U.S.
GOLD CORP. AND SUBSIDIARIES
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
See
accompanying notes to unaudited condensed consolidated financial statements.
U.S.
GOLD CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY
31, 2023
NOTE
1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Organization
U.S.
Gold Corp., formerly known as Dataram Corporation (the “Company”), was originally incorporated in the State of New Jersey
in 1967 and was subsequently re-incorporated under the laws of the State of Nevada in 2016. Effective June 26, 2017, the Company changed
its name to U.S. Gold Corp. from Dataram Corporation.
On
June 13, 2016, Gold King Corp. (“Gold King”), a private Nevada corporation, entered into an Agreement and Plan of Merger
(the “Gold King Merger Agreement”) with the Company, the Company’s wholly-owned subsidiary Dataram Acquisition Sub,
Inc., a Nevada corporation (“Acquisition Sub”), and all of the principal shareholders of Gold King. Upon closing of the transactions
contemplated under the Gold King Merger Agreement (the “Gold King Merger”), Gold King merged with and into Acquisition Sub
with Gold King as the surviving corporation and became a wholly-owned subsidiary of the Company. The Gold King Merger was treated as
a reverse acquisition and recapitalization, and the business of Gold King became the business of the Company. The financial statements
are those of Gold King (the accounting acquirer) prior to the merger and include the activity of the Company (the legal acquirer) from
the date of the Gold King Merger. Gold King is a gold and precious metals exploration company pursuing exploration and development opportunities
primarily in Nevada and Wyoming. The Company has a wholly owned subsidiary, U.S. Gold Acquisition Corporation, formerly Dataram Acquisition
Sub, Inc. (“U.S. Gold Acquisition”), a Nevada corporation which was formed in April 2016.
On
May 23, 2017, the Company closed the Gold King Merger with Gold King. The Gold King Merger constituted a change of control and the majority
of the board of directors changed with the consummation of the Gold King Merger. The Company issued shares of common stock to Gold King
which represented approximately 90% of the combined company.
On
September 10, 2019, the Company, 2637262 Ontario Inc., a corporation incorporated under the laws of the Province of Ontario (“NumberCo”),
and all of the shareholders of NumberCo (the “NumberCo Shareholders”), entered into a Share Exchange Agreement (the “Share
Exchange Agreement”), pursuant to which, among other things, the Company agreed to issue to the NumberCo Shareholders 200,000 shares
of the Company’s common stock in exchange for all of the issued and outstanding shares of NumberCo, with NumberCo becoming a wholly-owned
subsidiary of the Company.
On
March 17, 2020, the board of directors (the “Board”) of the Company approved a 1-for-10 reverse stock split of the Company’s
issued and outstanding shares of common stock (the “Reverse Stock Split”), and on March 18, 2020, the Company filed with
the Secretary of State of the State of Nevada a Certificate of Amendment to its Articles of Incorporation to effect the Reverse Stock
Split. The Reverse Stock Split became effective as of 5:00 p.m. Eastern Time on March 19, 2020, and the Company’s common stock
began trading on a split-adjusted basis when the market opened on March 20, 2020. Accordingly, all common stock and per share data are
retrospectively restated to give effect of the split for all periods presented herein.
On
August 10, 2020, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Gold King Acquisition
Corp. (“Acquisition Corp.”), a wholly-owned subsidiary of the Company, Northern Panther Resources Corporation (“Northern
Panther” or “NPRC”) and the Stockholder Representative named therein, pursuant to which Acquisition Corp. merged with
and into NPRC, with NPRC surviving as a wholly-owned subsidiary of the Company.
The
Company’s CK Gold property contains proven and probable mineral reserves and accordingly is classified as a development stage property,
as defined in subpart 1300 of Regulation S-K (“S-K 1300”) promulgated by the United States Securities and Exchange Commission
(“SEC”). None of the Company’s other properties contain proven and probable mineral reserves and all 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, 2023
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of presentation and principles of consolidation
The
accompanying interim unaudited condensed consolidated financial statements have been prepared by the Company in accordance with accounting
principles generally accepted in the United States of America (“U.S. GAAP”), the instructions to Form 10-Q, and the rules
and regulations of 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,
2023. 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, 2022, which are contained in the Form 10-K filed on August 15, 2022. The unaudited condensed consolidated
balance sheet as of January 31, 2023 was derived from those financial statements. It is management’s opinion that all material
adjustments (consisting of normal recurring adjustments) have been made, which are necessary for a fair financial statement presentation.
Operating results during the nine months ended January 31, 2023 are not necessarily indicative of the results to be expected for the
year ending April 30, 2023.
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 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 stock, valuation of warrant liability, asset
retirement obligations and the valuation of deferred tax assets and liabilities.
Fair
Value Measurements
The
Company has adopted Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures”
(“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition
for fair value to be applied in accordance with U.S. GAAP, which requires the use of fair value measurements, establishes a framework
for measuring fair value and expands disclosure about such fair value measurements.
ASC
820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the
use of observable inputs and minimize the use of unobservable inputs.
These
inputs are prioritized below:
Level
1: |
Observable
inputs such as quoted market prices in active markets for identical assets or liabilities. |
Level
2: |
Observable
market-based inputs or unobservable inputs that are corroborated by market data. |
Level
3: |
Unobservable
inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions. |
The
Company analyzes all financial instruments with features of both liabilities and equity under the Financial Accounting Standard Board’s
(“FASB”) accounting standard for such instruments. Under this standard, financial assets and liabilities are classified in
their entirety based on the lowest level of input that is significant to the fair value measurement.
The
Company’s warrant liability for warrants issued in March 2022 (see Note 9) was estimated using a Monte Carlo simulation model using
Level 3 inputs.
Prepaid
expenses and other current assets
Prepaid
expenses and other current assets of $463,928 and $787,902 at January 31, 2023 and April 30, 2022, respectively, consist primarily of
costs paid for future services which will occur within a year. Prepaid expenses principally include prepayments in cash and equity instruments
for consulting, public relations, business advisory services, insurance premiums, mining claim fees, drilling fees, easement fees, options
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 three to five years.
U.S.
GOLD CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY
31, 2023
Impairment
of long-lived assets
The
Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the
assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted
future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s
estimated fair value and its book value. The Company did not recognize any impairment during the three and nine months ended January
31, 2023 and 2022.
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. Where the Company has identified proven and probable mineral reserves on any of its properties, development
costs will be capitalized when all the following criteria have been met, a) the Company receives the requisite operating permits, b)
completion of a favorable Feasibility Study and c) approval from the Board authorizing the development of the ore body. Until all these
criteria have been met the Company records pre-development costs to expense as incurred.
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 expensed all exploration and pre-development costs as none of its properties have satisfied the criteria above
for capitalization.
ASC
930-805, “Extractive Activities—Mining: Business Combinations” (“ASC 930-805”), states that mineral rights
consist of the legal right to explore, extract, and retain at least a portion of the benefits from mineral deposits. Mining assets include
mineral rights.
Acquired
mineral rights are considered tangible assets under ASC 930-805. ASC 930-805 requires that mineral rights be recognized at fair value
as of the acquisition date. As a result, the direct costs to acquire mineral rights are initially capitalized as tangible assets. Mineral
rights include costs associated with acquiring patented and unpatented mining claims.
ASC
930-805 provides that in measuring the fair value of mineral assets, an acquirer should take into account both:
●
The value beyond proven and probable reserves (“VBPP”) to the extent that a market participant would include VBPP in determining
the fair value of the assets.
●
The effects of anticipated fluctuations in the future market price of minerals in a manner that is consistent with the expectations of
market participants.
Leases
to explore for or use of natural resources are outside the scope of ASU 2016-02, “Leases”.
Share-Based
Compensation
Share-based
compensation is accounted for based on the requirements of ASC 718, “Compensation—Stock Compensation” (“ASC 718”),
which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award
of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively,
the vesting period). ASC 718 also requires measurement of the cost of employee and director services received in exchange for an award
based on the grant-date fair value of the award.
U.S.
GOLD CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY
31, 2023
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 except for the warrants issued in March 2022 (see
below) 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.
Warrant
Liability
The
Company accounts for the 625,000 warrants issued in March 2022 in accordance with the guidance contained in ASC 815. ASC 815 concluded
that the warrants do not meet the criteria for equity treatment and must be recorded as a liability (see Note 9). Accordingly, the Company
classifies these warrant instruments as a liability at fair value and adjusts the instruments to fair value at each reporting period.
This liability will be re-measured at each balance sheet date until the warrants are exercised or expire, and any change in fair value
will be recognized in the Company’s statement of operations. The fair value of these warrants is estimated using a Monte Carlo
simulation model. Such warrant classification is also subject to re-evaluation at each reporting period.
Offering
Costs
Offering
costs incurred consisted of legal, placement agent fees and other costs that were directly related to registered direct offerings. Offering
costs were allocated to the separable financial instruments issued in the registered direct offering based on a relative fair value basis,
compared to total proceeds received. Offering costs associated with warrant liability were expensed as incurred, presented as offering
costs related to warrant liability in the consolidated statements of operations. Offering costs associated with the sale of common shares
were charged against equity.
Remediation
and Asset Retirement Obligation
Asset
retirement obligations (“ARO”), consisting primarily of estimated reclamation costs at the Company’s CK Gold, Keystone
and Maggie Creek properties, are recognized in the period incurred and when a reasonable estimate can be made, and recorded as liabilities
at fair value. Such obligations, which are initially estimated based on discounted cash flow estimates, are accreted to full value over
time through charges to accretion expense. Corresponding asset retirement costs are capitalized as part of the carrying amount of the
related long-lived asset and depreciated over the asset’s remaining useful life. AROs are periodically adjusted to reflect changes
in the estimated present value resulting from revisions to the estimated timing or amount of reclamation and closure costs. The Company
reviews and evaluates its AROs annually or more frequently at interim periods if deemed necessary.
Foreign
Currency Transactions
The
reporting and functional currency of the Company is the U.S. dollar. Transactions denominated in foreign currencies are translated into
the functional currency at the exchange rates prevailing on the transaction dates. Assets and liabilities denominated in foreign currencies
are translated into the functional currency at the exchange rates prevailing at the balance sheet date with any transaction gains and
losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency included
in the results of operations as incurred. Translation adjustments, and transaction gains or losses, have not had, and are not expected
to have, a material effect on the results of operations of the Company and are included in general and administrative expenses.
U.S.
GOLD CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY
31, 2023
Leases
The
Company accounts for leases in accordance with ASC Topic 842, Leases (Topic 842), the Company has elected the ‘package of practical
expedients’, which permits it not to reassess under the standard its prior conclusions about lease identification, lease classification
and initial direct costs. In addition, the Company elects not to apply ASC Topic 842 to arrangements with lease terms of 12 months or
less. Operating lease right of use assets (“ROU”) represent the right to use the leased asset for the lease term and operating
lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement
date. As most leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available
at the adoption date in determining the present value of future payments. Upon the election by the Company to extend the lease for additional
years, that election will be treated as a lease modification and the lease will be reviewed for re-measurement. Lease expense for minimum
lease payments is amortized on a straight-line basis over the lease term and is included in general and administrative expenses in the
statements of operations.
Income
Taxes
The
Company accounts for income taxes pursuant to the provision of ASC 740, “Accounting for Income Taxes” (“ASC 740”),
which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach
requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between
the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets
for which management believes it is more likely than not that the net deferred asset will not be realized.
The
Company follows the provision of ASC 740-10, “Accounting for Uncertain Income Tax Positions” (“ASC 740-10”).
When tax returns are filed, there may be uncertainty about the merits of positions taken or the amount of the position that would be
ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements
in the period during which, based on all available evidence, management believes it is more likely than not that the position will be
sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or
aggregated with other positions.
Tax
positions that meet the more likely than not recognition threshold are measured at the largest amount of tax benefit that is more than
50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefit associated with
tax positions taken that exceed the amount measured as described above should be reflected as a liability for uncertain tax benefits
in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon
examination. The Company believes its tax positions are all more likely than not to be upheld upon examination. As such, the Company
has not recorded a liability for uncertain tax benefits or for any related interest and penalties. In the event that the Company is assessed
penalties and/or interest, penalties will be charged to other operating expense and interest will be charged to interest expense.
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.
In
December 2019, the FASB issued ASU 2019-12 – Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which
is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general
principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application. This ASU became effective and
the Company adopted the guidance during fiscal 2022. The adoption of this ASU did not have an impact on the Company’s consolidated
financial statements.
Recent
Accounting Pronouncements
Accounting
standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material
effect on the financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have
an effect on or are unrelated to its financial condition, results of operations, cash flows or disclosures.
U.S.
GOLD CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY
31, 2023
In
June 2022, FASB issued ASU 2022-03, Fair Value Measurement (Topic 820) (“ASU 2022-03”). The amendments in ASU 2022-03 clarify
that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security
and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account,
recognize and measure a contractual sale restriction. The amendments in this Update also require additional disclosures for equity securities
subject to contractual sale restrictions. The provisions in this Update are effective for fiscal years beginning after December 15, 2024.
Early adoption is permitted. The Company does not expect to early adopt this ASU. The Company does not expect the adoption of this standard
to have a significant impact on its unaudited condensed consolidated financial statements.
NOTE
3 — GOING CONCERN
The
accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course of business. As of January 31, 2023, the Company had cash
of approximately $5.3 million, working capital of approximately $5.2 million which consists primarily of cash and an accumulated deficit
of approximately $63.6 million. The Company had a net loss and cash used in operating activities of approximately $5.7 million and $6.4
million, respectively, for the nine months ended January 31, 2023. As a result of the utilization of cash in its operating activities,
and the development of its assets, the Company has incurred losses since it commenced operations. The Company’s primary source
of operating funds since inception has been equity financings. As of the date of filing the Form 10-Q for the period ended January 31,
2023, the Company has sufficient cash to fund its corporate activities and general and administrative costs and currently undertaken
project activities related to permitting and engineering studies. However, in order to advance any of its projects past the aforementioned
objectives, the Company does not have sufficient cash and will need to raise additional funds. 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 unaudited condensed
consolidated financial statements.
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
As
of the dates presented, mineral properties consisted of the following:
SCHEDULE
OF MINERAL RIGHTS
| |
January 31, 2023 | | |
April 30, 2022 | |
CK Gold Project | |
$ | 3,091,738 | | |
$ | 3,091,738 | |
Keystone Project | |
| 1,028,885 | | |
| 1,028,885 | |
Maggie Creek Project | |
| - | | |
| 1,986,607 | |
Challis Gold Project | |
| 10,249,632 | | |
| 10,249,632 | |
Total | |
$ | 14,370,255 | | |
$ | 16,356,862 | |
On
November 9, 2022, the Company entered into an Assignment and Assumption Agreement (the “Assignment and Assumption Agreement”)
with and among Orevada Metals, Inc., the Company’s indirectly wholly-owned subsidiary (“Orevada”), Nevada Gold Mines
LLC (“NGM”), Orogen Royalties Inc. (“Orogen”) and Renaissance Exploration, Inc., a wholly-owned subsidiary of
Orogen (“RenEx”) whereby Orevada assigned its interest in that certain Exploration Earn-In Agreement with RenEx, dated February
19, 2019 (the “Original Earn-In Agreement”), to NGM. Pursuant to the Original Earn-In Agreement, Orevada, by making certain
payments and incurring certain exploration expenditures, had the right to earn at least a 50% interest and up to a 70% interest in the
Maggie Creek Property, owned by RenEx, in Eureka County, Nevada. Simultaneous with this assignment, NGM and RenEx entered into an Amended
and Restated Exploration Earn-In Agreement, pursuant to which NGM can earn a 100% interest in the Maggie Creek Property (the “NGM
Option”).
U.S.
GOLD CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY
31, 2023
As
consideration for the assignment of the Original Earn-In Agreement to NGM, U.S. Gold received an upfront cash payment of $2,750,000 from
NGM, and NGM agreed that if it exercises the NGM Option and acquires the Maggie Creek Property, it will grant to U.S. Gold a 0.5% Net
Smelter Returns royalty on all gold and other recovered and saleable minerals from the Maggie Creek Property (the “U.S. Gold Royalty”),
pursuant to a separate royalty agreement (the “U.S. Gold Royalty Agreement”) between NGM and the Company, the terms of which
have been fully agreed as part of this assignment. Under the U.S. Gold Royalty Agreement, NGM will have the right to buy back one-half
of the U.S. Gold Royalty (reducing the royalty to 0.25% of Net Smelter Returns) for a fixed price of $500,000. In addition, the U.S.
Gold Royalty Agreement will provide that the Company waives the first $800,000 of production royalty payments owed to it, regardless
of whether NGM exercises its buy-back rights. Under the U.S. Gold Royalty Agreement, NGM will also have a right of first refusal to purchase
the U.S. Gold Royalty if the Company decides to sell that royalty. Under the U.S. Gold Royalty Agreement, NGM will also have a right
of first refusal to purchase the U.S. Gold Royalty if the Company decides to sell that royalty. Accordingly, the Company recognized gain
from sale of asset of $763,393 during the nine months ended January 31, 2023 as reflected in the accompanying unaudited condensed consolidated
statements of operations in connection with the Assignment and Assumption Agreement.
NOTE
5 — PROPERTY AND EQUIPMENT
As
of the dates presented, property consisted of the following:
SCHEDULE
OF PROPERTY AND EQUIPMENT
| |
January 31, 2023 | | |
April 30, 2022 | |
| |
| | |
| |
Site costs | |
$ | 203,320 | | |
$ | 203,320 | |
Land | |
| 352,718 | | |
| 175,205 | |
Computer equipment | |
| 7,265 | | |
| 7,265 | |
Vehicle | |
| 39,493 | | |
| 39,493 | |
Total | |
| 602,796 | | |
| 425,283 | |
Less: accumulated depreciation | |
| (103,828 | ) | |
| (75,366 | ) |
Total | |
$ | 498,968 | | |
$ | 349,917 | |
For
the nine months ended January 31, 2023 and 2022, depreciation expense amounted to $28,462 and $25,565, respectively, and included in
general and administrative expenses as reflected in the accompanying statements of operations. For the three months ended January 31,
2023 and 2022, depreciation expense amounted to $8,237 and $9,458, respectively, and included in general and administrative expenses
as reflected in the accompanying statements of operations.
NOTE
6 — ASSET RETIREMENT OBLIGATION
In
conjunction with various permit approvals permitting the Company to undergo exploration activities at the CK Gold, Keystone and Maggie
Creek projects, the Company has recorded an ARO based upon the reclamation plans submitted in connection with the various permits. The
following table summarizes activity in the Company’s ARO for the periods presented:
SCHEDULE
OF ASSET RETIREMENT OBLIGATION
| |
January 31, 2023 | | |
April 30, 2022 | |
| |
| | |
| |
Balance, beginning of period | |
$ | 260,196 | | |
$ | 204,615 | |
Addition and changes in estimates | |
| - | | |
| 33,517 | |
Accretion expense | |
| 19,243 | | |
| 22,064 | |
Balance, end of period | |
$ | 279,439 | | |
$ | 260,196 | |
For
the nine months ended January 31, 2023 and 2022, accretion expense amounted to $19,243 and $16,174, respectively, and included in general
and administrative expenses as reflected in the accompanying statements of operations. For the three months ended January 31, 2023 and
2022, accretion expense amounted to $6,436 and $5,988, respectively, and included in general and administrative expenses as reflected
in the accompanying statements of operations.
U.S.
GOLD CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY
31, 2023
NOTE
7 – OPERATING LEASE RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES
On
May 1, 2021, the Company entered into a lease agreement for its lease facility in Cheyenne, Wyoming. The term of the lease is for a two-year
period from May 2021 to May 2023 starting with a monthly base rent of $1,667. The Company has an option to renew the lease for an additional
three years beyond the primary term. The Company typically excludes options to extend the lease in a lease term unless it is reasonably
certain that the Company will exercise the option and when doing so is in the Company’s sole discretion. The base rent is subject
to an annual increase as defined in the lease agreement. In addition to the monthly base rent, the Company is charged separately for
common area maintenance which is considered a non-lease component. These non-lease component payments are expensed as incurred and are
not included in operating lease assets or liabilities. On January 30, 2023, the Company entered into a lease amendment effective as of
May 1, 2023 to extend this lease for a period of one year expiring April 30, 2024 with an option to renew the lease for an additional
one year term. The monthly base rent will be $1,768. The Company accounted for the lease extension as a lease modification under ASC
842. On January 30, 2023, the effective date of modification, the Company recorded an adjustment to the right-of-use asset and lease
liability in the amount of $20,472 based on the net present value of lease payments discounted using an incremental borrowing rate of
8%.
On
September 1, 2021, the Company entered into another lease agreement for its lease facility in Cheyenne, Wyoming. The term of the lease
is for a two-year period from September 2021 to August 2023. The monthly base rent was $3,100 and was lowered to $2,950 starting in March
2022. The Company has an option to renew the lease for an additional two years upon giving a written notice from 60 to 120 days prior
to the expiration of the initial term of this lease. The Company typically excludes options to extend the lease in a lease term unless
it is reasonably certain that the Company will exercise the option and when doing so is in the Company’s sole discretion.
During
the nine months ended January 31, 2023 and 2022, lease expense of $42,116 and $30,725 was included in general and administrative expenses
as reflected in the accompanying consolidated statements of operations. During the three months ended January 31, 2023 and 2022, lease
expense of $14,041 and $14,375 was included in general and administrative expenses as reflected in the accompanying consolidated statements
of operations.
Right-of-
use assets are summarized below:
SCHEDULE
OF SUPPLEMENTAL BALANCE SHEET INFORMATION RELATED TO LEASES
| |
January 31, 2023 | | |
April
30, 2022 | |
Operating leases | |
$ | 45,591 | | |
$ | 64,064 | |
Operating
Lease liabilities are summarized below:
| |
January 31, 2023 | | |
April
30, 2022 | |
Operating lease, current portion | |
$ | 40,429 | | |
$ | 55,630 | |
Operating lease, long term portion | |
| 5,237 | | |
| 8,734 | |
Total lease liability | |
$ | 45,666 | | |
$ | 64,364 | |
The
weighted average remaining lease term for the operating leases is 0.92 years and the weighted average incremental borrowing rate is 8.0%
at January 31, 2023.
The
following table includes supplemental cash and non-cash information related to the Company’s lease:
SCHEDULE
OF SUPPLEMENTAL CASH AND NON-CASH INFORMATION
| |
2023 | | |
2022 | |
| |
Period ended January 31, | |
| |
2023 | | |
2022 | |
Cash paid for amounts included in the measurement of lease liabilities | |
| | | |
| | |
Operating cash flows from operating lease | |
$ | 42,000 | | |
$ | 30,500 | |
Lease assets obtained in exchange for new operating lease liabilities | |
$ | - | | |
$ | 106,631 | |
The
remaining minimum lease payments under non-cancelable operating leases at January 31, 2023 are as follows:
SCHEDULE
OF MINIMUM LEASE PAYMENTS UNDER NON-CANCELABLE OPERATING LEASES
Year ended April 30, 2023 - remainder | |
| 14,000 | |
Year ended April 30, 2023 - remainder | |
| 14,000 | |
Year ended April 30, 2024 | |
| 33,030 | |
Total | |
$ | 47,030 | |
Less: imputed interest | |
| (1,364 | ) |
Total present value of lease liability | |
$ | 45,666 | |
U.S.
GOLD CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY
31, 2023
NOTE
8 — RELATED PARTY TRANSACTIONS
On
January 7, 2021, the Company entered into a one-year agreement (“January 2021 Agreement”) with a director providing for an
annual consulting fee of $86,000 consisting of shares of the Company’s common stock with a value of $50,000 and cash payments of
$36,000, which is paid $3,000 per month. In January 2021, the Company issued 3,222 shares of common stock pursuant to the January 2021
Agreement. The Company and the director mutually agreed to extend the term of the agreement from January 2022 to January 2023 under the
same terms as the initial agreement (the “January 2022 Agreement”). In January 2022, the Company issued 5,814 shares of common
stock pursuant to the January 2022 Agreement. The Company paid consulting fees to such director of $24,000 and $27,000 in cash during
the nine months ended January 31, 2023 and 2022, respectively. The Company paid consulting fees to such director of $6,000 and $9,000
in cash during the three months ended January 31, 2023 and 2022, respectively. Effective December 31, 2022, the director resigned from
the Board. Accordingly, the Company issued 7,927 shares of common stock in connection with vested RSU’s on the date of resignation
(see Note 10).
On
March 19, 2021, the Company and Edward Karr, the Company’s former Executive Chairman, agreed by mutual understanding, that Mr.
Karr’s employment as an officer and employee, and his service as a member of the Board was terminated, effective March 19, 2021.
In connection with Mr. Karr’s departure, the Company entered into a General Release and Severance Agreement with Mr. Karr, as amended,
pursuant to which Mr. Karr provided certain transition services to the Company through the Separation Date. Pursuant to the Separation
Agreement, Mr. Karr is entitled to receive any equity awards granted to Mr. Karr by the Company. Additionally, on March 19, 2021, the
Company entered into a one-year agreement (the “Karr March 2021 Agreement”) for general corporate advisory services to be
provided by Mr. Karr for an annual fee of $180,000 consisting of shares of the Company’s common stock with a value of $60,000 and
cash payments of $120,000, which is paid $10,000 per month. In January 2022, the Company’s Board approved the renewal of the Karr
March 2021 Agreement for an additional year under the same terms as the initial period (the “Karr March 2022 Agreement”).
In April 2022, the Company issued 5,168 and 7,353 shares of common stock pursuant to the Karr March 2021 and March 2022 Agreements, respectively.
Additionally, on January 24, 2022, the Company issued an aggregate of 13,564 RSU’s and granted 5,310 five-year options to purchase
the Company’s common stock to Mr. Karr for consulting services rendered. The Company paid consulting fees to Mr. Karr of $90,000
in cash during each of the nine months ended January 31, 2023 and 2022. The Company paid consulting fees to Mr. Karr of $30,000 in cash
during each of the three months ended January 31, 2023 and 2022.
On
March 10, 2021, the Company entered into a one-year consulting agreement (“March 2021 Agreement”) with an individual who
subsequently was appointed as a director of the Company on May 18, 2022, providing for an annual fee of $250,000 consisting of shares
of the Company’s common stock with a value of $130,000 and cash payments of $120,000, which is paid $10,000 per month. The Company
and the consultant mutually agreed to extend the term of the agreement from March 2022 to March 2023 under the same terms as the initial
agreement (the “March 2022 Agreement”). In April 2022, the Company issued 14,286 shares of common stock pursuant to the March
2022 Agreement. The Company paid consulting fees to such director of $90,000 in cash during each of the nine months ended January 31,
2023 and 2022. The Company paid consulting fees to such director of $30,000 in cash during each of the three months ended January 31,
2023 and 2022. Additionally, as of January 31, 2023, the Company recorded accounts payable and accrued expenses totaling $37,497 due
to such director and was included in accounts payable and accrued liabilities.
NOTE
9 — WARRANT LIABILITY
As
of January 31, 2023 and April 30, 2022, the Company’s warrants liability was valued at $1,675,000 and $2,440,000, respectively.
Under the guidance in ASC 815-40, certain warrants do not meet the criteria for equity treatment. As such, these warrants are recorded
at fair value as of each reporting date with the change in fair value reported within other income in the accompanying unaudited condensed
consolidated statements of operations as “Change in fair value of warrant liability” until the warrants are exercised, expired
or other facts and circumstances lead the warrant liability to be reclassified to stockholders’ equity. The Company utilized a
Monte Carlo Simulation model to estimate the fair value of the March 2022 warrants, which incorporates significant inputs that are not
observable in the market, and thus represents a Level 3 measurement as defined in ASC 820. The unobservable inputs utilized for measuring
the fair value of the contingent consideration reflect management’s own assumptions about the assumptions that market participants
would use in valuing the contingent consideration. The Company determined the fair value by using the following key inputs to the Monte
Carlo Simulation Model:
U.S.
GOLD CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY
31, 2023
Initial
Measurement
The
Company accounted for the 625,000 warrants issued on March 18, 2022 in accordance with the guidance contained in ASC 815 “Derivatives
and Hedging” whereby under that provision these warrants did not meet the criteria for equity treatment and was recorded as a liability.
The initial valuation of these warrants were valued at $3,652,000 on March 18, 2022.
The
key inputs for the warrant liability were as follows as of January 31, 2023:
SCHEDULE
OF KEY INPUTS FOR THE WARRANT LIABILITY
Key Valuation Inputs | |
| |
Expected term (years) | |
| 4.63 | |
Annualized volatility | |
| 78.0 | % |
Volatility if fundamental transaction occurs | |
| 100.00 | % |
Risk-free interest rate | |
| 3.68 | % |
Stock price | |
$ | 4.61 | |
Dividend yield | |
| 0.00 | % |
Exercise price | |
$ | 8.60 | |
Probability of fundamental transaction | |
| 85 | % |
Date of fundamental transaction | |
| 1.4 years to 4.6
years | |
The
key inputs for the warrant liability were as follows as of April 30, 2022:
Key Valuation Inputs | |
| |
Expected term (years) | |
| 5.39 | |
Annualized volatility | |
| 84.2 | % |
Volatility if fundamental transaction occurs | |
| 100.00 | % |
Risk-free interest rate | |
| 2.92 | % |
Stock price | |
$ | 5.65 | |
Dividend yield | |
| 0.00 | % |
Exercise price | |
$ | 8.60 | |
Probability of fundamental transaction | |
| 85 | % |
Date of fundamental transaction | |
| 1.9 years to 5.4 years | |
The
following table sets forth a summary of the changes in the fair value of the Level 3 warrant liability for the nine months ended January
31, 2023:
SCHEDULE
OF CHANGES IN FAIR VALUE OF LEVEL THREE WARRANT LIABILITY
| |
Warrant Liability | |
Fair value as of April 30, 2022 | |
$ | 2,440,000 | |
Change in fair value | |
| (765,000 | ) |
Fair value as of January 31, 2023 | |
$ | 1,675,000 | |
NOTE
10 — STOCKHOLDERS’ EQUITY
As
of January 31, 2023, authorized capital stock consisted of 200,000,000 shares of common stock, par value $0.001 per share, and 50,000,000
shares of “blank check” preferred stock, par value $0.001 per share, of which 1,300,000 shares are designated as Series A
Convertible Preferred Stock, 400,000 shares are designated as Series B Convertible Preferred Stock, 45,002 shares are designated as Series
C Convertible Preferred Stock, 7,402 shares are designated as Series D Convertible Preferred Stock, 2,500 shares are designated as Series
E Convertible Preferred Stock, 1,250 shares are designated as Series F Preferred Stock, 127 shares are designated as Series G Preferred
Stock, 106,894 shares are designated as Series H Preferred Stock, and 921,666 shares are designated as Series I Preferred Stock. The
Company’s Board has the authority, without further action by the stockholders, to issue shares of preferred stock in one or more
series and to fix the rights, preferences, privileges and restrictions granted to or imposed upon the preferred stock.
U.S.
GOLD CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY
31, 2023
Common
Stock Issued, Restricted Stock Awards, and RSU’s Granted for Services
Total
stock compensation expense for awards issued for services of $553,594 and $1,201,981 was expensed for the nine months ended January 31,
2023 and 2022, respectively. Total stock compensation expense for awards issued for services of $184,531 and $785,007 was expensed for
the three months ended January 31, 2023 and 2022, respectively. There is 90,160 unvested restricted stock units which is equivalent to
a balance of $846,104 remains to be expensed over future vesting periods related to unvested restricted stock units issued for services
to be expensed over a weighted average period of 0.92 years. There were 343,315 restricted stock units awarded but unissued into common
stock as of January 31, 2023.
On
November 14, 2022, the Company issued an aggregate of 7,510 shares of common stock to a consultant in connection with an advisory consulting
agreement for services rendered from May 2022 to October 2022 and issued 885 shares of common stock for services rendered in April 2022
for a total of 8,395 shares. The 8,395 shares of common stock had a fair value of $35,000, or $4.17 per share, based on the quoted trading
price on the date of grants, which was fully vested. The Company reduced accrued liabilities by $5,000 in connection with the issuance
of the 885 shares and recognized stock-based consulting of $30,000 in connection with the issuance of the 7,510 shares.
On
November 14, 2022, the Company issued an aggregate of 5,425 shares of common stock to a consultant in connection with a consulting agreement
for services rendered from May 2022 to October 2022. The 5,425 shares of common stock had a fair value of $22,500, or $4.15 per share,
based on the quoted trading price on the date of grants, which was fully vested and expensed immediately.
On
December 22, 2022, the Company issued 7,927 shares of common stock to a former director in connection with vested RSU’s on the
date of resignation (see Note 8).
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 initially reserved 330,710
shares for future issuance to officers, directors, employees and contractors as directed from time to time by the Compensation Committee
of the Board. The 2020 Plan was approved by a vote of stockholders at the 2019 annual meeting. With the approval and effectivity of the
2020 Plan, no further grants will be made under the 2017 Plan. On August 31, 2020, the Board approved and adopted, subject to stockholder
approval, an amendment (the “2020 Plan Amendment”) to the 2020 Plan. The 2020 Plan Amendment increased the number of shares
of common stock available for issuance pursuant to awards under the 2020 Plan by an additional 836,385, to a total of 1,167,095 shares
of the Company’s common stock. The 2020 Plan Amendment was approved by the Company’s stockholders on November 9, 2020. On
December 16, 2022 the Company’s stockholders approved another amendment to the 2020 plan increasing the number of shares of common
stock available for issuance pursuant to awards under the 2020 Plan by an additional 1,252,476 shares, to a total of 2,419,571 shares
of the Company’s common stock.
Stock
options
The
following is a summary of the Company’s stock option activity during the nine months ended January 31, 2023:
SCHEDULE
OF STOCK OPTION ACTIVITY
| |
Number of Options | | |
Weighted Average Exercise Price | | |
Weighted Average Remaining Contractual Life (Years) | |
Balance at April 30, 2022 | |
| 148,060 | | |
$ | 11.65 | | |
| 2.23 | |
Granted | |
| 140,000 | | |
| 5.02 | | |
| 5.00 | |
Exercised | |
| — | | |
| — | | |
| — | |
Forfeited | |
| — | | |
| — | | |
| — | |
Cancelled | |
| (90,000 | ) | |
| 14.70 | | |
| — | |
Balance at January 31, 2023 | |
| 198,060 | | |
| 5.58 | | |
| 4.67 | |
| |
| | | |
| | | |
| | |
Options exercisable at end of period | |
| 184,960 | | |
$ | 5.48 | | |
| | |
Options expected to vest | |
| 13,100 | | |
$ | 6.93 | | |
| | |
Weighted average fair value of options granted during the period | |
| | | |
$ | 3.31 | | |
| | |
U.S.
GOLD CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY
31, 2023
At
January 31, 2023 and April 30, 2022, the aggregate intrinsic value of options outstanding and exercisable were de minimis for
each period.
On
January 12, 2023, the Company granted an aggregate of 48,000 options to purchase the Company’s common stock to certain officers
and employees of the Company. The options have a term of 5 years from the date of grant and are exercisable at an exercise price of $5.02
(see table below for the assumptions used). The options fully vested and was expensed immediately.
On
January 12, 2023, the Company granted an aggregate of 70,000 options to purchase the Company’s common stock to the directors of
the Company. The options have a term of 5 years from the date of grant and are exercisable at an exercise price of $5.02 (see table below
for the assumptions used). The options fully vested and was expensed immediately.
On
January 12, 2023, the Company granted an aggregate of 22,000 options to purchase the Company’s common stock to certain consultants
of the Company. The options have a term of 5 years from the date of grant and are exercisable at an exercise price of $5.02 (see table
below for the assumptions used). The options fully vested and was expensed immediately. One of the consultants is Mr. Karr, the Company’s
former Executive Chairman (see Note 8).
The
Company used the Black-Scholes model to determine the fair value of stock options granted on January 12, 2023. In applying the Black-Scholes
option pricing model to options granted, the Company used the following assumptions:
SCHEDULE
OF STOCK OPTION
| |
Grant date on
January 12, 2023 | |
Risk free interest rate | |
| 3.53 | % |
Dividend yield | |
| 0.00 | % |
Expected volatility | |
| 80 | % |
Contractual term (in years) | |
| 5.0 | |
Forfeiture rate | |
| 0.00 | % |
Stock-based
expense for stock options recorded in the unaudited consolidated statements of operations totaled $485,605 and $176,073 for the nine
months ended January 31, 2023 and 2022, respectively. Stock-based expense for stock options recorded in the unaudited consolidated statements
of operations totaled $470,802 and $176,073 for the three months ended January 31, 2023 and 2022, respectively. A balance of $56,744
remains to be expensed over future vesting periods related to unvested stock options issued for services to be expensed over a weighted
average period of 1.98 years.
Stock-based
expense for stock options were recorded in the following as reflected in the unaudited statements of operations:
SCHEDULE
OF STOCK-BASED EXPENSE FOR STOCK OPTION
| |
Three
Months ended
January 31, 2023 | | |
Nine
Months ended
January 31, 2023 | |
Compensation and related taxes – general and administrative | |
$ | 166,282 | | |
$ | 181,085 | |
Professional and consulting fees | |
| 304,520 | | |
| 304,520 | |
Total | |
$ | 470,802 | | |
$ | 485,605 | |
U.S.
GOLD CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY
31, 2023
Stock
Warrants
A
summary of the Company’s outstanding warrants to purchase shares of common stock as of January 31, 2023 and changes during the
period ended as presented below:
SCHEDULE
OF STOCK WARRANT ACTIVITY
| |
Number of Warrants | | |
Weighted Average Exercise Price | | |
Weighted Average Remaining Contractual Life (Years) | |
Warrants with no Class designation: | |
| | | |
| | | |
| | |
Balance at April 30, 2022 | |
| 1,909,262 | | |
$ | 9.29 | | |
| 4.38 | |
Granted | |
| — | | |
| — | | |
| — | |
Exercised | |
| — | | |
| — | | |
| — | |
Forfeited | |
| — | | |
| — | | |
| — | |
Canceled | |
| — | | |
| — | | |
| — | |
Balance at January 31, 2023 | |
| 1,909,262 | | |
| 9.29 | | |
| 3.63 | |
Class A Warrants: | |
| | | |
| | | |
| | |
Balance at April 30, 2022 | |
| 109,687 | | |
| 11.40 | | |
| 2.22 | |
Granted | |
| — | | |
| — | | |
| — | |
Exercised | |
| — | | |
| — | | |
| — | |
Forfeited | |
| — | | |
| — | | |
| — | |
Canceled | |
| — | | |
| — | | |
| — | |
Balance at January 31, 2023 | |
| 109,687 | | |
| 11.40 | | |
| 1.47 | |
Total Warrants Outstanding at January 31, 2023 | |
| 2,018,949 | | |
$ | 9.41 | | |
| 3.51 | |
Warrants exercisable at end of period | |
| 2,018,949 | | |
$ | 9.41 | | |
| | |
Weighted average fair value of warrants granted during the period | |
| | | |
$ | — | | |
| | |
As
of January 31, 2023, the aggregate intrinsic value of warrants outstanding and exercisable was $0.
NOTE
11 — NET LOSS PER COMMON SHARE
Net
loss per share of common stock is calculated in accordance with ASC 260, “Earnings Per Share”. Basic loss per share is computed
by dividing net loss available to common stockholder, by the weighted average number of shares of common stock outstanding during the
period. The following were excluded from the computation of diluted shares outstanding as they would have had an anti-dilutive impact
on the Company’s net loss. In periods where the Company has a net loss, all dilutive securities are excluded.
SCHEDULE
OF ANTIDILUTIVE SECTURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE
| |
January 31, 2023 | | |
January 31, 2022 | |
Common stock equivalents: | |
| | | |
| | |
Restricted stock units | |
| 433,475 | | |
| 441,402 | |
Stock options | |
| 198,060 | | |
| 148,060 | |
Stock warrants | |
| 2,018,949 | | |
| 1,368,246 | |
Total | |
| 2,650,484 | | |
| 1,957,708 | |
NOTE
12 — COMMITMENTS AND CONTINGENCIES
Mining
Leases
The
CK Gold property position consists of two State of Wyoming Metallic and Non-metallic Rocks and Minerals Mining Leases. These leases were
assigned to the Company in July 2014 through the acquisition of the CK Gold Project. Leases to explore for or use of natural resources
are outside the scope of ASU 2016-02 “Leases”.
The
Company’s rights to the CK Gold Project arise under two State of Wyoming mineral leases; 1) State of Wyoming Mining Lease No. 0-40828,
consisting of 640 acres, and 2) State of Wyoming Mining Lease No. 0-40858 consisting of 480 acres.
U.S.
GOLD CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY
31, 2023
Lease
0-40828 was renewed in February 2023 for a third ten-year term and Lease 0-40858 was renewed for its second ten-year term in February
2014. Lease 0-40828 requires an annual payment of $3.00 per acre starting with the year ending February 2024 and Lease 0-40858 requires
an annual payment of $2.00 per acre through February 2024. If Lease 0-40858 is renewed for another ten-year term the annual payment will
increase to $3.00 per acre. In connection with the Wyoming Mining Leases, the following production royalties must be paid to the State
of Wyoming, although once the project is in operation, the Board of Land Commissioners has the authority to reduce the royalty payable
to the State of Wyoming:
SCHEDULE
OF ROYALTY PAYABLE
FOB
Mine Value per Ton |
|
Percentage
Royalty |
|
$00.00
to $50.00 |
|
|
5 |
% |
$50.01
to $100.00 |
|
|
7 |
% |
$100.01
to $150.00 |
|
|
9 |
% |
$150.01
and up |
|
|
10 |
% |
The
future minimum lease payments at January 31, 2023 under these mining leases are as follows, each payment to be made in the fourth quarter
of the respective fiscal years:
SCHEDULE
OF FUTURE MINIMUM LEASE PAYMENTS
Fiscal 2024 | |
$ | 2,880 | |
Fiscal 2024 | |
$ | 2,880 | |
Fiscal 2025 | |
| 1,920 | |
Fiscal 2026 | |
| 1,920 | |
Fiscal 2027 | |
| 1,920 | |
Fiscal 2028 and thereafter | |
| 11,520 | |
Total | |
$ | 20,160 | |
The
Company may renew each lease for a fourth ten-year term, which will require annual payments of $4.00 per acre.
NPRC
option:
Pursuant
to the Merger, the Company acquired from NPRC a mineral property called Challis Gold located in Idaho pursuant to an option agreement
dated in February 2020 which was later amended in June 2020. The Company satisfied the minimum royalty payment of $25,000 for fiscal
2022 and 2023.
The
annual advance minimum royalty payments at January 31, 2023 under the option agreement are as follows, each payment to be made on the
first anniversary of the effective date of this option agreement and continuing until the tenth anniversary:
SCHEDULE
OF ADVANCE MINIMUM ROYALTY PAYMENTS
Fiscal 2024 | |
$ | 25,000 | |
Fiscal 2024 | |
$ | 25,000 | |
Fiscal 2025 | |
| 25,000 | |
Fiscal 2026 | |
| 25,000 | |
Fiscal 2027 and thereafter | |
| 125,000 | |
Total | |
$ | 200,000 | |
100%
of the advance minimum royalty payments will be applied to the royalty credits.
Exploration
Access and Option to Lease Agreement
On
August 25, 2021 (“Effective Date”), the Company entered into an Exploration Access and Option to Lease Agreement (the “Agreement”)
with a private-party landowner (the “Landowner”) whereby the Landowner granted the Company an option (the “Option”)
to lease and right of way on a property located in Laramie County, Wyoming. The Company may exercise the Option for five years (“Option
Term”) from the Effective Date. During the Option, the Landowner granted non-exclusive rights (the “Exploration Access Rights”)
to the Company to use the surface of the property for an annual exploration and access right payment of $10,000, thirty days after the
effective date and each year on the anniversary of the Effective Date during the Option Term until such time the Option is exercised
or expires. The Company is also required to pay an annual Option payment of $35,780 for the lease and $6,560 for the right of way within
thirty days after the Effective Date and each year on the anniversary of the Effective Date during the Option Term until such time the
Option is exercise by the Company or expires. The Company paid a total of $42,340 for each of the period on September 1, 2021 and September
1, 2022 pursuant to this Agreement.
U.S.
GOLD CORP. AND SUBSIDIARIES
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY
31, 2023
At
any time during the Option Term, the Company may exercise the Option by providing a written notice to the Landowner and the Company shall
pay a one-time right of way payment of $26,240 at closing and shall execute a lease agreement. The exclusive option to lease (the “Lease”)
and right of way (the “Right of Way”) is for a term of ten years with the right to extend for an additional ten years and
requires an annual lease payment of $50,000, compensation for loss of grazing of $40.00 per acre impacted land and annual Right of Way
payments of $13,120.
In
consideration for the option rights, lease rights and right of way rights under this Agreement, the Company agreed to grant the Landowner
shares of the Company’s common stock worth $50,000, which shares will not vest, or be issued, until the Company executes the Lease.
Currently, the Company has not executed the Lease.
At
any time during the Option Term, the Company may terminate this Agreement by providing a written notice to the Landowner. Upon termination,
the Landowner is entitled to retain any payments already made and the Company shall have no further obligation after the date of termination.
The Agreement, including the Option and the Exploration Access Rights, may be extended for a period of five years upon written notice
from the Company. In the absence of such notice, the Agreement shall automatically terminate at the end of the Option Term. Currently,
the Company has not exercised the Option.
Legal
Matters
From
time to time the Company may be involved in claims and legal actions that arise in the ordinary course of business. To the Company’s
knowledge, there are no material pending legal proceedings to which the Company is a party or of which any of the Company’s property
is the subject.