Lode-Star Mining Inc. - Quarter Report: 2018 September (Form 10-Q)

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☑	QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2018
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 000-53676

 

 

LODE-STAR MINING INC.

(Exact name of registrant as specified in its charter)

 

NEVADA	47-4347638
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

 

1 East Liberty Street, Suite 600

Reno, NV 89501

(Address of principal executive offices, including zip code.)

 

(775) 234-5443

(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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer	☐	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☑
Emerging Growth Company	☐

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ☐ NO ☑

 

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 12, 2018.

 

 

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

	Page
PART I - FINANCIAL INFORMATION
Item 1.       Financial Statements	2
Balance Sheets as of September 30, 2018 and December 31, 2017 (unaudited)	4
Statements of Operations for the Three Months and Nine Months ended September 30, 2018 and 2017 (unaudited)	5
Statements of Cash Flows for the Nine Months ended September 30, 2018 and 2017 (unaudited)	6
Notes to Financial Statements (unaudited)	7
Item 2.       Management’s Discussion and Analysis Of Financial Condition and Results of Operations	11
Item 3.       Quantitative and Qualitative Disclosures About Market Risk	15
Item 4.       Controls and Procedures	15
PART II - OTHER INFORMATION
	15
Item 1A.    Risk Factors
Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 6.      Exhibits	16
SIGNATURES	17

 

 

 

 

 

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LODE-STAR MINING INC.

 

INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LODE-STAR MINING INC.

 

BALANCE SHEETS

 

(Unaudited)

 

	SEPTEMBER 30	DECEMBER 31
	2018	2017
ASSETS
Current assets
Cash	$16,607	$818
Prepaid fees	3,061	3,725
Total current assets	19,668	4,543
Mineral Property Interest, unproven	230,180	230,180
Total assets	$249,848	$234,723
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
Current liabilities
Accounts payable and accrued liabilities	$8,702	$8,048
Due to related parties and accrued interest	1,276,304	1,036,569
Loans payable and accrued interest	34,645	47,055
Total current liabilities	1,319,651	1,091,672
STOCKHOLDERS’ DEFICIENCY
Capital Stock
Authorized:
480,000,000 voting common shares with a par value of $0.001 per share
20,000,000 preferred shares with a par value of $0.001 per share
Issued:
49,127,825 common shares at September 30, 2018 and December 31, 2017	1,947	1,947
Additional Paid-In Capital	1,569,444	1,512,872
Accumulated Deficit	(2,641,194)	(2,371,768)
Total stockholders’ deficiency	(1,069,803)	(856,949)
Total liabilities and stockholders’ deficiency	$249,848	$234,723

 

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

 

 

 

LODE-STAR MINING INC.

 

STATEMENTS OF OPERATIONS

(Unaudited)

 

 

	THREE MONTHS ENDED		NINE MONTHS ENDED
	SEPTEMBER 30		SEPTEMBER 30
	2018	2017	2018	2017
Revenue	$-	$-	$-	$-
Operating Expenses
Consulting services	14,585	100,659	75,005	411,558
Corporate support services	483	499	1,446	1,440
Exploration and evaluation	-	-	-	3,190
Mineral option fees	25,012	25,012	75,000	75,000
Office, foreign exchange and sundry	3,702	1,799	14,902	5,600
Professional fees	10,305	12,316	39,895	33,842
Transfer and filing fees	2,141	1,909	20,668	19,234
Total operating expenses	56,228	142,194	226,916	549,864
Operating Loss	(56,228)	(142,194)	(226,916)	(549,864)
Other Expenses
Interest, bank and finance charges	(14,046)	(11,600)	(42,510)	(33,645)
Net Loss	$(70,274)	$(153,794)	$(269,426)	$(583,509)
Basic and Diluted Net Loss Per Common Share	$(0.00)	$(0.00)	$(0.01)	$(0.01)
Weighted Average Number of Common Shares Outstanding – Basic and Diluted	49,127,825	49,127,825	49,127,825	49,127,825

 

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

 

 

 

 

LODE-STAR MINING INC.

 

STATEMENTS OF CASH FLOWS

(Unaudited)

 

	NINE MONTHS ENDED
	SEPTEMBER 30
	2018	2017
Operating Activities
Net loss	$(269,426)	$(583,509)
Adjustments to reconcile net loss to net cash used in operating activities:
Foreign exchange loss	931	2,103
Stock options issued for services	56,572	393,565
Changes in operating assets and liabilities:
Prepaid fees	663	-
Accounts payable and accrued liabilities	35,010	36,465
Due to related parties	75,000	75,000
Accrued interest payable	42,039	33,407
Net cash used in operating activities	(59,211)	(42,969)
Financing Activities
Repayment of loans payable	(15,000)	(15,000)
Proceeds from loans payable – related party	90,000	55,000
Net cash provided by financing activities	75,000	40,000
Net Increase (Decrease) in Cash	15,789	(2,969)
Cash, Beginning of Period	818	5,134
Cash, End of Period	$16,607	$2,165
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest	$-	$-
Income taxes	$-	$-
Non-cash Financing Activity
Expenses paid by related party on behalf of the Company	$34,355	$53,987

 

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

 

 

1.	BASIS OF PRESENTATION AND NATURE OF OPERATIONS

 

Organization

 

Lode-Star Mining Inc. (“the Company”) was incorporated in the State of Nevada, U.S.A., on December 9, 2004. The Company’s principal executive offices are in Reno, Nevada. The Company was originally formed to acquire 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 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.

 

Going Concern

 

The accompanying unaudited interim 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 its business plan. As shown in the accompanying financial statements, the Company has had no revenue and has incurred accumulated losses of $2,641,194 as of September 30, 2018. These factors raise substantial doubt about the Company’s ability to continue as a going concern. To continue as a going concern, the Company will need, among other things, additional capital resources. The Company is significantly dependent upon its ability and will continue to attempt to secure additional equity and/or debt financing. There are noassurances that the Company will be successful and without sufficient financing, it would be unlikely for the Company to continue as a going concern. 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 interim 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 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, 2017. 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 disclosures, which would substantially duplicate the disclosures contained in the Company’s financial statements for the fiscal year ended December 31, 2017, have been omitted. The results of operations for the nine months ended September 30, 2018 are not necessarily indicative of results for the entire year ending December 31, 2018.

 

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

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.

 

3.	MINERAL PROPERTY INTEREST

 

The Company’s mineral property interest is a group of thirty-one claims known as the “Goldfield Bonanza Project” (the “Property”), in the State of Nevada. Pursuant to an option agreement dated October 14, 2014 with Lode-Star Gold Inc. (“LSG”), a private Nevada corporation, the Company acquired an initial 20% undivided interest in and to the mineral claims owned by LSG and an option to earn a further 60% interest in the claims. LSG received 35,000,000 shares of the Company’s common stock and is its controlling shareholder. Until the Company has earned the additional 60% interest, the net smelter royalty will be split 79.2% to LSG, 19.8% to the Company and 1% to the former Property owner.

 

 

3.	MINERAL PROPERTY INTEREST (Continued)

 

To earn the additional 60% interest, the Company is 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 royalty, commencing after December 11, 2014. If the Company fails to make any cash payments to LSG within one year of the date of the option agreement, it is required to pay LSG an additional $100,000, and in any subsequent years in which the Company fails to complete the payment of the entire $5 million, it must make quarterly cash payments to LSG of $25,000.

 

Given that permitting for operations on the Property is still to be completed, on January 11, 2017 LSG agreed to defer payment of all amounts due in accordance with the mineral option agreement until further notice. On January 17, 2017, the Company and LSG agreed that as of January 1, 2017, all outstanding balances shall carry a compound interest rate of 5% per annum. It was further agreed that the ongoing payment deferral shall apply to both interest and principal. The total amount of such fees due at September 30, 2018 was $398,913 (December 31, 2017: $323,913), with total interest due in the amount of $25,636 (December 31, 2017: $11,196).

 

The Company has agreed with LSG that upon the successful completion of a toll milling agreement after permitting is achieved, it will have the basis to form a joint management committee to outline work programs and budgets, as contemplated in the option agreement, and for the Company to act as the operator of the property.

 

The Company assessed its mineral property interest to the date of issue 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.

 

 

4.	CAPITAL STOCK

 

During the nine months ended September 30, 2018, the Company did not issue any shares of its common stock.

Capitalization

The authorized capital of the Company is 500,000,000 shares of capital stock, divided into 480,000,000 shares of common stock with a par value of $0.001 per share, and 20,000,000 shares of preferred stock with a par value of $0.001 per share. The Company reserved 10,000,000 shares of common stock for issuance under its 2016 Omnibus Equity Incentive Plan. No preferred shares have been issued.

 

Options

On February 14, 2017, the Company granted 9,500,000 non-qualified stock options pursuant to the Equity Incentive Plan, to key corporate officers and outside consultants, with 25% vesting immediately and a further 25% vesting every six months thereafter for eighteen months. Each option is exercisable into one share of the Company’s common stock at a price of $0.06 per share, equal to the closing price of the common stock on the grant date, for a term of five years. At the date they were granted, the options had an estimated fair value of $536,750. For the nine-month period ended September 30, 2018, $56,572 has been included in Consulting services expense based on fair value estimates determined using the Black-Scholes option pricing model, with an average risk-free rate of 1.98%, a weighted average life of 4.837 years, volatility of 189.07% and dividend yield of 0%. At September 30, 2018, the options had an intrinsic value of $0 based on the exercise price of $0.06 per option and a market price of $0.033 per share.

 

A summary of option activity in the current nine-month period and options outstanding at September 30, 2018 is as follows:

 

					Weighted
				Weighted	Average
				Average	Life
	Options		Exercise	Exercise	Remaining	Expiry	Intrinsic
	Issued	Vested	Price	Price	(Years)	Date	Value
Balance December 31, 2017	9,500,000	4,750,000	$0.06	$0.06	4.12	February 14, 2022	$-
Issued	-	-	-	-	-	-	-
Expired	-	-	-	-	-	-	-
Exercised	-	-	-	-	-	-	-
Vested	-	4,750,000	$0.06	$0.06	-	February 14, 2022	-
Balance September 30, 2018	9,500,000	9,500,000	$0.06	$0.06	3.38	February 14, 2022	$-

4.	CAPITAL STOCK (Continued)

 

A summary of warrant activity in the current nine-month period and warrants outstanding at September 30, 2018 is as follows:

 

	Number of Warrants	Exercise Price	Weighted Average Exercise Price	Weighted Average Life Remaining (Years)	Expiry Date	Intrinsic Value
Balance December 31, 2017	3,336,060	$0.02	$0.02	2.88	November 19, 2020	$40,033
Issued	-	-	-	-	-	-
Expired	-	-	-	-	-	-
Exercised	-	-	-	-	-	-
Balance outstanding and exercisable at September 30, 2018	3,336,060	$0.02	$0.02	2.13	November 19, 2020	$43,369

 

5.	LOANS PAYABLE

 

At September 30, 2018, the Company had the following loans payable:

Total interest accrued on the above loans at September 30, 2018 was $23,645 (December 31, 2017: $21,055).

 

6.	RELATED PARTY TRANSACTIONS AND AMOUNTS DUE

 

At September 30, 2018, the Company had the following amounts due to related parties:

   

During the period ended September 30, 2018, the Company incurred $75,000 (2017: $75,000) in mineral option fees and $14,440 (2017: $8,374) in interest payable to LSG, which were accrued as of that date. The total amount of such fees due at September 30, 2018 was $398,913 (December 31, 2017: $323,913), with total interest due in the amount of $25,636 (December 31, 2017: $11,196).

 

At September 30, 2018, the total due to related parties of $1,276,304 (December 31, 2017: $1,036,569) was comprised of the following:

An additional $1,427 (December 31, 2017: $Nil) owing to the Company’s President was outstanding in accounts payable at September 30, 2018. The President provides a full spectrum of senior management services, functioning also as the Company’s CEO and CFO, without compensation.

 

7.	CONTRACTUAL OBLIGATIONS AND COMMITMENTS

 

See Note 3 for details about the Company’s obligations and commitments regarding its Mineral Property Interest.

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

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”). LSG would acquire control of us as a result of the intended transaction.

 

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 issued 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 we have earned the additional 60% interest, the NSR royalty will be split with 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 covering a total of approximately 460 acres, or 186 hectares. The claims are owned as private land by LSG, and only annual property taxes must be paid. Operations are managed from a 6,000 sq. ft. office and warehouse facility complete with showers and laundry amenities. Two residential trailer sites are immediately adjacent to this building for crew needs. All properties, claims, buildings, equipment, and supplies are owned by LSG and we have free access to utilize and manage all the above-noted items.

 

The Property has one working shaft, the February Premier, which has access to the 300 ft level, with approximately 1/2 mile of ventilated drift. Underground work has identified 2 high-grade gold-bearing zones which the company plans to further explore. Given that the most prudent exploration must take place underground, we are applying through LSG for a "Surface Separation Facility” through the Nevada Department of Environmental Protection (NDEP). The program that we envision undertaking includes the mining of approximately 10,000 tons of non-NI 43-101 compliant gold mineralization at an approximate grade of 0.9 ounces per ton. The estimated grade is based on historic drilling work done by LSG, for which the 1.5-inch core samples were consumed by assay requirements. In order to provide adequate sample weights to the assaying lab, the entire core was processed for individual samples. While we have encountered several additional high-grade drill anomalies throughout the property, it is important to note that we have no proven and/or probable reserves at the present time and therefore the program is exploratory in nature.

 

The Property has two operating water monitoring wells (completed April 15, 2016) that are mandatory for us to receive a water pollution control permit. Part of the permitting application is for the allowance of the company to store its waste rock underground. The property has no milling on site and we must rely on a third party to receive our mineralized material and tombstone our tailings.

 

Our primary objective remains the completion of our Surface Separation Facility permit, to allow processing of material extracted from our targeted underground zones. This entails having a toll milling agreement with an existing milling operation to handle processing of our mineralized material, as well as the tomb-stoning of the tailings from that mineralized material. On February 17, 2017, we executed an agreement with Scorpio Gold Corporation for a pilot toll milling test. We completed the first test in May 2017 and both companies have determined that further testing needs to be completed to determine a definitive cost analysis and other operational details. The sample processed was historic material stockpiled on the property surface and therefore of limited metallurgical value, but indicative of material that will be run through the mill. Milling throughput did identify specific equipment configuration details that need to be considered for future runs. The Company expects to provide material from its targeted underground zone for more comprehensive milling results when we are permitted to do so.

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

 

Recent Developments

 

For Q3 2018, all work and processes as described below are continuing. No material, additional developments have occurred since December 31, 2017.

 

Permitting for operations on the Property has not been completed. We filed our permit application with NDEP on April 5, 2017. NDEP has completed its Administrative Review of the application and is underway with its Technical Review. We received NDEP’s response letter on October 20, 2017 requesting additional information on a small number of engineering and hydrology concerns, as well as recommendations on some additional matters. Correspondence with NDEP is ongoing. Following review by NDEP of our latest tests, the permit should be put out for public review for a period expected to be no longer than 60 days.

 

The Company has re-occupied its underground workings on the 300 ft level and has access to the ore zone we wish to extract. We are waiting on the NDEP permit to begin mining endeavors.

 

We have agreed with LSG that upon the successful completion of a toll milling agreement, we will have the basis to form a joint management committee to outline work programs and budgets, as contemplated in our Option agreement dated October 4, 2014, and for us to act as the operator of the property.

 

Personnel

 

We have no employees. Our president and CEO, Mark Walmesley, 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.

 

Plan of Operations

 

As noted above, our primary objective remains the completion of our Surface Separation Facility permit, to allow processing of material extracted from our targeted underground zones. This entails having a toll milling agreement with an existing milling operation to handle processing of our mineralized material, as well as the tomb-stoning of the tailings from that mineralized material

 

The following specialists in underground permitting of narrow vein, high sulfide mines are charged with executing the permitting process:

 

· Rubicon Environmental Consulting is the lead consultant

· Hydrogeologica Inc. consults on water and geology

· Tierra Group International consults on mine planning and engineering

 

Permitting costs to date are approximately $250,000.

 

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 these two mitigating circumstances will make our permitting process more rapid and therefore, the costs of execution and infrastructure improvements will be kept at a minimum.

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

 

In addition to the permitting costs, we expect 1-year development costs to come in as follows:

 

Site and Surface Preparation	$100,000
Equipment and Mining Materials	$500,000
Underground Rehab & Preliminary Mine Development	$110,000
Ore Grade Control	$50,000
Red Hill's Vein Zone Work	$270,000
General Corporate and Administration Fees	$720,000

 

Exploration

The Company is structuring a drill program, targeting expansion of its known gold zones as soon as permitting is achieved.

 

Funding

The Property continues to be advanced by work executed by LSG. This interim advancement will continue for the foreseeable future.

 

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. 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.

 

Results of Operations

The following summary of our results of operations for the three months and nine months ended September 30, 2018 and 2017 should be read in conjunction with our financial statements for the period ended September 30, 2018 which are included above in Part I, Item 1.

conjunction with our financial statements for the period ended September 30, 2018 which are included above in Part I, Item 1.

	Three Months Ended September 30		Change
	2018	2017	Amount	Percentage
	$	$	$
Revenue	-	-	-	-
Operating Expenses	56,228	142,194	(85,966)	(60%)
Operating Loss	(56,228)	(142,194)	85,966	(60%)
Other Income (Expense)	(14,046)	(11,600)	(2,446)	21%
Net Loss	(70,274)	(153,794)	83,520	(54%)

 

	Nine Months Ended September 30		Change
	2018	2017	Amount	Percentage
	$	$	$
Revenue	-	-	-	-
Operating Expenses	226,916	549,864	(322,948)	(59%)
Operating Loss	(226,916)	(549,864)	322,948	(59%)
Other Income (Expense)	(42,510)	(33,645)	(8,865)	26%
Net Loss	(269,426)	(583,509)	314,083	54%

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

 

Revenues

We had no operating revenues during the three-month and nine-month periods ended September 30, 2018 and 2017. We recorded a net loss of $70,274 for the current quarter (2017: $153,794) and a net loss of $269,426 for the nine months ended September 30, 2018 (2017: $583,509). We have an accumulated deficit of $2,641,194. The possibility and timing of revenue being generated from our mineral property interest remains uncertain.

 

Expenses

Notable year over year differences in expenses for the third quarter were as follows:

 

	Three Months Ended September 30		Increase/(Decrease)
	2018	2017	Amount	Percentage
Consulting services	14,585	100,659	(86,074)	(86%)
Office, foreign exchange and sundry	3,702	1,799	1,903	106%
Professional fees	10,305	12,316	(2,011)	(16%)
Interest, bank and finance charges	14,046	11,600	2,446	21%

 

Consulting services expense in the third quarter of 2018 included approximately $9,000 related to options which were granted during the first quarter of 2017. However, in the third quarter of 2017, consulting expense included approximately $95,000 related to the same options, which accounts for the year over year decrease of approximately $86,000 in the third quarter.

Office, foreign exchange and sundry expenses were higher in Q3 of 2018 primarily due to increased travel costs necessitated by mine site visits and business development.

Professional fees were higher in Q3 of 2017 primarily due to geotechnical report services of approximately $4,000 being incurred, with no equivalent expense in Q3 of 2018, offset by accounting services for preparation of the company’s US tax return of approximately $2,000 in the current quarter, whereas in the prior year, that cost was incurred in Q4.

Interest, bank and finance charges were higher primarily due to increases in Q3 in 2018 versus the same period in 2017 of approximately $1,000 in interest on accrued mineral option fees due to LSG, plus an increase in interest accrued on loans of approximately $1,000. Those increases were due to higher balances in loans and accrued mineral option fees due.

 

Cash Flows

 

	Nine Months Ended September 30		Increase/(Decrease)
	2018	2017	Amount	Percentage
Cash Flows Provided By (Used In):
Operating Activities	$(59,211)	$(42,969)	$(16,242)	38%
Financing Activities	$75,000	$40,000	$35,000	88%
Net increase in cash	$15,789	$(2,969)	$18,758	632%

 

Net cash provided by financing activities was approximately $16,000 greater than cash used in operating activities in the 2018 period, compared to it being approximately $3,000 lower in the 2017 period.

 

Balance Sheets at September 30, 2018 and December 31, 2017

 

Balance Sheet items with notable period-end differences are as follows:

 

			Change
	September 30, 2018	December 31, 2017	Amount	Percentage
Cash	$16,607	$818	$15,789	1,930%
Due to related parties and accrued interest	$1,276,304	$1,036,569	$239,735	23%
Loans payable and accrued interest	$34,645	$47,055	$(12,410)	(26%)
Additional paid-in capital	$1,569,444	$1,512,872	$56,572	4%

 

The increase in Cash is explained in Cash Flows above.

Due to related parties increased due to increased related party loans and accrued interest in the nine-month period of approximately $150,000, together with the accrual of fees and interest due under the terms of our mineral option agreement with LSG of approximately $89,000.

 

 

Loans payable decreased due to a repayment of $15,000 in loan principal, partially offset by the accrual of interest totaling approximately $3,000.

Additional paid-in capital increased as a result of the current period expense of a portion of the value assigned to the 9.5 million stock options issued on February 14, 2017, calculated using the Black-Scholes option pricing model.

 

Liquidity and Capital Resources

 

At September 30, 2018, our total assets were $249,848 and our total liabilities were $1,319,651. Our working capital deficiency at September 30, 2018 and December 31, 2017 and the changes between those dates were as follows:

			Increase/(Decrease)
	September 30, 2018	December 31, 2017	Amount	Percentage
Current Assets	$19,668	$4,543	$15,125	333%
Current Liabilities	$1,319,651	$1,091,672	$227,979	21%
Working Capital Deficiency	$(1,299,983)	$(1,087,129)	$(212,854)	20%

 

The increase in our working capital deficiency from December 31, 2017 to September 30, 2018 was primarily due to the increases in amounts Due to related parties and accrued interest of approximately $240,000, offset by the decrease of approximately $12,000 in Loans payable and accrued interest, and the increase in Cash of approximately $16,000, each of which are explained above.

 

We have yet to generate any revenues from our business operation and our ability to generate adequate amounts of cash to meet our needs is entirely dependent on the issuance of shares or loans, which have been our principal sources of working capital so far. 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 conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2018, our disclosure controls and procedures were not effective, due to the size and nature of the existing business operation. Given the size of our current operation and existing personnel, the opportunity to implement disclosure control procedures is limited. Until the organization can increase sufficiently in size to warrant an increase in personnel required to effectively execute and monitor formal disclosure control procedures, those formal procedures will not be implemented. Given the current size of the organization, there are not significant levels of supervision, review, independent directors or a formal audit committee.

 

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2018 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 period ended December 31, 2017.

 

 

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, 2018.

 

Other than as disclosed in previous reports filed with the SEC, we have not issued any equity securities that were not registered under the Securities Act within the past three years.

 

ITEM 6.

EXHIBITS.

 

The following documents are included herein:

 

Exhibit No.	Document Description
31.1	Certification of Principal Executive and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Chief Executive and Chief Financial Officer.
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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 12th day of November 2018.

 

 

	LODE-STAR GOLD 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 12, 2018
Mark Walmesley
/s/ Thomas Temkin	Director and Chief Operating Officer	November 12 2018
Thomas Temkin

 

 

 

 

 

 

EXHIBIT INDEX

 

 

 

Exhibit No.	Document Description
31.1	Certification of Principal Executive and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Chief Executive and Chief Financial Officer.
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