Item
1. Description of Business
Organization
We
were incorporated under the laws of the State of Nevada on February 27, 2014, with fiscal year end on December 31, under the original
name Tech Foundry Ventures, Inc. On July 6, 2016, we changed our name to Nevada Canyon Gold Corp.
On April 28, 2016, we split our common stock on a 10:1 basis without affecting the par value. On August 27, 2020, our Board of
Directors approved a 1:10 reverse split of our common stock (the “Reverse Stock Split”), which became effective upon approval
by the Financial Industry Regulatory Authority (“FINRA”), which was received on October 28, 2020. All shares and per share
amounts have been retroactively restated to account for the Reverse Stock Split.
We
have never been party to any bankruptcy, receivership or similar proceeding, nor have we undergone any material reclassification, merger,
consolidation, purchase or sale of a significant amount of assets not in the ordinary course of business.
We
were a consulting service company, which provided management and consulting services to early and middle stage start-ups. In December
2015, we changed our business to mineral exploration, when we acquired Nevada Canyon Gold Corporation, a privately held Nevada corporation.
On December 15, 2021, we incorporated two subsidiaries, Nevada Canyon LLC and Canyon Carbon LLC. Both subsidiaries were incorporated
under the laws of the state of Nevada.
Our
principal business, executive, and registered statutory office is located at 316 California Avenue, Suite 543, Reno, NV 89509 and our
telephone number is (888) 909-5548, fax is (888) 909-1033 and email contact is info@nevadacanyongold.com. Our website address
is www.nevadacanyongold.com.
Continued
Uncertainty due to Global Outbreak of COVID-19
In
March of 2020, the World Health Organization declared an outbreak of COVID-19 Global pandemic. The COVID-19 has impacted vast array of
businesses through the restrictions put in place by most governments internationally, including the USA federal government as well as
provincial and municipal governments, regarding travel, business operations and isolation/quarantine orders. At this time, it is unknown
to what extent the impact of the COVID-19 outbreak may have on the Company as this will depend on future developments that are highly
uncertain and that cannot be predicted with confidence. These uncertainties arise from the inability to predict the ultimate geographic
spread of the disease, and the duration of the outbreak, including the duration of travel restrictions, business closures or disruptions,
and quarantine/isolation measures that are currently, or may be put, in place world-wide to fight the virus. While the extent of the
impact is unknown, the COVID-19 outbreak may hinder the Company’s ability to raise financing for exploration or operating costs
due to uncertain capital markets, supply chain disruptions, increased government regulations and other unanticipated factors, all of
which may also negatively impact the Company’s business and financial condition.
Business
As
of the date of this Annual report on Form 10-K, our mineral property interests are comprised of the Lazy Claims Property, the Loman Property,
and the Agai-Pah Property located in Mineral County, Nevada, the Swales Property located in Elko County, Nevada, and the Belshazzar Property
located in Quartzburg mining district, Boise County, Idaho. In addition, we acquired a 2% net smelter returns royalty (“NSR”)
on the Palmetto Project, located in Esmeralda County, Nevada, and have an option to acquire 100% interest of Target Minerals, Inc’s
(“Target”) 1% production royalty on the Olinghouse Project, located in the Olinghouse Mining District, Washoe County, Nevada.
Lazy
Claims Property
On
August 2, 2017, we entered into an exploration lease agreement (the “Lazy Claims Agreement”) with Tarsis Resources US Inc.
(“Tarsis”), a Nevada corporation, to lease rights to three Lazy claims totaling 60 acres (the “Lazy Claims”).
The term of the Lazy Claims Agreement is ten years and is subject to extension for an additional two consecutive 10-year terms. Full
consideration of the Lazy Claims Agreement consists of the following: an initial cash payment of $1,000 to Tarsis, which we paid upon
the execution of the Lazy Claims Agreement, with $2,000 payable to Tarsis on each subsequent anniversary of the effective date. We agreed
to pay Tarsis a 2% production royalty (the “Lazy Claims Royalty”) based on the gross returns from the production and sale
of minerals from the Lazy Claims Property. Should the Lazy Claims Royalty payments to Tarsis be in excess of $2,000 per year, we will
not be required to pay a $2,000 annual minimum payment. As of the date of this Annual Report on Form 10-K, we retain our leasing rights
to the Lazy Claims.
Location
and means of access
The
Lazy Claims consist of three claims (60 acres) and are located within the Walker Lane shear zone, a 60-mile-wide structural corridor
extending in a southeast direction from Reno, Nevada. The Project is located in Mineral County, Nevada, with year-round access and established
infrastructure, 18 miles southeast of Hawthorne, NV via U.S. Highway 95.
Geology
The
US Geological Survey has mapped the area and has published the results as Miscellaneous Field Studies maps, MF 1485 and MF 1486. Mapped
units include Paleozoic metasediments, Mesozoic sediments and intrusions, and Cenozoic volcanic rocks and porphyry intrusions. Like most
of the Walker Lane, the area has a strong system of N50W- trending, normal and strike-slip faults along with a series of generally NE-trending
thrust faults. The area has seen prospecting since the late 1800’s and contains hundreds of prospect pits and adits that explore
various styles of base and precious metal mineralization.
The
published USGS geologic quadrangle map for the Pamlico mine area, (MF 1485, MF 1486, Oldow, 1985), shows the eastern portion of the Lazy
Claims project area underlain by a thick, undivided sequence of folded and faulted Mesozoic and or Paleozoic volcanic and sedimentary
rocks. The western portion of the project is underlain by Jurassic- to Triassic-age Sunrise and Gabbs Formations comprising interbedded
limestones and calcareous mudstones. Locally, black Tertiary basalt caps the older rocks. The structural fabric is dominated by NW-trending,
Walker Lane structures and by an older N70o E fabric, several phases of strongly altered and locally mineralized intrusive rocks as well
as zones of jasperoids and strong silicification has been identified.
Mineralization
Previous
work on the project has identified the following discrete zones of mineralization: (1) the Lazy Man gold zone which is a structurally-controlled,
intrusion-related gold deposit that produced about 1,200 oz Au from NW-trending, high grade zones partially hosted by altered rhyolite
dikes, (2) areas of strong vuggy silica alteration in both intrusive porphyritic rocks and volcanic agglomerates particularly in the
footwall of the Lazy Man zone, (3) a large area of barite and copper mineralization with intense bleaching east of the gold zone, (4)
strong copper showings to the southeast of the gold zone, (5) the Loman antimony mine to the southwest of the gold zone, (6) skarn zones
to the west of the gold zone, (7) a large zone of strong IP response to the west of the gold zone, and (8) a pyrrhotite porphyry intrusion
west of the gold zone.
Exploration
history
The
Lazy Claims cover several past-producing small-scale high-grade mines, altered and mineralized zones discovered by geological compilations
and mapping of the historical workings, discovered by the previous exploration on the Project. The previous sampling on the project has
revealed the presence of copper, bismuth, and antimony as well as pervasive lower grade gold mineralization, cut by vein structures (some
previously mined) of higher grade gold. Previous induced polarization surveys also denoted the presence of significant coincident I.P.
anomalies. Below is a summary of previous exploration of identified mineralized areas within the properties.
Lazy
Man Mine
The
main structure that the mine workings explore has an N35oW trend and dips about 60o to the southwest. The vein
was discovered in 1933 by a local prospector. The mine is credited with historic production of about 1,200 ounces of gold from 2,800
feet (853 m) of underground workings. The three main shafts explore about 1,000 feet (304 m) of strike length on the vein, and the shafts
extend to a maximum depth of 300 feet (91 m). The workings have been mapped and sampled in some detail by Congdon and Carey in 1974,
and many multi-ounce gold values are noted in the remaining vein material. One 4.9 foot-long (1.5 m) sample from a cross cut on the 300
level contained 2.2 oz Au/ton (68.4g/t). The high-grade veins occur within a broader zone of intense quartz-sericite alteration, which
has previously been mapped as rhyolite. Most of the mine dumps are composed of this “rhyolite”, and Congdon and Carey measured
approximately 8,000 tons of this material containing from 0.09 to 0.21 oz Au/ton (3.07 to 7.1 g/t Au). Gold occurs in iron oxide-filled
fractures along with druzy quartz veinlets, and there is occasionally visible gold. Detailed mapping around the old workings of the Lazy
Man mine has delineated a zone of intense acid-leaching in intrusive porphyritic rocks and volcanic agglomerates primarily in the footwall
of the vein. The rock now has a porous and vuggy appearance; this style of alteration is interpreted to be “Vuggy Silica”
alteration that is typical of the upper levels of high-sulfidation ore deposits. Surrounding the vuggy silica zone is a zone of strong
argillic alteration. Recent work has discovered previously unrecognized mineralized zones east of and parallel to the Lazy Man vein that
contain silicified, brecciated outcrops assaying 2.26 g/t Au and 8,150 ppm As. These zones have been traced for over 1,200 feet (365
m) and are up to 60 feet (18 m) wide.
Exploration
program
We
plan to continue our exploration program once the uncertainty and the restrictions associated with COVID-19 pandemic are resolved. In
2020 we completed a portion of the Phase I exploration program on the Lazy Claims Property, which consisted of reconnaissance prospecting,
geological mapping, surface trenching, and relocating historical workings. Completion of the Phase I program was initially scheduled
for spring of 2021, however, due to the continued restrictions associated with COVID-19 pandemic, the phase was put on hold and the Company
plans to resume it when economically and logistically feasible. Once completed, Phase I program will provide accurate modern data
to assist in the planning of the Phase II drill program.
Loman
Property
In
December 2019 we acquired 27 unpatented mining claims for a total of $10,395 from a third-party (the “Loman Property”). Due
to certain regulatory restrictions associated with COVID-19 pandemic, the Company was required to delay the re-registration of the Loman
Property claims into the Company’s name. The Loman claims were transferred and re-registered into the Company’s name in the
fourth quarter of the fiscal 2021.
Location
and means of access
The
Loman Property is located in Mineral County, Nevada, within the Walker Lane shear zone, a 60-mile-wide structural corridor extending
in a southeast direction from Reno, Nevada, located 20 miles southeast of Hawthorne, Nevada, along U.S. Highway 95. The project has excellent
year-round access and infrastructure within Mineral County, one of the most pro-mining counties and highest-grade gold districts of Nevada.
The
Loman Property consists of 27 unpatented mining claims having a combined area of approximately 540 acres. The Loman Property covers several
past producing small-scale high-grade gold and copper mines, altered and mineralized zones discovered by previous geological compilations
and mapping of the historical workings. Historical sampling on the project has revealed the presence of copper, bismuth, and antimony
as well as pervasive lower grade gold mineralization, cut by vein structures (some previously mined) of higher-grade gold. Previous geophysical
surveys also denoted the presence of significant coincident I.P. and magnetic anomalies. These factors clearly demonstrate the potential
of this relatively unexplored project for the discovery of gold mineralization.
The
Loman Property is located near several past producing mines including the Bodie, Aurora, Borealis, Pamlico, Evening Star, Mabel, Mindoro
and Camp Douglas Mines. Held by private interests for most of its history, the Loman Property remains very underexplored with a potential
for new discoveries on several exploration targets with multiple zones.
Exploration
program
We
plan to continue our exploration program once the uncertainty and the restrictions associated with COVID-19 pandemic are resolved. In
2020 we completed a portion of our Phase I program that consisted of reconnaissance prospecting, geological mapping, surface trenching,
relocating historical workings and ground based geophysical surveying. Completion of the Phase I program will provide accurate modern
data to assist in the planning of the Phase II drill program. Phase I was initially expected continue in the spring 2021, with Phase
II to begin shortly after the compilation of the Phase I results. Due to the continued restrictions associated with COVID-19 pandemic,
Phase I was put on hold and the Company plans to resume it when economically and logistically feasible.
Agai-Pah
Property
On
May 19, 2021, we entered into an exploration lease with option to purchase agreement (the “Agai-Pah Property Agreement”)
with MSM Resource, L.L.C., (“MSM”) a Nevada limited liability Corporation on the Agai-Pah Property, consisting of 20 unpatented
mining claims totaling 400 acres (the “Agai-Pah Property”).
The
term of the Agai-Pah Property Agreement commenced on May 19, 2021, and continues for ten years, subject to the Company’s right
to extend the Agai-Pah Property Agreement for two additional terms of ten years each, and subject to the Company’s option to purchase
the Property.
Full
consideration of the Agai-Pah Property Agreement consists of the following: (i) an initial cash payment of $20,000 to be paid within
90 days from the execution of the Agai-Pah Property Agreement on May 19, 2021 (the “Effective Date”), and (ii) annual payments
of $20,000 to be paid on the anniversary of the Effective Date while the Agai-Pah Property Agreement remains in effect.
The
Company has the exclusive option and right to acquire 100% ownership of the Agai-Pah Property (the “Agai-Pah Purchase Option”).
To exercise the Agai-Pah Purchase Option, the Company will be required to pay $750,000 (the “Agai-Pah Purchase Price”). The
Agai-Pah Purchase Price can be paid in either cash and/or equity of the Company, or a combination thereof, at the election of MSM. The
annual payments paid by the Company to MSM, shall not be applied or credited against the Purchase Price. We made the initial cash payment
of $20,000 on November 6, 2021, pursuant to a verbal extension granted to the Company by MSM.
Location
and means of access
The
Agai-Pah Property consists of 20 unpatented mining claims with a combined area of 162 hectares (400 acres). The Property is located in
the northwestern portion of the Gillis Range, within the Buckley Mining District, in Mineral County, Nevada, 13 miles north-east of the
town of Hawthorne, and 22 miles SW of the Rawhide Mine. The Property is within the Walker Lane shear zone, a 60-mile-wide structural
corridor extending in a southeast direction from Reno, Nevada. The project has excellent year-round access and infrastructure within
Mineral County, Nevada.
Geology
and Mineralization
The
property is underlain by meta-volcanic rocks of the Permo-Triassic Excelsior Formation. The local stratigraphy consists of interbedded
volcanics, conglomerate and occasional limestone lenses that have been altered through metamorphisim to hornfelsic greenstones and localized
calcsilicate and marble skarns. The area is cross-cut by a large northwest to southeast structural trend, with the mineralization occurring
along this trend and along skarn contacts.
Mineralization
occurs as hydrothermal alteration and veining along structures and along contacts with carbonate rocks. Silver, lead, copper and gold
are found within clay altered shears, quartz veins and hornfeslic scarns. In the west central portion of the property, a quartz vein
is exposed within a small open pit which exhibits visible chlorargyrite (AgCl) with assay values to 1.76% silver.
Exploration
history
The
Agai-Pah property contains numerous historical workings consisting of underground workings with multi-level vertical shafts, several
adits at different sub-levels, declines and a number of prospects pits that dig along structures. An existing road network provide access
to the numerous historical workings. Historical sampling on the project has revealed the presence of silver, copper, gold, lead, zinc,
barium and barite. There have been at least two periods of mining on the property, with the first in the early 1900’s, and then
later in the late 1980’s. The early 1900’s, work consisted of excavation of at least 15 adits, 5 vertical shafts, declines
and numerous prospects pits that dig along structures.
The
second episode of mining took place in the late 1980s when a small pit was excavated, and ore material was mined and transported approximately
2 miles to the west to a small heap leach. During this time about two kilometers of roads were built, several large trenches were completed,
and a number of shallow drill holes (12+) were drilled. All the drill holes noted during this historical work were vertical and most
were drilled in the hanging wall of the ore-bearing structures. An extensive sampling program was undertaken in early 1988, evidenced
by aluminum sample tags widely spaced in the areas of alteration. No historical data has been found from any of this historical exploration
work.
Exploration
program
We
are planning an initial exploration program once the uncertainty and the restrictions associated with COVID-19 pandemic are resolved.
Phase I of the exploration program on the Agai-Pah Property, will consist of reconnaissance prospecting, geological mapping, surface
trenching, and relocating historical workings. Completion of the Phase I program is scheduled for later in 2022. Once completed, the
Phase I program will provide accurate modern data to assist in the planning of the Phase II exploration program. Phase II will consist
of a ground-based geophysical survey and final compilation of all the Phase I results.
Belshazzar
Property
On
June 4, 2021, we entered into an exploration lease with option to purchase agreement (the “Belshazzar Property Agreement”)
with Belshazzar Holdings, L.L.C., (“BH”) a Nevada limited liability Corporation on the Belshazzar Property, consisting of
ten unpatented lode mining claims and seven unpatented placer mineral claim totaling 200 acres (the “Belshazzar Property”).
The
term of the Belshazzar Property Agreement commenced on June 4, 2021, and continues for ten years, subject to the Company’s right
to extend the Belshazzar Property Agreement for two additional terms of ten years each, and subject to the Company’s option to
purchase the Belshazzar Property.
Full
consideration of the Belshazzar Property Agreement consists of the following: (i) an initial cash payment of $20,000 to be paid within
90 days from the execution of the Belshazzar Property Agreement on June 4, 2021 (the “effective date”), and (ii) annual payments
of $20,000 to be paid on the anniversary of the Effective Date while the Belshazzar Property Agreement remains in effect.
The
Company has the exclusive option and right to acquire 100% ownership of the Belshazzar Property (the “Belshazzar Purchase Option”).
To exercise the Belshazzar Purchase Option, the Company will be required to pay $800,000 (the “Belshazzar Purchase Price”).
The Belshazzar Purchase Price can be paid in either cash and/or equity of the Company, or a combination thereof, at the election of BH.
The annual payments paid by the Company to BH, shall not be applied or credited against the Belshazzar Purchase Price. The Belshazzar
Property is subject to a 1% Gross Returns Royalty payable to the property owner, from the commencement of commercial production subject
to certain terms. We made the initial cash payment of $20,000 on November 6, 2021, pursuant to a verbal extension granted to the Company
by BH.
Location
and means of access
The
Belshazzar Property consists of 10 unpatented mineral claims and 7 placer mineral claims in a combined area of approximately 200 acres
situated along the upper reaches of Fall Creek within the Quartzburg mining district. The Belshazzar Property is accessed via 16 miles
of mostly gravel road from Idaho City, with year-round access. The Quartzburg district is in the western part of a larger mining region
known as the Boise Basin, which produced over 2.8 million troy ounces of gold from placer and lode mines (Anderson, 1947).
Geology
and Mineralization
The
Boise Basin is underlain by Cretaceous-age plutonic rocks of the Idaho Batholith, consisting chiefly of biotite granodiorite and muscovite-biotite
granite. Stocks of platonic rocks of Eocene age, including diorite, quartz monzodiorite, hornblende-biotite granodiorite, gabbro and
biotite granite have intruded into the Idaho Batholith.
The
Belshazzar and Mountain Chief mines are situated at opposite ends of a northeast-striking, mineralized shear zone in Cretaceous biotite
granodiorite of the Idaho Batholith. Three roughly parallel fissure veins have been identified within this shear zone, with the Belshazzar
being the central and most prominent. The Centennial vein lies 680 feet to the south and has received only a limited amount of underground
development work from the Belshazzar mine. A third vein is located approximately 600 feet to the north of the Belshazzar vein and has
seen only limited prospecting from the surface.
Exploration
history
The
Belshazzar Property hosts the past producing Belshazzar mine. Approximately 3,000 feet of underground workings consisting of several
adits at different levels, sub-levels with connecting vertical shafts and milling facilities. By 1914, the Belshazzar mine had its own
boarding house, bunk house, barn, assay office, blacksmith shops, sawmill and IO-stamp mill. Construction of a new mill was completed
in 1924. A 1,700-foot-long aerial tramway connected ore bins at the No. 2 portal with the mill on Fall Creek (Quinn, 1914) remains of
a tram terminal can still be seen at the No. 2 portal and at the site of the original mill (Dan Turmes, Idaho Dept. of Environmental
Quality, 2008) The last known production from the Belshazzar mine was reported in 1941 (Mitchell, 2008). Exact production figures for
the mine are not available.
As
early as 1914, “high grade specimen rock” was being reported from the Belshazzar mine (Quinn 1914), this material was found
in the drift on the No. 3 level. A reported (Campbell,1927) “nugget” which yielded $245 in gold, equivalent at the time to
almost 12 ounces. During 1928, it was noted that “some remark ably rich segregations of native gold” had been found in a
section of the vein between the 401 and No. 3 levels. Several hand-sorted lots of this material contained between 48 and 435 ounces of
gold, and one single specimen of pure metal reportedly weighed 105 ounces (Mitchell, 2008). Some of the ore was so rich that it was shipped
directly to the assay office in Boise without treatment. Most of the specimen gold found at the Belshazzar was probably melted down,
as few specimens are known to have survived from the active mining period ending in 1931.
In
recent years, a “ waste” rock dump located near the portal of the mine’s 401-foot level has, with the aid of modern
metal detectors, produced hundreds of wire gold specimens, ranging from microscopic in size to over 20 troy ounces. Total recent gold
specimen production to-date is unknown but is probably well in excess of 800 ounces of gold
Exploration
program
We
are planning an initial exploration program once the uncertainty and the restrictions associated with COVID-19 pandemic are resolved.
Phase I of the exploration program on the Belshazzar Property, will consist of reconnaissance prospecting, geological mapping, surface
trenching, and relocating historical workings. Completion of the Phase I program is scheduled for later in 2022. Once completed, the
Phase I program will provide accurate modern data to assist in the planning of the Phase II drilling program.
Swales
Property
On
December 27, 2021, we entered into an exploration lease with option to purchase agreement (the “Swales Property Agreement”)
with Mr. W. Wright Parks III., (“Mr. Parks”) on the Swales Property, consisting of 40 unpatented lode mining claims totaling
800 acres (the “Swales Property”).
The
term of the Agreement commenced on December 27, 2021, and continues for ten years, subject to the Company’s right to extend the
Swales Property Agreement for two additional terms of ten years each, and subject to the Company’s option to purchase the Swales
Property.
Full
consideration of the Swales Property Agreement consists of the following: (i) an initial cash payment of $20,000 to be paid within 90
days from the execution of the Belshazzar Agreement on December 27, 2021 (the “effective date”), and (ii) annual payments
of $20,000 to be paid on the anniversary of the Effective Date while the Swales Property Agreement remains in effect.
The
Company has the exclusive option and right to acquire 100% ownership of the Swales Property (the “Swales Purchase Option”).
To exercise the Swales Purchase Option, the Company will be required to pay $750,000 (the “Swales Purchase Price”). The Swales
Purchase Price can be paid in either cash and/or equity of the Company, or a combination thereof, at the election of Mr. Parks. The annual
payments paid by the Company to Mr. Parks, shall not be applied or credited against the Swales Purchase Price. The Company made the initial
cash payment of $20,000 subsequent to December 31, 2021.
Location
and means of access
The
Swales Property consists of 40 unpatented mining claims with a combined area of 800 acres. The Swales Property is located within the
Carlin Trend, one of the richest mining districts in the world, and home to some of the largest gold mines in the US. The property is
approximately 13 miles northeast of Nevada Gold Mine’s Gold Quarry Mine and 16 miles east southeast of Nevada Gold Mine’s
Goldstrike Mine, all of which are located along the gold rich Carlin Trend. There are currently eight producing gold mines within the
Carlin Trend. Collectively, these mines have to date produced over 100 million ounces of gold (Nevada Bureau of Mines 2019) and still
contain more than 21 million ounces of gold reserves (Nevada Gold Mines, LLC Carlin Complex 2020). The Swales Property has excellent
year-round access and infrastructure within Elko County, one of the most pro-mining counties in the pro-mining states and highest-grade
gold districts of Nevada.
Geology
and Mineralization
Geologically,
the Swales Property is underlain by Upper plate Ordovician Vinini Formation (upper plate of the Roberts Mountains thrust) with windows
of Lower plate Mississippian to Silurian Roberts Mountains Formation limestone (Lower plate of Roberts Mountains thrust), the ideal host
rocks for a Carlin type gold deposit. These rocks have been intruded by Tertiary rocks identified as Monzonite porphyry to the west of
the property with many prospects and historic mining. Much of the property is covered by alluvium, but silicified, iron stained jasperoids
are found throughout the property where outcrops are exposed. Small gold anomalies occur in the upper plate rocks at Swales Mountain
which suggests the possibility of more extensive deposits in the Roberts Mountains Formation where it lies concealed by gravels or in
the broken rock within the Roberts Mountains thrust.
Exploration
history
The
Swales Property contains numerous historical workings consisting of prospects pits that dig along structures found throughout the property
where outcrops are exposed. The Swales Property is located within the Carlin Trend, one of the richest mining districts in the world,
and home to some of the largest gold mines in the USA. There are currently eight producing gold mines within the Carlin Trend. Collectively,
these mines have to date produced over 100 million ounces of gold (Nevada Bureau of Mines 2019) and still contain more than 21 million
ounces of gold reserves. (Nevada Gold Mines, LLC Carlin Complex 2020) The Swales Property has excellent year-round access and infrastructure
within Elko County, one of the most pro-mining counties in the pro-mining states and highest-grade gold districts of Nevada.
Exploration
program
We
are planning an initial exploration program once the uncertainty and the restrictions associated with COVID-19 pandemic are resolved.
Phase I of the exploration program on the Swales Property, will consist of reconnaissance prospecting, geological mapping, surface trenching,
and relocating historical workings. Completion of the Phase I program is scheduled for later in 2022. Once completed, the Phase I program
will provide accurate modern data to assist in the planning of the Phase II exploration program. Phase II will consist of a ground-based
geophysical survey and final compilation of all the Phase I results
Olinghouse
Project
On
December 17, 2021, our wholly-owned subsidiary, Nevada Canyon, LLC, entered into an Option to Purchase Agreement (the “Olinghouse
Agreement”) with Target Minerals, Inc (“Target”), to acquire 100% interest of Target’s 1% production royalty
on the Olinghouse Project.
The
Company has the exclusive right and option (the “Olinghouse Purchase Option”), exercisable at any time during the Olinghouse
Option Period, as further defined below, at its sole discretion, to acquire 100% of a 1% production royalty from the net smelter returns
on all minerals and products produced from certain properties comprising the Olinghouse Project.
The
term of the Olinghouse Purchase Option shall be the later of one year, or 60 days after the date on which the Company delivers to Target
a written notice to exercise the Olinghouse Purchase Option, subject to further extension if Target’s conditions to closing are
not fully satisfied or otherwise waived by the Company. Full consideration of the Olinghouse Agreement consists of the following: (i)
an initial cash option payment of $200,000 payable upon execution of the Agreement, which the Company paid on December 18, 2021, and
(ii) purchase price (the “Olinghouse Purchase Price”) which shall be paid by the Company to Target in either cash or common
shares of the Company, the determination of which shall be as follows:
|
● |
if
the Company’s 10-day volume weighted average price (“VWAP”) Calculation is less than $1.25 per share, the Olinghouse
Purchase Price shall be paid in cash; or |
|
● |
if
the Company’s 10-day VWAP Calculation is more than $1.25 per share, the Olinghouse Purchase Price shall be paid in the form
of 2,000,000 Shares of the Company’s common stock. |
Location
and means of access
The
Olinghouse Project is located approximately 30 miles east of Reno, Nevada in the Olinghouse mining district. The project has excellent
year round access via state roads with existing infrastructures in place.
Exploration
history
The
Olinghouse property was operated by Alta Gold in the late 1990’s and had a Feasibility Study completed in 1997. The mine went into
production in 1999, however, due to historically low gold prices combined with a substantial debt load, Alta Gold went bankrupt shortly
thereafter, in late 2000.
Classification | |
Ton (000’s) | | |
Au/ton oz | | |
Au oz | |
Indicated 0.010 Au/ton cut-off | |
| 18,244 | | |
| 0.0381 | | |
| 695,128 | |
| |
| | | Total Au oz | | |
| 695,128 | |
The
historic geologic resource as outlined in the above table is from the 1997 Alta Gold Feasibility Study based on over 600 drill holes
collared at 100 ft centers. The historic geologic resource contained 18,244,830 tons (695,128 ounces) of gold at an average grade of
0.0381 oz/ton gold at an 0.01 oz/ton cut-off. The Olinghouse Project has had no modern exploration since the Alta Gold bankruptcy in
2000. The historical mineralized resource is open at depth and along strike, with excellent potential to increase the historical mineralized
resources.
Nevada
Canyon considers this historical estimate to be reliable and relevant, however it is not treating this historic estimate as current compliant
mineral resources.
The
Olinghouse Project’s current owner is Lake Mountain Mining LLC (“LMM”), a private Nevada company. LMM is currently
reviewing its financing plans for additional exploration, required permitting, economic studies and various capital expenditures towards
a production re-start decision in the near future.
Palmetto
Project
On
January 27, 2022, the Company’s wholly-owned subsidiary, Nevada Canyon, LLC, entered into a Royalty Purchase Agreement (the
“Royalty Agreement”) with Smooth Rock Ventures, LLC, a wholly-owned subsidiary of Smooth Rock Ventures Corp. (“Smooth
Rock”), to acquire a 2% net smelter returns royalty (“NSR”) on the Palmetto Project (the “Palmetto Project”),
located in Esmeralda County, Nevada. Alan Day, the Company’s director, is also a director and CEO of Smooth Rock.
To
acquire the 2% NSR on the Palmetto Project, Nevada Canyon agreed to pay Smooth Rock a one-time cash payment of $350,000.
Location
and means of access
The
Palmetto Project, consists of 116 unpatented mining claims totaling 2,217 acres located in Esmeralda County, Nevada, within the southern
portion of the Walker Lane gold trend.
Exploration
history
The
Palmetto Project’s owner, Smooth Rock Ventures Corp (“Smooth Rock”), engaged WSP Canada Inc. to complete a current
resource estimation of the Palmetto Project (Palmetto Resource Estimation and Technical Report, McCracken, October 20, 2020) using drill
data up to October 2017 and applying certain economic constraints. The current mineral resource statement was updated by WSP to reflect
a change in gold pricing and an adjustment in the mining costs in the generation of the constraining pit shells.
The
table below summarizes the pit constrained resource estimation at the 0.15 g/t gold cut-off and remaining underground resource estimation
at the 2.0 g/t gold cut-off.
Classification | |
Tonnes (000’s) | | |
Au g/t | | |
Ag g/t | | |
Au oz. | | |
Ag oz. | |
Inferred (Pit)
| |
| 9,397 | | |
| 0.93 | | |
| 6.38 | | |
| 281,581 | | |
| 1,926,652 | |
Inferred (U/G)
| |
| 170 | | |
| 2.76 | | |
| 17.51 | | |
| 11,114 | | |
| 95,926 | |
Total inferred | |
| 9,567 | | |
| 0.96 | | |
| 6.58 | | |
| 296,695 | | |
| 2,022,578 | |
The
above mineral resource estimation was completed using NI 43-101 standards of practice and classified as an inferred resource.
The
Palmetto Project has had significant exploration work completed to date by Newmont Gold, Phelps Dodge Corp, Cambior Inc., Romarco Minerals,
Curran Corp., Amselco Minerals, Escape Gold Group Inc., and most recently by ML Gold Corp. To date, 173 drill holes totaling 43,940 meters
have been completed on several targets within the Palmetto Project. The initial “Discovery Hole” was drilled by Phelps Dodge
in 1988, and bonanza gold-silver veins were subsequently drilled by Romarco Minerals in 1997-2002.
There
are several additional mineralized zones hosting significant grades within close proximity to the inferred resource zones. These zones
have yet to be included in the resource estimate due to drilling density. Smooth Rock sees these areas having immediate potential to
significantly increase the overall resource on the Palmetto Project by increasing the drilling density between mineralized shells. Evidence
suggests that there is significant potential to expand the resource in multiple directions.
Exploration
program
The
2022 drill program will focus on Smooth Rock’s interpreted geological model, based on the Smooth Rock’s compilation of all
historical data from previous drilling and exploration programs. The information from the compilation and interpretation of the initial
2021 drill program will greatly aid in acceleration of drilling, geological mapping and understanding of the gold mineralization at the
Palmetto Project. Drilling will target potential high-grade feeder chutes contained in deformation corridors, paralleling the main structural
trends and explored other areas of the project outside of the inferred resource area.
Competition
The
mineral exploration business is an extremely competitive industry. We are competing with many other exploration companies looking for
minerals. We are one of the smallest exploration companies and a very small participant in the mineral exploration business. Being a
junior mineral exploration company, we compete with other similar companies for financing and joint venture partners, and for resources
such as professional geologists, camp staff, helicopters, and mineral exploration contractors and supplies. We do not represent a competitive
presence in the industry.
Raw
Materials
The
raw materials for our exploration programs include camp equipment, hand exploration tools, sample bags, first aid supplies, groceries,
and propane. All of these types of materials are readily available from a variety of local suppliers.
Dependence
on Customers
As
a junior exploration company, we have no customers.
Trademarks
and Patents
We
have no intellectual property such as patents or trademarks and, other than the obligations under the exploration lease agreement with
Tarsis Resources US Inc., no royalty agreements or labor contracts.
Need
for Any Government Approval of Principal Products or Services
Our
exploration activities on our exploration projects may require permits from the BLM and several other governmental agencies. We may be
unable to obtain these permits in a timely manner, on reasonable terms, or at all. If we cannot obtain or maintain the necessary permits,
or if there is a delay in receiving these permits, our timetable and business plan for exploration of our exploration claims will be
adversely affected. Furthermore, the mining business is subject to various levels of government controls and regulations, which are supplemented
and revised from time to time. We cannot predict what additional legislation or revisions might be proposed that could affect our business
or when any proposals, if enacted, might become effective. Such changes, however, could require more operating capital and expenditures
and could prevent or delay some of our operations.
The
various levels of government controls and regulations address, among other things, the environmental impact of mining and mineral processing
operations. For mining and processing, legislation and regulations in various jurisdictions establish performance standards, air and
water quality emission standards and other design or operational requirements for various components of operations, including health
and safety standards. Legislation and regulations also establish requirements for decommissioning, reclaiming and rehabilitating mining
properties following the cessation of operations, and may require that some former mining properties be managed for long periods of time.
As we are not mining or processing, and are unlikely to do so for some years, we have not investigated these regulations.
None
of the exploration work that we have completed to date requires an environmental permit, however, we must ensure timely repair of any
damage done to the land during exploration.
We
believe that we are in substantial compliance with all material government controls and regulations on the Lazy Claims Property and on
the Loman Property.
Research
and Development
We
have not spent any money on research and development activities.
Employees
At
the present time, we do not have any employees other than our sole officer who devotes his time as needed to our business and expects
to continue devoting approximately 10 hours per week in 2022.
Item
1A. Risk Factors
We
are subject to those financial risks generally associated with early-stage enterprises. Since we have sustained losses since inception,
we will require financing to fund our development activities and to support our operations and will independently seek additional financing.
However, we may be unable to obtain such financing. We are also subject to risk factors specific to our business strategy and the mining
and exploration industry.
RISKS
ASSOCIATED WITH OUR COMPANY AND INDUSTRY
The
following are certain risk factors that could affect our business, financial position, results of operations or cash flows. These risk
factors should be considered along with the forward-looking statements contained in this Annual Report on Form 10-K because these factors
could cause our actual results or financial condition to differ materially from those projected in forward-looking statements. The following
discussion is not an all-inclusive listing of risks, although we believe these are the more material risks that we face. If any of the
following occur, our business, financial position, results of operations or cash flows could be negatively affected. We caution the reader
to keep these risk factors in mind and refrain from attributing undue certainty to any forward-looking statements, which speak only as
of the date of this Annual Report.
We
are a junior exploration company incorporated on February 27, 2014. We have a limited operating history upon which an evaluation of our
future prospects can be made. As at December 31, 2021, we had a working capital deficit of $348,869, cash on hand of $1,420,864, and
$951,446 in accumulated deficit. Our capital assets include an equity investment in common shares and warrants to acquire common
shares of Walker River Resources Corp. (“WRR”), which we can use as a source of additional cash inflow, should we decide
to sell all or part of our investment. These details must be considered in light of the substantial risks, expenses, and difficulties
encountered by new entrants into the mining and mineral exploration industry. Our ability to achieve and maintain profitability and positive
cash flow is highly dependent upon a number of factors. Based upon current plans, we expect to incur losses in future periods as we incur
expenses associated with our operations and exploration programs. Further, we cannot guarantee that we will be successful in realizing
future revenues or in achieving or sustaining positive cash flow at any time in the future. Any such failure could result in the possible
closure of our business or force us to seek additional capital through loans or additional sales of our equity securities to continue
business operations, which would dilute the value of any shares.
As
a public company, we will have to comply with numerous financial reporting and legal requirements, including those pertaining to audits
and internal control. The cost of these compliance requirements could be significant. If we are unable to satisfy the costs in the normal
course of business and/or through the issuance of our shares, we may not be able to continue as a going concern.
There
is substantial doubt about our ability to continue as a going concern.
There
is substantial doubt as to whether we can continue as an ongoing business. Moreover, our officers may be unable or unwilling to loan
or advance us any funds. See “Audited Financial Statements – Report of Independent Registered Public Accounting Firm”
We
have incurred a net and comprehensive loss of $692,571 for the year ended December 31, 2021, of which $474,287 resulted from loss on
fair value adjustment we recorded on our equity investment in WRR Shares and Warrants. Our future is dependent upon our ability to obtain
financing, to continue gainfully sell shares of WRR, and upon future profitable operations. In addition to selling part of our equity
investment in WRR we may seek additional funds through private placements of our common stock which may result in substantial dilution
to our existing shareholders. Our 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 we cannot continue in existence.
Key
management personnel may leave us, which could adversely affect our ability to continue operations.
We
are entirely dependent on the efforts of Jeffrey Cocks, our president, CEO, CFO, and director, and our new directors, Mr. Day and Mr.
List. The loss of our officer and directors, or of other key personnel hired in the future, could have a material adverse effect on the
business and its prospects. There is currently no employment contract by and between any officer/director and us. Also, there is no guarantee
that replacement personnel, if any, will help us to operate profitably. Our management has been and continues to be expected to be able
to commit approximately 10 hours per week of their time, to the continued implementation of our business plan. If management is required
to spend additional time with their outside employment, they may not have sufficient time to devote to us, and we would be unable to
continue to implement our business plan resulting in the business failure.
We
do not maintain key person life insurance on our officer and directors.
If
we are unable to generate cash from our operations, we may sell our equity investment in WRR or obtain additional funding which may cause
substantial dilution to our then existing shareholders.
As
of December 31, 2021, we had $1,420,864 in cash on hand and $318,418 in equity investments. From April 2014 to December 31, 2021, our
initial three shareholders have advanced us $44,232 to cover our working capital expenses. We have raised $85,000 in our initial public
offering, $375,000 in private placement, $980,000 in convertible debentures, and $16,164 through non-interest-bearing advances payable
on demand. If we are unable to develop our business or secure additional funds we will have no choice but to continue selling our equity
investment in WRR, or our business would fail and our shares may be rendered worthless. To preserve our equity investment in WRR we may
seek to obtain debt financing, which may result in substantial dilution to our then existing shareholders. There can also be no assurance
that we will be able to successfully dispose of our equity investment in WRR to satisfy our operating needs. The inability to obtain
additional capital will restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are
unable to obtain additional financing, we will likely be required to curtail our business plans and possibly cease our operations.
General
domestic and international economic conditions could have a material adverse effect on our operating results and common stock price and
our ability to obtain additional financing.
As
a result of the current economic downturn, COVID-19 pandemic, and macro-economic challenges currently affecting the economy of the United
States and other parts of the world, some of the exploration programs that we may plan could suffer delays or postponement until the
economy strengthens, which could in turn effect our ability to obtain additional financing. We anticipate our revenues to be derived
from the sale of ore, which could suffer if customers are suffering from the economic downturn. During weak economic conditions, we may
not experience any growth if we are unable to obtain financing to enable us to continue our planned operations.
Our
officer and directors may have conflicts in allocating their time to our business.
Our
officer and directors are required to commit time to our affairs and, accordingly, may have conflicts of interest in allocating management
time among various business activities including Mr. Cocks’ and Mr. Day’s competing businesses. In the course of other business
activities, they may become aware of business opportunities that may be appropriate for presentation to us, as well as the other entities
with which they are affiliated. Messrs. Cocks, Day and List have orally agreed that any business opportunities that they come across
in the United States will be presented to our Company and that any opportunities that they come across in Canada will be made available
to their other businesses.
We
cannot provide assurances that our efforts to eliminate the potential impact of conflicts of interest will be effective.
We
are subject to the periodic reporting requirements of the Exchange Act that will require us to incur audit fees and legal fees in connection
with the preparation of such reports. These additional costs could reduce or eliminate our ability to earn a profit.
We
are required to file periodic reports with the SEC pursuant to the Exchange Act and the rules and regulations promulgated thereunder.
In order to comply with these requirements, our independent registered public accounting firm will have to review our financial statements
on a quarterly basis and audit our financial statements on an annual basis. Moreover, our legal counsel will have to review and assist
in the preparation of such reports. The costs charged by these professionals for such services cannot be accurately predicted at this
time because factors such as the number and type of transactions that we engage in and the complexity of our reports cannot be determined
at this time and will have a major effect on the amount of time to be spent by our auditors and attorneys. However, the incurrence of
such costs will obviously be an expense to our operations and thus have a negative effect on our ability to meet our overhead requirements
and earn a profit. We may be exposed to potential risks resulting from any new requirements under Section 404 of the Sarbanes-Oxley Act
of 2002. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors
could lose confidence in our reported financial information, and the trading price of our common stock, if a market ever develops, could
drop significantly.
Our
internal controls may be inadequate, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated
to the public.
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange
Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the principal executive
and principal financial officer and effected by the board of directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and includes those policies and procedures that:
|
● |
pertain
to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; |
|
|
|
|
● |
provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations
of management and/or our directors; and |
|
|
|
|
● |
provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that
could have a material effect on the financial statements. |
Our
internal controls may be inadequate or ineffective, which could cause our financial reporting to be unreliable and lead to misinformation
being disseminated to the public. Investors relying upon this misinformation may make an uninformed investment decision.
Our
board of directors has significant control over us, and we have not established committees comprised of independent directors.
We
have only three directors who each hold more than 10% of our common shares, and one of the directors holds all of our officer positions.
Accordingly, we cannot establish board committees comprised of independent members to oversee functions like compensation or audit issues.
In addition, since we only have three directors, they have significant control over all corporate issues. We do not have an audit or
compensation committee comprised of independent directors. Our three directors performing these functions are not independent directors.
Thus, there is a potential conflict in that our directors are also engaged in management and participate in decisions concerning management
compensation and audit issues that may affect management performance.
Until
we have a larger board of directors that would include some independent members, if ever, there will be limited oversight of our directors’
decisions and activities and little ability for minority shareholders to challenge or reverse those activities and decisions, even if
they are not in the best interests of minority shareholders.
We
are a smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure
requirements available to smaller reporting companies, this could make our securities less attractive to investors and may make it more
difficult to compare our performance with other public companies.
We
are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage
of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We
will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our ordinary shares held
by non-affiliates exceeds $250 million as of the prior June 30h, or (2) our annual revenues exceeded $100 million during such
completed fiscal year and the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the prior June 30th.
To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with
other public companies difficult or impossible.
Our
mineral claims have no known reserves.
The
probability of a mining claim having the necessary quantity and quality of ore to result in a profitable mining operation is uncertain.
Our claims, even with large investments by us, may never generate a profit.
We
are dependent upon the successful exploration of our mining claims and the discovery of valuable mineralization on those claims for our
success. Should we fail to locate economically extractable mineralization on our mineral claims, or enter into an agreement to option
and sell our interests to mining production Company, we will have no revenue and our business will fail.
Mineral
deposit estimates are imprecise and subject to error.
Mineral
deposit estimation calculations, when made, may prove unreliable. Assumptions made regarding the supporting data may prove inaccurate
and unforeseen events may lead to further inaccuracies. Sample variability, mining and processing adjustments, environmental changes,
metal price fluctuations, and legal and regulatory changes are all factors that could lead to deviations from any original estimations.
Our current mineral claims have no known ore reserves. Despite future investment in exploration activities, there is no guarantee we
will locate a commercially viable ore deposit or reserve. Most exploration projects do not result in discovery of commercially viable
and mineable ore deposits. With little capital available, we may have to limit our exploration efforts, which decrease the chances of
finding a commercially viable ore body. Even if potentially promising mineralization is identified, we may not be able to put our claims
into production due to many factors, including high extraction costs, low gold prices, or inadequate amount and reduced recovery rates.
If the exploration activities do not suggest a commercially successful prospect we may have to abandon our plans to pursue efforts to
develop the claims.
Our
future exploratory operations may be adversely affected by future governmental and environmental regulations and permitting.
Environmental
regulations may negatively affect the progression of operations and these regulations may become stricter in the future. In the U.S.,
all mining is regulated by Federal and State level government agencies. Obtaining licenses and permits from these agencies as well as
an environmental impact study for each mining property must be completed before starting mining activities. These are expensive and affect
the timing of operations. Pollution can be anticipated with mining activities. If we are unable to comply with current or future regulations,
we may expose ourselves to fines, penalties and litigation that could cause our business to fail.
Further,
the laws, regulations, policies or current administrative practices of any government body, organization or regulatory agency in the
U.S. or Nevada may be changed, applied or interpreted in a manner which will fundamentally alter our ability to carry on our business.
The
actions, policies or regulations, or changes thereto, of any government body or regulatory agency, or other special interest groups,
may have a detrimental effect on us. Any or all of these situations may have a negative impact on our ability to operate and/or our profitably.
We
are subject to inherent mining hazards and risks that may result in future financial obligations.
Risks
and hazards associated with the mining industry may adversely affect our operations such as, but not limited to, political and country
risks, industrial accidents, labor disputes, inability to retain necessary personnel or equipment, environmental hazards, unexpected
geologic formations, cave-ins, landslides, flooding and monsoons, fires, explosions, power outages, processing problems. Personal injury
and death could result, as well as property damage, delays in mining, environmental damage, legal liability and monetary loss. We may
not be able to obtain insurance to cover these risks at economically reasonable premiums. We do not carry any sort of insurance and may
have difficulties obtaining such once operations start as insurance is generally sparse and cost prohibitive.
Our
financial performance depends on the successful operation of our exploration activities, which are subject to various operational risks.
There
is no assurance we will be successful in our mining exploration activities. Our financial performance depends on the successful operation
of our future exploration activities. The cost of operation and maintenance, and the results of the proposed activities may be adversely
affected by a variety of factors, including the following:
|
● |
regular
and unexpected maintenance and replacement expenditures; |
|
● |
shutdowns
due to the breakdown or failure of our equipment; |
|
● |
labor
disputes; |
|
● |
the
presence of hazardous materials on our planned project sites; |
|
● |
catastrophic
events such as fires, explosions, earthquakes, landslides, floods, releases of hazardous materials, severe storms or similar occurrences
affecting our proposed exploration activities; and |
|
● |
unforeseen
results and problems inherent in mining and exploration activities. |
Any
of these events could significantly increase the expenses incurred our planned and future exploration activities and could materially
and adversely affect our business, financial condition, future results, and cash flow if any.
In
addition, our exploration activities would be subject to substantial risks, including:
|
● |
unanticipated
cost increases; |
|
● |
shortages
and inconsistent qualities of equipment, material, and labor; |
|
● |
work
stoppages; |
|
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inability
to obtain permits and other regulatory matters; and |
|
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failure
by key suppliers, component manufacturers, and vendors to timely and properly perform. |
As
all our mineral claims are in the early-exploration stage, there can be no assurance that we will identify commercially viable qualities
and quantities of mineralization on the claims.
Exploration
for mineralization is subject to a number of risk factors. Few properties that are explored are ultimately developed into producing mines.
Our mineral claims are in the early-exploration stage and are without any identified economically extractable mineralization. We may
not establish commercially viable quantities and qualities of economically extractable mineralization on our mineral claims and, even
if we do, there is no guarantee that we will be able to interest a third-party mining company to enter into a business arrangement, e.g.,
option to purchase arrangement with us, which could cause our business to fail.
Because
we anticipate our operating expenses will increase prior to us earning revenues, we may never achieve profitability.
Prior
to completion of the exploration stage, we anticipate incurring increased operating expenses without realizing any revenues, and therefore
incur significant losses into the foreseeable future. We recognize that if we are unable to generate significant revenues from the exploration
of our mineral claims, we will not be able to earn profits or continue future proposed operations, which will adversely affect us. There
is no history upon which to base any assumption as to the likelihood that we will prove successful, and we can provide no assurance that
we will generate any revenues or ever achieve profitability. If we are unsuccessful in addressing these risks, our business will most
likely fail.
Because
of the inherent dangers involved in mineral exploration, there is a risk that we may incur liability or damages as we conduct our business.
The
search for valuable mineralization involves numerous hazards. As a result, we may become subject to liability for such hazards, including
pollution, cave-ins and other hazards against which we cannot insure or against which we may elect not to insure. At the present time
we do not have any coverage to insure against these hazards. The payment of such liabilities may have a material adverse effect on our
financial position.
Our
exploration activities will be adversely affected if our exploration costs are higher than anticipated.
If
our exploration costs surpass our budgeted costs, we will not be able to carry out all of our planned exploration of the claims. Factors
that could cause exploration costs to increase are: adverse weather conditions, difficult terrain, and shortages of qualified personnel,
among others.
The
price of gold is volatile and a decrease in gold prices could cause us to incur losses.
We
will be exploring our claims primarily for gold. The profitability of gold exploration and production is directly related to the prevailing
market price for gold. The market prices of metals, including the gold market, fluctuate significantly and are affected by a number of
factors beyond our control, including, but not limited to, the rate of inflation, the exchange rate of the dollar to other currencies,
interest rates, and global economic and political conditions. Price fluctuations in the gold market from the time exploration is undertaken
and the time production can commence can significantly affect the profitability of a mine. Accordingly, we may begin to explore for gold
at a time when the price of gold or other related mineral make such exploration economically feasible and, subsequently, incur losses
because prices have decreased. Adverse fluctuations of metals market prices or the continued decline in the gold market, generally, may
force us to curtail or cease our operations.
The
costs of compliance with environmental laws and obtaining and maintaining environmental permits and governmental approvals required for
construction and/or operation, which currently are significant, may increase in the future and could materially and adversely affect
our business, financial condition, future results, and cash flow; any non-compliance with such laws or regulations may result in the
imposition of liabilities which could materially and adversely affect our business, financial condition, future results, and cash flow.
We
are required to comply with numerous federal, state and local statutory and regulatory environmental standards and to maintain numerous
environmental permits and governmental approvals required for construction and/or operation. Some of the environmental permits and governmental
approvals that may be issued to us may contain conditions and restrictions, including restrictions or limits on emissions and discharges
of pollutants and contaminants, or may have limited terms. If we fail to satisfy these conditions or comply with these restrictions,
or with any statutory or regulatory environmental standards, we may become subject to regulatory enforcement action and the operation
of the projects could be adversely affected or be subject to fines, penalties or additional costs. In addition, we may not be able to
renew, maintain or obtain all environmental permits and governmental approvals required for the continued operation or further development
of the projects.
Our
operations are subject to permitting requirements which could require us to delay, suspend or terminate our operations on our exploration
claims.
Our
exploration activities on our claims may require permits from the BLM and several other governmental agencies. We may be unable to obtain
these permits in a timely manner, on reasonable terms or at all. If we cannot obtain or maintain the necessary permits, or if there is
a delay in receiving these permits, our timetable and business plan for exploration of our exploration claims will be adversely affected.
Our
exploration activities may not be commercially successful, which could lead us to abandon our plans to seek a mining production company
to develop or purchase our exploration claims, and thereby lose the investment we made in our exploration claims.
Our
long-term success depends on our ability to identify commercially viable and mineable mineralization deposits on our exploration claims
that we can then, using our best business judgment, determine whether any such deposits can be developed into a commercially viable mining
operation. Mineral exploration is highly speculative in nature, involves many risks and is frequently non-productive. These risks include
unusual or unexpected geologic formations, and the inability to obtain suitable or adequate machinery, equipment or labor. The success
of exploration is determined in part by the following factors:
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the
identification of potential silver and/or gold mineralization based on evaluation of the host rock, alteration, structure, geochemistry
and proper sampling; |
|
● |
availability
of government-granted operation permits; |
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● |
the
quality of our management and our geological and technical expertise; and |
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the
capital available for exploration. |
Substantial
expenditures are required to establish proven and probable reserves through drilling and analysis, to develop metallurgical processes
to extract metal, and to develop the mining and processing facilities and infrastructure at any site chosen for mining. Whether a mineral
deposit will be commercially viable depends on a number of factors, which include, without limitation, the particular attributes of the
deposit, such as size, grade and proximity to infrastructure; metal prices, which fluctuate widely; and government regulations, including,
without limitation, regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and
environmental protection. We may invest significant capital and resources in exploration activities and abandon such investments if we
are unable to identify commercially exploitable mineral deposits. The decision to abandon our mineral claims may have an adverse effect
on the market value of our securities and our ability to raise future financing. We cannot assure you that we will discover or acquire
any mineralized material in sufficient quantities on the Property to justify commercial operations, or that we will be able to find a
mining operator who is willing and able to enter into a business venture with us.
A
shortage of critical equipment, supplies, and resources could adversely affect our exploration activities.
We
are dependent on the availability of certain equipment, supplies, and resources for us to carry out our mining exploration activities,
including input commodities, drilling equipment and skilled labor. A shortage in the market for any of these factors could cause unanticipated
cost increases and delays in delivery times, which could in turn adversely impact exploration schedules and costs.
Historical
production on our mineral claims may not be indicative of the potential for future development.
Our
mineral claims are not in commercial production, and, since acquiring our interests, we have never recorded any revenues from
commercial production on the claims. The fact that there were limited historical mining operations in the mining district surrounding
the mineral claims should not be relied upon as an indication that we will ever find commercially mineable quantities and qualities of
extractable mineralization on our claims or have future successful commercial operations on our mineral claims. In fact, based on the
reviewed information available to us, none of the historical mining operations were successful.
If
the development of one or more claims included in our claims portfolio is found to be economically feasible, such claims will be subject
to all of the risks associated with establishing new mining operations.
If
the development of one or more of our mining claims is found to be economically feasible, and we are unable to enter into a business
arrangement with a mining company that engages in mining operations and production, such development will require obtaining permits and
financing, and the construction and operation of mines, processing plants and related infrastructure. As a result, the project will be
subject to all of the risks associated with establishing new mining operations, including:
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the
timing and cost, which can be considerable, of the construction of mining and processing facilities and related infrastructure; |
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the
availability and cost of skilled labor, mining equipment and principal supplies needed for operations, including explosives, fuels,
chemical reagents, water, power, equipment parts, and lubricants; |
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the
availability and cost of appropriate smelting and refining arrangements; |
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● |
the
need to obtain necessary environmental and other governmental approvals and permits and the timing of the receipt of those approvals
and permits; |
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● |
the
availability of funds to finance construction and development activities; |
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● |
industrial
accidents; |
|
● |
mine
failures, shaft failures or equipment failures; |
|
● |
natural
phenomena such as inclement weather conditions, floods, droughts, rock slides, and seismic activity; |
|
● |
unusual
or unexpected geological and metallurgic conditions; |
|
● |
exchange
rate and commodity price fluctuations; |
|
● |
high
rates of inflation; |
|
● |
potential
opposition from non-governmental organizations, environmental groups or local groups, which may delay or prevent development activities;
and |
|
● |
restrictions
or regulations imposed by governmental or regulatory authorities. |
The
costs, timing, and complexities of developing the joint venture projects may be greater than anticipated. Cost estimates may increase
significantly as more detailed engineering work is completed on a project. It is common in mining operations to experience unexpected
costs, problems and delays during construction, development and mine start-up. We cannot provide assurance that activities will result
in profitable mining operations at the mineral claim, or that we will derive financial benefits from such operations. Any one or more
of the events identified above could have a material adverse effect on any revenues we may anticipate receiving from our mineral claims.
Our
operations involve significant risks and hazards inherent to the mining industry.
Our
exploration operations may involve the operation of large pieces of drilling and other heavy equipment. Hazards such as fire, explosion,
floods, structural collapses, industrial accidents, unusual or unexpected geological conditions, ground control problems, cave-ins, flooding,
and mechanical equipment failure are inherent risks in our operations. Hazards inherent to the mining industry can cause injuries or
death to employees, contractors or other persons on our mineral claims, severe damage to and destruction of our property, plant and equipment
and mineral claims, and contamination of, or damage to, the environment can result in the suspension of our exploration activities and
any future development and production activities. While the Company aims to maintain best safety practices as part of our culture, safety
measures implemented by us may not be successful in preventing or mitigating future accidents.
In
addition, from time to time we may be subject to governmental investigations and claims and litigation filed on behalf of persons who
are harmed while working on our mineral claims or otherwise in connection with our operations. To the extent that we are subject to personal
injury or other claims or lawsuits in the future, it may not be possible to predict the ultimate outcome of these claims and lawsuits
due to the nature of personal injury litigation. Similarly, if we are subject to governmental investigations or proceedings, we may incur
significant penalties and fines, and enforcement actions against us could result in the closing of certain of our mining operations.
If claims and lawsuits or governmental investigations or proceedings are ultimately resolved against us, they could have a material adverse
effect on our financial performance, financial position and results of operations. Also, if we conduct mining operations on property
without the appropriate licenses and approvals, we could incur liability or our operations could be suspended.
The
mining industry is very competitive.
The
mining industry is very competitive. Much of our competition is from larger, established mining companies with greater liquidity, greater
access to credit and other financial resources, newer or more efficient equipment, lower cost structures, more effective risk management
policies and procedures and/or greater ability than us to withstand losses. Our competitors may be able to respond more quickly to new
laws or regulations or emerging technologies, or devote greater resources to the expansion or efficiency of their operations than we
can. In addition, current and potential competitors may make strategic acquisitions or establish cooperative relationships among themselves
or with third parties. Accordingly, it is possible that new competitors or alliances among current and new competitors may emerge and
gain significant market share to our detriment. We may not be able to compete successfully against current and future competitors, and
any failure to do so could have a material adverse effect on our business, financial condition or results of operations.
The
title to some of our mineral claims may be uncertain or defective, thus risking the investment in such claims.
The
mineral claims to which we have options to buy, and those we may acquire in the future, if any, may be subject to prior recorded and
unrecorded agreements, transfers or claims, and other undetected defects, which may result in a defective title. A title defect on any
of our mineral claims (or any portion thereof) could adversely affect our ability to mine the claims and/or process the minerals.
Title
insurance is generally not available for mineral claims and our ability to ensure that we have obtained a secure claim to individual
mineral claims or mining concessions may be severely constrained. We rely on title information and/or representations and warranties
provided by our grantors. Any challenge to titles could result in litigation, insurance claims, and potential losses, delay the exploration
and development of a claim and ultimately result in the loss of some or all of our interest in the claim. In addition, if we mine on
a claim without the appropriate title, we could incur liability for such activities.
If
we obtain insurance, it may not provide adequate coverage.
Our
operations are subject to a number of risks and hazards including, but not limited to, adverse environmental conditions, industrial accidents,
labor disputes, unusual or unexpected geological conditions, ground control problems, cave-ins, changes in the regulatory environment,
metallurgical and other processing problems, mechanical equipment failure, facility performance problems, fires and natural phenomena
such as inclement weather conditions, floods and earthquakes. These risks could result in damage to, or destruction of, our mineral claims
or exploration equipment, personal injury or death, environmental damage, delays in exploration, increased exploration costs, asset write-downs,
monetary losses, and legal liability.
We
do not currently have insurance and do not have any plans to obtain insurance. Insurance against certain risks, including those related
to environmental matters or other hazards resulting from exploration, is generally not available to us or to other companies within the
mining industry. In addition, we do not carry business interruption insurance relating to our mineral claims. Accordingly, delays in
returning to any future exploration could produce severe near-term impact on our business. Any losses from these events may result in
significant costs that could have a material adverse effect on our financial performance, financial position and results of operations.
Changes
in the market price of gold, silver and other metals, which in the past has fluctuated widely, will affect the profitability of our operations
and financial condition.
Our
profitability and long-term viability depend, in large part, upon the market price of gold, copper, silver and other metals and minerals
which may be produced from our mineral claims, and from which we may derive revenues under any agreement we may enter into with a company
that conducts mining operations on our claims. The market price of gold and other metals is volatile and is impacted by numerous factors
beyond our control, including:
|
● |
sales
by central banks and other holders, speculators and producers of gold and other metals in response to any of the below factors. |
|
● |
the
relative strength of the U.S. dollar and certain other currencies; |
|
● |
interest
rates; |
|
● |
global
or regional political, financial, or economic conditions; |
|
● |
supply
and demand for jewelry and industrial products containing metals; and |
|
● |
expectations
with respect to the rate of inflation; |
A
material decrease in the market price of gold and other metals could affect the commercial viability of our mineral claims and any of
our future anticipated development and production assumptions if any. Lower gold prices could also adversely affect our ability to finance
future development of our mining claims, all of which would have a material adverse effect on our financial condition and results of
operations. There can be no assurance that the market price of gold and other metals will remain at current levels or that such prices
will improve.
RISKS
RELATED TO THE OWNERSHIP OF OUR SECURITIES
Participation
is subject to risks of investing in micro-capitalization companies.
Micro
capitalization companies generally have limited product lines, markets, market shares, and financial resources. The securities of such
companies, if traded in the public market, may trade less frequently and in more limited volume than those of more established companies.
Additionally, in recent years, the stock market has experienced a high degree of price and volume volatility for the securities of micro-capitalization
companies. In particular, micro-capitalization companies that trade in the over-the-counter markets have experienced wide price fluctuations
not necessarily related to the operating performance of such companies.
There
has not been any established trading market for our common stock although our common stock is quoted on the OTC Link alternative trading
system on the OTC Pink marketplace and we are eligible with the Depository Trust Company (“DTC”) to permit our shares to
trade electronically. There can be no assurances as to whether:
|
(i) |
any
market for our shares will develop; |
|
(ii) |
the
prices at which our common stock will trade; or |
|
(iii) |
the
extent to which investor interest in us will lead to the development of an active, liquid trading market. Active trading markets
generally result in lower price volatility and more efficient execution of buy and sell orders for investors. |
In
addition, our common stock is unlikely to be followed by any market analysts, and there may be few institutions acting as market makers
for our common stock. Either of these factors could adversely affect the liquidity and trading price of our common stock. Until our common
stock is fully distributed and an orderly market develops in our common stock if ever, the price at which it trades is likely to fluctuate
significantly. Prices for our common stock will be determined in the marketplace and may be influenced by many factors, including the
depth and liquidity of the market for shares of our common stock, developments affecting our business, including the impact of the factors
referred to elsewhere in these Risk Factors, investor perception of us and general economic and market conditions. No assurances can
be given that an orderly or liquid market will ever develop for the shares of our common stock.
Because
of the low price of our securities, many brokerage firms may not be willing to effect transactions in these securities. Purchasers of
our securities should be aware that any market that develops in our stock would be subject to the penny stock restrictions.
Rule
3a51-1 of the Exchange Act establishes the definition of a “penny stock,” for purposes relevant to us, as any equity security
that has a minimum bid price of less than $4.00 per share or with an exercise price of less than $4.00 per share, subject to a limited
number of exceptions that are not available to us. It is likely that our shares will be considered to be penny stocks for the immediately
foreseeable future. This classification severely and adversely affects any market liquidity for our common stock.
For
any transaction involving a penny stock, unless exempt, the penny stock rules require that a broker or dealer approve a person’s
account for transactions in penny stocks and the broker or dealer receive from the investor a written agreement to the transaction setting
forth the identity and quantity of the penny stock to be purchased. In order to approve a person’s account for transactions in
penny stocks, the broker or dealer must obtain financial information and investment experience and objectives of the person and make
a reasonable determination that the transactions in penny stocks are suitable for that person and that that person has sufficient knowledge
and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The
broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the SEC relating to
the penny stock market, which, in highlight form, sets forth:
|
● |
the
basis on which the broker or dealer made the suitability determination, and |
|
|
|
|
● |
that
the broker or dealer received a signed, written agreement from the investor prior to the transaction. |
The
disclosure also must be made about the risks of investing in penny stock in both public offerings and in secondary trading and commissions
payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies
available to an investor in cases of fraud in penny stock transactions. Additionally, monthly statements have to be sent disclosing recent
price information for the penny stock held in the account and information on the limited market in penny stocks.
Because
of these regulations, broker-dealers may not wish to engage in the above-referenced necessary paperwork and disclosures and/or may encounter
difficulties in their attempt to sell shares of our common stock, which may affect the ability of selling shareholders or other holders
to sell their shares in any secondary market and have the effect of reducing the level of trading activity in any secondary market. These
additional sales practice and disclosure requirements could impede the sale of our securities, if and when our securities become publicly
traded.
In
addition, the liquidity for our securities may decrease, with a corresponding decrease in the price of our securities. Our shares, in
all probability, will be subject to such penny stock rules for the foreseeable future and our shareholders will, in all likelihood, find
it difficult to sell their securities.
Our
management believes that the market for penny stocks has suffered from patterns of fraud and abuse. Such patterns include:
|
● |
control
of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; |
|
● |
manipulation
of prices through prearranged matching of purchases and sales and false and misleading press releases; |
|
● |
“Boiler
room” practices involving high pressure sales tactics and unrealistic price projections by sales persons; |
|
● |
excessive
and undisclosed bid-ask differentials and markups by selling broker-dealers; and |
|
● |
wholesale
dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with
the inevitable collapse of those prices with consequent investor losses. |
Transfer
of our common stock may also be restricted under the securities or securities regulations laws promulgated by various states and foreign
jurisdictions, commonly referred to as “Blue Sky” laws. Absent compliance with such individual state laws, our common stock
may not be traded in such jurisdictions. Because the securities registered hereunder have not been registered for resale under the blue-sky
laws of any state, the holders of such shares and persons who desire to purchase them in any trading market that might develop in the
future, should be aware that there may be significant state blue sky law restrictions upon the ability of investors to sell the securities
and of purchasers to purchase the securities. These restrictions prohibit the secondary trading of our common stock. We currently do
not intend to and may not be able to qualify securities for resale in at least 17 states which do not offer manual exemptions (or may
offer manual exemptions) and require shares to be qualified before they can be resold by our shareholders. Accordingly, investors should
consider the secondary market for our securities to be a limited one.
Because
insiders control our activities, they may cause us to act in a manner that is most beneficial to them and not to outside shareholders,
which could cause us not to take actions that outside investors might view favorably and which could prevent or delay a change in control.
Our
three directors together own 7,000,000 common shares representing 80.6% of the outstanding common stock. As a result, they effectively
control all matters requiring director and stockholder approval, including the election of directors, and the approval of significant
corporate transactions, such as mergers and related party transactions. These insiders also have the ability to delay or perhaps even
block, by their ownership of our stock, an unsolicited tender offer. This concentration of ownership could have the effect of delaying,
deterring or preventing a change in control of our company that you might view favorably.
The
interests of shareholders may be hurt because we can issue shares of our common stock to individuals or entities that support existing
management with such issuances serving to enhance existing management’s ability to maintain control of us.
Our
directors have authority, without action or vote of the shareholders, to issue all or part of the authorized but unissued common shares.
Such issuances may be issued to parties or entities committed to supporting existing management and the interests of existing management
which may not be the same as the interests of other shareholders. Our ability to issue shares without shareholder approval serves to
enhance existing management’s ability to maintain control of us.
Our
articles of incorporation provide for indemnification of officers and directors at our expense and limit their liability that may result
in a major cost to us and hurt the interests of our shareholders because corporate resources may be expended for the benefit of officers
and/or directors.
Our
Articles of Incorporation at Article Nine provide for indemnification as follows: “Every person who was or is a party to, or is
threatened to be made a party to, or is involved in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative,
by reason of the fact that he, or a person of whom he is the legal representative, is or was a Director or Officer of the Corporation,
or is or was serving at the request of the Corporation as a Director or Officer of another Corporation, or as its representative in a
partnership, joint venture, trust, or other enterprise, shall be indemnified and held harmless to the fullest extent legally permissible
under the laws of the State of Nevada from time to time against all expenses, liability, and loss (including attorneys’ fees judgments,
fines, and amounts paid or to be paid in settlement) reasonably incurred or suffered by him in connection therewith. Such right of indemnification
shall be a contract right, which may be enforced in any manner desired by such person. The expenses of Officers and Directors incurred
in defending a civil or criminal action, suit, or proceeding must be paid by the Corporation as they are incurred and in advance of the
final disposition of the action, suit, or proceeding, upon receipt of an undertaking by or on behalf of the Director or Officer to repay
the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the Corporation.
Such right of indemnification shall not be exclusive of any other right which such Directors, Officers, or representatives may have or
hereafter acquire, and, without limiting the generality of such statement, they shall be entitled to their respective rights of indemnification
under any bylaw, agreement, vote of Stockholders, provision of law, or otherwise, as well as their rights under this Article. Without
limiting the application of the foregoing, the Stockholders or Board of Directors may adopt bylaws from time to time with respect to
indemnification, to provide at all times the fullest indemnification permitted by the laws of the State of Nevada, and may cause the
Corporation to purchase and maintain insurance on behalf of any person who is or was a Director or Officer of the Corporation, or is
or was serving at the request of the Corporation as a Director or Officer of another Corporation, or as its representative in a partnership,
joint venture, trust, or other enterprise against any liability asserted against such person and incurred in any such capacity or arising
out of such status, whether or not the Corporation would have the power to indemnify such person. The indemnification provided in this
Article shall continue as to a person who has ceased to be a Director, Officer, Employee, or Agent, and shall inure to the benefit of
the heirs, executors, and administrators of such person.”
We
have been advised that, in the opinion of the SEC, indemnification for liabilities arising under federal securities laws is against public
policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification for
liabilities arising under federal securities laws, other than the payment by us of expenses incurred or paid by a director, officer or
controlling person in the successful defense of any action, suit or proceeding, is asserted by a director, officer or controlling person
in connection with our activities, we will (unless in the opinion of our counsel, the matter has been settled by controlling precedent)
submit to a court of appropriate jurisdiction, the question whether indemnification by us is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue. The legal process relating to this matter if it were to
occur is likely to be very costly and may result in us receiving negative publicity, either of which factors is likely to materially
reduce the market and price for our shares, if such a market develops.
We
do not expect to pay cash dividends in the foreseeable future.
We
have never paid cash dividends on our common stock. We do not expect to pay cash dividends on our common stock at any time in the foreseeable
future. The future payment of dividends directly depends upon our future earnings, capital requirements, financial requirements and other
factors that our directors will consider. Since we do not anticipate paying cash dividends on our common stock, return on your investment,
if any, will depend solely on the increase, if any, in the market value of our common stock.
Because
we are not subject to compliance with rules requiring the adoption of certain corporate governance measures, our stockholders have limited
protection against interested director transactions, conflicts of interest and similar matters.
The
Sarbanes-Oxley Act of 2002, as well as rule changes proposed and enacted by the SEC, the New York and American Stock Exchanges and the
Nasdaq Stock Market, as a result of Sarbanes-Oxley, require the implementation of various measures relating to corporate governance.
These measures are designed to enhance the integrity of corporate management and the securities markets and apply to securities that
are listed on those exchanges or the Nasdaq Stock Market. Because we are not presently required to comply with many of the corporate
governance provisions and because we chose to avoid incurring the substantial additional costs associated with such compliance any sooner
than legally required, we have not yet adopted these measures.
Because
our directors are not independent directors, we do not currently have independent audit or compensation committees. As a result, our
directors have the ability, among other things, to determine their own level of compensation. Until we comply with such corporate governance
measures, regardless of whether such compliance is required, the absence of such standards of corporate governance may leave our stockholders
without protections against interested director transactions, conflicts of interest, if any, and similar matters and investors may be
reluctant to provide us with funds necessary to expand our operations.
We
intend to comply with all corporate governance measures relating to director independence as and when required. However, we may find
it very difficult or be unable to attract and retain qualified officers, directors and members of board committees required to provide
for our effective management as a result of Sarbanes-Oxley Act of 2002. The enactment of the Sarbanes-Oxley Act of 2002 has resulted
in a series of rules and regulations by the SEC that increase responsibilities and liabilities of directors and executive officers. The
perceived increased personal risk associated with these recent changes may make it costlier or deter qualified individuals from accepting
these roles.
The
access to information regarding our business may become limited because our obligations to file periodic reports with the SEC could be
automatically suspended under certain circumstances.
We
are subject to certain informational requirements of the Exchange Act, as amended and we will be required to file periodic reports (i.e.,
annual, quarterly and special reports) with the SEC which will be immediately available to the public for inspection and copying. These
reporting obligations may (in our sole discretion) be automatically suspended under Section 15(d) of the Exchange Act if we have less
than 300 shareholders and do not file a registration statement on Form 8A. If this occurs, we will no longer be obligated to file periodic
reports with the SEC and the access to our business information would then be even more restricted. We will not be required to furnish
proxy statements to security holders and our directors, officer and principal beneficial owners will not be required to report their
beneficial ownership of securities to the SEC pursuant to Section 16 of the Exchange Act until we have both 500 or more security holders
that are not accredited investors (or, alternatively, 2,000 or more total shareholders) and greater than $10 million in assets. This
means that access to information regarding our business will be limited.
We
will incur ongoing costs and expenses for SEC reporting and compliance; without revenue we may not be able to remain in compliance, making
it difficult for investors to sell their shares, if at all.
In
order for us to remain in compliance with the SEC reporting and compliance requirements we will require further funding to cover the
cost of these filings, which could comprise a substantial portion of our available cash resources. If we are unable to generate sufficient
revenues to remain in compliance, it may be difficult for our shareholders to resell any shares they may purchase, if at all.
For
all of the foregoing reasons and others set forth herein, an investment in our securities in any market that may develop in the future
involves a high degree of risk.