U.S. Gold Corp. — Form 10-Q Summary
Reporting period: Quarter and six months ended October 31, 2017. Financial statements are unaudited. U.S. Gold is an exploration-stage gold and precious-metals company; it reported no proven or probable reserves and no continuing-operation revenue.
Key financial metrics
| Metric | Three months ended Oct. 31, 2017 | Six months ended Oct. 31, 2017 | Comparable 2016 period |
|---|---|---|---|
| Continuing revenue | $0 | $0 | $0 |
| Operating expenses | $1.672 million | $4.879 million | $0.694 million and $2.032 million, respectively |
| Loss from continuing operations | $1.672 million | $4.879 million | $0.694 million and $2.037 million, respectively |
| Net loss | $1.428 million | $10.706 million | $0.694 million and $2.037 million, respectively |
| Operating cash used | Not provided for the quarter | $4.288 million | $1.473 million for six months |
The six-month net loss included a $5.827 million loss from discontinued operations, including a $6.095 million goodwill impairment. In the quarter, discontinued operations produced a $244,403 gain. The discontinued Dataram Memory business reported $7.885 million of revenue and $1.232 million of gross profit from the merger date through October 31; it was sold on October 13.
At October 31, cash was $5.428 million, total assets $10.612 million, total liabilities $840,661, and stockholders’ equity $9.771 million. The company had no amount outstanding under the former memory-business credit facility after its buyer assumed the obligation. Six-month financing provided $2.590 million from common-stock issuance; cash decreased $1.392 million to $5.428 million.
Material changes and unusual items
- The May 2017 Gold King merger was accounted for as a reverse acquisition and recapitalization. U.S. Gold changed its name from Dataram Corporation in June and shifted its focus to mineral exploration. The merger and discontinued-business presentation make comparisons with 2016 less directly comparable.
- Operating expenses rose year over year, reflecting higher compensation, exploration activity—particularly at Keystone—professional fees, and public-company costs. Six-month compensation included approximately $718,000 of severance for two former officers.
- The Dataram Memory business was sold for $900,000. The filing reports a $102,023 gain on sale and $326,404 of net cash proceeds after sale-related costs; remaining discontinued-operation assets and liabilities were $372,086 and $254,744, respectively.
- Common shares outstanding increased to 14,156,766 at October 31, including shares issued in a $2.59 million financing and conversions of Series C preferred stock. The filing reports 14,211,660 shares outstanding as of December 14.
Outlook, liquidity, and risks
Management said it anticipates raising additional capital but cautioned that financing may not be available or available on favorable terms. Given cash on hand and the ability to control exploration spending, management believed its plans alleviated substantial doubt about sustaining operations for at least one year from issuance of the statements. This is management’s assessment, not a guarantee.
Key risks include the lack of established reserves or commercial feasibility, continued cash consumption, dependence on future financing, and uncertainty in estimates and mineral-right valuations. Management concluded disclosure controls and procedures were not effective as of October 31 because of limited resources and personnel. The filing reported no material change in internal control over financial reporting and no legal proceedings.
Important facts for investors to verify
- Cash runway under different exploration-spending and financing assumptions, and the timing and terms of any future capital raise.
- Exploration results and the status of permitting, technical studies, and any progress toward establishing reserves or commercial feasibility.
- The final settlement and collection of the Dataram sale-related escrow receivable and remaining discontinued-operation obligations.
- The basis and implications of the $6.095 million goodwill impairment and the accounting comparability following the reverse merger.
- Plans to remediate ineffective disclosure controls, and potential dilution from outstanding equity awards and future share issuance.