U.S. Gold Corp. — Form 10-Q Summary
Reporting period: Three and nine months ended January 31, 2018 (fiscal third quarter); filed March 16, 2018. The statements are unaudited. Following its May 2017 reverse acquisition of Gold King, the company’s business is gold and precious-metals exploration, primarily in Nevada and Wyoming. The former Dataram Memory business was sold in October 2017 and is reported as discontinued operations.
Financial performance and position
| Metric | Three months ended Jan. 31, 2018 | Nine months ended Jan. 31, 2018 | Comparable 2017 period |
|---|---|---|---|
| Continuing-operations revenue | $0 | $0 | $0 |
| Operating expenses | $1.768 million | $6.647 million | $1.648 million / $3.681 million |
| Loss from continuing operations | $1.768 million | $6.647 million | $1.648 million / $3.685 million |
| Discontinued-operations loss, net | $4,110 | $5.831 million | $0 |
| Net loss | $1.772 million | $12.478 million | $1.648 million / $3.685 million |
| Net loss per share, basic and diluted | $0.12 | $1.03 | $0.16 / $0.38 |
| Operating cash used | Not separately reported | $6.262 million | $2.930 million |
At January 31, 2018, cash was $8.374 million, current assets were $8.976 million, total assets were $13.235 million, and total liabilities were $199,938. There was no balance-sheet debt reported. The former Dataram credit facility was assumed by the buyer upon the business sale; the company reported no remaining liability under it. Stockholders’ equity was $13.035 million, with an accumulated deficit of $17.048 million.
Nine-month investing activities provided $306,000, mainly from the memory-business sale, while financing activities provided $7.509 million: $2.590 million from common-stock issuance and $4.919 million net from preferred stock and warrants. Cash increased by $1.553 million from April 30, 2017.
Material changes and unusual items
- Nine-month operating expenses rose $2.966 million year over year. Management attributed the increase to higher compensation, including approximately $716,000 of severance, increased exploration spending, professional fees, and general and administrative costs. Third-quarter operating expenses increased $120,000 year over year.
- The company recorded a $6.095 million goodwill impairment related to the May 2017 merger. The nine-month discontinued-operations results included $7.885 million of Dataram Memory revenue, $1.232 million gross profit, a $5.926 million loss from discontinued operations, and a $94,485 gain on sale. Net cash proceeds from the sale were $326,404 after fees and other assumed liabilities.
- In January 2018, the company raised $5.0 million gross through Series E preferred stock and warrants, or approximately $4.9 million net. It also issued common stock for approximately $2.6 million net during the nine months. Preferred-stock conversions increased common shares outstanding; the filing reports 16,210,416 shares at January 31 and 17,352,084 at March 16, 2018.
- The company reported no proven or probable mineral reserves; its properties remain exploratory. Mineral rights totaled $4.177 million, including the Gold Bar North project acquired in August 2017.
Outlook, risks, and other disclosures
The company provided no revenue or earnings guidance. Management said cash, financing plans, and the ability to control exploration spending alleviated substantial doubt about sustaining operations for at least one year from the financial-statement issuance date. It also said additional capital may be needed and there is no assurance it can be raised or obtained on favorable terms.
Key risks include continued operating cash burn, dependence on capital markets, exploration-stage uncertainty and absence of proven reserves, and the possibility that mineral-rights valuations or exploration prospects do not support carrying values. Management reported disclosure controls and procedures were not effective as of January 31, 2018, citing limited resources and staffing; it was implementing a remediation plan with outside consulting assistance. The company reported no material changes to its previously disclosed risk factors. Two lawsuits were settled in December 2017. The filing also describes state production royalties on the Copper King leases and net-smelter royalty obligations associated with Keystone claims.
Important facts for investors to verify
- Cash runway assumptions, exploration spending plans, and the timing and terms of any future financing.
- The basis and implications of the $6.095 million goodwill impairment and the company’s remaining exposure to discontinued-business matters.
- Potential dilution from preferred-stock conversions, outstanding warrants, and subsequent share issuances.
- Progress on internal-control remediation and whether disclosure controls become effective.
- Exploration results, reserve-development prospects, and royalty obligations for the company’s mineral projects.