U.S. Gold Corp. — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended October 31, 2022; balance-sheet comparisons are with April 30, 2022. The company is a gold exploration and development-stage business, not a producing miner. Its CK Gold project in Wyoming has proven and probable reserves; other properties are exploratory. Financial statements are unaudited.
Financial performance and position
| Metric | Three months ended Oct. 31, 2022 | Six months ended Oct. 31, 2022 | Comparable 2021 period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Operating expenses | $2.11 million | $5.00 million | $4.29 million and $7.84 million, respectively |
| Operating loss | $2.11 million | $5.00 million | $4.29 million and $7.84 million, respectively |
| Net loss | $1.90 million | $3.84 million | $4.29 million and $7.84 million, respectively |
| Net loss per share | $0.23 | $0.46 | $0.61 and $1.10, respectively |
| Net cash used in operating activities | Not separately presented | $4.91 million | $6.50 million for six months |
At October 31, cash was $4.20 million, current assets $4.79 million, current liabilities $0.59 million, and working capital $4.20 million. Total assets were $22.35 million and total liabilities $2.15 million, including a $1.29 million warrant liability, $0.27 million asset retirement obligation, and lease liabilities. The filing does not report conventional borrowings. No revenue means operating margins are not meaningful.
Cash declined $4.91 million from April 30. Investing cash flow was zero and financing cash flow was zero for the six months. The company reported no cash interest or income-tax payments.
Changes versus prior comparable periods
- Six-month operating expenses fell $2.85 million year over year, mainly because exploration spending declined by about $3.56 million; professional and consulting fees rose about $0.54 million.
- Quarterly operating expenses declined about $2.18 million, also primarily reflecting lower exploration spending. Net losses improved in both the quarter and six-month period.
- Other income included a $1.15 million noncash gain from the decrease in fair value of warrant liabilities; the liability fell from $2.44 million at April 30 to $1.29 million at October 31. This gain reduced reported net loss.
- Working capital fell $4.56 million from April 30, while cash declined from $9.11 million to $4.20 million. Common shares outstanding at October 31 were 8,349,843; the cover reports 8,363,663 as of December 15.
Outlook, risks, and notable developments
- Going concern and funding: Management said cash was sufficient for corporate costs and currently undertaken permitting and engineering work over the next 12 months, but not to advance projects beyond those objectives without additional funding. The filing states this raises substantial doubt about the company’s ability to continue as a going concern for the 12 months following issuance. Additional capital may not be available on acceptable terms; equity financing could dilute shareholders and debt financing could impose restrictive covenants.
- CK Gold permitting: The company submitted its permit-to-mine application and reclamation plan to Wyoming in September 2022. On November 16, WDEQ notified the company that the application passed its completeness review; public notice and technical review were to follow. The filing provides no project completion or production guidance.
- Maggie Creek transaction after quarter-end: On November 9, 2022, the company assigned its Maggie Creek earn-in interest to Nevada Gold Mines for $2.75 million in cash. If NGM exercises its option and acquires the property, U.S. Gold is to receive a 0.5% net smelter returns royalty. NGM may buy back half the royalty for $500,000; U.S. Gold waives the first $800,000 of royalty payments, and NGM has a right of first refusal if the royalty is offered for sale. These are subsequent events and are not reflected in October 31 cash.
- Other risks and contingencies: Outcomes depend on permitting, feasibility and engineering work, exploration results, commodity prices, costs, financing availability, market conditions, regulation, and other factors identified in the filing. The company disclosed no material pending legal proceedings and no off-balance-sheet arrangements. It expects annual legal and accounting compliance costs of $175,000 to $250,000.
- Controls: Management concluded disclosure controls were not effective because of material weaknesses in internal control over financial reporting, including limited personnel and inadequate segregation of duties. The company said it had engaged an independent firm to assist with control design and testing and expected the weaknesses to continue for the foreseeable future.
Important facts for investors to verify
- Cash received from the November Maggie Creek assignment, its use, and the final executed royalty terms, including the buyback and initial royalty waiver.
- Whether available funds and any subsequent cash proceeds meet the company’s stated funding needs, and whether it raises additional capital.
- Progress, timing, and conditions in WDEQ’s public-notice and technical review of the CK Gold permit application, as well as feasibility-study and project-cost assumptions.
- Future exploration and consulting spending, cash burn, and the noncash effect of warrant-liability remeasurement on reported results.
- Remediation of internal-control material weaknesses and any changes to the share count or potential dilution from warrants, options, and restricted stock units.