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Part
I – FINANCIAL INFORMATION
Item
1. Financial Statements
Nevada Canyon Gold Corp.
Condensed Consolidated Balance Sheets
(Presented in US Dollars)
(Unaudited)
The accompanying notes are an integral part of these condensed consolidated financial statements
Nevada
Canyon Gold Corp.
Condensed
Consolidated Statements of Operations
(Presented in US Dollars)
(Unaudited)
The
accompanying notes are an integral part of these condensed consolidated financial statements
Nevada Canyon Gold Corp.
Condensed Consolidated Statement of Stockholders’ Equity/(Deficit)
(Presented in US Dollars)
(Unaudited)
The
accompanying notes are an integral part of these condensed consolidated financial statements
Nevada Canyon Gold Corp.
Condensed Consolidated Statements of Cash Flow
(Presented in US Dollars)
(Unaudited)
The accompanying notes are an integral part of these condensed consolidated financial statements
NEVADA
CANYON GOLD CORP.
NOTES
TO THE CONDENSED
CONSOLIDATED
FINANCIAL STATEMENTS
SEPTEMBER
30, 2022
(UNAUDITED)
NOTE
1 - NATURE OF BUSINESS
Nevada
Canyon Gold Corp. (the “Company”) was incorporated under the laws of the state of Nevada on February 27, 2014. The Company
is involved in acquiring and exploring mineral properties and royalty interests in Nevada and Idaho. On December 15, 2021, the Company
incorporated two subsidiaries, Nevada Canyon LLC and Canyon Carbon LLC. Both subsidiaries were incorporated under the laws of the state
of Nevada.
Going
Concern
The
Company’s condensed consolidated financial statements are prepared using accounting principles generally accepted in the United
States of America (“GAAP”) applicable to a going concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. The Company is in a business of acquiring and exploring mineral properties and royalty
interests and has not generated or realized any revenues from these business operations. The ability of the Company to continue as a
going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company
is unable to obtain adequate capital, it could be forced to cease operations.
NOTE
2 - BASIS OF PRESENTATION
The
condensed consolidated financial statements of the Company have been prepared in accordance with GAAP for interim financial information
and the rules and regulations of the Securities and Exchange Commission (“SEC”). They do not include all information and
footnotes required by GAAP for complete financial statements. Except as disclosed herein, there have been no material changes in the
information disclosed in the notes to the consolidated financial statements for the year ended December 31, 2021, included in the Company’s
Annual Report on Form 10-K, filed with the SEC. The condensed consolidated financial statements should be read in conjunction with those
consolidated financial statements included in Form 10-K. In the opinion of management, all adjustments considered necessary for fair
presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the three and nine months ended
September 30, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.
Recent
Accounting Pronouncements
The
Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not
believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial
position or results of operations.
NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Deferred
Stock Issuance Costs
Deferred
stock issuance costs represent amounts paid for legal, consulting, and other offering expenses in conjunction with the future raising
of additional capital to be performed within one year. These costs are netted against additional paid-in capital as a cost of the stock
issuance upon closing of the respective stock placement. During the nine months ended September 30, 2022, the Company recorded $39,250
in deferred stock issuance costs which were included in prepaid expenses, as the private placement financing was not closed. As at September
30, 2022, the Company did not have any deferred stock issuance costs which were netted against additional paid-in capital as a cost of
stock issued (2021 - $Nil).
Income
per Share
The
Company’s basic income/loss per share (“EPS”) is calculated by dividing its net income/loss available to common stockholders
by the weighted average number of common shares outstanding for the period, excluding unvested portion of restricted stock with performance
conditions.
The
Company’s diluted EPS is calculated by dividing its net income/loss available to common shareholders by the diluted weighted average
number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted number
of shares adjusted for any potentially dilutive debt or equity. Restricted stock with performance conditions is only included in the
diluted EPS calculation to the extent that performance conditions have been met at the measurement date. Dilutive effect of the restricted
stock is determined using the treasury stock method.
At
September 30, 2022, the Company had 6,005,000 shares that were issued but restricted under 3-year lock-up and vesting agreements with
shareholders. These shares vest in equal annual installments over a 3-year term; during which term the shareholders agreed not to sell,
directly or indirectly, or enter into any other transactions involving the Company’s common shares regardless if the shares have
vested or not. As at September 30, 2022, the full 6,005,000 unvested shares were excluded from denominator of basic EPS.
The
outstanding securities at September 30, 2022 and December 31, 2021 that could have a dilutive effect are as follows:
SCHEDULE OF ANTIDILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE
| |
| | | |
| | |
| |
September 30, 2022 | | |
December 31, 2021 | |
Convertible Notes Payable | |
| 2,890,404 | | |
| 2,764,815 | |
Restricted Stock | |
| 6,005,000 | | |
| - | |
Total Possible Dilutive Shares | |
| 8,895,404 | | |
| 2,764,815 | |
The
Company incurred losses for the three- and nine-month periods ended September 30, 2022 and 2021, therefore the diluted loss per share
was not presented.
NOTE
4 – RELATED PARTY TRANSACTIONS
Amounts
due to related parties at September 30, 2022 and December 31, 2021:
SCHEDULE OF RELATED PARTY TRANSACTIONS
| |
| | | |
| | |
| |
September 30, 2022 | | |
December 31, 2021 | |
Amounts due to the Chief Executive Officer (“CEO”) (a) | |
$ | 117,031 | | |
$ | 144,031 | |
Amounts due to a company controlled by the CEO (a) | |
| 360,000 | | |
| 360,000 | |
Amounts due to a former director(b) | |
| - | | |
| 220,000 | |
Amounts due to a company controlled by the former director (b) | |
| - | | |
| 240,000 | |
Amounts due from a director for shares | |
| - | | |
| (200 | ) |
Amounts due from a director for shares | |
| - | | |
| (200 | ) |
Related party payables | |
$ | 477,031 | | |
$ | 963,631 | |
(a) |
These
amounts are non-interest bearing, unsecured and due on demand. |
(b) |
During
the year ended December 31, 2021, Mr. Levine resigned from the board of directors of the Company, therefore at September 30, 2022,
the Company has reclassified $220,000 owed to Mr. Levine and $240,000 owed to a private company controlled by Mr. Levine as at December
31, 2021, from related party payables to regular accounts payable. |
During
the three- and nine-month periods ended September 30, 2022 and 2021, the Company had the following transactions with its related parties.
SCHEDULE OF TRANSACTIONS WITH ITS RELATED PARTIES
| |
| | | |
| | | |
| | | |
| | |
| |
Three months ended September 30, | | |
Nine months ended September 30, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
Stock-based compensation incurred to CEO | |
$ | 105,797 | | |
$ | - | | |
$ | 225,392 | | |
$ | - | |
Stock-based compensation incurred to a director | |
| 52,766 | | |
| - | | |
| 112,415 | | |
| - | |
Stock-based compensation incurred to a director | |
| 158,299 | | |
| - | | |
| 337,246 | | |
| - | |
Related party transactions | |
$ | 316,862 | | |
$ | - | | |
$ | 675,053 | | |
$ | - | |
On
December 30, 2021, the Company issued a total of 6,005,000 shares of common stock to the Company’s directors (the “Director
Shares”). The Director Shares were issued at par value for a total consideration of $601. In addition to the regular restrictive
legend, the release of the Director Shares is subject to the terms and conditions included in 3-year lock-up and vesting agreements (the
“Lock-up Agreements”), which contemplate that the Director Shares will vest in equal annual installments over a 3-year term;
during which term the shareholders agreed not to sell, directly or indirectly, or enter into any other transactions involving the Company’s
common shares regardless if the shares have vested or not.
The
Company analyzed the issuance of the Director Shares pursuant to the guidance available in ASC 718, Compensation—Stock Compensation.
Based on the guidance, the Company determined that the directors are nonemployees of the Company, however, since they were appointed
to the board positions that are expected to be filled by another person whom the shareholders will elect when the current term expires,
and the Directors are not expected to provide any additional services, the Director Shares must be accounted for in the same manner as
an award granted to an employee. Therefore, the Director Shares are to be valued at the fair market value and stock-based compensation
must be recorded as the services are provided over a vesting period of 3 years. The Company determined the fair market value of the shares
to be $0.4938 per share, the grant date to be March 18, 2022, the date the Lock-up Agreements were agreed to by the board of directors
and the beneficiaries, and the service period commencing on March 18, 2022.
NOTE
5 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
| |
| | | |
| | |
| |
September 30, 2022 | | |
December 31, 2021 | |
Trade payables | |
$ | 804,448 | | |
$ | 367,578 | |
Accrued liabilities | |
| 5,700 | | |
| 28,692 | |
Accounts payable and
accrued liabilities | |
$ | 810,148 | | |
$ | 396,270 | |
NOTE
6 – MINERAL PROPERTY INTERESTS
As
of September 30, 2022, the Company’s mineral property interests are comprised of the Lazy Claims Property, the Loman Property,
and the Agai-Pah Property located in Mineral County, Nevada, the Swales Property located in Elko County, Nevada, and the Belshazzar Property
located in Quartzburg mining district, Boise County, Idaho. In addition, the Company acquired an option to acquire 100% interest of Target
Minerals, Inc’s (“Target”) 1% production royalty on the Olinghouse Project, located in the Olinghouse Mining District,
Washoe County, Nevada, and acquired 2% net smelter returns royalty (“NSR”) on the Palmetto Project (the “Project”),
located in Esmeralda County, Nevada.
Lazy
Claims Property
On
August 2, 2017, the Company entered into an exploration lease agreement (the “Lazy Claims Agreement”) with Tarsis Resources
US Inc. (“Tarsis”), a Nevada corporation, to lease the Lazy Claims, consisting of three claims. The term of the Lazy Claims
Agreement is ten years, and is subject to extension for additional two consecutive 10-year terms. Full consideration of the Lazy Claims
Agreement consists of the following: an initial cash payment of $1,000 to Tarsis, paid upon the execution of the Lazy Claims Agreement,
with $2,000 payable to Tarsis on each subsequent anniversary of the effective date. The Company agreed to pay Tarsis a 2% production
royalty (the “Lazy Claims Royalty”) based on the gross returns from the production and sale of minerals from the Lazy Claims.
Should the Lazy Claims Royalty payments to Tarsis be in excess of $2,000 per year, the Company will not be required to pay a $2,000 annual
minimum payment.
During
the three and nine months ended September 30, 2022 and 2021, the Company paid $2,543 (2021 - $2,543) for its mineral property interests
in Lazy Claims, of which $2,000 (2021 - $2,000) represented annual minimum payment required under the Lazy Claims Agreement and $543
(2021 - $543) was associated with the annual mining claim fees payable to the Bureau of Land Management (the “BLM”). These
fees were recorded as part of the Company’s exploration expenses.
Loman
Property
In
December 2019 the Company acquired 27 mining claims for a total of $10,395. The claims were acquired by the Company from a third-party.
During
the three and nine months ended September 30, 2022, the Company paid $4,791 (2021 - $Nil) in annual mining claim fees payable to the
BLM. These fees were recorded as part of the Company’s exploration expenses.
Agai-Pah
Property
On
May 19, 2021, the Company entered into exploration lease with option to purchase agreement (the “Agai-Pah Property Agreement”)
with MSM Resource, L.L.C., (“MSM”) a Nevada limited liability Corporation on the Agai-Pah Property, consisting of 20 unpatented
mining claims totaling 400 acres, located in Mineral County, Nevada about 10 miles northeast of the town of Hawthorne (the “Agai-Pah
Property”). Alan Day, the managing member of MSM, is a director of the Company and a related party.
The
term of the Agai-Pah Property Agreement commenced on May 19, 2021, and continues for ten years, subject to the Company’s right
to extend the Agai-Pah Property Agreement for two additional terms of ten years each, and subject to the Company’s option to purchase
the Property.
Full
consideration of the Agai-Pah Property Agreement consists of the following: (i) an initial cash payment of $20,000 to be paid within
90 days from the execution of the Agai-Pah Property Agreement on May 19, 2021 (the “Effective Date”), and (ii) annual payments
of $20,000 to be paid on the anniversary of the Effective Date while the Agai-Pah Property Agreement remains in effect. The Company has
the exclusive option and right to acquire 100% ownership of the Agai-Pah Property (the “Agai-Pah Purchase Option”). To exercise
the Agai-Pah Purchase Option, the Company will be required to pay $750,000 (the “Agai-Pah Purchase Price”). The Agai-Pah
Purchase Price can be paid in either cash and/or equity of the Company, or a combination thereof, at the election of MSM. The annual
payments paid by the Company to MSM, shall not be applied or credited against the Purchase Price. The Company made the initial cash payment
of $20,000 on November 6, 2021, pursuant to a verbal extension granted to the Company by MSM, and made the first $20,000 anniversary
payment on June 20, 2022.
During
the three and nine months ended September 30, 2022, the Company paid $3,552 (2021 - $Nil) in annual mining claim fees payable to the
BLM. These fees were recorded as part of the Company’s exploration expenses.
Belshazzar
Property
On
June 4, 2021, the Company entered exploration lease with option to purchase agreement (the “Belshazzar Property Agreement”)
with Belshazzar Holdings, L.L.C., (“BH”) a Nevada limited liability Corporation on the Belshazzar Property, consisting of
ten unpatented lode mining claims and seven unpatented placer mineral claim totaling 200 acres, within Quartzburg mining district, in
Boise County, Idaho (the “Belshazzar Property”). Alan Day, the managing member of BH, is a director of the Company and a
related party.
The
term of the Belshazzar Property Agreement commenced on June 4, 2021, and continues for ten years, subject to the Company’s right
to extend the Belshazzar Property Agreement for two additional terms of ten years each, and subject to the Company’s option to
purchase the Belshazzar Property.
Full
consideration of the Belshazzar Property Agreement consists of the following: (i) an initial cash payment of $20,000 to be paid within
90 days from the execution of the Belshazzar Property Agreement on June 4, 2021 (the “effective date”), and (ii) annual payments
of $20,000 to be paid on the anniversary of the Effective Date while the Belshazzar Property Agreement remains in effect. The Company
has the exclusive option and right to acquire 100% ownership of the Belshazzar Property (the “Belshazzar Purchase Option”).
To exercise the Belshazzar Purchase Option, the Company will be required to pay $800,000 (the “Belshazzar Purchase Price”).
The Belshazzar Purchase Price can be paid in either cash and/or equity of the Company, or a combination thereof, at the election of BH.
The annual payments paid by the Company to BH, shall not be applied or credited against the Belshazzar Purchase Price. The Belshazzar
Property is subject to a 1% Gross Returns Royalty payable to the property owner, from the commencement of commercial production subject
to certain terms. The Company made the initial cash payment of $20,000 on November 6, 2021, pursuant to a verbal extension granted to
the Company by BH, and made the first $20,000 anniversary payment on June 20, 2022.
During
the three and nine months ended September 30, 2022, the Company paid $2,660 (2021 - $Nil) in annual mining claim fees payable to the
BLM. These fees were recorded as part of the Company’s exploration expenses.
Swales
Property
On
December 27, 2021, the Company entered into exploration lease with option to purchase agreement (the “Swales Property Agreement”)
with Mr. W. Wright Parks III., (“Mr. Parks”) on the Swales Property, consisting of 40 unpatented lode mining claims totaling
800 acres, within Swales Mountain Mining District in Elko County, Nevada (the “Swales Property”).
The
term of the Swales Property Agreement commenced on December 27, 2021, and continues for ten years, subject to the Company’s right
to extend the Swales Property Agreement for two additional terms of ten years each, and subject to the Company’s option to purchase
the Swales Property.
Full
consideration of the Swales Property Agreement consists of the following: (i) an initial cash payment of $20,000 to be paid within 90
days from the execution of the Belshazzar Agreement on December 27, 2021 (the “effective date”), and (ii) annual payments
of $20,000 to be paid on the anniversary of the Effective Date while the Swales Property Agreement remains in effect. The Company has
the exclusive option and right to acquire 100% ownership of the Swales Property (the “Swales Purchase Option”). To exercise
the Swales Purchase Option, the Company will be required to pay $750,000 (the “Swales Purchase Price”). The Swales Purchase
Price can be paid in either cash and/or equity of the Company, or a combination thereof, at the election of Mr. Parks. The annual payments
paid by the Company to Mr. Parks, shall not be applied or credited against the Swales Purchase Price. The Company made the initial cash
payment of $20,000 on January 15, 2022.
During
the three and nine months ended September 30, 2022, the Company paid $7,092 (2021 - $Nil) in annual mining claim fees payable to the
BLM. These fees were recorded as part of the Company’s exploration expenses.
Olinghouse
Project
On
December 17, 2021, the Company’s wholly-owned subsidiary, Nevada Canyon, LLC, entered into an Option to Purchase Agreement (the
“Olinghouse Agreement”) with Target Minerals, Inc (“Target”), a private Nevada company, to acquire
100% interest of Target’s 1% production royalty on the Olinghouse Project, located in the Olinghouse Mining District, Washoe County,
Nevada.
The
Company has the exclusive right and option (the “Olinghouse Purchase Option”), exercisable at any time during the Olinghouse
Option Period, as further defined below, at its sole discretion, to acquire 100% of a 1% production royalty from the net smelter returns
on all minerals and products produced from certain properties comprising the Olinghouse Project.
The
term of the Olinghouse Purchase Option shall be the later of one year, or 60 days after the date on which the Company delivers to Target
a written notice to exercise the Olinghouse Purchase Option, subject to further extension if Target’s conditions to closing are
not fully satisfied or otherwise waived by the Company. Full consideration of the Olinghouse Agreement consists of the following: (i)
an initial cash option payment of $200,000 payable upon execution of the Agreement, which the Company paid on December 18, 2021, and
(ii) purchase price (the “Olinghouse Purchase Price”) which shall be paid by the Company to Target in either cash or common
shares of the Company, the determination of which shall be as follows:
|
● |
if
the Company’s 10-day volume weighted average price (“VWAP”) Calculation is less than $1.25 per share, the Olinghouse
Purchase Price shall be paid in cash; or |
|
|
|
|
● |
if
the Company’s 10-day VWAP Calculation is more than $1.25 per share, the Olinghouse Purchase Price shall be paid in the form
of 2,000,000 Shares of the Company’s common stock. |
During
the three- and nine-month periods ended September 30, 2022 and 2021, the Company did not incur any additional expenses associated with
the Olinghouse Project.
Palmetto
Project
On
January 27, 2022, Nevada Canyon, LLC entered into a Royalty Purchase Agreement with Smooth Rock Ventures, LLC, a wholly-owned subsidiary
of Smooth Rock Ventures Corp. (“Smooth Rock”), to acquire a 2% net smelter returns royalty on the Palmetto Project. Alan
Day, a director and a related party of the Company, is also a director and CEO of Smooth Rock.
To
acquire the 2% NSR on the Palmetto Project, Nevada Canyon agreed to pay Smooth Rock a one-time cash payment of $350,000, which was paid
on February 7, 2022.
During
the three- and nine-month periods ended September 30, 2022 and 2021, the Company did not incur any additional expenses associated with
the Palmetto Project.
NOTE
7 – EQUITY INVESTMENT
As
at September 30, 2022, the Company’s equity investments consist of 511,750 common shares of Walker River Resources Corp. (“WRR”),
(2021 - 1,366,167 shares and warrants to acquire an additional 316,667 WRR common shares). This number of the WRR shares is adjusted
to reflect the 6-for-1 share consolidation, which WRR effected on July 25, 2022.
During
the nine-month period ended September 30, 2022, the Company exercised its WRR Warrants, which were expiring on July 18, 2022, and acquired
an additional 316,667 common shares in the capital of WRR without further consideration.
At
September 30, 2022, the fair market value of the equity investment was calculated to be $78,403 (2021 - $318,418) based on the market
price of WRR Shares at September 30, 2022 and December 31, 2021, respectively.
During
the three-month periods ended September 30, 2022 and 2021, the Company did not sell any WRR Shares. The revaluation of the equity investment
in WRR resulted in $40,737 loss for the three-month period ended September 30, 2022 (2021 - $94,775). The loss resulted from the decrease
of the market price of WRR Shares from CAD$0.30 per share at June 30, 2022, to CAD$0.21 per share at September 30, 2022. In comparison,
during the three-month period ended September 30, 2021, the market price of WRR Shares decreased from CAD$0.42 per share at June 30,
2021, to CAD$0.36 per share at September 30, 2021.
During
the nine-month period ended September 30, 2022, the Company sold 1,171,083 WRR Shares (2021 – 3,500 WRR Shares) for net proceeds
of $614,658 (2021 - $2,152). The Company recorded a net realized gain of $211,530 on the sale of WRR Shares (2021 - $315).
The
revaluation of the equity investment in WRR Shares resulted in a $163,113 gain for the nine-month period ended September 30, 2022. The
gain resulted from a decrease of the market price of WRR Shares from CAD$0.24 per share at December 31, 2021, to CAD$0.21 per share
at September 30, 2022, which was offset by fluctuation in foreign exchange rate between US$ and CAD$. In comparison, during the
nine-month period ended September 30, 2021, the market price of WRR Shares decreased from CAD$0.60 per share at December 31, 2020, to
CAD$0.36 per share at September 30, 2021, resulting in a loss of $317,364.
NOTE
8 – NOTES AND ADVANCES PAYABLE
At
September 30, 2022, the Company’s liability under notes and advances payable consisted of $1,100 the Company received from WRR
as a payment of its vendor payable (2021 - $1,100). The advance is non-interest-bearing, unsecured and due on demand.
NOTE
9 – CONVERTIBLE NOTES PAYABLE
During
the year ended December 31, 2021, the Company received $980,000 in cash proceeds under the convertible promissory notes financing, in
addition, the Company’s existing debt holder agreed to convert $15,064 the Company owed on account of unsecured, non-interest-bearing
note payable due on demand into a convertible promissory note for a total of $20,000.
The
convertible promissory notes (the “Notes”) are due in twelve months after their issuances (the “Maturity Date”)
and accrue interest at a rate of 15% per annum. At the option of the Note Holder, the Company may either (i) pay the interest quarterly
in arrears, or (ii) allow the interest to accrue until the Maturity Date. In addition, at the Company’s sole discretion, the Company
may either (i) repay the principal amount of the Notes on the Maturity Date, or (ii) commencing one month from the issue date repay 1/12
of the outstanding principal amount of the Notes in any given month until the Maturity Date. At the option of the Note Holder the Notes
can be converted into the Shares of the Company at a conversion price equal to the lesser of (i) $0.375 per Share, or (ii) a 25% discount
to the price per Share in a qualified public offering that occurs subsequent to the issuance of the Notes and results in gross offering
proceeds to the Company of at least $5,000,000.
The
Company determined the embedded beneficial conversion feature present in the Notes to be $663,867, which was recorded as additional paid-in
capital. The discount that resulted from the intrinsic value of the Notes is being accreted over a 12-month period based on the implied
interest rate calculated on each Note separately.
The
tables below provide the details of the Notes as at September 30, 2022, and as at December 31, 2021:
SCHEDULE OF CONVERTIBLE NOTE PAYABLE
As
at September 30, 2022
Principal | | |
Fair Value on Commitment Date | | |
Number of Shares to be issued based on $0.375/Share | | |
Intrinsic Value of Beneficial Conversion Feature | | |
Discount recorded as part of Additional Paid-in Capital | | |
Implied Interest | | |
Present Value of the Notes | |
$ | 100,000 | | |
$ | 0.79/Share | | |
| 266,667 | | |
$ | 110,667 | | |
$ | 100,000 | | |
| 2,081 | % | |
$ | 116,151 | (1) |
| 50,000 | | |
$ | 0.77/Share | | |
| 133,333 | | |
| 52,667 | | |
| 50,000 | | |
| 1,903 | % | |
| 57,972 | (1) |
| 50,000 | | |
$ | 0.60/Share | | |
| 133,333 | | |
| 29,600 | | |
| 29,600 | | |
| 108 | % | |
| 56,827 | |
| 600,000 | | |
$ | 0.60/Share | | |
| 1,600,000 | | |
| 363,200 | | |
| 363,200 | | |
| 112 | % | |
| 610,432 | (2) |
| 25,000 | | |
$ | 0.60/Share | | |
| 66,667 | | |
| 15,133 | | |
| 15,133 | | |
| 112 | % | |
| 28,147 | |
| 20,000 | | |
$ | 0.60/Share | | |
| 53,333 | | |
| 12,107 | | |
| 12,107 | | |
| 112 | % | |
| 22,450 | |
| 50,000 | | |
$ | 0.60/Share | | |
| 133,333 | | |
| 30,267 | | |
| 30,267 | | |
| 112 | % | |
| 56,126 | |
| 25,000 | | |
$ | 0.60/Share | | |
| 66,667 | | |
| 15,133 | | |
| 15,133 | | |
| 112 | % | |
| 27,651 | (3) |
| 20,000 | | |
$ | 0.60/Share | | |
| 53,333 | | |
| 12,107 | | |
| 12,107 | | |
| 112 | % | |
| 22,450 | |
| 10,000 | | |
$ | 0.60/Share | | |
| 26,667 | | |
| 6,053 | | |
| 6,053 | | |
| 112 | % | |
| 11,093 | |
| 50,000 | | |
$ | 0.60/Share | | |
| 133,333 | | |
| 30,267 | | |
| 30,267 | | |
| 112 | % | |
| 55,301 | |
$ | 1,000,000 | | |
| | | |
| 2,666,667 | | |
$ | 677,200 | | |
$ | 663,867 | | |
| | | |
$ | 1,064,600 | |
(1) |
These
Notes have been fully accreted as at September 30, 2022, and interest expense of $1,623 has been recognized as at September 30, 2022. |
(2) |
The
$600,000-note-holder
requested a cash payment of interest accrued up to June 30, 2022, totaling $65,096. |
As
at December 31, 2021
Principal | | |
Fair Value on Commitment Date | | |
Number of Shares to be issued based on $0.375/Share | | |
Intrinsic Value of Beneficial Conversion Feature | | |
Discount recorded as part of Additional Paid-in Capital | | |
Implied Interest | | |
Present Value of the Notes | |
$ | 100,000 | | |
$ | 0.79/Share | | |
| 266,667 | | |
$ | 110,667 | | |
$ | 100,000 | | |
| 2,081 | % | |
$ | 33 | |
| 50,000 | | |
$ | 0.77/Share | | |
| 133,333 | | |
| 52,667 | | |
| 50,000 | | |
| 1,903 | % | |
| 21 | |
| 50,000 | | |
$ | 0.60/Share | | |
| 133,333 | | |
| 29,600 | | |
| 29,600 | | |
| 108 | % | |
| 26,193 | |
| 600,000 | | |
$ | 0.60/Share | | |
| 1,600,000 | | |
| 363,200 | | |
| 363,200 | | |
| 112 | % | |
| 303,861 | |
| 25,000 | | |
$ | 0.60/Share | | |
| 66,667 | | |
| 15,133 | | |
| 15,133 | | |
| 112 | % | |
| 12,661 | |
| 20,000 | | |
$ | 0.60/Share | | |
| 53,333 | | |
| 12,107 | | |
| 12,107 | | |
| 112 | % | |
| 10,100 | |
| 50,000 | | |
$ | 0.60/Share | | |
| 133,333 | | |
| 30,267 | | |
| 30,267 | | |
| 112 | % | |
| 25,249 | |
| 25,000 | | |
$ | 0.60/Share | | |
| 66,667 | | |
| 15,133 | | |
| 15,133 | | |
| 112 | % | |
| 12,443 | |
| 20,000 | | |
$ | 0.60/Share | | |
| 53,333 | | |
| 12,107 | | |
| 12,107 | | |
| 112 | % | |
| 10,100 | |
| 10,000 | | |
$ | 0.60/Share | | |
| 26,667 | | |
| 6,053 | | |
| 6,053 | | |
| 112 | % | |
| 4,992 | |
| 50,000 | | |
$ | 0.60/Share | | |
| 133,333 | | |
| 30,267 | | |
| 30,267 | | |
| 112 | % | |
| 24,885 | |
$ | 1,000,000 | | |
| | | |
| 2,666,667 | | |
$ | 677,200 | | |
$ | 663,867 | | |
| | | |
$ | 430,538 | |
During
the three-month period ended September 30, 2022, the Company recorded $396,143 in accretion expense associated with the discount on the
Notes (September 30, 2021 - $3). In addition, the Company accrued an additional $1,623 in interest expense on the notes that had reached
their maturity (September 30, 2021 - $Nil).
During
the nine-month period ended September 30, 2022, the Company recorded $697,535 in accretion expense associated with the discount on the
Notes (September 30, 2021 - $3). In addition, the Company accrued an additional $1,623 in interest expense on the notes that had reached
their maturity (September 30, 2021 - $Nil).
Subsequent
to September 30, 2022, the Company paid an additional $22,438 in interest due on a $600,000 Note, and repaid a $25,000 Note including
$3,750 in interest accrued thereon in full.
NOTE
10 – STOCKHOLDERS’ EQUITY
The
Company was formed with one class of common stock, $0.0001 par value and is authorized to issue 100,000,000 common shares and one class
of preferred stock, $0.0001 par value and is authorized to issue 10,000,000 preferred shares. Voting rights are not cumulative and, therefore,
the holders of more than 50% of the common stock could, if they chose to do so, elect all of the directors of the Company.
Equity
transactions during the nine-month period ended September 30, 2022:
During
the nine-month period ended September 30, 2022, the Company did not have any transactions that would have resulted in issuance of the
shares of its common stock.
Equity
transactions during the year ended December 31, 2021:
On
December 30, 2021, the Company’s former director tendered for cancellation 845,000 shares of common stock and a major shareholder
tendered 930,000 shares of common stock. As a result, a total of 1,775,000 shares of common stock were cancelled and returned to the
Company’s treasury to a status of authorized but unissued.
On
December 30, 2021, the Company issued a total of 6,005,000 shares of common stock to the Company’s directors. These shares were
issued at par value for a total cash consideration of $601 (Note 4).
Item
2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations
Forward
Looking Statements
This
Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
in Item 2 of Part I of this report include forward-looking statements within the meaning of Section 27A of the Securities Exchange Act
of 1934, as amended, and the Private Securities Litigation Reform Act of 1995 (collectively, the “Reform Act”). The Reform
Act provides a safe harbor for forward-looking statements to encourage companies to provide prospective information about themselves
so long as they identify these statements as forward-looking and provide meaningful cautionary statements identifying important factors
that could cause actual results to differ from the projected results. All statements, other than statements of historical fact that we
make in this Quarterly Report on Form 10-Q are forward-looking. The words “anticipates,” “believes,” “expects,”
“intends,” “will continue,” “estimates,” “plans,” “projects,” the negative
of these terms and similar expressions are intended to identify forward-looking statements. However, the absence of these words does
not mean the statement is not forward-looking.
Forward-looking
statements involve risks, uncertainties or other factors which may cause actual results to differ materially from the future results,
performance or achievements expressed or implied by the forward-looking statements. These statements are based on our management’s
beliefs and assumptions, which in turn are based on currently available information. Certain risks, uncertainties or other important
factors are detailed in this Quarterly Report on Form 10-Q and may be detailed from time to time in other reports we file with the Securities
and Exchange Commission, including on Forms 8-K and 10-K.
Examples
of forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, our expectations regarding our ability
to generate operating cash flows and to fund our working capital and capital expenditure requirements. Important assumptions relating
to the forward-looking statements include, among others, assumptions regarding demand for our future products, the timing and cost of
capital expenditures, competitive conditions and general economic conditions. These assumptions could prove inaccurate. Although we believe
that the estimates and projections reflected in the forward-looking statements are reasonable, our expectations may prove to be incorrect.
Important factors that could cause actual results to differ materially from the results and events anticipated or implied by such forward-looking
statements include:
|
● |
management’s
plans, objectives and budgets for its future operations and future economic performance; |
|
● |
capital
budget and future capital requirements; |
|
● |
meeting
future capital needs; |
|
● |
our
dependence on management and the need to recruit additional personnel; |
|
● |
limited
trading for our common stock; |
|
● |
the
level of future expenditures; |
|
● |
impact
of recent accounting pronouncements; |
|
● |
the
outcome of regulatory and litigation matters; and |
|
● |
the
assumptions described in this report underlying such forward-looking statements. |
Actual
results and developments may materially differ from those expressed in, or implied by, such statements due to a number of factors, including:
|
● |
those
described in the context of such forward-looking statements; |
|
● |
future
product development and marketing costs; |
|
● |
the
markets of our domestic operations; |
|
● |
the
impact of competitive products and pricing; |
|
● |
the
political, social and economic climate in which we conduct operations; and |
|
● |
the
risk factors described in other documents and reports filed with the Securities and Exchange Commission, including our Registration
Statement on Form S-1/A (SEC File No. 333-196075). |
We
operate in an extremely competitive environment. New risks emerge from time to time. It is not possible for us to predict all of those
risks, nor can we assess the impact of all of those risks on our business or the extent to which any factor may cause actual results
to differ materially from those contained in any forward-looking statement. We believe these forward-looking statements are reasonable.
However, you should not place undue reliance on any forward-looking statements, which are based on current expectations. Further, forward-looking
statements speak only as of the date they are made, and unless required by law, we expressly disclaim any obligation or undertaking to
update publicly any of them in light of new information or future events.
The
following is management’s discussion and analysis of financial condition and results of operations and is provided as a supplement
to the accompanying unaudited condensed consolidated financial statements and notes to help provide an understanding of our financial
condition, results of operations and cash flows during the periods included in the accompanying unaudited condensed consolidated financial
statements.
In
this Quarterly Report on Form 10-Q, “Company,” “the Company,” “us,” and “our” refer to
Nevada Canyon Gold Corp. and its wholly-owned subsidiaries, Nevada Canyon LLC and Canyon Carbon LLC, incorporated in Nevada, unless the
context requires otherwise.
We
intend the following discussion to assist in the understanding of our financial position and our results of operations for the
three- and nine-month periods ended September 30, 2022 and 2021. You should refer to the Condensed Consolidated Financial Statements
and related Notes in conjunction with this discussion.
General
We
were incorporated under the laws of the state of Nevada on February 27, 2014, as Tech Foundry Ventures. On July 8, 2016, we changed our
name to Nevada Canyon Gold Corp., in order to reflect our current business and strategy. On December 15, 2021, we incorporated two subsidiaries,
Nevada Canyon LLC and Canyon Carbon LLC. Both subsidiaries were incorporated under the laws of the state of Nevada.
We
are a US-based natural resource company headquartered in Reno, Nevada. The Company has a large, strategic land position and royalties
in multiple projects within some of Nevada’s highest-grade historical mining districts. As of the date of the filing of this Quarterly
report on Form 10-Q our mineral property interests are comprised of the Lazy Claims Property, the Loman Property, and the Agai-Pah Property
located in Mineral County, Nevada, the Swales Property located in Elko County, Nevada, and the Belshazzar Property located in Quartzburg
mining district, Boise County, Idaho. In addition, we acquired an option to acquire 100% interest of Target Minerals, Inc’s (“Target”)
1% production royalty on the Olinghouse Project, located in the Washoe County, Nevada, and acquired 2% net smelter returns royalty (“NSR”)
on the Palmetto Project, located in Esmeralda County, Nevada.
Critical
Accounting Policies and Estimates
Our
consolidated financial statements and related public financial information are based on the application of accounting principles generally
accepted in the United States of America (“GAAP”) and are presented in US dollars. GAAP requires the use of estimates; assumptions,
judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense
amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information
regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to
GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions
or conditions. We continue to monitor significant estimates made during the preparation of our consolidated financial statements.
The
following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed
consolidated financial statements for the three- and nine-month periods ended September 30, 2022 and 2021, together with notes thereto,
which are included in this Quarterly Report on Form 10-Q, as well as our most recent audited consolidated financial statements on Form
10-K for the year ended December 31, 2021.
Results
of Operations
Three-
and nine-month periods ended September 30, 2022, compared to the three- and nine-month periods ended September 30, 2021:
| |
Three months ended September 30, | | |
Changes between the | | |
Nine months ended September 30, | | |
Changes between the | |
| |
2022 | | |
2021 | | |
periods | | |
2022 | | |
2021 | | |
periods | |
Operating expenses | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Exploration expense | |
$ | 20,758 | | |
$ | 2,543 | | |
$ | 18,215 | | |
$ | 20,758 | | |
$ | 2,543 | | |
$ | 18,215 | |
General and administrative expenses | |
| 8,737 | | |
| 2,828 | | |
| 5,909 | | |
| 41,204 | | |
| 30,983 | | |
| 10,221 | |
Professional fees | |
| 13,258 | | |
| 2,500 | | |
| 10,758 | | |
| 69,590 | | |
| 8,500 | | |
| 61,090 | |
Stock-based compensation | |
| 316,862 | | |
| - | | |
| 316,862 | | |
| 675,053 | | |
| - | | |
| 675,053 | |
Transfer agent and filing fees | |
| 1,935 | | |
| 1,924 | | |
| 11 | | |
| 11,735 | | |
| 7,039 | | |
| 4,696 | |
Total operating expenses | |
| (361,550 | ) | |
| (9,795 | ) | |
| 351,755 | | |
| (818,340 | ) | |
| (49,065 | ) | |
| 769,275 | |
Other items | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Accrued interest | |
| (1,623 | ) | |
| - | | |
| 1,623 | | |
| (1,623 | ) | |
| - | | |
| 1,623 | |
Accretion expense | |
| (396,143 | ) | |
| (3 | ) | |
| 396,140 | | |
| (697,535 | ) | |
| (3 | ) | |
| 697,532 | |
Fair value gain/(loss) on equity investments | |
| (40,737 | ) | |
| (94,775 | ) | |
| (54,038 | ) | |
| 163,113 | | |
| (317,364 | ) | |
| 480,477 | |
Foreign exchange gain/(loss) | |
| (15 | ) | |
| (13,725 | ) | |
| (13,710 | ) | |
| (982 | ) | |
| 4,683 | | |
| (5,665 | ) |
Interest income | |
| 4,397 | | |
| 63 | | |
| 4,334 | | |
| 5,285 | | |
| 694 | | |
| 4,591 | |
Realized gain on equity investment | |
| - | | |
| - | | |
| - | | |
| 211,530 | | |
| 315 | | |
| 211,215 | |
Net and comprehensive loss | |
$ | (795,671 | ) | |
$ | (118,235 | ) | |
$ | 677,436 | | |
$ | (1,138,552 | ) | |
$ | (360,740 | ) | |
$ | 777,812 | |
Revenues
We
had no revenues for the three- and nine-month periods ended September 30, 2022 and 2021. Due to the exploration rather than the production
nature of our business, we do not expect to have significant operating revenue in the foreseeable future.
Operating
Expenses
Our
operating expenses for the three-month periods ended September 30, 2022 and 2021 included exploration costs, general and administrative
expenses, professional fees, stock-based compensation, and transfer agent and filing fees. During the three-month period ended September
30, 2022, our operating expenses increased by $351,755, or 3,591%, to $361,550 as compared to $9,795 for the three months ended September
30, 2021. This change was associated with $316,862 in stock-based compensation we recorded on the par-value shares that we sold to our
three directors on December 30, 2021. On March 18, 2022, the Company’s directors entered into 3-year lock-up agreements (the “Lock-up
Agreements”), whereby the 6,005,000 shares issued to them vest on an annual basis over a three-year term based on their performance.
The stock-based compensation associated with the vested shares is calculated at $0.4938 per share, the fair market value of our common
stock on the date of the Lock-up Agreements, being March 18, 2022. Our mineral exploration fees increased by $18,215, and were associated
with the annual mining claim fees we paid to the Bureau of Land Management (“BLM”). Our professional fees increased by $10,758,
from $2,500 we incurred during the three-month period ended September 30, 2021, to $13,258 we incurred during the three-month period
ended September 30, 2022, this increase was associated mainly with $7,752 we incurred on account of Rangeland Carbon Credit Royalties
Streaming Opportunity Analysis which was commissioned by Carbon Canyon, and which, as of September 30, 2022, was 85% completed. Our general
and administrative expenses increased by $5,909, from $2,828 we incurred during the three-month period ended September 30, 2021, to $8,737
we incurred during the three-month period ended September 30, 2022. Our transfer agent and filing fees remained consistent and increased
by $11, from $1,924 we incurred during the three-month period ended September 30, 2021, to $1,935 we incurred during the three-month
period ended September 30, 2022.
On
a year-to-date basis, our operating expenses increased by $769,275, or 1,568%, to $818,340 for the nine months ended September 30, 2022,
compared to $49,065 we incurred for the nine months ended September 30, 2021. This change was associated with $675,053 in stock-based
compensation we recorded on the par-value shares that we sold to our three directors on December 30, 2021, and was further increased
by $61,090 change in our professional fees from $8,500 we incurred during the nine-month period ended September 30, 2021, to $69,590
we incurred during the nine months ended September 30, 2022. The increase in professional fees was mainly associated with $43,966 we
incurred on account of Rangeland Carbon Credit Royalties Streaming Opportunity Analysis which was commissioned by Carbon Canyon, and
which, as of September 30, 2022, was 85% completed. Our general and administrative expenses increased from $30,983 we incurred during
the nine-month period ended September 30, 2021, to $41,204 we incurred during the nine-month period ended September 30, 2022; our transfer
agent and filing fees increased by $4,696 from $7,039 we incurred during the nine-month period ended September 30, 2021, to $11,735 we
incurred during the nine-month period ended September 30, 2022. In addition, we incurred $20,758 in mineral exploration fees, an increase
of $18,215, as compared to $2,543 we incurred in the comparative period ended September 30, 2021. These fees were associated with the
annual mining claim fees we paid to the BLM.
Other
Items
During
the three-month period ended September 30, 2022, we recognized $40,737 loss on fair value of equity investments (2021 – $94,775).
The loss resulted from revaluation of WRR Shares from CAD$0.30 per share at June 31, 2022 (adjusted for six-for-one share consolidation
effected by WRR on July 25, 2022), to CAD$0.21 per WRR Share on September 30, 2022, and to a smaller degree from fluctuation of exchange
rates between the US and Canadian dollars. We earned $4,397 in interest revenue (2021 - $63). Since part of funds generated from the
sale of equity investments are held in Canadian dollars, we incurred $15 loss associated with foreign exchange fluctuation rates (2021
- $13,725). In addition, we recorded $396,143 accretion expense associated with the beneficial conversion discount we recognized on convertible
notes payable we issued in September and October of 2021 (2021 - $3) and $1,623 in accrued interest on the convertible notes payable
that have reached their maturity (2021 - $Nil).
During
the nine-month period ended September 30, 2022, we recognized $163,113 gain on fair value of equity investments (2021 – $317,364
loss). The gain resulted from revaluation of WRR Shares from CAD$0.24 per share at December 31, 2021, to CAD$0.21 per WRR Share on September
30, 2022, and to a smaller degree from fluctuation of exchange rates between the US and Canadian dollars. We earned $5,285 in interest
revenue (2021 - $694). Since part of funds generated from the sale of equity investments are held in Canadian dollars, we incurred $982
loss associated with foreign exchange fluctuation rates (2021 - $4,683 gain). During the nine-month period ended September 30, 2022,
we recorded $211,530 gain (2021 - $315) on equity investments which was associated with the sale of 1,171,000 WRR Shares for net proceeds
of $614,658 (2021 – 3,500 WRR Shares for net proceeds of $2,152). In addition, we recorded $697,535 accretion expense associated
with the beneficial conversion discount we recognized on convertible notes payable we issued in September and October of 2021 (2021 -
$3) and $1,623 in accrued interest on the convertible notes payable that have reached their maturity (2021 - $Nil).
Net
Loss
During
the three months ended September 30, 2022, we incurred net loss of $795,671, as compared to net loss of $118,235 we incurred during the
three-month period ended September 30, 2021. This change mainly resulted from $316,862 in stock-based compensation we recorded during
the three-month period ended September 30, 2022 (2021 - $Nil), $396,143 accretion expense associated with the beneficial conversion discount
we recognized on convertible notes payable we issued in September and October of 2021 (2021 - $3), and $40,737 loss on revaluation of
our equity investments in WRR Shares, as opposed to $94,775 loss we recognized in the comparative period.
On
a year-to-date basis, our loss increased by $777,812 from $360,740 we incurred during the nine-month period ended September 30, 2021,
to $1,138,552 we incurred during the nine-month period ended September 30, 2022. This change mainly resulted from $675,053 in stock-based
compensation we recorded during the nine-month period ended September 30, 2022 (2021 - $Nil), and $697,535 accretion expense associated
with the beneficial conversion discount we recognized on convertible notes payable we issued in September and October of 2021 (2021 -
$3), which were in part offset by $163,113 gain on revaluation of our equity investments in WRR Shares, as opposed to $317,364 loss we
recognized in the comparative period, and $211,530 gain we recognized on the sale of WRR Shares during the same period (2021 - $315).
Liquidity
and Capital Resources
| |
September 30, 2022 | | |
December 31, 2021 | |
| |
| | |
| |
Current assets | |
$ | 1,390,526 | | |
$ | 1,442,670 | |
Current liabilities | |
| 2,352,879 | | |
| 1,791,539 | |
Working capital deficit | |
$ | (962,353 | ) | |
$ | (348,869 | ) |
As
of September 30, 2022, we had a cash balance of $1,298,154 and working capital deficit of $962,353 with cash flows used in operations
totaling $326,786 for the period then ended. During the nine months ended September 30, 2022, our operations were funded with cash on
hand. The cash that we had on hand at September 30, 2022, was generated by selling WRR Shares and from the issuance of convertible notes
payable due in 12 months, which we issued in September and October 2021. Our operating activities did not generate sufficient cash flows
to satisfy our cash requirements for the nine-month period ended September 30, 2022. Due to the exploration rather than the production
nature of our business, there is no assurance that we will be able to generate sufficient cash from our operations. If we are unable
to generate sufficient cash flow from our operations to repay the amounts owing when due, we may be required to continue selling our
equity investments in WRR or raise additional financing by borrowing funds or issuing our equity. There can be no assurance that we will
be successful in our efforts to raise additional capital.
Cash
Flow
| |
Nine Months Ended September 30, | |
| |
2022 | | |
2021 | |
Cash flows used in operating activities | |
$ | (326,786 | ) | |
$ | (57,767 | ) |
Cash flows generated by investing activities | |
| 204,658 | | |
| 2,152 | |
Cash flows provided by financing activities | |
| 400 | | |
| 150,000 | |
Effects of foreign currency translation on cash | |
| (982 | ) | |
| 4,683 | |
Net increase/(decrease) in cash during the period | |
$ | (122,710 | ) | |
$ | 99,068 | |
Net
cash used in operating activities
Our
net cash used in operating activities increased by $269,019, or 466%, to $326,786 for the nine months ended September 30, 2022, compared
with $57,767 for the comparative period in 2021. During the nine months ended September 30, 2022, we used $203,098 to cover our cash
operating costs, $26,122 to decrease our accounts payable and accrued liabilities, $27,000 to decrease amounts due to our related parties,
and $70,566 to increase our prepaid expenses, of which $39,250 were associated with prepaid share issuance costs related to our offering
of up to 12,500,000 units (the “Units”) of our securities pursuant to Regulation A. Each Unit will be comprised of one common
share (a “common share”), and one common share purchase warrant (a “warrant”) to purchase one additional common
share (a “warrant share”) at an exercise price of $1.20 per warrant share, subject to certain adjustments, over a 24-month
exercise period following the date of issuance of the warrants.
Our
net cash used in operating activities increased by $16,925, or 41%, to $57,767 for the nine months ended September 30, 2021, compared
with $40,842 for the comparative period in 2020. During the nine months ended September 30, 2021, we used $48,371 to cover our cash operating
costs, $7,000 to decrease our accounts payable and accrued liabilities, and $2,396 to increase our prepaid expenses.
Adjustments
to reconcile net loss to net cash used in operating activities
During
the nine months ended September 30, 2022, we recognized $163,113 gain on revaluation of fair value of equity investments associated with
WRR Shares and recorded $211,530 gain on sale of 1,171,083 WRR Shares for net proceeds of $614,658 (CAD$769,400). In addition, we recognized
$982 loss on foreign exchange fluctuations associated with cash we held in high-interest savings account at a major Canadian bank, recorded
$697,535 in accretion expense associated with the discount on the convertible notes payable we issued in September and October 2021,
and accrued $1,623 in interest expense on the convertible notes that had reached their maturity. In addition, we recorded $675,053 in
stock-based compensation associated with the par-value shares we issued to our directors on December 30, 2021. We also used $65,096 cash
to pay interest accrued on a convertible note payable.
During
the nine months ended September 30, 2021, we recognized $317,364 loss on revaluation of fair value of equity investments associated with
WRR Shares and WRR Warrants and recorded $315 gain on sale of 3,500 WRR Shares for net proceeds of $2,152 (CAD$2,659). In addition, we
recognized $4,683 gain on foreign exchange fluctuations associated with cash we held in high-interest savings account at a major Canadian
bank, and recorded $3 in accretion expense associated with the discount on the convertible notes payable we issued in September 2021.
Net
cash generated by investing activities
During
the nine-month period ended September 30, 2022, we generated $614,658 on the sale of 1,171,083 WRR Shares. During the same period, we
used $410,000 to acquire our mineral property interests.
During
the nine-month period ended September 30, 2021, we generated $2,152 from the sale of 3,500 WRR Shares
Net
cash provided by financing activities
During
the nine-month period ended September 30, 2022, we received $400 from the sale of 4,000,000 par-value shares to two of our directors,
which shares were considered sold on December 30, 2021, however, we received cash payment from the directors subsequent to December 31,
2021.
During
the nine-month period ended September 30, 2021, we received $150,000 on issuance of convertible notes payable due 12 months from the
issuance date (the “Notes”). The Notes accrue interest at a rate of 15% per annum and are unsecured. At the option of the
Note Holder, the Company may either (i) pay the interest quarterly in arrears, or (ii) allow the interest to accrue until the Maturity
Date. In addition, at the Company’s sole discretion, the Company may either (i) repay the principal amount of the Notes on the
Maturity Date, or (ii) commencing one month from the issue date repay 1/12 of the outstanding principal amount of the Notes in any given
month until the Maturity Date. At the option of the Note Holder the Notes can be converted into the Shares of the Company at a conversion
price equal to the lesser of (i) $0.375 per Share, or (ii) a 25% discount to the price per Share in a qualified public offering that
occurs subsequent to the sale of the Notes and results in gross offering proceeds to the Company of at least $5,000,000.
Going
Concern
At
September 30, 2022, we had a working capital deficit of $962,353 and cash on hand of $1,298,154, which is sufficient enough to support
our current plan of operations for the next 12-month period. Our equity investments include 511,750 WRR Shares (3,070,500 pre-roll back
WRR Shares). We have been using WRR Shares and are planning to continue to use them as a source of additional cash inflow. To support
our operations beyond the 12-month period we may require additional funds; therefore, we continue to actively pursue other means of financing
our operations through equity and/or debt financing. There can be no assurance that we will be able to procure funds sufficient to support
our day-to-day operations and exploration programs. If operating difficulties or other factors (many of which are beyond our control)
delay our realization of revenues or cash flows from operations, we may be limited in our ability to pursue our business plan. Moreover,
if our resources from obtaining additional capital or cash flows from operations, once we commence them, do not satisfy our operational
needs or if unexpected expenses arise due to unanticipated pressures or if we decide to expand our business plan beyond its currently
anticipated level or otherwise, we will require additional financing to fund our operations, in addition to anticipated cash generated
from our operations. Additional financing might not be available on terms favorable to us, or at all. If adequate funds were not available
or were not available on acceptable terms, our ability to fund our operations, take advantage of unanticipated opportunities, develop
or enhance our business or otherwise respond to competitive pressures would be significantly limited. In a worst-case scenario, we might
not be able to fund our operations or to remain in business, which could result in a total loss of our stockholders’ investment.
If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders
would be reduced, and these newly issued securities might have rights, preferences or privileges senior to those of existing stockholders.
Impact
of Inflation
We
believe that inflation has had a negligible effect on operations over the past fiscal quarter.
Capital
Expenditures
During
the nine months ended September 30, 2022, we used $20,000 to make an initial cash payment to acquire Swales Property, $20,000 to make
the first anniversary payment on Agai-Pah Property, and further $20,000 to make the first anniversary payment on Belshazzar Property.
In addition, we made a $350,000 one-time cash payment to acquire 2% NSR on Palmetto Project.
The
Company expended no amounts on capital expenditures for the nine months ended September 30, 2021.
Unproved
Mineral Properties
As
of the date of this Quarterly report on Form 10-Q, our mineral property interests are comprised of the Lazy Claims Property, the Loman
Property, and the Agai-Pah Property located in Mineral County, Nevada, the Swales Property located in Elko County, Nevada, and the Belshazzar
Property located in Quartzburg mining district, Boise County, Idaho. In addition, we acquired a 2% NSR on the Palmetto Project, located
in Esmeralda County, Nevada, and have an option to acquire 100% interest of Target Minerals, Inc’s (“Target”) 1% production
royalty on the Olinghouse Project, located in the Olinghouse Mining District, Washoe County, Nevada.
Lazy
Claims Property
We
acquired the Lazy Claims Property through an exploration lease agreement with Tarsis Resources US Inc. (“Tarsis”), a Nevada
corporation, dated for reference August 2, 2017 (the “Lazy Claims Agreement”). The Lazy Claims Agreement grants us a right
to conduct exploratory work for minerals on three Lazy Claims totaling 60 acres located in Mineral County, Nevada about 18 miles southeast
of the town of Hawthorne (the “Lazy Claims”).
The
term of the Lazy Claims Agreement is ten years and is subject to extension for an additional two consecutive 10-year terms. Full consideration
for the Lazy Claims Agreement consists of the following: an initial cash payment of $1,000 to Tarsis, which we paid upon the execution
of the Lazy Claims Agreement, with $2,000 payable to Tarsis on each subsequent anniversary of the effective date. We agreed to pay Tarsis
a 2% production royalty (the “Lazy Claims Royalty”) based on the gross returns from the production and sale of minerals from
the Lazy Claims Property. Should the Lazy Claims Royalty payments to Tarsis be in excess of $2,000 per year, we will not be required
to pay a $2,000 annual minimum payment.
During
the three and nine months ended September 30, 2022 we paid $2,543 for our mineral property interests in Lazy Claims, of which $2,000
represented annual minimum payment required under the Lazy Claims Agreement and $543 was associated with the annual mining claim fees
payable to the Bureau of Land Management (the “BLM”). These fees were recorded as part of our exploration expenses.
Loman
Property
In
December 2019 we acquired 27 unpatented mining claims for a total of $10,395 from a third-party (the “Loman Property”). Due
to certain regulatory restrictions associated with COVID-19 pandemic, the Company was required to delay the re-registration of the Loman
Property claims into the Company’s name. The Loman claims were transferred and re-registered into the Company’s name in the
fourth quarter of the fiscal 2021.
During
the three and nine months ended September 30, 2022, we paid $4,791 in annual mining claim fees payable to the BLM. These fees were recorded
as part of our exploration expenses.
Agai-Pah
Property
On
May 19, 2021, we entered into exploration lease with option to purchase agreement (the “Agai-Pah Agreement”) with MSM Resource,
L.L.C., (“MSM”) a Nevada limited liability Corporation on the Agai-Pah Property, consisting of 20 unpatented mining claims
totaling 400 acres, located in Mineral County, Nevada about 10 miles northeast of the town of Hawthorne (the “Agai-Pah Property”).
Alan Day, the managing member of MSM, is also our director and a related party.
The
term of the Agai-Pah Agreement commenced on May 19, 2021, and continues for ten years, subject to our right to extend the Agai-Pah Agreement
for two additional terms of ten years each, and subject to the Company’s option to purchase the Agai-Pah Property.
Full
consideration of the Agai-Pah Agreement consists of the following: (i) an initial cash payment of $20,000 to be paid within 90 days from
the execution of the Agai-Pah Agreement on May 19, 2021 (the “Effective Date”), and (ii) annual payments of $20,000 to be
paid on the anniversary of the Effective Date while the Agai-Pah Agreement remains in effect. We retain the exclusive option and right
to acquire 100% ownership of the Agai-Pah Property (the “Agai-Pah Purchase Option”). To exercise the Agai-Pah Purchase Option,
we will be required to pay $750,000 (the “Agai-Pah Purchase Price”). The Agai-Pah Purchase Price can be paid in either cash
and/or equity, or a combination thereof, at the election of MSM. The annual payments paid by us, shall not be applied or credited against
the Purchase Price.
We
made the initial cash payment of $20,000 on November 6, 2021, pursuant to a verbal extension granted to the Company by MSM. On June 20,
2022, we made the first anniversary payment on the Agai-Pah Property, being $20,000.
During
the three and nine months ended September 30, 2022, we paid $3,552 in annual mining claim fees payable to the BLM. These fees were recorded
as part of our exploration expenses.
Belshazzar
Property
On
June 4, 2021, we entered into exploration lease with option to purchase agreement (the “Belshazzar Agreement”) with Belshazzar
Holdings, L.L.C., (“BH”) a Nevada limited liability Corporation on the Belshazzar Property, consisting of ten unpatented
lode mining claims and seven unpatented placer mineral claim totaling 200 acres, within Quartzburg mining district, in Boise County,
Idaho (the “Belshazzar Property”). Alan Day, the managing member of BH, is also our director and a related party.
The
term of the Belshazzar Agreement commences on June 4, 2021, and continues for ten years, subject to our right to extend the Belshazzar
Agreement for two additional terms of ten years each, and subject to our option to purchase the Belshazzar Property.
Full
consideration of the Belshazzar Agreement consists of the following: (i) an initial cash payment of $20,000 to be paid within 90 days
from the execution of the Belshazzar Agreement on June 4, 2021 (the “effective date”), and (ii) annual payments of $20,000
to be paid on the anniversary of the Effective Date while the Belshazzar Agreement remains in effect. We retain the exclusive option
and right to acquire 100% ownership of the Belshazzar Property (the “Belshazzar Purchase Option”). To exercise the Belshazzar
Purchase Option, we will be required to pay $800,000 (the “Belshazzar Purchase Price”). The Belshazzar Purchase Price can
be paid in either cash and/or equity, or a combination thereof, at the election of BH. The annual payments paid by us to BH, shall not
be applied or credited against the Belshazzar Purchase Price. The Belshazzar Property is subject to a 1% Gross Returns Royalty payable
to the property owner, from the commencement of commercial production subject to certain terms.
We
made the initial cash payment of $20,000 on November 6, 2021, pursuant to a verbal extension granted to the Company by BH. On June 20,
2022, we made the first anniversary payment on the Belshazzar Property, being $20,000.
During
the three and nine months ended September 30, 2022, we paid $2,660 in annual mining claim fees payable to the BLM. These fees were recorded
as part of our exploration expenses.
Swales
Property
On
December 27, 2021, we entered into an exploration lease with option to purchase agreement (the “Swales Property Agreement”)
with Mr. W. Wright Parks III., (“Mr. Parks”) on the Swales Property, consisting of 40 unpatented lode mining claims totaling
800 acres (the “Swales Property”).
The
term of the Agreement commenced on December 27, 2021, and continues for ten years, subject to the Company’s right to extend the
Swales Property Agreement for two additional terms of ten years each, and subject to the Company’s option to purchase the Swales
Property.
Full
consideration of the Swales Property Agreement consists of the following: (i) an initial cash payment of $20,000 to be paid within 90
days from the execution of the Belshazzar Agreement on December 27, 2021 (the “effective date”), and (ii) annual payments
of $20,000 to be paid on the anniversary of the Effective Date while the Swales Property Agreement remains in effect.
The
Company has the exclusive option and right to acquire 100% ownership of the Swales Property (the “Swales Purchase Option”).
To exercise the Swales Purchase Option, the Company will be required to pay $750,000 (the “Swales Purchase Price”). The Swales
Purchase Price can be paid in either cash and/or equity of the Company, or a combination thereof, at the election of Mr. Parks. The annual
payments paid by the Company to Mr. Parks, shall not be applied or credited against the Swales Purchase Price.
We
made the initial cash payment of $20,000 on January 15, 2022.
During
the three and nine months ended September 30, 2022, we paid $7,092 in annual mining claim fees payable to the BLM. These fees were recorded
as part of our exploration expenses.
Olinghouse
Project
On
December 17, 2021, our wholly-owned subsidiary, Nevada Canyon, LLC, entered into an Option to Purchase Agreement (the “Olinghouse
Agreement”) with Target Minerals, Inc (“Target”), to acquire 100% interest of Target’s 1% production royalty
on the Olinghouse Project.
The
Company has the exclusive right and option (the “Olinghouse Purchase Option”), exercisable at any time during the Olinghouse
Option Period, as further defined below, at its sole discretion, to acquire 100% of a 1% production royalty from the net smelter returns
on all minerals and products produced from certain properties comprising the Olinghouse Project.
The
term of the Olinghouse Purchase Option shall be the later of one year, or 60 days after the date on which the Company delivers to Target
a written notice to exercise the Olinghouse Purchase Option, subject to further extension if Target’s conditions to closing are
not fully satisfied or otherwise waived by the Company. Full consideration of the Olinghouse Agreement consists of the following: (i)
an initial cash option payment of $200,000 payable upon execution of the Agreement, which we paid on December 18, 2021, and (ii) purchase
price (the “Olinghouse Purchase Price”) which shall be paid by the Company to Target in either cash or common shares of the
Company, the determination of which shall be as follows:
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if
the Company’s 10-day volume weighted average price (“VWAP”) Calculation is less than $1.25 per share, the Olinghouse
Purchase Price shall be paid in cash; or |
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if
the Company’s 10-day VWAP Calculation is more than $1.25 per share, the Olinghouse Purchase Price shall be paid in the form
of 2,000,000 Shares of the Company’s common stock. |
During
the three- and nine-month periods ended September 30, 2022 and 2021, we did not incur any additional expenses associated with the Olinghouse
Project.
Palmetto
Project
On
January 27, 2022, our wholly-owned subsidiary, Nevada Canyon, LLC, entered into a Royalty Purchase Agreement (the “Royalty Agreement”)
with Smooth Rock Ventures, LLC, a wholly-owned subsidiary of Smooth Rock Ventures Corp. (“Smooth Rock”), to acquire a 2%
net smelter returns royalty (“NSR”) on the Palmetto Project (the “Palmetto Project”), located in Esmeralda County,
Nevada. Alan Day, our director, is also a director and CEO of Smooth Rock.
To
acquire the 2% NSR on the Palmetto Project, Nevada Canyon agreed to pay Smooth Rock a one-time cash payment of $350,000, which was paid
on February 7, 2022.
During
the three- and nine-month periods ended September 30, 2022 and 2021, we did not incur any additional expenses associated with the Palmetto
Project.
Off-Balance
Sheet Arrangements
None.
Use
of Estimates
Areas
where significant estimation judgments are made and where actual results could differ materially from these estimates are the carrying
value of certain assets and liabilities which are not readily apparent from other sources and the classification of net operating loss
and tax credit carry forwards.
We
evaluate impairment of our long-lived assets by applying the provisions of ASC No. 360. In applying those provisions, we have not recognized
any impairment charge on our long-lived assets during the three-month period ended September 30, 2022.
Item
3. Quantitative and Qualitative Disclosures about Market Risk
As
a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information
required by this item.
Item
4. Controls and Procedures
(a)
Evaluation of Disclosure Controls and Procedures
We
conducted an evaluation, under the supervision and with the participation of the Chief Executive Officer, who is also our Chief Financial
Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(f) under the Securities Exchange
Act of 1934 as amended (the “Exchange Act”)). Based on this evaluation, the Chief Executive Officer, who is also our Chief
Financial Officer, concluded that our disclosure controls and procedures as of the end of the fiscal quarter covered by this quarterly
report on Form 10-Q were not effective to ensure that information required to be disclosed by us in reports that we file or submit under
the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission
rules and forms.
(b)
Changes in Internal Controls over Financial Reporting
During
the quarter ended September 30, 2022, there has been no change in internal control over financial reporting that has materially affected,
or is reasonably likely to materially affect, our internal control over financial reporting.
Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
Inherent
Limitations of Internal Controls
Our
internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with the GAAP. Our internal control over financial reporting
includes those policies and procedures that:
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pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our
assets; |
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provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
the GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors;
and |
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provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that
could have a material effect on the financial statements. |
Management
does not expect that our internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed
and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design
of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative
to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance
that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in
future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions,
or that the degree of compliance with the policies or procedures may deteriorate.