U.S. Gold Corp. — Form 10-Q Summary
Reporting period: Quarter and nine months ended January 31, 2020, filed March 12, 2020. This is the company’s fiscal 2020 third quarter, notwithstanding the “2019 Q3” request metadata. The unaudited statements cover an exploration-stage mining company with projects in Wyoming and Nevada; the company reported no proven or probable reserves and no revenue.
Financial performance and liquidity
- Revenue: $0 for both the three- and nine-month periods, in 2020 and 2019.
- Net loss: $961,458 for the quarter, versus $2.07 million a year earlier. For nine months, net loss was $4.50 million versus $6.56 million. Nine-month loss applicable to common shareholders was $6.52 million, including a $2.02 million deemed dividend related to Series F preferred stock; comparative-period common-shareholder loss was $6.56 million.
- Operating expenses: $1.18 million for the quarter, down from $1.64 million; $4.72 million for nine months, down from $6.12 million. Nine-month exploration costs declined to $1.20 million from $2.50 million, while professional and consulting fees rose to $1.87 million from $1.64 million.
- EPS: Basic and diluted loss per share was $0.04 for the quarter and $0.29 for nine months, versus $0.11 and $0.36, respectively, in the comparable periods.
- Cash flow: Nine-month operating cash use was $3.55 million, compared with $4.63 million. Investing activities provided $159,063, principally cash acquired in the Maggie Creek-related share exchange. Financing provided $2.40 million from Series F preferred stock and warrant issuance. Cash declined $991,137 to $1.21 million.
- Liquidity and liabilities: Current assets were $1.75 million and current liabilities $77,979, yielding working capital of $1.67 million, down from $2.65 million at April 30, 2019. Total liabilities were $173,391, including a $95,412 asset retirement obligation; no borrowings or interest expense were reported.
- Assets and equity: Total assets were $8.34 million, including $6.16 million in mineral rights. Stockholders’ equity was $8.17 million. Common shares outstanding increased to 24,439,478 from 19,860,625 at April 30, 2019; 24,464,621 shares were outstanding on March 12, 2020.
Changes, outlook, and material matters
- Lower exploration spending was the principal reason for reduced operating costs and losses. Quarterly compensation expense increased, partly because of equity bonus awards. The nine-month results also include a $219,073 tax benefit from a refund of previously paid alternative minimum tax.
- The September 2019 Maggie Creek transaction added mineral rights recorded at $1.99 million, in exchange for 2 million common shares valued at $2.02 million. The acquired option allows an earn-in of up to a 50% interest through $4.5 million of staged exploration expenditures and a $250,000 payment; a feasibility study could allow an additional 20% interest.
- Management said cash on hand was sufficient for approximately six months of operations and that additional financing would be needed thereafter. The filing states that these conditions raise substantial doubt about the company’s ability to continue as a going concern. There is no assurance that capital can be raised on acceptable terms; failure to obtain funding could require reduced exploration or other changes to operations.
- The company focused on finalizing its 2019 Keystone drilling program and analyzing Maggie Creek. Management highlighted gold mineralization in Keystone hole KEY19-05rc as a target for follow-up exploration. The filing provides no financial guidance or quantified future exploration budget.
- Nasdaq notified the company that it did not meet the $1.00 minimum bid-price requirement. The compliance period ran through May 5, 2020; the company could consider a reverse stock split, but gave no assurance of regaining or maintaining compliance. Delisting could impair share liquidity and access to capital.
- COVID-19 was identified as an uncertain risk that could disrupt travel, contractors, exploration, technical work, or financing. Other disclosed risks include regulatory and permitting costs, reclamation obligations, and potential dilution from future equity financing and outstanding securities.
- Disclosure controls were reported ineffective. Management cited limited staffing and inadequate segregation of duties as material weaknesses and said it delayed its Sarbanes-Oxley compliance program to conserve cash. A prior-period classification error involving the $2.02 million deemed dividend was reclassified between additional paid-in capital and accumulated deficit; management concluded it was not qualitatively material and it did not affect net loss or cash flows.
- The filing reported no material pending legal proceedings and no subsequent events requiring financial-statement adjustment through the filing date.
Important facts for investors to verify
- Cash runway, current financing plans, and the terms and availability of any future capital.
- Progress on Keystone follow-up exploration and Maggie Creek earn-in spending, milestones, and any resulting interest.
- Nasdaq bid-price compliance status and any reverse-split action taken after the reporting date.
- Potential dilution from Series F conversion rights, outstanding warrants and options, and equity compensation plans.
- Remediation of the disclosed control weaknesses and the effect of the delayed compliance program.