $ | 25,000 | ||
| Fiscal 2023 | 25,000 | |||
| Fiscal 2024 | 25,000 | |||
| Fiscal 2025 | 25,000 | |||
| Fiscal 2026 and thereafter | 150,000 | |||
| $ | 250,000 |
100% of the advance minimum royalty payments will be applied to the royalty credits.
On November 11, 2020, the Company entered into a one-year consulting agreement for business advisory services. The term may be extended for an additional 6 months increment by both parties. In consideration for the services, the Company shall pay the consultant $12,500 per month ($3,750 in cash and $8,750 worth of the Company’s common stock) during the first 6 months and $7,500 per month ($3,750 in cash and $3,750 worth of the Company’s common stock) during the last 6 months of the agreement. As of January 31, 2021, the Company recorded accrued expenses of $26,250 in connection with the November 11, 2020 consulting agreement and reflected in accounts payable and accrued liabilities in the accompanying unaudited condensed consolidated balance sheets.
Legal Matters
On October 27, 2020, Mandeep Singh (“Plaintiff”), through his attorney, filed a complaint (Singh v. U.S. Gold Corp., et al., Case No. 1:20-cv-08995 (S.D.N.Y.)) in the United States District Court for the Southern District of New York, against the Company and its members (the “Directors”) of the board of directors (the “Board”). As of the date of this Quarterly Report, the Company has not been served with the complaint.
The complaint alleges, among other things, that the Company’s definitive proxy statement on Schedule 14A (as further amended and supplemented, the “proxy statement”) filed with the Commission on September 14, 2020 contains material omissions and materially misleading statements in connection with the acquisition of NPRC (such acquisition, the Merger”) and the related financing transactions and that the Directors breached their duty by failing to disclose the required information in the proxy statement. The complaint seeks to enjoin the Company from taking any actions that would allow the issuances of shares of the Company’s common stock upon the conversion of Series H Convertible Preferred Stock, Series I Convertible Preferred Stock and exercise of certain warrants, all of which were previously issued in connection with the Merger and the related financing or, in the event that the proposed share issuances are consummated, seeks a judgment for damages. The complaint alleges that the proxy statement failed to disclose, among other things, (i) the background process leading up to the Merger and related transactions, (ii) the discussion of due diligence undertaken by the Company and financial analysis prepared in connection with the Merger, (iv) the discussion of the Company’s financial advisor and the fairness opinion delivered by the financial advisor in connection with the Merger, and (v) a summary of financial projections prepared by the Company in connection with the share issuances.
The Company believes that the suit is without merit and intends to defend vigorously against the suit.
U.S. GOLD CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2021
NOTE 11 — SUBSEQUENT EVENTS
ThePurchase Agreement
On January 28, 2021, the Company has evaluated subsequent events throughentered into the filing of this Quarterly ReportPurchase Agreement with the Purchasers, pursuant to which the Company issued and closed on Form 10-Q, and determined that there have been no events that have occurred that would require adjustments to our disclosuresFebruary 1, 2021, (i) in the condensed consolidatedOffering an aggregate of 914,136 shares of common stock of the Company, at an offering price of $10.54 per share and (ii) in a concurrent private placement warrants to purchase an aggregate of 457,068 shares of common stock at an exercise price of $14.50 per share, for gross proceeds from the Offering of approximately $9.6 million before the deduction of financial statements.advisory fees and offering expenses. As of January 31, 2021, certain of these investors completed and funded their subscription agreements (see Note 8).
Pursuant to the Purchase Agreement, the warrants are exercisable six months following the date of issuance and terminate five years following the initial exercise date. A holder of such warrant will not have the right to exercise any portion of its warrants if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or 9.99% at the election of the holder prior to the date of issuance) of the number of shares of common stock outstanding immediately after giving effect to such exercise (the “Beneficial Ownership Limitation”); provided, however, that upon 61 days’ prior notice to the Company, the holder may increase the Beneficial Ownership Limitation, provided that in no event shall the Beneficial Ownership Limitation exceed 9.99%.
On January 27, 2021, the Company entered into an amendment to that certain engagement agreement (“Engagement Agreement Amendment”) with Palladium Capital Group, LLC (“Palladium”), dated March 29, 2020, in connection with the Offering, among other things. Pursuant to the Engagement Agreement Amendment, the Company agreed to pay Palladium a cash fee equal to 8% of the aggregate gross proceeds received by the Company in the Offering from investors introduced to the Company by Palladium. In addition, the Company issued to Palladium warrants to purchase up to 46,490 shares of common stock which are identical in all material respects to the warrants issued pursuant to the Purchase Agreement.
Restricted Stock Unit
On February 14, 2021, the Company granted an aggregate of 3,946 restricted stock units to a director of the Company for services rendered. The 3,946 restricted stock units had a fair value of $50,000 or $12.67 per share of common stock based on the quoted trading price on the date of grant. The restricted stock units fully vested and expensed immediately.
Income Tax Refund
On March 1, 2021, the Company collected $219,072 of the income tax receivable.
Common Stock issued for exercise of Stock Warrants
In February 2021 and March 2021, the Company issued an aggregate of 178,571 shares of common stock for the exercise of stock warrants and received proceeds of $1,250,000.
In February 2021, the Company issued 91,894 shares of common stock for the cashless exercise of 166,666 stock warrants.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The interim unaudited condensed consolidated financial statements included herein have been prepared by U.S. Gold Corp. (the “Company”, “we”, “us”, or “our”) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “Commission”). Certain information and footnote disclosure normally included in interim unaudited consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which are duplicate to the disclosures in the audited consolidated financial statement have been omitted pursuant to such rules and regulations, although we believe that the disclosures are adequate to make the information presented not misleading. These interim unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto in the Form 10-K filed with the Commission on July 26, 2019.13, 2020.
In the opinion of management, all adjustments have been made consisting of normal recurring adjustments and consolidating entries, necessary to present fairly the unaudited interim condensed consolidated financial position of us and our subsidiaries as of January 31, 2020,2021, the results of our unaudited interim condensed consolidated statements of operations and changes in stockholders’ equity for the three- and nine-month periods ended January 31, 20202021 and 2019,2020, and our unaudited interim condensed consolidated cash flows for the nine-month periods ended January 31, 20202021 and 2019.2020. The results of unaudited interim condensed consolidated operations for the interim periods are not necessarily indicative of the results for the full year.
The preparation of interim unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Forward-Looking Statements
In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. See “Forward-Looking Statements.” Our results and the timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including the risk factors described in this report and in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended April 30, 2019.2020.
Overview
We are an exploration company that owns certain mining leases and other mineral rights comprising the Copper KingCK Gold Project in Wyoming, and the Keystone Gold Bar North and Maggie Creek Projects in Nevada.Nevada and most recently the Challis Gold Project in Idaho. None of our properties contain any proven and probable reserves under SEC Industry Guide 7, and all of our activities on our properties are exploratory in nature.
During the three-monthsthree months ended January 31, 2020,2021, we focused primarily on finalizingthe advancement of a Preliminary Feasibility Study (“PFS”) on our 2019 drilling program atCK Gold Project, securing additional funds of approximately $9.6 million in gross proceeds from equity financing and strengthening our Keystone Project and enhancing our understandingboard of that property through continuing analytics. In addition, we commenced an internal analysis of our newly acquired Maggie Creek exploration project.directors. An overview of certain significant events follows:
| ● | On November | |
| ● | On | |
| ● | On | |
| ● | During the three-month period ended January 31, 2021, we released the assay results of several metallurgical holes drilled during the recently completed field season at our CK Gold Project, August to November 2020. The results demonstrate continuity of attractive gold and copper grades. |
| 25 |
Recent Developments
Appointment of Director
On November 7, 2019,January 11, 2021, we receivedannounced the appointment of Mr. Michael Waldkirch to our Board of Directors.
Securities Purchase Agreement
On January 28, 2021, the Company entered into a lettersecurities purchase agreement (the “Purchase Agreement”) with certain institutional and accredited investors (the “Purchasers”), pursuant to which we agreed to issue and sell (i) in the Offering an aggregate of 914,136 shares of common stock of the Company, at an offering price of $10.54 per share and (ii) in a concurrent private placement warrants to purchase an aggregate of 457,068 shares of common stock at an exercise price of $14.50 per share, for gross proceeds from the Listing Qualifications DepartmentOffering of approximately $9.6 million before the deduction of financial advisory fees and offering expenses and such Offering. As of January 31, 2021, certain of these investors completed and funded their subscription agreements, consequently, we recorded 794,136 common stock to be issued valued at par value of $794 and additional paid in capital of $8,370,373 as of January 31, 2021 until which time we could administratively issue the shares.
Pursuant to the Purchase Agreement, the warrants are exercisable six months following the date of issuance and terminate five years following the initial exercise date. A holder of such warrant will not have the right to exercise any portion of its warrants if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or 9.99% at the election of the Nasdaq Stock Market (“Nasdaq”) indicating that, based uponholder prior to the closing bid pricedate of ourissuance) of the number of shares of common stock foroutstanding immediately after giving effect to such exercise (the “Beneficial Ownership Limitation”); provided, however, that upon 61 days’ prior notice to the 30 consecutive business day period between September 26, 2019, through November 6, 2019, we did not meetCompany, the minimum bid priceholder may increase the Beneficial Ownership Limitation, provided that in no event shall the Beneficial Ownership Limitation exceed 9.99%.
On January 27, 2021, the Company entered into an amendment to that certain engagement agreement (“Engagement Agreement Amendment”) with Palladium Capital Group, LLC (“Palladium”), dated March 29, 2020, in connection with the Offering, among other things. Pursuant to the Engagement Agreement Amendment, the Company agreed to pay Palladium a cash fee equal to 8% of $1.00 per share required for continued listing on The Nasdaq Capital Marketthe aggregate gross proceeds received by the Company in the Offering from investors introduced to the Company by Palladium. In addition, the Company issued to Palladium warrants to purchase up to 46,490 shares of common stock are identical in all material respects to the warrants issued pursuant to Nasdaq Listing Rule 5550(a)(2). The letter also indicated that we will be given a compliance period of 180 calendar days, or until May 5, 2020 (the “Compliance Period”), in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A).the Purchase Agreement.COVID-19 Developments
In orderDecember 2019, a novel strain of coronavirus, COVID-19, was reported to regain compliancehave surfaced in Wuhan, China and has reached multiple other countries, resulting in government-imposed quarantines, travel restrictions and other public health safety measures in China and other countries. On March 12, 2020, the WHO declared COVID-19 to be a global pandemic, and the COVID-19 pandemic has resulted in significant financial market volatility and uncertainty in recent months. The ongoing COVID-19 pandemic has and may continue to adversely impact our business, as our operations are based in and rely on third parties located in areas affected by the pandemic.
We, or our people, investors, contractors or stakeholders, have been prevented from free cross-border travel or normal attendance to activities in conducting our business at trade shows, presentations, meetings or other activities meant to promote or execute our business strategy and transactions. We have been prevented from receiving goods or services from contractors. Decisions beyond our control, such as canceled events, restricted travel, barriers to entry or other factors have affected or may affect our ability to accomplish drilling programs, technical analysis of completed exploration actions, equity raising activities, and other needs that would normally be accomplished without such limitations. Furthermore, our exploration activities rely heavily on outside contracts. The COVID-19 pandemic has caused disruptions in travel and accessing our exploration properties with Nasdaq’s minimum bid price requirement,contractors. Such government-imposed precautionary measures may have been relaxed in certain countries or states, but there is no assurance that more strict measures will be put in place again due to a resurgence in COVID-19 cases. There can be no assurance that the Company and its personnel may travel and access property freely in the near future.
Moreover, the COVID-19 pandemic has made and continues to make indeterminable adverse effects on general commercial activity and the world economy, and our common stock must maintain a minimum closing bid pricebusiness and results of $1.00 for at least ten consecutive business days duringoperations could be adversely affected to the Compliance Period. Inextent that COVID-19 or any other epidemic harms the event weglobal economy generally.
We do not regain compliance byyet know the endfull extent of potential delays or impact on our business, our relationship with our business partners, or the global economy as a whole. However, any one or a combination of these events could have an adverse effect on our other business operations. A continuation or worsening of the Compliance Period, we may be eligible for additional timelevels of market disruption and volatility seen in the recent past could have an adverse effect on our ability to regain compliance. To qualify, we will be required to meet the continued listing requirement for the market valueaccess capital, on our business, results of our publicly held sharesoperations and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement,financial condition, and will need to provide written notice of our intention to cure the deficiency during the second compliance period by effecting a reverse stock split if necessary. If we meet these requirements, we may be granted an additional 180 calendar days to regain compliance. However, if it appears to Nasdaq that we will be unable to cure the deficiency, or if we are not otherwise eligible for the additional cure period, Nasdaq will provide notice that our common stock will be subject to delisting.
The letter has no immediate impact on the listing of the Company’s common stock, which will continue to be listed and traded on The Nasdaq Capital Market, subject to the Company’s compliance with the other listing requirements of The Nasdaq Capital Market. At our Annual Meeting of Stockholders held on September 18, 2019, our stockholders authorized management to enact a reverse split of our common stock of not less than 1-to-2 and not greater than 1-to-10 before September 18, 2020, in an effort to increase the trading price of our common stock. However, we cannot assure you that the reverse stock split, if implemented, will have the desired effect of proportionately raising our common stock price over the long term, or at all. The effect of a reverse stock split upon the market price of our common stock cannot be predicted with any certainty, and the history of similar stock splits for companies in similar circumstances is varied. Accordingly, we cannot assure you that the market price per share after the reverse stock split will exceed or remain in excess of the $1.00 minimum bid price for a sustained period of time. The market price of our common stock may vary based on other factors unrelated to the number of shares outstanding, including our future performance.stock.
| 26 |
Results of Operations
Three and nine months ended January 31, 20202021 compared to the three and nine months ended January 31, 2019:2020:
Net Revenues
We are an exploration stage company with no operations, and we generated no revenues for the three- and nine-month periods ended January 31, 20202021 and 2019.2020.
Operating Expenses
Total operating expenses for the nine months ended January 31, 20202021 as compared to the nine months ended January 31, 2019,2020, were approximately $4.7$9.5 million and $6.1$4.7 million, respectively. The approximate $1.4$4.8 million decreaseincrease in operating expenses for the nine months ended January 31, 20202021 as compared to the nine months ended January 31, 2019,2020, is comprised of a decrease(i) an increase in compensation of approximately $377,000$1,354,000 primarily due to increase in compensation as a resultrelated to total bonuses of a decrease$600,000 paid in common stock and cash, stock-based compensation due to a decrease in issuancefrom the accelerated vesting of certain stock options and commonrestricted stock issued to our officersunits and employees as compared to the prior period, a $1.3 million decreasehiring of additional executive management in August and September 2020, (ii) an increase of approximately $1,905,000 in exploration expenses on our mineral properties due to a decreasean increase in exploration activities andin our CK Gold property, (iii) an increase in professional consulting fees of approximately $229,000$1,327,000 primarily due to increases in stock-based consulting fees of approximately $636,000, legal fees of approximately $266,000 primarily due to an increase inservices related to the NPRC merger and general corporate matters, accounting fees of approximately $40,000, and general strategic, investor relations, legal fees and stock-based compensation to our boardpermitting consulting services of directors$385,000, and (iv) an overall increase in general and administrative expenses of approximately $50,000$200,000 due primarily to increases in public company expenses related to the Annual Meeting, abandonment expense related to the Gold Bar Mineral properties, insurance, expense and travel and relatedadvertising expenses.
Total operating expenses for the three months ended January 31, 2020,2021 as compared to the three months ended January 31, 2019,2020, were approximately $1.2$3.7 million and $1.6$1.2 million, respectively. The approximate $455,000 decrease$2.5 million increase in operating expenses for the three months ended January 31, 2020,2021 as compared to the three months ended January 31, 20192020, is comprised of (i) an increase in compensation of approximately $650,000 primarily due to increase in compensation related to stock-based compensation from restricted stock unit grants to our three officers and one employee and the hiring of additional executive management in August and September 2020 (ii) an increase of approximately $273,000 in compensation as a result of an$1,245,000 increase in stock-based compensation due to the issuance of common stock issued to our officers as bonus equity awards and employees as compared to the prior comparable period, a decrease of approximately $674,000 in exploration expenses on our mineral properties due to a decreasean increase in exploration activities a decreasein our CK Gold property, (iii) an increase in professional and consulting fees of approximately $69,000$489,000 primarily due to increases in professionalstock-based consulting fees of approximately $89,000 and increase in legal fees of approximately $77,000 primarily due to services related to general corporate matters, and general strategic, investor relations and permitting consulting services of $323,000, and (iv) an increase in general and administrative expenses of approximately $137,000 due primarily to a decreaseincreases in legal fees,abandonment expense related to the Gold Bar Mineral properties, insurance, and an increase of approximately $16,000 in general and administrativeadvertising expenses.
Loss from Operations
We reported loss from operations before tax of approximately $4.7$9.5 million and $6.1$4.7 million for the nine months ended January 31, 20202021 and 2019,2020, respectively. We reported loss from operations before tax of approximately $1.2$3.7 million and $1.6$1.2 million for the three months ended January 31, 2021 and 2020, and 2019, respectively.
Net Loss
As a result of the operating expense with no revenues discussed above, we reported a net loss of approximately $9.5 million for the nine months ended January 31, 2021 as compared to a net loss of $4.5 million for the nine months ended January 31, 2020,2020. We reported a net loss of approximately $3.7 million for the three months ended January 31, 2021 as compared to a net loss of $6.6 million for the nine months ended January 31, 2019. We reported a net loss of approximately $961,000 for the three months ended January 31, 2020, as compared to a net loss of $2.1 million for the three months ended January 31, 2019.2020.
Liquidity and Capital Resources
The following table summarizes total current assets, liabilities and working capital at January 31, 20202021 compared to April 30, 2019,2020, and the increase between those periods:
| January 31, 2020 | April 30, 2019 | Increase (Decrease) | ||||||||||
| Current Assets | $ | 1,751,603 | $ | 2,810,442 | $ | (1,058,839 | ) | |||||
| Current Liabilities | $ | 77,979 | $ | 160,209 | $ | (82,230 | ) | |||||
| Working Capital | $ | 1,673,624 | $ | 2,650,233 | $ | (976,609 | ) | |||||
| January 31, 2021 | April 30, 2020 | Increase | ||||||||||
| Current Assets | $ | 14,579,963 | $ | 3,181,747 | $ | 11,398,216 | ||||||
| Current Liabilities | $ | 572,190 | $ | 157,840 | $ | 414,350 | ||||||
| Working Capital | $ | 14,007,773 | $ | 3,023,907 | $ | 10,983,866 | ||||||
As of January 31, 2020,2021, we had working capital of $1,673,624,$14,007,773, as compared to working capital of $2,650,233$3,023,907 as of April 30, 2019, a decrease2020, an increase of $976,609.$10,983,866. During the nine months ended January 31, 2020,2021, we received net proceedsa total of approximately $2.4$15.2 million proceeds from the issuancesale of preferredan aggregate of 921,666 shares of our Series I Convertible Preferred Stock and warrants to purchase an aggregate of 921,666 shares of our common stock at an exercise price of $6.00 per share for approximately $5.5 million, exercise of stock warrants for approximately $1.2 million and warrants. We used the proceeds primarilysale of 794,136 common stock to be issued as of January 31, 2021 for approximately $8.4 million in the Offering. These were the primary source of cash to fund operations duringoperations. Additionally, we received approximately $2.5 million in cash as a part of the nine months ended January 31,acquisition of NPRC in August 2020.
We are obligated to file annual, quarterly and current reports with the Commission pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and the rules subsequently implemented by the Commission and the Public Company Accounting Oversight Board have imposed various requirements on public companies, including requiring changes in corporate governance practices. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities of ours more time-consuming and costlier. We expect to spend between $200,000 and $250,000 in legal and accounting expenses annually to comply with our reporting obligations and Sarbanes-Oxley. These costs could affect profitability and our results of operations.
Our unaudited condensed consolidated financial statements are prepared using the accrual method of accounting in accordance with U.S. GAAP and have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. For the nine months ended January 31, 20202021 and 2019,2020, we incurred losses in the amounts of approximately $4.5$9.5 million and $6.6$4.5 million, respectively. As of January 31, 2020,2021, we had cash of approximately $1.2$14.0 million, working capital of approximately $14.0 million, and an accumulated deficit of approximately $41.1 million. The CompanyAs a result of the utilization of cash in its operating activities, and the development of its assets, we have incurred losses since we commenced operations. Our primary source of operating funds since inception has been equity financings. As of the date of the filing of the quarterly report for the interim period January 31, 2021, we had sufficient cash to fund its operations for approximately 69 to 12 months and expected that we will be required to raise additional funds. There can be no assurance that the Company will be ablefunds to fund our operations thereafter. These matters raise additional capital or if the terms will be favorable. The Company has generated no revenues in the reported periods and has an accumulated deficit, which raises substantial doubt about itsour ability to continue as a going concern.concern for the twelve months following the issuance of these financial statements.
Management has determinedWe have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Our future capital requirements will depend on many factors, including potential acquisitions, changes in exploration programs and related studies and other operating strategies. In addition, we continue to assess the impact of the COVID-19 pandemic, which may adversely affect our ability to obtain additional future capital. To the extent we require additional funding, we cannot be certain that additional capitalfunding will be required to continue its operations. There are no assurances that management will be able toavailable on acceptable terms, or at all. To the extent we raise capital on terms acceptable to us. If we are unable to obtain sufficient amounts of additional capital, we may be required to reduce the scope of our planned exploration activities, which could harm our business, financial condition and operating results. If we obtain additional funds by selling any of ourissuing equity securities, or by issuing common stock to pay current or future obligations, the percentage ownership of our stockholders will be reduced, stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that impact our ability to conduct business. If unable to raise additional dilution,capital when required or the equity securitieson acceptable terms, we may have rights preferencesto delay, scale back or privileges senior todiscontinue the common stock. If adequate funds are not available to us when needed on satisfactory terms,exploration activities or at all, we may be required to cease operating or otherwise modify our business strategy.
Management is monitoring the effects of the current health and business risks related to the Coronavirus, also known as COVID-19. We have revised and amended our Risk Factors below to disclose the unknown and unquantifiable risks to the Company from this or other similar risks.programs.
Cash Used in Operating Activities
Net cash used in operating activities totaled $3.6$6.4 million and $4.6$3.6 million for the nine months ended January 31, 20202021 and 2019,2020, respectively. Net loss for the nine months ended January 31, 20202021 and 20192020 totaled approximately $4.5$9.5 million and $6.6$4.5 million, respectively. Additionally, we expensed approximately $1.1$2.9 million in stock-based compensation for options and shares issued to employees and consultants during the nine months ended January 31, 2020.2021 compared to approximately $1.1 million during the nine months ended January 31, 2020 primarily due to stock-based compensation related to bonuses to our CEO and former COO and stock-based consulting fee paid to a consultant related to the NPRC merger. Net changes of $163,171 in operating assets and liabilities are primarily due to net increases in prepaid expenses and other assets of approximately $109,000, reclamation of bond deposits of approximately $16,000, $78,000 in prepaid expenses,$34,000, and $2,000net of increases of approximately $306,000 in accounts payable to trade vendors and related parties. These net increases were partially offset by a net decrease in accounts payable of approximately $178,000 and accrued liabilities of approximately $5,000 in the nine months ended January 31, 2020.
Cash Provided by Investing Activities
Net cash provided by investing activities totaled approximately $159,000$2.5 million for the nine months ended January 31, 20202021, as compared to $159,000 primarily due to cash received in connection with a share exchange agreement, as compared to no such investing activitiesagreements during the nine months ended January 31, 2019.2020.
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Cash Provided by Financing Activities
Net cash provided by financing activities totaledthe nine months ended January 31, 2021 of approximately $15.2 million primarily due to proceeds from the issuance of Series I Preferred Stock and warrants in August 2020 for approximately $5.5 million, proceeds from exercise of stock warrants for approximately $1.2 million and the sale of 794,136 common stock to be issued as of January 31, 2021 for approximately $8.4 million in the Offering as compared with net cash provided by financing activities of approximately $2.4 million, net of issuance costs, for the nine months ended January 31, 2020, primarily due to the issuance of Series F Preferred Stock and warrants as compared to no issuances of preferred stock or warrants during the nine months ended January 31, 2019. Net cash of approximately $179,000, net of offering costs, was provided by issuance of common stock during the nine months ended January 31, 2019.warrants.
Off-Balance Sheet Arrangements
As of January 31, 2020,2021, we did not have, and do not have any present plans to implement, any off-balance sheet arrangements.
Recently Issued Accounting Pronouncements
See Note 2, Summary of Significant Accounting Policies, to the unaudited condensed consolidated financial statements for a summary of recently issued accounting pronouncements.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations are based upon our financial statements, whichThere have been prepared in accordance with U.S. GAAP. The preparation ofno changes to our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Management believes the following critical accounting policies affectduring the nine months ended January 31, 2021. Critical accounting policies and the significant judgments andaccounting estimates usedmade in according with such policies are regularly discussed with the preparationAudit Committee of the financial statements.
UseCompany’s board of Estimatesdirectors. Those policies are discussed under “Critical Accounting Policies” in our “Management’s Discussion and Assumptions
In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities asAnalysis of the dateFinancial Condition and Results of the balance sheet, and revenues and expenses for the period then ended. Actual results may differ significantly from those estimates. Significant estimates made by management include, but are not limitedOperations” included in Item 7, as well as Note 2 to valuation of mineral rights, stock-based compensation, the assumptions used to fair value of common and preferred stock, valuation of warrants, asset retirement obligations, and the valuation of deferred tax assets and liabilities.
Stock-Based Compensation
Stock-based compensation is accounted for based on the requirements of Accounting Standards Codification (“ASC”) 718, “Compensation—Stock Compensation” (“ASC 718”), which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). ASC 718 also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award. Pursuant to ASC 505, “Equity—Equity Based Payments to Non-Employees” (“ASC 505-50”), for share-based payments to consultants and other third parties, compensation expense is determined at the measurement date, which is the grant date. Until the measurement date is reached, the total amount of compensation expense remains uncertain.
In June 2018, the FASB issued Accounting Standards Update 2018-07, “Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting” (“ASU 2018-07”), which expands the scope of Topic 718 to include all share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 specifies that Topic 718 applies to all share-based payment transactions in which the grantor acquires goods and services to be used or consumed in its own operations by issuing share-based payment awards. ASU 2018-07 also clarifies that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under ASC 606. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted, but no earlier than adoption of ASC 606. We chose to early adopt ASU 2018-07 in July 2018. The adoption of this standard did not have a material effect on our consolidated financial statements and related disclosures.
Mineral Rights
Costs of leasing, exploring, carrying and retaining unproven mineral lease properties are expensed as incurred. We expense all mineral exploration costs as incurred as we are still in the exploration stage. If we identify proven and probable reservesthereto, included in our investigation of our properties and upon development of a plan for operating a mine, we would enterAnnual Report on Form 10-K, filed with the development stage and capitalize future costs until production is established.
When a property reaches the production stage, the related capitalized costs are amortizedCommission on a units-of-production basis over the proven and probable reserves following the commencement of production. We assess the carrying costs of the capitalized mineral properties for impairment under ASC 360-10, “Impairment of Long-Lived Assets”, and evaluate its carrying value under ASC 930-360, “Extractive Activities—Mining”, annually. An impairment is recognized when the sum of the expected undiscounted future cash flows is less than the carrying amount of the mineral properties. Impairment losses, if any, are measured as the excess of the carrying amount of the mineral properties over its estimated fair value.July 13, 2020.
ASC 930-805, “Extractive Activities-Mining: Business Combinations” (“ASC 930-805”), states that mineral rights consist of the legal right to explore, extract, and retain at least a portion of the benefits from mineral deposits. Mining assets include mineral rights. Acquired mineral rights are considered tangible assets under ASC 930-805. ASC 930-805 requires that mineral rights be recognized at fair value as of the acquisition date. As a result, the direct costs to acquire mineral rights are initially capitalized as tangible assets. Mineral rights include costs associated with acquiring patented and unpatented mining claims.
Leases to explore for or use of natural resources are outside the scope of ASU 2016-02 “Leases”.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to include disclosure under this item.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
At the end of the period covered by this report,Quarterly Report, an evaluation was carried out under the supervision of, and with the participation of, the Company’s management, including the our Presidentits Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a – 15(e) and Rule 15d – 15(e) of the Exchange Act). Based on that evaluation, the PresidentCompany’s Chief Executive Officer and Chief Financial Officer have concluded that as of the end of the period covered by this Quarterly Report, the Company’s disclosure controls and procedures were not effective in ensuring that information required to be disclosed by the Company in its reports that it files or submits to the SEC under the Exchange Act, is recorded, processed, summarized and reported within the time period specified in applicable rules and forms.
While present in ourthe Company’s design of internal controls, ourthe Company’s internal controls over financial reporting and disclosure are not written; however, the operation of many controls are in place and are applied on a consistent basis. Company personnel perform controls standard to: 1) approve all Company expenditures, 2) approve and sign contractual obligations, 3) reconcile bank accounts and other general ledger accounts, and 4) many other similar rudimentary controls applied as best practice. However, we havemanagement has concluded that due to the Company’s small size and limited personnel available to perform control functions, the Company is precluded from applying adequate segregation of duties in financial transactions. These are material weaknesses common to companies of similar size and staffing in ourthe Company’s industry. We expectThe Company expects these material weakness conditions to continue for the foreseeable future, or until significant Company growth results in additional personnel to perform financial functions.
Changes in Internal Control Over Financial Reporting
During the three months ended January 31, 2020,2021, management determined that athe delay of its program for compliance with the Sarbanes-Oxley Act of 2002 wasand the 2013 COSO Framework continued to be necessary to conserve cash in ourthe Company’s current financial condition. There have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, ourthe Company’s internal control over financial reporting; however, management has determined that for the sake of transparency and conservancy, it cannot state that internal controls over financial reporting are effective at this time.
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From timeOn October 27, 2020, Mandeep Singh (“Plaintiff”), through his attorney, filed a complaint (Singh v. U.S. Gold Corp., et al., Case No. 1:20-cv-08995 (S.D.N.Y.)) in the United States District Court for the Southern District of New York, against U.S. Gold Corp. (the “Company”) and its members (the “Directors”) of the board of directors (the “Board”). As of the date of this Quarterly Report, the Company has not been served with the complaint.
The complaint alleges, among other things, that the Company’s definitive proxy statement on Schedule 14A (as further amended and supplemented, the “proxy statement”) filed with the Commission on September 14, 2020 contains material omissions and materially misleading statements in connection with the acquisition of NPRC (such acquisition, the Merger”) and the related financing transactions and that the Directors breached their duty by failing to time we may be involveddisclose the required information in claims and legalthe proxy statement. The complaint seeks to enjoin the Company from taking any actions that arisewould allow the issuances of shares of the Company’s common stock upon the conversion of Series H Convertible Preferred Stock, Series I Convertible Preferred Stock and exercise of certain warrants, all of which were previously issued in connection with the Merger and the related financing or, in the ordinary courseevent that the proposed share issuances are consummated, seeks a judgment for damages. The complaint alleges that the proxy statement failed to disclose, among other things, (i) the background process leading up to the Merger and related transactions, (ii) the discussion of business. To our knowledge, there are no material pending legal proceedingsdue diligence undertaken by the Company and financial analysis prepared in connection with the Merger, (iv) the discussion of the Company’s financial advisor and the fairness opinion delivered by the financial advisor in connection with the Merger, and (v) a summary of financial projections prepared by the Company in connection with the share issuances.
The Company believes that the suit is without merit and intends to which we are a party or of which any of our property isdefend vigorously against the subject.suit.
Except as follows and as supplemented by the Risk Factors disclosed in our Quarterly Report on Form 10-Q for the quarter ended July 31, 2019, which was filed with the Commission on September 16, 2019,below, there were no material changes to the Risk Factors disclosed in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended April 30, 2019.2020. For more information concerning our risk factors, please see “Item 1A. Risk Factors” in our Form 10-K.10-K, filed with the Commission on July 13, 2020.
OurThe Company’s activities may be adversely affected by unforeseeable and unquantifiable health risks, such as Coronavirus,the COVID-19 pandemic, whether those effects are local, nationwide or global. Matters outside ourthe Company’s control may prevent usit from executing on ourits exploration programs, limit travel of Company representatives, adversely affect the health and welfare of Company personnel or prevent important vendors and contractors from performing normal and contracted activities.
While we do notIn December 2019, a novel strain of coronavirus, COVID-19, was reported to have surfaced in Wuhan, China and has reached multiple other countries, resulting in government-imposed quarantines, travel restrictions and other public health safety measures in China and other countries. On March 12, 2020, the WHO declared COVID-19 to be a global pandemic, and the COVID-19 pandemic has resulted in significant financial market volatility and uncertainty in recent months. The ongoing COVID-19 pandemic has and may continue to adversely impact the Company’s business, as its operations are based in countries currently identified as high-riskand rely on third parties located in areas for illness or pandemic, such as Coronavirus (COVID-19),affected by the pandemic.
The risks to the Company related to contagious disease, or policies implemented by governments to protect against the spread of a disease, are unforeseeable and unquantifiable by us. We,The COVID-19 pandemic has prevented the Company, or ourits people, investors, contractors or stakeholders, may be prevented from free cross-border travel or normal attendance to activities in conducting Companyits business at trade shows, presentations, meetings or other activities meant to promote or execute ourits business strategy and transactions. We may beIn addition, the Company has been prevented from receiving goods or services from contractors. Decisions beyond ourthe Company’s control, such as canceled events, restricted travel, barriers to entry or other factors have affected or may affect ourits ability to accomplish drilling programs, technical analysis of completed exploration actions, equity raising activities, and other needs that would normally be accomplished without such limitations. Such government-imposed precautionary measures related to COVID-19 may have been relaxed in certain states, but there is no assurance that more strict measures will be put in place again due to a resurgence in COVID-19 cases. There can be no assurance that the Company and its personnel may travel and access property freely in the near future.
Furthermore, the Company uses a variety of outsourced contractors to execute its exploration programs. Drilling contractors need to be able to access the Company’s projects and insure social distancing recommended safety standards. The COVID-19 pandemic has caused disruptions in travel and accessing the Company’s exploration properties with contractors. There is still uncertainty and lack of clarity with regards to travel restrictions and future State openings in Wyoming and Nevada. The Company continues to monitor the overall situation closely, with safety of its employees and contractors our top priority. There are no assurances that material exploration activities can take place in 2021.
Our failureThe COVID-19 pandemic has brought tremendous uncertainty to meet the continued listing requirements of The Nasdaq Capital Market could result in a delisting of our common stock.
global financial markets. As previously reported,an exploration company with no revenues, the Company is reliant on November 7, 2019, we received a letter from the Listing Qualifications Departmentconstantly raising additional capital to fund its operations. A continuation or worsening of the Nasdaq Stock Market (“Nasdaq”) indicating that, based uponlevels of market disruption and volatility seen in the closing bid pricerecent past could have an adverse effect on its ability to access capital, on its business, results of our common stock for the 30 consecutive business day period between September 26, 2019, through November 6, 2019, we did not meet the minimum bid price of $1.00 per share required for continued listingoperations and financial condition, and on The Nasdaq Capital Market pursuant to NASDAQ Listing Rule 5550(a)(2). The letter also indicated that we will be provided with a compliance period of 180 calendar days, or until May 5, 2020 (the “Compliance Period”), in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A).
In order to regain compliance with Nasdaq’s minimum bid price requirement, our common stock must maintain a minimum closing bid price of $1.00 for at least ten consecutive business days during the Compliance Period. In the event that we do not regain compliance by the end of the Compliance Period, we may be eligible for additional time to regain compliance. To qualify, we will be required to meet the continued listing requirement for the market value of our publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and will need to provide written notice of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split if necessary. If we meet these requirements, we may be granted an additional 180 calendar days to regain compliance. However, if it appears to Nasdaq that we will be unable to cure the deficiency, or if we are not otherwise eligible for the additional cure period, Nasdaq will provide notice that our common stock will be subject to delisting.
To resolve the noncompliance, we may consider available options including a reverse stock split, which may not result in a permanent increase in the market price of ourthe Company’s common stock,stock. There are no assurances we will be able to raise additional capital on favorable terms in the foreseeable future.
The COVID-19 pandemic can cause potential disruptions with several of its outsourced consultants and professionals which is dependentthe Company relies on many factors, including generalto execute its business. The Company’s outsourced accountants, financial advisors, auditors, legal counsel, employees and Board have all experienced disruptions due to travel restrictions and remote working conditions. This has the potential to cause delays to current and future financial filings. The Company has taken steps to mitigate the potential risks to suppliers and employees posed by the spread of COVID-19. The Company has implemented work from home policies where appropriate. The Company will continue to monitor developments affecting both its workforce and contractors, and will take additional precautions that management determines are necessary in order to mitigate the impacts.
In addition, the economic marketdisruptions caused by COVID-19 could also adversely impact the impairment risks for certain long-lived assets and industry conditionsequity method investments. The Company evaluated these impairment considerations and other factors detailed fromdetermined that no such impairments occurred as of January 31, 2021.
Litigation costs and the outcome of litigation could have a material adverse effect on the Company’s business.
From time to time, the Company has been and may be subject to various legal, administrative and regulatory inquiries, investigations, proceedings and claims through the ordinary course of its business operations regarding, but not limited to, environmental matters, contractual relations with third-party contracts, consultants, and professionals, property rights and other matters related to the Company’s operations and transactions. Litigation to defend the Company against claims by third parties, or to enforce any rights that the Company may have against third parties, may be necessary, which could result in substantial costs and diversion of the Company’ resources, causing a material adverse effect on its business, financial condition and results of operations. On October 27, 2020, Mandeep Singh filed a complaint in the reports we file with the Commission. It is not uncommonUnited States District Court for the market priceSouthern District of a company’s sharesNew York, against the Company and its members of the board of directors. For further detailed discussion of the complaint, please see Item 1. “Legal Proceedings” herein. The Company believes that the suit is without merit and intends to decline indefend vigorously against the period following a reverse stock split.
Although we expect to take actions intended to restore our compliance withsuit. However, the listing requirements, we can provide no assurance thatoutcome of any action taken by us would be successful, or that any such action would stabilize the market price or improve the liquidity of our common stock. Should a delisting occur, a stockholder would likely find it significantly more difficult to dispose of, or to obtain accurate quotations as to the value of our common stock, and our ability to raise future capital through the sale of our common stock could be severely limited.litigation is inherently uncertain.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Other than as set forth below, there were no sales of unregistered securities during the quarter ended January 31, 20202021 that were not previously reported on a Current Report on Form 8-K. None
On September 16, 2020, the Board of Directors awarded a now former employee 18,502 shares of restricted stock as a bonus for services under a separation agreement effective October 31, 2020. The Company recognized stock-based compensation of $150,000 or $8.11 per share. These shares were issued on November 5, 2020. The issuance of the following transactions involved any underwriters, underwriting discounts or commissions. The recipientsshares of common stock to the securities in each of these transactions represented their intentions to acquire the securities for investment only anddirectors was not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed on the share certificates issued in these transactions. All recipients had adequate access sufficient information about us to make an informed investment decision. The sales of these securities were made without any general solicitation or advertising. Each of the issuances set forth below was exempt from the registration requirements ofregistered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any state, and the shares of the common stock were issued in reliance on the exemption from registration under the Securities Act pursuant to Section 4(a)(2) thereof and Rule 506 of Regulation D promulgated thereunder as a transaction not involving a public offering.the Securities Act.
On September 18, 2019, November 9, 2020, the Compensation Committee of the Board of Directors awarded fivefour former directors of the Company an aggregate of 250,000188 shares of restricted stock for board services pursuant to respective restricted stock award agreements. The shares of restricted stock vested immediately on the date of grant.The Company recognized stock-based compensationtotal 188 shares of $257,500restricted stock had a fair value of $1,598, or $1.03$8.50 per share, based on the quoted trading price on the date of grant.grant, which was fully vested and expensed immediately. These shares were issued on November 16, 2020. The issuance of the shares of common stock to the directors was not registered under the Securities Act, or the securities laws of any state, and the shares of the common stock were issued in reliance on the exemption from registration under the Securities Act pursuant to Section 4(a)(2) of the Securities Act.
On December 8, 2020, the Company issued 5,009 shares of restricted common stock to a consultant for services. The shares had a fair value of $56,250 or $11.23 per share. The shares of the common stock were issued in reliance on the exemption from registration under the Securities Act pursuant to Section 4(a)(2) of the Securities Act.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
None.
Item 4. MINE SAFETY DISCLOSURES
Pursuant to Section 1503(a) of 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 specified information about mine health and safety in their periodic reports. These reporting requirements are based on the safety and health requirements applicable to mines under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”) which is administered by the U.S. Department of Labor’s Mine Safety and Health Administration (“MSHA”). During the three-monthnine-month period ended January 31, 2020, we2021, the Company and ourits properties or operations were not subject to regulation by MSHA under the Mine Act and thus no disclosure is required under Section 1503(a) of the Dodd-Frank Act.
None.
| # | Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. U.S. Gold Corp. hereby undertakes to furnish supplemental copies of any of the omitted schedules and exhibits upon request by the Securities and Exchange Commission. |
| * | Management Contract or Compensatory Plan or Arrangement. |
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.
| U.S. GOLD CORP. | ||
| Date: March | By: | /s/ |
| (Principal Executive Officer) | ||
| Date: March | By: | /s/ |
Eric Alexander Chief Financial Officer | ||
| (Principal Financial and Accounting | ||
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