Lode-Star Mining Inc. - Quarter Report: 2016 September (Form 10-Q)
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UNITED STATES
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SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
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FORM 10-Q
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☒
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QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30,
2016
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OR
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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Commission file number 000-53676
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LODE-STAR MINING INC.
(formerly International Gold Corp.)
(Exact name
of registrant as specified in its charter)
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NEVADA
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47-4347638
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(State or other jurisdiction of incorporation or
organization)
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(IRS Employer Identification No.)
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13529 Skinner Road, Suite N
Cypress, TX 77429-1775
(Address of
principal executive offices, including zip
code.)
(832) 371-6531
(Telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 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 last 90 days. YES ☒
NO
☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See the definitions of “large
accelerated filer, “accelerated filer,”
“non-accelerated filer,” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act.
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Large Accelerated Filer
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Accelerated Filer
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Non-accelerated Filer
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Smaller Reporting Company
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Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act). YES ☐ NO
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State the number of shares outstanding of each of the
issuer’s classes of common equity, as of the latest
practicable date: 49,127,825 as
of November 10, 2016.
1
TABLE OF CONTENTS
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Page
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PART I - FINANCIAL INFORMATION
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Item 1. Financial
Statements
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3
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Balance Sheets as of September 30, 2016 (unaudited) and December
31, 2015
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3
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Statements of Operations for the Three Months and Nine Months ended
September 30, 2016 and 2015 (unaudited)
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4
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Statements of Cash Flows for the Nine Months ended September 30,
2016 and 2015 (unaudited)
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5
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Notes to Financial Statements (unaudited)
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6
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Item 2. Management’s
Discussion and Analysis Of Financial Condition and Results of
Operations
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11
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Item 3. Quantitative and Qualitative
Disclosures About Market Risk
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15
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Item 4. Controls and
Procedures
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15
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PART II - OTHER INFORMATION
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Item 1A. Risk Factors
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15
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Item 2. Unregistered Sales
of Equity Securities and Use of Proceeds
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15
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Item 6. Exhibits
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16
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SIGNATURES
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17
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2
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
LODE-STAR MINING INC.
(formerly International Gold Corp.)
INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND
2015
(Unaudited)
(Stated in U.S. Dollars)
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LODE-STAR MINING INC.
(formerly International Gold Corp.)
BALANCE SHEETS
(Stated in U.S. Dollars)
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SEPTEMBER 30
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DECEMBER
31
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2016
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2015
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(Unaudited)
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ASSETS
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Current
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Cash
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$10,019
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$12,456
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Prepaid
fees
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3,217
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3,217
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Total current assets
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13,236
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15,673
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Mineral Property Interest
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230,180
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230,180
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Total assets
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$243,416
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$245,853
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LIABILITIES
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Current
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Accounts
payable and accrued liabilities
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$25,460
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$14,302
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Due
to related parties
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700,761
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495,384
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Loans
payable
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66,088
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76,180
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Total current
liabilities
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792,309
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585,866
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Contractual Obligations, Commitments And Subsequent Events (Notes
3, 7 and 8)
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STOCKHOLDERS’ DEFICIT
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Capital Stock
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Authorized:
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480,000,000
voting common shares with a par value of $0.001 per
share
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20,000,0000
preferred shares with a par value of $0.001 per share
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Issued:
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49,127,825
common shares at September 30, 2016 and December 31,
2015
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1,947
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1,947
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Additional Paid-In Capital
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1,070,064
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1,070,064
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Accumulated Deficit
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(1,620,904)
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(1,412,024)
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Stockholders' deficit
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(548,893)
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(340,013)
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Total liabilities and stockholders'
deficit
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$243,416
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$245,853
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The accompanying condensed notes are an integral part of these
interim financial statements.
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LODE-STAR MINING INC.
(formerly International Gold Corp.)
STATEMENTS OF OPERATIONS
(Unaudited)
(Stated in U.S. Dollars)
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THREE MONTHS ENDED
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NINE MONTHS ENDED
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SEPTEMBER 30
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SEPTEMBER 30
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2016
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2015
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2016
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2015
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Revenue
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$-
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$-
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$-
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$-
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Expenses
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Consulting
services
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6,834
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6,102
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18,657
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19,356
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Corporate
support services
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482
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1,140
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1,625
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3,691
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Mineral
option fees
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25,000
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-
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74,988
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-
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Office,
foreign exchange and sundry
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3,789
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(2,306)
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11,905
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3,756
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Professional
fees
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12,206
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10,592
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36,084
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50,301
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Transfer
and filing fees
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5,074
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2,470
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24,485
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29,519
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Total expenses
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53,385
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17,998
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167,744
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106,623
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Operating Loss Before Other Income (Expense)
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(53,385)
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(17,998)
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(167,744)
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(106,623)
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Other Income (Expense)
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Interest,
bank and finance charges
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(7,374)
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(5,544)
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(21,023)
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(14,613)
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Penalties
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-
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(20,113)
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Total other income
(expense)
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(7,374)
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(5,544)
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(41,136)
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(14,613)
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Net Loss For The Period
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$(60,759)
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$(23,542)
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$(208,880)
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$(121,236)
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Basic And Diluted Loss Per Common Share
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$(0.00)
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$(0.00)
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$(0.00)
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$(0.00)
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Weighted Average Number Of Common Shares Outstanding
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49,127,825
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47,658,000
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49,127,825
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47,253,956
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The accompanying condensed notes are an integral part of these
interim financial statements.
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LODE-STAR MINING INC.
(formerly International Gold Corp.)
STATEMENTS OF CASH FLOWS
(Unaudited)
(Stated in U.S. Dollars)
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NINE MONTHS ENDED
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SEPTEMBER 30
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2016
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2015
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Cash Provided By (Used In)
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Operating Activities
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Net
loss for the period
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$(208,880)
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$(121,236)
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Adjustments
to reconcile net loss to net cash used in operating
activities:
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Foreign
exchange loss (gain)
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1,486
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(3,921)
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Changes
in operating assets and liabilities:
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Prepaid
fees
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(2,285)
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Accounts
payable and accrued liabilities
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64,331
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(19,458)
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Due
to related party
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74,988
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Accrued
interest payable
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20,638
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14,102
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Net cash used by operating
activities
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(47,437)
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(132,798)
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Financing Activities
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Repayment
of loans payable
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(15,000)
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(4,000)
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Proceeds
from loans payable – related party
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60,000
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142,426
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Net cash provided by financing
activities
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45,000
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138,426
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Net Increase (Decrease) In Cash
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(2,437)
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5,628
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Cash, Beginning Of Period
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12,456
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5,372
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Cash, End Of Period
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$10,019
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$11,000
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Supplemental Disclosure Of Cash Flow Information
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Cash
paid during the period for:
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Interest
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$-
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$-
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Income
taxes
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$-
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$-
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Non-cash Financing Activity
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Expenses
paid by related parties on behalf of the Company
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$53,174
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$18,393
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Common
shares issued for debt settlements
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$-
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$53,213
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The accompanying condensed notes are an integral part of these
interim financial statements.
6
LODE-STAR MINING INC.
(formerly International Gold Corp.)
CONDENSED NOTES TO INTERIM
FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND
2015
(Unaudited)
(Stated in U.S. Dollars)
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1.
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BASIS OF PRESENTATION AND NATURE OF OPERATIONS
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Organization and Nature of Operations
Lode-Star
Mining Inc. (formerly International Gold Corp.) (“the
Company”) was incorporated in the State of Nevada, U.S.A., on
December 9, 2004. The Company’s principal executive offices
are located in Cypress, Texas. The Company was originally formed
for the purpose of acquiring exploration stage natural resource
properties. The Company acquired a mineral property interest from
Lode Star Gold Inc., a private Nevada corporation
(“LSG”) on December 11, 2014 (See Note 3) in
consideration for the issuance of 35,000,000 common shares of the
Company. As a result of this transaction, control of the Company
was acquired by LSG.
On
May 12, 2015, International Gold Corp. completed a merger with its
wholly owned subsidiary, Lode-Star Mining Inc., and formally
assumed the subsidiary’s name by filing Articles of Merger
with the Nevada Secretary of State (the “Name
Change”). The subsidiary was incorporated entirely for
the purpose of effecting the Name Change and the merger did not
affect the Company’s corporate structure in any other
way.
Going Concern
The
accompanying financial statements have been prepared assuming the
Company will continue as a going concern.
The future of the Company is dependent upon its
ability to establish a business and to obtain new financing to
execute a business plan. As shown in the accompanying financial
statements, the Company has incurred accumulated losses of
$1,620,904 for the period from December 9, 2004 (inception) to
September 30, 2016, and has had no revenue. There is no
assurance that management’s plans to seek additional capital
through private placements of its common stock will be realized,
and these factors cast substantial doubt upon the use of the going
concern assumption. These 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.
Basis of Presentation
The
unaudited financial information furnished herein reflects all
adjustments which, in the opinion of management, are necessary to
fairly state the Company’s financial position and the results
of its operations for the periods presented. These third
quarter financial statements should be read in conjunction with the
Company’s financial statements and notes thereto included in
the Company’s report on Form 10-K for the year ended December
31, 2015. 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 financial statements for the fiscal year ended
December 31, 2015, has been omitted. The results of
operations for the nine month period ended September 30, 2016 are
not necessarily indicative of results for the entire year ending
December 31, 2016.
Reclassification of Prior Year Presentation
Certain
prior year amounts have been reclassified to conform to the current
period presentation. These reclassifications on the interim
statement of cash flows for the nine months ended September 30,
2015 had no effect on the reported results of operations. Expenses
paid by related parties on behalf of the Company were removed from
the net change in loan advances and from the change in accounts
payable and are shown as a Non-cash Financing Activity. The foreign
exchange gain component of the change in loan advances was removed
and shown as an adjustment to reconcile net loss to net cash used
in operating activities. Accrued interest that was converted to
shares has been removed from the change in loan advances and
included in the change in accrued interest. The remaining change in
loan advances was separated into repayments of loans payable to
non-related parties and loan proceeds from related parties. These
changes in classification decreased the amount previously reported
as Cash Used In Operating Activities for the nine months ended
September 30, 2015 from $174,020 to $132,798. Offsetting that
change, the amount previously reported for the 2015 period as Cash
Provided By Financing Activities decreased from $179,648 to
$138,426.
7
LODE-STAR MINING INC.
(formerly International Gold Corp.)
CONDENSED NOTES TO INTERIM
FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND
2015
(Unaudited)
(Stated in U.S. Dollars)
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2.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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The
financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in the
United States (“GAAP”). Because a precise determination
of many assets and liabilities is dependent upon future events, the
preparation of financial statements for a period necessarily
involves the use of estimates which have been made using careful
judgment. All dollar amounts are in U.S. dollars unless otherwise
noted. The financial statements have, in management’s
opinion, been properly prepared within reasonable limits of
materiality.
The
Company has implemented all applicable new accounting
pronouncements that are in effect. Those pronouncements did not
have any material impact on the financial statements unless
otherwise disclosed, and the Company does not believe that there
are any other new accounting pronouncements that have been issued
that might have a material impact on its financial position or
results of operations.
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3.
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MINERAL PROPERTY INTEREST
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Given
that permitting for operations on the Property is still to be
completed, at the request of the Company’s management, LSG
granted a deferment to January 18, 2017 of payments otherwise due
in accordance with the Mineral Option Agreement between the
parties. At September 30, 2016, $198,901 was accrued for fees due
under the terms of the agreement.
The
Company assessed its mineral property interest at September 30,
2016 and to the date of these financial statements and concluded
that facts and circumstances do not suggest that the mineral
property interest’s carrying value exceeds its recoverable
amount and therefore no impairment is required.
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4.
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CAPITAL STOCK
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During
the nine months ended September, 2016, the Company had no cash
subscriptions for shares of its common stock. No preferred shares
have been issued to the date of issue of these financial
statements.
8
LODE-STAR MINING INC.
(formerly International Gold Corp.)
CONDENSED NOTES TO INTERIM
FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND
2015
(Unaudited)
(Stated in U.S. Dollars)
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4.
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CAPITAL STOCK (Continued)
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Summary
of warrant activity and warrants outstanding at September 30,
2016:
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Number of Warrants
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Exercise Price
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Weighted Average Exercise Price
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Weighted Average Life Remaining(Years)
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Expiry Date
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Balance, December 31, 2015
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3,336,060
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$0.02
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$0.02
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4.86
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November 10, 2020
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Granted
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-
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$-
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$-
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-
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Expired
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-
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$-
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$-
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-
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Exercised
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-
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$-
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$-
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-
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Balance outstanding and exercisable at September 30,
2016
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3,333,060
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$0.02
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$0.02
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4.11
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November 10, 2020
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5.
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LOANS PAYABLE
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At
September 30, 2016, the Company had the following loans
payable:
i.
$1,000
(December 31, 2015 - $1,000): unsecured; interest at 15% per annum;
originally due on April 20, 2012.
ii.
$50,000
(December 31, 2015 - $65,000): unsecured; interest at 10% per annum
from January 10, 2015.
●
$27,500,
and any accrued interest shall become due and payable on written
demand in full (not received to date) on the earlier of June 9,
2015 or the date on which the Company completes one or more debt or
equity financings that generate aggregate gross proceeds of at
least $250,000
●
The
balance of the outstanding principal, now $22,500, and any accrued
interest shall become due and payable on written demand in full on
January 9, 2016 (not received to date)
●
The
Company shall have the right to repay all or any part of the
Principal and any accrued interest to the Lender at any time and
from time to time, without any premium
iii.
$42,075 (December 31, 2015 - $40,789): unsecured;
interest at 5% per annum; with no specific terms of
repayment, due
to a related party, the president of the
Company
iv.
$350,000 (December 31, 2015 - $290,000):
unsecured; interest at 5% per annum from January 1, 2015; with no
specific terms of repayment, due
to a related party, LSG, the Company’s majority
shareholder
v.
$77,140
(December 31, 2015 - $23,966): unsecured; interest at 5% per annum;
with no specific terms of repayment, due to a related party, LSG,
the Company’s majority shareholder.
vi.
$3,812
(December 31, 2015 - $3,613): unsecured; non-interest bearing; with
no specific terms of repayment, due to a related party, the
controlling shareholder of LSG
At
September 30, 2016, interest totaling $43,921 (December 31, 2015 -
$23,283) was accrued on the above loan amounts.
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6.
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RELATED PARTY TRANSACTIONS AND AMOUNTS DUE
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Transactions
with related parties were in the normal course of operations and
have been valued in these financial statements at the exchange
amount, which is the amount of consideration agreed to and
established by the related parties.
During
the nine months ended September 30, 2016, the Company accrued
mineral option fees totaling $74,988 due to its majority
shareholder under terms of the Mineral Option Agreement between the
parties. The balance due at September 30, 2016 was $198,901
(December 31, 2015: $123,913).
During
the nine months ended September 30, 2016, the majority shareholder
of the Company paid a total of $53,174 to various vendors on behalf
of the Company. That amount is included in the $77,140 loan balance
detailed in Note 5 above.
9
LODE-STAR MINING INC.
(formerly International Gold Corp.)
CONDENSED NOTES TO INTERIM
FINANCIAL STATEMENTS
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND
2015
(Unaudited)
(Stated in U.S. Dollars)
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6.
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RELATED PARTY TRANSACTIONS AND AMOUNTS DUE (Continued)
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At
September 30, 2016, accrued interest was due to related parties in
connection with loans detailed above in Note 5, as
follows:
Loan iii) $4,285 (December 31, 2015 -
$2,609) to the president of the Company
Loan
iv) $22,158 (December 31, 2015 - $10,157) to the majority
shareholder of the Company.
Loan
v) $2,391 (December 31, 2015 - $336) to the majority shareholder of
the Company
At
September 30, 2016, the $700,761 (December 31, 2015: $495,384)
total due to related parties is comprised of the
following:
Loans
and accrued interest - $501,860 (December 31, 2015:
$371,471)
Mineral
option fees payable - $198,901(December 31, 2015:
$123,913)
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7.
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CONTRACTUAL OBLIGATIONS AND COMMITMENTS
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Under
the terms of the Mineral Option Agreement between the Company and
LSG, its majority shareholder, payments are due from the Company to
LSG as follows:
If
the Company fails to make any option cash payments for a period of
one year from the Effective Date of the agreement (October 4, 2014)
the Company shall pay an additional $100,000 on the first
anniversary of the Effective Date and in any subsequent year in
which the Company has failed to exercise its option to acquire a
further 60% interest in the property and the agreement remains in
effect, the Company shall make quarterly cash payments of $25,000,
payable on the last day of the applicable quarter, until such time
as the option to acquire the additional 60% interest has been
exercised.
No
option payments have been made by the Company to date and amounts
totaling $198,901 were included in accrued liabilities at September
30, 2016 (December 31, 2015: $123,913).
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8.
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SUBSEQUENT EVENTS
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Management
has evaluated subsequent events and the impact on the reported
results and disclosures and has concluded that no other significant
events require disclosure as of the date these financial statements
were issued.
10
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ITEM 2.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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The following discussion and analysis of our financial condition
and results of operations should be read in conjunction with our
unaudited financial statements and related notes appearing
elsewhere in this Quarterly Report. In addition to historical
financial information, the following discussion includes a number
of forward-looking statements that reflect our plans, estimates and
our current views with respect to future events and financial
performance. Forward-looking statements are often identified by
words like: believe, expect, estimate, anticipate, intend, project
and similar expressions, or words which, by their nature, refer to
future events. You should not place undue certainty on these
forward-looking statements, which apply only as of the date of this
report. Except as required by applicable law, including the
securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements
to actual results
Mineral Property Interest
On August 29, 2014, we entered into a Letter of Intent (the
“LSG LOI”) with Lode-Star Gold, Inc. (“LSG"), a
private Nevada corporation, pursuant to which we agreed to issue
shares of our common stock and make certain payments to LSG in
consideration for the acquisition of an interest in LSG's Nevada
Goldfield Bonanza property (the “Property”). As a
result of the intended transaction, control of us would be acquired
by LSG.
On October 4, 2014, we entered into a definitive mineral option
agreement (the "Option Agreement") which superseded the LSG LOI.
Pursuant to the Option Agreement, we were to issue LSG 35,000,000
shares of our common stock in exchange for a 20% undivided interest
in the Property (the “Acquisition”). In order to earn
an additional 60% undivided interest in the Property (for a total
of 80%), we are required to fund all expenditures on the Property
and pay LSG an aggregate of $5 million in cash in the form of a net
smelter returns ("NSR") royalty, each beginning on the
closing date of a subscription agreement for the shares (the
“Closing Date”). Until such time as ITGC has earned the additional
60% interest, the NSR royalty will be split as to 79.2% to LSG,
19.8% to and 1% to the former Property owner.
The Property is located in west-central Nevada, in the Goldfield
Mining District at Latitude 37° 42’, and Longitude
117° 14’. The claims comprising the Property are located
in surveyed sections 35 and 36, Township 2 South, Range 42 East,
and in sections 1, 2, 11, and 12, Township 3 South, Range 42 East,
in Esmeralda County, Nevada. The Property is accessible by
traveling approximately one-half mile northeast of the community of
Goldfield, along a county-maintained road that originates at U.S.
Highway 95, which runs through “downtown” Goldfield.
The town of Goldfield, which is the Esmeralda county seat
(population 300), is approximately 200 air miles south of Reno and
180 air miles north of Las Vegas.
The Property consists of 31 patented claims and 1 unpatented
millsite claim, covering a total of approximately 460 acres, or 186
hectares. Only the single unpatented claim is administered by the
United States Bureau of Land Management, and annual assessment
filings and payments are due on it. The patented claims are owned
as private land by LSG, and only annual property taxes must be
paid.
Recent Developments
We are in the final stages of completing materials for filing our
permit application. Additional activities for this quarter included
general cleanup and housekeeping of the surface facilities in
anticipation of submitting Notification of Commencement to both
State of Nevada and MSHA agencies in order to reoccupy our mine
workings.
Given that permitting for operations on the Property is still to be
completed, at the request of our management, LSG granted, by a
letter of agreement, a deferment to January 18, 2017 of payments
totaling $198,901 due and accrued as of September 30, 2016 under
the terms of the Option Agreement.
Personnel
We have no employees. Our president and CEO, Mark Walmesley,
currently receives no compensation for his services. We expect to
continue to use outside consultants, advisors, attorneys and
accountants as necessary.
Our Chief Operating Officer, Thomas Temkin, who is also a director,
is a Certified Professional Geologist and a Qualified Person under
National Instrument (NI) 43101, with more than 38 years of
experience in the mining industry, primarily in exploration in the
Western United States. He is currently a consulting geologist
working with LSG. Mr. Temkin has been associated with LSG and the
Property for over 15 years and has been instrumental through its
entire exploration program to date.
Our Corporate Secretary, Pam Walters, has been associated with the
mining industry for over 25 years and has managed the corporate
finance and business operations of LSG and its owners.
11
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
|
Plan of Operations
We anticipate that we will require approximately $2 million to
pursue our plan of operations over 12 months, as detailed in
previous quarterly filings.
Our primary focus is currently on the mine permitting process. We
have retained the following specialists in underground permitting
of narrow vein, high sulphide mines to assist in executing that
permitting process:
· Rubicon
Environmental Consulting to act as the lead
consultant
· Hydrogeologica Inc. to consult on water and
geology
· Tierra
Group International to consult on mine planning and
engineering
Unique to our permitting is the proposed underground area of work
named the Red Hills Stope Zone. It is 150 feet above the 450 foot
deep water table, making the mine essentially a dry
mine.
The mine’s 300 foot level workings has pockets of unused
volume where our potentially acid generating waste rock can be
stored. This means no waste rock will come to the surface and LSM
will avoid, for the short-term, the expense of having to build and
maintain a surface storage facility.
We are hopeful that the two aforementioned mitigating circumstances
will make our permitting process more rapid and therefore, the
costs of execution and infrastructure improvements will be kept at
a minimum.
Permitting costs are anticipated to be as follows:
|
Rubicon
|
$40,000
|
|
Hydrogeologica
|
$135,000
|
|
Tierra
|
$75,000
|
|
State
/ NDEP
|
$0
|
|
Total
|
$250,000
|
Funding
We do not currently have sufficient funds to carry out our entire
plan of operations, so we intend to meet the balance of our cash
requirements for the next 12 months through a combination of debt
financing and equity financing through private placements.
Currently we are active in contacting broker/dealers regarding
possible financing arrangements; however, we do not currently have
any arrangements in place to complete any private placement
financings and there is no assurance that we will be successful in
completing any such financings.
If we are unsuccessful in obtaining sufficient funds through our
capital raising efforts, we may review other financing options,
although we cannot provide any assurance that any such options will
be available to us or on terms reasonably acceptable to us.
Further, if we are unable to secure any additional financing then
we plan to reduce the amount that we spend on our operations,
including our management-related consulting fees and other general
expenses, so as not to exceed the capital resources available to
us. Regardless, our current cash reserves and working capital will
not be sufficient for us to sustain our business for the next 12
months, even if we decide to scale back our
operations.
Going Concern
Our auditors have issued a going concern opinion. This means that
there is substantial doubt that we can continue as an on-going
business for the next twelve months unless we obtain additional
capital to pay our expenses. This is because we have not generated
any revenues to date and we cannot currently estimate the timing of
any possible future revenues. Our only source for cash at this time
is investments by others in our common stock, or
loans.
12
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
|
Results of Operations
To September 30, 2016
The following summary of our results of operations should be read
in conjunction with our financial statements for the period ended
September 30, 2016 which are included with this
Report.
|
|
Three Months Ended
September 30
|
Change
|
||
|
|
2016
|
2015
|
Amount
|
Percentage
|
|
Revenue
|
$-
|
$-
|
$-
|
-
|
|
Operating
Expenses
|
53,385
|
17,998
|
35,387
|
197%
|
|
Loss
from Operations
|
(53,385)
|
(17,998)
|
(35,387)
|
197%
|
|
Other
Income (Expense)
|
(7,374)
|
(5,544)
|
(1,830)
|
33%
|
|
Net
Loss For The Period
|
$(60,759)
|
$(23,542)
|
$(37,217)
|
158%
|
|
|
Nine Months Ended
September 30
|
Change
|
||
|
|
2016
|
2015
|
Amount
|
Percentage
|
|
Revenue
|
$-
|
$-
|
$-
|
-
|
|
Operating
Expenses
|
167,744
|
106,623
|
61,121
|
57%
|
|
Loss
from Operations
|
(167,744)
|
(106,623)
|
(61,121)
|
57%
|
|
Other
Income (Expense)
|
(41,136)
|
(14,613)
|
(26,523)
|
182%
|
|
Net
Loss For The Period
|
$(208,880)
|
$(121,236)
|
$(87,644)
|
72%
|
Revenues
We have had no operating revenues since our inception on December
9, 2004. We recorded a net loss of $60,758 for the quarter ended
September 30, 2016 and have an accumulated deficit of $1,620,904.
The possibility and timing of revenue being generated from our
mineral property interest remains uncertain.
Expenses – Three months ended September 30, 2016 and
2015
Notable period over period differences are as follows:
|
|
Three Months Ended September 30
|
Change
|
||
|
|
2016
|
2015
|
Amount
|
Percentage
|
|
Mineral
option fees
|
$25,000
|
$-
|
$25,000
|
-
|
|
Office,
foreign exchange and sundry
|
$3,789
|
$(2,306)
|
$6,095
|
(264%)
|
|
Transfer
and filing fees
|
$5,074
|
$2,470
|
$2,604
|
105%
|
|
Interest,
bank and finance charges
|
$7,374
|
$5,544
|
$1,830
|
33%
|
■
Mineral
option fees were incurred in Q3 of 2016, but not in Q3 of 2015,
under the terms of our Mineral Option Agreement with LSG. They
first became due in Q4 of 2015.
■
Office,
foreign exchange & sundry expenses were higher in Q3 of 2016
mainly due to increases in foreign exchange costs and travel
necessitated by site visits and business development
activity.
■
Transfer
and filing fees were higher in Q3 of 2016 as the Company filed five
reports with the SEC in that quarter, compared to one in Q3 of
2015.
■
Interest,
bank and finance charges were higher in Q3 of 2016 mainly due to
increased loan amounts. Interest-bearing loan balances totaled
approximately $520,215 at September 30, 2016 compared to $367,635
at September 30, 2015.
13
|
ITEM
2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
|
Balance Sheet at September 30, 2016 and December 31,
2015
Items with notable period-end differences are as
follows:
|
|
|
|
Change
|
|
|
|
September 30
2016
|
December 31
2015
|
Amount
|
Percentage
|
|
Accounts
payable and accrued liabilities
|
$25,460
|
$14,302
|
$11,158
|
78%
|
|
Due
to related parties
|
$700,761
|
$495,384
|
$205,377
|
41%
|
|
Loans
payable
|
$66,088
|
$76,180
|
$(10,092)
|
(13%)
|
■
Accounts
payable and accrued liabilities increased mainly due to the accrual
of approximately $20,000 for an IRS penalty in connection with the
Company’s 2013 income tax filing, which was partly offset by
a decrease of approximately $10,000 in accounting and legal fees
due since the end of 2015. An identical IRS penalty for the
Company’s 2012 tax year was waived and we are waiting for a
determination of our appeal of the 2013 penalty.
■
The
change in Due to Related parties was a result of increased related
party loans and accrued interest in the nine months ended September
30, 2016 of approximately $130,000, together with the accrual of
fees due under the terms of the Company’s mineral option
agreement with LSG of approximately $75,000.
■
Loans payable decreased
due to repayment of $15,000 in loan principal, partially offset by
the accrual of interest totaling approximately
$5,000.
Liquidity and Capital Resources
As of September 30, 2016, our total assets were $243,416, and our
total liabilities were $792,309. Our working capital as at
September 30, 2016 and December 31, 2015 and the changes between
those dates are summarized as follows:
|
|
September 30
|
December 31
|
Increase/(Decrease)
|
|
|
|
2016
|
2015
|
Amount
|
Percentage
|
|
Current
Assets
|
$13,236
|
$15,673
|
$(2,437)
|
(16%)
|
|
Current
Liabilities
|
792,309
|
585,866
|
206,443
|
35%
|
|
Working
Capital (Deficiency)
|
$(779,073)
|
$(570,193)
|
$(208,880)
|
37%
|
The increase in our working capital deficiency from December 31,
2015 to September 30, 2016 was primarily due to the increase in
amounts due to related parties of approximately $205,000, which is
explained above. The increase in accounts payable of approximately
$11,000 was largely offset by the decrease in loans payable of
approximately $10,000.
Cash Flows
|
|
Nine Months Ended
September 30
|
Change
|
||
|
|
2016
|
2015
|
Amount
|
Percentage
|
|
Cash
Provided By (Used In):
|
|
|
|
|
|
Operating
Activities
|
$(47,437)
|
$(132,798)
|
$85,361
|
(64%)
|
|
Financing
Activities
|
45,000
|
138,426
|
(93,426)
|
(67%)
|
|
Net
increase (decrease) in cash
|
$(2,437)
|
$5,628
|
$(8,065)
|
(143%)
|
Cash Used In Operating Activities
The
decrease in cash used in operating activities of approximately
$85,000 was mainly due to the following:
An increase in net loss for the 2016 period compared to the 2015
period of approximately $88,000, offset by:
■
a
change of approximately $5,000 from a foreign exchange gain in 2015
to a loss in 2016;
■
an
increase of approximately $2,000 in Prepaid fees in the 2015 period
, with no change in the 2016 period;
■
a
difference of approximately $84,000 in the change in accounts
payable and accrued liabilities in 2016 versus 2015;
■
accrued
mineral option fees of approximately $75,000 for the nine month
period in 2016, with none in the equivalent period in 2015;
and
■
an
increase of approximately $7,000 in the change in accrued interest,
as interest-bearing loan balances increased.
Cash Provided By Financing Activities
The decrease of approximately $93,000 in cash provided by financing
activities was due to repayment of loans being $11,000 higher in
the 2016 period and direct loans from related parties increasing by
$60,000 in 2016, compared to approximately $142,000 in the 2015
period, a net decrease of approximately $82,000.
14
|
ITEM
2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
|
As of the date of this quarterly report, we have yet to generate
any revenues from our business operations. Our ability to generate
adequate amounts of cash to meet our needs is entirely dependent on
the issuance of shares or loans.
Our principal source of working capital has been in the form of
loans and subscriptions for our common stock. For the foreseeable
future, we will have to continue to rely on those sources for
funding. We have no assurance that we can successfully engage in
any further private sales of our securities or that we can obtain
any additional loans.
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
|
We are a smaller reporting company as defined by Rule 12b-2 of the
Securities Exchange Act of 1934 and are not required to provide the
information under this item.
|
ITEM 4.
|
CONTROLS AND PROCEDURES.
|
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as
such term is defined in Rule 13a-15(e) under the Securities
Exchange Act of 1934 (the “Exchange Act”), that are
designed to ensure that information required to be disclosed in our
Exchange Act reports is recorded, processed, summarized and
reported within the time periods specified in the Securities and
Exchange Commission rules and forms, and that such information is
accumulated and communicated to our management, including our
Principal Executive Officer and our Principal Financial Officer, as
appropriate, to allow timely decisions regarding required
disclosure. We conducted an evaluation under the supervision and
with the participation of our Principal Executive Officer and our
Principal Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures as of the end
of the period covered by this report pursuant to Rule 13a-15 of the
Exchange Act. Based on this Evaluation, our Principal Executive
Officer and our Principal Financial Officer concluded that our
Disclosure Controls were effective as of the end of the period
covered by this report.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial
reporting during the quarter ended September 30, 2016 that have
materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
PART II - OTHER INFORMATION
|
ITEM 1A.
|
RISK FACTORS
|
We are a smaller reporting company as defined by Rule 12b-2 of the
Securities Exchange Act of 1934 and are not required to provide
information under this item. Our business is subject to
risks inherent in the establishment of a new business enterprise,
including, without limitation, the items listed in Item 1A RISK
FACTORS in our report filed on Form 10-K for the year ended
December 31, 2015.
|
ITEM
2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS.
|
We had no unregistered sales of securities during the three months
ended September 30, 2016 or subsequently, to the date of this
report.
Within the past three years we have not issued any equity
securities that were not registered under the Securities Act, other
than as disclosed in previous reports on Forms 10-Q, 10-K or
8-K.
15
|
ITEM 6.
|
EXHIBITS.
|
The following documents are included herein:
|
Exhibit No.
|
Document Description
|
|
|
|
|
|
|
|
101.INS
|
XBRL
Instance Document
|
|
|
|
|
101.SCH
|
XBRL Taxonomy Extension Schema
|
|
|
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
|
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase
|
|
|
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase
|
|
|
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase
|
16
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized on this
10th day of November, 2016
|
|
LODE-STAR MINING INC.
|
|
|
|
|
|
|
|
|
|
BY:
|
“Mark Walmesley”
|
|
|
|
|
Mark Walmesley
|
|
|
|
|
President, Principal Executive Officer, Treasurer, Principal
Financial Officer, and Principal Accounting Officer
|
|
|
|
|
|
|
In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated:
|
Signature
|
Title
|
Date
|
|
|
|
|
|
/s/ Mark Walmesley
|
Director,
President, Chief Executive Officer and Chief Financial
Officer
|
November 10, 2016
|
|
Mark Walmesley
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Thomas
Temkin
|
Director
and Chief Operating Officer
|
November 10, 2016
|
|
Thomas Temkin
|
|
|
17
EXHIBIT INDEX
|
Exhibit No.
|
Document Description
|
|
|
|
|
|
|
|
101.INS
|
XBRL Instance Document
|
|
|
|
|
101.SCH
|
XBRL Taxonomy Extension Schema
|
|
|
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
|
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase
|
|
|
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase
|
|
|
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase
|
18