NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

This summary of significant accounting policies is presented to assist in understanding the financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. The accompanying unaudited financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America for interim financial information, as well as the instructions to Form 10-Q. Accordingly, the financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. InIn the opinion of our management, the accompanying unaudited financial statements contain all adjustments, (consistingconsisting of only normal recurring accruals) consideredadjustments, necessary for a fair presentationstatement of its financial position as of October 31, 2018, and its results of operations for the three and six months ended October 31, 2018 and 2017, and cash flows for the six months ended October 31, 2018 and 2017.  The balance sheet at April 30, 2018, was derived from audited annual financial statements but does not contain all of the interimfootnote disclosures from the annual financial statements have been included. Operating results for the six-month period ended January 31, 2018 are not necessarily indicative of the results that may be expected for the full year ending April 30, 2018.statements. All amounts presented are in U.S. dollars.  For further information, refer to the financial statements and footnotes thereto in the Company’s Annual Report on Form 10-K for the year ended April 30, 2017.2018.

Going Concern

As shown in the accompanying financial statements, the Company has incurred operating losses since inception.  As of January 31, 2018, the Company has limited financial resources with which to achieve the objectives and obtain profitability and positive cash flows.  As shown in the accompanying balance sheets and statements of operations, the Company has an accumulated deficit of $10,210,145 and, at January 31, 2018, the Company’s working capital was $826,112.  Achievement of the Company’s objectives will be dependent upon the ability to obtain additional financing, to locate profitable mining properties and generate revenue from current and planned business operations, and control costs.  The Company plans to fund its future operations by joint venturing, obtaining additional financing from investors and/or lenders, and attaining commercial production.  With the recent capital raise (Note 8), management believes the Company has adequate funds to operate over the next twelve months.

Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use of management assumptions and estimates relate to long-lived asset impairments and stock optionstock-based compensation valuation.  Actual results could differ from these estimates and assumptions and could have a material effect on the Company’s reported financial position and results of operations.

Risks and uncertainties

The Company’s operations are subject to significant risks and uncertainties, including financial, operational, technological and other risks associated with operating an emerging exploration mining business, including the potential risk of business failure.

Cash and Cash Equivalentscash equivalents

For the purposes of the statement of cash flows, the Company considers all highly liquid investments with original maturities of three months or less when acquired to be cash equivalents.

Restricted cash

Restricted cash constitutes cash held as collateral for the faithful performance of bonds securing exploration permits.

Financial Instruments

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STAR GOLD CORP.

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2018

The Company’s financial instruments include cash and cash equivalents and line of credit.reclamation bonds.  All instruments are accounted for on a historical cost basis, which, due to the short-term natureshort maturity of these financial instruments, approximates fair value at DecemberOctober 31, 2017.2018.

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STAR GOLD CORP.

NOTES TO FINANCIAL STATEMENTS

OCTOBER 31, 2018

Fair Value Measures

When required to measure assets or liabilities at fair value, the Company uses a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used.  The Company determines the level within the fair value hierarchy in which the fair value measurements in their entirety fall.  The categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.  Level 1 uses quoted prices in active markets for identical assets or liabilities, Level 2 uses significant other observable inputs, and Level 3 uses significant unobservable inputs.  The amount of the total gains or losses for the period are included in earnings that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date.  

At DecemberOctober 31, 20172018 and 2016,April 30, 2018, the Company had no assets or liabilities accounted for at fair value on a recurring or nonrecurring basis.

Mining Interests and Mineral Exploration Expenditures

Exploration costs are expensed in the period in which they occur. The Company capitalizes costs for acquiring and leasing mining properties and expenses costs to maintain mineral rights as incurred. Should a property reach the production stage, these capitalized costs would be amortized using the units-of-production method on the basis of periodic estimates of ore reserves. Mining interests are periodically assessed for impairment of value, and any subsequent losses are charged to operations at the time of impairment. If a property is abandoned or sold, its capitalized costs are charged to operations.

Pre-development Expenditures

Pre-development activities involve costs incurred in the exploration stage that may ultimately benefit production, such as underground ramp development, which are expensed due to the lack of evidence of economic development, which is necessary to demonstrate future recoverability of these expenses. 

Equipment

Equipment is stated at cost. Depreciation of equipment is calculated using the straight-line method over the estimated useful lives of the assets, which ranges from three to seven years.  Maintenance and repairs are charged to operations as incurred. Significant improvements are capitalized and depreciated over the useful life of the assets. Gains or losses on disposition or retirement of property and equipment are recognized in operating expenses.

Reclamation and Remediation

The Company’s operations are subject to standards for mine reclamation that have been established by various governmental agencies.  In the period in which the Company incurs a contractual obligation for the retirement of tangible long-lived assets, the Company will record the fair value of an asset retirement obligation as a liability.  A corresponding asset will also be recorded and depreciated over the life of the asset.  After the initial measurement of an asset retirement obligation, the liability will be adjusted at the end of each reporting period to reflect changes in the estimated future cash flows underlying the obligation.  To date, the Company has not incurred any contractual obligation requiring recording either a liability or associated asset.

Impaired Asset PolicyImpairment of Long-lived Assets

The Company periodically reviews its long-lived assets to determine if any events or changes in circumstances have transpired which indicate that the carrying value of its assets may not be recoverable. The Company determines impairment by comparing the undiscounted net future cash flows estimated to be generated by its assets to their respective carrying amounts. If impairment is deemed to exist, the assets will be written down to fair value.

Stock-based Compensation

The Company estimates the fair value of options to purchase common stock using the Black-Scholes model, which requires the input of some subjective assumptions. These assumptions include estimating the length of time employees will retain their vested

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STAR GOLD CORP.

NOTES TO FINANCIAL STATEMENTS

OCTOBER 31, 2018

stock options before exercising them (“expected life”), the estimated volatility of the Company’s common stock price over the expected term (“volatility”), employee forfeiture rate, the risk-free interest rate and the dividend yield. Changes in the subjective assumptions can materially affect the estimate of fair value of stock-based compensation. Options granted have a ten-year maximum term and varying

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STAR GOLD CORP.

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2018

vesting periods as determined by the Board of Directors.  The value of shares of common stock awards is determined based on the closing price of the Company’s stock on the date of the award.

Loss Per Share

Basic Earnings Per Share (“EPS”) is computed as net income (loss) available to common stockholders divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options and warrants.

The outstanding securities at January 31, 2018 and 2017, that could have a dilutive effect are as follows:

At January 31, 2018 and 2017, the effect of the Company’s outstanding stock options and warrants would have been anti-dilutive.

Income Taxes

The Company recognizes provisionaccounts for income taxtaxes using the liability method.  Deferred income tax liabilities or assets atThe liability method requires the endrecognition of each period are determined using the tax rates expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on deferred tax assets and liabilities for the expected future tax consequences of (i) temporary differences between financial statement carrying amounts of assets and liabilities and their basis for tax purposes and (ii) operating loss and tax credit carry-forwards for tax purposes.  Deferred tax assets are reduced by a valuation allowance when management concludes that it is more likely than not that some or alla portion of thesethe deferred tax assets will not be realized.realized in a future period.

Reclassifications

Certain reclassifications have been made to the 2017 financial statements in order to conform to the 2018 presentation.  These reclassifications have no effect on net loss, total assets or accumulated deficit as previously reported.

New Accounting Pronouncements

In November 2015,August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-17 Income Taxes - Balance Sheet Classification of Deferred Taxes (Topic 740). The update is designed to reduce complexity of reporting deferred income tax liabilities and assets into current and non-current amounts in a statement of financial position. ASU No. 2015-17 requires the presentation of deferred income taxes, changes to deferred tax liabilities and assets be classified as non-current in the statement of financial position. The update is effective for fiscal years beginning after December 15, 2016. The Company adopted this ASU on May 1, 2017.  It had no impact on the financial statements.

In March 2016, the FASB issued ASU No. 2016-09 Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The update simplifies the accounting for stock-based compensation, including income tax consequences and balance sheet and cash flow statement classification of awards. The update is effective for fiscal years beginning after December 15, 2016, with early adoption permitted.  The Company adopted this ASU on May 1, 2017.  It had no impact on the financial statements.

In August 2016, the FASB issued ASU No. 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The update provides guidance on classification for cash receipts and payments related to eight specific issues. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted.  The Company is currently evaluatingThere was no impact to the impactfinancial statements upon adoption of implementing this update on the financial statements.effective May 1, 2018.

In November 2016, the FASB issued ASU No. 2016-18 Statement of Cash Flows (Topic 230): Restricted Cash. The update requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The update is effective for fiscal years beginning after December 15, 2017, and interim

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STAR GOLD CORP.

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2018

periods within those fiscal years, with early adoption permitted.  The Company does not expectThere was no impact to the financial statements upon adoption of this update to have a material impact on the consolidation financial statements.effective May 1, 2018.

In January 2017, the FASB issued ASU No. 2017-01 Business Combinations (Topic 805): Clarifying the Definition of a Business. The update clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company will apply the provisions of the update to potential future acquisitions occurring after the effective date.acquisitions.

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.  The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

NOTE 3– EARNINGS PER SHARE

Basic Earnings Per Share (“EPS”) is computed as net income (loss) available to common stockholders divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options and warrants.

The outstanding securities at October 31, 2018 and 2017 that could have a dilutive effect are as follows:

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STAR GOLD CORP.

NOTES TO FINANCIAL STATEMENTS

OCTOBER 31, 2018

For the six months ended October 31, 2018 and 2017, respectively, the effect of the Company’s outstanding stock options and warrants would have been anti-dilutive and so are excluded in the diluted EPS.

NOTE 3–4– EQUIPMENT AND MINING INTEREST

The following is a summary of the Company’s equipment and mining interest at JanuaryOctober 31, 2018 and April 30, 2017.2018.

Pursuant to the Longstreet Property Option Agreement, as amended, (the “Longstreet Agreement”) entered into by the Company on or about January 15, 2010, the Company leases, with an option to acquire, unpatented mining claims located in the State of Nevada known as the Longstreet Property.   On December 10, 2014,Under the Longstreet Agreement was amended revisingagreement, the Company is required expendituresto make minimal lease payments in the form of cash and annual stock option obligation.options to purchase shares of the Company’s common stock.

On January 5, 2016,In addition, the Longstreet Agreement was further amended revising the required expenditures and annual stock option obligation.  All allowable expenditures in excess of the required annual expenditures shall be carried-over to the subsequent year.

The Company is also obligated, pursuant to the Longstreet Agreement, as amended, to pay an annual advance royalty payment of $12,000 related to the Clifford claims.  The Longstreet Agreement obligates the Company to minimal expenditures to be spent on the property.  All allowable expenditures in excess of the required annual expenditures are carried-over to the subsequent year.

For the year ended April 30, 2017,2018, the Company made the annual required payment to the optioner of $35,000 which is included in “Equipment and Mining Interest”.  The Company also issued options to purchase 40,000 shares of common stock with fair value of $2,000 during the year ended April 30, 2018.  

For the six months ended October 31, 2018, the Company paid the annual $12,000 advance royalty for additional mining interest on the Longstreet Property related to the Clifford claims.  The Company also made an annual required payment to the optioner of $25,000 which is included in “Equipment and Mining Interest”.  The Company also issued options to purchase 25,000 shares of common stock with fair value of $1,875.  

For the nine months ended January 31, 2018, the Company paid the annual $12,000 advance royalty for additional mining interest on the Longstreet property related to the Clifford claims.  The Company also made an annual required payment to the optioner of $35,000 which is included in “Equipment and Mining Interest”.  Additionally, the Company issued options to purchase 40,000 shares of common stock with fair value of $2,000.  

The schedule of future annual payments, minimum expenditures and number of stock options to be issued pursuant to the amended Longstreet Agreement of January 5, 2016, is as follows:

(1)Does not include $12,000 annual advance royalty payment related to Clifford claims. 

As of the measurement date of January 16, 2018, the Company had made cumulative allowable expenditures of $2,433,991, a

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STAR GOLD CORP.

NOTES TO FINANCIAL STATEMENTS

OCTOBER 31, 2018

surplus of $83,991 over the required cumulative expenditures of $2,350,000.  As of JanuaryOctober 31, 2018, the Company was in compliance with all provisions of the Longstreet Agreement.

NOTE 45 –OTHER ASSETS

On January 19, 2017, the Company entered into an Option and Lease of Water Rights with Stone Cabin Company, LLC (the “Stone Cabin Water Rights Agreement”).  In exchange for a one-time payment of $20,000, the Stone Cabin Water Rights Agreement granted the Company a three-year option to commence a ten-year lease of certain water rights in Nevada.  The water rights are for use in conjunction with the Company’s Longstreet Project. Lease payments for the water rights do not commence unless the Company exercises the option to lease. The Stone Cabin Water Rights Agreement also granted the Company the ability to extend, upon additional option payments, the option to lease for up to an additional three years and the ability to extend the water rights lease (if exercised) for an additional ten-year period.  The $20,000 payment has beenwas deferred as Other Assets and is being amortized on a straight-line basis over the three-year option period.

On August 21, 2017, the Company entered into an Option and Lease of Water Rights, with High Test Hay, LLC (the “High Test Water Rights Agreement”).  In exchange for a one-time payment of $25,000, the High Test Water Rights Agreement grants the Company a three-year option to commence a ten-year lease on certain water rights in Nevada.  The water rights are for use in conjunction with the Company’s Longstreet Project.  Lease payments for the water rights do not commence unless and until the Company exercises the option to lease.  The High Test Water Rights Agreement also grants Star Goldthe Company the ability to extend, upon additional option payments, the option to lease for up to an additional three years and the ability to extend the water rights lease (if exercised) for up to an additional twenty years.  The $25,000 payment has been deferred and is being amortized on a straight-line basis over the three-year option period.

The following is a summary of the Company’s other assetsOther Assets at JanuaryOctober 31, 2018 and April 30, 2017.2018.

NOTE 5–6– RELATED PARTY TRANSACTIONS

The Company rents its office space from Marlin Property Management, LLC (“Marlin”) an entity owned by the spouse of the Company’s former President and current Chairman of the Board of Directors. The lease is on a month-to-month basis as financial resources are available.  The Company currently pays $250 per month plus a proportionate share of utilities and insurance.  For the three months ended JanuaryOctober 31, 2018 and 2017, office rent was $750 and $Nil,$750, respectively. For the ninesix months ended JanuaryOctober 31, 2018 and 2017, office rent was $1,500 and $Nil,$1,500, respectively.

The Company has had short term promissory notes with its Chairman of the Board of Directors as follows:

On March 20, 2016 in the amount of $15,000 with an original maturity date of December 31, 2016.  The full amount of principal and all accrued interest was paid on August 23, 2016.   

On May 4, 2016 in the amount of $70,000 with an original maturity date of December 31, 2016.  The full amount of principal and all accrued interest were paid in full on August 23, 2016.   

For the three months ended January 31, 2018 and 2017, interest expense on these notes in aggregate was $Nil and $Nil, respectively.  For the nine months ended January 31, 2018 and 2017, interest expense on these notes in aggregate was $Nil and $2,093, respectively.

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STAR GOLD CORP.

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2018

NOTE 6 – WARRANTS  

The following is a summary of the Company’s warrants to purchase shares of common stock activity:

The composition of the Company’s warrants outstanding at January 31, 2018 is as follows:

NOTE 7 - STOCK OPTIONS  

Options issued for mining interest

In consideration for mining interests (see Note 3), the Company is obligated to issue stock options to purchase shares of the Company’s common stock based on "fair market price" which for financial statement purposes is considered to be the closing price of the Company's common stock on the issue dates.  Those costs are capitalized as Mining Interests (Note 3).  

The Company estimated the fair value of these option grants using the Black-Scholes model with the following information and range of assumptions:

The following is a summary of the Company’s options issued and outstanding in conjunction with certain mining interest agreements on properties for the three and nine months ended January 31, 2018 and January 31, 2017, respectively:

As of January 31, 2018, the remaining weighted average term of the 440,000 outstanding stock options granted for mining interest was

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STAR GOLD CORP.

NOTES TO FINANCIAL STATEMENTS

JANUARY 31, 2018

4.61 years.  

Options issued for consulting services

As per an agreement fully executed on October 3, 2012, in consideration for consulting and advisory services rendered, the Company was obligated to issue a total of 1,000 stock options based on 5-day variable weighted-average price (VWAP) at the end of each month of the associated consulting contract.  The stock options had a term of 1 year.  The consultant options vested on the first day of the following month of service and were exercisable for a period of nine months following the termination of the agreement.  

Effective August 1, 2016, the consulting agreement was terminated, and all outstanding options issued for consulting services were rescinded by mutual consent of the parties.  During the nine months ended January 31, 2017, 3,000 options with a fair value of $215 were granted under this consulting agreement.

Total charged against operations under the option grants for consulting services was $Nil and $215, for the nine months ended January 31, 2018 and 2017, respectively.  These costs are classified as management and administrative expense.   

Options issued under the 2011 Stock Option/Restricted Plan

The Company established the 2011 Stock Option/Restricted Stock Plan.  The Stock Option Plan is administered by the Board of Directors and provides for the grant of stock options to eligible individual including directors, executive officers and advisors that have furnished bona fide services to the Company not related to the sale of securities in a capital-raising transaction.  

The Stock Option Plan has a fixed maximum percentage of 10% of the Company's outstanding shares that are eligible for the plan pool, whereby the number of Shares under the plan increases automatically increases as the total number of shares outstanding increase.  The number of shares subject to the Stock Option Plan and any outstanding awards will be adjusted appropriately by the Board of Directors if the Company's common stock is affected through a reorganization, merger, consolidation, recapitalization, restructuring, reclassification dividend (other than quarterly cash dividends) or other distribution, stock split, spin-off or sale of substantially all of the Company's assets.  

The Stock Option plan also has terms and conditions, including without limitations that the exercise price for stock options granted under the Stock Option Plan must equal the stock's fair market value, based on the closing price per share of common stock, at the time the stock option is granted.  The fair value of each option award is estimated on the date of grant utilizing the Black-Scholes model and commonly utilized assumptions associated with the Black-Scholes methodology.  Options granted under the Plan have a ten-year maximum term and varying vesting periods as determined by the Board.  

On October 18, 2016, the Company rescinded 2,696,667 fully vested options previously granted under the Stock Option plan with a weighted average exercise price of $0.37.  The Company re-issued the options and granted an additional 2,116,333 options to purchase shares of the Company’s common stock, or a total of 4,810,000 options, with an exercise price of $0.06 per share.  The options vested immediately and had a term of 5 years.  The Company accounted for the repricing as a modification of stock option terms.  The incremental fair value of the modified options over the fair value of the original options and the fair value of the new options was $126,562 and was recognized stock-based compensation for the nine months ended January 31, 2017.  

No options were issued during the three and nine months ended January 31, 2018.  No options were issued during the three months ended January 31, 2017.

The Company estimated the fair value of the option grant in October 2016 using the Black-Scholes model with the following information and range of assumptions:

The following is a summary of the Company’s options outstanding and exercisable in conjunction with the Company’s Stock Option Plan:

(a) Weighted average exercise price.

The following table summarizes additional information about the options under the Company’s Stock Option Plan as of January 31, 2018:

The total value of the Plan stock option awards is expensed ratably over the vesting period of the employees receiving the awards.  As of January 31, 2018, there was no unrecognized compensation cost related to stock-based options and awards.

Summary:

The following is a summary of the Company’s stock options outstanding and exercisable:

The aggregate intrinsic value of all options vested and exercisable at January 31, 2018, was $Nil based on the Company's closing price of $0.05 per common share at January 31, 2018.  The Company's current policy is to issue new shares to satisfy option exercises.  

NOTE 87 – STOCKHOLDERS’ EQUITY

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STAR GOLD CORP.

NOTES TO FINANCIAL STATEMENTS

OCTOBER 31, 2018

On October 12, 2016, the Company issued 14,000,000 shares of its common stock, and warrants to purchase an additional 14,000,000 shares of its common stock to 24 investors pursuant to a private placement of its securities (the “2016 Offering”).  The 2016 Offering consisted of the sale of “units” of the Company’s securities at the per unit price of $0.05.  Warrants issued pursuant to the 2016 Offering entitled the holders thereof to purchase shares of common stock for the price of $0.15 per share.  The term of each warrant is for five years commencing with its issuance date.  The Company raised a total of $700,000 ($18,000 in fiscal year ended April 30, 2016 and $682,000 in the year ended April 30, 2017) pursuant to the 2016 Offering.  

On October 31,17, 2017, the Company issued 21,597,698 shares of its common stock and 10,798,849 warrants to purchase an additional 10,798,849 shares of its common stock to 34 investors pursuant to a private placement of its securities (the “2017 Offering”).  The 2017 Offering consisted of the sale of “units” of the Company’s securities at the per unit price of $0.10. Each unit consisted of two shares of common stock and one warrantswarrant to purchase an additional share of common stock.   Warrantsstock at an exercise price of $0.15. The warrants expiration date is October 31, 2020.   The Company raised a total of $1,079,884.  

On October 26, 2018, the Company issued pursuant to960,417 shares of its common stock in lieu of cash payment for accounts payable.  The value of the 2017 Offering entitledshares issued was $57,625, based on a price of $0.06 per share which approximated fair value on the holders thereofdate of issuance.

NOTE 8 – WARRANTS

The following is a summary of the Company’s warrants to purchase shares of common stock activity:

The composition of the Company’s warrants outstanding at October 31, 2018 is as follows:

NOTE 9 - STOCK OPTIONS

Options issued for mining interest

In consideration for its mining interest (see Note 4), the Company is obligated to issue stock options to purchase shares of the Company’s common stock based on "fair market price" which for financial statement purposes is considered to be the closing price of the Company's common stock on the issue dates.  Those costs are capitalized as Mining Interest (Note 4). No options were issued for mineral interests during the six months ended October 31, 2018 and 2017.

As of October 31, 2018, the remaining weighted average term of the option grants for mining interest was 3.86 years.   As of October 31, 2018, the weighted average exercise price of the option grants for mining interest was $0.28 per share.

Options issued under the 2011 Stock Option/Restricted Stock Plan

The Company established the 2011 Stock Option/Restricted Stock Plan.  The Stock Option Plan is administered by the Board of Directors and provides for the grant of stock options to eligible individuals including directors, executive officers and advisors that have furnished bona fide services to the Company not related to the sale of securities in a capital-raising transaction.  

The Stock Option Plan has a fixed maximum percentage of 10% of the Company’s outstanding shares that are eligible for the plan pool, whereby the number of Shares under the plan increases automatically as the total number of issued and outstanding shares of the Company’s common stock increases.  The number of shares subject to the Stock Option Plan and any outstanding awards will be adjusted appropriately by the Board of Directors if the Company’s common stock is affected through a

Page 11 of26

STAR GOLD CORP.

NOTES TO FINANCIAL STATEMENTS

OCTOBER 31, 2018

reorganization, merger, consolidation, recapitalization, restructuring, reclassification dividend (other than quarterly cash dividends) or other distribution, stock split, spin-off or sale of substantially all of the Company’s assets.  

The Stock Option plan also has terms and conditions, including without limitations that the exercise price for stock options granted under the Stock Option Plan must equal the stock’s fair value, based on the closing price per share of common stock, at the time the stock option is granted.  The fair value of each option award is estimated on the date of grant utilizing the Black-Scholes model and commonly utilized assumptions associated with the Black-Scholes methodology.  Options granted under the Plan have a ten-year maximum term and varying vesting periods as determined by the Board.  

The total value of stock option awards is expensed ratably over the vesting period of the employees receiving the awards.  As of October 31, 2018, there was no unrecognized compensation cost related to stock-based options and awards. No options were issued under the 2011 Plan during the six months ended October 31, 2018 and 2017.

The following table summarizes additional information about the options under the Company’s Stock Option Plan as of October 31, 2018:

Summary:

The following is a summary of the Company’s stock options outstanding and exercisable:

The aggregate intrinsic value of all options vested and exercisable at October 31, 2018 was $Nil based on the Company’s closing price of $0.15$0.06 per share.common share at October 31, 2018.  The termCompany’s current policy is to issue new shares to satisfy option exercises.  

NOTE 10 – SUBSEQUENT EVENTS

On December 4, 2018, the Longstreet Property Option Agreement (Note 4) was amended, changing future measurement dates for required expenditures from January 16, 2019 and January 16, 2020 to August 31, 2019 and August 31, 2020, respectively.  All other terms, payments and provisions of each warrant is for three years commencing with its issuance date.  The Company raised a total of $1,079,884.the Longstreet Property Option Agreement remain unchanged.

Page 1112 of26

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION. 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report and the exhibits attached hereto contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended.  Such forward-looking statements concern the Company’s anticipated results and developments in the Company’s operations in future periods, planned exploration and development of its properties, plans related to its 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 statement that expresses or involves 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” or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “estimates”, or “intends”, or states that certain actions, events or results “may” or “could”, “would”, “might” or “will” be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements.  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:

Risks related to the Company’s properties being in the exploration stage; 

Risks related to the mineral operations being subject to government regulation; 

Risks related to environmental concerns; 

Risks related to the Company’s ability to obtain additional capital to develop the Company’s resources, if any; 

Risks related to mineral exploration and development activities; 

Risks related to mineral estimates; 

Risks related to the Company’s insurance coverage for operating risks; 

Risks related to the fluctuation of prices for precious and base metals, such as gold, silver and copper; 

Risks related to the competitive industry of mineral exploration; 

Risks related to the title and rights in the Company’s mineral properties; 

Risks related to the possible dilution of the Company’s common stock from additional financing activities; 

Risks related to potential conflicts of interest with the Company’s management; 

Risks related to the Company’s shares of common stock; 

This list is not exhaustive of the factors that may affect the Company’s forward-looking statements.  Some of the important risks and uncertainties that could affect forward-looking statements are described further under the sections titled “Risk Factors and Uncertainties”, “Description of Business” and “Management’s Discussion and Analysis” of this Quarterly Report.  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.  The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.  Star Gold Corp. disclaims 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, except as required by law.  The Company advises readers to carefully review the reports and documents filed from time to time with the Securities and Exchange Commission (the “SEC”), particularly the Company’s Annual Reports on Form 10-K, reportsQuarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Star Gold Corp qualifies all forward-looking statements contained in this Quarterly Report by the foregoing cautionary statement.

Certain statements contained in this Quarterly Report on Form 10-Q constitute “forward-looking statements.” These statements, identified by words such as “plan,” “anticipate,” “believe,” “estimate,” “should,” “expect,” and similar expressions include the Company’s expectations and objectives regarding its future financial position, operating results and business strategy. These statements reflect the current views of management with respect to future events and are subject to risks, uncertainties and other factors that may cause actual results, performance or achievements, or industry results, to be materially different from those described in the forward-looking statements. Such risks and uncertainties include those set forth under the caption “Management’s Discussion and Analysis or Plan of Operation” and elsewhere in this Quarterly Report.

As used in this Quarterly Report, the terms “we,” “us,” “our,” “Star Gold,” and the “Company”, mean Star Gold Corp., unless otherwise indicated. All dollar amounts in this Quarterly Report are expressed in U.S. dollars, unless otherwise indicated.

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Management’s Discussion and Analysis is intended to be read in conjunction with the Company’s financial statements and the integral notes (“Notes”) thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ending April 30, 2017.2018.  The following statements may be forward-looking in nature and actual results may differ materially.

Corporate Background

The Company was originally incorporated on December 8, 2006, under the laws of the State of Nevada as Elan Development, Inc.  On April 25, 2008, the name of the company was changed to Star Gold Corp.  Star Gold Corp. is an exploration stage company engaged in the acquisition and exploration of precious metal deposit properties and advancing them toward production.  The Company is engaged in the business of exploring, evaluating and acquiring mineral prospects with the potential for economic deposits of precious and base metals.

Star Gold Corp. currently leases with an option to acquire certain unpatented mining claims located in the State of Nevada which in part make up what we refer to as the “Longstreet Property” (or the “Longstreet Project”). The Longstreet Property in its entirety comprises 125 mineral claims (75claims: 75 original optioned claims, of which 70 are unpatented staked claims and five claims leased from local ranchers, pursuant to the “Clifford Lease,”Lease”; as well as 50 recentlyclaims subsequently staked claims by Star Gold, coveringGold.  The Longstreet Property covers a total area of approximately 2,500 acres (1,012 ha). The Longstreet propertyProject is at an intermediate stage of exploration.

The Company has no patents, licenses, franchises or concessions which are considered by the Company to be of importance.  The business is not of a seasonal nature.  Since the potential productsBecause minerals are traded in the open market, the Company has little to no control over the competitive conditions in the industry.  

Overview of Mineral Exploration and Current Operations

Star Gold Corp. is an exploration stage mineral company with no producing mines.  Mineral exploration is essentially a research activity that does not produce a product.  As such, theThe Company acquires properties which it believes have potential to host economic concentrations of minerals;minerals, particularly gold and silver.  These acquisitions have and may take the form of unpatented mining claims on federal land, or leasing claims, or private property owned by others.  An unpatented mining claim is an interest, that can be acquired, toin the mineral rights on open lands of the federalfederally owned public domain.  Claims are staked in accordance with the Mining Law of 1872, recorded with the federal government pursuant to laws and regulations established by the Bureau of Land Management.  The Company intends to remain in the business of exploring for mining properties that have the potential to produce gold, silver, base metals and other commodities.

The Company will perform basic geological work to identify specific drill targets on the properties, and then collect subsurface samples by drilling to confirm the presence of mineralization (the presence of economic minerals in a specific area or geological formation).  The Company may enter joint venture agreements with other companies to fund further exploration and/or development work.  It is the Company’s plan to focus on assembling a high-quality group of mid-stage mineral (primarily gold and silver) exploration prospects, using the experience and contacts of the management group.  By such prospects, the Company means properties that have been previously identified by third parties, (including prior owners and/or exploration companies), as mineral prospects with potential for economic mineralization.  Often these properties have been sampled, mapped and sometimes drilled, usually with indefinite results.  Accordingly, such acquired projects will have either prior exploration history and/or will have strong similarity to a recognized geologic ore deposit model.  Geographic emphasis will be place on the western United States.

The geologic potential and ore deposit models have been defined and specific drill targets identified the Company’s sole remaining property.  The Company’s property evaluation process involves using basic geologic fieldwork to perform an initial evaluation of a property.  If the evaluation is positive, the Company seeks to acquire, either by staking unpatented mining claims on open public domain, or by leasing the property from the owner of private property or the owner of unpatented claims.  Once acquired, the Company then typically makes a more detailed evaluation of the property.  This detailed evaluation involves expenditures for exploration work which may include rock and soil sampling, geologic mapping, geophysics, trenching, drilling or other means to determine if economic mineralization is present on a property.

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Portions of the Company’s mining properties are owned by third parties and leased to Star Gold as outlined in the following table:

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⁽¹⁾Great Basin Resources, Inc. (“Great Basin”) took assignment from MinQuest, ownsInc., of the 120 claims which are leased (with an option to acquire) to the Company under the Longstreet Agreement (which was also assigned to Great Basin) (Note 34 of the financial statements contained in Item 8)1 of this Form 10Q) and Clifford owns 5 claims (also Note 3)4) which are managed by the Company. 

Compliance with Government Regulations

Continuing to acquire and explore mineral properties in the State of Nevada will require the Company to comply with all regulations, rules and directives of governmental authorities and agencies applicable to the exploration of minerals in the State of Nevada and the United States Federal agencies.

United States

Mining in the State of Nevada is subject to federal, state and local law. Three types of laws are of particular importance to the Company’s U.S. mineral properties: those affecting land ownership and mining rights; those regulating mining operations; and those dealing with the environment.

Land Ownership and Mining Rights.

On Federal Lands, mining rights are governed by the General Mining Law of 1872 (General Mining Law) as amended, 30 U.S.C. §§21-161 (various sections), which allows the location of mining claims on certain Federal Lands upon the discovery of a valuable mineral deposit and proper compliance with claim location requirements. A valid mining claim provides the holder with the right to conduct mining operations for the removal of locatable minerals, subject to compliance with the General Mining Law and Nevada state law governing the staking and registration of mining claims, as well as compliance with various federal, state and local operating and environmental laws, regulations and ordinances. As the owner or lessee of the unpatented mining claims, the Company has the right to conduct mining operations on the lands subject to the prior procurement of required operating permits and approvals, compliance with the terms and conditions of any applicable mining lease, and compliance with applicable federal, state, and local laws, regulations and ordinances.

Mining Operations

The exploration of mining properties and development and operation of mines is governed by both federal and state laws.

The State of Nevada likewise requires various permits and approvals before mining operations can begin, although the state and federal regulatory agencies usually cooperate to minimize duplication of permitting efforts. Among other things, a detailed reclamation plan must be prepared and approved, with bonding in the amount of projected reclamation costs. The bond is used to ensure that proper reclamation takes place, and the bond will not be released until that time. The Nevada Department of Environmental Protection, which is referred to as the NDEP, is the state agency that administers the reclamation permits, mine permits and related closure plans on the Nevada property. Local jurisdictions (such as Eureka County) may also impose permitting requirements (such as conditional use permits or zoning approvals).

Environmental Law

The development, operation, closure, and reclamation of mining projects in the United States requires numerous notifications, permits, authorizations, and public agency decisions. Compliance with environmental and related laws and regulations requires us to obtain permits issued by regulatory agencies, and to file various reports and keep records of the Company’s operations.

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Certain of these permits require periodic renewal or review of their conditions and may be subject to a public review process during which opposition to the Company’s proposed operations may be encountered. The Company is currently operating under  

various permits for activities connected to mineral exploration, reclamation, and environmental considerations. Unless and until a mineral resource is proved, it is unlikely Star Gold Corp. operations will move beyond the exploration stage. If in the future the Company decides to proceed beyond exploration, there will be numerous notifications, permit applications, and other decisions to be addressed at that time.

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Competition

Star Gold Corp. competes with other mineral resource exploration and development companies for financing and for the acquisition of new mineral properties and for equipment and labor related to exploration and development of mineral properties. Many of the mineral resource exploration and development companies with whom the Company competes have greater financial and technical resources.  Accordingly, competitors may be able to spend greater amounts on acquisitions of mineral properties of merit, on exploration of their mineral properties and on development of their mineral properties. In addition, they may be able to afford greater geological expertise in the targeting and exploration of mineral properties. This competition could result in competitors having mineral properties of greater quality and interest to prospective investors who may finance additional exploration and development. This competition could adversely impact Star Gold Corp.’s ability to finance further exploration and to achieve the financing necessary for the Company to develop its mineral properties.

The Company provides no assurance it will be able to compete in any of its business areas effectively with current or future competitors or that the competitive pressures faced by the Company will not have a material adverse effect on the business, financial condition and operating results.

Office and Other Facilities

Star Gold Corp. currently maintains its administrative offices at 611 E. Sherman Avenue, Coeur d’Alene, ID  83814.  The telephone number is (208) 664-5066.  Star Gold Corp. does not currently own title to any real property.

Employees

The Company has no employees as of the date of this Quarterly Report on Form 10-Q.  Star Gold Corp. conducts business largely through independent contractor agreements with consultants.

Research and Development Expenditures

The Company has not incurred any research expenditures since incorporation.

Reports to Security Holders

The Registrant does not issue annual or quarterly reports to security holders other than the annual Form 10-K and quarterly Forms 10-Q as electronically filed with the SEC.  Electronically filed reports may be accessed atwww.sec.gov.  Interested parties also may read and copy any materials filed with the SEC at the SEC’s Public Reference Room at 450 Fifth Street NW, Washington, DC 20549.  Information may be obtained on the operation of the Public Reference Room by calling the SEC at (800) SEC-0330.

PLAN OF OPERATION    

The Company maintains a corporate office in Coeur d’Alene, Idaho.  This is the primary administrative office for the Company and is utilized by Board Chairman Lindsay Gorrill and Chief Financial Officer Kelly Stopher.

During the year ended April 30, 2017,2018, the Company completed the following:

Evaluated the costs of studies necessary for the preparation of an Environmental ImpactWildlife and Biological Baseline Study (“EIS”).   (WBS)

InvestigationCultural and preparation of flora and fauna studies at Longstreet which generally indicate no material conditions present that would limit the Company’s ability to commence mining operations at the site.  

Completion of cultural resources studies at Longstreet that provided reasonable assurance of no significant barriers to commence mining operations at the site.   

Reached agreement on leasing water rights for a portion of the quantity of water necessary to operate an open pit mine and heap leach pad on or adjacent to the Longstreet property. Archeology Study

For the currentupcoming fiscal year ending April 30, 2018,2019, the Company plans to commence or continue the following activities as it prepares the EISEnvironmental Impact Statement (“EIS”) on the Longstreet Project:

Aerial mapping of the Property 

PreparationPart 2 of a hydro-geologicRaptor Study began in early May 2018 as a two-year study of the Longstreet Propertyis required;

Hydrology Study (in progress – dependant on permit to determine the hydrogeologic conditions of and confirm thedrill water table depth in the project area. holes.  Permit application has been filed.);

Geochemical analysis – design of program for submission to State of Nevada (in progress); and

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CompletionPlan of a rock characterization study to determine any potential issues with leaching ore from the target property and assessing any potentially required remediation actions.  

Develop a mine and engineering plan to assess the necessary footprint of the proposed mining operations, with a view toward minimizing the areas of potential land disturbance.   Operations Development (Mine Plan, Civil Engineering Designs).

Assuming the results of the above-referenced studies are favorable, the Company intends to proceed to the preparation of an EIS and plan of operation for the Longstreet project (the “Longstreet Plan”). The eventual objective of the EIS and Longstreet Plan is the issuance, by each governing agency, of the necessary mine permits to authorize the construction of, and ongoing operations at, an open pit/heap leach mine at the Longstreet Property.  

The Company anticipates all of the aforementioned preliminary tasks to be completed during early 2018,by mid 2019, with the EIS prepared in late 2018.2019.  

Approval of the Longstreet Plan is subject to governmental agency review and may require additional remediation activities.

The preliminary budget for Longstreet Project is as follows:

Management believes it can source additional capital in the investment markets in the coming months and years.  The Company may also consider other sources of funding, including potential mergers, joint ventures and/or a farm-out of a portion of its exploration properties.

Future liquidity and capital requirements depend on many factors including timing, cost and progress of the Company’s exploration efforts.  The Company will consider additional public offerings, private placement, mergers or debt instruments to finance its activities.instruments.

Additional financing will be required in the future to complete all necessary steps to apply for a final permit. Although the Company believes it will be able to source additional financing there are no guarantees any needed financing will be available at the time needed or on acceptable terms, if at all.  If the Company is unable to raise additional financing when necessary, it may have to delay exploration efforts or property acquisitions or be forced to cease operations.  Collaborative arrangements may require the Company to relinquish rights to certain of its mining claims.

RESULTS OF OPERATIONS

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The Company has earned no operating revenue in 2018 or 2017 and does not anticipate earning any operating revenues in the near future. Star Gold Corp. is an exploration stage company and presently is seeking other natural resources related business opportunities.

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The Company will continue to focus its capital and resources toward exploration and permitting activities at its Longstreet Property.  

Total net loss for the three months ended JanuaryOctober 31, 2018 of $60,337 decreased$84,924 increased by $38,254$20,454 from the three months ended January 31, 2017 total net loss of $98,591.$64,470.  Total net loss for the ninesix months ended JanuaryOctober 31, 2018 of $270,255 decreased$216,003 increased by $263,468$6,085 from the nine months ended January 31, 2017 total net loss of $533,723.$209,918.

Mineral exploration and consultants’ expense