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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

(Mark One)

 

x   Quarterly Report Pursuant to Section 13 Or 15(d) Of The Securities Exchange Act of 1934

For the quarterly period ended January 31, 2022

 

o   Transition Report Under Section 13 Or 15(d) Of The Securities Exchange Act of 1934

For the transition period ________ to ________

 

COMMISSION FILE NUMBER 000-52711

 

STAR GOLD CORP.

(Exact name of small business issuer as specified in its charter)

 

Nevada  27-0348508
(State or other jurisdiction of incorporation or organization)  (IRS Employer Identification No.)
    
1875 N. Lakewood Drive, Suite 200   
Coeur d’Alene, Idaho  83814
(Address of principal executive office)  (Postal Code)

 

(208) 664-5066
(Issuer’s telephone number)

 

Title of Each Class  Trading Symbol   Name of Each Exchange on Which Registered
Common Stock,  SRGZ   OTCQB

 

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

 

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post filed). Yes x No o

 

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “Accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

 

Large Accelerated Filer o Accelerated Filer o
Non-Accelerated Filer x Smaller Reporting Company x
Emerging Growth Company o  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

 

As of March 4, 2022, there were 97,290,810 shares of registrant’s common stock, $0.01 par value, issued and outstanding.

Page 1 of 25

 

Contents

 

PART I - FINANCIAL INFORMATION 3
   
ITEM 1. FINANCIAL STATEMENTS 3
     
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION 13
     
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 22
     
ITEM 4. CONTROLS AND PROCEDURES 22
     
PART II - OTHER INFORMATION 23
   
ITEM 1. LEGAL PROCEEDINGS 23
     
ITEM 1A. RISK FACTORS 23
     
ITEM 2. RECENT SALES OF UNREGISTERED SECURITIES 23
     
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 23
     
ITEM 4. MINE SAFETY DISCLOSURES 23
     
ITEM 5. OTHER INFORMATION 23
     
ITEM 6. EXHIBITS 24

Page 2 of 25

 

PART I - FINANCIAL INFORMATION

 

ITEM 1.FINANCIAL STATEMENTS

 

STAR GOLD CORP.
CONDENSED BALANCE SHEETS (UNAUDITED)

 

   January 31, 2022   April 30, 2021 
ASSETS          
CURRENT ASSETS          
Cash and cash equivalents  $32,402   $265,944 
Other current assets (NOTE 5)   149,738    33,331 
TOTAL CURRENT ASSETS   182,140    299,275 
MINING INTEREST (NOTE 4)   566,167    554,167 
RECLAMATION BOND   89,400    89,400 
           
TOTAL ASSETS  $837,707   $942,842 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
CURRENT LIABILITIES:          
Accounts payable and accrued liabilities  $29,153   $32,336 
TOTAL CURRENT LIABILITIES   29,153    32,336 
CONVERTIBLE NOTES PAYABLE – RELATED PARTIES (NOTE 6)   150,000    - 
           
TOTAL LIABILITIES   179,153    32,336 
           
COMMITMENTS AND CONTINGENCIES (NOTE 4)   -    - 
           
STOCKHOLDERS’ EQUITY          
Preferred stock, $.001 par value; 10,000,000 shares authorized, none issued and outstanding   -    - 
Common stock, $.001 par value; 300,000,000 shares authorized; 97,290,810 shares issued and outstanding   97,291    97,291 
Additional paid-in capital   12,702,879    12,615,008 
Accumulated deficit   (12,141,616)   (11,801,793)
           
TOTAL STOCKHOLDERS’ EQUITY   658,554    910,506 
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $837,707   $942,842 

 

The accompanying notes are an integral part of these condensed unaudited financial statements.

Page 3 of 25

 

STAR GOLD CORP.
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

 

   Three months ended   Nine months ended 
   January 31, 2022   January 31, 2021   January 31, 2022   January 31, 2021 
OPERATING EXPENSES                    
Mineral exploration expense  $-   $-   $25,146   $25,146 
Pre-development expense   11,768    95,168    38,679    231,076 
Legal and professional fees   14,916    48,179    63,596    109,767 
Management and administrative   40,834    21,868    210,411    65,283 
Depreciation   -    416    -    1,248 
TOTAL OPERATING EXPENSES   67,518    165,631    337,832    432,520 
LOSS FROM OPERATIONS   (67,518)   (165,631)   (337,832)   (432,520)
OTHER INCOME (EXPENSE)                    
Interest income   3    127    69    138 
Interest expense   (262)   (262)   (786)   (786)
Interest expense, related parties   (1,274)   -    (1,274)   (1,367)
TOTAL OTHER INCOME (EXPENSE)   (1,533)   (135)   (1,991)   (2,015)
NET LOSS BEFORE INCOME TAX   (69,051)   (165,766)   (339,823)   (434,535)
Provision (benefit) for income tax   -    -    -    - 
NET LOSS  $(69,051)  $(165,766)  $(339,823)  $(434,535)
Basic and diluted loss per share  $Nil   $Nil   $Nil   $Nil 
Basic and diluted weighted average number shares outstanding   97,290,810    97,290,810    97,290,810    88,706,972 

 

The accompanying notes are an integral part of these condensed unaudited financial statements.

Page 4 of 25

 

STAR GOLD CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
For the periods ended January 31, 2022 and 2021

 

   Common Stock             
   Shares   Amount   Additional
Paid in Capital		   Accumulated
Deficit		   Total
Stockholders’
Equity		 
BALANCE, April 30, 2020   77,394,841   $77,395   $11,576,571   $(11,157,593)  $496,373 
Common shares issued for exercise of warrants   816,000    816    35,904    -    36,720 
Net loss   -    -    -    (121,076)   (121,076)
BALANCE, July 31, 2020   78,210,841   $78,211   $11,612,475   $(11,278,669)  $412,017 
Common shares issued for exercise of warrants   18,679,969    18,680    821,918    -    840,598 
Common shares issued for accounts payable   400,000    400    19,600    -    20,000 
Net loss   -    -    -    (147,693)   (147,693)
BALANCE, October 31, 2020   97,290,810   $97,291   $12,453,993   $(11,426,362)  $1,124,922 
Net loss   -    -    -    (165,766)    (165,766)
BALANCE, January 31, 2021   97,290,810   $97,291   $12,453,993   $(11,592,128)  $959,156 
                          
BALANCE, April 30, 2021   97,290,810   $97,291   $12,615,008   $(11,801,793)  $910,506 
Net loss   -    -    -    (165,384)   (165,384)
BALANCE, July 31, 2021   97,290,810   $97,291   $12,615,008   $(11,967,177)  $745,122 
Warrants issued for other current assets   -    -    87,871    -    87,871 
Net loss   -    -    -    (105,388)   (105,388)
BALANCE, October 31, 2021   97,290,810   $97,291   $12,702,879   $(12,072,565)  $727,605 
Net loss   -    -    -    (69,051)   (69,051)
BALANCE, January 31, 2022   97,290,810   $97,291   $12,702,879   $(12,141,616)  $658,554 
                          

The accompanying notes are an integral part of these condensed unaudited financial statements.

Page 5 of 25

 

STAR GOLD CORP.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

   Nine months ended 
   January 31, 2022   January 31, 2021 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(339,823)  $(434,535)
Adjustments to reconcile net loss to net cash used by operating activities          
Depreciation   -    1,248 
Conversion of deferred compensation to officers and directors to convertible notes payable – related parties   150,000    - 
Changes in operating assets and liabilities:          
Other current assets   (28,536)   (14,295)
Accounts payable and accrued liabilities   (3,183)   41,463 
Deferred compensation to officers and directors   -    (89,000)
Net cash used by operating activities   (221,542)   (495,119)
CASH FLOWS FROM INVESTING ACTIVITIES:          
Payments for mining interest   (12,000)   (12,000)
 Net cash used by investing activities   (12,000)   (12,000)
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from note payable, related party   -    30,000 
Repayment of note payable, related party   -    (80,000)
Proceeds from exercise of warrants   -    877,318 
Net cash provided by financing activities   -    827,318 
 Net decrease in cash and cash equivalents   (233,542)   320,199 
           
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD   265,944    26,617 
           
CASH AND CASH EQUIVALENTS AT END OF PERIOD  $32,402   $346,816 
           
NON-CASH FINANCING AND INVESTING ACTIVITIES:          
Warrants issued for prepaid expense  $87,871   $- 

 

The accompanying notes are an integral part of these condensed unaudited financial statements.

Page 6 of 25

 

STAR GOLD CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

JANUARY 31, 2022

 

NOTE 1 – NATURE OF OPERATIONS

 

Star Gold Corp. (the “Company”) was initially incorporated as Elan Development, Inc., in the State of Nevada on December 8, 2006. The Company was originally organized to explore mineral properties in British Columbia, Canada but the Company is currently focusing on gold, silver and other base metal-bearing properties in Nevada.

 

The Company’s core business consists of assembling and/or acquiring land packages and mining claims the Company believes have potential mining reserves, and expending capital to explore these claims by drilling, and performing geophysical work or other exploration work deemed necessary. The business is a high-risk business as there is no guarantee that the Company’s exploration work will ultimately discover or produce any economically viable minerals.

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

This summary of significant accounting policies is presented to assist in understanding the financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. The accompanying unaudited financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America for interim financial information, as well as the instructions to Form 10-Q. Accordingly, the financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

 

In the opinion of the Company’s management, all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair statement of the interim financial statements have been included. The balance sheet at April 30, 2021 was derived from audited annual financial statements but does not contain all the footnote disclosures from the annual financial statements. All amounts presented are in U.S. dollars. Operating results for the three- and nine-month periods ended January 31, 2022 are not necessarily indicative of the results that may be expected for the full fiscal year ending April 30, 2022.

 

For further information, refer to the financial statements and footnotes thereto in the Company’s Annual Report on Form 10-K for the year ended April 30, 2021.

 

Going Concern

 

As shown in the accompanying financial statements, the Company has incurred operating losses since inception. As of January 31, 2022, the Company has limited financial resources with which to achieve the objectives and obtain profitability and positive cash flows, which raises substantial doubt about the Company’s ability to continue as a going concern. As shown in the accompanying balance sheets of January 31, 2022, the Company has an accumulated deficit of $12,141,616. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence. Achievement of the Company’s objectives will be dependent upon the ability to obtain additional financing, to locate profitable mining properties and generate revenue from current and planned business operations, and control costs. The Company plans to fund its future operations by joint venturing or obtaining additional financing from investors and/or lenders.

 

Use of Estimates

 

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use of management assumptions and estimates relate to long-lived asset impairments and stock-based compensation valuation. Actual results could differ from these estimates and assumptions and could have a material effect on the Company’s reported financial position and results of operations.

Page 7 of 25

 

STAR GOLD CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

JANUARY 31, 2022

 

Fair Value Measures

 

When required to measure assets or liabilities at fair value, the Company uses a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used. The Company determines the level within the fair value hierarchy in which the fair value measurements in their entirety fall. The categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Level 1 uses quoted prices in active markets for identical assets or liabilities, Level 2 uses significant other observable inputs, and Level 3 uses significant unobservable inputs. The amount of the total gains or losses for the period are included in earnings that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date.

 

At January 31, 2022 and April 30, 2021, the Company had no assets or liabilities accounted for at fair value on a recurring basis.

 

Reclassifications

 

Certain reclassifications have been made to the 2021 financial statements in order to conform to the 2021 presentation. These reclassifications have no effect on net loss, total assets or accumulated deficit as previously reported.

 

NOTE 3 – EARNINGS PER SHARE

 

Basic Earnings Per Share (“EPS”) is computed as net income (loss) available to common stockholders divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options and warrants.

 

The outstanding securities at January 31, 2022 and 2021 that could have a dilutive effect are as follows:

 

 

   January 31, 2022   January 31, 2021 
Stock options   5,035,000    7,145,000 
Warrants   2,000,000    6,789,667 
TOTAL POSSIBLE DILUTIVE SHARES   7,035,000    13,934,667 

 

For the three- and nine-months ended January 31, 2022 and 2021, respectively, the effect of the Company’s outstanding stock options and warrants would have been anti-dilutive and so are excluded in the calculation of diluted EPS.

 

NOTE 4 – MINING INTEREST

 

The following is a summary of the Company’s equipment and mining interest at January 31, 2022 and April 30, 2021.

 

   January 31, 2022   April 30, 2021 
Mining interest - Longstreet  $566,167   $554,167 
TOTAL MINING INTEREST  $566,167   $554,167 

 

Pursuant to the Longstreet Property Option Agreement with Great Basin Resources, Inc. (“Great Basin”), as amended, which was originally entered into by the Company on or about January 15, 2010 (the “Longstreet Agreement”), the Company leased, with an option to acquire, unpatented mining claims located in the State of Nevada known as the Longstreet Property. Through August 12, 2019, the Company was required to make minimal lease payments in the form of cash and options to purchase shares of the Company’s common stock.

 

On September 1, 2019, the Company executed a consulting agreement with Great Basin for a term of 18 months (the “Consulting Agreement”). Under the Consulting Agreement, the Company agreed to pay Great Basin $7,500 per month for the term of the Consulting Agreement.

Page 8 of 25

 

STAR GOLD CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

JANUARY 31, 2022

 

On August 24, 2020, the Company executed an amendment to the Consulting Agreement which accelerated the payments to Great Basin to include a $22,500 lump sum payment and three subsequent monthly payments of $7,500 in consideration of the execution and recording of a quit claim deed on the Longstreet claims for benefit of the Company. For the year ended April 30, 2021, the Company paid Great Basin a total of $67,500 which is included in pre-development expense. As of January 31, 2022, no amount is due to Great Basin under the Consulting Agreement.

 

The August 24, 2020 Amendment also grants the Company the option, to be exercised no later than six (6) months following the first receipt of proceeds from the sale of ore from the Longstreet Property, to purchase one-half of Great Basin’s 3.0% Net Smelter Royalty on the Longstreet Project for a payment of $1,750,000.

 

In addition, the Company is obligated, pursuant to the Longstreet Agreement, as amended, to pay an annual advance royalty payment of $12,000 related to the Clifford claims. For the nine-months ended January 31, 2022 and 2021, respectively, the Company paid the annual $12,000 advance royalty for additional mining interest on the Longstreet Property.

 

At January 31, 2022 and April 30, 2021, the Company has a reclamation bond of $89,400 with the United States Department of Agriculture-Forest Service to increase the Reclamation Bond as collateral on the Longstreet Property. The bond is collateral on reclamation of planned drilling activities on the Longstreet Property and is refundable subject to the Company completing defined reclamation actions upon completion of drilling.

 

NOTE 5 – OTHER CURRENT ASSETS

 

On August 21, 2017, the Company entered into an Option and Lease of Water Rights, with High Test Hay, LLC (the “High Test Water Rights Agreement”).  In exchange for a one-time payment of $25,000, the High Test Water Rights Agreement grants the Company a three-year option to commence a ten-year lease on certain water rights in Nevada. The water rights are for use in conjunction with the Company’s Longstreet Project. Lease payments for the water rights do not commence unless and until the Company exercises the option to lease.  The High Test Water Rights Agreement also grants the Company the ability to extend, upon additional option payments, the option to lease for up to an additional three years and the ability to extend the water rights lease (if exercised) for up to an additional twenty years.  The initial $25,000 payment has been deferred and was amortized on a straight-line basis over the three-year option period.

 

On August 21, 2020, the Company exercised its first option to extend the High Test Hay Water Rights agreement for an additional twelve months and made a $25,000 payment to be amortized over twelve months. On August 21, 2021, the Company exercised its second option to extend the High Test Hay Water Rights agreement for an additional twelve months and made a $25,000 payment to be amortized over twelve months. As of January 31, 2022, the unamortized portion of the High Test Hay Water Rights Agreement and subsequent exercise of its second option is $13,836.

 

On October 31, 2021, the Company issued 2,000,000 warrants to purchase stock. for services. The fair value of the warrants issued was $87,871 and is included in “Other Current Assets” and will be recognized over subsequent periods when services are received. For the three months and nine months ended January 31, 2022, no share based compensation has been recognized. (Note 7).

 

The following is a summary of the Company’s Other Current Assets at January 31, 2022 and April 30, 2021:

 

 

   January 31, 2022   April 30, 2021 
Option on water rights lease agreements, net  $13,836   $21,570 
Prepaid insurance   8,868    11,761 
Prepaid promotion expense   125,084    - 
Prepaid legal expense   1,950    - 
Total  $149,738   $33,331 

Page 9 of 25

 

STAR GOLD CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

JANUARY 31, 2022

 

NOTE 6 – RELATED PARTY TRANSACTIONS

 

Effective September 1, 2019, the Board authorized the Company to accrue for a period of nine months a monthly total of $18,000 to reward, compensate and incentivize for the Chairman of the Board, two other respective members of the Board, and the Company’s Chief Financial Officer. During the year ended April 30, 2021, the accrued balance of $89,000 was paid to the respective officers and directors. As of April 30, 2021, there were no further payments due under this board action.

 

On May 1, 2021, the Company entered into consulting agreements with four members of the Company’s management team (the “Consulting Agreements”). The Company entered into an Agreement each with the Chairman of the Board, the President, the Chief Financial Officer and the Vice President of Finance.

 

Each Agreement is for a two-year period, automatically renewable annually thereafter, and paid each executive $6,000 per month. Each executive was eligible to receive a bonus payable upon a change in control event equal to eighteen (18) months’ compensation. The Consulting Agreements superseded any previous agreements or resolutions.

 

Effective December 1, 2022, the Consulting Agreements were amended. Under the terms of the amended agreements, three executives are to be paid $1 annual compensation and one executive will be paid $2,500 per month. Each executive is eligible to receive a bonus payable of $108,000 upon a change of control.

 

For the three months ended January 31, 2022, the Company recognized $53,000 in management and administrative expense under the Consulting Agreements. For the nine months ended January 31, 2022, the Company recognized $173,000 in management and administrative expense under the Consulting Agreements.

 

On November 30, 2021, the Company entered into four Convertible Promissory Notes (the “Convertible Promissory Notes”) with certain officers and directors of the Company in consideration of deferred compensation totaling $150,000. The notes accrue interest at 5% per annum with monthly interest-only payments through April 30, 2025. The notes mature April 30, 2025.

 

The Convertible Promissory Notes are convertible at any time after the original issue date into a number of shares of the Company’s common stock, determined by dividing the amount to be converted by a conversion price equal to $0.05 per share. The Convertible Promissory Notes are convertible to an aggregate of 3,000,000 shares. At January 31, 2022, the balance of the Convertible Promissory Notes is $150,000.

 

On March 10, 2020 and June 25, 2020, the Company entered into promissory notes with the Company’s Chairman of the Board of Directors in the amount of $50,000 and $30,000, respectively.  The notes had maturity dates of March 10, 2022 and June 27, 2022, respectively and accrued interest at 6% per annum. During the year ended April 30, 2021, the total outstanding balance of the respective promissory notes of $80,000 and accrued interest of $1,786 was paid to the Company’s Chairman of the Board.

 

For the three months ended January 31, 2022 and 2021, the Company recognized interest expense, related parties of $1,274 and $Nil, respectively. For the nine months ended January 31, 2022 and 2021, the Company recognized interest expense, related parties of $1,274 and $1,367, respectively. At January 31, 2022, the balance of accrued interest is $1,274.

 

NOTE 7 – WARRANTS

 

On October 31, 2021, the Company granted 2,000,000 warrants to purchase common stock in lieu of cash payment for future services. The warrants have an exercise price of $0.0442. The expiration date of the warrants is October 31, 2026. The fair value of the warrants granted was $87,871 and is included in “Other Current Assets” and will be amortized for services to be provided over the subsequent twelve months (Note 5).

Page 10 of 25

 

STAR GOLD CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

JANUARY 31, 2022

 

The Company estimated the fair value of the October 31, 2021 warrants issued using the Black-Scholes model with the following information and range of assumptions:

 

 

Warrants issued     2,000,000  
Fair value of warrant issuance   $ 87,871  
Exercise price   $ 0.0442  
Expected volatility     244.99%  
Expected term     5 years  
Risk free rate     1.18%  

 

The following is a summary of the Company’s warrants to purchase shares of common stock activity:

 

   Warrants   Weighted Average
Exercise Price		 
Balance outstanding at April 30, 2020   29,039,849   $0.16 
Exercised   (19,495,969)   (0.05)
Expired   (2,754,213)   (0.05)
Balance outstanding at April 30, 2021   6,789,667   $0.15 
Issued   2,000,000    0.0442 
Expired   (6,789,667)   (0.15)
Balance outstanding at January 31, 2022   2,000,000   $0.0442 

 

The composition of the Company’s warrants outstanding at January 31, 2022 is as follows:

 

Issue Date  Expiration Date  Warrants   Exercise Price   Remaining life (years) 
October 31, 2021  October 31, 2026   2,000,000   $0.0442    4.75 
       2,000,000   $0.0442    4.75 

 

NOTE 8 – STOCK OPTIONS

 

Options issued for mining interest

 

In consideration for its mining interest (see Note 4), the Company was obligated to issue stock options to purchase shares of the Company’s common stock based on “fair market price” which for financial statement purposes is considered to be the closing price of the Company’s common stock on the issue dates. Those costs are capitalized as Mining Interest.

 

Options outstanding for mining interest totaled 935,000 on January 31, 2022 and April 30, 2021, and are fully vested. As of January 31, 2022, the remaining weighted average term of the option grants for mining interest was 2.58 years. As of January 31, 2022, the weighted average exercise price of the option grants for mining interest was $0.04 per share.

 

Options issued under the 2011 Stock Option/Restricted Stock Plan

 

The Company established the 2011 Stock Option/Restricted Stock Plan (the “2011 Plan”). The 2011 Plan is administered by the Board of Directors and provides for the grant of stock options to eligible individual including directors, executive officers and advisors that have furnished bona fide services to the Company not related to the sale of securities in a capital-raising transaction.

Page 11 of 25

 

STAR GOLD CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

JANUARY 31, 2022

 

On April 30, 2021, the Board of Directors authorized the grant of 2,700,000 options to purchase shares of common stock of the Company to various directors and officers. The options have an exercise price of $0.06 based on the closing price of the Company’s common Stock on the date of grant and vest immediately. The expiration date of the options is April 30, 2026.

 

The Company estimated the fair value of the April 30, 2021 option grants using the Black-Scholes model with the following information and range of assumptions:

 

Options granted   2,700,000 
Fair value of option grant  $161,015 
Exercise price  $0.06 
Expected volatility   244.74% 
Expected term   5 years 
Risk free rate   0.86% 

 

No options were issued under the Stock Option Plan during the three- and nine months ended January 31, 2022 or 2021.

 

The total value of stock option awards is expensed ratably over the vesting period of the employees receiving the awards. As of January 31, 2022 and April 30, 2021, respectively, there was no unrecognized compensation cost related to stock-based options and awards.

 

The following table summarizes additional information about the options under the Company’s 2011 Plan as of January 31, 2022:

 

   Options outstanding and exercisable 
Date of Grant  Shares   Price   Remaining Term (years) 
April 30, 2018   1,400,000   $0.065    1.24 
April 30, 2021   2,700,000    0.06    4.25 
Total plan options   4,100,000   $0.06    3.22 

 

Summary:

 

The following is a summary of the Company’s stock options outstanding and exercisable:

 

Options issued for:  Expiration Date  Options   Weighted Average
Exercise Price		 
Mining interests  August 31, 2024   935,000   $0.04 
Stock option plan  April 30, 2023 to April 30, 2026   4,100,000    0.06 
Outstanding and exercisable at January 31, 2022   5,035,000   $0.06 

 

The aggregate intrinsic value of all options vested and exercisable at January 31, 2022, was $Nil based on the Company’s closing price of $0.0338 per common share at January 31, 2022. The Company’s current policy is to issue new shares to satisfy option exercises.

 

NOTE 9 – STOCKHOLDERS’ EQUITY

 

On August 1, 2020, the Company issued 400,000 shares of its common stock in lieu of cash to at $0.05 per share for accounts payable.

 

For the nine months ended January 31, 2021, the Company issued a total of 19,495,969 shares of its common stock upon exercise of warrants at $0.045 per share by 44 warrant holders for aggregate proceeds of $877,318 (Note 7).

 

For the three- and nine-months ended January 31, 2022, the Company did not issue any shares of its common stock.

Page 12 of 25

 

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION.

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This quarterly report and the exhibits attached hereto contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements concern the Company’s anticipated results and developments in the Company’s operations in future periods, planned exploration and development of its properties, plans related to its business and other matters that may occur in the future. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management.

 

Any statement that expresses or involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always using words or phrases such as “expects” or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “estimates”, or “intends”, or states that certain actions, events or results “may” or “could”, “would”, “might” or “will” be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements. Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors which could cause actual events or results to differ from those expressed or implied by the forward-looking statements, including, without limitation:

 

●Risks related to the Company’s properties being in the exploration stage;

 

●Risks related to the mineral operations being subject to government regulation;

 

●Risks related to environmental concerns;

 

●Risks related to the Company’s ability to obtain additional capital to develop the Company’s resources, if any;

 

●Risks related to mineral exploration and development activities;

 

●Risks related to mineral estimates;

 

●Risks related to the Company’s insurance coverage for operating risks;

 

●Risks related to the fluctuation of prices for precious and base metals, such as gold, silver and copper;

 

●Risks related to the competitive industry of mineral exploration;

 

●Risks related to the title and rights in the Company’s mineral properties;

 

●Risks related to the possible dilution of the Company’s common stock from additional financing activities;

 

●Risks related to potential conflicts of interest with the Company’s management;

 

●Risks related to the Company’s shares of common stock;

 

This list is not exhaustive of the factors that may affect the Company’s forward-looking statements. Some of the important risks and uncertainties that could affect forward-looking statements are described further under the sections titled “Risk Factors and Uncertainties”, “Description of Business” and “Management’s Discussion and Analysis” of this Quarterly Report. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Star Gold Corp. disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events, except as required by law. The Company advises readers to carefully review the reports and documents filed from time to time with the Securities and Exchange Commission (the “SEC”), particularly the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

 

Star Gold Corp qualifies all forward-looking statements contained in this Quarterly Report by the foregoing cautionary statement.

 

Certain statements contained in this Quarterly Report on Form 10-Q constitute “forward-looking statements.” These statements, identified by words such as “plan,” “anticipate,” “believe,” “estimate,” “should,” “expect,” and similar expressions include the Company’s expectations and objectives regarding its future financial position, operating results and business strategy. These statements reflect the current views of management with respect to future events and are subject to risks, uncertainties and other factors that may cause actual results, performance or achievements, or industry results, to be materially different from those described in the forward-looking statements. Such risks and uncertainties include those set forth under the caption “Management’s Discussion and Analysis or Plan of Operation” and elsewhere in this Quarterly Report.

Page 13 of 25

 

As used in this Quarterly Report, the terms “we,” “us,” “our,” “Star Gold,” and the “Company”, mean Star Gold Corp., unless otherwise indicated. All dollar amounts in this Quarterly Report are expressed in U.S. dollars, unless otherwise indicated.

 

Management’s Discussion and Analysis is intended to be read in conjunction with the Company’s financial statements and the integral notes (“Notes”) thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ending April 30, 2021. The following statements may be forward-looking in nature and actual results may differ materially.

 

Corporate Background

 

The Company was originally incorporated on December 8, 2006, under the laws of the State of Nevada as Elan Development, Inc. On April 25, 2008, the name of the Company was changed to Star Gold Corp. Star Gold Corp. is a pre-development stage company engaged in the acquisition and exploration of precious metal deposit properties and advancing them toward production. The Company is engaged in the business of exploring, evaluating and acquiring mineral prospects with the potential for economic deposits of precious and base metals.

 

Star Gold Corp. originally leased with an option to acquire certain unpatented mining claims located in the State of Nevada which in part make up what we refer to as the “Longstreet Property” (or the “Longstreet Project”).

 

The Longstreet Project is in a historical region of mineral production in Nye County, Nevada, USA, known as Walker Lane. Walker Lane hosts the well-known deposits of Round Mountain, Mineral Ridge, Bell Mountain and Bullfrog, all current or past producers.

 

The Longstreet Au-Ag Project is located approximately 275 km northwest of Las Vegas and approximately 80 km northeast of Tonopah, a town of approximately 2,500 people and the seat of the government for Nye County, in west-central Nevada. The northeast-southwest oriented property is situated within the McCann Canyon and Georges Canyon Rim 7 1/2 topographic quadrangles and extends approximately 3 km along strike within the Monitor Range. The geographic coordinates of the central part of the property are approximately 38°22′0′ N Latitude and 116°40′00″ W Longitude. The deposit has been known for many years and the property explored on numerous occasions. Exploration work on the property has included pits, core drilling, RC drilling, an inclined shaft, three adits and limited underground vertical raising.

 

The Longstreet Au-Ag Project is at an intermediate stage of exploration. The area has been sporadically explored since the early 1900s by several early operators and recent drilling by Star Gold.

 

The property comprises 142 mineral claims (137 claims acquired from Great Basin and 5 claims leased from local ranchers, Roy Clifford and family (the “Clifford claims”)). The Longstreet Au-Ag Projects covers a total area of approximately 1149 hectares.

 

The Clifford claims are for use during mining exclusively with a royalty of 2% on the values extracted from those claims. The 2% royalty to Clifford, et. al. is inclusive of the overall 3% NSR to Great Basin and applies only to the following claims:

 

Morning Star NMC 96719

 

Longstreet 11 NMC 164002 

Longstreet 12 NMC 164003 

Longstreet 14 NMC 164005 

Longstreet 15 NMC 164006

 

Star Gold is not subject to any liens or encumbrances regarding the Longstreet property. Included in the claim package are 26 claims (Leach Pad Claims) adjacent to the eastern boundary of the property, with the objective of providing the site for leach pads planned for future development of the Main Zone. This includes 12 claims along a corridor leading from the main Longstreet property to the Leach Pad Claims.

 

The Company has no patents, licenses, franchises or concessions which are considered by the Company to be of importance. The business is not of a seasonal nature. Because minerals are traded in the open market, the Company has little to no control over the competitive conditions in the industry.

Page 14 of 25

 

Overview of Mineral Exploration and Current Operations

 

Star Gold Corp. is a pre-development stage mineral company with no producing mines. Mineral exploration is essentially a research activity that does not produce a product. The Company acquires properties which it believes have potential to host economic concentrations of minerals, particularly gold and silver. These acquisitions have and may take the form of unpatented mining claims on federal land, or leasing claims, or private property owned by others. An unpatented mining claim is an interest, that can be acquired, in the mineral rights on open lands of the federally owned public domain. Claims are staked in accordance with the Mining Law of 1872, recorded with the federal government pursuant to laws and regulations established by the Bureau of Land Management. The Company intends to remain in the business of exploring for mining properties that have the potential to produce gold, silver, base metals and other commodities.

 

The Company will perform basic geological work to identify specific drill targets on the properties, and then collect subsurface samples by drilling to confirm the presence of mineralization (the presence of economic minerals in a specific area or geological formation). The Company may enter joint venture agreements with other companies to fund further exploration and/or development work. It is the Company’s plan to focus on assembling a high-quality group of mid-stage mineral (primarily gold and silver) exploration prospects, using the experience and contacts of the management group. By such prospects, the Company means properties that have been previously identified by third parties, (including prior owners and/or exploration companies), as mineral prospects with potential for economic mineralization. Often these properties have been sampled, mapped and sometimes drilled, usually with indefinite results. Accordingly, such acquired projects will have either prior exploration history or will have strong similarity to a recognized geologic ore deposit model. Geographic emphasis will be placed on the western United States.

 

The geologic potential and ore deposit models have been defined and specific drill targets identified on the Longstreet Property. The Company’s property evaluation process involves using basic geologic fieldwork to perform an initial evaluation of a property. If the evaluation is positive, the Company seeks to acquire, either by staking unpatented mining claims on open public domain, or by leasing the property from the owner of private property or the owner of unpatented claims. Once acquired, the Company then typically makes a more detailed evaluation of the property. This detailed evaluation involves expenditures for exploration work which may include rock and soil sampling, geologic mapping, geophysics, trenching, drilling or other means to determine if economic mineralization is present on a property.

 

The Company owns 137 claims and leases 5 Claims from Clifford. The Company shall pay a 3% Net Smelter Royalty (“NSR”) within thirty (30) days following the end of the calendar quarter under which the Company receives Net Smelter Returns. To date, the Company has not received Net Smelter Returns. Third parties to which NRR payments would be made are as follows:

 

Property name   Longstreet
Third parties   Great Basin Resources, Inc. and Clifford
Number of claims   142  (1)(2)(3)(4)
Acres (approx.)   2,500
Agreements/Royalties    
  Royalties   3% Net Smelter Royalty (“NSR”)
  Annual advance royalty payment   $12,000

 

  (1) Great Basin Resources, Inc. (“Great Basin”) took assignment from MinQuest, Inc., of the 142 total claims controlled by the Company (Note 4 of the financial statements) of which 137 are owned by the Company and 5 of which are owned by (also Note 4) and leased to and managed by the Company.

 

  (2) On August 12, 2019, the Company and Great Basin Resources, Inc. (“Great Basin”) agreed to amend the Longstreet Agreement (Note 4) to eliminate the required property expenditure structure and to implement new consideration for the transfer of the Property pursuant to that agreement (the “2019 Amendment”). The Amendment eliminated the remainder of the required property expenditures set forth in the Longstreet Agreement, as amended.

 

  (3) On September 10, 2020, the Company accelerated the payment to Great Basin Resources, Inc. in consideration of a recorded quit claim deed on the Longstreet property claims.  The Company owns 137 claims (exclusive of 5 Clifford claims) and has no required spend other than annual claims filing fees.

 

  (4) The Company shall pay Clifford a 2% net smelter royalty on net smelter returns which is inclusive of the overall 3% net smelter royalty for the properties.

Page 15 of 25

 

Compliance with Government Regulations

 

Continuing to acquire and explore mineral properties in the State of Nevada will require the Company to comply with all regulations, rules and directives of governmental authorities and agencies applicable to the exploration of minerals in the State of Nevada and the United States Federal agencies.

 

United States

 

Mining in the State of Nevada is subject to federal, state and local law. Three types of laws are of particular importance to the Company’s U.S. mineral properties: those affecting land ownership and mining rights; those regulating mining operations; and those dealing with the environment.

 

Land Ownership and Mining Rights.

 

On Federal Lands, mining rights are governed by the General Mining Law of 1872 (General Mining Law) as amended, 30 U.S.C. §§ 21-161 (various sections), which allows the location of mining claims on certain Federal Lands upon the discovery of a valuable mineral deposit and proper compliance with claim location requirements. A valid mining claim provides the holder with the right to conduct mining operations for the removal of locatable minerals, subject to compliance with the General Mining Law and Nevada state law governing the staking and registration of mining claims, as well as compliance with various federal, state and local operating and environmental laws, regulations and ordinances. As the owner or lessee of the unpatented mining claims, the Company has the right to conduct mining operations on the lands subject to the prior procurement of required operating permits and approvals, compliance with the terms and conditions of any applicable mining lease, and compliance with applicable federal, state, and local laws, regulations and ordinances.

 

Mining Operations

 

The exploration of mining properties and development and operation of mines is governed by both federal and state laws. The State of Nevada likewise requires various permits and approvals before mining operations can begin, although the state and federal regulatory agencies usually cooperate to minimize duplication of permitting efforts. Among other things, a detailed reclamation plan must be prepared and approved, with bonding in the amount of projected reclamation costs. The bond is used to ensure that proper reclamation takes place, and the bond will not be released until that time. The Nevada Department of Environmental Protection, which is referred to as the NDEP, is the state agency that administers the reclamation permits, mine permits and related closure plans on the Nevada property. Local jurisdictions (such as Eureka County) may also impose permitting requirements (such as conditional use permits or zoning approvals).

 

Environmental Law

 

The development, operation, closure, and reclamation of mining projects in the United States requires numerous notifications, permits, authorizations, and public agency decisions. Compliance with environmental and related laws and regulations requires us to obtain permits issued by regulatory agencies, and to file various reports and keep records of the Company’s operations. Certain of these permits require periodic renewal or review of their conditions and may be subject to a public review process during which opposition to the Company’s proposed operations may be encountered. The Company is currently operating under

 

various permits for activities connected to mineral exploration, reclamation, and environmental considerations. Unless and until a mineral resource is proved, it is unlikely Star Gold Corp. operations will move beyond the pre-development stage. If in the future the Company decides to proceed beyond exploration, there will be numerous notifications, permit applications, and other decisions to be addressed at that time.

 

Competition

 

Star Gold Corp. competes with other mineral resource exploration and development companies for financing and for the acquisition of new mineral properties and for equipment and labor related to exploration and development of mineral properties. Many of the mineral resource exploration and development companies with whom the Company competes have greater financial and technical resources. Accordingly, competitors may be able to spend greater amounts on acquisitions of mineral properties of merit, on exploration of their mineral properties and on development of their mineral properties. In addition, they may be able to afford greater geological expertise in the targeting and exploration of mineral properties. This competition could result in competitors having mineral properties of greater quality and interest to prospective investors who may finance additional exploration and development. This competition could adversely impact Star Gold Corp.’s ability to finance further exploration and to achieve the financing necessary for the Company to develop its mineral properties.

Page 16 of 25

 

The Company provides no assurance it will be able to compete in any of its business areas effectively with current or future competitors or that the competitive pressures faced by the Company will not have a material adverse effect on the business, financial condition and operating results.

 

Office and Other Facilities

 

Star Gold Corp. currently maintains its administrative offices at 1875 N. Lakeview Drive, Suite 200 Coeur d’Alene, ID 83814. The telephone number is (208) 664-5066. Star Gold Corp. does not currently own title to any real property.

 

Employees

 

The Company has no employees as of the date of this Quarterly Report on Form 10-Q. Star Gold Corp. conducts business largely through independent contractor agreements with consultants.

 

Research and Development Expenditures

 

The Company has not incurred any research expenditures since incorporation.

 

Reports to Security Holders

 

The Registrant does not issue annual or quarterly reports to security holders other than the annual Form 10-K and quarterly Forms 10-Q as electronically filed with the SEC. Electronically filed reports may be accessed at www.sec.gov

 

SELECTED FINANCIAL DATA.

 

Statement of Operations Information:

 

   For the nine months ended 
   January 31, 2022   January 31, 2021 
Revenues  $-   $- 
Total operating expenses   337,832    432,520 
Loss from operations   (337,832)   (432,520)
Other income (expense)   (1,991)   (2,015)
NET LOSS  $(339,823)  $(434,535)
           
Weighted average shares of common stock (basic and diluted)   97,290,810   88,706,972 
           
Income (loss) per share (basic and diluted)  $ Nil    $  Nil  

 

Balance Sheet Information:

 

   January 31, 2022   April 30, 2021 
Working capital  $152,987   $266,939 
Total assets   837,707    942,842 
Accumulated deficit   12,141,616    11,801,793 
Stockholders’ equity   658,554    910,506 

Page 17 of 25

 

PLAN OF OPERATION

 

The Company maintains a corporate office in Coeur d’Alene, Idaho. This is the primary administrative office for the Company and is utilized by Board Chairman Lindsay Gorrill and Chief Financial Officer Kelly Stopher.

 

During the fiscal year ended April 30, 2021, the Company commissioned a detailed third-party Preliminary Economic Assessment (“PEA”) to redefine the Longstreet Project and to make sure that the assumptions, and resulting economics, relied on to move the leach pad closer to the Main nob justified the change in design. The PEA has been completed and the Company is currently assessing the best strategy to proceed.

 

The drilling permit granted from the Bureau of Land Management (“BLM”) in September 2019 remains valid until December 2022. This allows the Company to commence drilling mainly for the Hydrology Study but also enabling drilling of other holes on the Main knob for geochemical analysis. A bond has been obtained and there are no impediments to drilling other than capital constraints. The Company may apply for an extension of the permit.

 

For the fiscal year ending April 30, 2022, the Company plans to commence the following activities as it prepares to draft its Environmental Impact Statement (“EIS”) on the Longstreet Project:

 

Hydrology Drilling – 2 to 4 holes expected to be sufficient:

 

Geochemical analysis – design of program for submission to State of Nevada involves some core drilling;

 

Plan of Operations Development (Mine Plan, Civil Engineering Design)

 

Assuming the results of the above-referenced activities are favorable, the Company intends to proceed to the preparation of an EIS and plan of operation for the Longstreet project (the “Longstreet Plan”). The eventual objective of the EIS and Longstreet Plan is the issuance, by each respective governing agency, of the necessary mine permits to authorize the construction of, and ongoing operations at, an open pit/heap leach mine at the Longstreet Property.

 

Approval of the Longstreet Plan is subject to governmental agency review and may require additional remediation activities.

 

Management believes it can source additional capital in the investment markets in the coming months and years.  The Company may also consider other sources of funding, including potential mergers, sale of property, joint ventures and/or farm-out a portion of its exploration properties.

 

Future liquidity and capital requirements depend on many factors including timing, cost and progress of the Company’s exploration efforts.  The Company will consider additional public offerings, private placement, mergers or debt instruments.

 

Additional financing will be required in the future to complete all necessary steps to apply for a final permit. Although the Company believes it will be able to source additional financing there are no guarantees any needed financing will be available at the time needed or on acceptable terms, if at all.  If the Company is unable to raise additional financing when necessary, it may have to delay exploration efforts or property acquisitions or be forced to cease operations.  Collaborative arrangements may require the Company to relinquish rights to certain of its mining claims.

 

RESULTS OF OPERATIONS

 

   For the three months ended January 31,         
   2022   2021   $ Change   % Change 
Pre-development expense  $11,768   $95,168   $(83,400)   (87.6%)
Legal and professional fees   14,916    48,179    (33,263)   (69.0%)
Management and administrative   40,834    21,868    18,966    86.7%
Depreciation   -    416    (416)   (100.0%)
Interest expense   262    262    -    0.0%
Interest expense, related parties   1,274    -    1,274    N/A 
Interest (income)   (3)   (127)   124    (97.6%)
   NET LOSS  $69,051   $165,766   $(96,715)   (58.3%)

Page 18 of 25

 

   For the nine months ended January 31,         
   2022   2021   $ Change   % Change 
Mineral exploration expense  $25,146   $25,146   $-    0.0%
Pre-development expense   38,679    231,076    (192,397)   (83.3%)
Legal and professional fees   63,596    109,767    (46,171)   (42.1%)
Management and administrative   210,411    65,283    145,128    222.3%
Depreciation   -    1,248    (1,248)   (100.0%)
Interest expense   786    786    -    0.0%
Interest expense, related party   1,274    1,367    (93)   (6.8%)
Interest (income)   (69)   (138)   69    50.0%
   NET LOSS  $339,823   $434,535   $(94,712)   (21.8%)

 

The Company earned no operating revenue in 2022 or 2021 and does not anticipate earning any operating revenues in the near future. Star Gold Corp. is a pre-development stage company and presently is seeking other natural resources related business opportunities.

 

The Company will continue to focus its capital and resources toward permitting activities at its Longstreet Property.

 

Total net loss for the three months ended January 31, 2022 of $69,051 decreased by $96,715 from the 2021 total net loss of $165,766. Total net loss for the nine months ended January 31, 2022 of $339,823 decreased by $94,712 from the 2021 total net loss of $434,535.

 

Mineral exploration expense

 

   For the nine months ended January 31,         
   2022   2021   $ Change   % Change 
Claims   25,146    25,146    -    0.0%
   Total mineral exploration expense  $25,146   $25,146   $-    0.0%

 

Mineral exploration expense for the nine months ended January 31, 2022 was $25,146, no change from 2021 mineral exploration expense of $25,146. There was no additional mineral exploration expense for the three months ended January 31, 2022 and 2021, respectively.

 

The Company’s emphasis has shifted from exploratory drilling to activities related to pre-development expense including environmental and anthropological studies associated with building a Plan of Operations and obtaining a permit to construct a mine at the Longstreet site.

 

Pre-development expense

 

   For the three months ended January 31,         
   2022   2021   $ Change   % Change 
Engineering and permitting services   -    1,085    (1,085)   (100.0%)
Field expense  $2,124   $1,995   $129    6.5%
Project management   -    4,975    (4,975)   (100.0%)
Technical consultants   -    76,068    (81,043)   (100.0%)
Water rights costs   9,644    11,045    (1,401)   (12.7%)
   Total pre-development expense  $11,768   $95,168   $(83,400)   (87.6%)

Page 19 of 25

 

   For the nine months ended January 31,         
   2022   2021   $ Change   % Change 
Engineering and permitting services  $-   $2,075   $(2,075)   (100.0%)
Environmental impact and plan of operation   -    1,085    (1,085)   100.0%
Field expense   4,119    1,995    2,124    N/A 
Permits and fees   200    -    200    N/A 
Project management   1,625    4,975    (3,350)   (67.3%)
Technical consultants   -    192,453    (195,803)   (101.7%)
Water rights costs   32,735    28,493    4,242    14.9%
   Total pre-development expense  $38,679   $231,076   $(192,397)   (83.3%)

 

Pre-development expense for the three months ended January 31, 2022 was $11,768, a decrease of $83,400 from 2021 pre-development expense of $95,168. Pre-development expense for the nine months ended January 31, 2022 was $38,679, a decrease of $192,397 from a 2021 pre-development expense of $231,076.

 

Technical consultant expense decreased to $Nil in 2022 due to no payments required in 2022 related to a consulting contract executed with Great Basin Resources, Inc. as consideration for amending the Longstreet Property Agreement.

 

Legal and professional fees

 

   For the three months ended January 31,         
   2022   2021   $ Change   % Change 
Audit and accounting  $5,625   $3,783   $1,842    48.7%
Legal fees   6,150    29,125    (22,975)   (78.9%)
Public company expense   3,063    3,921    (858)   (21.9%)
Investor relations   78    11,350    (11,272)   (99.3%)
   Total legal and professional fees  $14,916   $48,179   $(33,263)   (69.0%)

 

   For the nine months ended January 31,         
   2022   2021   $ Change   % Change 
Audit and accounting  $27,217   $22,961   $4,256    18.5%
Legal fees   14,900    51,336    (36,436)   (71.0%)
Public company expense   21,266    22,440    (1,174)   (5.2%)
Investor relations   213    13,030    (12,817)   (98.4%)
   Total legal and professional fees  $63,596   $109,767   $(46,171)   (42.1%)

 

Audit and accounting fees for the three months ended January 31, 2022 increased by $1,842 compared to the three months ended January 31, 2021. Audit and accounting fees for the nine months ended January 31, 2022 increased $4,256 compared to the three months ended January 31, 2021.

 

Legal fees decreased $22,975 from $29,125 for the three months ended January 31, 2021 to $6,150 for the three months January 31, 2022 primarily as a result of legal fees associated with corporate governance and capital raising activities. Legal fees decreased $36,436 from $51,336 for the nine months ended January 31, 2021 to $14,900 for the nine months ended January 31, 2022. There are no pending legal issues or contingencies as of January 31, 2022.

Page 20 of 25

 

General and administrative expense

 

   For the three months ended January 31,         
   2022   2021   $ Change   % Change 
Auto and travel  $50   $760   $(710)   (93.4%)
General administrative and insurance   11,163    12,691    (1,528)   (12.0%)
Management fees and payroll   29,000    7,500    21,500    286.7%
Office and computer expense   527    823    (296)   (36.0%)
Telephone and utilities   94    94    -    0.0%
   Total general and administrative  $40,834   $21,868   $18,966    86.7%

 

   For the nine months ended January 31,         
   2022   2021   $ Change   % Change 
Auto and travel  $1,285   $2,353   $(1,068)   (45.4%)
General administrative and insurance   33,879    36,473    (2,594)   (7.1%)
Management fees and payroll   173,000    22,500    150,500    668.9%
Office and computer expense   1,822    3,655    (1,833)   (50.2%)
Telephone and utilities   425    302    123    40.7%
   Total general and administrative  $210,411   $65,283   $145,128    222.3%

 

Total general and administrative expense increased $18,966 for the three months ended January 31, 2022 to $ 40,834 compared to $21,868 for the three months ended January 31, 2021. Management fees increased $21,500 for the three months ended January 31, 2022 as management fees were accrued for the period then ended.

 

Effective December 1, 2022, management amended certain portions of four respective consulting agreements to include suspension of $21,500 in monthly accrual of fees.

 

Total general and administrative expense increased $145,128 for the nine months ended January 31, 2022 to $210,411 compared to $65,283 for the nine months ended January 31, 2021. Management fees increased $150,500 for the nine months ended January 31, 2022 as management fees were accrued for the period then ended.

 

COVID-19 limited business-related travel which resulted in a slight decrease in auto and travel expense for the nine months ended January 31, 2022.

 

LIQUIDITY AND FINANCIAL CONDITION

 

WORKING CAPITAL  January 31, 2022   April 30, 2021 
Current assets  $182,140   $299,275 
Current liabilities   29,153    32,336 
Working capital  $152,987   $266,939 

 

   For the nine months ended 
CASH FLOWS  January 31, 2022   January 31, 2021 
Cash flow used by operating activities  $(221,542)  $(495,119)
Cash flow used by investing activities   (12,000)   (12,000)
Cash flow provided by financing activities   -    827,318 
Net change in cash during period  $(233,542)  $320,199 

 

As of January 31, 2022, the Company had cash on hand of $32,402. Since inception, the sole source of financing has been sales of the Company’s debt and equity securities. Star Gold Corp. has not attained profitable operations and its ability to pursue any future plan of operation is dependent upon our ability to obtain financing.

Page 21 of 25

 

Star Gold Corp. anticipates continuing to rely on sales of its debt and/or equity securities to continue to fund ongoing operations. Issuances of additional shares of common stock may result in dilution to the Company’s existing stockholders. There is no assurance that the Company will be able to complete any additional sales of equity securities or that it will be able arrange for other financing to fund its planned business activities.

 

The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, to obtain additional financing as may be required, or ultimately to attain profitability. Potential sources of cash, or relief of demand for cash, include additional external debt, the sale of shares of the Company’s capital stock or alternative methods such as mergers or sale of the Company’s assets. No assurances can be given, however, that the Company will be able to obtain any of these potential sources of cash. The Company currently requires additional cash funding from outside sources to sustain existing operations and to meet current obligations and ongoing capital requirements.

 

The Company plans for the long-term continuation as a going concern include financing future operations through sales of our equity and/or debt securities and the anticipated profitable exploitation of the Company’s mining properties. These plans may also, at some future point, include the formation of mining joint ventures with senior mining company partners on specific mineral properties whereby the joint venture partner would provide the necessary financing in return for equity in the property.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

The Company has no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to its stockholders.

 

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

The Company does not hold any derivative instruments and does not engage in any hedging activities.

 

ITEM 4.CONTROLS AND PROCEDURES

 

Conclusions of Management Regarding Effectiveness of Disclosure Controls and Procedures

 

At the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision and with the participation of the Company’s management, including the President and Principal Executive Officer (“PEO”) and Principal Financial Officer (“PFO”), of the effectiveness of the design and operations of the Company’s disclosure controls and procedures (as defined in Rule 13a – 15(e) and Rule 15d – 15(e) under the Exchange Act). Based on that evaluation, the PEO and the PFO have concluded that as of the end of the period covered by this report, the Company’s disclosure controls and procedures were not effective as it was determined that there were material weaknesses affecting our disclosure controls and procedures. 

 

Management of the Company believes that these material weaknesses are due to the small size of the Company’s accounting staff. The small size of the Company’s accounting staff may prevent adequate controls in the future, such as segregation of duties, due to the cost/benefit of such remediation. To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of external legal and accounting professionals. As the Company grows, management expects to increase the number of employees, which will enable us to implement adequate segregation of duties within the internal control framework.

 

PEO and PFO Certifications

 

Appearing immediately following the Signatures section of this report there are Certifications of the PEO and the PFO. The Certifications are required in accordance with Section 03 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). The Items of this report which you are currently reading is the information concerning the Evaluation referred to in Section 302 Certifications and this information should be read in conjunction with Section 302 Certifications for a more complete understanding of the topics presented.

Page 22 of 25

 

Changes in Internal Control over Financial Reporting

 

There have been no changes during the quarter ended January 31, 2022 in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, internal controls over financial reporting.

 

PART II - OTHER INFORMATION

 

ITEM 1.LEGAL PROCEEDINGS.

 

Star Gold Corp. is not a party to any material legal proceedings, and, to Management’s knowledge, no such proceedings are threatened or contemplated. No director, officer or affiliate of Star Gold Corp. and no owner of record or beneficial owner of more than 5% of the Company’s securities or any associate of any such director, officer or security holder is a party adverse to Star Gold Corp. or has a material interest adverse to Star Gold Corp. in reference to pending litigation.

 

ITEM 1A.RISK FACTORS.

 

There have been no material changes from the risk factors as previously disclosed in the Company’s Form 10-K for the year ended April 30, 2021 which was filed with the SEC on August 4, 2021.

 

ITEM 2.RECENT SALES OF UNREGISTERED SECURITIES.

 

For the year ended April 30, 2021, forty-four (44) warrant holders exercised a total of 19,495,969 warrants to purchase shares of the Company’s common stock at $0.045 per share for aggregate cash proceeds of $877,318, inclusive of five (5) officers and directors who exercised 2,072,222 at $0.045 per share for aggregate cash proceeds of $93,250.

 

For the three- and nine- months ended January 31, 2022, the Company sold no common stock.

 

On October 31, 2021, the Company issued 2,000,000 warrants to purchase Common Stock in lieu of cash payment for services. The warrants have an exercise price of $0.0442 based on the closing price of the Company’s Common Stock on the date of grant and vest immediately. The expiration date of the warrants is October 31, 2026. The fair value of the warrants issued was $87,871 and is included in “Other Current Assets” and will be amortized over twelve months (Note 5).

 

On November 30, 2021, the Company entered into four Convertible Promissory Notes with certain officers and directors of the Company in consideration of deferred compensation totaling $150,000. The notes accrue interest at 5% per annum with monthly interest-only payments through April 30, 2025. The Company is scheduled to make 41 monthly interest payments beginning no later than December 31, 2021.

 

The Convertible Promissory Notes are convertible at any time after the original issue date into a number of shares of the Company’s Common Stock, determined by dividing the amount to be converted by a conversion price equal to the greater of $0.05 per share or the closing price of the Company’s Common Stock on November 30, 2021. The Convertible Promissory Notes are convertible to an aggregate of 3,000,000 shares.

 

During the three months ended January 31, 2022, neither the Company nor any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Exchange Act) purchased any shares of our Common Stock, the only class of the Company’s equity securities registered pursuant to section 12 of the Exchange Act at the date of this filing.

 

ITEM 3.DEFAULTS UPON SENIOR SECURITIES.

 

None

 

ITEM 4.MINE SAFETY DISCOSURES.

 

Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities. The Company is in the exploration stage and has no operations.

 

ITEM 5.OTHER INFORMATION.

 

None

Page 23 of 25

 

ITEM 6.EXHIBITS.

 

Exhibit  
Number Description of Exhibits
   
3.1 Articles of Incorporation.(1)
   
3.2 Bylaws, as amended.(1)
   
4.1 Form of Share Certificate.(1)
   
10.1 Purchase Agreement dated June 22, 2004 between Guy R. Delorme and Star Gold Corp.(1)
   
10.2 Declaration of Trust executed by Guy R. Delorme.(1)
   
14.1 Code of Ethics. (2)
   
99.1 Property Option Agreement dated January 15, 2010 between Minquest, Inc., and Star Gold Corp.
   
99.1 Amendment to Longstreet Property Option Agreement dated December 10, 2014 between Minquest, Inc. and Star Gold Corp.
   
99.1 Amendment to Longstreet Property Option Agreement dated January 5, 2016 between Minquest, Inc. and Star Gold Corp.
   
99.1 Option and Lease of Water Rights Agreement dated January 19, 2017 between Stone Cabin Company, LLC and Star Gold Corp.
   
99.1 Option and Lease of Water Rights Agreement dated August 21, 2017 between High Test Hay, LLC and Star Gold Corp.
   
10.5 2019 Amendment to Longstreet Property Option Agreement
   
99.2 Shareholder Letter January 23, 2017
   
99.2 Shareholder Letter March 20, 2018
   
99.2 Longstreet Property Press Release August 14, 2019
   
99.2 Shareholder Letter September 10, 2019
   
31.1 Certification of Principal Executive Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
31.2 Certification of Principal Financial Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
32.1 Certification of Principal Executive Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
32.2 Certification of Principal Financial Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
101.INS(2) Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
   
101.SCH* Inline XBRL Taxonomy Extension Schema Document
   
101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document
   
101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document
   
101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document
   
101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document
   
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
   
(1) Filed with the SEC as an exhibit to the Company’s Registration Statement on Form SB-2 originally filed on June 14, 2007, as amended.
(2) Filed with the SEC, on February 02, 2012, as an exhibit to Form 8-K.
(*) XBRL Information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended and otherwise is not subject to liability under these sections.

Page 24 of 25

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

      STAR GOLD CORP.
       
Date:  March 4, 2022 By:   /s/ DAVID SEGELOV
      President
      (Principal Executive Officer)
       
Date:  March 4, 2022 By:   /s/ KELLY J. STOPHER
      Kelly J. Stopher
      Chief Financial Officer and Secretary
      (Principal Financial Officer)

Page 25 of 25
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