U.S. Gold Corp. — Form 10-Q Summary
Reporting period: Three months ended July 31, 2018, the company’s fiscal first quarter. Comparisons are with the three months ended July 31, 2017. U.S. Gold is an exploration-stage gold and precious-metals company focused primarily on Nevada and Wyoming; it reported no proven or probable reserves and generated no revenue.
Financial highlights
| Metric | July 31, 2018 quarter / balance | Comparable period / prior balance |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $1.482 million | $3.206 million |
| Net loss | $1.482 million; $0.08 per share | $9.278 million; $1.00 per share |
| Operating cash flow | $(1.452) million | $(2.974) million |
| Cash | $6.194 million | $7.646 million at April 30, 2018 |
| Working capital | $6.636 million | $7.992 million at April 30, 2018 |
| Total liabilities | $0.433 million | $0.286 million at April 30, 2018 |
There were no financing cash proceeds in the quarter and no interest paid. The balance sheet shows no borrowings; current liabilities were $0.372 million. The company reported no gross margin because it had no revenue. Exploration costs were $0.505 million. Mineral rights were carried at $4.177 million. A $0.061 million asset retirement obligation was recorded during the quarter.
Changes and notable items
- Operating expenses fell about $1.725 million year over year: compensation decreased about $1.1 million, exploration expense $0.263 million, professional fees $0.320 million, and general and administrative expenses about $0.054 million. Management attributed these changes to lower officer compensation after the merger-related transition, reduced exploration activity, lower investor-relations spending, and lower public-company and other costs.
- Net loss improved mainly because the prior-year quarter included $6.095 million of goodwill impairment and $6.071 million of discontinued-operation losses related to the former Dataram Memory business. That business was sold in October 2017; the current quarter had no discontinued-operation loss.
- Cash declined $1.452 million in the quarter, approximately matching operating cash use. Working capital decreased $1.356 million from April 30, 2018.
- Common shares outstanding were 17,619,084 at July 31, 2018. Subsequent to quarter-end, the company issued an aggregate 1,000,000 shares to officers, directors, and employees for services, with half vesting at issuance and half after one year.
Outlook, risks, and controls
Management said cash and spending plans alleviated substantial doubt about the company’s ability to continue operations for at least 12 months from issuance of the statements, while also stating that additional capital will be required and that future financing is not assured or guaranteed on favorable terms. If adequate funding is unavailable, the company may curtail exploration, alter its strategy, or cease operations. Management said it can control exploration spending. It estimated annual legal and accounting costs of $200,000–$250,000 for reporting and Sarbanes-Oxley compliance.
The company has no producing mines, and all property activity remains exploratory; commercial feasibility and reserves have not been established. Exploration and mineral-rights valuations, reclamation estimates, and the ability to obtain financing are material uncertainties. The company reported no legal proceedings and no material changes to the risk factors in its latest annual report. Management concluded that disclosure controls and procedures were not effective as of July 31, 2018, citing limited resources and staffing; remediation included engaging an outside consulting firm and beginning documentation of the control environment.
Investor facts to verify
- Whether the company can raise capital on acceptable terms and sustain operations beyond management’s stated 12-month assessment.
- Exploration plans, spending levels, permitting and reclamation obligations, and progress toward establishing reserves or commercial feasibility.
- The extent of dilution from the post-quarter 1,000,000-share issuance and other outstanding options and warrants.
- Progress in remediating ineffective disclosure controls and procedures.