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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended November 30, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________ to _____________
Commission file number 000-32919
PATRIOT GOLD CORP.
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(Exact name of registrant as specified in its charter)
Nevada 86-0947048
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
#501-1775 Bellevue Avenue, West Vancouver, British Columbia Canada V7V 1A9
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(Address of principal executive offices) (Zip Code)
(604) 925-5257
(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (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. X Yes __ No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $0.001 par value, 29,279,400 shares outstanding as of January 7,
2005.
Transitional Small Business Disclosure Format (elect one) ___ Yes __X___ No
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
PATRIOT GOLD CORP.
(An Exploration State Company)
BALANCE SHEETS
(Unaudited)
November 30, May 31,
2004 2004
------------------ ------------------
ASSETS:
Current Assets:
Cash $ 4,056,102 $ 3,049,991
Prepaid Expense 79 -
GST Receivables 1,946 1,344
------------------ ------------------
Total Assets $ 4,058,127 $ 3,051,335
================== ==================
LIABILITIES & STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts Payable $ 26,620 $ 22,646
Accrued Expense 2,489 -
------------------ ------------------
Total Liabilities 29,109 22,646
------------------ ------------------
Stockholders' Equity:
Preferred Stock, Par Value $.001
Authorized 20,000,000 shares,
No shares issued at November 30, 2004 and May 31, 2004 - -
Common Stock, Par Value $.001
Authorized 100,000,000 shares,
Issued 29,279,400 shares at
November 30, 2004 and May 31, 2004 29,279 29,279
Paid-In Capital 26,376,487 26,376,487
Subscription Receivable (79,000) (1,676,500)
Currency Translation Adjustment (16,361) (16,361)
Deficit Accumulated Since Inception of Exploration State (22,240,305) (21,643,134)
Retained Deficit (41,082) (41,082)
------------------ ------------------
Total Stockholders' Equity 4,029,018 3,028,689
------------------ ------------------
Total Liabilities and Stockholders' Equity $ 4,058,127 $ 3,051,335
================== ==================
The accompanying notes are an integral part of these financial statements.
PATRIOT GOLD CORP.
(An Exploration State Company)
STATEMENTS OF OPERATIONS
(Unaudited)
Cumulative
Since
For the Three Months For the Six Months June 1, 2000
Ended Ended Inception of
November 30, November 30, Exploration
2004 2003 2004 2003 State
----------------- --------------- ----------------- --------------- -----------------
Revenues $ - $ - $ - $ - $ -
Cost of Revenues - - - - -
----------------- --------------- ----------------- --------------- -----------------
Gross Margin - - - - -
Expenses:
Mining Costs 107,393 27,010 522,839 42,757 873,387
General & Administrative 46,656 1,770,643 76,751 2,053,280 21,369,337
----------------- --------------- ----------------- --------------- -----------------
Net Loss from Operations (154,049) (1,797,653) (599,590) (2,096,037) (22,242,724)
Other Income (Expense)
Interest, Net 2,419 - 2,419 - 2,419
----------------- --------------- ----------------- --------------- -----------------
Net Loss $ (151,630)$ (1,797,653)$ (597,171)$ (2,096,037) $ (22,240,305)
================= =============== ================= =============== =================
Basic & Diluted loss per
Share $ (0.01)$ (0.07) (0.02)$ (0.12)
================= =============== ================= ===============
Weighed Average Shares
Outstanding 29,279,400 25,593,499 29,279,400 18,186,094
================= =============== ================= ===============
The accompanying notes are an integral part of these financial statements.
PATRIOT GOLD CORP.
(An Exploration State Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
Cumulative
Since
June 1, 2000
For the Six Months Ended Inception of
November 30, Exploration
2004 2003 State
----------------- ------------------ ------------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Loss $ (597,171) $ (2,096,037) $ (22,240,305)
Adjustments to Reconcile Net Loss to Net
Cash Used in Operating Activities:
Compensation Expense of Stock Options - 1,984,413 4,892,401
Common Stock Issued for Services - 13,500 16,267,500
Change in Operating Assets and Liabilities:
(Increase) Decrease in Receivables (602) (675) (1,946)
(Increase) Decrease in Prepaid Expenses (79) - (79)
Increase (Decrease) in Accounts Payable 3,974 2,475 20,377
Increase (Decrease) in Accrued Expense 2,489 - 2,489
----------------- ------------------ ------------------
Net Cash Used in Operating Activities (591,389) (96,324) (1,059,563)
----------------- ------------------ ------------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Net Cash Used in Investing Activities - - -
----------------- ------------------ ------------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from Sale of Common Stock 1,597,500 811,975 5,105,825
Proceeds from Contributed Capital - - 9,840
----------------- ------------------ ------------------
Net Cash Provided by Financing Activities 1,597,500 811,975 5,115,665
----------------- ------------------ ------------------
Net (Decrease) Increase in
Cash and Cash Equivalents 1,006,111 715,651 4,056,102
Cash and Cash Equivalents
at Beginning of Period 3,049,991 - -
----------------- ------------------ ------------------
Cash and Cash Equivalents
at End of Period $ 4,056,102 $ 715,651 $ 4,056,102
================= ================== ==================
PATRIOT GOLD CORP.
(An Exploration State Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
(Continued)
Cumulative
Since
June 1, 2000
For the Six Months Ended Inception of
November 30, Exploration
2004 2003 State
----------------- ------------------ ------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
During the six months ended November 30, 2003, the Company granted
3,735,000 stock options to various directors and consultants for an exercise
price ranging from $0.05 to $1.50 per share. Consulting expense of $1,984,413
was recorded.
On June 11, 2003, the Company issued 13,500,000 shares of preferred
stock to its president for services rendered. Consulting expense of $13,500 was
recorded.
On July 25, 2003, the Company issued 350,000 Class A warrants, 350,000
Class B warrants, 350,000 Class C warrants, and 350,000 Class D warrants. Each
warrant is exercisable, commencing October 25, 2003, for a period of three years
at a price of $1.40, $1.45, $1.50 and $1.55, respectively, for one share of
common stock.
On November 27, 2003, the Company issued 864,000 Class A warrants,
864,000 Class B warrants, 864,000 Class C warrants, and 864,000 Class D
warrants. The Class A warrants are exercisable on November 27, 2004 for a period
of five years at an exercise price of $1.40 per share of common stock; the Class
B warrants are exercisable on November 27, 2005 for a period of four years at an
exercise price of $1.45; the Class C warrants are exercisable on November 27,
2006 an at exercise price of $1.50; and the Class D warrants are exercisable on
November 27, 2007 at an exercise price of $1.55. The Company has the right, in
its sole discretion, to accelerate the exercise date of the warrants, to
decrease the exercise price of the warrants and/or extend the expiration date of
the warrants.
The accompanying notes are an integral part of these financial statements.
PATRIOT GOLD CORP.
(An Exploration State Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of accounting policies for Patriot Gold Corp. (An
Exploration State Company) is presented to assist in understanding the Company's
financial statements. The accounting policies conform to generally accepted
accounting principles and have been consistently applied in the preparation of
the financial statements.
Interim Reporting
The unaudited financial statements as of November 30, 2004 and for the
three and six month period then ended reflect, in the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
fairly state the financial position and results of operations for the six
months. Operating results for interim periods are not necessarily indicative of
the results which can be expected for full years.
Nature of Operations and Going Concern
The accompanying financial statements have been prepared on the basis
of accounting principles applicable to a "going concern", which assume that the
Company will continue in operation for at least one year and will be able to
realize its assets and discharge its liabilities in the normal course of
operations.
Several conditions and events cast doubt about the Company's ability to
continue as a "going concern". The Company has incurred net losses of
approximately $22,240,000 for the period from June 1, 2000 (inception of
exploration state) to November 30, 2004 and requires additional financing in
order to finance its business activities on an ongoing basis. The Company is
actively pursuing alternative financing and has had discussions with various
third parties, although no firm commitments have been obtained. However,
management believes that the money raised from the private placements in July
and November 2003 along with money from the exercising of stock options and
warrants, will be sufficient to continue planned operations for the remainder of
the current fiscal year.
The Company's future capital requirements will depend on numerous
factors including, but not limited to, acquiring interests in various mining
opportunities and the success of its current mining operations.
These financial statements do not reflect adjustments that would be
necessary if the Company were unable to continue as a "going concern". While
management believes that the actions already taken or planned, will mitigate the
adverse conditions and events which raise doubt about the validity of the "going
concern" assumption used in preparing these financial statements, there can be
no assurance that these actions will be successful.
PATRIOT GOLD CORP.
(An Exploration State Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Nature of Operations and Going Concern
If the Company were unable to continue as a "going concern", then
substantial adjustments would be necessary to the carrying values of assets, the
reported amounts of its liabilities, the reported expenses, and the balance
sheet classifications used.
Organization and Basis of Presentation
The Company was incorporated under the laws of the State of Nevada on
November 30, 1998. On June 11, 2003, the Company changed its name to Patriot
Gold Corp.
Nature of Business
The Company has no products or services as of November 30, 2004. The
Company operated from November 30, 1998 through approximately May 31, 2000 in
the production of ostrich meat. On June 1, 2000, the Company ceased operations.
In June 2003, Management decided to change the direction of the Company
and has decided to become a natural resource exploration company and will seek
opportunities in this field. The Company is currently engaging in the
acquisition, exploration, and if warranted and feasible, development of natural
resource properties. Since June 1, 2000, the Company is in the exploration
state.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents to the extent the funds are not being held for investment
purposes.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles required management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
PATRIOT GOLD CORP.
(An Exploration State Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Foreign Currency
Prior to the quarter ending August 31, 2003, the Company's primary
functional currency was the Canadian dollar. During, the quarter ended August
31, 2003, the Company underwent some significant changes in its operations.
Prior to May 31, 2000, the company was in the business of producing ostrich meat
in Canada. Subsequently on June 1, 2000, the Company ceased operations and
remained dormant until June 2003, when the Company decided to enter the mining
industry in the United States. Due to the change in direction the Company was
headed, the majority of its operations and transactions would be located in the
United States and the majority of the transaction would be in U.S. dollars. This
was considered "a significant change in economic facts and circumstances" per
SFAS 52, Appendix A and thus the Company changed its functional currency from
the Canadian dollar to the U.S. dollar.
The Company's primary functional currency is the U.S. dollar. However,
the Company still has a few transactions with Canadian suppliers. Transaction
gains and losses are included in income. However, for the periods ended November
30, 2004 and 2003, no transaction gains or losses occurred.
Concentration of Credit Risk
The Company has no significant off-balance-sheet concentrations of
credit risk such as foreign exchange contracts, options contracts or other
foreign hedging arrangements. The Company maintains the majority of its cash
balances with one financial institution, in the form of demand deposits.
Loss per Share
Net income (loss) per share is computed by dividing the net income by
the weighted average number of shares outstanding during the period. The effect
of the Company's common stock equivalents would be anti-dilutive for November
30, 2004 and 2003 and are thus not considered.
PATRIOT GOLD CORP.
(An Exploration State Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Comprehensive Income
The Company has adopted SFAS No. 130, "Reporting Comprehensive Income",
which establishes standards for reporting and display of comprehensive income,
its components and accumulated balances. The Company is disclosing this
information on its Consolidated Statement of Operations. Comprehensive income is
comprised of net income (loss) and all changes to capital deficit except those
resulting from investments by owners and distribution to owners.
Stock Options
The Company has adopted SFAS No. 123, "Stock Option and Purchase
Plans", which establishes standards for reporting compensation expense for stock
options that have been issued. The fair value of each stock option granted is
estimated using the Black-Scholes option-pricing model.
Exploration and Development Costs
On June 1, 2000, the Company ceased operations and until June 2003
conducted minimal administrative activities. The Company has been in the
exploration state since that time and has not yet realized any revenue from its
planned operations. It is primarily engaged in the acquisition, exploration and
development of mining properties. Mineral exploration costs and payments related
to the acquisition of the mineral rights are expensed as incurred. When it has
been determined that a mineral property can be economically developed as a
result of establishing proven and probable reserves, the costs incurred to
acquire and develop such property will be capitalized. Such costs will be
amortized using the units-of-production method over the estimated life of the
probable reserve.
Advertising Costs
Advertising costs are expensed as incurred. There was no advertising
expense for the periods ended November 30, 2004 and 2003.
PATRIOT GOLD CORP.
(An Exploration State Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 2 - INCOME TAXES
As of May 31, 2004, the Company had a net operating loss carryforward
for income tax reporting purposes of approximately $21,684,000 that may be
offset against future taxable income through 2022. Current tax laws limit the
amount of loss available to be offset against future taxable income when a
substantial change in ownership occurs. Therefore, the amount available to
offset future taxable income may be limited. No tax benefit has been reported in
the financial statements, because the Company believes there is a 50% or greater
chance the carryforwards will expire unused. Accordingly, the potential tax
benefits of the loss carryforwards are offset by a valuation allowance of the
same amount.
NOTE 3 - EXPLORATION STATE COMPANY/ GOING CONCERN
The Company has not begun principal operations and as is common with a
company in the exploration state, the Company has had recurring losses.
Continuation of the Company as a going concern is dependent upon obtaining the
additional working capital necessary to be successful in its planned activity,
and the management of the Company has developed a strategy, which it believes
will accomplish this objective through additional equity funding and long term
financing, which will enable the Company to operate for the coming year.
NOTE 4 - RELATED PARTY TRANSACTIONS
As of November 30, 2004, all activities of the Company have been
conducted by corporate officers from either their homes or business offices.
There are no commitments for future use of the facilities.
On June 12, 2003, the Company issued 13,500,000 Series A 7% Redeemable
Preferred Shares to Mr. Bruce Johnstone, a former director and sole officer. On
January 24, 2004, Mr. Johnstone converted these shares into the same number of
common shares and transferred 3,000,000 shares to each of the three directors,
Ronald C. Blomkamp, Robert D. Coale and Robert A. Sibthorpe. Compensation
expense of $16,254,000 was record in connection with the transfer.
PATRIOT GOLD CORP.
(An Exploration State Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 5 - STOCK OPTIONS / WARRANTS
Pursuant to a 2003 Stock Option Plan, grants of shares can be made to
employees, officers, directors, consultants and independent contractors of
non-qualified stock options as well as for the grant of stock options to
employees that qualify as incentive stock options under Section 422 of the
Internal Revenue Code of 1986 ("Code") or as non-qualified stock options. The
Plan is administered by the Option Committee of the Board of Directors (the
"Committee"), which has, subject to specified limitations, the full authority to
grant options and establish the terms and conditions for vesting and exercise
thereof. Currently the entire Board functions as the Committee.
In order to exercise an option granted under the Plan, the optionee
must pay the full exercise price of the shares being purchased. Payment may be
made either: (i) in cash; or (ii) at the discretion of the Committee, by
delivering shares of common stock already owned by the optionee that have a fair
market value equal to the applicable exercise price; or (iii) with the approval
of the Committee, with monies borrowed from us.
Subject to the foregoing, the Committee has broad discretion to
describe the terms and conditions applicable to options granted under the Plan.
The Committee may at any time discontinue granting options under the Plan or
otherwise suspend, amend or terminate the Plan and may, with the consent of an
optionee, make such modification of the terms and conditions of such optionee's
option as the Committee shall deem advisable.
On May 26, 2003, the Board of Directors approved a stock option plan
whereby 2,546,000 common shares have been set aside for employees and
consultants to be distributed at the discretion of the Board of Directors. On
September 22, 2003, the Board of Directors amended the stock option plan to
allow 3,000,000 additional options. As of May 31, 2004, 5,290,000 stock options
were granted to various directors and consultants for an exercise price ranging
from $.05 to $1.50 per share.
In most cases the fair value of the stock issued was higher then the
exercise price. Compensation expense of $4,892,401 has been recorded in
connection with the granting of the stock options as of May 31, 2004. The
Black-Scholes option pricing model was used to calculate to estimate the fair
value of the options granted. The following assumptions were made:
Risk Free Rate (Equal to Libor) 1.028%
Expected Life of Option 10 years
Expected Volatility of Stock (Based on Historical Volatility) 96.00%
Expected Dividend yield of Stock 0.00
PATRIOT GOLD CORP.
(An Exploration State Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 5 - STOCK OPTIONS / WARRANTS (Continued)
On July 25, 2003, the Company issued 350,000 Class A warrants, 350,000
Class B warrants, 350,000 Class C warrants, and 350,000 Class D warrants. Each
warrant is exercisable, commencing October 25, 2003, for a period of three years
at a price of $1.40, $1.45, $1.50 and $1.55, respectively, for one share of
common stock. The warrants were determined to have no value at the time of their
issuance. The shares and warrants were issued to David Langley, Almir Ramic and
Paul Uppal.
On November 27, 2003, the Company issued 864,000 Class A warrants,
864,000 Class B warrants, 864,000 Class C warrants, and 864,000 Class D
warrants. The Class A warrants are exercisable on November 27, 2004 for a period
of five years at an exercise price of $1.40 per share of common stock; the Class
B warrants are exercisable on November 27, 2005 for a period of four years at an
exercise price of $1.45; the Class C warrants are exercisable on November 27,
2006 an at exercise price of $1.50; and the Class D warrants are exercisable on
November 27, 2007 at an exercise price of $1.55. The Company has the right, in
its sole discretion, to accelerate the exercise date of the warrants, to
decrease the exercise price of the warrants and/or extend the expiration date of
the warrants. The warrants were determined to have no value at the time of their
issuance. The shares and warrants were issued to Jill Kurucz, Almir Ramic and
Colin Worth.
The following table sets forth the options and warrants outstanding as
of November 30, 2004.
Weighted
Option / Average Weighted
Warrants Exercise Average
Shares Price Fair Value
------------------ --------------- ----------------
Options & warrants outstanding, May 31, 2004 5,496,000 $ 1.32
Granted, Exercise price more than fair value - - -
Granted, Exercise price less than fair value - - -
Expired - -
Exercised - -
------------------
Options & warrants outstanding, November 30, 2004 5,496,000 $ 1.32
================== ===============
PATRIOT GOLD CORP.
(An Exploration State Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 5 - STOCK OPTIONS / WARRANTS (Continued)
The following table sets forth the options and warrants outstanding as
of November 30, 2003.
Weighted
Option / Average Weighted
Warrants Exercise Average
Shares Price Fair Value
------------------- ---------------- ----------------
Options & warrants outstanding, May 31, 2003 - $ -
Granted, Exercise price more than fair value 3,895,000 0.79 0.64
Granted, Exercise price less than fair value 4,696,000 1.05 1.88
Expired - -
Exercised (3,075,000) .56
-------------------
Options & warrants outstanding, November 30, 2003 5,516,000 $ 1.32
=================== ================
Exercise prices for optioned shares and warrants outstanding as of
November 30, 2004 ranged from $0.05 to $1.55. A summary of these options by
range of exercise prices is shown as follows:
Weighted- Weighted-
Weighted- Shares/ Average Average
Shares / Average Warrants Exercise Price Contractual
Exercise Warrants Exercise Currently Currently Remaining
Price Outstanding Price Exercisable Exercisable Life
------------------ ------------------ --------------- ------------------ --------------------- -----------------
$ 0.05 550,000 $ 0.05 550,000 $ 0.05 9 years
0.80 10,000 0.80 10000 0.80 9 years
1.03 80,000 1.03 80,000 1.03 9 years
1.40 to 1.45 2,428,000 1.43 700,000 1.43 4 years
1.50 to 1.55 2,428,000 1.52 700,000 1.52 4 years
NOTE 6 - COMMON STOCK TRANSACTIONS
The Company was incorporated to allow for the issuance of up to
100,000,000 shares of $.001 par value common stock (as amended).
At inception, the Company issued 7,600,000 shares of common stock to
its officers and directors for services performed and payments made on the
Company's behalf during its formation. This transaction was valued at
approximately $.001 per share or an aggregate approximate $1,000.
PATRIOT GOLD CORP.
(An Exploration State Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 6 - COMMON STOCK TRANSACTIONS (Continued)
On February 8, 1999, to provide initial working capital, the Company
authorized a private placement sale of an aggregate of 7,600,000 (1,000,000
pre-split) shares of common stock at approximately $.05 per share. The private
placement was completed April 1, 1999 and 7,630,400 shares were issued for
approximately $50,200 in proceeds to the Company which were primarily used to
pay operating expenses.
On June 12, 2003, the previous President of the Company, returned
5,320,000 (700,000 pre split) shares of common stock to the Company.
On July 25, 2003, the Company issued 350,000 shares of common stock and
1,400,000 warrants for $367,500 in cash to Almir Ramic, Paul Uppal and David
Langley. Shares and warrants were issued for $1.05 per share. The warrants were
determined to have no fair value at the time of their issuance and thus none of
the proceeds were allocated to the warrants.
On September 2, 2003, the Company's previous president converted his
13,500,000 shares of preferred stock into 13,500,000 shares of common stock. On
January 24, 2004, Mr. Johnstone transferred 3,000,000 common shares to each of
the three directors. Compensation expense of $16,254,000 was record in
connection with the transfer.
During September, October and November 2003, 3,075,000 common shares
were issued to various directors and consultants in connection with the
exercising of stock options for $1,710,225 in cash. The exercise price ranged
from $0.05 to $1.50.
On November 27, 2003, the Company issued 864,000 shares of common stock
and 3,456,000 warrants for $1,080,000 in cash to Almir Ramic, Colin Worth and
Jill Kurucz. Shares and warrants were issued for $1.25 per share. The warrants
were determined to have no fair value at the time of their issuance and thus
none of the proceeds were allocated to the warrants.
During the quarter ending February 29, 2004, 245,000 common shares were
issued in connection with the exercising of stock options for cash of $189,600.
The exercise price ranged from $0.75 to $1.03.
During March and April 2004, 1,335,000 common shares were issued in
connection with the exercising of stock options for cash of $1,837,500. The
exercise price ranged from $0.75 to $1.50.
PATRIOT GOLD CORP.
(An Exploration State Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 7 - PREFERRED STOCK
The Company has authorized a total of 20,000,000 shares of Preferred
Stock with a par value of $.001. As of November 30, 2003, there are no preferred
shares outstanding.
The Corporation is under no obligation to pay dividends on the Series A
Redeemable Preferred Stock, and the stock is redeemable at the option of the
Company.
In the event of any liquidation, dissolution or winding-up of the
Corporation, the holders of outstanding shares of Series A Preferred shall be
entitled to be paid out of the assets of the Corporation available for
distribution to shareholders, before any payment shall be made to or set aside
for holders of the Common Stock, at an amount of $.001 plus any unpaid and
accrued dividends per share.
A holder of Series A Preferred has the right to one vote per share in
the case of matters provided for in the General Corporation Law of the State of
Nevada or the Amended and Restated Articles of Incorporation or Bylaws to be
voted on by the holders of the Series A Preferred Stock as a separate class. In
the case of matters to be voted on by the holders of Common Stock and the
holders of Series A Preferred voting together as a single class, each share of
Series A Preferred, has full voting rights and powers equal to the voting rights
and powers of the holders of the Common Stock.
On June 11, 2003, the Company issued 13,500,000 Series A shares of
preferred stock to its president for services rendered and recorded $13,500 in
consulting expenses. The Series A shares have non-cumulative dividends of 7% of
the redemption price when declared by the Board. On September 2, 2003, the
Company's previous president converted his 13,500,000 shares of preferred stock
into 13,500,000 shares of common stock.
NOTE 8 - STOCK SPLIT
On June 17, 2003, the Company approved a forward split at a rate of one
for seven and six- tenths so that each share of common stock will be equal to
7.6 shares. All references to shares in the accompanying financial statements
have been adjusted for the stock split.
NOTE 9 - MINERAL PROPERTIES
The Company has an agreement with Minquest, Inc. which gives them the
right to purchase 100% of the mining interests of two Nevada mineral exploration
properties currently controlled by MinQuest, a natural resource exploration
company. Together, these two properties consist of 28 mining claims on a total
of 560 acres in the northwest trending Walker Lane located in western Nevada.
PATRIOT GOLD CORP.
(An Exploration State Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 9 - MINERAL PROPERTIES (Continued)
In order to earn a 100% interest in these two properties, the Company
must pay MinQuest, Inc. and incur expenditures relating to mining operations in
accordance with the following schedule: (i) on or before July 25, 2004, $20,000
to MinQuest and $75,000 in expenditures; (ii) on or before July 25, 2005,
$20,000 to MinQuest and an additional $100,000 in expenditures; (iii) on or
before July 25, 2006, $20,000 to MinQuest and an additional $100,000 in
expenditures; (iv) on or before July 25, 2007, $20,000 to MinQuest and an
additional $100,000 in expenditures; and (v) on or before July 25, 2008, an
additional $125,000 in expenditures. If the Company has not incurred the
requisite expenditures to maintain the option in good standing, the Company has
a 60-day period subsequent to July 25th to make such payment along with such
amount which shall be deemed to have been an expenditure incurred by us during
such period. Since the payment obligations are non-refundable, if the Company
does not make any payments, it will lose any payments made and all our rights to
the properties. If all said payments are made, then the Company will acquire all
mining interests in the property, subject to MinQuest retaining a 3% royalty of
the aggregate proceeds. The Company has the right at anytime to discontinue
making the payments if the exploration is determined to be unfeasible.
On February 19, 2004, the Company executed a formal agreement to
purchase 100% mining interest in the Moss Mine property located in the historic
Oatman gold mining district for $350,000. On February 27, 2004, $25,000 was paid
in connection with this agreement and three months after signing, on June 14,
2004, an additional $25,000 was paid. On or before the 6-month anniversary from
when we signed the definitive agreement, the balance of $300,000 was due to the
sellers. On August 27, 2004, the Company paid the final $300,000 to the sellers.
As of November 30, 2004, $395,000 has been paid in connection with the
acquisition of these rights and $478,387 has been paid for expenditures in
exploration of these properties. As these properties are unproven, all $873,387
has been expensed.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Certain statements contained in this report, including statements regarding the
anticipated development and expansion of our business, our intent, belief or
current expectations, primarily with respect to the future operating performance
of the Company and the feasibility of the property in which we have an interest
and other statements contained herein regarding matters that are not historical
facts, are "forward-looking" statements. Future filings with the Securities and
Exchange Commission, future press releases and future oral or written statements
made by us or with our approval, which are not statements of historical fact,
may contain forward-looking statements. Because such statements include risks
and uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. For a more detailed listing of some
of the risks and uncertainties we face, please see the 2004 Form 10-KSB filed by
us with the Securities and Exchange Commission.
All forward-looking statements speak only as of the date on which they are made.
We undertake no obligation to update such statements to reflect events that
occur or circumstances that exist after the date on which they are made.
OVERVIEW
We are a natural resource exploration company with an objective of acquiring,
exploring, and if warranted and feasible, developing natural resource
properties. Our primary focus in the natural resource sector is gold. We do not
consider ourselves a "blank check" company required to comply with Rule 419 of
the Securities and Exchange Commission, because we were not organized for the
purpose of effecting, and our business plan is not to effect, a merger with or
acquisition of an unidentified company or companies, or other entity or person.
We do not intend to merge with or acquire another company in the next 12 months.
Though we have the expertise on our board of directors to take a resource
property that hosts a viable ore deposit into mining production, the costs and
time frame for doing so are considerable, and the subsequent return on
investment for our shareholders would be very long term indeed. We therefore
anticipate selling any ore bodies that we may discover to a major mining
company. Most major mining companies obtain their ore reserves through the
purchase of ore bodies found by junior exploration companies. Although these
major mining companies do some exploration work themselves, many of them rely on
the junior resource exploration companies to provide them with future deposits
for them to mine. By selling a deposit found by us to these major mining
companies, it would provide an immediate return to our shareholders without the
long time frame and cost of putting a mine into operation ourselves, and it
would also provide future capital for the company to continue operations.
The search for valuable natural resources as a business is extremely risky. We
can provide investors with no assurance that the property we have optioned in
Nevada contains commercially exploitable reserves. Exploration for natural
reserves is a speculative venture involving substantial risk. Few properties
that are explored are ultimately developed into producing commercially feasible
reserves. Problems such as unusual or unexpected formations and other conditions
are involved in mineral exploration and often result in unsuccessful exploration
efforts. In such a case, we would be unable to complete our business plan and
any money spent on exploration would be lost.
Natural resource exploration and development requires significant capital and
our assets and resources are limited. Therefore, we anticipate participating in
the natural resource industry through the purchase of small interests in
producing properties, the purchase of property where feasibility studies already
exist or by the optioning of natural resource exploration and development
projects. To date we have acquired several properties and we have several
properties under option. We have already conducted various kinds of exploration
on these properties, including mapping, sampling, surveying and drilling, we
expect to conduct further exploration of these properties. There has been no
indication as yet that any mineral deposits exist on these properties, and there
is no assurance that a commercially viable mineral deposit exists on any of our
properties. Further exploration will be required before a final evaluation as to
the economic and legal feasibility is determined.
In the following discussion, there are references to "patented" mining claims
and "unpatented" mining claims. A patented mining claim is one for which the
U.S. government has passed its title to the claimant, giving that person title
to the land as well as the minerals and other resources above and below the
surface. The patented claim is then treated like any other private land and is
subject to local property taxes. An unpatented mining claim on U.S. government
lands establishes a claim to the locatable minerals (also referred to as
stakeable minerals) on the land and the right of possession solely for mining
purposes. No title to the land passes to the claimant. If a proven economic
mineral deposit is developed, provisions of federal mining laws permit owners of
unpatented mining claims to patent (to obtain title to) the claim. If you
purchase an unpatented mining claim that is later declared invalid by the U.S.
government, you could be evicted.
MinQuest Property Option Agreement
Pursuant to a Property Option Agreement with MinQuest, we have the option to
earn a 100% interest in the two Nevada mineral exploration properties that we
are currently exploring. An overview of our activities and obligations with
respect to these properties are set forth below.
BRUNER PROJECT
The property is located approximately 130 miles east-southeast of Reno, Nevada
at the northern end of the Paradise Range. Access from Fallon, the closest town
of any size, is by 50 miles of paved highway and 16 miles of gravel roads.
We hold the property via 16 unpatented mining claims (320 acres). We have an
option on the property with MinQuest, Inc., a Nevada Corporation, which
terminates if, prior to July 25, 2008, we fail to make any payments when due to
MinQuest, Inc. or complete property expenditures as required by the option. The
option will have been fully exercised, and we can earn a 100 percent interest in
these claims if we make payments to MinQuest of $70,000 and spend $275,000 in
exploration over a five year period ending on July 25, 2008. On July 25, 2003,
we paid MinQuest $10,000 with respect to the Bruner property, and we owe an
additional $60,000 which is due in four equal annual installments commencing on
July 25, 2004. With the approval of MinQuest, we paid the first installment late
on August 27, 2004. By July 25, 2004, we were to have spent $50,000 on
exploration, and by that date we had spent $64,000 on exploration of the Bruner
property. The $14,000 in excess of our required expenditures will be applied to
our exploration commitment due by July 25, 2005. We are obligated to spend
another $225,000 over the next four years as follows: $50,000 by each of July
25, 2005, 2006 and 2007 and $75,000 by July 25, 2008. As noted below, we expect
to spend an estimated $130,000 in the fall of 2004 on a five or six hole
drilling program. MinQuest retains a three percent NSR production royalty.
Our exploration program to date at Bruner has included:
o geologic mapping (producing a plan map of the rock types, structure and
alteration),
o rock chip geochemical sampling (sample of soil, rock, silt, water or
vegetation analyzed to detect the presence of valuable metals or other
metals which may accompany them (e.g., Arsenic may indicate the
presence of gold),
o a ground magnetic survey, and
o a Controlled Source Magneto Telluric survey (recording variations in a
generated electrical field using sophisticated survey methods).
In October 2004, we received the approval of a Notice of Intent for Exploration
Drilling, and an environmental bond filed with the Nevada office of the Bureau
of Land Management. A total of 18 drill sites have been located to target both
extensions of the gold intercepts in previous drilling and geophysical anomalies
found by a CSMT survey. A CSMT survey is an electromagnetic method used to map
the variation of the Earth's resistance to conduct electricity by measuring
naturally occurring electric and magnetic fields at the Earth's surface. With
the proper approvals in place, we began drilling on the Bruner property on
December 20, 2004. This drilling program is expected to continue through January
2005. We expect to drill a total of 6 to 9 holes with depths ranging form 300 to
1,150 feet. This drilling program will test possible extensions of gold
mineralization intersected in historic drilling as well as the large CSMT
geophysical anomaly located under gravel cover. We expect results from the
drilling program to be available by February 2005.
The drilling program that we began on December 20, 2004, as described in the
preceding paragraph, is estimated to cost $130.000. If this drilling program
produces favorable results, and a second phase is warranted, then we would
follow up with additional reverse circulation drilling as well as some core
drilling which would help to further delineate the underground geological
structure. The total cost of a phase 2 work program would be around $70,000.
VERNAL PROJECT
The property is located approximately 140 miles east-southeast of Reno, Nevada
on the west side of the Shoshone Mountains. Access from Fallon, the closest town
of any size, is by 50 miles of paved highway and 30 miles of gravel roads.
We hold the property via 12 unpatented mining claims (240 acres). We have an
option on the property with MinQuest, Inc., a Nevada Corporation, which
terminates if, prior to July 25, 2008, we fail to make any payments when due to
MinQuest, Inc. or complete property expenditures as required by the option. The
option will have been fully exercised, and we can earn a 100 percent interest in
these claims, if we make payments to MinQuest of $22,500 and spend $250,000 in
exploration over a five year period ending July 25, 2008. On July 25, 2003, we
paid MinQuest $2,500 with respect to the Vernal property, and we owe an
additional $20,000 which is due in four equal annual installments commencing on
July 25, 2004. With MinQuest's approval, we paid the first installment of $5,000
late on August 27, 2004. By July 25, 2004 we were required to spend $20,000 on
exploration, and we had already spent $21,500 on exploration of the Vernal
property. The $1,500 excess of our required expenditure will be applied towards
our exploration commitment due by July 25, 2005. We are obligated to spend
another $205,000 over the next four years as follows: $50,000 by each of July
25, 2005, 2006, 2007 and $55,000 by July 25, 2008. As noted below, we expect to
secure the proper permits for trenching from the U.S. Forest Service by the end
of Spring 2005 and then spend an estimated $30,000 in the summer 2005 on
trenching and additional geochemical sampling. MinQuest retains a three percent
NSR production royalty.
Our exploration of the Vernal property to date has consisted of geologic mapping
and rock chip geochemical sampling. Trenching and additional geochemical
sampling is now planned for the summer of 2005 after we secure trenching permits
from the U.S. Forest Service, which we expect will be completed by the end of
Spring 2005. We currently have no plans for any drilling of the Vernal property.
Trenching is a cost effective way of examining the structure and nature of
mineral ores just beneath the surface. It involves digging long usually shallow
trenches in carefully selected areas to expose unweathered rock and allow
sampling. The cost of trenching and sampling at Vernal will be approximately
$40,000. We currently have no plans for any drilling of the Vernal property, but
if a significant thickness of anomalous gold is found in the trenches, the area
would be drilled. This would involve five or six holes approximately 300 feet
deep. The cost of this drilling program would be around $75,000.
In July 2003, members of our Board of Directors and geology team made an onsite
inspection of both properties optioned by the company from MinQuest. From this
visit, an exploration plan was determined and a schedule to begin work on the
properties was organized to commence in the month of September 2003. On
September 19, 2003 the company announced that an exploration program consisting
of geologic mapping and surface geochemical sampling was underway on the Bruner
property and that a Global Positioning System geophysical survey (electrical,
magnetic and other means used to detect features, which may be associated with
mineral deposits) conducted on the ground was scheduled for later that month.
Such a survey measures the magnetic variations within the underlying rocks.
Since then, a ground magnetics survey and detailed mapping and rock sampling of
the western portion of the claim block on the Bruner property has been
completed. The rock sampling is a collection of a series of small chips over a
measured distance, which is then submitted for a chemical analysis, usually to
determine the metallic content over the sampled interval. The magnetics indicate
the presence of northwesterly and northerly trending faults under the pediment
cover that may host gold mineralization. A fault, which is a break in the rock
along which the movement has taken place, are often the sites for the deposition
of metallic rich fluids. A pediment cover is a broad, gently sloping surface at
the base of a steeper slope. Geologic mapping of rocks exposed in the western
portion of the Patriot held claims show several small quartz bearing structures
trending northwest and dipping steeply to the northeast. These small structures
are thought to be related to a much larger vein, often filled with quartz,
contained within a fault or break in the rock (a fault-hosted vein system) under
gravel cover in the broad valley south of the mapping. Approximately 1 square
mile of ground magnetics was completed at Bruner. The survey was done on 50
meter spaced lines, run north-south using a GPS controlled Geometrics
magnetometer, which is the geophysical instrument used in collecting magnetic
data with an attached GPS that allows the operator to more precisely determine
the location of each station where the magnetic signature is taken. . The
interpretation shows numerous northwest and north-south trending magnetic lows
associated with faults. Magnetic lows are an occurrence that may be indicative
of a destruction of magnetic minerals by later hydrothermal (hot water) fluids
that have come up along these faults. These hydrothermal fluids may in turn have
carried and deposited precious metals such as gold and/or silver. To the
southeast, under gravel cover (where there is no exposure of rock at the
surface), is a much more continuous northwest trending feature that has not been
drill tested, and data is sufficiently encouraging that an expanded CSMT survey
is recommended to trace these structures in the third dimension. Three or four
north-south lines of CSMT are scheduled and further work is ongoing.
MINQUEST PROPERTY AT MOSS MINE: The project area is 10 miles east of Bullhead
City, Arizona and approximately 70 miles southeast of Las Vegas, Nevada. Access
is via gravel roads from Bullhead City.
We hold the property in the Moss Mine region via 65 unpatented mining claims and
7 patented claims (1300 total acres). The unpatented claims are held under a
lease/purchase agreement with MinQuest, Inc., a Nevada Corporation. On March 4,
2004, we signed the agreement that earned us a 100 percent interest in these
claims by paying MinQuest a one time lease fee of $50,000. The fee of $50,000
was paid on July 7, 2004. A three percent NSR production royalty is retained by
MinQuest. The patented claims are held collectively by numerous owners within
the extended Williams family, and we have the right to purchase these patented
claims from these owners under the terms of a letter of intent which is
discussed in the subsequent section titled "Letter of Intent for the Williams
Property at the Moss Mine Property".
The Moss Mine was the first gold discovery made in the Oatman district.
Discovered in 1864, the mine was worked discontinuously through the 1930's.
Production records are very poor, with past writers listing production equal to
or greater than $250,000. The mine lay idle until the early 1980's when a number
of mining companies explored the district. These companies included Billiton
Minerals, Magma Copper, Golconda Resources and Addwest Minerals.
Our exploration of the MinQuest property has consisted of geologic mapping, vein
geochemical sampling and drill testing of the identified veins. Drilling is in
progress. Total project exploration cost is estimated to be $500,000.
Phase 1 drilling has been completed at the MinQuest property. A total of 36
holes were drilled totaling 2,471 meters (8,107 feet). Thirty holes were drilled
on the Moss property, and six holes were drilled on one of the adjacent parcels
of land. Geochemical results of gold and silver assaying are currently being
collected, plotted and cross-sections constructed. Final results from the Phase
1 drilling were sufficiently encouraging that we are now in the planning stages
of acquiring key targeted claims by mid-2005, and then conducting phase 2
drilling program on those claims, by the fall of 2005. We are also in the
process of preparing a budget, schedule and outline of such a drilling program..
The project area is underlain by Tertiary quartz monzonite (a coarsely
crystalline rock composed primarily of the minerals quartz, plagioclase and
orthoclase) intruding tertiary volcanics. Precambrian basement rocks underlie
the volcanics. The veins consist of quartz-calcite and lesser adularia. The
principal vein is up to 45 feet thick and can be followed on surface for over
5,000 feet. The hanging wall of the veins commonly have several tens of feet of
stockwork veining. Gold values are somewhat erratic, but appear to be highest in
the thicker and deeper parts of the vein explored to date.
With the expertise provided by our Board of Directors and consulting geology
professionals, all of whom have been compensated by way of the company stock
option plan, we now have the expertise required to decide if we should invest in
a particular project. This decision will be based on information that will be
provided by the vendor or the project and by information collected by our
experts through independent due diligence, and include at least the following:
* A description of the project and the location of the property;
* The lands that will be subject to the exploration project;
* The royalties, net profit interest or other charges applicable to the
subject lands;
* The estimated cost of any geophysical work contemplated; and
* The estimated acquisition costs, exploration costs and development
costs of the property.
Letter of Intent for Williams Property at the Moss Mine
In November 2003 we executed a letter of intent to purchase a 100% interest in
the Moss Mine property owned by an extended family and which is located in the
historic Oatman gold mining district. This property is unrelated to and separate
from the MinQuest property also located in the Moss Mine region. Work already
completed on this property includes a pre-feasibility study as well as 36,000
feet of primarily reverse circulation drilling which was done over twenty years
ago. Reverse circulation drilling is a less expensive form of drilling that does
not allow for the recovery of a tube or core of rock, in which the material is
brought up from depth as a series of small chips of rock that are then bagged
and sent in for analysis. Though this is a quicker and cheaper method of
drilling, reverse circulation drilling does not necessarily give as much
information about the underlying rocks.
The property is comprised of six patented claims, which as a group, we call the
Williams property. These claims are held collectively by as many as 23 owners
within an extended family who are represented by Barbara Williams, a realtor,
and a member of this extended family, who put together the letter of intent and
arranged for the signing of the agreement by the numerous owners. None of these
owners, including Barbara Williams, has or has had any relationship or
affiliation with us prior to the agreement for the Williams property.
The letter of intent grants us an exclusive right to close on the purchase of
the Williams property for six months from the date the contract is executed.
On February 19, 2004, we executed a formal agreement to purchase the Williams
property for $350,000. On February 27, 2004 we deposited $25,000 with the title
company, which was acting as escrow agent, and three months after signing, on
June 14, 2004, we deposited an additional $25,000. When the title company,
acting as escrow agent, received the signature pages from the various sellers,
the initial $25,000 deposit was to be delivered to the sellers. On the
three-month anniversary from when we signed the definitive agreement, the second
$25,000 was to be delivered to the sellers. By mid July, 2004, the escrow agent
had received 19 of the 23 signatures, which under Arizona law was enough to
complete the transaction, and on July 24, 2004, the first and second deposits of
$25,000 each were released to the sellers. On or before the 6-month anniversary
from when we signed the definitive agreement, the balance of $300,000 was due to
the sellers. As a result of our due diligence, we decided to complete the
purchase of the Williams property. On August 27, 2004 we paid the final $300,000
to the escrow agent for the closing of the sale. The escrow agent will release
the $300,000 to the sellers at the closing of the sale. Upon the closing of the
sale, we will own 100% interest in the Williams property.
Seller has delivered to us all information in their possession regarding the
property. During the six month period after the signing of the definitive
agreement we had the right to conduct our due diligence on the property and if
we decided not to proceed we had to give the sellers and escrow agent notice no
less than 10 days prior to the six-month anniversary of our intention not to
close. During this period we could not perform mining or remove any ore from the
property. We were responsible for all costs and expenses associates with the
purchase of the property, including escrow fees, cost of feasibility study,
charges resulting from any tests, environmental assessments reports or surveys,
and any exploration activity costs. Once we had concluded our analysis and had
determined that it is feasible to close on the purchase of the property, doing
so would give us full rights to begin mining operations.
Due Diligence Performed on the Williams Property
In October 2003, our director Robert Sibthorpe (who is a geologist by training)
evaluated a proposal for the purchase of the Moss mine in Arizona. His
recommendation was to visit the site, and if the visual inspection supported the
information presented in the proposal, then an offer to purchase should be drawn
up. At the recommendation of Mr. Sibthorpe, on January, 2004, Mr. Robert Coale
(P.Eng.), another one of our directors visited the site to see the overall
geological setting and occurrence of mineralization and evaluate the drilling
program proposed by MinQuest, the company that we would contract to co-ordinate
any work programs undertaken. At this time, the recent metallurgical data and
reports that had been collected from the sellers were reviewed for study. Mr.
Coale's analysis revealed that reagent (liquid chemicals used for leaching)
consumptions are acceptable and deleterious compounds (things present in the ore
that would be difficult to work with) are not apparent. He recommended bulk
sampling at a selected location in the future once the definition of the ore
body is further advanced through drilling. On January 31, 2004 Robert Sibthorpe
wrote a report with a summery of the property, and reviewing the Draft Budget
supplied by Richard Kern, our work program contractor, that was laid out for the
drilling program planned for the property. The drilling was conducted throughout
the spring and early summer of 2004, and in June, 2004, Mr. Sibthorpe wrote a
report incorporating the results of the drilling program which encouraged us to
pursue the project. Also in June 2004, Mr. Kern sent a Memo to the Company
regarding the potential at the Williams property. Mr. Kern's recommendation was
that we should proceed with the purchase of the Williams property.
Based on the information gathered in this due diligence process, and on the
recommendation of our board members and consultants, the decision to proceed
with the purchase of the Williams property was made. On August 27, 2004, the
final payment of $300,000 was paid to the escrow agent for the closing of the
sale. On November 11, 2004, the escrow agent released the $300,000 to the
sellers for the closing of the sale, and, as a result, we now own 100% interest
in the Williams property.
RESULTS OF OPERATIONS
For the quarter ended November 30, 2004 compared to the same period in
2003 are not necessarily indicative of the results that may be expected for the
year ended May 31, 2005.
The Company had no sales and sales revenues from continuing operations
for the three months ended November 30, 2004 and no sales for the three months
ended November 30, 2003 from continuing operations.
The Company had no selling and marketing expenses from continuing
operations for the three months ended November 30, 2004 and the three months
ended November 30, 2003. Mining Costs were $107,393 and $522,839 for the three
and six months ended November 30, 2004 and $27,010 and $42,757 for the three and
six months ended November 30, 2003. These expenses include money paid for
acquiring mineral rights and exploration costs related to these rights. General
and administrative expenses were $46,656 and $76,751 for the three and six
months ended November 30, 2004 and $1,770,643 and $2,053,280 for the three and
six months ended November 30, 2003. The decrease in general and administrative
expenses from 2003 to 2004 is largely attributable to consulting fees as a
result of the issuance of stock options to various consultants that were issued
at a discounted price. The Company felt this was necessary in order to attract
the best consultants in the field of geology, ground operations, corporate
development and financial management to work for the Company, without having to
compensate them by way of cash paid directly from the funds that have been
raised for project operations. Compensation expense was determined using the
Black-Scholes method. We expect such expenses to continue in the future.
The Company recorded a net loss of $151,630 and $597,171for the three
and six months ended November 30, 2004 compared to a net loss of $1,797,653 and
$2,096,037 for the same periods in 2003. The decrease in net loss from 2003 to
2004 is largely attributable to the Company not issuing stock options to
consultants for a discounted exercise price.
LIQUIDITY AND CAPITAL RESOURCES
Our balance sheet as of November 30, 2004 reflects assets of $4,058,127
consisting of $4,056,102 in cash and $2,025 in other current assets. Total
liabilities on the balance sheet as of November 30, 2004 reflect current
liabilities of $29,109, consisting of accounts payable of $26,620 and accrued
expenses of $2,489.
Cash and cash equivalents from inception to date have been insufficient to
provide the operating capital necessary to operate. The Company has raised funds
the exercising of stock options and the sale of common stock and warrants. For
the six months ended November 30, 2004, the Company received $1,597,500 from the
exercise of stock options.
GOING CONCERN CONSIDERATION
As indicated in the accompanying balance sheet, as of November 30, 2004 we had
$4,056,102 in cash available and current liabilities of $29,109. The cash was as
a result of the private placement in which the Company received $1,447,500 and
from the exercise of stock options from which the Company received $3,658,325.
Management believes that the gross proceeds from the private placements and from
the exercise of stock options will be sufficient to continue our planned
activities until May 31, 2005, the end of our current fiscal year. However, we
anticipate generating losses and therefore we may be unable to continue
operations in the future as a going concern. In addition, if we want to maintain
our interest in the MinQuest property, on or before July 25, 2005 we are
required to incur no less than $100,000 in expenditures in connection with
mining operations as well as paying MinQuest $20,000. Our plans to deal with
this uncertainty include raising additional capital or entering into a strategic
arrangement with a third party. There can be no assurance that our plans can be
realized. No adjustment has been made in the accompanying financial statements
to the amounts and classification of assets and liabilities that could result
should be unable to continue as a going concern.
We currently have no agreements, arrangements or understandings with any person
to obtain funds through bank loans, lines of credit or any other sources.
Accordingly, we have added a note to the accompanying financial statements
regarding concerns about our ability to continue as a going concern. Our
financial statements contain additional note disclosures describing the
circumstances that lead to this note being included in our financial statements.
OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements.
ITEM 3. CONTROLS AND PROCEDURES.
The Company's president acts both as the Company's chief executive officer and
chief financial officer and is responsible for establishing and maintaining
disclosure controls and procedures for the Company.
(a) Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's President, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures
pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Based upon the evaluation, the Company's President
concluded that, as of the end of the period, the Company's disclosure controls
and procedures were effective in timely alerting him to material information
relating to the Company required to be included in the reports that the Company
files and submits pursuant to the Exchange Act.
(b) Changes in Internal Controls
Based on his evaluation as of November 30, 2004, there were no significant
changes in the Company's internal controls over financial reporting or in any
other areas that could significantly affect the Company's internal controls
subsequent to the date of his most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
PART II -OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We are not involved in any pending legal proceedings nor are we aware of any
pending or contemplated proceedings against us. We know of no legal proceedings
pending or threatened, or judgments entered against any of our directors or
officers in their capacity as such.
ITEM 2. CHANGES IN SECURITIES. None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None.
ITEM 5. OTHER INFORMATION. None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit 31 - Certification of Principal Executive and Financial Officer
pursuant to Rule 13a-14 of the Securities and Exchange Act of 1934 as amended,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32 - Certification of Principal Executive and Financial Officer
Pursuant to 18 U.S.C Section 1350 as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K. None.
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange
act of 1934, as amended, the Registrant has duly caused this report to be signed
on behalf by the undersigned, thereunto duly authorized.
PATRIOT GOLD CORP.
Date: January 7, 2005 By /s/ Ronald C. Blomkamp
-----------------------
Ronald C. Blomkamp
President, Chief Executive
Officer, Chief Financial Officer,
Secretary and Treasurer