Blueprint
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark
One)
☒ Quarterly Report
Pursuant to Section 13 Or 15(d) Of The Securities Exchange Act of
1934
For the quarterly period ended July 31,
2019
☐ Transition Report Under Section 13
Or 15(d) Of The Securities Exchange Act of 1934
For the
transition period ________ to ________
COMMISSION FILE NUMBER 000-52711
STAR GOLD CORP.
(Exact
name of small business issuer as specified in its
charter)
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NEVADA
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27-0348508
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(State or other jurisdiction of incorporation or
organization)
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(IRS Employer Identification No.)
|
|
|
|
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1875 N. Lakewood Drive, Suite 200
Coeur d'Alene, Idaho
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83814
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(Address of principal executive
office)
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(Postal
Code)
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(208) 664-5066
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(Issuer's
telephone number)
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Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes ☒ No ☐
Indicate by checkmark whether the registrant has submitted
electronically and posted on its corporate Website, if any, every
Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T during the preceding 12 months (or
for such shorter period that the registrant was required to submit
and post filed).Yes ☒ No ☐
Indicate
by checkmark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See
definition of “Accelerated filer and large accelerated
filer” in Rule 12b-2 of the Exchange Act (Check
one):
|
Large Accelerated Filer ☐
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Accelerated Filer ☐
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Non-Accelerated Filer ☐
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Smaller Reporting Company ☒
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Emerging Growth Company ☐
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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 ☐ No ☒
As of September 13, 2019
there were 77,394,841 shares of registrant’s common stock, $0.01
par value, issued and outstanding.
PART I - FINANCIAL INFORMATION
STAR GOLD CORP.
BALANCE SHEETS (UNAUDITED)
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|
July 31, 2019
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April 30, 2019
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ASSETS
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CURRENT
ASSETS
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|
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Cash and cash
equivalents
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$339,620
|
$440,316
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Other current
assets (NOTE 5)
|
20,740
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22,845
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TOTAL CURRENT
ASSETS
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360,360
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463,161
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EQUIPMENT AND
MINING INTEREST, net (NOTE 4)
|
478,691
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467,107
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OTHER ASSETS
– NON-CURRENT (NOTE 5)
|
457
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2,557
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RECLAMATION
BOND
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21,600
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21,600
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TOTAL
ASSETS
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$861,108
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$954,425
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LIABILITIES
AND STOCKHOLDERS’ EQUITY
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CURRENT
LIABILITIES:
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Accounts
payable
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$50,380
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$19,246
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TOTAL CURRENT
LIABILITIES
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50,380
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19,246
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|
|
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TOTAL
LIABILITIES
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50,380
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19,246
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COMMITMENTS AND
CONTINGENCIES (NOTE 4)
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|
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STOCKHOLDERS’
EQUITY
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|
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Preferred Stock,
$.001 par value; 10,000,000 shares authorized, none issued and
outstanding
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-
|
-
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Common Stock, $.001
par value; 300,000,000 shares authorized; 77,394,841 shares issued
and outstanding
|
77,395
|
77,395
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Additional paid-in
capital
|
11,560,527
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11,560,527
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Accumulated
deficit
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(10,827,194)
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(10,702,743)
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TOTAL
STOCKHOLDERS’ EQUITY
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810,728
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935,179
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TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
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$861,108
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$954,425
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The
accompanying notes are an integral part of these financial
statements.
Page 3 of
24
STAR GOLD CORP.
STATEMENTS OF OPERATIONS (UNAUDITED)
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For the three months
ended
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July 31, 2019
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July 31, 2018
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OPERATING
EXPENSE
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|
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Mineral exploration
expense
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$26,630
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$24,628
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Pre-development
expense
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29,073
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45,046
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Legal and
professional fees
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40,260
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29,895
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Management and
administrative
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28,343
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31,452
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Depreciation
|
416
|
416
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TOTAL OPERATING
EXPENSES
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124,722
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131,437
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LOSS FROM
OPERATIONS
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(124,722)
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(131,437)
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OTHER INCOME
(EXPENSE)
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Interest
expense
|
(215)
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(200)
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Interest
income
|
486
|
558
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TOTAL OTHER INCOME
(EXPENSE)
|
271
|
358
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NET
LOSS
|
$(124,451)
|
$(131,079)
|
|
Basic and diluted
loss per share
|
$-
|
$-
|
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Basic and diluted
weighted average number shares outstanding
|
77,394,841
|
76,434,424
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
Page 4 of
24
STAR GOLD CORP.
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the three months ended July 31, 2019 and 2018
(UNAUDITED)
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Common Stock
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Shares
Issued
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Par Value
$.001 per share
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Additional
Paid in Capital
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Accumulated
Deficit
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Total
Stockholders’Equity
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|
BALANCE, April 30,
2018
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76,434,424
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$76,434
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$11,501,613
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$(10,367,039)
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$1,211,008
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Net
loss
|
-
|
-
|
-
|
(131,079)
|
(131,079)
|
|
BALANCE, July 31,
2018
|
76,434,424
|
$76,434
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$11,501,613
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$(10,498,118)
|
$1,079,929
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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BALANCE, April 30,
2019
|
77,394,841
|
$77,395
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$11,560,527
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$(10,702,743)
|
$935,179
|
|
Net
loss
|
-
|
-
|
-
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(124,451)
|
(124,451)
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|
BALANCE, July 31,
2019
|
77,394,841
|
$77,395
|
$11,560,527
|
$(10,827,194)
|
$810,728
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
Page 5 of
24
STAR GOLD CORP.
STATEMENTS OF CASH FLOWS (UNAUDITED)
|
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For the three months ended
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July 31, 2019
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July 31, 2018
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CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
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Net
loss
|
$(124,451)
|
$(131,079)
|
|
Adjustments to
reconcile net loss to net cash used by operating
activities
|
|
|
|
Depreciation
|
416
|
416
|
|
Changes in
operating assets and liabilities:
|
|
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Other
current assets
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2,105
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7
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Other
assets
|
2,100
|
3,781
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|
Accounts
payable
|
31,134
|
62,575
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Net cash used by
operating activities
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(88,696)
|
(64,300)
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CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
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Payments
for mining interest
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(12,000)
|
(12,000)
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Net cash used in
investing activities
|
(12,000)
|
(12,000)
|
|
Net
change in cash and cash equivalents
|
(100,696)
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(76,300)
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CASH
AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
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440,316
|
832,426
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CASH
AND CASH EQUIVALENTS AT END OF PERIOD
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$339,620
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$756,126
|
|
|
|
|
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STAR GOLD CORP.
NOTES TO FINANCIAL STATEMENTS
NOTE
1 - NATURE OF OPERATIONS
Star
Gold Corp. (the “Company”) was initially incorporated
as Elan Development, Inc., in the State of Nevada on December 8,
2006. The Company was originally organized to explore mineral
properties in British Columbia, Canada but the Company is currently
focused on gold, silver and other base metal-bearing properties in
Nevada. On April 25, 2008, the name of the company was changed to
Star Gold Corp.
The
Company’s core business consists of assembling and/or
acquiring land packages and mining claims the Company believes have
potential mining reserves, and expending capital to explore these
claims by drilling, and performing geophysical work or other
exploration work deemed necessary to move such claims towards
development and production. The business is a high-risk business as
there is no guarantee that the Company’s exploration work
will ultimately discover or produce any economically viable
minerals.
NOTE
2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
This
summary of significant accounting policies is presented to assist
in understanding the financial statements. The financial statements
and notes are representations of the Company’s management,
which is responsible for their integrity and objectivity. The
accompanying unaudited financial statements have been prepared by
the Company in accordance with accounting principles generally
accepted in the United States of America for interim financial
information, as well as the instructions to Form 10-Q. Accordingly,
the financial statements do not include all of the information and
footnotes required by accounting principles generally accepted in
the United States of America for complete financial
statements.
In the opinion of the Company’s management, all
adjustments, consisting of only normal recurring adjustments,
considered necessary for a fair statement of the interim financial
statements have been included. The balance sheet at April 30, 2019
was derived from audited annual financial statements but does not
contain all of the footnote disclosures from the annual financial
statements. All amounts presented are in U.S. dollars.
Operating results for the three month period ended July 31,
2019 are not necessarily indicative of the results that may be
expected for the full fiscal year ending April 30,
2020.
For
further information, refer to the financial statements and
footnotes thereto in the Company’s Annual Report on Form 10-K
for the year ended April 30, 2019.
Use of Estimates
The
preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America
requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities at the dates of the
financial statements, and the reported amounts of revenues and
expenses during the reporting period. Significant areas requiring
the use of management assumptions and estimates relate to
long-lived asset impairments and stock-based compensation
valuation. Actual results could differ from these estimates and
assumptions and could have a material effect on the Company’s
reported financial position and results of operations.
Risks and Uncertainties
The
Company’s operations are subject to significant risks and
uncertainties, including financial, operational, technological and
other risks associated with operating an emerging exploration
mining business, including the potential risk of business
failure.
Cash and Cash Equivalents
For the
purposes of the statement of cash flows, the Company considers all
highly liquid investments with original maturities of three months
or less when acquired to be cash equivalents.
STAR GOLD CORP.
NOTES TO FINANCIAL STATEMENTS
Reclamation bond
Reclamation
bond constitutes cash held as collateral for the faithful
performance of bond securing exploration permits and are accounted
for on a cost basis.
Financial Instruments
The
Company’s financial instruments include cash and cash
equivalents and reclamation bond. All instruments are accounted for
on a cost basis, which, due to the short maturity of these
financial instruments, approximates fair value at April 30,
2019.
Fair Value Measures
When required to measure assets or liabilities at fair value, the
Company uses a fair value hierarchy based on the level of
independent, objective evidence surrounding the inputs used. The
Company determines the level within the fair value hierarchy in
which the fair value measurements in their entirety fall. The
categorization within the fair value hierarchy is based upon the
lowest level of input that is significant to the fair value
measurement. Level 1 uses quoted prices in active markets for
identical assets or
liabilities, Level 2 uses significant other observable inputs, and
Level 3 uses significant unobservable inputs. The amount of the
total gains or losses for the period are included in earnings that
are attributable to the change in unrealized gains or losses
relating to those assets and liabilities still held at the
reporting date.
At July
31, 2019 and April 30, 2019, the Company had no assets or
liabilities accounted for at fair value on a recurring or
nonrecurring basis.
Mining Interests and Mineral Exploration Expenditures
Exploration
costs are expensed in the period in which they occur. The Company
capitalizes costs for acquiring and leasing mining properties and
expenses costs to maintain mineral rights as incurred. Should a
property reach the production stage, capitalized costs would be
amortized using the units-of-production method on the basis of
periodic estimates of ore reserves. Mining interests are
periodically assessed for impairment of value, and any subsequent
losses are charged to operations at the time of impairment. If a
property is abandoned or sold, its capitalized costs are charged to
operations.
Pre-development Expenditures
Pre-development
activities involve costs incurred in the exploration stage
that may ultimately benefit production, such as
underground ramp development, which are expensed due to the lack of
evidence of economic development, which is necessary to demonstrate
future recoverability of these costs.
Equipment
Equipment is stated at cost. Significant improvements are
capitalized and depreciated. Depreciation of equipment is
calculated using the straight-line method over the estimated useful
lives of the assets, which range from three to seven years.
Maintenance and repairs are charged to operations as incurred.
Gains or losses on disposition or retirement of property and
equipment are recognized in operating expenses.
Reclamation and Remediation
The
Company’s operations are subject to standards for mine
reclamation that have been established by various governmental
agencies. In the period in which the Company incurs a contractual
obligation for the retirement of tangible long-lived assets, the
Company will record the fair value of an asset retirement
obligation as a liability. A corresponding asset will also be
recorded and depreciated over the life of the asset. After the
initial measurement of an asset retirement obligation, the
liability will be adjusted at the end of each reporting period to
reflect changes in the estimated future cash flows underlying the
obligation. To date, the Company has not incurred any contractual
obligation requiring recording either a liability or associated
asset.
STAR GOLD CORP.
NOTES TO FINANCIAL STATEMENTS
JULY
31, 2019
Impairment
of Long-lived Assets
The
Company periodically reviews its long-lived assets to determine if
any events or changes in circumstances have transpired which
indicate that the carrying value of its assets may not be
recoverable. The Company determines impairment by comparing the
undiscounted net future cash flows estimated to be generated by its
assets to their respective carrying amounts. If impairment is
deemed to exist, the assets will be written down to fair
value.
Stock-based Compensation
The
Company estimates the fair value of options to purchase common
stock using the Black-Scholes model, which requires the input of
some subjective assumptions. These assumptions include estimating
the length of time employees will retain their vested stock options
before exercising them (“expected life”), the estimated
volatility of the Company’s common stock price over the
expected term (“volatility”), employee forfeiture rate,
the risk-free interest rate and the dividend yield. Changes in the
subjective assumptions can materially affect the estimate of fair
value of stock-based compensation. Options granted have a ten-year
maximum term and varying vesting periods as determined by the Board
of Directors. The value of shares of common stock awards is
determined based on the closing price of the Company’s stock
on the date of the award.
Income Taxes
The
Company accounts for income taxes using the liability method. The
liability method requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of (i)
temporary differences between financial statement carrying amounts
of assets and liabilities and their basis for tax purposes and (ii)
operating loss and tax credit carryforwards for tax purposes.
Deferred tax assets are reduced by a valuation allowance when
management concludes that it is more likely than not that a portion
of the deferred tax assets will not be realized in a future
period.
Reclassifications
Certain reclassifications have been
made to the prior year financial statements in order to compare to
the current year financial statement presentation. These
reclassifications have no effect on net loss, total assets or
accumulated deficit as previously
reported.
New Accounting Pronouncements
In
February 2016, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update
(“ASU”) No. 2016-02 Leases (Topic 842). The update
modifies the classification criteria and requires lessees to
recognize the assets and liabilities on the balance sheet for most
leases. The update is effective for fiscal years beginning after
December 15, 2018, with early adoption permitted. Adoption of this
update on May 1, 2019 had no impact on the Company’s
financial statement.
In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock
Compensation, Improvements to Nonemployee Share-Based Payment
Accounting. ASU No. 2018-07 expands the scope of the standard for
stock-based compensation to include share-based payment
transactions for acquiring goods and services from nonemployees.
ASU No. 2018-07 became effective for the Company on May 1,
2019. Adoption of this update on May 1, 2019 had no impact
on the Company’s financial statement.
Other accounting standards that have been issued or proposed by
FASB that do not require adoption until a future date are not
expected to have a material impact on the consolidated financial
statements upon adoption. The Company does not discuss recent
pronouncements that are not anticipated to have an impact on or are
unrelated to its financial condition, results of operations, cash
flows or disclosures.
NOTE 3– EARNINGS PER SHARE
Basic
Earnings Per Share (“EPS”) is computed as net income
(loss) available to common stockholders divided by the weighted
average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur from common
shares issuable through stock options and warrants.
STAR GOLD CORP.
NOTES TO FINANCIAL STATEMENTS
The
outstanding securities at July 31, 2019 and 2018 that could have a
dilutive effect are as follows:
|
|
July 31, 2019
|
July 31, 2018
|
|
Stock
options
|
6,645,000
|
6,650,000
|
|
Warrants
|
29,039,849
|
30,654,249
|
|
TOTAL
POSSIBLE DILUTIVE SHARES
|
35,684,849
|
37,304,249
|
|
|
|
|
For the
three months ended July 31, 2019 and 2018, respectively, the effect
of the Company’s outstanding stock options and warrants would
have been anti-dilutive and so are excluded in the diluted
EPS.
NOTE 4– EQUIPMENT AND MINING INTEREST
The
following is a summary of the Company’s equipment and mining
interest at July 31, 2019 and April 30, 2019:
|
|
July 31, 2019
|
April 30, 2019
|
|
Equipment
|
$4,995
|
$32,002
|
|
Less
accumulated depreciation
|
(2,428)
|
(29,019)
|
|
Equipment, net of
accumulated depreciation
|
2,567
|
2,983
|
|
Mining interest -
Longstreet
|
476,124
|
464,124
|
|
TOTAL
EQUIPMENT AND MINING INTEREST
|
$478,691
|
$467,107
|
Pursuant
to the Longstreet Property Option Agreement, as amended, (the
“Longstreet Agreement”) originally entered into by the
Company on or about January 15, 2010, the Company leases, with an
option to acquire, unpatented mining claims located in the State of
Nevada known as the Longstreet Property. Under the agreement, the
Company is required to make minimal lease payments in the form of
cash and options to purchase shares of the Company’s common
stock.
On
December 4, 2018, the Company amended the Longstreet Agreement to
change the due date of certain expenditures required by that
agreement (the “2018 Amendment”). The Amendment extends
the due date of the 2019 expenditures from January 16, 2019 to
August 31, 2019 and also extends the due date of the 2020
expenditures from January 16, 2020 to August 31, 2020. No other
provisions of the Longstreet Agreement, as previously amended, were
affected by the Amendment.
In
addition, the Company is obligated, pursuant to the Longstreet
Agreement, to pay an annual advance royalty payment of $12,000
related to the Clifford claims. The Longstreet Agreement obligates
the Company to minimal expenditures to be spent on the Longstreet
Property. All allowable expenditures in excess of the required
annual expenditures are carried over to the subsequent
year.
During
each of the three-month periods ended April 30, 2019 and 2018, the
Company paid the annual $12,000 advance royalty, for the Clifford
claims.
The
schedules of future minimum required expenditures, annual payments,
and number of stock options to be issued pursuant to the Longstreet
Agreement are as follows:
|
|
Required
expenditure
|
|
January 17, 2018
through August 31, 2019
|
$500,000
|
|
September 1, 2019
through August 31, 2020
|
700,000
|
|
TOTAL
|
$1,200,000
|
|
|
Cash payment (1)
|
Stock options
|
|
January 16,
2020
|
$45,000
|
50,000
|
|
Payment due upon
transfer but no later than January 16, 2021
|
85,000
|
-
|
|
TOTAL
|
$130,000
|
50,000
|
|
|
|
|
(1)
Does not include
$12,000 annual advance royalty payment related to Clifford
claims.
As of
July 31, 2019, the Company was in compliance with the expenditure
provisions of the Longstreet Agreement, as amended.
STAR GOLD CORP.
NOTES TO FINANCIAL STATEMENTS
On
August 12, 2019, the Company amended the Longstreet Agreement to
eliminate the required property expenditure structure and to
implement new consideration for the transfer of the Longstreet
Property pursuant to that Agreement (Note 10).
NOTE 5 –OTHER ASSETS
On
January 19, 2017, the Company entered into an Option and Lease of
Water Rights with Stone Cabin Company, LLC (the “Stone Cabin
Water Rights Agreement”). In exchange for a one-time payment
of $20,000, the Stone Cabin Water Rights Agreement granted the
Company a three-year option to commence a ten-year lease of certain
water rights in Nevada. The water rights are for use in conjunction
with the Company’s Longstreet Project. Lease payments for the
water rights do not commence unless the Company exercises the
option to lease. The Stone Cabin Water Rights Agreement also
granted the Company the ability to extend, upon additional option
payments, the option to lease for up to an additional three years
and the ability to extend the water rights lease (if exercised) for
an additional ten-year period. The $20,000 payment was deferred as
Other Assets and is being amortized on a straight-line basis over
the three-year option period.
On August 21, 2017, the Company entered into an Option and Lease of
Water Rights, with High Test Hay, LLC (the “High Test Water
Rights Agreement”). In exchange for a one-time payment
of $25,000, the High Test Water Rights Agreement grants the Company
a three-year option to commence a ten-year lease on certain water
rights in Nevada. The water rights are for use in conjunction with
the Company’s Longstreet Project. Lease payments for the
water rights do not commence unless and until the Company exercises
the option to lease. The High Test Water Rights Agreement
also grants the Company the ability to extend, upon additional
option payments, the option to lease for up to an additional three
years and the ability to extend the water rights lease (if
exercised) for up to an additional twenty years. The
$25,000 payment has been deferred and is being amortized on a
straight-line basis over the three-year option period.
The
following is a summary of the Company’s Other Assets at July
31, 2019 and April 30, 2019.
|
|
July 31, 2019
|
April 30, 2019
|
|
Option on water
rights lease agreements, net
|
$11,954
|
$15,735
|
|
Prepaid insurance
and other expenses
|
9,243
|
9,667
|
|
Total
|
21,197
|
25,402
|
|
Less Other Assets -
Current
|
(20,740)
|
(22,845)
|
|
TOTAL
OTHER ASSETS - NON-CURRENT
|
$457
|
$2,557
|
NOTE 6– RELATED PARTY TRANSACTIONS
The
Company rented office space from Marlin Property Management, LLC
(“Marlin”) an entity owned by the spouse of the
Company’s former President and current Chairman of the Board
of Directors. The lease was on a month-to-month basis as financial
resources were available. The Company terminated the lease
effective November 1, 2018. For the three months ended July 31,
2019 and 2018, office rent was $Nil and $750,
respectively.
During
the three months ended April 30, 2019, the Company paid a member of
the Company’s Board of Directors for consulting and investor
relation services in the amount of $4,000. The balance is included
in “Accounts payable and accrued liabilities” at July
31, 2019. There was no payment for such services during the three
months ended April 30, 2018.
NOTE 7 – STOCKHOLDERS’ EQUITY
On
October 26, 2018, the Company issued 960,417 shares of its common
stock in lieu of cash payment for accounts payable. The value of
the shares issued was $57,625, based on a price of $0.06 per share
which was the fair value on the date of issuance.
NOTE 8 – WARRANTS
The
following is a summary of activity for warrants to purchase shares
of the Company’s stock through April 30, 2019.
STAR GOLD CORP.
NOTES TO FINANCIAL STATEMENTS
|
|
Warrants
|
Weighted average exercise
price
|
|
Balance outstanding
at April 30, 2018 and April 30, 2019
|
30,654,249
|
$0.16
|
|
Expired
|
(1,614,400)
|
(0.23)
|
|
Balance outstanding
at July 31, 2019
|
29,039,849
|
$0.16
|
|
|
|
|
There
were no warrants to purchase shares of the Company’s common
stock issued or exercised during the three months ended July 31,
2019 and 2018, respectively.
The
composition of the Company’s warrants outstanding at April
30, 2019 is as follows:
|
Issue
Date
|
Expiration
Date
|
Warrants
|
Exercise Price
|
Remaining life
(years)
|
|
October 12,
2015
|
October 12,
2020
|
4,241,000
|
$0.20
|
1.20
|
|
October 12,
2016
|
October 12,
2021
|
14,000,000
|
0.15
|
2.20
|
|
October 31,
2017
|
October 31,
2020
|
10,798,849
|
0.15
|
1.25
|
|
|
29,039,849
|
$0.16
|
1.70
|
NOTE 9 - STOCK OPTIONS
Options issued for mining interest
In
consideration for its mining interest (see Note 4), the Company is
obligated to issue stock options to purchase shares of the
Company’s common stock based on "fair market price" which for
financial statement purposes is considered to be the closing price
of the Company's common stock on the issue dates. Those costs are
capitalized as Mining Interest (Note 4). No options were issued for
mineral interests during the three months ended July 31, 2019 and
2018.
Options
outstanding for mining interest totaled 435,000 at both April 30,
2019 and July 31, 2019 and are fully vested. As of July 31, 2019,
the remaining weighted average term of the option grants for mining
interest was 4.16 years. As of July 31, 2019, the weighted average
exercise price of the option grants for mining interest was $0.26
per share.
Options issued under the 2011 Stock Option/Restricted Stock
Plan
The
Company established the 2011 Stock Option/Restricted Stock Plan.
The Stock Option Plan is administered by the Board of Directors and
provides for the grant of stock options to eligible individuals
including directors, executive officers and advisors that have
furnished bona fide services to the Company not related to the sale
of securities in a capital-raising transaction.
The
Stock Option Plan has a fixed maximum percentage of 10% of the
Company’s outstanding shares that are eligible for the plan
pool, whereby the number of Shares under the plan increases
automatically increases as the total number of shares outstanding
increase. The number of shares subject to the Stock Option Plan and
any outstanding awards will be adjusted appropriately by the Board
of Directors if the Company’s common stock is affected
through a reorganization, merger, consolidation, recapitalization,
restructuring, reclassification dividend (other than quarterly cash
dividends) or other distribution, stock split, spin-off or sale of
substantially all of the Company’s assets.
The
Stock Option plan also has terms and conditions, including without
limitations that the exercise price for stock options granted under
the Stock Option Plan must equal the stock’s fair value,
based on the closing price per share of common stock, at the time
the stock option is granted. The fair value of each option award is
estimated on the date of grant utilizing the Black-Scholes model
and commonly utilized assumptions associated with the Black-Scholes
methodology. Options granted under the Plan have a ten-year maximum
term and varying vesting periods as determined by the
Board.
The
total value of stock option awards is expensed ratably over the
vesting period of the employees receiving the awards. As of July
31, 2019 and 2018, respectively, there was no unrecognized
compensation cost related to stock-based options and awards. No
options were issued under the 2011 Plan during the three months
ended July 31, 2019 and 2018, respectively.
STAR GOLD CORP.
NOTES TO FINANCIAL STATEMENTS
The
following table summarizes additional information about the options
under the Company’s Stock Option Plan as of July 31,
2019:
|
|
Options outstanding and
exercisable
|
|
Date of
Grant
|
Shares
|
Price
|
Remaining Term
|
|
October 18,
2016
|
4,810,000
|
$0.06
|
2.22
|
|
April 30,
2018
|
1,400,000
|
0.065
|
3.75
|
|
Total
options
|
6,210,000
|
$0.06
|
2.67
|
|
|
|
|
|
The
total value of stock option awards is expensed ratably over the
vesting period of the employees receiving the awards. As of April
30, 2019, there was no unrecognized compensation cost related to
stock-based options and awards.
Summary:
The
following is a summary of the Company’s stock options
outstanding and exercisable:
|
Options issued
for:
|
Expiration
Date
|
Options
|
Weighted Average
Exercise Price
|
|
Mining
interests
|
April 11, 2020 to
January 15, 2029
|
435,000
|
$0.26
|
|
Stock option
plan
|
October 18, 2021 to
April 30, 2023
|
6,210,000
|
0.06
|
|
Outstanding
and exercisable at April 30, 2019
|
|
6,645,000
|
$0.07
|
The
aggregate intrinsic value of all options vested and exercisable at
July 31, 2019, was $Nil based on the Company’s closing price
of $0.045 per common share at July 31, 2019. The Company’s
current policy is to issue new shares to satisfy option
exercises.
NOTE 10 – SUBSEQUENT EVENTS
On
August 12, 2019, the Company and Great Basin Resources, Inc.
(“Great Basin”) agreed to amend the Longstreet
Agreement (Note 4) to eliminate the required property expenditure
structure and to implement new consideration for the transfer of
the Property pursuant to that agreement (the “2019
Amendment”). The Amendment eliminated the remainder of the
required property expenditures set forth in the Longstreet
Agreement, as amended. Furthermore, the Amendment sets forth that
upon the Company: a) repricing 435,000 existing options to purchase
Company common stock at the exercise price of $0.04; b) issuing an
additional 500,000 options to purchase Company common stock at the
exercise price of $0.04; c) making a cash payment of $50,000 to
Great Basin (paid on August 19 2019) and d) entering into
a consulting agreement with
Great Basin with a term of eighteen
months, Great Basin shall transfer title to the Property to the
Company.
The
Amendment also grants the Company the option, to be exercised no
later than six (6) months following the first receipt of proceeds
from the sale of ore from the Property, to purchase one-half of Great Basin’s 3.0% Net
Smelter Royalty for a payment of $1,750,000.
No
other provisions of the Longstreet Agreement, as previously
amended, were affected by the Amendment.
MANAGEMENT’S
DISCUSSION AND ANALYSIS AND PLAN OF OPERATION.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
quarterly report and the exhibits attached hereto contain
“forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995, as amended. Such
forward-looking statements concern the Company’s anticipated
results and developments in the Company’s operations in
future periods, planned exploration and development of its
properties, plans related to its 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.
Any
statement that expresses or involves discussions with respect to
predictions, expectations, beliefs, plans, projections, objectives,
assumptions or future events or performance (often, but not always
using words or phrases such as “expects” or “does
not expect”, “is expected”,
“anticipates” or “does not anticipate”,
“plans”, “estimates”, or
“intends”, or states that certain actions, events or
results “may” or “could”,
“would”, “might” or “will” be
taken, occur or be achieved) are not statements of historical fact
and may be forward-looking statements. Forward-looking statements
are subject to a variety of known and unknown risks, uncertainties
and other factors which could cause actual events or results to
differ from those expressed or implied by the forward-looking
statements, including, without limitation:
●
Risks related to
the Company’s properties being in the exploration
stage;
●
Risks related to
the mineral operations being subject to government
regulation;
●
Risks related to
environmental concerns;
●
Risks related to
the Company’s ability to obtain additional capital to develop
the Company’s resources, if any;
●
Risks related to
mineral exploration and development activities;
●
Risks related to
mineral estimates;
●
Risks related to
the Company’s insurance coverage for operating
risks;
●
Risks related to
the fluctuation of prices for precious and base metals, such as
gold, silver and copper;
●
Risks related to
the competitive industry of mineral exploration;
●
Risks related to
the title and rights in the Company’s mineral
properties;
●
Risks related to
the possible dilution of the Company’s common stock from
additional financing activities;
●
Risks related to
potential conflicts of interest with the Company’s
management;
●
Risks related to
the Company’s shares of common stock;
This
list is not exhaustive of the factors that may affect the
Company’s forward-looking statements. Some of the important
risks and uncertainties that could affect forward-looking
statements are described further under the sections titled
“Risk Factors and Uncertainties”, “Description of
Business” and “Management’s Discussion and
Analysis” of this Quarterly Report. Should one or more of
these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially
from those anticipated, believed, estimated or expected. The
Company cautions readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made.
Star Gold Corp. disclaims any obligation subsequently to revise any
forward-looking statements to reflect events or circumstances after
the date of such statements or to reflect the occurrence of
anticipated or unanticipated events, except as required by law. The
Company advises readers to carefully review the reports and
documents filed from time to time with the Securities and Exchange
Commission (the “SEC”), particularly the
Company’s Annual Reports on Form 10-K, Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K.
Star Gold Corp qualifies all forward-looking statements contained
in this Quarterly Report by the foregoing cautionary
statement.
Certain
statements contained in this Quarterly Report on Form 10-Q
constitute “forward-looking statements.” These
statements, identified by words such as “plan,”
“anticipate,” “believe,”
“estimate,” “should,” “expect,”
and similar expressions include the Company’s expectations
and objectives regarding its future financial position, operating
results and business strategy. These statements reflect the current
views of management with respect to future events and are subject
to risks, uncertainties and other factors that may cause actual
results, performance or achievements, or industry results, to be
materially different from those described in the forward-looking
statements. Such risks and uncertainties include those set forth
under the caption “Management’s Discussion and Analysis
or Plan of Operation” and elsewhere in this Quarterly
Report.
As used
in this Quarterly Report, the terms “we,”
“us,” “our,” “Star Gold,” and
the “Company”, mean Star Gold Corp., unless otherwise
indicated. All dollar amounts in this Quarterly Report are
expressed in U.S. dollars, unless otherwise indicated.
Management’s
Discussion and Analysis is intended to be read in conjunction with
the Company’s financial statements and the integral notes
(“Notes”) thereto included in the Company’s
Annual Report on Form 10-K for the fiscal year ending April 30,
2019. The following statements may be forward-looking in nature and
actual results may differ materially.
Corporate Background
The
Company was originally incorporated on December 8, 2006, under the
laws of the State of Nevada as Elan Development, Inc. On April 25,
2008, the name of the company was changed to Star Gold Corp. Star
Gold Corp. is an exploration stage company engaged in the
acquisition and exploration of precious metal deposit properties
and advancing them toward production. The Company is engaged in the
business of exploring, evaluating and acquiring mineral prospects
with the potential for economic deposits of precious and base
metals.
Star
Gold Corp. currently leases with an option to acquire certain
unpatented mining claims located in the State of Nevada which in
part make up what we refer to as the “Longstreet
Property” (or the “Longstreet Project”). The
Longstreet Property in its entirety comprises 125 mineral claims:
75 original optioned claims, of which 70 are unpatented staked
claims and five claims leased from local ranchers, pursuant to the
“Clifford Lease”; as well as 50 claims subsequently
staked by Star Gold. The Longstreet Property covers a total area of
approximately 2,500 acres (1,012 ha). The Longstreet Project is at
an intermediate stage of exploration.
The
Company has no patents, licenses, franchises or concessions which
are considered by the Company to be of importance. The business is
not of a seasonal nature. Because minerals are traded in the open
market, the Company has little to no control over the competitive
conditions in the industry.
Overview of Mineral Exploration and Current Operations
Star
Gold Corp. is an exploration stage mineral company with no
producing mines. Mineral exploration is essentially a research
activity that does not produce a product. The Company acquires
properties which it believes have potential to host economic
concentrations of minerals, particularly gold and silver. These
acquisitions have and may take the form of unpatented mining claims
on federal land, or leasing claims, or private property owned by
others. An unpatented mining claim is an interest, that can be
acquired, in the mineral rights on open lands of the federally
owned public domain. Claims are staked in accordance with the
Mining Law of 1872, recorded with the federal government pursuant
to laws and regulations established by the Bureau of Land
Management. The Company intends to remain in the business of
exploring for mining properties that have the potential to produce
gold, silver, base metals and other commodities.
The
Company will perform basic geological work to identify specific
drill targets on the properties, and then collect subsurface
samples by drilling to confirm the presence of mineralization (the
presence of economic minerals in a specific area or geological
formation). The Company may enter joint venture agreements with
other companies to fund further exploration and/or development
work. It is the Company’s plan to focus on assembling a
high-quality group of mid-stage mineral (primarily gold and silver)
exploration prospects, using the experience and contacts of the
management group. By such prospects, the Company means properties
that have been previously identified by third parties, (including
prior owners and/or exploration companies), as containing mineral
deposits with potential for economic mineralization. Often these
properties have been sampled, mapped and sometimes drilled, usually
with indefinite results. Accordingly, such acquired projects will
have prior exploration history and/or will have strong similarity
to a recognized geologic ore deposit model. Geographic emphasis
will be place on the western United States.
The
geologic potential and ore deposit models have been defined and
specific drill targets identified the Company’s sole
remaining property. The Company’s property evaluation process
involves using basic geologic fieldwork to perform an initial
evaluation of a property. If the evaluation is positive, the
Company seeks to acquire, either by staking unpatented mining
claims on open public domain, or by leasing the property from the
owner of private property or the owner of unpatented claims. Once
acquired, the Company then typically makes a more detailed
evaluation of the property. This detailed evaluation involves
expenditures for exploration work which may include rock and soil
sampling, geologic mapping, geophysics, trenching, drilling or
other means to determine if economic mineralization is present on a
property.
Portions
of the Company’s mining properties are owned by third parties
and leased to Star Gold as outlined in the following
table:
|
Property name
|
|
Longstreet
|
|
Third parties
|
|
Great
Basin Resources, Inc. and Clifford
|
|
Number of claims
|
|
142
(1)
|
|
Acres (approx.)
|
|
2,500
|
|
Agreements/Royalties
|
|
|
|
|
Royalties
|
|
3% Net
Smelter Royalty (“NSR”)
|
|
|
Annual
lease payments – total due through 2020
|
|
$130,000
|
|
|
Minimum
exploration expenditures – total due through
2020
|
|
$1,200,000
|
|
|
Stock
options – total due through 2020
|
|
50,000
|
|
|
Annual
advance royalty payment
|
|
$12,000
|
(1)
Great Basin
Resources, Inc. (“Great Basin”) took assignment from
MinQuest, Inc., of the 142 claims which are leased to the Company
under the Longstreet Agreement (which was also assigned to Great
Basin) (Note 4 of the financial statements contained in Item 8) and
Clifford owns 5 claims (also Note 4) which are managed by the
Company.
(2)
On August 12, 2019,
the Company and Great Basin Resources, Inc. (“Great
Basin”) agreed to amend the Longstreet Agreement (Note 4) to
eliminate the required property expenditure structure and to
implement new consideration for the transfer of the Property
pursuant to that agreement (the “2019 Amendment”). The
Amendment eliminated the remainder of the required property
expenditures set forth in the Longstreet Agreement, as
amended.
Compliance with Government Regulations
Continuing
to acquire and explore mineral properties in the State of Nevada
will require the Company to comply with all regulations, rules and
directives of governmental authorities and agencies applicable to
the exploration of minerals in the State of Nevada and the United
States Federal agencies.
United States
Mining
in the State of Nevada is subject to federal, state and local law.
Three types of laws are of particular importance to the
Company’s U.S. mineral properties: those affecting land
ownership and mining rights; those regulating mining operations;
and those dealing with the environment.
Land Ownership and Mining Rights.
On
Federal Lands, mining rights are governed by the General Mining Law
of 1872 (General Mining Law) as amended, 30 U.S.C. §§
21-161 (various sections), which allows the location of mining
claims on certain Federal Lands upon the discovery of a valuable
mineral deposit and proper compliance with claim location
requirements. A valid mining claim provides the holder with the
right to conduct mining operations for the removal of locatable
minerals, subject to compliance with the General Mining Law and
Nevada state law governing the staking and registration of mining
claims, as well as compliance with various federal, state and local
operating and environmental laws, regulations and ordinances. As
the owner or lessee of the unpatented mining claims, the Company
has the right to conduct mining operations on the lands subject to
the prior procurement of required operating permits and approvals,
compliance with the terms and conditions of any applicable mining
lease, and compliance with applicable federal, state, and local
laws, regulations and ordinances.
Mining Operations
The
exploration of mining properties and development and operation of
mines is governed by both federal and state laws.
The
State of Nevada likewise requires various permits and approvals
before mining operations can begin, although the state and federal
regulatory agencies usually cooperate to minimize duplication of
permitting efforts. Among other things, a detailed reclamation plan
must be prepared and approved, with bonding in the amount of
projected reclamation costs. The bond is used to ensure that proper
reclamation takes place, and the bond will not be released until
that time. The Nevada Department of Environmental Protection, which
is referred to as the NDEP, is the state agency that administers
the reclamation permits, mine permits and related closure plans on
the Nevada property. Local jurisdictions (such as Eureka County)
may also impose permitting requirements (such as conditional use
permits or zoning approvals).
Environmental Law
The
development, operation, closure, and reclamation of mining projects
in the United States requires numerous notifications, permits,
authorizations, and public agency decisions. Compliance with
environmental and related laws and regulations requires us to
obtain permits issued by regulatory agencies, and to file various
reports and keep records of the Company’s operations. Certain
of these permits require periodic renewal or review of their
conditions and may be subject to a public review process during
which opposition to the Company’s proposed operations may be
encountered. The Company is currently operating under various
permits for activities connected to mineral exploration,
reclamation, and environmental considerations. Unless and until a
mineral resource is proved, it is unlikely Star Gold Corp.
operations will move beyond the exploration stage. If in the future
the Company decides to proceed beyond exploration, there will be
numerous notifications, permit applications, and other decisions to
be addressed at that time.
Competition
Star
Gold Corp. competes with other mineral resource exploration and
development companies for financing and for the acquisition of new
mineral properties and for equipment and labor related to
exploration and development of mineral properties. Many of the
mineral resource exploration and development companies with whom
the Company competes have greater financial and technical
resources. Accordingly, competitors may be able to spend greater
amounts on acquisitions of mineral properties of merit, on
exploration of their mineral properties and on development of their
mineral properties. In addition, they may be able to afford greater
geological expertise in the targeting and exploration of mineral
properties. This competition could result in competitors having
mineral properties of greater quality and interest to prospective
investors who may finance additional exploration and development.
This competition could adversely impact Star Gold Corp.’s
ability to finance further exploration and to achieve the financing
necessary for the Company to develop its mineral
properties.
The
Company provides no assurance it will be able to compete in any of
its business areas effectively with current or future competitors
or that the competitive pressures faced by the Company will not
have a material adverse effect on the business, financial condition
and operating results.
Office and Other Facilities
Star
Gold Corp. currently maintains its administrative offices at 1875
Lakewood Drive, Suite 200,
Coeur d’Alene, ID 83814. The telephone number is (208)
664-5066. Star Gold Corp. does not currently own title to any real
property.
Employees
The
Company has no employees as of the date of this Quarterly Report on
Form 10-Q. Star Gold Corp. conducts business largely through
independent contractor agreements with consultants.
Research and Development Expenditures
The
Company has not incurred any research expenditures since
incorporation
Reports to Security Holders
The
Registrant does not issue annual or quarterly reports to security
holders other than the annual Form 10-K and quarterly Forms 10-Q as
electronically filed with the SEC. Electronically filed reports may
be accessed at www.sec.gov.
Interested parties also may read and copy any materials filed with
the SEC at the SEC’s Public Reference Room at 450 Fifth
Street NW, Washington, DC 20549. Information may be obtained on the
operation of the Public Reference Room by calling the SEC at (800)
SEC-0330.
PLAN OF OPERATION
The
Company maintains a corporate office in Coeur d’Alene, Idaho.
This is the primary administrative office for the Company and is
utilized by Board Chairman Lindsay Gorrill and Chief Financial
Officer Kelly Stopher.
During
the year ended April 30, 2019, the Company completed the
following:
Wildlife and
Biological Baseline Study (WBS)
Cultural and
Archeology Study
Plan of
Operation submitted to US Forestry Service.
For the
upcoming fiscal year ending April 30, 2020, the Company plans to
commence the following activities as it prepares the EIS on the
Longstreet Project:
Hydrology Study (in
progress – dependent on Plan of Operations being
approved)
Geochemical
analysis – design of program for submission to State of
Nevada (in progress)
Plan of
Operations Development (Mine Plan, Civil Engineering
Designs)
Assuming
the results of the above-referenced studies are favorable, the
Company intends to proceed to the preparation of an EIS and plan of
operation for the Longstreet Project (the “Plan of
Operations”). The eventual objectives of the EIS and the Plan
of Operations are the issuance, by each responsible agency, of the
necessary permits to authorize the construction of, and ongoing
operations at, an open pit/heap leach mine at the Longstreet
Property.
The
Company anticipates the aforementioned tasks to be completed in
late 2019, with the EIS prepared in 2020.
Approval
of the Longstreet Plan is subject to governmental agency review and
may require additional remediation activities.
Management
believes it can source additional capital in the investment markets
in the coming months and years. The Company may also consider other
sources of funding, including potential mergers, joint ventures
and/or farm-out a portion of its exploration
properties.
Future
liquidity and capital requirements depend on many factors including
timing, cost and progress of the Company’s exploration
efforts. The Company will consider additional public offerings,
private placement, mergers or debt instruments.
Additional
financing will be required in the future to complete all necessary
steps to apply for a final permit. Although the Company believes it
will be able to source additional financing there are no guarantees
any needed financing will be available at the time needed or on
acceptable terms, if at all. If the Company is unable to raise
additional financing when necessary, it may have to delay
exploration efforts or property acquisitions or be forced to cease
operations. Collaborative arrangements may require the Company to
relinquish rights to certain of its mining claims.
RESULTS OF OPERATIONS
|
|
For the three months ended July
31,
|
|
|
|
|
2019
|
2018
|
$ Change
|
% Change
|
|
Mineral exploration
expense
|
$26,630
|
$24,628
|
$2,002
|
8.1%
|
|
Pre-development
expense
|
29,073
|
45,046
|
(15,973)
|
(35.5%)
|
|
Legal and
professional fees
|
40,260
|
29,895
|
10,365
|
34.7%
|
|
Management and
administrative
|
28,343
|
31,452
|
(3,109)
|
(9.9%)
|
|
Depreciation
|
416
|
416
|
-
|
N/A
|
|
Interest
expense
|
215
|
200
|
15
|
7.5%
|
|
|
(486)
|
(558)
|
72
|
(12.9%)
|
|
|
$124,451
|
$131,079
|
$(6,628)
|
(5.1%)
|
The
Company earned no operating revenue in 2019 or 2018 and does not
anticipate earning any operating revenues in the near future. Star
Gold Corp. is an exploration stage company and presently is seeking
other natural resources related business
opportunities.
The
Company will continue to focus its capital and resources toward
permitting activities at its Longstreet Property.
Total
net loss for the three months ended July 31, 2019 of $124,451
decreased by $6,628 from 2018 total net loss of
$131,079.
Mineral exploration and consultants’ expense
|
|
For the three months ended July
31,
|
|
|
|
|
2019
|
2018
|
$ Change
|
% Change
|
|
Drilling and field
work
|
$1,386
|
$804
|
$582
|
72.4%
|
|
Claims
|
25,244
|
23,824
|
1,420
|
6.0%
|
|
Total
mineral exploration and consultants’ expense
|
$26,630
|
$24,628
|
$2,002
|
8.1%
|
Mineral exploration and consultants’ expense for the three
months ended July 31, 2019 was $26,630, an increase of $2,002 from
2018 mineral exploration and consultants’ expense of $24,628.
The Company’s emphasis has shifted from exploratory drilling
to activities related to pre-development expense including
environmental and anthropological studies associated with building
a Plan of Operations and obtaining a permit for construct a mine at
the Longstreet site.
Pre-development expense
|
|
For the three months ended July
31,
|
|
|
|
|
2019
|
2018
|
$ Change
|
% Change
|
|
Flora and fauna
contractor
|
$8,060
|
$8,837
|
$(777)
|
(8.8%)
|
|
Environmental
impact and plan of operations
|
11,857
|
12,013
|
(156)
|
(1.3%)
|
|
Project
management
|
5,375
|
20,415
|
(15,040)
|
(73.7%)
|
|
Water rights
costs
|
3,781
|
3,781
|
-
|
0.0%
|
|
Aerial
mapping
|
-
|
-
|
-
|
N/A
|
|
Total
pre-development expense
|
$29,073
|
$45,046
|
$(15,973)
|
(35.5%)
|
|
|
|
|
|
|
Pre-development expense for the three months ended July 31, 2019
was $29,073, a decrease of
$15,973 from 2018 pre-development expense of $45,046. The Company
is currently assembling bids from engineering firms for development
of a full Plan of Operations and Mine Schedule for development and
eventual submission of an application to permit construction of a
heap leach mining operation on the Longstreet
Property.
Legal and professional fees
|
|
For the three months ended July
31,
|
|
|
|
|
2019
|
2018
|
$ Change
|
% Change
|
|
Audit and
accounting
|
$15,000
|
$15,000
|
$-
|
0.0%
|
|
Legal
fees
|
2,200
|
2,338
|
(138)
|
(5.9%)
|
|
Public company
expense
|
15,364
|
12,557
|
2,807
|
22.4%
|
|
Investor
relations
|
7,696
|
-
|
7,696
|
N/A
|
|
Total
legal and professional fees
|
$40,260
|
$29,895
|
$10,365
|
34.7%
|
|
|
|
|
|
|
There
was no change in audit and accounting fees of $15,000 for the three
months ended July 31, 2019 compared to the three months ended July
31, 2018.
The
primary component of public company expense is the annual fee
associated with OTC Markets for the Company’s OTCQB status.
Public company expense increased $2,807 in conjunction with
services provided by the company’s transfer
agent.
Legal
fees decreased $138 from $2,338 for the three months ended July 31,
2018 to $2,200 for the three months ended July 31, 2019. There are
no pending legal issues or contingencies as of July 31,
2019.
Management and administrative expense
|
|
For the three months ended July
31,
|
|
|
|
|
2019
|
2018
|
$ Change
|
% Change
|
|
Auto and
travel
|
$4,847
|
$7,659
|
$(2,812)
|
(36.7%)
|
|
General
administrative and insurance
|
9,641
|
8,821
|
820
|
9.3%
|
|
Management fees and
payroll
|
12,660
|
13,253
|
(593)
|
(4.5%)
|
|
Office and computer
expense
|
1,019
|
631
|
388
|
61.5%
|
|
Rent and lease
expense
|
-
|
750
|
(750)
|
(100.0%)
|
|
Telephone and
utilities
|
176
|
338
|
(162)
|
(47.9%)
|
|
Total
management and administrative
|
$28,343
|
$31,452
|
$(3,109)
|
(9.9%)
|
|
|
|
|
|
|
Total management and administrative expense decreased $3,109 to
$28,343 compared to 2018 expense of $31,452.
The primary difference was attributable to auto and travel expenses
decreasing $2,812 for the three months ended July 31, 2019 compared
to the prior three months ended April 30, 2018.
LIQUIDITY AND FINANCIAL CONDITION
|
WORKING
CAPITAL
|
July 31, 2019
|
April 30, 2019
|
|
Current
assets
|
$360,360
|
$463,161
|
|
Current
liabilities
|
50,380
|
19,246
|
|
Working
capital
|
$309,980
|
$443,915
|
|
|
For the three months
ended
|
|
CASH
FLOWS
|
July 31, 2019
|
July 31, 2018
|
|
Cash flow used by
operating activities
|
$(88,696)
|
$(64,300)
|
|
Cash flow used by
investing activities
|
(12,000)
|
(12,000)
|
|
Cash flow provided
by financing activities
|
-
|
-
|
|
Net decrease in
cash during period
|
$(100,696)
|
$(76,300)
|
As of
July 31, 2019, the Company had cash on hand of $339,620. Since
inception, the sole source of financing has been sales of the
Company’s debt and equity securities. Star Gold Corp. has not
attained profitable operations and its ability to pursue any future
plan of operation is dependent upon our ability to obtain
financing.
Star
Gold Corp. anticipates continuing to rely on sales of its debt
and/or equity securities in order to continue to fund ongoing
operations. Issuances of additional shares of common stock may
result in dilution to the Company’s existing stockholders.
There is no assurance that the Company will be able to complete any
additional sales of equity securities or that it will be able
arrange for other financing to fund its planned business
activities.
The
Company’s continuation as a going concern is dependent upon
its ability to generate sufficient cash flow to meet its
obligations on a timely basis, to obtain additional financing as
may be required, or ultimately to attain profitability. Potential
sources of cash, or relief of demand for cash, include additional
external debt, the sale of shares of the Company’s stock or
alternative methods such as mergers or sale of the Company’s
assets. No assurances can be given, however, that the Company will
be able to obtain any of these potential sources of cash. The
Company currently requires additional cash funding from outside
sources to sustain existing operations and to meet current
obligations and ongoing capital requirements.
The
Company has sufficient capital to meet its obligations for the next
twelve months but will require additional financing to complete its
planned permitting tasks.
The
Company plans for the long-term continuation as a going concern
include financing future operations through sales of our equity
and/or debt securities and the anticipated profitable exploitation
of the Company’s mining properties. These plans may also, at
some future point, include the formation of mining joint ventures
with senior mining company partners on specific mineral properties
whereby the joint venture partner would provide the necessary
financing in return for equity in the property.
OFF-BALANCE SHEET ARRANGEMENTS
The
Company has no significant off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or
capital resources that are material to its
stockholders.
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The
Company does not hold any derivative instruments and does not
engage in any hedging activities.
Conclusions of Management Regarding Effectiveness of Disclosure
Controls and Procedures
At the
end of the period covered by this Quarterly Report on Form 10-Q, an
evaluation was carried out under the supervision and with the
participation of the Company's management, including the President
and Principal Executive Officer ("PEO") and Principal Financial
Officer ("PFO"), of the effectiveness of the design and operations
of the Company's disclosure controls and procedures (as defined in
Rule 13a – 15(e) and Rule 15d – 15(e) under the
Exchange Act). Based on that evaluation, the PEO and the PFO have
concluded that as of the end of the period covered by this report,
the Company's disclosure controls and procedures were not effective
as it was determined that there were material weaknesses affecting
our disclosure controls and procedures.
Management
of the Company believes that these material weaknesses are due to
the small size of the Company's accounting staff. The small size of
the Company's accounting staff may prevent adequate controls in the
future, such as segregation of duties, due to the cost/benefit of
such remediation. To mitigate the current limited resources and
limited employees, we rely heavily on direct management oversight
of transactions, along with the use of external legal and
accounting professionals. As the Company grows, management expects
to increase the number of employees, which will enable us to
implement adequate segregation of duties within the internal
control framework.
PEO and PFO Certifications
Appearing
immediately following the Signatures section of this report there
are Certifications of the PEO and the PFO. The Certifications are
required in accordance with Section 03 of the Sarbanes-Oxley Act of
2002 (the Section 302 Certifications). This Items of this report
which you are currently reading is the information concerning the
Evaluation referred to in Section 302 Certifications and this
information should be read in conjunction with Section 302
Certifications for a more complete understanding of the topics
presented.
Changes in Internal Control over Financial Reporting
There
have been no changes during the quarter ended July 31, 2019 in the
Company’s internal controls over financial reporting that
have materially affected, or are reasonably likely to materially
affect, internal controls over financial reporting.
PART II - OTHER INFORMATION
Star
Gold Corp. is not a party to any material legal proceedings, and,
to Management’s knowledge, no such proceedings are threatened
or contemplated. No director, officer or affiliate of Star Gold
Corp. and no owner of record or beneficial owner of more than 5% of
the Company’s securities or any associate of any such
director, officer or security holder is a party adverse to Star
Gold Corp. or has a material interest adverse to Star Gold Corp. in
reference to pending litigation.
There
have been no material changes from the risk factors as previously
disclosed in the Company’s Form 10-K for the year ended April
30, 2019 which was filed with the SEC on July 22,
2019.
RECENT
SALES OF UNREGISTERED SECURITIES.
None.
DEFAULTS
UPON SENIOR SECURITIES.
None
Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform
and Consumer Protection Act of 2010 (the “Dodd-Frank
Act”), issuers that are operators, or that have a subsidiary
that is an operator, of a coal or other mine in the United States
are required to disclose in their periodic reports filed with the
SEC information regarding specified health and safety violations,
orders and citations, related assessments and legal actions, and
mining-related fatalities. The Company is in the exploration stage
and has no operations.
None
|
Exhibit
|
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|
Number
|
Description of Exhibits
|
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|
101.INS(2)
|
XBRL
Instance
|
|
|
|
|
101.SCH*
|
XBRL
Taxonomy Extension Schema
|
|
|
|
|
101.CAL*
|
XBRL
Taxonomy Extension Calculation
|
|
|
|
|
101.DEF*
|
XBRL
Taxonomy Extension Definition
|
|
|
|
|
101.LAB*
|
XBRL
Taxonomy Extension Labels
|
|
|
|
|
101.PRE*
|
XBRL
Taxonomy Extension Presentation
|
|
|
|
|
(1)
|
Filed
with the SEC as an exhibit to the Company’s Registration
Statement on Form SB-2 originally filed on June 14, 2007, as
amended.
|
|
(2)
|
Filed
with the SEC, on February 02, 2012, as an exhibit to Form
8-K.
|
|
(*)
|
XBRL
Information is furnished and not filed or a part of a registration
statement or prospectus for purposes of Sections 11 or 12 of the
Securities Act of 1933, as amended, is deemed not filed for
purposes of Section 18 of the Securities Exchange Act of 1934, as
amended and otherwise is not subject to liability under these
sections.
|
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.
|
|
|
|
STAR GOLD CORP.
|
|
|
|
|
|
|
|
|
|
|
|
Date:
|
September
12, 2019
|
By:
|
/s/
DAVID
SEGELOV
|
|
|
|
|
President
|
|
|
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
|
Date:
|
September
12, 2019
|
|
/s/
KELLY J.
STOPHER
|
|
|
|
By:
|
Kelly
J. Stopher
|
|
|
|
|
Chief
Financial Officer and Secretary
|
|
|
|
|
(Principal
Financial Officer)
|