Forward Looking Statements
This Quarterly Report on Form 10-Q, including "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in Item 2 of Part I
of this report include forward-looking statements within the meaning of Section
27A of the Securities Exchange Act of 1934, as amended, and the Private
Securities Litigation Reform Act of 1995 (collectively, the "Reform Act"). The
Reform Act provides a safe harbor for forward-looking statements to encourage
companies to provide prospective information about themselves so long as they
identify these statements as forward-looking and provide meaningful cautionary
statements identifying important factors that could cause actual results to
differ from the projected results. All statements, other than statements of
historical fact that we make in this Quarterly Report on Form 10-Q are
forward-looking. The words "anticipates," "believes," "expects," "intends,"
"will continue," "estimates," "plans," "projects," the negative of these terms
and similar expressions are intended to identify forward-looking statements.
However, the absence of these words does not mean the statement is not
forward-looking.
Forward-looking statements involve risks, uncertainties or other factors which
may cause actual results to differ materially from the future results,
performance or achievements expressed or implied by the forward-looking
statements. These statements are based on our management's beliefs and
assumptions, which in turn are based on currently available information. Certain
risks, uncertainties or other important factors are detailed in this Quarterly
Report on Form 10-Q and may be detailed from time to time in other reports we
file with the Securities and Exchange Commission, including on Forms 8-K and
10-K.
Examples of forward-looking statements in this Quarterly Report on Form 10-Q
include, but are not limited to, our expectations regarding our ability to
generate operating cash flows and to fund our working capital and capital
expenditure requirements. Important assumptions relating to the forward-looking
statements include, among others, assumptions regarding demand for our future
products, the timing and cost of capital expenditures, competitive conditions
and general economic conditions. These assumptions could prove inaccurate.
Although we believe that the estimates and projections reflected in the
forward-looking statements are reasonable, our expectations may prove to be
incorrect. Important factors that could cause actual results to differ
materially from the results and events anticipated or implied by such
forward-looking statements include:
? management's plans, objectives and budgets for its future operations and
future economic performance;
? capital budget and future capital requirements;
? meeting future capital needs;
? our dependence on management and the need to recruit additional personnel;
? limited trading for our common stock;
? the level of future expenditures;
? impact of recent accounting pronouncements;
? the outcome of regulatory and litigation matters; and
? the assumptions described in this report underlying such forward-looking
statements.
Actual results and developments may materially differ from those expressed in,
or implied by, such statements due to a number of factors, including:
? those described in the context of such forward-looking statements;
? future product development and marketing costs;
? the markets of our domestic operations;
? the impact of competitive products and pricing;
? the political, social and economic climate in which we conduct operations; and
? the risk factors described in other documents and reports filed with the
Securities and Exchange Commission, including our Registration Statement on
Form S-1/A (SEC File No. 333-196075).
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We operate in an extremely competitive environment. New risks emerge from time
to time. It is not possible for us to predict all of those risks, nor can we
assess the impact of all of those risks on our business or the extent to which
any factor may cause actual results to differ materially from those contained in
any forward-looking statement. We believe these forward-looking statements are
reasonable. However, you should not place undue reliance on any forward-looking
statements, which are based on current expectations. Further, forward-looking
statements speak only as of the date they are made, and unless required by law,
we expressly disclaim any obligation or undertaking to update publicly any of
them in light of new information or future events.
The following is management's discussion and analysis of financial condition and
results of operations and is provided as a supplement to the accompanying
unaudited interim condensed financial statements and notes to help provide an
understanding of our financial condition, results of operations and cash flows
during the periods included in the accompanying unaudited interim condensed
financial statements.
In this Quarterly Report on Form 10-Q, "Company," "the Company," "us," and "our"
refer to Nevada Canyon Gold Corp., a Nevada corporation, unless the context
requires otherwise.
We intend the following discussion to assist in the understanding of our
financial position and our results of operations for the three-month periods
ended March 31, 2020 and 2019. You should refer to the Financial Statements and
related Notes in conjunction with this discussion.
General
We were incorporated under the laws of the state of Nevada on February 27, 2014.
We are involved in acquiring and exploring mineral properties in Nevada,
however, as of the date of this Quarterly Report on Form 10-Q we have not
generated or realized any revenues from these business operations.
We were a party to an exploration agreement (the "Agreement") with an option to
form a joint venture with Walker River Resources Corp. ("WRR") on its
wholly-owned Lapon Canyon Gold Project ("Lapon Canyon Project") located
approximately 40 miles southeast of Yerington, Nevada. On July 5, 2017, we
entered into a property purchase agreement with WRR on the Lapon Canyon Project,
pursuant to which WRR agreed to buy back our interest in the Lapon Canyon
Project in exchange for 9,100,000 common shares of WRR (the "WRR Shares") and
warrants to acquire an additional 11,900,000 WRR Shares (the "WRR Warrants").
Each WRR Warrant is exercisable for a period of five years without further
consideration into one WRR Share. The terms of the WRR Warrants contain a
provision which prevents us from exercising any WRR Warrants which would result
in us owning 10% or more of the issued and outstanding shares of WRR.
On June 7, 2017, we entered into an exploration lease and option to purchase
agreement (the "Garfield Agreement") with Goodsprings Development LLC
("Goodsprings"), a Nevada limited liability corporation on the Garfield Flats
Project (the "Garfield Property"), consisting of six Orsa Claims and six Lazy
Claims totaling 240 acres located in sections 27 and 28 of T 7 N, R 32 E,
Mineral County, Nevada about 18 miles southeast of the town of Hawthorne. During
our Fiscal 2017, we staked an additional 69 Orsa Claims and 75 Lazy Claims which
we added to the Garfield Flats Project.
On July 11, 2018, we entered into a definitive purchase agreement with WRR for
the sale of the Garfield Agreement. Full consideration for the Garfield
Agreement consisted of a one-time cash payment of $55,000 (the "Cash
Consideration"). In lieu of the Cash Consideration, WRR agreed to extinguish the
$55,000 note payable we issued to WRR during our fiscal 2017.
On August 2, 2017, we entered into an exploration lease agreement (the "Lazy
Claims Agreement") with Tarsis Resources US Inc. ("Tarsis"), a Nevada
corporation, to lease rights to three additional Lazy claims totaling 60 acres
and located in the vicinity of the Garfield Property. The term of the Lazy
Claims Agreement is ten years and is subject to extension for an additional two
consecutive 10-year terms. Full consideration of the Lazy Claims Agreement
consists of the following: an initial cash payment of $1,000 to Tarsis, which we
paid upon the execution of the Lazy Claims Agreement, with $2,000 payable to
Tarsis on each subsequent anniversary of the effective date. We agreed to pay
Tarsis a 2% production royalty (the "Lazy Claims Royalty") based on the gross
returns from the production and sale of minerals from the Lazy Claims Property.
Should the Lazy Claims Royalty payments be in excess of $2,000 per year, we will
not be required to pay a $2,000 annual minimum payment.
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In December 2019 we acquired 27 unpatented mining claims for a total of $10,395
from a third-party (the "Loman Property"). As at the date of this Quarterly
Report on Form 10-Q, the Loman Property claims are being re-registered into the
Company's name.
As of the date of this Quarterly Report on Form 10-Q, our mineral interests are
represented by Lazy Claims Property and Loman Property.
Critical Accounting Policies and Estimates
Our financial statements and related public financial information are based on
the application of accounting principles generally accepted in the United States
("GAAP"). GAAP requires the use of estimates; assumptions, judgments and
subjective interpretations of accounting principles that have an impact on the
assets, liabilities, revenues and expense amounts reported. These estimates can
also affect supplemental information contained in our external disclosures
including information regarding contingencies, risk and financial condition. We
believe our use of estimates and underlying accounting assumptions adhere to
GAAP and are consistently and conservatively applied. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances. Actual results may differ materially from
these estimates under different assumptions or conditions. We continue to
monitor significant estimates made during the preparation of our financial
statements.
Our Management's Discussion and Analysis of Financial Condition and Results of
Operations section discusses our unaudited interim condensed financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. On an on-going basis, management evaluates its estimates
and judgments, including those related to revenue recognition, accrued expenses,
financing and investing operations, and contingencies and litigation. Management
bases its estimates and judgments on historical experience and on various other
factors that are believed to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying value of assets
and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions. The
most significant accounting estimates inherent in the preparation of our
unaudited interim condensed financial statements include estimates as to the
appropriate carrying value of certain assets and liabilities, which are not
readily apparent from other sources.
The following discussion of our financial condition and results of operations
should be read in conjunction with our unaudited interim condensed financial
statements for the three months ended March 31, 2020, together with notes
thereto, which are included in this Quarterly Report on Form 10-Q, as well as
our most recent audited financial statements on Form 10-K for the year ended
December 31, 2019.
Results of Operations
Three months ended March 31, 2020, compared to the three months ended March 31,
2019:
Changes
Three months ended March 31, between
2020 2019 the periods
Operating expenses
Exploration expenses $ - $ 30,000 $ (30,000 )
General and administrative expenses 2,859 70,384 (67,525 )
Professional fees 2,500 2,200 300
Transfer agent and filing fees 2,487 2,484 3
Total operating expenses (7,846 ) (105,068 ) (97,222 )
Other items
Fair value gain (loss) on equity investments (232,587 ) 890,801 (1,123,388 )
Realized gain on investments 82,280 247,524 (165,244 )
Foreign exchange gain (loss) (36,450 ) 3,772 (40,222 )
Interest income 1,394 468 926
Net income (loss) $ (193,209 ) $ 1,037,497 $ (1,230,706 )
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Revenues
We had no revenues for the three-month periods ended March 31, 2020 and 2019.
Due to the exploration rather than the production nature of our business, we do
not expect to have significant operating revenue in the foreseeable future.
Operating Expenses
Our operating expenses include exploration expenses, general and administrative
expenses, professional fees and transfer agent and filing fees. During the
three-month period ended March 31, 2020, our operating expenses decreased by
$97,222, or 93%, to $7,846 for the three months then ended, compared to $105,068
for the three-month period ended March 31, 2019. This change was mainly
associated with decreased general and administrative fees, which decreased by
$67,525 to $2,859 for the three-month period ended March 31, 2020, as compared
to $70,384 we incurred during the three months ended March 31, 2019, the main
component affecting the change in general and administrative expenses was
associated with absence of management consulting fees, as the Company's related
parties agreed to provide their consulting services free of charge. During the
comparative three-month period ended March 31, 2019, we incurred $60,000 in
management consulting fees. In addition to the increases in general and
administrative expenses, we did not incur any exploration expenses for the
three-month period ended March 31, 2020, as compared to $30,000 in exploration
expenses we incurred during the three-month period ended March 31, 2019. These
decreases were in part offset by $300 increase in professional fees, from $2,200
we incurred during a three-month period ended March 31, 2019 to $2,500 we
incurred during the three months ended March 31, 2020.
Other Items
During the three months ended March 31, 2020, we recognized $232,587 loss on
fair value of equity investments (2019 -$890,801 gain). The loss resulted from
revaluation of WRR Shares and WRR warrants and was caused mainly by decreased
market price of WRR's shares from CAD$0.085 per share at December 31, 2019, to
CAD$0.07 per share at March 31, 2020, and to a smaller degree from fluctuation
of exchange rates between the US and Canadian dollars.
During the same period, we recorded $82,280 gain on equity investments which was
associated with the sale of 1,269,000 WRR Shares for net proceeds of $165,330
(CAD$219,974). We earned $1,394 in interest revenue (2019 - $468). Since the
funds generated from the sale of equity investments are held in Canadian
dollars, we incurred $36,450 loss associated with foreign exchange fluctuation
rates (2019 - $3,772 gain).
Net Income (Loss)
At March 31, 2020, we recorded a net loss of $193,209, as compared to net income
of $1,037,497 for the three-month period ended March 31, 2019. This change
mainly resulted from $232,587 loss on revaluation of our equity investments, as
opposed to $890,801 gain we recognized in the comparative period, and $82,280
realized gain on the sale of WRR Shares as compared to $247,524 gain we
recognized in the comparative period.
Liquidity and Capital Resources
March 31, 2020 December 31, 2019
Current assets $ 493,412 $ 368,484
Current liabilities 1,431,896 1,429,396
Working capital deficit $ (938,484 ) $ (1,060,912 )
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As of March 31, 2020, we had a cash balance of $491,946, of which $439,134
(CAD$622,999) were held in high-interest savings account with a major Canadian
bank, and working capital deficit of $938,484 with cash flows used in operations
totaling $4,135 for the period then ended. During the three months ended March
31, 2020, our operations were funded with $165,330 cash we generated from the
sales of our equity investments.
We did not generate sufficient cash flows from our operating activities to
satisfy our cash requirements for the three-month period ended March 31, 2020.
There is no assurance that we will be able to generate sufficient cash from our
operations to repay the amounts owing under the advances payable, or to support
our exploration program. If we are unable to generate sufficient cash flow from
our operations to repay the amounts owing when due, we may be required to
continue selling our equity investments or raise additional financing by
borrowing funds or issuing our equity. There can be no assurance that we will be
successful in our efforts to raise additional capital.
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