UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TOUNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2020June 30, 2021
or
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _____________________to ___________
Commission file number 000-501191
Dakota Territory Resource Corp.
DakotaTerritoryResourceCorp
(Exact Name of Registrant as Specified in its charter)
Nevada |
| |
(State or other jurisdiction of or organization) | (I.R.S. Employer Identification No.) | |
141 Glendale Drive | 57754 | |
(Address of principal executive offices) | (Zip Code) |
|
|
(605) 717-2540
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the pastpreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
1
Indicate by check mark whether the registrantRegistrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitiondefinitions of “large"large accelerated filer,” “accelerated filer”" "accelerated filer" and “smaller"smaller reporting company”company" in Rule 12b-2 of the Exchange Act.
Act (Check one):
Large Accelerated Filer | [ ] |
| [ ] |
|
Non-Accelerated Filer | [ ] |
| [X] |
|
| Emerging Growth Company | [ ] |
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the Registrantregistrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
NumberAs of August 12, 2021, there were 69,182,109 shares of issuer’s common stock outstanding at February 5, 2021: 151,889,323.outstanding.
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS
(Unaudited)
|
| December 31, |
| March 31, |
|
| 2020 |
| 2020 |
ASSETS |
|
|
|
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
Cash and cash equivalents | $ | 1,346,092 | $ | 146,425 |
Restricted cash |
| 4,357,246 |
| - |
Prepaid expenses and other current assets |
| 95,253 |
| 7,649 |
Total current assets |
| 5,798,591 |
| 154,074 |
|
|
|
|
|
Mineral properties |
| 5,287,116 |
| 216,104 |
Office equipment, net |
| 19,921 |
| - |
|
|
|
|
|
TOTAL ASSETS | $ | 11,105,628 | $ | 370,178 |
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' DEFICIT |
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
Accounts payable and accrued liabilities | $ | 401,714 | $ | 501,818 |
Accounts payable, related party |
| 13,211 |
| 1,790,829 |
Dividend payable |
| 4,357,246 |
| - |
Line of credit |
| 24,888 |
| 30,082 |
Note payable to related party |
| 920,438 |
| 325,645 |
Total current liabilities |
| 5,717,497 |
| 2,648,374 |
|
|
|
|
|
Notes payable, net of discount |
| 567,179 |
| 300,000 |
|
|
|
|
|
TOTAL LIABILITIES |
| 6,284,676 |
| 2,948,374 |
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
|
SHAREHOLDERS' DEFICIT |
|
|
|
|
Preferred stock, par value $0.001; 10,000,000 shares authorized, no |
|
|
|
|
shares issued and outstanding as of December 31, 2020 and |
|
|
|
|
March 31, 2020, respectively |
| - |
| - |
Common stock, par value $0.001; 300,000,000 shares authorized, |
|
|
|
|
151,889,323 and 65,416,787 shares issued and outstanding as of |
|
|
|
|
December 31, 2020 and March 31, 2020, respectively |
| 151,890 |
| 65,417 |
Additional paid-in capital |
| 12,462,435 |
| 2,734,130 |
Accumulated deficit |
| (7,793,373) |
| (5,377,743) |
|
|
|
|
|
TOTAL SHAREHOLDERS' DEFICIT |
| 4,820,952 |
| (2,578,196) |
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT | $ | 11,105,628 | $ | 370,178 |
|
|
|
|
|
The accompanying notes are an integral part of these financial statements. |
June 30, 2021 | March 31, 2021 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | 24,852,299 | $ | 10,392,940 | ||||
Prepaid expenses and other current assets | 67,460 | 75,608 | ||||||
Total current assets | 24,919,759 | 10,468,548 | ||||||
Mineral properties, net | 7,357,741 | 5,337,072 | ||||||
Property and equipment, net | 983,701 | 870,744 | ||||||
TOTAL ASSETS | $ | 33,261,201 | $ | 16,676,364 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable and accrued liabilities | $ | 514,760 | $ | 162,024 | ||||
Accounts payable - related party | 81,250 | 3,000 | ||||||
Current portion of notes payable - related party | 872,578 | 906,768 | ||||||
Total current liabilities | 1,468,588 | 1,071,792 | ||||||
Notes payable - related party, net of current portion and discount | 0 | 473,325 | ||||||
Total liabilities | 1,468,588 | 1,545,117 | ||||||
COMMITMENTS AND CONTINGENCIES | 0 | 0 | ||||||
SHAREHOLDERS' EQUITY | ||||||||
Preferred stock, par value $0.001; 10,000,000 shares authorized, 0 shares issued and outstanding as of June 30, 2021 and March 31, 2021, respectively | 0 | 0 | ||||||
Common stock, par value $0.001; 75,000,000 shares authorized, 60,227,899 and 56,197,331 shares issued and outstanding as of June 30, 2021 and March 31, 2021, respectively | 60,228 | 56,197 | ||||||
Additional paid-in capital | 52,456,311 | 23,617,834 | ||||||
Accumulated deficit | (20,723,926 | ) | (8,542,784 | ) | ||||
Total shareholders' equity | 31,792,613 | 15,131,247 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 33,261,201 | $ | 16,676,364 |
DAKOTA TERRITORY RESOURCE CORP
STATEMENTS OF OPERATIONS
(Unaudited)
|
| Nine Months Ended |
| Three Months Ended | ||||
|
| December 31, |
| December 31, | ||||
|
| 2020 |
| 2019 |
| 2020 |
| 2019 |
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
Exploration costs | $ | 576,260 | $ | 63,008 | $ | 94,335 | $ | 23,850 |
General and administrative |
| 524,266 |
| 451,233 |
| 158,100 |
| 164,773 |
|
|
|
|
|
|
|
|
|
Total operating expenses |
| 1,100,526 |
| 514,241 |
| 252,435 |
| 188,623 |
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
| (1,100,526) |
| (514,241) |
| (252,435) |
| (188,623) |
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
|
|
Interest income |
| 2,140 |
| - |
| 140 |
| - |
Interest expense |
| (1,322,244) |
| (9,353) |
| (1,048,735) |
| (3,144) |
Other income (expense) |
| 5,000 |
| - |
| 5,000 |
| - |
|
|
|
|
|
|
|
|
|
TOTAL OTHER INCOME |
|
|
|
|
|
|
|
|
(EXPENSE), NET |
| (1,315,104) |
| (9,353) |
| (1,043,595) |
| (3,144) |
|
|
|
|
|
|
|
|
|
NET LOSS | $ | (2,415,630) | $ | (523,594) | $ | (1,296,030) | $ | (191,767) |
|
|
|
|
|
|
|
|
|
Net loss per common share - basic and |
|
|
|
|
|
|
|
|
diluted | $ | (0.03) | $ | (0.01) | $ | (0.01) | $ | (0.00) |
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - |
|
|
|
|
|
|
|
|
basic and diluted |
| 84,699,253 |
| 63,708,787 |
| 125,496,518 |
| 62,172,222 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
4
DAKOTA TERRITORY RESOURCE CORPCORP.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT
For the Nine Months Ended December 31, 2020 and 2019OPERATIONS
(Unaudited)
| Common Stock |
| Additional Paid-In |
| Accumulated |
|
| ||
| Shares |
| Amount |
| Capital |
| Deficit |
| Total |
Balance at March 31, 2020 | 65,416,787 | $ | 65,417 | $ | 2,734,130 | $ | (5,377,743) | $ | (2,578,196) |
|
|
|
|
|
|
|
|
|
|
Cashless exercise of stock options and warrants | 1,498,177 |
| 1,498 |
| (1,498) |
| - |
| - |
Cash received for unissued shares | - |
| - |
| 330,000 |
| - |
| 330,000 |
Debt discount assigned to purchase option | - |
| - |
| 1,305,000 |
| - |
| 1,305,000 |
Net loss | - |
| - |
| - |
| (345,735) |
| (345,735) |
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2020 | 66,914,964 |
| 66,915 |
| 4,367,632 |
| (5,723,478) |
| (1,288,931) |
|
|
|
|
|
|
|
|
|
|
Issuance of previously unissued shares | 1,100,000 |
| 1,100 |
| (1,100) |
| - |
| - |
Cash received for unissued shares | - |
| - |
| 50,000 |
| - |
| 50,000 |
Common stock issued upon exercise of |
|
|
|
|
|
|
|
|
|
options | 300,000 |
| 300 |
| 23,700 |
| - |
| 24,000 |
Common stock issued upon cashless |
|
|
|
|
|
|
|
|
|
exercise of warrants | 2,200,000 |
| 2,200 |
| (2,200) |
| - |
| - |
Net loss | - |
| - |
| - |
| (773,865) |
| (773,865) |
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2020 | 70,514,964 |
| 70,515 |
| 4,438,032 |
| (6,497,343) |
| (1,988,796) |
|
|
|
|
|
|
|
|
|
|
Issuance of previously unissued shares | 550,000 |
| 550 |
| (550) |
| - |
| - |
Common stock issued for cash | 60,000,000 |
| 60,000 |
| 8,940,000 |
| - |
| 9,000,000 |
Common stock issued for investment |
|
|
|
|
|
|
|
|
|
of mineral properties | 3,000,000 |
| 3,000 |
| 1,317,000 |
| - |
| 1,320,000 |
Common stock issued upon conversion of debt | 9,666,667 |
| 9,667 |
| 1,440,333 |
| - |
| 1,450,000 |
Common stock issued upon exercise of |
|
|
|
|
|
|
|
|
|
options and warrants | 7,650,000 |
| 7,650 |
| 599,350 |
| - |
| 607,000 |
Common stock issued upon cashless |
|
|
|
|
|
|
|
|
|
exercise of options | 507,692 |
| 508 |
| (508) |
| - |
| - |
Debt discount on notes payable, related party | - |
| - |
| 86,024 |
| - |
| 86,024 |
Cash dividend ($0.055 per share) | - |
| - |
| (4,357,246) |
| - |
| (4,357,246) |
Net loss | - |
| - |
| - |
| (1,296,030) |
| (1,296,032) |
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020 | 151,889,323 | $ | 151,890 | $ | 12,462,435 | $ | (7,793,373) | $ | 4,820,952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2019 | 62,916,787 | $ | 62,917 | $ | 2,390,733 | $ | (4,263,470) | $ | (1,809,820) |
|
|
|
|
|
|
|
|
|
|
Net loss | - |
| - |
| - |
| (140,110) |
| (140,110) |
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2019 | 62,916,787 |
| 62,917 |
| 2,390,733 |
| (4,403,580) |
| (1,949,930) |
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash | 1,000,000 |
| 1,000 |
| 99,000 |
| - |
| 100,000 |
Common stock issued for services | 1,000,000 |
| 1,000 |
| 83,700 |
| - |
| 84,700 |
Stock options issued for services | - |
| - |
| 13,026 |
| - |
| 13,026 |
Net loss | - |
| - |
| - |
| (191,717) |
| (191,717) |
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2019 | 64,916,787 |
| 64,917 |
| 2,586,459 |
| (4,595,297) |
| (1,943,921) |
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash | 500,000 |
| 500 |
| 49,500 |
| - |
| 50,000 |
Net loss | - |
| - |
| - |
| (191,767) |
| (191,767) |
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019 | 65,416,787 | $ | 65,417 | $ | 2,635,959 | $ | (4,787,064) | $ | (2,085,688) |
Three Months Ended June 30, | ||||||||
2021 | 2020 | |||||||
OPERATING EXPENSES | ||||||||
Exploration costs | $ | 2,183,641 | $ | 126,461 | ||||
General and administrative expenses | 9,905,592 | 151,530 | ||||||
Total operating expenses | 12,089,233 | 277,991 | ||||||
LOSS FROM OPERATIONS | (12,089,233 | ) | (277,991 | ) | ||||
OTHER INCOME (EXPENSE) | ||||||||
Loss on settlement of debt | (92,045 | ) | 0 | |||||
Interest income | 237 | 2,000 | ||||||
Interest expense | (101 | ) | (69,744 | ) | ||||
Total other income (expense) | (91,909 | ) | (67,744 | ) | ||||
NET LOSS | $ | (12,181,142 | ) | $ | (345,735 | ) | ||
Net loss per share: | ||||||||
Basic and diluted net loss per share | $ | (0.21 | ) | $ | (0.02 | ) | ||
Weighted average shares outstanding: | ||||||||
Basic and diluted | 56,900,553 | 16,410,868 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
5
DAKOTA TERRITORY RESOURCE CORPCORP.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(Unaudited)
|
| Nine Months Ended | ||
|
| December 31, | ||
|
| 2020 |
| 2019 |
Net loss | $ | (2,415,630) | $ | (523,594) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
Depreciation expense |
| 868 |
| - |
Stock based compensation |
| - |
| 47,718 |
Accretion of debt discount |
| 1,315,644 |
| - |
Changes in current assets and current liabilities: |
|
|
|
|
Prepaid expenses and other assets |
| (87,604) |
| (4,909) |
Accounts payable & accrued liabilities |
| (100,104) |
| (60,686) |
Accounts payable, related party |
| (329,621) |
| 269,751 |
Net cash used in operating activities |
| (1,616,447) |
| (271,720) |
|
|
|
|
|
Cash Flows From Investing Activities: |
|
|
|
|
Purchase of office equipment |
| (20,789) |
| - |
Investment in mineral properties |
| (3,751,012) |
| - |
Net cash used in investing activities |
| (3,771,801) |
| - |
|
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
|
Payments on note payable to related party |
| (210,645) |
| - |
Proceeds from the issuance of note payable |
| 1,150,000 |
| - |
Proceeds from the sale of common stock |
| 9,380,000 |
| 150,000 |
Proceeds from exercise of options and warrants |
| 631,000 |
| - |
Repayment on line of credit, net |
| (5,194) |
| (3,749) |
Net cash provided by financing activities |
| 10,945,161 |
| 146,251 |
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
| 5,556,913 |
| (125,469) |
Cash, cash equivalents and restricted cash, beginning of period |
| 146,425 |
| 152,590 |
|
|
|
|
|
Cash, cash equivalents and restricted cash, end of period | $ | 5,703,338 | $ | 27,121 |
|
|
|
|
|
Supplemental Disclosure of Cashflow Information |
|
|
|
|
Interest paid | $ | 6,865 | $ | - |
Taxes paid | $ | - | $ | - |
|
|
|
|
|
Non-cash Investing and Financing Activities: |
|
|
|
|
Common stock issued for investment in mineral properties | $ | 1,320,000 | $ | - |
Common stock issued upon conversion of note payable | $ | 1,450,000 | $ | - |
Related party accounts payable converted to related party note | $ | 1,447,997 | $ | - |
Common stock issued for prepaid services | $ | - | $ | 84,700 |
Three months ended June 30, | ||||||||
2021 | 2020 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net loss | $ | (12,181,142 | ) | $ | (345,735 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Stock-based compensation expense | 10,604,248 | 0 | ||||||
Loss on settlement of debt | 54,169 | 0 | ||||||
Depreciation expense | 27,661 | 0 | ||||||
Amortization of debt discount | 37,876 | 67,037 | ||||||
Changes in current assets and liabilities: | ||||||||
Prepaid expenses and other assets | 8,148 | (4,244 | ) | |||||
Accounts payable and accrued expenses | 352,986 | 3,490 | ||||||
Accounts payable - related party | 78,250 | 9,405 | ||||||
Net cash used in operating activities | (1,017,804 | ) | (270,047 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchases of property and equipment | (140,618 | ) | 0 | |||||
Purchases of mineral properties | (901,203 | ) | (57,213 | ) | ||||
Net cash used in investing activities | (1,041,821 | ) | (57,213 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from the issuance of note payable | 0 | 1,150,000 | ||||||
Proceeds from issuance of common stock | 10,399,500 | 330,000 | ||||||
Deposits received | 6,496,034 | 0 | ||||||
Repayment of note payable - related party | (376,550 | ) | (40,145 | ) | ||||
Repayment of line of credit, net | 0 | (1,472 | ) | |||||
Net cash provided by financing activities | 16,518,984 | 1,438,383 | ||||||
NET CHANGE IN CASH AND CASH EQUIVALENTS | 14,459,359 | 1,111,123 | ||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 10,392,940 | 146,425 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 24,852,299 | $ | 1,257,548 | ||||
SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
Interest paid | $ | 0 | $ | 0 | ||||
Taxes paid | $ | 0 | $ | 0 | ||||
NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
Common stock issued for investment in mineral property | $ | 1,119,466 | $ | 0 | ||||
Common stock issued for payment of note payable | $ | 223,259 | $ | 0 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
6
DAKOTA TERRITORY RESOURCE CORP.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the three months ended June 30, 2021 and 2020
(Unaudited)
Common Stock | |||||||||||||||||||
Shares | Amount | Additional Paid-In Capital | Accumulated Deficit | Total | |||||||||||||||
Balance March 31, 2020 | 16,354,197 | $ | 16,354 | $ | 2,783,193 | $ | (5,377,743 | ) | $ | (2,578,196 | ) | ||||||||
Cashless exercise of stock options and warrants | 374,544 | 375 | (375 | ) | 0 | 0 | |||||||||||||
Cash received for unissued shares | - | 0 | 330,000 | 0 | 330,000 | ||||||||||||||
Debt discount assigned to purchase option | - | 0 | 1,305,000 | 0 | 1,305,000 | ||||||||||||||
Net loss | - | 0 | 0 | (345,735 | ) | (345,735 | ) | ||||||||||||
Balance at June 30, 2020 | 16,728,741 | $ | 16,729 | $ | 4,417,818 | $ | (5,723,478 | ) | $ | (1,288,931 | ) | ||||||||
Balance at March 31, 2021 | 56,197,331 | $ | 56,197 | $ | 23,617,834 | $ | (8,542,784 | ) | $ | 15,131,247 | |||||||||
Common stock issued for cash | 2,311,000 | 2,311 | 10,397,189 | 10,399,500 | |||||||||||||||
Cash received for unissued shares | - | 0 | 6,496,034 | 0 | 6,496,034 | ||||||||||||||
Common stock issued for investment in mineral properties | 224,005 | 224 | 1,119,243 | 0 | 1,119,467 | ||||||||||||||
Common stock issued upon conversion of debt | 45,563 | 46 | 223,213 | 0 | 223,259 | ||||||||||||||
Stock-based compensation expense | 1,450,000 | 1,450 | 10,602,798 | 0 | 10,604,248 | ||||||||||||||
Net loss | - | 0 | 0 | (12,181,142 | ) | (12,181,142 | ) | ||||||||||||
Balance at June 30, 2021 | 60,227,899 | $ | 60,228 | $ | 52,456,311 | $ | (20,723,926 | ) | $ | 31,792,613 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
7
DAKOTA TERRITORY RESOURCES CORP
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
DECEMBER 31, 2020JUNE 30, 2021
(UNAUDITED)
Note 1—Summary1-Summary of Accounting Policies
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements ("interim financial statements") of Dakota Territory Resource Corp. (“we”("we", “us”"us", “our”"our", the “Company”"Company", the “Corporation”"Dakota Territory") have been prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") and the rules of the Securities and Exchange Commission (“SEC”("SEC"), for interim statements, and should be read in conjunction with the audited financial statements and notes thereto contained in our annual reportAnnual Report on Form 10-K, for the year ended March 31, 20202021 as filed with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal year ended March 31, 20202021 as reported in our annual reportAnnual Report on Form 10-K, have been omitted. The year-end balance sheet data was derived from the audited financial statements. Unless otherwise noted, there have been no material changes to the footnotes from those accompanying the audited consolidated financial statements contained in the Company's Annual Report on Form 10-K.
Uncertainties and Economic Development
Cash, cash equivalentsIn March 2020, the World Health Organization designated the new coronavirus ("COVID-19") as a global pandemic. Federal, state and restricted cash
local governments have mandated orders to slow the transmission of the virus, including but not limited to shelter-in-place orders, quarantines, restrictions on travel, and work restrictions that prohibit many employees from going to work. Uncertainty with respect to the economic effects of the pandemic has resulted in significant volatility in the financial markets. The restrictions put in place by federal, state and local governments could delay our exploratory programs on our mineral properties. Furthermore, the impact of the pandemic on the global economy could also negatively impact the availability and cost of future borrowings should the need arise. It is unknown how long the adverse conditions associated with the pandemic will last and what the complete financial effect will be to the Company. The Company consideredcontinues to monitor the impact that the pandemic, including relief bills enacted in response thereto, may have on operations. Currently, the Company is unable to determine the impact that the pandemic will have on its financial condition, results of operations, or liquidity.
Reverse Stock Split
On May 13, 2021, the Board of Directors of the Company approved a reverse stock split of the Company's common stock at a ratio of 1-for-4. The reverse stock split was made effective on May 25, 2021 and all highly liquid investments with original maturities of three months or less to be cash equivalents.
The following table provides a reconciliation of cashshare numbers and cash equivalents and restricted cash reported within the balance sheetscommon stock prices presented give effect to the same such amounts shownreverse split.
Merger Agreement
Pursuant to the Merger Agreement, JR Resources Corp. ("JR") and the Company have incorporated a new company ("NewCo") that will acquire all of the outstanding securities of JR and of the Company in exchange for securities of NewCo (the "Merger"). Shareholders of JR will receive a number of NewCo shares of common stock equal to their percentage shareholding in JR multiplied by the 35,641,667 Dakota Territory shares that JR owns. Shareholders of the Company other than JR will receive one share of common stock of NewCo for each share of common stock of the Company.
In addition, at the closing of the Merger, (i) each outstanding option to purchase the Company's common stock, whether vested or unvested, will be assumed and converted into an option with respect to a number of shares of NewCo common stock in the manner set forth in the Merger Agreement, (ii) each outstanding warrant to purchase JR common stock, whether or not exercisable, will be assumed and converted into a warrant with respect to a number of shares of NewCo common stock in the manner set forth in the Merger Agreement, (iii) any outstanding awards of restricted stock units with respect to shares of the Company's common stock will be assumed and converted into the right to receive an award of restricted stock units representing a right to receive a number of shares of NewCo common stock in the manner set forth in the Merger Agreement and (iv) NewCo will change its name to "Dakota Gold Corp."
8
Note 1-Summary of Accounting Policies, continued
The completion of the Merger is subject to customary closing conditions for a transaction of this nature, including securities law compliance, the approval of JR shareholders and the approval of the Company's shareholders. In addition, in connection with the Merger, the Company and JR intend to cause NewCo to prepare and file a registration statement on Form S-4 with the US Securities and Exchange Commission ("SEC").
On April 30, 2021, the Company incorporated Dakota Gold Services (Canada) Corp. ("Dakota Canada") under the British Columbia Business Corporations Act. These financial statements of cash flows.
|
| December 31, |
|
| 2020 |
Cash and cash equivalents | $ | 1,346,092 |
Restricted cash |
| 4,357,246 |
Cash, cash equivalents and restricted cash as shown in the Statements of cash flows | $ | 5,703,338 |
Restricted cash represents amounts placed in escrow as of December 31, 2020 and paid asconsolidate Dakota Canada, a special dividend on January 4, 2021.wholly-owned subsidiary.
Note 2—Related2-Related Party Transactions
The Company engages in related party transactions that involve its officers and directors and/or companies controlled by the officers and directors. Following is an analysis of related party transactions:
Mr. Gerald Aberle is the Company’s president, chief executive officerCompany's former President, Chief Executive Officer and chief operating officer.is currently Chief Operating Officer of the Company. He is also a director and significant shareholder of the Company and the owner of Jerikodie, Inc. ("Jerikodie"). Under a February 2012 agreement, Jerikodie Inc. earns a fixed consulting fee of $9,000 per month, plus approved expenses. In October 2020, the Company paid Jerikodie, Inc, $200,000 of the approximate $729,500 owed to it for consulting fees and issued a note payable to Jerikodie for the remaining balance of approximately $529,500 bearing interest at 0.25% per year. PaymentsOn June 1, 2021 the Company and Jerikodie settled debt of $100,000 plus accrued interest are due quarterly, beginning with$529,500 through the quarter ending March, 2021payment of $376,550 and continuing untilthe issuance of 45,563 shares of common stock. Upon settlement, the Company recognized all unamortized debt discount on the note is fully repaid.
At March 31, 2020,totaling $37,876 as interest expense. The fair value of the consideration paid to settle the note exceeded the carrying amount of the note resulting in a loss on settlement of $54,169 which was recognized as a general and administrative expense. During the three months ended June 30, 2021, the Company owedengaged a Company controlled by a family member of Mr. Aberle, individually, $20,500for the purpose of providing general labor and incurred approximately $20,734 in unsecured loans. These unsecured loans bear interest of 3% per year and are due on demand or past due. In July 2020, Mr. Aberle wascosts. During the three months ended June 30, 2021, the Company paid in fullJerikodie $39,238 for these unsecured loans and related accrued interest of $770.consulting fees.
Mr. Richard Bachman serves asis the Company’s chief geological officer (“CGO”Company's former Chief Geological Officer ("CGO"). He is also a director and significant shareholder of the Company and the owner of Minera Teles Pires Inc. (“("Minera Teles”Teles"). Under an October 2005 agreement that expired in March 2020, Minera Teles earned a $10,000 monthly consulting fee and received $1,500 per month for office rent and expenses. The consulting fee was divided between a $5,000 per month cash payment and a $5,000 per month deferred amount. The Company also owed Mr. Bachman, individually, $305,145 in unsecured loans. These unsecured loans bear interest at rates ranging from 3% to 4% per year and are due on demand. In June 2020, the Company repaid $40,145 of unsecured loans, plus accrued interest totaling $6,095. In October 2020, the Company paid Minera Teles $200,000 for amounts owed for prior services and combined the remaining amount owed of approximately $795,500 with amounts owed under the unsecured loans, including unpaid interest, into a new note in the amount of $1,055,310, bearing interest at 0.25% per year. A payment of $145,000 was made in December 2020, a2020. As of June 30, 2021, the unpaid principal balance totalled $872,578. In July 2021, the Company and Mr. Bachman settled debt of $872,578 through the payment of $50,000 is due$425,165 in Marchcash and the issuance of 99,049 shares of common stock.
During the three months ended June 30, 2021, and quarterly payments of $100,000 plus accrued interest beginning with the quarter ending June 2021, and continuing until the note is fully repaid.
DAKOTA TERRITORY RESOURCES CORP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
(UNAUDITED)
Note 2—Related Party Transactions, continued
In October 2020, the Company issued a note payablepaid $6,000 for consulting fees to WCM Associates, LP, an entity controlled by the Company’s CFO, in the amount of $123,000, bearing interest at 0.25% per year, for amounts owed for consulting fees. The note required an initial payment in the amount of $86,500 due on January 1, 2021 and subsequent payments in the amount of $25,000 plus accrued interest, due on the last day of each quarter, beginning with the quarter ending March, 2021, and continuing until the note is fully repaid. As of the date of this filing, Mr. Mathers has been paid in full.Company's former CFO.
In connection with the notes payable issued in 2020, as discussed above, the Company determined that the 0.25% contractual rate representsrepresented a below-market interest rate. Interest was imputed on the notes payable at 5.00% interest resulting in a discount at issuance of $86,024. During the three months ended December 31, 2020,June 30, 2021, the Company recognized amortization of the debt discount of $10,644$Nil in interest expense, with the remaining unamortized discount to be recognized into interest expense over the remaining life of the notes using the effective interest method.expense.
In September 2018, Mr. Stephen T. O’Rourke, a director of the Company, purchased 750,000 shares of our common stock in a private placement for $75,000. Additionally, Mr. O’Rourke, through his consulting firm, entered into a one-year consulting agreement with the Company (i) in September 2018 whereby he was issued a consulting fee of 1,000,000 shares for services rendered, and (ii) in September 2019 whereby he was issued a five-year option to purchase 1,000,000 shares of our common stock at an exercise price of $0.08 per share. Mr. O’Rourke exercised these options for cash in October 2020.
In October and December 2020, options to purchase 4,300,000 shares of common stock were exercised for $344,000 by our officers and directors.
Messrs. Aberle and Bachman own a 5% net smelter return royalty on the original 84 unpatented mining claims that comprised the Blind Gold Property. An agreement to extinguish the royalty for $25,000 each has been executed.
9
Note 2-Related Party Transactions, continued
The remuneration of directors and other members of key management personnel during the three months ended June 30, 2021 and 2020 was as follows:
June 30, 2021 | June 30, 2020 | |||||
Directors fees | $ | 27,000 | $ | 0 | ||
Salaries | 71,133 | 0 | ||||
Consulting fees | 126,613 | 37,215 | ||||
Share-based compensation | 6,391,544 | 0 | ||||
$ | 6,616,290 | $ | 37,215 |
Note 3—Mineral3-Mineral Properties
On September 26, 2012, the Company was re-organized with North Homestake Mining Company. With this re-organization, the Company acquired 84 unpatented lode mining claims covering approximately 1,600 acres known as the Blind Gold Property located in the Black Hills of South Dakota.
On December 28, 2012, the Company acquired 57 unpatented lode mining claims covering approximately 853 acres known as the West False Bottom Creek and Paradise Gulch Claim Group, the City Creek Claims Group, and the Homestake Paleoplacer Claims Group, all located in the Black Hills of South Dakota. The West False Bottom Creek and Paradise Gulch Claims were contiguous to the Blind Gold Property and have been incorporatedconsolidated into the Blind Gold Property. The purchase price was 1,000,000250,000 restricted common shares valued at $0.15$0.60 per share, or $150,000.
On February 24, 2014, the Company acquired surface and mineral title to the 26.16 acres of the Squaw and Rubber Neck Lodes that comprise Mineral Survey 1706 in the Black Hills of South Dakota. The Company is required to make annual lease payments of $8,000 for a period of 5 years, of which $8,000 was due upon execution of the agreement. On May 7, 2019, the Company extended the lease with an option to purchase agreement for Mineral Survey 1706 for an additional 5-year period. The property is part of the Homestake Paleoplacer Property, and the Company has maintained the option to purchase the mineral property for $150,000.
On March 3, 2014, the Company completed the acquisition of approximately 565.24 mineral acres in the Northern Black Hills of South Dakota. The acquisition increased the Company’sour mineral interests in the Homestake District by nearly 23%, to over 3,057 acres. As part of the property acquisition, the Company purchased an additional 64.39 mineral acres located immediately southwest and contiguous to our Paleoplacer Property, including mineral title to the historic Gustin, Minerva and Deadbroke Gold Mines. The purchase price of the mineral interests was $33,335.
DAKOTA TERRITORY RESOURCES CORP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
(UNAUDITED)
Note 3—Mineral Properties, continued
On April 5, 2017, the Company acquired options to purchase a combination of surface and mineral titles to 284approximately 293 acres in the Homestake District of the Northern Black Hills of South Dakota. The acquisition included 61 acres located immediately south and contiguous with theour City Creek Property; 82 acres located approximately one half mile south of theour Blind Gold Property at the western fringe of the historic Maitland Gold Mine; and 141 acres located immediately north and contiguous to theour Homestake Paleoplacer Property. The Company is required to make annual lease payments totaling $20,000 for a period of 5 years, of which $20,000 was due upon execution of the agreement. The Company has an option to purchase the mineral properties for total price of $626,392. As of December 31, 2020,June 30, 2021, the Company is current on all required annual lease payments.
In November 2018, the Companywe acquired 42 unpatented lode mining claims covering approximately 718 acres located immediately to the north and adjacent to the Company’sCompany's City Creek Property. Through this staking, the City Creek project area was expanded from approximately 449 acres to 1,1671,106 acres.
In September 2019, the Company completed the acquisition of 106 unpatented lode mining claims covering approximately 1,167 acres in close proximity to the historic Tinton Gold Camp. The Tinton area was the site of placer mining activity between 1876 and the turn of the century.
OnIn May 18, 2020, the Company increased its land holdings in the Black Hills through the staking of 70acquired 67 unpatented lode mining claims covering approximately 1,1201,045 acres located on the western margin of the structural corridor that extends north of the Homestake Gold Mine. The West Corridor property is located just south of the mineral property Dakota Territory acquired from Deadbroke Mining Company in March of 2014, just north of the producing Wharf Mine (Coeur Mining) and just to the south and east of the former Richmond Hill Mine (Barrick Gold).
10
Note 3-Mineral Properties, continued
In July 2020, the Company staked 166 unpatented lode mining claims covering approximately 3,152 acres located immediately north and adjacent to the Company's City Creek Property. Through this staking, the City Creek project area was expanded from approximately 1,176 acres to 4,319 acres. The City Creek Property is comprised of a combination of patented and unpatented mining claims covering the continuous extension of the iron-formation gold host northeast of the Homestake Mine. The City Creek geology is dominated by the Homestake, Ellison and Poorman stratigraphic sequence that has been delineated by more than 40,000 ft of core drilling across the property. The historic drilling also documents the occurrence of gold mineralization in the classic quartz vein, chlorite-arsenopyrite style of the Homestake Mine.
On September 15, 2020, we completed the acquisition of 50 unpatented lode mining claims covering approximately 840 acres at the historic Ragged Top Gold Camp of the Black Hills of South Dakota. Tertiary-aged gold mineralization in the Ragged Top area is hosted primarily in the Paha Sapa Limestone formation and has been mined from both vertical fissures called "Verticals" and from collapsed breccias. The Ragged Top acquisition is located just northwest of the producing Wharf Mine (Coeur Mining) and approximately 3 miles southwest of the former Richmond Hill Mine (Barrick Gold).
On October 26, 2020, the Company completed the purchase of the Maitland Gold Property from Homestake Mining Company of California, a wholly owned subsidiary of Barrick Gold Corporation ("Barrick"). At closing, the Company paid Barrick $3.5 million cash and issued 750,000 shares of its common stock valued at $1.76 per share, for total consideration of $4.82 million. Additionally, Barrick retained a 2.5% net smelter returns royalty on the property. The 2,112 mineral-acre Maitland acquisition is an important component of the Company's exploration and development strategy for the structural corridor that extends from the Homestake Gold Mine to the Company's Blind Gold Property at the northern end of the Homestake District.
On November 25, 2020, the Company acquired 64 unpatented lode mining claims covering approximately 1,092 acres located south and to the west of the former Homestake Gold Mine at Lead, South Dakota. The Poorman Anticline geological structure is the southwestern-most known extension of the Homestake iron-formation host in the district. Gold mineralization was discovered underground on the 2,600 and 4,100 foot levels in the far western extents of the Homestake Mine in the 1950's and 60's with little historic follow-up exploration in the Poorman Anticline closer to surface. Dakota Territory's targeting in the Poorman Anticline is based on the presence of the Homestake iron-formation host and projected intersections with important shear fabric that is known to have conducted fluids necessary to the deposition of gold mineralization in the northern extents of the structural corridor.
On January 26, 2021, the Company acquired 143 unpatented lode mining claims covering approximately 2,468 acres. The acquisition was based on continuing analysis of the Company's historic data sets coupled with new insights derived from the Company's district-scale airborne geophysical survey flown during the summer of 2020 and increased the acreage covered by three of the Company's existing project areas. At the west side of the Homestake District, the Tinton property was extended to the north and northwest adding approximately 1,966 acres to the original claim block. In the central region of the District, the West Corridor property was extended west to Cleopatra Creek covering approximately 242 additional acres between Richmond Hill and Wharf gold mines, and the Blind Gold Property was expanded west adding approximately 260 acres immediately north of the Richmond Hill Mine.
On March 8, 2021, the Company acquired 39 unpatented lode mining claims covering approximately 806.5 acres at the eastern boundary of the Company's Tinton Property. Tinton was the site of placer mining activity between 1876 and the turn of the century, the lode source for which has not been discovered. Our original Tinton claim block was located based on historic research and exploration conducted by members of our technical team at Homestake Mining Company in the 1980's and 1990's, which suggested a Pre-Cambrian lode source at depth. The latest property acquisition is focussed on additional younger Tertiary-aged gold mineralization in the younger sedimentary and igneous rocks covering the property.
On March 9, 2021, Dakota Territory acquired, by option, 25 patented mining claims covering approximately 307 acres at the eastern boundary of the northern segment of the Company's Ragged Top Property. NaN additional unpatented lode claims covering approximately 29 acres were also acquired by staking and added at the north end of the property. The Ragged Top Property has been subject to historic mining operations producing Tertiary-aged gold and silver mineralization primarily from vertical fissures and collapsed breccias within the Paha Sapa limestone unit. The Ragged Top property is located just northwest of the producing Wharf Mine (Coeur Mining) and approximately 3 miles southwest of the former Richmond Hill Mine (Barrick Gold).
11
Note 3-Mineral Properties, continued
On May 21, 2021, the Company purchased surface and mineral title to approximately 213 acres located contiguous to the northwest boundary of the Company's West Corridor Property. The property is located just south of the mineral property Dakota Territory acquired from Deadbroke Mining Company in the Maitland Area in March of 2014, just north of the producing Wharf Mine (Coeur Mining) and just to the south and east of the former Richmond Hill Mine (Barrick Gold).
On July 23, 2020 the Company announced that it had substantially increased its land holdings in the Black Hills of South Dakota through the staking of 166 unpatented lode mining claims covering approximately 3,152 acres located immediately north and adjacent The purchased property is subject to the Company’s City Creek Property. The project area was first expanded in 2018 on the basis of inversion modeling of historical geophysical survey data. Subsequent reconnaissance and preliminary analysis of the Company’s new geophysical data provided evidence of underlying shear fabric on a similar orientation with the productive structural corridor north of the Homestake Mine.
On September 15, 2020 the Company increased its land holdings in the Homestake District of the Black Hills of South Dakota through the staking of 50 unpatented lode mining claims covering approximately 840 acres at the historic Ragged Top Gold Camp. Tertiary-aged gold mineralization in the Ragged Top area is hosted primarily in the Paha Sapa Limestone formation and has been mined from both vertical fissures called “Verticals” and from collapsed breccias. The Company’s Ragged Top property acquisition is located just northwest of the producing Wharf Mine (Coeur Mining) and approximately 3 miles southwest of the former Richmond Hill Mine (Barrick Gold).
On October 23, 2020, the Company closed the purchase of the Maitland Gold Property in the Black Hills of South Dakota from2% NSR Royalty held by Homestake Mining Company of California and a wholly owned subsidiarybuyback right for 51% interest in the property subject to, among other provisions, the establishment of Barrick Gold Corporation (“Barrick”), fora 1,000,000-ounce reserve and/or inferred resource from one or more deposits located within a one-kilometer area of influence surrounding the property.
During the quarter ended June 30, 2021, the Company purchased an additional 334 acres of patented mining claims.
In total, consideration of $4.82 million,the Company currently holds eight brownfield project areas in the district comprised of $3.5 million cash976 unpatented claims and the issuancea combination of 3 million sharessurface and mineral leases covering a total of Company common stock valued at $0.44 per share,approximately 19,937 acres. We have not established that any of our projects or $1.32 million. Additionally, Barrick will retain a 2.5% net smelter returns royalty on the property. The 2,112 mineral-acre Maitland acquisition will secure an important componentproperties contain any proven or probable reserves under SEC Industry Guide 7.
As of the Company’s strategy for the structural corridor that extends from the Homestake Gold Mine to the Company’s Blind Gold Property at the northern end of the Black Hills District.
DAKOTA TERRITORY RESOURCES CORP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
(UNAUDITED)
Note 3—Mineral Properties, continued
In August 2020, the Company completed a broad high definition airborne geophysical survey to enhance the Company’s previous drill targeting, as well as to screen the entire Northern Hills area for new areas of interest and additional targets. Management believes the Homestake District holds exceptional discovery potential and it is the Company’s intent to continue to consolidate the Company’s dominant land position and to conduct systematic exploration of the district.
At December 31, 20202021 and March 31, 2020,2021, the Company’sCompany's mineral properties totaled $5,287,116$7,357,741 and $216,104,$5,337,072, respectively. As of December 31, 2020,June 30, 2021, the Company is in the exploration stage and has not commenced amortization of theits properties.
Note 4—Notes4-Notes Payable
JR Resources Corp.
In February 2020, we entered into a $300,000 unsecured promissory note agreement with JR Resources Corp. (“JR”).JR. The note bore interest at 3.0% per year and was due on May 5, 2021.2020. In May 2020, JR and the Company entered into an amended and restated promissory note in the amount of $1,450,000, which includes the $300,000 that was advanced in February 2020 and an additional $1,150,000 that was advanced in May 2020. The amended and restated unsecured note bears interest at 0.25% per year, compounded annually, and matures on December 31, 2021. At maturity, the principal amount of the note, together with any accrued but unpaid interest, will be due and payable in cash, provided that, if and to the extent that the Company does not pay this note in cash on the maturity date, then JR will be required to exercise, and will in fact be deemed to have exercised, its right to convert such unpaid portion of the note into shares of Company common stock. The conversion price is $0.15 per share through December 31, 2020 and, thereafter, the lesser of $0.15 per share on the volume weighted average price of Company common stock for the five consecutive trading days immediately preceding the date of such conversion (with a floor of $0.10 per share). The note has customary event of default provisions and, upon an event of default, JR will be required to convert the unpaid portion of the note into the shares of Company common stock, if not paid in cash by the Company.
In connection with the promissory note agreement with JR, the Company granted JR an option to purchase up to 142,566,667 shares of common stock at $0.15 per share in one or more closings on or prior to October 15, 2020. The proceeds from the debt issuance were allocated between the debt instrument and the purchase option based on their estimated relative fair values (management calculated the initial estimated fair values, to be followed up with a third-party valuation). The Company estimated that $1,305,000 of the total proceeds was allocable to the purchase option and recognized through a charge to additional paid-in capital with a corresponding discount on the debt. The debt discount will be amortized to interest expense over the remaining life of the note using the effective interest method.
On October 15, 2020, and as a part of the first closing of our agreement with JR, Resources, the promissory note of $1,450,000 was converted into 9,666,6672,416,667 shares of the Company’sCompany's common stock.stock, pursuant to its terms. In connection with the conversion, the Company recognized the remaining $1,036,849 of unamortized debt discount as interest expense. For the nine and three monthsyear ended DecemberMarch 31, 2020,2021, the Company recognized additional interest expense of approximately $1,316,000 and $1,047,000, respectively,$1,305,000 related to amortization of the debt discount.
On January 20, 2021 JR lent the Company $300,000, on an unsecured basis. On the occurrence of the final closing, the unpaid principal of the loan would be applied to the consideration relating to the final close.
Note 5—LineIn March 2021, the Company and JR effected the second and final closing under the option, whereby JR acquired 18,225,000 shares of Credit
Company common stock for aggregate consideration of $10,935,000, $10,635,000 in cash and $300,000 upon conversion of the principal amount of the promissory note issued in January 2021. The Company executedfinal closing resulted in a Linechange in control of Credit with Wells Fargo Bank in California. The Line of Credit allows the Company to borrow up to $47,500. The LineJR.
12
Note 5-Property and Equipment
As of Credit bears interest at 7.75% per annum, is unsecured,June 30, 2021 and due on demand. The balance on this LineMarch 31, 2021, the Company's property and equipment consists of Credit at December 31,the following:
Estimated Useful Life (Years) | June 30, 2021 | March 31, 2021 | ||||||||
Land | $ | 70,000 | $ | 70,000 | ||||||
Building | 39 | 543,549 | 503,711 | |||||||
Furniture and equipment | 3 - 5 | 398,006 | 330,125 | |||||||
Vehicle | 5 | 32,899 | 0 | |||||||
1,044,454 | 903,836 | |||||||||
Less accumulated depreciation | (60,753 | ) | (33,092 | ) | ||||||
Property and equipment, net | $ | 983,701 | $ | 870,744 |
Depreciation expense for the three months ended June 30, 2021 and 2020, was approximately $25,000.$27,661 and $0, respectively.
Note 6-Shareholders' Equity
Note 6—Common Stock Options and Warrants
Our authorized capital stock consists of 300,000,00075,000,000 shares of common stock, with a par value of $0.001 per share, and 10,000,000 preferred shares with a par value of $0.001 per share.
InOn June 2020, an option to purchase 1,300,00023, 2021, the Company issued 2,311,000 shares of common stock was exercised onat a cashless basis by our chief financial officer, resultingprice of $4.50 per Common Share, for gross proceeds of $10,399,500, in connection with the issuanceinitial tranche of 1,083,333 sharesa non-brokered private placement (“Private Placement”). As of common stock.
DAKOTA TERRITORY RESOURCES CORP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
(UNAUDITED)
June 30, 2021, the Company had received $6,496,034 in connection with the second tranche of the Private Placement, as further discussed in Note 6—Common Stock, Options and Warrants, continued
In June 2020, a warrant to purchase 500,0007. The related 1,443,563 shares of common stock was exercised on a cashless basis by a consultant, resulting inwere not issued until July 2021.
During the issuance of 414,844three months ended June 30, 2021, the Company also issued (i) 224,005 shares of common stock.stock valued at $1,119,467 for investment in mineral properties (see Note 3 for further discussion), (ii) 45,563 shares of common stock valued at $223,259 for a settlement of debt (see Note 2 for further discussion), and (iii) 1,450,000 shares of common stock valued at $7,177,500 as bonus shares to directors, employees and consultants to the Company. For the three months ending June 30, 2021, the share-based compensation expense for the bonus shares was allocated $1,361,250 to exploration costs and $5,816,250 to general and administrative expenses.
During the three months ended June 30, 2020, the Company issued 374,544 shares of common stock upon cashless exercise of stock options and warrants.
Common Stock Options, Restricted Stock Units and Warrants
On March 11, 2021, the Company's board of $0.15 were granteddirectors adopted a plan entitled the "2021 Stock Incentive Plan." The 2021 Stock Incentive Plan has a total of 6,250,000 Common Shares available to award to the Company's directors, executive officers and consultants. As of June 30, 2021, a consultant.
In July 2020, warrants to purchase 3,300,000total of 2,378,750 shares of our common stock were exercisedremained available for $330,000 by investors.future grants under the 2021 Stock Incentive Plan.
In July 2020, an option to purchase 300,000 sharesOn January 25, 2015, the Company's board of directors adopted a plan entitled the "2015 Omnibus Incentive Plan." The 2015 Omnibus Incentive Plan is no longer in effect and no further securities will be issued under the 2015 Omnibus Incentive Plan, other than in respect of 75,000 common stock was exercised for $24,000 bypurchase options that remain outstanding.
13
Note 6-Shareholders' Equity, continued
Outstanding stock options under the 2021 Stock Incentive Plan have a consultant.
In September 2020, a warrantterm of five years. Outstanding stock options granted to purchase 500,000 shares of common stock was exercised for $50,000 from an investor. These shares were issued in October 2020.
In connection withthird-party service providers generally vest over the May 2020 JR note, the Company provided JR the option to acquire up to 142,566,667 shares of common stock at $0.15 per share. On October 15, 2020, JR exercised the first closingperiod of the option agreementcontract, which is typically one year. The Company recognized stock-based compensation related to issuance of stock options totaling $3,056,515 ($501,890 being allocated to exploration costs and acquired 60,000,000 shares of common stock for total consideration of $9.0 million. JR has the right$2,554,625 and being allocated to purchase up to 72,900,000 additional shares of common stock for up to $10,935,000 on or prior to February 15, 2021. JR also converted the outstanding principal on its convertible promissory note totaling $1,450,000 into 9,666,667 shares of common stock (See Note 4 – Notes Payable for additional information).
In October 2020, the Company issued 3,000,000 shares valued at $1.32 million to Barrick in connection with the acquisition of the Maitland Gold Property as further described in Note 3 – Mineral Properties.
Duringadministrative expenses) during the three months ended December 31, 2020,June 30, 2021. No stock-based compensation was recognized by the holders of 7,650,000 common stock option with exercise prices ranging from $0.06 to $0.08 per share, exercised such options for total consideration of $607,000.
DuringCompany during the three months ended December 31, 2020, the holders of 600,000 common stock options with exercise prices of $0.08 per share, exercised such options on a cashless basis for a total of 507,692 shares of common stock.June 30, 2020.
On November 13, 2020,May 17, 2021, the Company declared a special cash dividend of $0.055 per common share, payable January 4, 2021 to holders of record on December 22, 2020. As of the date thereof, there were 150,181,631 shares of common stock issued and outstanding and common stockgranted 2,071,250 options to purchase 1,800,000 shares of common stock; holders of 72,666,667 shares of common stock have contractually relinquishedofficer, directors and waived their right to receive this special cash dividend. As of December 31, 2020, the cash dividend totaling $4,357,246 is being held in escrow and is presented under restricted cash and dividend payable in the accompanying balance sheet.
At December 31, 2020, there were 151,889,323 shares of our common stock outstanding.
Common Stock Options and Warrants
consultants. A summary of the Company's stock option activity and related information for the period ended December 31, 2020June 30, 2021 is as follows:
Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (In Years) | Aggregate Intrinsic Value | ||||||||
Outstanding as of March 31, 2021 | 825,000 | $ | 1.77 | 4.61 | $ | 2,661,000 | |||||
Options granted | 2,071,250 | 4.76 | 4.88 | 497,100 | |||||||
Outstanding as of June 30, 2021 | 2,896,250 | $ | 3.91 | 4.80 | $ | 3,158,100 | |||||
Options exercisable as of June 30, 2021 | 765,417 | $ | 4.32 | 3.84 |
| Options |
| Price Range |
| Weighted Average Remaining Life (Years) |
Outstanding March 31, 2020 | 7,950,000 | $ | 0.08 |
| 4.40 |
Granted | 2,200,000 |
| 0.08 |
| 4.11 |
Cancelled/Expired | - |
| - |
| - |
Exercised | (9,850,000) |
| 0.08 |
| 4.37 |
Outstanding and exercisable December 31, 2020 | 300,000 | $ | 0.08 |
| 2.69 |
DAKOTA TERRITORY RESOURCES CORP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
(UNAUDITED)
Note 6—Common Stock, Options and Warrants, continued
A summaryDuring the three months ended June 30, 2021, we estimated the fair value of each stock option to have a weighted average grant date fair value of $3.39 per share on the Company's stock warrant activity and related information fordate of grant using a Black Scholes valuation model. The weighted-average assumptions used to calculate the period ended December 31, 2020 isgrant date fair value were as follows: exercise price of $4.76, risk-free interest rate of 0.95%, estimated volatility of 90%, dividend yield of 0%, and expected life of 5 years. As at June 30, 2021 the unrecognized compensation cost related to unvested options was $4,963,034.
| Warrants |
| Price Range |
| Weighted Average Remaining Life (Years) |
Outstanding March 31, 2020 | 4,300,000 | $ | 0.10 |
| 1.99 |
Granted | - |
| - |
| - |
Cancelled/Expired | - |
| - |
| - |
Exercised | (4,300,000) |
| 0.10 |
| - |
Outstanding and exercisable December 31, 2020 | - | $ | - |
| - |
Note 7 – Subsequent Events
There were no warrants outstanding as the Company’s new corporate headquarters. The cash purchase price of the building, furniture, fixturesJune 30, 2021 and other property was approximately $755,000. The building, built in the 1890’s as a railroad roundhouse, was completely renovated between 2000 and 2010 and is approximately 13,500 square feet with mixed use office and retail.March 31, 2021.
Note 7-Subsequent Events
On January 20,August 2, 2021, the Company entered into a note payable with JRseries of substantially similar subscription agreements pursuant to which the Company issued and sold to certain investors, in the amountfinal tranche of $300,000the Private Placement, an aggregate of 120,550 common shares at a price of $4.50 per share, for additional working capital. The note does not bear interestgross proceeds of $542,475. In aggregate with the first tranche issuance of 2,311,000 common shares for gross proceeds of $10,399,500, and is duethe second tranche issuance of 8,734,611 common shares for $39,305,749.50, the Company issued a total of 11,166,161 common shares for total gross proceeds of $50,247,724.50.
Robert Quartermain, a director and payable in cash on December 31, 2021. However, upon the occurrence of a change in controlCo-Chair of the Company, pursuant to the May 2020 agreement, the unpaid principal amount of the loan outstanding at the time of such change in control closing shall be applied to and considered an investment amount paid by JR.
On February 2, 2021, the Company announced the hiring of Mark Rantapaa to fill the position of Manager of Black Hills Operations. Mr. Rantapaa is responsible for the conduct of all of the Company’s exploration and mining activitiespurchased 50,000 common shares in the Black Hills and has been charged with development of policy and programs necessary to the achievement of Dakota Territory’s goals for excellence in health, safety and environmental performance.Private Placement.
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Forward-Looking Statements
This Quarterly Report on Form 10-Q and the exhibits attached hereto contain “forward-looking statements”."forward-looking statements" within the meaning of the US Private Securities Litigation Reform Act of 1995. Such forward-looking statements concern our anticipated results and developments inof our operations in future periods, planned exploration and development of our properties, plans related to our business and other matters that may occur in the future. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as “expects”"expects", "anticipates", "plans", "estimates" or “does not expect”"intends", “is expected”, “anticipates” or “does not anticipate”, “plans”, “estimates” or “intends”,the negatives thereof, variations thereon and similar expressions or stating that certain actions, events or results “may”"may", “could”"could", “would”"would", “might”"might" or “will”"will" be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q, include, but are not limited to:
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Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors which could cause actual events or results to differ from those expressed or implied by the forward-looking statements, including, without limitation:
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This list is not exhaustive of the factors that may affect our forward-looking statements. Although we have attempted to identify important factors that could cause actual results to differ materially from those described in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Except as required by law, we disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. We qualify all the forward-looking statements contained in this Quarterly Report on Form 10-Q by the foregoing cautionary statements.
This Management’s Discussionmanagement's discussion and Analysisanalysis should be read in conjunction with our financial statements and notes thereto as set forth herein. Readers are also urged to carefully review and consider the various disclosures made by us, which attempt to advise interested parties of the factors which affect our business, including without limitation, the disclosures made under “"Risk Factors”" of our most recent Form 10-K.
Our unaudited financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.
Since we are an exploration stage company and have not generated revenues to date, our business is subject to numerous contingencies and risk factors beyond our control, including exploration and development risks, competition from well-funded competitors, and our ability to manage growth.
Overview
Overview
We believe that theThe Black Hills of South Dakota has yielded approximately 44.6 million ounces of gold production from athe 100 square mile area known as the Homestake District. Despite the gold endowment of the area, we believe the District is generally underexplored and lacks a concerted effort to search for gold under the cover of younger sedimentary and igneous rocks that dominate the surface. The Black Hills of South Dakota is a safe low-cost jurisdiction with well-developed mining infrastructure and is a jurisdiction in which regulatory authorities have consistently demonstrated a willingness to work with responsible operators to permit well-planned compliant projects.
Since 2012, we have consistently pursued a strategy of expanding our portfolio of brownfields exploration properties located exclusively within the Homestake District to build a dominant land position with the goal of consolidating the remaining mineral potential. Our property acquisitions have been based on our past exploration experiences, the extensive data sets we have assembled over the past 8 years, and new research the Company haswe have conducted on the gold system that created the District. Dakota TerritoryWe currently holdshold eight brownfield exploration project areas in the district comprised of unpatented claims and a combination of surface and mineral leasesproperties covering a total of approximately 18,18219,604 mineral acres. We have not established that any of our projects or properties contain any proven or probable reserves under SEC Industry Guide 7.
Planned Activities
On March 6, 2020, the Company acquired 65 unpatented lode mining claims covering approximately 1,152 acresOur planned activities during fiscal 2022 are focussed on advancing our Maitland, Blind Gold, City Creek and Tinton gold exploration properties and to continue to build on our overall property position in the Homestake District of the Black Hills of South Dakota. The property is contiguous
We continue to the Company's Blind Gold Property and is the subject to historic prospecting activity that we believe suggests the occurrence of gold and/or silver mineralization at multiple locales on the property. We believe that the property is also a target for Pre-Cambrian Homestake style gold mineralization under the younger cover rocks based on the Company’s projections of the Homestake stratigraphic sequence (Ellison, Homestake, and Poorman Formations) and inversion modeling of geophysical surveymodel data completedacquired by our technical team in late 2018.
On May 18, 2020, the Company increased its land holdings in the Black Hills through the staking of 70 unpatented lode mining claims covering approximately 1,120 acres located on the western margin of the structural corridor that extends north of the Homestake Gold Mine. The West Corridor property is located just south of the mineral property Dakota Territory acquired from Deadbroke Mining Company in the Maitland Area in March of 2014, just north of the producing Wharf Mine (Coeur Mining) and just to the south and east of the former Richmond Hill Mine (Barrick Gold). We believe that the Property is a target for both Homestake Iron Formation hosted gold mineralization under the cover of younger sedimentary and igneous rocks that also host tertiary-aged replacement gold and silver mineralization in the area.
In May 2020, the Company entered into an agreement with JR Resources Corp. (“JR”) whereby JR loaned the Company an aggregate of $1,450,000 and the Company granted JR the right to purchase up to 142,566,667 shares of common stock at $0.15 per share in one or more closings on or prior to October 15, 2020 (“Agreement”). On October 15, 2020, the Company and JR effected the first closing under this Agreement whereby JR purchased 69,666,667 shares of the Company’s common stock for aggregate consideration of $10,450,000, including $9,000,000 in cash and $1,450,000 upon conversion of the principal amount of the May 2020 promissory note. Additionally, the Company and JR entered into an amending agreement on October 15, 2020 (“Amending Agreement”) whereby (i) it was agreed to extend the balance of the May 2020 purchase right until February 15, 2021, which will allow JR the option to purchase up to an additional 72,900,000 shares of common stock for up to an additional $10,935,000, and (ii) the Company created two director vacancies and agreed to allow for two JR nominees to be appointed, of which Alex Morrison was appointed as a director to fill one vacancy.
On July 23, 2020, the Company announced that it had substantially increased its land holdings in the Black Hills of South Dakota through the staking of 166 unpatented lode mining claims covering approximately 3,152 acres located immediately north and adjacent to the Company’s City Creek Property. The project area was first expanded in 2018 on the basis of inversion modeling of historical geophysical survey data. Subsequent reconnaissance and preliminary analysis of the Company’s new geophysical data provided evidence of underlying shear fabric on a similar orientation with the productive structural corridor north of the Homestake Mine.
On September 15, 2020, the Company increased its land holdings in the Homestake District of the Black Hills of South Dakota through the staking of 50 unpatented lode mining claims covering approximately 840 acres at the historic Ragged Top Gold Camp. Tertiary-aged gold mineralization in the Ragged Top area is hosted primarily in the Paha Sapa Limestone formation and has been mined from both vertical fissures called “Verticals” and from collapsed breccias. The Company’s Ragged Top property acquisition is located just northwest of the producing Wharf Mine (Coeur Mining) and approximately 3 miles southwest of the former Richmond Hill Mine (Barrick Gold). Dakota Territory believes the Property to be an excellent prospect for additional tertiary-aged limestone hosted gold mineralization and for tertiary-aged gold and silver replacement mineralization in the preferred Deadwood formation host that lies under the cover of the limestone that dominates the surface exposure.
On October 23, 2020, we closed the purchase of the Maitland Gold Property in the Black Hills of South Dakota from Homestake Mining Company of California, a wholly owned subsidiary of Barrick Gold Corporation (“Barrick”), for total consideration of $4.82 million, comprised of $3.5 million cash and the issuance of 3 million shares of Company common stock valued at $0.44 per share, or $1.32 million. Additionally, Barrick will retain a 2.5% net smelter returns royalty on the property. The 2,112 mineral-acre Maitland acquisition will secure an important component of the Company’s strategy for the structural corridor that extends from the Homestake Gold Mine to the Company’s Blind Gold Property at the northern end of the Black Hills District.
On November 30, 2020, the Company announced the acquisition of 64 unpatented lode mining claims covering approximately 1,092 acres located south and to the west of the former Homestake Gold Mine. The Poorman Anticline Property covers the southwestern-most extension of the Homestake iron-formation host in the district. Gold mineralization was discovered underground on the 2600 and 4100 foot levels in the far western extents of the Homestake Mine in the 1950's and 60’s with little known historic follow-up exploration in the Poorman Anticline closer to surface. Dakota Territory’s targeting in the Poorman Anticline is based on the presence of the Homestake iron-formation host and projected intersections with important shear fabric that is known to have conducted fluids necessary to the deposition of gold mineralization in the northern extents of the structural corridor.
In August 2020, we completed a broad high definition airborne geophysical survey to enhance our current drill targets, as well as to screen other areas of interest within the district. We plan to conduct additionalhave budgeted for several field sampling /mappingsampling/mapping programs and to continue to locate additional targets toand add historic information to our extensive data sets. We expect in the near futurehave planned to complete site preparations and to conduct our first drill program on the Paleoplacer Property.deep Maitland iron-formation target and other tertiary-replacement targets in the Maitland area. Additionally, we plan to complete additional property acquisitions, andour budget provides for the commencement of preliminarynecessary permit work for the Blind Gold, Tinton and City Creek Properties and Tinton Properties.
On January 4, 2021,provides for our general operating expenses and the Company purchased an office building located at 141 Glendale Dr., Lead, South Dakota 57754 to serve as the Company’s new corporate headquarters. The cash purchase pricemaintenance of the building, furniture, fixtures and other property was approximately $755,000. The building, built in the 1890’s as a railroad roundhouse, was completely renovated between 2000 and 2010 and is approximately 13,500 square feet with mixed use office and retail space.
On January 26, 2021, the Company announced the acquisition of 158 unpatented lodeCompany's mining claims covering approximately 2,740 acres. The acquisition was based on continuing analysis of the Company’s historic data sets coupled with new insights derived from the Company’s district-scale airborne geophysical survey flown during the summer of 2020. At the west side of the Homestake District, the Tinton property was extendedand leases.
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Table: Fiscal Year 2022 Proposed Exploration Expenditures (millions) | |
General & administrative | $ 3.4 |
Drilling, Field programs/Met Testing/Data Compilation | $ 6.2 |
Property Acquisition | $ 3.8 |
TOTAL | $13.4 |
On February 2, 2021, the Company announced the hiring of Mark Rantapaa to fill the position of Manager of Black Hills Operations. Mr. Rantapaa is responsible for the conduct of all of the Company’srisk factors beyond our control, including exploration and mining activities in the Black Hillsdevelopment risks, competition from well-funded competitors, and has been charged with development of policy and programs necessaryour ability to the achievement of Dakota Territory’s goals for excellence in health, safety and environmental performance. Mr. Rantapaa was born and raised in the Black Hills of South Dakota and holds a BSc in Geological Engineering from SDSM&T, where he has also served as a member of the University’s Mining Industrial Advisory Board. Mr. Rantapaa has broad technical and management experience gained through his 27-year career with Barrick Gold Corporation in Nevada where he served in various roles of increasing responsibility, including Open Pit Technical Services Superintendent and Operations Superintendent at the Goldstrike Mine and Mine Manager at the Cortez Mine. Mr. Rantapaa also held the Corporate position of Director of Safety and Health before moving to McEwen Mining where he served as Mine Manager and General Manager at the Gold Bar Mine.
Liquidity and Capital Resources
We are an exploration-stage company and do not generate revenues. As such, we finance our operations and the acquisition and exploration of our mineral properties through the issuance of share capital.
As of December 31, 2020,June 30, 2021, we had a working capital surplus of approximately $81,000$23,451,000 and our accumulated deficit as of December 31, 2020June 30, 2021 was approximately $7,793,000.$20,724,000. We had a net loss for the quarterthree months ended December 31, 2020June 30, 2021 of approximately $1,296,000. Our cash position as of December 31, 2020 was approximately $1,346,000 and$12,181,000. On June 23, 2021, we had approximately $4,357,000 of restricted cash held in escrow for payment of a special dividend declared in November 2020.
In May 2020, we entered into an Agreement with JR whereby JR loaned the Company an aggregate of $1,450,000 and the Company granted JR the right to purchase up to 142,566,667issued 2,311,000 shares of common stock at $0.15a price of $4.50 per share, in one or more closings on or prior to October 15, 2020. On October 15, 2020, the Company and JR effected the first closing under this Agreement whereby JR purchased 69,666,667 sharesfor proceeds of Company common stock for aggregate consideration of $10,450,000, including $9,000,000 in cash and $1,450,000 upon conversion of the principal amount of the May 2020 promissory note. Additionally, the Company and JR entered into an Amending Agreement on October 15, 2020 whereby it was agreed to extend the balance of the May 2020 purchase right until February 15, 2021, which will allow JR the option to purchase up to an additional 72,900,000 shares of common stock for up to an additional $10,935,000 in one or more closings from the Company. Each closing is subject to negotiation of closing deliverables and satisfaction of closing conditions to be mutually agreed upon by the Company and JR, including agreement on how the proceeds will be utilized. There is no assurance that closing deliverables will be agreed upon and that any subsequent closing will occur, as JR is not obligated to purchase any shares.approximately $10,399,500.
During the balance of our fiscal year ending March 31, 2021,2022, we plan to continue to pursue field programs, geophysical surveys, and effect land acquisitions.spend approximately $13.4 million. The timing of these expenditures is dependent upon a number of factors, including the availability of sufficient financing. We estimate that general and administrative expenses during the balancecontractors.
Results of our current fiscal year ending March 31, 2021 will be approximately $200,000 to include payroll, legal and accounting services and other general and administrative expenses necessary to conduct our operations.Operations
We currently have no employees. Our management, all of whom are consultants, conduct our operations.
During the threeThree months ended December 31,June 30, 2021 and 2020 outstanding options entitling the holders to purchase an aggregate of 8,250,000 shares of common stock were exercised. We received proceeds in the amount of $607,000 from the exercise of these options.
Revenue
On January 20, 2021, the Company entered into a note payable with JR in the amount of $300,000 for additional working capital. The note does not bear interest and is due and payable in cash on December 31, 2021. However, upon the occurrence of a change in control of the Company pursuant to the Agreement, the unpaid principal amount of the loan outstanding at the time of such change in control closing shall be applied to and considered an investment amount paid by JR.
Results of Operations
Nine months ended December 31, 2020 and 2019
We had no operating revenues for the ninethree months ended December 31, 2020June 30, 2021 and 2019.2020. We are not currently profitable. As a result of ongoing operating losses, we had an accumulated deficit of approximately $7,793,000$20,724,000 as of December 31, 2020.June 30, 2021.
Exploration Costs
OurDuring the three months ended June 30, 2021 and 2020, our exploration costs were approximately $576,000$2,184,000 and $63,000 for$126,000, respectively. Included in these costs were share-based compensation and payments of annual claim maintenance fees related to our mineral properties. The increase year over year related to $1,916,030 of share-based compensation expense in the ninethree months ended December 31, 2020June 30, 2021 and 2019, respectively. The exploration costs forhaving additional funds as a result of the nine moths ended December 31, 2020 were primarily for field programs and flying a new comprehensivefinancing proceeds from JR (the "Purchase Agreement"), which funded the airborne geophysical survey over the northern Black Hillsand review and compilation of South Dakota. historical geological data.
General and Administrative
Our general and administrative expenses for the ninethree months ended December 31,June 30, 2021 and 2020 were approximately $524,000$9,906,000 and approximately $451,000 for the nine months ended December 31, 2019. Our general and administrative$152,000, respectively. These expenditures were primarily for $8,688,218 of share-based compensation expense in the three months ended June 30, 2021, legal, accounting and& professional consulting fees, insuranceinvestor relations and other general and administrative expenses necessary for our operations.
We had losses from operations for the ninethree months ended December 31,June 30, 2021 and 2020 and 2019 totaling approximately $1,100,000$12,089,000 and $514,000, respectively, and a net loss for the nine months ended December 31, 2020 and 2019 totaling approximately $2,416,000 and $524,000,$278,000, respectively. We recorded additional interest expense of approximately $1,316,000 related to amortization of the debt discount on notes payable during the nine months ended December 31, 2020 and interest expense of approximately $9,000 during the nine months ended December 31, 2019.
Three months ended December 31, 2020 and 2019
We had no operating revenuestotal net losses for the three months ended December 31,June 30, 2021 and 2020 and 2019. We are not currently profitable. As a result of ongoing operating losses, we had an accumulated deficit of approximately $7,793,000 as of December 31, 2020.
Our exploration costs were approximately $94,000$12,181,000 and $24,000$346,000, respectively. We incurred interest expense from notes payable for the three months ended December 31,June 30, 2021 and 2020, respectively, in the amounts of $101 and 2019, respectively. The exploration costs for the quarter ended December 31, 2020 were primarily for field programs, collection of ground gravity data$69,744 and analysis of data collected from our new geophysical programs. Our general and administrative expenses for the three months ended December 31, 2020 and 2019 were approximately $158,000 and $165,000, respectively. These expenditures were primarily for legal, accounting and professional consulting fees, insurance and other general and administrative expenses necessary for our operations.
We hadrecognized a loss from operations for the three months ended December 31, 2020on settlement of related party debt of $92,045 and 2019 totaling approximately $252,000 and $189,000,$0, respectively. We recorded additionalOur money market account generated interest expense of approximately $1,054,000 related to amortization of the debt discount on notes payableincome during the three months ended December 31, 2020. We had a net loss forJune 30, 2021 and 2020, respectively, in the amounts of $237 and $2,000.
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Off-Balance Sheet Arrangements
For the three months ended December 31,June 30, 2021 and 2020, and 2019 totaling approximately $1,296,000 and $192,000, respectively.
Off-Balance Sheet Arrangements
For the nine months ended December 31, 2020 and 2019, we have off-balance sheet arrangements for annual payments in relation to the mineral leases as disclosed in Note 3 of the unaudited notes to financial statements.
Critical Accounting Estimates
Management’sManagement's discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with account principles generally accepted in the United States of America (“U.S. GAAP”).US GAAP. Preparation of financial statements requires management to make assumptions, estimates and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and the related disclosures of contingencies. Management bases its estimates on various assumptions and historical experience, which are believed to be reasonable; however, due to the inherent nature of estimates, actual results may differ significantly due to changed conditions or assumptions. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are fairly presented in accordance with U.S.US GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. Management believes that the following critical accounting estimates and judgments have a significant impact on our financial statements:
·Valuation valuation of purchase option granted to JR,
·Valuation of stock options granted to directors and officers using the Black-Scholes model and
·Valuationfair value of mineral properties. The accounting policies are described in greater detail in Note 2 to our audited annual financial statements in our Annual Report on Form 10-K for the fiscal year ended March 31, 2021.
At the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision of and with the participation of our management, including the Chief Executive Officerour chief executive officer ("CEO") and Chief Financial Officer,chief financial officer ("CFO"), of the effectiveness of the design and operations of our disclosure controls and procedures (as defined in Rule 13a – 15(e)13a-15(e) and Rule 15d – 15(e)15d-15(e) under the Exchange Act). Based on that evaluation the CEO and the CFO have concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were not effective in ensuring that: (i) information required to be disclosed by us in our reports that we file or submit to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and (ii) material information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow for accurate and timely decisions regarding required disclosure.
Changes inManagement's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with US GAAP. Management has assessed the effectiveness of internal control over financial reporting based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control-Integrated Framework. A material weakness, as defined by SEC rules, is a control deficiency, or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses in internal control over financial reporting that were identified are:
a) We did not maintain sufficient personnel with an appropriate level of technical accounting knowledge, experience, and training in the application of US GAAP commensurate with our complexity and our financial accounting and reporting requirements. We have limited experience in the areas of financial reporting and disclosure controls and procedures. Also, we do not have an independent audit committee. As a result, there is a lack of monitoring of the financial reporting process and there is a reasonable possibility that material misstatements of the consolidated financial statements, including disclosures, will not be prevented or detected on a timely basis; and
b) Due to our small size, we do not have a proper segregation of duties in certain areas of our financial reporting process. The areas where we have a lack of segregation of duties include cash receipts and disbursements, approval of purchases and approval of accounts payable invoices for payment. This control deficiency, which is pervasive in nature, results in a reasonable possibility that material misstatements of the financial statements will not be prevented or detected on a timely basis.
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As a result of the existence of these material weaknesses as of June 30, 2021, management has concluded that we did not maintain effective internal control over financial reporting as of June 30, 2021, based on the criteria set forth by the COSO in Internal Control-Integrated Framework.
This Quarterly Report on Form 10-Q does not include an attestation report of the Company's independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our independent registered public accounting firm pursuant to SEC rules.
Changes to Internal Controls and Procedures over Financial Reporting
We intend to modify our internal control over financial reporting once we have adequate funding to allow adding additional advisors to address deficiencies in the financial closing, review and analysis process, which will improve our internal control over financial reporting. There were no changes to our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially effect, our internal controls over financial reporting.
Management's Remediation Plans
We will look to increase our personnel resources and technical accounting expertise within the accounting function with available funds. Management believes that hiring additional knowledgeable personnel with technical accounting expertise will remedy the following material weakness: insufficient personnel with an appropriate level of technical accounting knowledge, experience, and training in the application of US GAAP commensurate with our complexity and our financial accounting and reporting requirements.
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None
There have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended March 31, 2020.
In March 2020, the World Health Organization designated the new coronavirus (“COVID-19”) as a global pandemic. Federal, state and local governments have mandated orders to slow the transmission of the virus, including but not limited to shelter-in-place orders, quarantines, restrictions on travel, and work restrictions that prohibit many employees from going to work. Uncertainty with respect to the economic effects of the pandemic has resulted in significant volatility in the financial markets. The restrictions put in place by federal, state and local governments could delay our exploration and any development plans related to our properties. Furthermore, the impact of the pandemic on the global economy could also negatively impact the availability and cost of future borrowings should the need arise.
2021.
Except as set forth below, all unregistered sales of equity securities during the period covered by this Quarterly Report were previously disclosed in our current reports on Form 8-K.
Date | Description | Number | Purchaser | Proceeds ($) | Consideration | Exemption (A) |
July 2020 | Exercise of Common Stock Warrants | 3,300,000 | Investors | $330,000 | Cash | Sec. 4(a)(2) |
July 2020 | Exercise of Common Stock Options | 300,000 | Consultant | $24,000 | Cash | Sec. 4(a)(2) |
August 2020 | Exercise of Common Stock Warrants | 1,000,000 | Investor | $100,000 | Cash | Sec. 4(a)(2) |
October 2020 | Common Stock | 69,666,667 | Investor | $10,450,000 | Cash | Sec. 4(a)(2) |
October 2020 | Common Stock | 3,000,000 | Property Acquisition | Partial purchase price of land acquisition | Investment | Sec. 4(a)(2) |
October 2020 | Exercise of Common Stock Options | 6,500,000 | Investors | $520,000 | Cash | Sec. 4(a)(2) |
November 2020 | Exercise of Common Stock Options | 75,000 | Investor | $6,000 | Cash | Sec 4(a)(2) |
December 2020 | Exercise of Common Stock Options | 1,075,000 | Investors | $81,000 | Cash | Sec. 4(a)(2) |
(A)With respectOn June 3, 2021, the Company issued 45,563 Common Shares to sales designated by “Sec. 4(a)(2),” these shares were issued pursuant toGerald Aberle as partial consideration for a settlement of debt. The Company relied on the exemption from registration contained in tounder Section 4(a)(2) of the Securities Act as privately negotiated, isolated, non-recurring transactions not involving any public offer or solicitation. Each purchaser represented that such purchaser’s intention to acquire the sharesRule 506 of Regulation D for investment only and not with a view toward distribution. Nonepurposes of the securities were sold throughissuance of issuance common stock.
On June 4, 2021, the Company issued an underwriteraggregate of 1,450,000 Common Shares to certain directors and accordingly, there were no underwriting discountsconsultants as a share bonus. The Company relied on the exemption from registration under Section 4(a)(2) of the Securities Act or commissions involved. Rule 506 of Regulation D for purposes of the issuance of issuance common stock.
During the quarter ended June 30, 2021, the Company issued an aggregate of 222,116 Common Shares to certain vendors of mineral properties as partial consideration for certain mineral properties. The Company relied on the exemption from registration under Section 4(a)(2) of the Securities Act or Rule 506 of Regulation D for purposes of the issuance of issuance common stock.
Not applicable.
Pursuant to Section 1503(a) of the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act, (The “Dodd-Frank Act”), issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities. During the quarterthree months ended June 30, 2017,2021, our U.S. exploration properties were not subject to regulation by the Federal Mine Safety and Health Administration (“MSHA”) under theFederal Mine Safety and Health Act of 1977 (the “Mine Act”).
None.
None.
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The following exhibits are attached hereto or are incorporated by reference:
Exhibit Number | Description | |
10.2 | Form of Dakota Territory Resource Corp. | |
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31.1(1) | Section 302 Certification of | |
31.2(1) | Section 302 Certification of | |
32.1(1) | Section 906 Certification of | |
32.2(1) | Section | |
101.INS | XBRL Instance Document–the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
(1) Filed herewith
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SIGNATURES
Pursuant to the requirementsIn accordance with Section 13 or 15(d) of the Securities Exchange Act, of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DAKOTA TERRITORY RESOURCE CORP.
/s/ | |
By: | |
Chief Executive Officer, | |
Dated: | |
/s/ Gerald Aberle | |
By: Gerald Aberle | |
Chief Operating Officer and Director | |
Dated: August 12, 2021 | |
/s/ Stephen O'Rourke | |
By: Stephen T. O'Rourke | |
Director | |
Dated: August 12, 2021 | |
/s/ Robert Quartermain | |
By: Robert Quartermain | |
Director | |
Dated: August 12, 2021 | |
/s/ Alex Morrison | |
By: Alex G. Morrison | |
Director | |
Dated: August 12, 2021 | |
/s/ Shawn Campbell | |
By: Shawn Campbell | |
Chief Financial Officer | |
Dated: August 12, 2021 |
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