form10qsb113007.htm
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, 2007
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
(Exact
name of registrant as specified in its charter)
Nevada
(State
or other jurisdiction
of
incorporation or organization)
|
86-0947048
(I.R.S.
Employer Identification No.)
|
501-1775
Bellevue Avenue,
West Vancouver B.C. V7V 1A9, Canada
(Address
of principal executive offices) (Zip Code)
(604)
925-5257
(Registrant's
telephone number, including area code)
(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.
Yes
[X]
No [ ]
Indicate
by check mark whether the registrant is a shell company (as defined by Rule
12b-2 of the Exchange Act). Yes [_] No
[X]
State
the
number of shares outstanding of each of the issuer's classes of common stock,
as
of the latest practicable date: 26,224,400 shares of common stock, $0.001 par
value, issued and outstanding as of January 10, 2008.
Transitional
Small Business Disclosure Format (elect one) Yes [_] No
[X]
TABLE
OF
CONTENTS
|
Page
|
|
|
|
|
PART
I - Financial Information
|
3
|
|
|
|
|
Item
1. Financial Statements
|
3
|
|
Balance
Sheets November 30, 2007 (unaudited), and May 31, 2007
|
3
|
|
Statements
of Operations for the three and six-month periods ended
|
4
|
|
November
30, 2007 and 2006, and for the period from inception
|
|
|
of
exploration state on June 1, 2000 to November 30, 2007.
|
|
|
Statements
of Cash Flows for the six-month periods ended
|
5
|
|
November
30, 2007 and 2006, and for the period from inception
|
|
|
of
exploration state on June 1, 2000 to November 30, 2007.
|
|
|
Notes
to the Financial Statements
|
7
|
|
Item
2. Management’s Discussion and Analysis or Plan of
Operation
|
14
|
|
Item
3 Controls and Procedures
|
20
|
|
|
|
|
PART
II – Other Information
|
21
|
|
|
|
|
Item
1. Legal Proceedings
|
21
|
|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
21
|
|
Item
3. Defaults Upon Senior Securities
|
21
|
|
Item
4. Submission of Matters to a Vote of Security Holders
|
21
|
|
Item
5. Other Information
|
21
|
|
Item
6. Exhibits
|
21
|
|
Item
1. Financial Statements.
PATRIOT
GOLD CORP.
(An
Exploration State Company)
BALANCE
SHEETS
|
|
(Unaudited)
|
|
|
|
|
|
|
November
30,
|
|
|
May
31,
|
|
|
|
2007
|
|
|
2007
|
|
ASSETS:
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash
|
|
$ |
2,975,816 |
|
|
$ |
3,029,331 |
|
Prepaid
expenses
|
|
|
6,472 |
|
|
|
1,472 |
|
|
|
|
|
|
|
|
|
|
Total
Current Assets
|
|
|
2,982,288 |
|
|
|
3,030,803 |
|
|
|
|
|
|
|
|
|
|
Office
Equipment, Net
|
|
|
1,050 |
|
|
|
1,749 |
|
Reclamation
Deposit
|
|
|
900 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$ |
2,984,238 |
|
|
$ |
3,032,552 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
& STOCKHOLDERS’ EQUITY:
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
Accounts
Payable
|
|
$ |
109,016 |
|
|
$ |
2,084 |
|
|
|
|
|
|
|
|
|
|
Total
Current Assets
|
|
|
109,016 |
|
|
|
2,084 |
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
|
|
|
Preferred
Stock, Par Value $.001
|
|
|
|
|
|
|
|
|
Authorized
20,000,000 shares,
|
|
|
|
|
|
|
|
|
No
shares issued at November 30, 2007 and May 31, 2007
|
|
|
- |
|
|
|
- |
|
Common
Stock, Par Value $.001
|
|
|
|
|
|
|
|
|
Authorized
100,000,000 shares,
|
|
|
|
|
|
|
|
|
Issued
26,224,400 shares at
|
|
|
|
|
|
|
|
|
November
30, 2007 and May 31, 2007
|
|
|
26,224 |
|
|
|
26,224 |
|
Paid-In
Capital
|
|
|
26,380,276 |
|
|
|
26,383,636 |
|
Currency
Translation Adjustment
|
|
|
(16,361
|
)
|
|
|
(16,361
|
)
|
Deficit
Accumulated Since Inception of Exploration State
|
|
|
(23,473,835
|
)
|
|
|
(23,321,949
|
)
|
Retained
Deficit
|
|
|
(41,082
|
)
|
|
|
(41,082
|
)
|
|
|
|
|
|
|
|
|
|
Total
Stockholders' Equity
|
|
|
2,875,222 |
|
|
|
3,030,468 |
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' Equity
|
|
$ |
2,984,238 |
|
|
$ |
3,032,552 |
|
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
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
State
|
|
Revenues
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Cost
of Revenues
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Margin
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mining
Costs
|
|
|
113,867 |
|
|
|
12,400 |
|
|
|
153,700 |
|
|
|
51,003 |
|
|
|
1,970,459 |
|
General
& Administrative
|
|
|
50,705 |
|
|
|
77,468 |
|
|
|
66,975 |
|
|
|
98,265 |
|
|
|
21,859,138 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss from Operations
|
|
|
(164,572
|
)
|
|
|
(89,868
|
)
|
|
|
(220,675
|
)
|
|
|
(149,268
|
)
|
|
|
(23,829,597
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest,
Net
|
|
|
30,911 |
|
|
|
32,127 |
|
|
|
60,973 |
|
|
|
64,550 |
|
|
|
358,073 |
|
Currency
Exchange
|
|
|
5,628 |
|
|
|
- |
|
|
|
7,816 |
|
|
|
(27
|
)
|
|
|
(2,311
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$ |
(128,033 |
)
|
|
$ |
(57,741 |
)
|
|
$ |
(151,886 |
)
|
|
$ |
(84,745 |
)
|
|
$ |
(23,473,835 |
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
& Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per Share
|
|
$ |
(0.00 |
)
|
|
$ |
(0.00 |
)
|
|
$ |
(0.00 |
)
|
|
$ |
(0.00 |
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighed
Average Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
26,224,400 |
|
|
|
26,279,400 |
|
|
|
26,224,400 |
|
|
|
26,279,400 |
|
|
|
|
|
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
|
|
|
|
2007
|
|
|
2006
|
|
|
State
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(151,886
|
)
|
|
$
|
(84,745
|
)
|
|
$
|
(23,473,835
|
)
|
Adjustments
to Reconcile Net Loss to Net
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Used in Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
Expense of Stock Options
|
|
|
(3,360
|
)
|
|
|
9,100
|
|
|
|
5,002,135
|
|
Common
Stock Issued for Services
|
|
|
—
|
|
|
|
—
|
|
|
|
16,267,500
|
|
Depreciation
|
|
|
699
|
|
|
|
698
|
|
|
|
3,143
|
|
Change
in Operating Assets and Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase)
Decrease in GST Receivable
|
|
|
—
|
|
|
|
2,538
|
|
|
|
-
|
|
(Increase)
Decrease in Prepaid Expenses
|
|
|
(5,000
|
)
|
|
|
(15,000
|
)
|
|
|
(6,472
|
)
|
Increase
(Decrease) in Accounts Payable
|
|
|
106,932
|
|
|
|
16,908
|
|
|
|
102,773
|
|
Net
Cash Used in Operating Activities
|
|
|
(52,615
|
)
|
|
|
(70,501
|
)
|
|
|
(2,104,756
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of Office Equipment
|
|
|
—
|
|
|
|
—
|
|
|
|
(4,193
|
)
|
Reclamation
Deposit
|
|
|
(900
|
)
|
|
|
—
|
|
|
|
(900
|
)
|
Net
Cash Used in Investing Activities
|
|
|
(900
|
)
|
|
|
—
|
|
|
|
(5,093
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from Sale of Common Stock
|
|
|
—
|
|
|
|
—
|
|
|
|
5,105,825
|
|
Redemption
of Common Stock
|
|
|
—
|
|
|
|
—
|
|
|
|
(30,000
|
)
|
Proceeds
from Contributed Capital
|
|
|
—
|
|
|
|
—
|
|
|
|
9,840
|
|
Net
Cash Provided by Financing Activities
|
|
|
—
|
|
|
|
—
|
|
|
|
5,085,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(Decrease) Increase in Cash and Cash Equivalents
|
|
|
(53,515
|
)
|
|
|
(70,501
|
)
|
|
|
2,975,816
|
|
Cash
and Cash Equivalents at Beginning of Period
|
|
|
3,029,331
|
|
|
|
3,263,024
|
|
|
|
—
|
|
Cash
and Cash Equivalents at End of Period
|
|
$
|
2,975,816
|
|
|
$
|
3,192,523
|
|
|
$
|
2,975,816
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
Cash
paid during the year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Income
taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
SUPPLEMENTAL
DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
|
Settlement
of Subscription Receivable by the
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation
of Common
Stock
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
79,000
|
|
On
March
10, 2006 the Company granted 1,000,000 stock options to various directors and
consultants for an exercise price of $0.25 per share. An aggregate consulting
expense of $113,094 relating to these stock options has been recorded to May
31,
2007. The vesting period for some of these options is up to three
years. As a result, the unvested portions of the options have been
revalued at November 30, 2007 resulting in a reversal of stock option expense
of
$3,360 due to a reduction in the fair value of the options as determined by
the
Black-Scholes model between the last revaluation date of May 31, 2007 and
November 30, 2007.
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 information furnished herein reflects all adjustments,
which
in the opinion of management are necessary to fairly state the financial
position of Patriot Gold Corp. (the “Company”) and the results of its operations
for the periods presented. This report on Form 10-QSB should be read
in conjunction with the Company’s financial statements and notes thereto
included in the Company’s Form 10-KSB for the fiscal year ended May 31,
2007. The Company assumes that the users of the interim financial
information herein have read or have access to the audited financial statements
for the preceding fiscal year and that the adequacy of additional disclosure
needed for a fair presentation may be determined in that
context. Accordingly, footnote disclosure, which would substantially
duplicate the disclosure contained in the Company’s Form 10-KSB for the fiscal
year ended May 31, 2007 has been omitted. The results of operations
for the three and six-month periods ended November 30, 2007 are not necessary
indicative of results for the entire year ending May 31, 2008.
Nature
of Operations
The
Company has no products or services as of November 30, 2007. 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 became
a
natural resource exploration company and will continue to 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 has been in the exploration
state.
Going
Concern
The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern.
As
shown
in the accompanying financial statements, the Company has incurred a net loss
of
$23,473,835 for the period from June 1, 2000 (inception of exploration state)
to
November 30, 2007, and has no sales. The future of the Company is
dependent upon its ability to obtain future financing and upon future profitable
operations from the development of its mineral properties. Management
is not currently seeking additional capital but will be required to do so in
order to continue to operate in the future. The financial statements
do not include any adjustments relating to the recoverability and classification
of recorded assets, or the amounts of and classification of liabilities that
might be necessary in the event the Company cannot continue in
existence.
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.
PATRIOT
GOLD CORP.
(An
Exploration State Company)
NOTES
TO
FINANCIAL STATEMENTS
(Continued)
NOTE
1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
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.
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.
Office
Equipment
Office
equipment is recorded at cost and is depreciated using the straight-line method
over its expected useful life, which is estimated at three
years. Depreciation expense of $699 was charged to general and
administrative expenses during the six-months ended November 30, 2007 (2006
-
$698).
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.
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. For the six-month period ended November 30, 2007 the Company
recognized a transaction gain of $7,816 (2006 – loss of $27).
Concentration
of Credit Risk
The
Company has no 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, 2007
and 2006 and are thus not presented.
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
Effective
June 1, 2006, the company adopted the provisions of SFAS No. 123(R). SFAS
No. 123(R) requiring employee equity awards to be accounted for under the
fair value method. Accordingly, share-based compensation is measured at grant
date, based on the fair value of the award. Prior to June 1, 2006, the
company accounted for awards granted to employees under its equity incentive
plans under the intrinsic value method prescribed by Accounting Principles
Board
(APB) Opinion No. 25, “Accounting for Stock Issued to Employees” (APB
25), and related interpretations, and provided the required pro forma
disclosures prescribed by SFAS No. 123, “Accounting for Stock-Based
Compensation” (SFAS No. 123), as amended. No stock options
were granted to employees during the three or six-months ended November 30,
2007
or 2006 and accordingly, no compensation expense was recognized under APB No.
25
for the three or six-months ended November 30, 2007 or 2006. In
addition, no compensation expense is required to be recognized under provisions
of SFAS No. 123(R) with respect to employees.
Under
the
modified prospective method of adoption for SFAS No. 123(R), the
compensation cost recognized by the company beginning on June 1, 2006 includes
(a) compensation cost for all equity incentive awards granted prior to, but
not yet vested as of June 1, 2006, based on the grant-date fair value
estimated in accordance with the original provisions of SFAS No. 123, and
(b) compensation cost for all equity incentive awards granted subsequent to
June 1, 2006, based on the grant-date fair value estimated in accordance
with the provisions of SFAS
No. 123(R).
The company uses the straight-line attribution method to recognize share-based
compensation costs over the service period of the award. Upon exercise,
cancellation, forfeiture, or expiration of stock options, or upon vesting or
forfeiture of restricted stock units, deferred tax assets for options and
restricted stock units with multiple vesting dates are eliminated for each
vesting period on a first-in, first-out basis as if each vesting period was
a
separate award. To calculate the excess tax benefits available for use in
offsetting future tax shortfalls as of the date of implementation, the company
followed the alternative transition method discussed in FASB Staff Position
No. 123(R)-3.
During
the three and six-month periods ended November 30, 2007 and 2006 no stock
options were granted to non-employees. Accordingly, no stock-based
compensation expense was recognized for new stock option grants in the Statement
of Operations at November 30, 2007 or 2006.
Compensation
expense for unvested options granted to non-employees in previous periods is
revalued at each period end and is being amortized over the vesting period
of
the options. As a result of revaluing and amortizing common stock
options for unvested options granted in March, 2006, a reversal of $3,360 in
stock-based compensation has been recognized in the Statement of Operations
at
November 30, 2007 and a loss of $9,100 has been recognized for the corresponding
period in 2006.
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.
PATRIOT
GOLD CORP.
(An
Exploration State Company)
NOTES
TO
FINANCIAL STATEMENTS
(Continued)
NOTE
1 -
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Exploration
and Development Costs (continued)
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, 2007 and 2006.
NOTE
2
RECLAMATION DEPOSIT
The
Company has been granted an exploration permit from the State of Nevada for
its
Vernal property. As part of the application process, the Company is
required to pay a refundable deposit to the State as surety for the estimated
reclamation costs associated with the planned exploration
program. Upon completion of required reclamation the Company will
receive a refund of the deposit.
NOTE
3 -
INCOME TAXES
As
of May
31, 2007, the Company had a net operating loss carryforward for income tax
reporting purposes of approximately $6,700,000 that may be offset against future
taxable income through 2026. 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
4 -
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
5 -
RELATED PARTY TRANSACTIONS
As
of
November 30, 2007, 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
November 1, 2005, the Company signed a service agreement with its President,
Robert Coale. Commencing November 2005 pursuant to the agreement the
Company began paying Robert Coale $2,500 per month for his expertise to identify
and acquire certain exploration style properties that fit the parameters of
the
Company’s business plan, oversee and manage, as directed by the Company, the
Company’s exploration programs that will be undertaken from time-to-time, and
perform all of the duties normally associated with serving as the President
and
Chief Executive Officer of a publicly traded mineral exploration
company. The service agreement shall be for an indefinite term,
cancelable in writing by either party with 30 days written
notice. For the six-months ended November 30, 2007, the Company paid
$15,000 (2006 - $15,000) pursuant to this agreement.
PATRIOT
GOLD CORP.
(An
Exploration State Company)
NOTES
TO
FINANCIAL STATEMENTS
(Continued)
NOTE
6 -
STOCK OPTIONS / WARRANTS
Pursuant
to the 2005 and 2003 Stock Option Plans, 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 optionees’ 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 November 30, 2007, 5,040,000 stock options
had been granted to various directors and consultants for an exercise price
ranging from $.05 to $1.50 per share.
On
November 18, 2005, the Board of Directors approved the 2005 stock option plan
whereby 2,000,000 common shares have been set aside for employees and
consultants to be distributed at the discretion of the Board of
Directors. As of November 30, 2007, 1,000,000 stock options had been
granted to various directors and consultants for an exercise price of $0.25
per
share.
No
stock
options were granted under either plan during the three or six-months ended
November 30, 2007 or 2006.
The
following table sets forth the options outstanding under the 2003 Plan as of
November 30, 2007:
|
|
Available
for Grant
|
|
|
Options
Outstanding
|
|
|
Weighted
Average Exercise Price
|
|
Balance,
May 31, 2007
|
|
|
506,000 |
|
|
|
385,000 |
|
|
$ |
0.26 |
|
Options
granted
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Options
cancelled
|
|
|
- |
|
|
|
- |
|
|
$ |
- |
|
Options
exercised
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Balance,
November 30, 2007
|
|
|
506,000 |
|
|
|
385,000 |
|
|
$ |
0.26 |
|
The
following table sets forth the options outstanding under the 2005 Plan as of
November 30, 2007:
|
|
Available
for Grant
|
|
|
Options
Outstanding
|
|
|
Weighted
Average Exercise Price
|
|
Balance,
May 31, 2007
|
|
|
1,000,000 |
|
|
|
1,000,000 |
|
|
$ |
0.25 |
|
Options
granted
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Options
forfeited
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Options
exercised
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Balance,
November 30, 2007
|
|
|
1,000,000 |
|
|
|
1,000,000 |
|
|
$ |
0.25 |
|
PATRIOT
GOLD CORP.
(An
Exploration State Company)
NOTES
TO
FINANCIAL STATEMENTS
(Continued)
NOTE
6 –
STOCK OPTIONS/WARRANTS (continued)
The
following table summarizes information concerning outstanding and exercisable
common stock options under the 2003 and 2005 Plans at November 30,
2007:
Exercise
Prices
|
Options
Outstanding
|
Remaining
Contractual Life
(in
years)
|
Weighted
Average
Exercise
Price
|
Number
of Options Currently Exercisable
|
Weighted
Average
Exercise
Price
|
$
0.05
|
300,000
|
5.58
|
$
0.05
|
300,000
|
$
0.05
|
$
0.25
|
1,000,000
|
8.25
|
$
0.25
|
750,000
|
$
0.25
|
$
0.80
|
5,000
|
5.67
|
$
0.80
|
5,000
|
$
0.80
|
$
1.03
|
80,000
|
5.67
|
$
1.03
|
80,000
|
$
1.03
|
|
|
|
|
|
|
|
1,385,000
|
|
$
0.25
|
1,135,000
|
$
0.25
|
The
aggregate intrinsic value of stock options outstanding and exercisable at
November 30, 2007 was $15,000. No stock options were exercised in
2007. As of November 30, 2007, there was a total of $4,348 in
unrecognized compensation cost related to all options granted and outstanding.
This unrecognized compensation cost is expected to be recognized over a
weighted-average period of approximately 1.50 years.
A
summary
of status of the Company’s unvested stock options as of November 30, 2007 under
all plans is presented below:
|
|
Number
of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Grant
Date Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
Unvested
at May 31, 2007
|
|
|
333,333 |
|
|
|
0.25 |
|
|
|
0.21 |
|
Granted
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Vested
|
|
|
(83,333 |
) |
|
|
0.25 |
|
|
|
0.21 |
|
Cancelled
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested
at November 30, 2007
|
|
|
250,000 |
|
|
$ |
0.25 |
|
|
$ |
0.21 |
|
The
following table sets forth common share purchase warrants outstanding as of
November 30, 2007:
|
|
Warrants
Outstanding
|
|
Balance,
May 31, 2007
|
|
|
3,456,000 |
|
Warrants
granted
|
|
|
- |
|
Warrants
exercised
|
|
|
- |
|
Balance,
November 30, 2007
|
|
|
3,456,000 |
|
PATRIOT
GOLD CORP.
(An
Exploration State Company)
NOTES
TO
FINANCIAL STATEMENTS
(Continued)
NOTE
6 –
STOCK OPTIONS/WARRANTS (continued)
The
following table lists the common share warrants outstanding at November 30,
2007. Each warrant is exchangeable for one common share.
Number
Outstanding
|
Exercise
Price
|
Weighted
Average Contractual Remaining Life (years)
|
Number
Currently Exercisable
|
Exercise
Price
|
864,000
|
$
1.40
|
2.00
|
864,000
|
$
1.40
|
864,000
|
$
1.45
|
2.00
|
864,000
|
$
1.45
|
864,000
|
$
1.50
|
2.00
|
864,000
|
$
1.50
|
864,000
|
$
1.55
|
2.00
|
864,000
|
$
1.55
|
3,456,000
|
|
|
3,456,000
|
|
NOTE
7 -
STOCK SPLIT
On
November 17, 2006, the Company held a special meeting (the "Meeting") of the
shareholders, pursuant to a proxy statement that it filed with the Securities
and Exchange Commission and that it had furnished to holders of record of the
outstanding shares of its common stock as of October 20, 2006. At the
Meeting, the Board of Directors received approval from a majority of the
Company’s shareholders of the following matters: (1) grant of discretionary
authority to the Board of Directors to implement either of the following: (a)
a
reverse stock split of the common stock on the basis of one post-consolidation
share for up to each ten pre-consolidation shares to occur at some time within
twelve months of the date of the shareholders’ meeting, with the exact time of
the reverse split to be determined by the Board of Directors, or (b) a forward
stock split of the common stock on the basis of up to three post-split shares
for each one pre-split share to occur at some time within twelve months of
the
date of the shareholders’ meeting, with the exact time of the forward split to
be determined by the Board of Directors; and (3) the increase of the number
of
authorized shares of the common stock from 100,000,000 shares, par value $0.001,
to 200,000,000 shares, par value $0.001, should the Board of Directors implement
a forward stock split as previously described. Our Directors believed
that shareholder approval of a range for the exchange ratio of the reverse
or
forward splits (as contrasted with approval of a specified ratio of the split)
provided the Board of Directors with maximum flexibility to achieve the purposes
of a stock split, and, therefore, was in the best interests of our shareholders.
The actual ratio for implementation of the reverse or forward split was to
have
been determined by our Board based upon its evaluation as to what ratio of
pre-split shares to post-split shares would have been most advantageous to
our
shareholders. Our Board of Directors also believed that, should it
have determined to implement a forward stock split as described above, it would
have been necessary to have increased the number of authorized shares of common
stock in order to provide the Company with the flexibility to issue common
stock
without further action by the Company's stockholders. As of the date
of this report, the one year anniversary of the approval by the Company’s
shareholders has elapsed. Prior to the elapsing of the one year time
period, the Board of Directors determined that it was in the best interests
of
the Company’s shareholders not to undertake a share split of any
kind.
Item
2.
Management’s Discussion and Analysis or Plan of Operations.
As
used
in this Form 10-QSB, references to the “Patriot Gold Corp.,” “Company,” ”we,”
“our” or “us” refer to Patriot Gold Corp., unless the context otherwise
indicates. This Management’s Discussion and Analysis or Plan of Operations
should be read in conjunction with the financial statements and the notes
thereto. Certain statements contained in this report, including statements
regarding the anticipated development and expansion of the Company's business,
the intent, belief or current expectations of the Company, its directors or
its
officers, primarily with respect to the future operating performance of the
Company and the products it expects to offer and other statements contained
herein regarding matters that are not historical facts, are "forward-looking"
statements within the meaning of the Private Securities Litigation Reform Act
(the "Reform Act"). Future filings with the Securities and Exchange Commission,
future press releases and future oral or written statements made by or with
the
approval of the Company, which are not statements of historical fact, may
contain forward-looking statements, as defined under the Reform Act. 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 facing the
Company, please see the May 31, 2007 Form 10-KSB filed by the Company with
the
Securities and Exchange Commission.
All
forward-looking statements speak only as of the date on which they are made.
The
Company undertakes no obligation to update such statements to reflect events
that occur or circumstances that exist after the date on which they are
made.
General
The
Company was incorporated under the laws of the State of Nevada on November
30,
1998. The Company operated from incorporation through approximately
May 31, 2000 in the production of ostrich meat. On June 1, 2000, the
Company ceased operations. On June 11, 2003, the Company changed its
name to Patriot Gold Corp. and became a natural resource exploration company
and
seeks opportunities in this field. The Company is currently engaged
in the acquisition, exploration, and if warranted and feasible, development
of
natural resource properties. Since June 1, 2000, the Company has been in the
exploration stage. Upon location of a commercial minable reserve, the
Company expects to actively pursue development
alternatives.
Financing
over the next
twelve months
Over
the
next twelve months, the Company intends to explore various properties to
determine whether there are commercially exploitable reserves of gold and silver
or other metals. The Company does not intend to hire any employees
nor to make any purchases of equipment over the next twelve months, as it
intends to rely upon outside consultants to provide all the tools needed for
the
exploratory work being conducted.
Current
cash on hand is sufficient for all of the Company’s commitments for the next 12
months. We anticipate that any additional funding that we require in the future
will be in the form of equity financing from the sale of our common
stock. However, we cannot provide investors with any assurance that
we will be able to raise sufficient funding from the sale of our common stock
to
fund additional phases of the exploration program, should we decide to
proceed. We believe that debt financing will not be an alternative
for funding any further phases in our exploration program. The risky
nature of this enterprise and lack of tangible assets places debt financing
beyond the credit-worthiness required by most banks or typical investors of
corporate debt until such time as an economically viable mine can be
demonstrated. We do not have any arrangements in place for any future
equity financing.
Notwithstanding,
we cannot be certain that any required additional financing will be available
on
terms favorable to us. If additional funds are raised by the issuance of our
equity securities, such as through the issuance and exercise of warrants, then
existing stockholders will experience dilution of their ownership interest.
If
additional funds are raised by the issuance of debt or other equity instruments,
we may be subject to certain limitations in our operations, and the issuance
of
such securities may have rights senior to those of the then existing holders
of
common stock. If adequate funds are not available or not available on acceptable
terms, we may be unable to fund expansion, develop or enhance services or
respond to competitive pressures.
Overview
We
are a
natural resource exploration company with an objective of acquiring, exploring,
and if warranted and feasible, exploiting 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 optioning
or 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 optioning or 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 properties we have in Arizona
and
Nevada contain 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 or option of early stage
properties. 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.
Exploration
Programs
Bruner
and Vernal Agreement
Pursuant
to a Property Option Agreement with MinQuest, Inc. (“MinQuest”), a Nevada
corporation, we have the option to earn a 100% interest in the Bruner and Vernal
mineral exploration properties located in Nevada. The property option
payments and required annual expenditures under the agreement apply to the
properties in aggregate and the Company has discretion as to which property
it
incurs the annual expenditures. The option with MinQuest terminates
if, prior to July 25, 2008, we fail to make any payments when due to MinQuest
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 both
properties if we make payments to MinQuest of $80,000 and spend $500,000 in
exploration over a five year period ending on July 25, 2008.
On
July
25, 2003, we paid MinQuest $12,500 with respect to the properties, and we owed
an additional $80,000 which was due in four equal annual installments commencing
on July 25, 2004. With the approval of MinQuest, we paid the first installment
on August 27, 2004 and we paid the second installment on September 20,
2005. On July 25, 2006 and 2007 respectively we made the third and
fourth installments of $20,000. The payment made on July 25, 2007 was
the final payment due under the property option agreement for the Bruner and
Vernal properties. By July 25, 2007, we were to have spent $375,000
on exploration, and by that date we had spent an aggregate of approximately
$280,000 on exploration of the two properties resulting in a shortfall of
$95,000. By way of letter agreement dated July 24, 2007 between the
Company and MinQuest, MinQuest agreed to extend the due date of the shortfall
of
$95,000 at July 25, 2007 until July 25, 2008. We are obligated to
spend another $125,000 July 25, 2008. The effect of the change is
that the Company is now obligated to incur $220,000 by July 25,
2008. MinQuest retains a three percent NSR production
royalty.
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). MinQuest
retains a three percent NSR production royalty.
Our
exploration program to date at Bruner has included:
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geologic
mapping (producing a plan map of the rock types, structure and
alteration),
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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),
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a
ground magnetic survey, and
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a
Controlled Source Magneto Telluric survey (recording variations in
a
generated electrical field using sophisticated survey methods).
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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 were located to target both
extensions of the gold intercepts in previous drilling and in 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 was completed in March
2005
at a total cost of approximately $153,800, with a total of 3,200 feet of reverse
circulation (RC) drilling in 7 holes. The depths of the holes ranged from 300
to
750 feet. We have received assays for all holes and the results are encouraging
enough that additional drilling was conducted.
Because
of the favorable drilling results from the drilling program we began on December
20, 2004, we decided to conduct additional drill testing on the Bruner property,
including both reverse circulation and core drilling. In April 2005,
we filed an amended drilling plan with the Bureau of Land Management that
allowed three fences of drill holes with the fences spaced 400 feet apart along
the apparent trend of the mineralization. This program was completed
in the fall of 2005 with 11 holes totaling 4,205 feet being
drilled.
The
Board
of Directors has approved a 2007 exploration budget of approximately $120,000
for the Bruner Property. The program will include a 3-hole, 3,000
feet, RC drill program. The goal of this program is to follow up on
the previous results from the programs completed in 2005. The
drilling has been completed and the Company is awaiting assay
results.
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). MinQuest retains a three percent NSR production
royalty.
In
July
2003, members of our Board of Directors and geology team made an onsite
inspection of Vernal. At the Vernal Property, mapping (the process of
laying out a grid on the land for area identification where samples are taken)
and sampling (the process of taking small quantities of soil and rock for
analysis) have been completed. In March 2005, we initiated the
process to secure the proper permits for trenching and geochemical sampling
from
the U.S. Forest Service. As a result of the Company not having
immediate plans to conduct drilling on the Vernal Property in 2005, the Company
stopped the permitting process before receiving permits for the Vernal
Property.
The
Board
of Directors has approved a budget of approximately $55,000 (including the
refundable bond of $15,000) for the Vernal Property. The program will
include trenching and mapping. Permitting for this program is
currently ongoing.
MOSS
PROPERTY
The
Moss
Property is located in Mohave County, Arizona in the historic Oatman
District, and is located some 5 miles northwest of the town of Oatman, with
Kingman, Arizona to the east, Laughlin, Nevada to the west and Las Vegas, Nevada
to the north. Access is via gravel roads from Bullhead City. We
hold the property in the Moss Mine region via 63 unpatented mining claims and
15
patented claims. The Company acquired these claims in a series of
transactions during fiscal 2004 and 2005.
Gintoff
Claim
On
November 14, 2003 the Company entered into a letter of intent to acquire a
single patented claim from Gregory Gintoff. The total purchase price
of $50,000 was made in two installments of $10,000 in December 2003 and $40,000
in February 2004.
MinQuest
Claims
We
hold
the MinQuest claims via 63 unpatented mining claims that were acquired from
MinQuest. 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.
Williams
Property
The
property is comprised of six patented claims, which as a group, we call the
Williams Property. These claims were held collectively by as many as 23 owners
within an extended family who were 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.
In
October 2003, our director Robert Sibthorpe (who is a geologist by training)
had
evaluated the proposal for the purchase of the Williams Property. 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. In November 2003 we executed a letter of intent to purchase a
100% interest in Williams Property owned by the extended family. This property
is unrelated to and separate from the MinQuest Claims. The sellers
delivered to us all information in their possession regarding the Williams
Property. During the six-month period after the signing of the letter
of intent we had the right to conduct our due diligence on the Williams 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 associated
with the purchase of the Williams 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 Williams Property, doing so would give us full rights to begin mining
operations.
At
the
recommendation of Mr. Sibthorpe, in January, 2004, Mr. Robert Coale
(P.E.), another one of our directors and our current President, visited the
site
to see the overall geological setting and occurrence of mineralization and
evaluated the drilling program proposed by MinQuest, the company that we would
contract to co-ordinate any work programs undertaken. At that time, the
metallurgical data and reports that had been collected from the sellers
were
reviewed.
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) were not apparent. He
recommended bulk sampling at a selected location in the future once the
definition of the ore body was further advanced through drilling. On
January 31, 2004 Robert Sibthorpe wrote a report with a summary of the property,
a review of the draft budget supplied by Richard Kern, our work program
contractor, and a layout of 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
drill 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.
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 after 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
after 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. 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.
Greenwood
Claim
On
January 18, 2005, the Company completed the acquisition of a single patented
claim from an individual for $150,000.
Martinez
Claims
The
Company acquired five patented claims from Ramon and Edna Martinez for a total
of $150,000. The Company made one payment of $75,000 on November 8,
2004 and made the final payment of $75,000 on February 14, 2005.
Ruth
and Rattan
Claims
On
January 18, 2005, the Company made a single payment of $25,000 to acquire two
patented claims known as the Ruth and Rattan claims.
Exploration
Programs
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. 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 Moss Property has consisted of geologic mapping, vein
geochemical sampling and drill testing of the identified veins. The
Moss Property contains the site of the former Moss Mine. The most
significant historic mining at Moss Mine occurred on narrow veins that trend
sub-parallel to the Moss Mine vein and dip steeply northerly. These veins should
intersect the Moss Mine vein at depth. The deepest vein intercepts at Moss
are
less than 400 feet. The Ruth vein should intersect the Moss Mine vein at 800-900
feet below the surface. If the Moss Mine vein is the feeder for the Ruth vein
it
must contain similar gold values at that level. The Moss Mine vein needs drill
testing to a depth of 900 feet to determine its potential to contain high-grade
gold mineralization.
Phase
1
drilling has been completed at the Moss Property. A total of 36 holes were
drilled totaling 8,807 feet. Thirty holes were drilled on the Gintoff Claim
on
the Moss Property, and six holes were drilled on one of the adjacent parcels
of
land. The easternmost section of the Property, which was mostly
untested by drilling, was drilled with
thirty
reverse circulation holes. This allowed accurate cross-sections to be made
for
this area. The coverage on this section is generally two or three holes on
100
foot sections testing grades and widths from 50-250 feet down dip. In the
western area, limited confirmation drilling was carried out and the results
obtained were generally in line with the values obtained by previous operators.
Geological information obtained may now provide a structural explanation for
the
lack of success obtained here to date by previous operators.
A
study
of all drilling results at the Moss Property indicates a tendency for total
gold
content to increase with intercept depth. Roughly 60% of the deeper holes have
better intercepts than shallow holes. An example from our drilling tests the
vein over a vertical extent of 300 feet. In this example the gold content nearly
doubles between AR-5 and AR-23.
An
expanded program of drilling began in April 2005, and was expected to be
completed by May 2006. Approximately 12,000 feet of reverse
circulation (RC) drilling was planned to be done to test for possible high-grade
(0.30 ounces per ton or above) down-dip extensions of the Moss vein. We planned
to drill 10 to 15 holes. The depths of these holes were to have
ranged from 500 to 1,300 feet. The program budget for this program was
$643,700.
The
first
portion of this expanded drilling program was expected to be completed by the
fall of 2005. However, after eight holes were attempted, drilling was
halted because of difficulty in drilling through the granite, because the
drilling rig that we contracted to use was too light to penetrate the
rock. We had sought to contract a heavier rig to continue the
program, which we had expected to happen by December 2005. The
remainder of the program was completed when the Company completed 6 core holes
from November 2006 to February 2007 for a total drilled amount drilled of 3,917
feet. The exploration program failed to find higher grades but it did
show that the vein system continues to at least 800 feet below the surface
and
appears to be thickening.
Encouraging
drilling results from earlier programs warrant an initial Scoping Study level
investigation, which is the determination of the indicated size and grade of
the
deposit and possible methods of mining and recovering the gold and
silver. Tonnage and grade will be determined by outlining the
mineralization on sections constructed every 100 feet across the deposit and
using the average grade of the drilling intersections. An open pit is
then designed that would allow extraction of the mineral in
deposit. The option of underground mining is also
considered. Tests are conducted to determine the best method of
extracting the gold and silver. These tests would include the
amenability of “heap leaching”. Heap leaching is the piling of ore on an
impermeable liner, circulating gold/silver-dissolving solutions (normally
cyanide) through the pile or “heap” and recovering the gold/silver from the
circulating solution using carbon. Another method that would be tested is
“milling” to recover the gold and silver. Milling involves crushing and grinding
the ore into tiny particles that allow the gold/silver to be removed by simple
gravity separation techniques or by using chemicals in solution. Determination
of the best methods of mining and recovery of the precious metals then allows
production costs to be calculated.
The
Company has submitted core samples to a laboratory where leach testing is being
conducted. Leaching is being conducted in both bench scale (Bottle
rolls) and in columns using crushed ore as the feed sample. These
tests are scheduled for completion by the end of the first quarter of
2008. The results of these tests will determine the next phase of the
exploration of the Moss Property.
Results
of Operations
We
did
not earn any revenues during the three or six-months ended November 30, 2007
or
2006. We do not anticipate earning revenues until such time as we
have entered into commercial production of our mineral properties. We
are presently in the exploration stage of our business and we can provide no
assurance that we will discover commercially exploitable levels of mineral
resources on our properties, or if such resources are discovered, that we will
enter into commercial production of our mineral properties.
During
the six months ended November 30, 2007, we incurred a net loss of $151,886
compared to a net loss of $84,745 for the comparative period in
2006. Our year to date net loss for 2007 has increased over 2006
largely due to higher exploration costs partially offset by lower general and
administrative expenses. During the six-months ended November 30,
2007, a significant portion of the Bruner Property drill program was
undertaken. In addition, in 2007 the core leaching tests related to
the Moss Property were commenced. In 2006, the only exploration
program costs relate to planning and mobilization expenses for the drill program
at the Moss Property where drilling
began
in
December 2006. General and administrative costs decreased to
$66,975 in 2007 from $98,265 in 2006 primarily due the costs the Company
incurred relating to the holding of a Special Meeting on November 17,
2006.
During
the three months ended November 30, 2007 we incurred a net loss of $128,033
compared to a net loss of $57,741 for the comparative period in
2006. Our current quarter loss in 2007 has increased over 2006
largely due to higher exploration costs. During the three-months
ended November 30, 2007, a significant portion of the Bruner Property drill
program was undertaken. In addition, in 2007 the core leaching tests
related to the Moss Property were commenced. In 2006, the only
exploration program costs relate to planning and mobilization expenses for
the
drill program at the Moss Property where drilling began in December
2006. General and administrative costs decreased to $50,705 in
2007 from $77,468 in 2006 primarily due to due the costs the Company incurred
relating to the holding of a Special Meeting on November 17, 2006.
Liquidity
and Capital
Resources
We
had
cash of $2,975,816 as of November 30, 2007. We anticipate that we will incur
the
following expenses over the next twelve months:
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$236,000
in exploration expenditures on the Company’s properties;
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$155,000
for operating expenses, including working capital and general, legal,
accounting and administrative expenses associated with reporting
requirements under the Securities Exchange Act of 1934.
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Net
cash
used in operating activities during the six months ended November 30, 2007
was
$52,615 compared to $70,501 during the six months ended November 30,
2006. The decrease in cash used in operating activities in the
current period was largely a result of an increase in accounts payable of
$106,932 in 2007 compared to $16,908 in 2006. Also, in 2007 the
outflow from prepaid expenses was $5,000 compared to an outflow from prepaid
expenses of $15,000 in 2006. Partially offsetting the effects of
these two working capital factors was an increase in the net loss in 2007
($151,886) compared to 2006 ($84,745). There were no financing
activities for either of the six months ended November 30, 2007 or
2006. During the six-months ended November 30, 2007, the Company paid
a $900 refundable reclamation deposit to the State of Nevada relating to the
planned exploration program on the Vernal property.
Going
Concern
Consideration
As
shown
in the accompanying financial statements, the Company has incurred a net loss
of
$23,473,835 for the period from June 1, 2000 (inception of exploration state)
to
November 30, 2007, and has no sales However, current cash on hand is
sufficient for all of the Company’s commitments for the next 12 months. We
anticipate that any additional funding that we require in the future will be
in
the form of equity financing from the sale of our common
stock. However, we cannot provide investors with any assurance that
we will be able to raise sufficient funding from the sale of our common stock
to
fund additional phases of the exploration program, should we decide to
proceed. The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts of and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence.
There
is
substantial doubt about our ability to continue as a going concern. Accordingly,
our independent auditors included an explanatory paragraph in their report
on
the May 31, 2007 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 disclosure by our
independent auditors.
Off-Balance
Sheet
Arrangements
We
have
no off-balance sheet arrangements.
Item
3. Controls and Procedures.
Evaluation
of Disclosure Controls and Procedures
Our
disclosure controls and procedures are designed to ensure that information
required to be disclosed in reports that we file or submit under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within
the
time periods specified in the rules and forms of the United States Securities
and Exchange Commission. Our Principal Executive Officer and Principal Financial
Officer have reviewed the effectiveness of our "disclosure controls and
procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-15(f)
and 15d-15(f)) as of the end of the period covered by this report and have
concluded that the disclosure controls and procedures are effective to ensure
that material information relating to the Company is recorded, processed,
summarized, and reported in a timely manner. There were no
significant changes in our internal controls or in other factors that could
significantly affect these controls subsequent to the last day they were
evaluated by our Principal Executive Officer and Principal Financial
Officer.
Changes
in
Internal Controls over Financial Reporting
There
have been no changes in the
Company's internal control over financial reporting during the last quarterly
period covered by this report that have materially affected, or are reasonably
likely to materially affect, the Company's internal control over financial
reporting.
PART
II -
OTHER INFORMATION
Item
1. Legal Proceedings.
There
are
no pending legal proceedings to which the Company is a party or in which any
director, officer or affiliate of the Company, any owner of record or
beneficially of more than 5% of any class of voting securities of the Company,
or security holder is a party adverse to the Company or has a material interest
adverse to the Company. The Company’s property is not the subject of
any pending legal proceedings.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item
3. Defaults upon Senior Securities.
None.
Item
4. Submission of Matters to a vote of Security Holders.
There
was
no matter submitted to a vote of security holders during the fiscal quarter
ended November 30, 2007.
Item
5. Other information.
None.
Item
6. Exhibits.
Exhibit
31.1
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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.
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Exhibit
32.1
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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.
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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.
Date: January10,
2008
PATRIOT
GOLD CORP.
By:
/s/
Robert
Coale
Robert
Coale
President,
Chief Executive
Officer,
Secretary and Treasurer
(Principal
Executive Officer and
Principal
Financial Officer)
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