You should read the following discussion and analysis of our financial condition
and results of operations together with our financial statements and related
notes appearing elsewhere in this Annual Report. This discussion and analysis
contains forward-looking statements that involve risks, uncertainties and
assumptions. See "Cautionary Note Regarding Forward-Looking Statements." Our
actual results may differ materially from those anticipated in these
forward-looking statements as a result of many factors, including, but not
limited to, those set forth under "Risk Factors" and elsewhere in this Annual
Report.
Overview
We currently do not have any producing properties and consequently, we have no
current operating income or cash flow and have not generated any revenues.
Further exploration will be required before a final evaluation as to the
economic and practical feasibility of any of our properties is determined.
Liquidity and Capital Resources
At August 31, 2019, our accumulated deficit was approximately $37,752,000 and
our cash position was approximately $1,825,000. In August 2019, we issued
5,111,626 shares of common stock for $1,840,185. We had a working capital
surplus of approximately $397,000. We have not commenced commercial production
on any of our mineral properties. We have no revenues from operations and
anticipate we will have no operating revenues until we place one or more of our
properties into production. All properties are in the exploration stage.
During the fiscal year ending August 31, 2019, we expended approximately
$139,000 in certain metallurgical activities and we expect to expend additional
amounts to fund metallurgical activities during our current fiscal year.
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Other than the financial commitment with USA Rare Earth to fund operations to
earn a 70% interest in the Round Top Project, we currently do not have funds to
pursue exploration or development work on the Round Top Project, which means
that we will be required to raise additional capital on best efforts terms if
USA Rare Earth ceases funding, or find alternative means to finance the Round
Top Project continued exploration activities, if warranted. Subsequent to the
funding of the USA Rare Earth amount, we will need to raise a significant amount
of additional capital to exploit the Round Top Project. Failure to obtain
required and sufficient financing may result in the (i) delay or indefinite
postponement of exploration and, if warranted, development or production in the
Round Top Project and/or (ii) curtailment or cessation of our operations. This
includes our leases over claims covering the Round Top Project. We cannot be
certain that additional capital or other types of financing will be available if
needed or that, if available, the terms of such financing will be favorable or
acceptable to us. Our ability to arrange additional financing in the future is
dependent upon third parties. Failure of obtaining the required capital will
result in the curtailment or cessation of our business operations.
Results of Operations
Fiscal Years ended August 31, 2019 and 2018
Revenue
During the fiscal year ended August 31, 2019 we had no revenues For the fiscal
year ended August 31, 2019, our net loss was approximately $2,381,000. We had no
operating revenues during the fiscal years ended August 31, 2019 and 2018. We
are not currently profitable. As a result of ongoing operating losses, we had an
accumulated deficit of approximately $37,752,000 as of August 31, 2019.
Operating expenses and resulting losses from Operations.
We incurred exploration costs for the fiscal years ended August 31, 2019 and
2018, in the amount of approximately $139,000 and $95,000, respectively.
Expenditures during fiscal year 2019 and 2018 were primarily for metallurgical
testing.
Our general and administrative expenses for the fiscal year ended August 31,
2019 were approximately $866,000 of which approximately $570,000 were stock
compensation for services. The remaining expenditures were primarily for accrued
payroll, professional fees and other general administrative expenses necessary
for our operations.
Our general and administrative expenses for the fiscal year ended August 31,
2018 were approximately $518,000 of which approximately $109,000 were for stock
compensation for services. The remaining expenditures were primarily for accrued
payroll and related taxes and benefits, professional fees and other general and
administrative expenses necessary for our operations.
We had losses from operations for the fiscal years ended August 31, 2019 and
2018 totaling approximately $1,005,000 and $618,000, respectively and net losses
for the fiscal years ended August 31, 2019 and 2018 totaling approximately
$2,381,000 and $738,000, respectively. During the year ended August 31, 2019, we
recognized a noncash loss on extinguishment of debt totaling $722,000 related to
modifications to advances received from related parties which included the
addition of a substantive conversion option. In addition, we recognized a
noncash loss on settlement of accrued liabilities totaling $642,000 during the
year ended August 31, 2019 related to shares issued for settlement of accrued
compensation due employees, officers and directors. We had interest expense of
approximately $21,000 and $121,000 for the fiscal years ended August 31, 2019
and 2018, respectively.
Off-Balance Sheet Arrangements
For the fiscal years ended August 31, 2019 and 2018, we have off-balance sheet
arrangements for annual payments in relation to the mineral leases as disclosed
in foot note 4 of the financial statements.
Recently Issued Accounting Pronouncements
The Company does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on our results of operations,
financial position, or cash flow.
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Critical Accounting Estimates
Management's discussion and analysis of financial condition and results of
operations is based on our financial statements, which have been prepared in
accordance with GAAP. Preparation of financial statements requires management to
make assumptions, estimates and judgments that affect the reported amounts of
assets, liabilities, revenues, costs and expenses, and the related disclosures
of contingencies. Management bases its estimates on various assumptions and
historical experience, which are believed to be reasonable; however, due to the
inherent nature of estimates, actual results may differ significantly due to
changed conditions or assumptions. On a regular basis, management reviews the
accounting policies, assumptions, estimates and judgments to ensure that our
financial statements are fairly presented in accordance with GAAP. However,
because future events and their effects cannot be determined with certainty,
actual results could differ from our assumptions and estimates, and such
differences could be material. Management believes that the following critical
accounting estimates and judgments have a significant impact on our financial
statements; Valuation of options granted to directors and officers using the
Black-Scholes model, and fair value of mineral properties. The accounting
policies are described in greater detail in Note 2 to our audited financial
statements for the fiscal year ended August 31, 2019.
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