Nevada Canyon Gold Corp. - Quarter Report: 2017 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] quarterly REPORT under SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2017

or

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File No. 333-196075

NEVADA CANYON GOLD CORP.

(Exact Name of Registrant as Specified in its Charter)

Registrant’s telephone number, including area code: (888) 909-5548

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§230.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] 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 file,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ] No [X]

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section l2, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes [  ] No [  ]

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of May 15, 2017, the number of shares outstanding of the issuer’s sole class of common stock, par value $0.0001 per share, is 44,050,000.

table of contents

Part I – FINANCIAL INFORMATION

Item 1. Financial Statements

Nevada Canyon Gold Corp.

Balance Sheets

(Presented in US Dollars)

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

NEVADA CANYON GOLD CORP.

Statements of Operations

(Unaudited)

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

NEVADA CANYON GOLD CORP.

Statements of Cash Flow

(Unaudited)

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

NEVADA CANYON GOLD CORP.

Notes to the Interim Financial Statements

(Unaudited)

NOTE 1 - NATURE OF BUSINESS

Nevada Canyon Gold Corp. (the “Company”) was incorporated under the laws of the state of Nevada on February 27, 2014. On July 6, 2016, the Company changed its name from Tech Foundry Ventures, Inc. to Nevada Canyon Gold Corp.

On April 28, 2016, the Company split its common stock on a 10:1 basis. All shares and per share amounts have been retroactively restated to account for the split.

Going Concern

The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America (“US GAAP”) applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has only recently begun its exploration operations and has not generated or realized any revenues from these business operations. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

The outcome of these matters cannot be predicted with any certainty at this time and raise substantial doubt that the Company will be able to continue as a going concern. These financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that may be necessary should the Company be unable to continue as a going concern. Management intends to obtain additional funding by borrowing funds, and/or a private placement of common stock.

NOTE 2 - BASIS OF PRESENTATION

The unaudited interim financial statements of the Company have been prepared in accordance with US GAAP for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC”). They do not include all information and footnotes required by US GAAP for complete financial statements. Except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements for the year ended December 31, 2016, included in the Company’s Annual Report on Form 10-K, filed with the SEC. The unaudited interim financial statements should be read in conjunction with those financial statements included in Form 10-K. In the opinion of management, all adjustments considered necessary for fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the three-month period ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

Recent Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and 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.

NOTE 3 – RELATED PARTY TRANSACTIONS

Amounts due to related parties at March 31, 2017 and December 31, 2016:

^(a) These advances are non-interest bearing, unsecured and due on demand.

NOTE 4 – MINERAL PROPERTY INTEREST

On December 17, 2015, the Company entered into a definitive agreement with Nevada Canyon Gold Corporation, a Nevada privately held corporation with the President and CEO in common (“NCG”), to acquire all of NCG’s rights, titles and interests in and into an exploration agreement with an option to form a joint venture with Walker River Resources Corp., a Canadian public company (“WRR”), dated September 15, 2015 (the “Agreement”). WRR owns a 100% undivided interest in and to the Lapon Canyon Gold Property, containing the Lapon Canyon claims, the subject of the Agreement.

The Agreement does not grant the Company an interest in or to the Lapon Canyon claims, or any equity interest in WRR, but rather, grants the Company the right to earn up to an undivided 50% interest in the Lapon Canyon claims by incurring, over a two-year period, $500,000 in exploration and other expenses required to carry out a work program established and operated by WRR on the Lapon Canyon claims (“Eligible Expenses”) and, thereafter, grants the Company an option to enter into a joint venture with WRR for further exploration and development of the Lapon Canyon claims. The Agreement also grants the Company the first right of refusal to acquire an additional 20% interest in the Lapon Canyon claims by the expenditure of additional funds and performance of additional tasks, all related to the joint venture.

Full consideration for all rights in and to the Agreement consisted of the following: payment of $65,000 by the Company to NCG, comprised of an initial cash deposit of $25,000, a cash payment of $30,000 and the balance of $10,000 paid through the issuance of 1,000,000 restricted common shares of the Company issued to NCG at a price of $0.01. All consideration had been fully paid as at December 31, 2015.

During the three-month period ended March 31, 2017, the Company incurred $20,008 in Eligible Expenses (2016 – $35,574) on the Lapon Canyon claims of which $20,008 represented exploration expenses (2016 – $24,953).

NOTE 5 – STOCKHOLDERS’ EQUITY (DEFICIT)

The Company was formed with one class of common stock, $0.0001 par value and is authorized to issue 100,000,000 common shares, and one class of preferred stock, $0.0001 par value and is authorized to issue 10,000,000 preferred shares. Voting rights are not cumulative and, therefore, the holders of more than 50% of the common stock could, if they chose to do so, elect all of the directors of the Company.

On April 28, 2016, the Company split its common stock on a 10:1 basis. The stock split did not affect the par value of the Company’s common stock. As a result, the stated capital on the Company’s balance sheet attributable to the Company’s common stock was increased proportionately based on the stock split ratio, and the additional paid-in capital account was credited with the amount by which the stated capital was increased. All shares and per share amounts have been retroactively restated to account for the split.

During the three-month period ended March 31, 2017, the Company did not have any transactions that resulted in issuance of its common stock, or warrants or options to acquire its common stock.

Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations

Forward Looking Statements

This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 of Part I of this report include forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995 (collectively, the “Reform Act”). The Reform Act provides a safe harbor for forward-looking statements to encourage companies to provide prospective information about themselves so long as they identify these statements as forward-looking and provide meaningful cautionary statements identifying important factors that could cause actual results to differ from the projected results. All statements, other than statements of historical fact that we make in this Quarterly Report on Form 10-Q are forward-looking. The words “anticipates,” “believes,” “expects,” “intends,” “will continue,” “estimates,” “plans,” “projects,” the negative of these terms and similar expressions are intended to identify forward-looking statements. However, the absence of these words does not mean the statement is not forward-looking.

Forward-looking statements involve risks, uncertainties or other factors which may cause actual results to differ materially from the future results, performance or achievements expressed or implied by the forward-looking statements. These statements are based on our management’s beliefs and assumptions, which in turn are based on currently available information. Certain risks, uncertainties or other important factors are detailed in this Quarterly Report on Form 10-Q and may be detailed from time to time in other reports we file with the Securities and Exchange Commission, including on Forms 8-K and 10-K.

Examples of forward looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, our expectations regarding our ability to generate operating cash flows and to fund our working capital and capital expenditure requirements. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding demand for our future products, the timing and cost of capital expenditures, competitive conditions and general economic conditions. These assumptions could prove inaccurate. Although we believe that the estimates and projections reflected in the forward-looking statements are reasonable, our expectations may prove to be incorrect. Important factors that could cause actual results to differ materially from the results and events anticipated or implied by such forward-looking statements include:

Actual results and developments may materially differ from those expressed in, or implied by, such statements due to a number of factors, including:

We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all of those risks, nor can we assess the impact of all of those risks on our business or the extent to which any factor may cause actual results to differ materially from those contained in any forward-looking statement. We believe these forward-looking statements are reasonable. However, you should not place undue reliance on any forward-looking statements, which are based on current expectations. Further, forward-looking statements speak only as of the date they are made, and unless required by law, we expressly disclaim any obligation or undertaking to update publicly any of them in light of new information or future events.

The following is management’s discussion and analysis of financial condition and results of operations and is provided as a supplement to the accompanying unaudited condensed interim financial statements and notes to help provide an understanding of our financial condition, results of operations and cash flows during the periods included in the accompanying unaudited condensed interim financial statements.

In this Quarterly Report on Form 10-Q, “Company,” “the Company,” “us,” and “our” refer to Nevada Canyon Gold Corp., a Nevada corporation, unless the context requires otherwise.

We intend the following discussion to assist in the understanding of our financial position and our results of operations for the three months ended March 31, 2017 and 2016. You should refer to the Financial Statements and related Notes in conjunction with this discussion.

General

We are an exploration stage Company. We have only recently begun our exploration operations and have not generated or realized any revenues from these business operations.

We are a party to an Exploration Agreement (the “Agreement”) with Option to form a Joint Venture with Walker River Resources Corp. (“WRR”) on its wholly-owned Lapon Canyon Gold Project (“Lapon Canyon Project”, or “the Property”) located approximately 40 miles southeast of Yerington, Nevada. The Agreement does not grant us an interest in or to the Property, or any equity interest in WRR, but rather, grants us the right to earn up to an undivided 50% interest in the Property by incurring eligible expenditures of $500,000 (over a two-year period) in exploration and other expenses required to carry out a work program established and operated by WRR on the Property (the “Eligible Expenses”). Thereafter, the Agreement grants us an option to enter into a joint venture with WRR for further exploration and development of the Property.

Even if we complete our current exploration programs and are successful in identifying a mineralized deposit, we will have to spend substantial funds on further drilling and engineering studies before we will know if we have a commercially viable mineral deposit, called a reserve.

We commenced exploration of the Property in early 2016 with what we anticipated is sufficient funding for approximately one year of operations. In order to continue our exploration activities we will be required to source additional cash through equity or debt financing, or by borrowing the funds from our management. We did not buy or sell any significant equipment during the past twelve months and do not anticipate buying or selling any significant equipment in the following 12 months either. If we find mineralized materials in the Property, we have no intention to develop the reserves ourselves, but rather, we will attempt to find a mining operations company to whom we can sell the property or with whom we can enter into a business arrangement to put the ore deposit into operation.

We do not intend to hire employees at this time. All of the work on the Property is being conducted by WRR, who is responsible for surveying, geology, engineering, exploration, and excavation, and we are responsible for paying all of the expenses incurred in such activities. As of October 15, 2016, we have incurred required $250,000 in Eligible Expenses, and earned the 25% interest to the Property. Once we have paid an additional $250,000, we will have earned an additional 25% interest, for a total 50% in the Property.

One of our directors is present on the Property as a representative for the Company during most exploration operations. If we hire an independent geologist, he/she will evaluate the information derived from the exploration and excavation and the engineers will advise us on the economic feasibility of removing the mineralized material.

Mineral property exploration is typically conducted in phases. We began our exploratory drilling campaign to determine if there is sufficient mineralization on the property to warrant continued exploration and development activities. We estimate the cost of the drilling, shipping samples, as well as geological mapping, rock chip sampling, grid establishment, hiring geologists, and soil sampling, to be approximately $500,000, which is the amount we expect to pay in order to acquire a 50% interest in the Property.

After the completion of the first phase of the exploration program, we will review the results and conclusions and evaluate the advisability of additional exploration work on the Property.

If we are unable to complete any phase of exploration because we don’t have enough funds, we will cease activities until we raise more money. At the present time, we have made arrangements to raise the additional funds required to do advanced exploration but not to place our Property into production. If we need additional cash and cannot raise it, we will either have to suspend activities until we do raise the cash, or cease activities entirely. Other than as described in this paragraph, we have no financing plans.

Critical Accounting Policy and Estimates

Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our unaudited condensed interim financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our unaudited condensed interim financial statements include estimates as to the appropriate carrying value of certain assets and liabilities, which are not readily apparent from other sources.

The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited interim financial statements for the three months ended March 31, 2017 and 2016, together with notes thereto, which are included in this Quarterly Report on Form 10-Q, as well as our most recent audited financial statements on Form 10-K for the year ended December 31, 2016.

Results of Operations

Three months ended March 31, 2017, compared to the three months ended March 31, 2016

Revenues. We had no revenues for the three months ended March 31, 2017 and 2016. Due to the exploration rather than the production nature of our business, we do not expect to have significant operating revenue in the foreseeable future.

Operating expenses. Our operating expenses include exploration expenses, general and administrative expenses, professional fees and transfer agent and filing fees. During the three-month period ended March 31, 2017, our operating expenses decreased by $11,590, or 28%, to $29,554 for the three months then ended, compared to $41,144 for the comparable period in 2016. This change was associated with reduced exploration expenses, as the main part of the drilling program we commenced on the Lapon Canyon claims (the “Exploration Program”), which was required under our Agreement with WRR to earn a 50% interest in a joint venture, was completed in our Fiscal 2016. During the three-month period ended March 31, 2017, we recorded $20,008 in exploration expenses directly associated with the Exploration Program, as compared with $24,953 we spend during the three-month period ended March 31, 2016. Our general and administrative expenses decreased by $6,520, or 57%, to $4,945 for the three months ended March 31, 2017, compared with $11,465 for the three-month period ended March 31, 2016. The greater general and administrative expenses during the comparable period were attributable to the fair value of 800,000 common shares we issued to Nevada Canyon Gold Corporation, a Nevada privately held corporation, with the President and CEO in common (“NCG”), which were valued at $8,000. The shares were issued to purchase the intangible assets of NCG which included its corporate name, domain name and all related content.

Net loss. Our net loss decreased by $12,823 or 30%, to $29,554 for the three months ended March 31, 2017, compared to $42,377 for the comparable period in 2016. The decrease was primarily attributable to the operating expenses discussed above, as well as $1,233 in interest expense we accrued on a $100,000 note payable we issued to an arms-length party (“Note Payable”).

Liquidity and Capital Resources

As of March 31, 2017, we had a cash balance of $15,176, and working capital deficit of $68,957 with cash flows used in operations totaling $31,613 for the period then ended. During the three-month period ended March 31, 2017, our operations were funded with proceeds from a private placement for gross proceeds of $375,000, which we closed in the second quarter of our Fiscal 2016.

We did not generate sufficient cash flows from our operating activities to satisfy our cash requirements for the three-month period ended March 31, 2017. There is no assurance that we will be able to generate sufficient cash from our operations to repay the amounts owing under the advances payable, or to support our exploration program. If we are unable to generate sufficient cash flow from our operations to repay the amounts owing when due, we may be required to raise additional financing from other sources.

We intend to seek additional financing for our working capital, in the form of equity or debt, to provide us with the necessary capital to accomplish our plan of operation. There can be no assurance that we will be successful in our efforts to raise additional capital.

Cash Flow

Net cash used in operating activities: Our net cash used in operating activities decreased by $2,115, or 6%, to $31,613 for the three months ended March 31, 2017, compared with $33,728 for the comparable period in 2016. During the three months ended March 31, 2017, we used $29,554 to cover our cash operating costs, $1,400 to decrease amounts payable to our vendors, and $659 to increase prepaid expenses.

During the three months ended March 31, 2016, we used $33,728 in our operating activities. This cash was used to cover our cash operating costs of $33,144 and to decrease our accounts payable by $584.

Certain non-cash transactions: During the three months ended March 31, 2016, our operating costs included $1,233 in accrued interest on $100,000 note payable we issued to an arms-length party, as well as $8,000 in share-based payment we recorded on issuance of 800,000 common shares to NCG in exchange for its intangible assets, including its corporate name, domain name and all related content. We did not have any non-cash transactions during the three-month period ended March 31, 2017.

Net cash provided by (used in) financing activities: Our net cash provided by financing activities decreased by $35,000, or 117%. During the three months ended March 31, 2017, we repaid $5,000 in advances we received from our CEO and President during our Fiscal 2016.

During the three-month period ended March 31, 2016, we received $30,000 as a non-interest bearing advance from our CEO and President.

During the three months ended March 31, 2017 and 2016, we did not have any investing transactions that would have effected our cash flows.

Going Concern

At March 31, 2017, we had a working capital deficit of $68,957 and cash on hand of $15,176, which is not sufficient enough to carry out our current plan of operation, however we are in the process of trying to procure funds sufficient to fund our operations until we are able to finance our operations through cash flow. There can be no assurance that we will be able to procure funds sufficient for such purpose. If operating difficulties or other factors (many of which are beyond our control) delay our realization of revenues or cash flows from operations, we may be limited in our ability to pursue our business plan. Moreover, if our resources from obtaining additional capital or cash flows from operations, once we commence them, do not satisfy our operational needs or if unexpected expenses arise due to unanticipated pressures or if we decide to expand our business plan beyond its currently anticipated level or otherwise, we will require additional financing to fund our operations, in addition to anticipated cash generated from our operations. Additional financing might not be available on terms favorable to us, or at all. If adequate funds were not available or were not available on acceptable terms, our ability to fund our operations, take advantage of unanticipated opportunities, develop or enhance our business or otherwise respond to competitive pressures would be significantly limited. In a worst-case scenario, we might not be able to fund our operations or to remain in business, which could result in a total loss of our stockholders’ investment. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders would be reduced, and these newly issued securities might have rights, preferences or privileges senior to those of existing stockholders.

Income Tax Benefit

The Company has a prospective income tax benefit resulting from a net operating loss carry forwards that may offset any future operating profit.

Impact of Inflation

We believe that inflation has had a negligible effect on operations over the past fiscal quarter.

Capital Expenditures

The Company expended no amounts on capital expenditures for the three months ended March 31, 2017.

Unproved Mineral Properties

On December 17, 2015, we entered into a definitive agreement (the “Agreement”) with Nevada Canyon Gold Corporation, to acquire all of NCG’s rights, titles and interests in and into an exploration agreement with an option to form a joint venture with Walker River Resources Corp. dated September 15, 2015. WRR owns a 100% undivided interest in and to the Lapon Canyon Gold Property, containing the Lapon Canyon claims (“the Property”), which is the subject of the Agreement.

The Agreement does not grant us an interest in or to the Property, or any equity interest in WRR, but rather, grants us the right to earn up to an undivided 50% interest in the Property by incurring $500,000 (over a two-year period) in eligible exploration and other expenses required to carry out an Exploration Program established and operated by WRR on the Property (the “Eligible Expenses”). As of October 15, 2016, we have incurred required $250,000 in Eligible Expenses, and earned the 25% interest to the Property. Once we have paid an additional $250,000, we will have earned an additional 25% interest, for a total 50% in the Property. For additional information on the acquisition of the Property please refer to the discussion included in the General section of this MD&A.

The Property consists of 36 claims (Sleeper claims 1–36) comprising 720 acres situated in the Wassuk Range (Mt. Grant Mining District), approximately 40 miles southeast of Yerington, Nevada. The Property is easily accessible by a well-maintained secondary state road to the Lapon Canyon road, which is generally a 15% grade canyon road. A state grid power transmission line passes within two miles of the property. An ample source of water exists (for drilling and other activities) in several locations on the Property.

As of the date of the filing of this report on Form 10-Q, we have incurred $300,277 in Eligible Expenses on the Exploration Program, of which $232,840 were associated with mineral exploration expenses on the Property.

Off-Balance Sheet Arrangements

None.

Use of Estimates

Areas where significant estimation judgments are made and where actual results could differ materially from these estimates are the carrying value of certain assets and liabilities which are not readily apparent from other sources and the classification of net operating loss and tax credit carry forwards.

We evaluate impairment of our long-lived assets by applying the provisions of SFAS No. 144. In applying those provisions, we have not recognized any impairment charge on our long-lived assets during the three months ended March 31, 2017.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this item.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

We conducted an evaluation, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(f) under the Securities Exchange Act of 1934 as amended (the “Exchange Act”)). Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the fiscal quarter covered by this quarterly report on Form 10-Q were not effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

(b) Changes in Internal Controls over Financial Reporting

During the three-month period ended March 31, 2017, there has been no change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Inherent Limitations of Internal Controls

Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that:

Management does not expect that our internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits

(a) The following exhibits are filed with this quarterly report on Form 10-Q or are incorporated herein by reference:

SignatureS

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