UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| |
For the quarterly period ended | |
| |
OR | |
| |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________ to ___________
Commission file number: 001-34055
TIMBERLINE RESOURCES CORPORATION |
(Exact Name of Registrant as Specified in its Charter) |
|
| 82-0291227 |
(State of other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
|
|
|
101 EAST LAKESIDE AVENUE |
|
|
COEUR D’ALENE, ID |
| 83814 |
(Address of Principal Executive Offices) |
| (Zip Code) |
(208) 664-4859
(Registrant’s Telephone Number, including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Stock, $0.001 par value, (Title of Class)
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered |
Common Stock, $0.001 par value | TLRS TBR | OTCQB
|
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 past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒Yes ☐No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer | ☐ | Accelerated Filer | ☐ |
| ☒ | Small Reporting Company | ☒ |
|
| Emerging Growth Company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ☐ Yes ☒ No
Number of shares of issuer’s common stock outstanding at August 15, 2022:February 9, 2023: 159,676,152
INDEX
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| Page | ||
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| F-1 | |||
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| F-1 | ||
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
|
| 3 | |
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| 9 | ||
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| 9 | ||
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| |||
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| 10 | ||
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| 10 | ||
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UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. |
|
| 10 | |
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| ||
|
| 10 | ||
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| ||
|
| 10 | ||
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| 10 | ||
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| 12 |
2 |
COVID-19
In March 2020, COVID-19 was declared a pandemic by the World Health Organization and the Centers for Disease Control and Prevention. Its rapid spread around the world and throughout the United States prompted many countries, including the United States, to institute restrictions on travel, public gatherings and certain business operations. These restrictions did not significantly disrupt economic activity in Timberline Resource’s business.
As of June 30, 2022, the pandemic had not materially impacted our financial statements. However, if the severity of the COVID-19 pandemic continues, the negative financial impact due to limitations in conducting geologic field work and exploration activities could be significantly greater in future periods. In addition, the economic disruptions caused by COVID-19 could adversely impact the impairment risks for certain long-lived assets and equity method investments. Timberline Resources evaluated these impairment considerations and determined that no such impairments occurred as of June 30, 2022.
The effects of the continued outbreak of COVID-19 and related government responses could also include extended disruptions to supply chains and capital markets, reduced availability of contractors and a prolonged reduction in economic activity. These effects could have a variety of adverse impacts on the Company, including its ability to conduct exploration activities. As of June 30, 2022, there were no material adverse impacts on the Company’s operations due to COVID-19.
The Company has taken steps to mitigate the potential risks to suppliers and employees posed by the spread of COVID-19, including work from home policies where appropriate. The Company will continue to monitor developments affecting both its workforce and contractors, and will take additional precautions as necessary. The ultimate impact of COVID-19 depends on factors beyond management’s knowledge or control, including its duration and third-party actions to contain its spread and mitigate its public health effects. Therefore, the Company cannot estimate the potential future impact to its financial position, results of operations and cash flows, but the impacts could be material.
Table of Contents |
PART I — FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TIMBERLINE RESOURCES CORPORATION AND SUBSIDIARIES
Contents |
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| Page | |
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FINANCIAL STATEMENTS (UNAUDITED): |
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| |
|
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| |
|
| F-2 | |
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| |
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| F-3 | |
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Condensed Consolidated statements of changes in stockholders’ equity |
|
| F-4 |
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| |
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| F-5 | |
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| |
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| F-6 - F-9 |
Table of Contents |
TIMBERLINE RESOURCES CORPORATION AND SUBSIDIARIES | TIMBERLINE RESOURCES CORPORATION AND SUBSIDIARIES | TIMBERLINE RESOURCES CORPORATION AND SUBSIDIARIES | ||||||||||||||
CONSOLIDATED BALANCE SHEETS (UNAUDITED) | ||||||||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) | |||||||||||||||
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|
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|
| ||||||||
|
| June 30, 2022 |
|
| September 30, 2021 |
|
| December 31, 2022 |
|
| September 30, 2022 |
| ||||
ASSETS |
|
|
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|
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| ||||||
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
|
| ||||||
Cash |
| $ | 4,182,930 |
| $ | 3,327,352 |
|
| $ | 956,147 |
| $ | 2,438,587 |
| ||
Prepaid expenses and other current assets |
|
| 45,431 |
|
|
| 23,573 |
|
|
| 71,099 |
|
|
| 18,444 |
|
TOTAL CURRENT ASSETS |
|
| 4,228,361 |
|
|
| 3,350,925 |
|
|
| 1,027,246 |
|
|
| 2,457,031 |
|
|
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| ||||||
PROPERTY, MINERAL RIGHTS AND EQUIPMENT, net |
|
| 13,875,085 |
|
|
| 13,821,085 |
| ||||||||
Property, mineral rights, and equipment, net |
|
| 14,022,809 |
|
|
| 13,980,855 |
| ||||||||
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| ||||||
OTHER ASSETS: |
|
|
|
|
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|
|
|
|
| ||||||
Reclamation bonds |
| 528,643 |
| 538,696 |
|
| 528,643 |
| 528,643 |
| ||||||
Deposits and other assets |
|
| 5,700 |
|
|
| 5,700 |
|
|
| 5,700 |
|
|
| 5,700 |
|
TOTAL OTHER ASSETS |
|
| 534,343 |
|
|
| 544,396 |
|
|
| 534,343 |
|
|
| 534,343 |
|
|
|
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|
|
|
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| ||||||
TOTAL ASSETS |
| $ | 18,637,789 |
|
| $ | 17,716,406 |
|
| $ | 15,584,398 |
|
| $ | 16,972,229 |
|
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| ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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| |||||||||||
CURRENT LIABILITIES: |
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|
|
|
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|
|
|
|
| ||||||
Accounts payable |
| $ | 134,128 |
| $ | 114,819 |
|
| $ | 65,806 |
| $ | 639,994 |
| ||
Accrued expenses |
| 804 |
| 23,749 |
|
| 12,182 |
| 22,214 |
| ||||||
Accrued expenses – related party |
| 19,790 |
| 0 |
| |||||||||||
Accrued interest – related party |
| 43,482 |
| 4,145 |
|
| 73,117 |
| 57,966 |
| ||||||
Accrued payroll, benefits and taxes |
| 42,139 |
|
| 38,193 |
|
| 38,480 |
| 42,143 |
| |||||
Senior unsecured note payable – related party |
|
| 270,991 |
|
| 0 |
|
|
| 270,991 |
|
|
| 270,991 |
| |
TOTAL CURRENT LIABILITIES |
|
| 511,334 |
|
|
| 180,906 |
|
|
| 460,576 |
|
|
| 1,033,308 |
|
|
|
|
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|
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| ||||||
LONG-TERM LIABILITIES: |
|
|
|
|
|
|
|
|
|
| ||||||
Asset retirement obligation |
| 122,681 |
| 118,247 |
|
|
| 138,895 |
|
|
| 124,159 |
| |||
Senior unsecured note payable – related party |
|
| 0 |
|
|
| 270,991 |
| ||||||||
TOTAL LONG-TERM LIABILITIES |
|
| 122,681 |
|
|
| 389,238 |
|
|
| 138,895 |
|
|
| 124,159 |
|
TOTAL LIABILITIES |
|
| 634,015 |
|
|
| 570,144 |
|
|
| 599,471 |
|
|
| 1,157,467 |
|
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| ||||||
COMMITMENTS AND CONTINGENCIES (Note 8) |
| 0 |
| 0 |
| |||||||||||
COMMITMENTS AND CONTINGENCIES (Note 7) |
| - |
| - |
| |||||||||||
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| ||||||
STOCKHOLDERS’ EQUITY: |
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| |||||||||||
Preferred stock, $0.01 par value; 10,000,000 shares authorized, no shares issued and outstanding |
| 0 |
| 0 |
| |||||||||||
Common stock, $0.001 par value; 500,000,000 shares authorized, 159,676,152 and 139,696,022 shares issued and outstanding, Respectively |
| 159,676 |
| 139,696 |
| |||||||||||
STOCKHOLDERS' EQUITY: |
|
|
|
|
| |||||||||||
Preferred stock, $ 0.01 par value; 10,000,000 shares authorized, no shares issued and outstanding |
| - |
| - |
| |||||||||||
Common stock, $ 0.001 par value; 500,000,000 shares authorized, 159,676,152 and 159,676,152 shares issued and outstanding, respectively |
| 159,676 |
| 159,676 |
| |||||||||||
Additional paid-in capital |
| 89,955,640 |
| 85,345,213 |
|
| 90,007,348 |
| 89,955,640 |
| ||||||
Accumulated deficit |
|
| (72,111,542 | ) |
|
| (68,338,647 | ) |
|
| (75,182,097 | ) |
|
| (74,300,554 | ) |
TOTAL STOCKHOLDERS’ EQUITY |
|
| 18,003,774 |
|
|
| 17,146,262 |
| ||||||||
TOTAL STOCKHOLDERS' EQUITY |
|
| 14,984,927 |
|
|
| 15,814,762 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
| $ | 18,637,789 |
|
| $ | 17,716,406 |
| ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
| $ | 15,584,398 |
|
| $ | 16,972,229 |
|
SeeThe accompanying notes toare an integral part of these condensed consolidated financial statements.
Table of Contents |
TIMBERLINE RESOURCES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) | ||||||||||||||||||||||||
TIMBERLINE RESOURCES CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) | TIMBERLINE RESOURCES CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) | |||||||||||||||||||||||
|
| Three months ended |
| Nine months ended |
|
| ||||||||||||||||||
|
| June 30, |
| June 30, |
|
| Three months ended December 31, |
| ||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||
|
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| ||||||||||
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Mineral exploration |
| $ | 896,465 |
| $ | 427,908 |
| $ | 2,696,797 |
| $ | 1,827,980 |
|
| $ | 522,643 |
| $ | 1,314,368 |
| ||||
Salaries and benefits |
| 71,819 |
| 74,584 |
| 219,750 |
| 230,502 |
|
| 112,164 |
| 76,320 |
| ||||||||||
Professional fees |
| 61,234 |
| 39,384 |
| 155,938 |
| 160,257 |
|
| 62,859 |
| 65,632 |
| ||||||||||
Insurance expense |
| 43,204 |
| 38,766 |
| 116,651 |
| 102,367 |
|
| 44,528 |
| 31,480 |
| ||||||||||
Other general and administrative |
|
| 149,748 |
|
|
| 638,053 |
|
|
| 332,254 |
|
|
| 936,809 |
|
|
| 127,902 |
|
|
| 122,671 |
|
TOTAL OPERATING EXPENSES |
|
| 1,222,470 |
|
|
| 1,218,695 |
|
|
| 3,521,390 |
|
|
| 3,257,915 |
|
|
| 870,096 |
|
|
| 1,610,471 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
LOSS FROM OPERATIONS |
|
| (1,222,470 | ) |
|
| (1,218,695 | ) |
|
| (3,521,390 | ) |
|
| (3,257,915 | ) |
|
| (870,096 | ) |
|
| (1,610,471 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Foreign exchange gain (loss) |
| (214,347 | ) |
| (22,165 | ) |
| (210,683 | ) |
| (10,037 | ) |
| 3,402 |
| (805 | ) | |||||||
Interest expense |
| (503 | ) |
| 0 |
| (1,636 | ) |
| 0 |
| |||||||||||||
Interest expense – related party |
| (13,701 | ) |
| (22,424 | ) |
| (39,337 | ) |
| (64,658 | ) |
| (15,151 | ) |
| (13,004 | ) | ||||||
Miscellaneous other income |
|
| 72 |
|
|
| 25 |
|
|
| 151 |
|
|
| 79 |
| ||||||||
Other income |
|
| 302 |
|
|
| 56 |
| ||||||||||||||||
TOTAL OTHER INCOME (EXPENSE) |
|
| (228,479 | ) |
|
| (44,564 | ) |
|
| (251,505 | ) |
|
| (74,616 | ) |
|
| (11,447 | ) |
|
| (13,753 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
LOSS BEFORE INCOME TAXES |
| (1,450,949 | ) |
| (1,263,259 | ) |
| (3,772,895 | ) |
| (3,332,531 | ) |
| (881,543 | ) |
| (1,624,224 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
INCOME TAX PROVISION (BENEFIT) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
NET LOSS |
| $ | (1,450,949 | ) |
| $ | (1,263,259 | ) |
| $ | (3,772,895 | ) |
| $ | (3,332,531 | ) |
| $ | (881,543 | ) |
| $ | (1,624,224 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
NET LOSS PER SHARE - BASIC AND DILUTED |
| $ | (0.01 | ) |
| $ | (0.01 | ) |
|
| (0.03 | ) |
| $ | (0.03 | ) | ||||||||
NET LOSS PER SHARE BASIC AND DILUTED |
| $ | (0.01 | ) |
| $ | (0.01 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED |
|
| 159,468,089 |
|
|
| 118,906,357 |
|
|
| 146,378,612 |
|
|
| 115,200,298 |
|
| 159,676,152 |
| 139,696,020 |
|
SeeThe accompanying notes toare an integral part of these condensed consolidated financial statements.
Table of Contents |
TIMBERLINE RESOURCES CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) | |||||||||||||||||||||
| |||||||||||||||||||||
|
|
Common Stock |
|
| Additional Paid-in |
|
| Accumulated |
|
| Total Stockholders’ |
| |||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Equity |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance, September 30, 2022 |
|
| 159,676,152 |
|
| $ | 159,676 |
|
| $ | 89,955,640 |
|
| $ | (74,300,554 | ) |
| $ | 15,814,762 |
| |
Stock based compensation |
|
| - |
|
|
| - |
|
|
| 51,708 |
|
|
| - |
|
|
| 51,708 |
| |
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (881,543 | ) |
|
| (881,543 | ) | |
Balance December 31, 2022 |
|
| 159,676,152 |
|
| $ | 159,676 |
|
| $ | 90,007,348 |
|
| $ | (75,182,097 | ) |
| $ | 14,984,927 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| Additional |
|
|
|
|
|
| Total |
| |||
|
| Common Stock |
|
| Paid-in |
|
| Accumulated |
|
| Stockholders’ |
| |||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Equity |
| ||||||
Balance, September 30, 2021 |
|
| 139,696,022 |
|
| $ | 139,696 |
|
| $ | 85,345,213 |
|
| $ | (68,338,647 | ) |
| $ | 17,146,262 |
| |
Stock based compensation |
|
| - |
|
|
| - |
|
|
| 44,321 |
|
|
| - |
|
|
| 44,321 |
| |
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (1,624,224 | ) |
|
| (1,624,224 | ) | |
Balance, December 31, 2021 |
|
| 139,696,022 |
|
| $ | 139,696 |
|
| $ | 85,389,534 |
|
| $ | (69,962,871 | ) |
| $ | 15,566,359 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-4 |
Table of Contents |
TIMBERLINE RESOURCES CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | ||||||||
| ||||||||
|
| Three months Ended December 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
Net loss |
| $ | (881,543 | ) |
| $ | (1,624,224 | ) |
Adjustments to reconcile net loss to net cash used by operating activities: |
|
|
|
|
|
|
|
|
Stock-based compensation |
|
| 51,708 |
|
|
| 44,321 |
|
Accretion of asset retirement obligation |
|
| 1,715 |
|
|
| 1,408 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
| (52,655 | ) |
|
| (56,940 | ) |
Accounts payable |
|
| (574,188 | ) |
|
| 174,865 |
|
Accrued expenses |
|
| (10,032 | ) |
|
| (6,840 | ) |
Accrued interest – related party |
|
| 15,151 |
|
|
| 12,672 |
|
Accrued payroll, benefits and taxes |
|
| (3,663 | ) |
|
| - |
|
Net cash used by operating activities |
|
| (1,453,507 | ) |
|
| (1,454,738 | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Payments for mineral rights |
|
| (18,000 | ) |
|
| (18,000 | ) |
Purchase of mineral rights |
|
| (10,933 | ) |
|
| - |
|
Net cash used by investing activities |
|
| (28,933 | ) |
|
| (18,000 | ) |
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
| (1,482,440 | ) |
|
| (1,472,738 | ) |
|
|
|
|
|
|
|
|
|
CASH AT BEGINNING OF PERIOD |
|
| 2,438,587 |
|
|
| 3,327,352 |
|
|
|
|
|
|
|
|
|
|
CASH AT END OF PERIOD |
| $ | 956,147 |
|
| $ | 1,854,614 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-5 |
Table of Contents |
TIMBERLINE RESOURCES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED) | ||||||||||||||||||||||||
| ||||||||||||||||||||||||
|
|
|
|
|
| Additional |
|
|
|
|
|
| Total |
| ||||||||||
|
| Common Stock |
|
| Paid-in |
|
| Subscription |
|
| Accumulated |
|
| Stockholders’ |
| |||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Receivable |
|
| Deficit |
|
| Equity |
| ||||||
Balance, September 30, 2021 |
|
| 139,696,022 |
|
| $ | 139,696 |
|
| $ | 85,345,213 |
|
| $ | 0 |
|
| $ | (68,338,647 | ) |
| $ | 17,146,262 |
|
Stock based compensation |
|
| - |
|
|
| 0 |
|
|
| 44,321 |
|
|
| 0 |
|
|
| 0 |
|
|
| 44,321 |
|
Net loss |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (1,624,223 | ) |
|
| (1,624,223 | ) |
Balance December 31, 2021 |
|
| 139,696,022 |
|
| $ | 139,696 |
|
| $ | 85,389,534 |
|
| $ | 0 |
|
| $ | (69,962,870 | ) |
| $ | 15,566,360 |
|
Common stock issued for exercise of warrants |
|
| 1,546,425 |
|
|
| 1,546 |
|
|
| 214,953 |
|
|
| (70,000 | ) |
|
| 0 |
|
|
| 146,499 |
|
Net loss |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
| (697,723 | ) |
|
| (697,723 | ) |
Balance, March 31, 2022 |
|
| 141,242,447 |
|
| $ | 141,242 |
|
| $ | 85,604,487 |
|
| $ | (70,000 | ) |
| $ | (70,660,593 | ) |
| $ | 15,015,136 |
|
Common stock issued for cash, net |
|
| 18,933,705 |
|
|
| 18,934 |
|
|
| 4,420,653 |
|
|
| 0 |
|
|
| 0 |
|
|
| 4,439,587 |
|
Refund of subscription receivable |
|
| (500,000 | ) |
|
| (500 | ) |
|
| (69,500 | ) |
|
| 70,000 |
|
|
| 0 |
|
|
| 0 |
|
Net loss |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (1,450,949 | ) |
|
| (1,450,949 | ) |
Balance, June 30, 2022 |
|
| 159,676,152 |
|
| $ | 159,676 |
|
| $ | 89,955,640 |
|
| $ | 0 |
|
| $ | (72,111,542 | ) |
| $ | 18,003,774 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Additional |
|
|
|
|
|
| Total |
| ||||||||||
|
| Common Stock |
|
| Paid-in |
|
| Subscription |
|
| Accumulated |
|
| Stockholders’ |
| |||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Receivable |
|
| Deficit |
|
| Equity |
| ||||||
Balance, September 30, 2020 |
|
| 112,075,224 |
|
| $ | 112,075 |
|
| $ | 79,613,593 |
|
| $ | 0 |
|
| $ | (63,630,832 | ) |
| $ | 16,094,836 |
|
Common stock issued for exercise of warrants |
|
| 950,000 |
|
|
| 950 |
|
|
| 132,050 |
|
|
| 0 |
|
|
| 0 |
|
|
| 133,000 |
|
Stock based compensation |
|
| - |
|
|
| 0 |
|
|
| 127,022 |
|
|
| 0 |
|
|
| 0 |
|
|
| 127,022 |
|
Net loss |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (1,584,113 | ) |
|
| (1,584,113 | ) |
Balance December 31, 2020 |
|
| 113,025,224 |
|
| $ | 113,025 |
|
| $ | 79,872,665 |
|
| $ | 0 |
|
| $ | (65,214,945 | ) |
| $ | 14,770,745 |
|
Common stock issued for exercise of warrants |
|
| 1,312,500 |
|
|
| 1,312 |
|
|
| 182,438 |
|
|
| 0 |
|
|
| 0 |
|
|
| 183,750 |
|
Net loss |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (485,159 | ) |
|
| (485,159 | ) |
Balance, March 31, 2021 |
|
| 114,337,724 |
|
| $ | 114,337 |
|
| $ | 80,055,103 |
|
| $ | 0 |
|
| $ | (65,700,104 | ) |
| $ | 14,469,336 |
|
Common stock issued for exercise of warrants |
|
| 2,150,000 |
|
|
| 2,150 |
|
|
| 298,850 |
|
|
| 0 |
|
|
| 0 |
|
|
| 301,000 |
|
Common stock and warrants issued for cash |
|
| 8,941,666 |
|
|
| 8,942 |
|
|
| 1,779,392 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1,788,334 |
|
Common stock to be issued for cash |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 333,333 |
|
|
| 0 |
|
|
| 333,333 |
|
Subscribed shares |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 2,492,493 |
|
|
| 0 |
|
|
| 2,492,493 |
|
Stock based compensation |
|
| - |
|
|
| 0 |
|
|
| 519,400 |
|
|
| 0 |
|
|
| 0 |
|
|
| 519,400 |
|
Net loss |
|
| - |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (1,263,259 | ) |
|
| (1,263,259 | ) |
Balance, June 30, 2021 |
|
| 125,429,390 |
|
| $ | 125,429 |
|
| $ | 82,652,745 |
|
| $ | 2,825,826 |
|
| $ | (66,963,363 | ) |
| $ | 18,640,637 |
|
See accompanying notes to consolidated financial statements.
TIMBERLINE RESOURCES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) | ||||||||
|
| Nine months Ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
Net loss |
| $ | (3,772,895 | ) |
| $ | (3,332,531 | ) |
Adjustments to reconcile net loss to net cash used by operating activities: |
|
|
|
|
|
|
|
|
Stock-based compensation |
|
| 44,321 |
|
|
| 646,422 |
|
Accretion of asset retirement obligation |
|
| 4,434 |
|
|
| 4,224 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
| (21,858 | ) |
|
| (30,888 | ) |
Accounts payable |
|
| 19,310 |
|
|
| (57,642 | ) |
Accrued expenses |
|
| (22,946 | ) |
|
| (25,660 | ) |
Accrued expenses – related party |
|
| 19,790 |
|
|
| 3,536 |
|
Accrued interest – related party |
|
| 39,337 |
|
|
| 63,284 |
|
Accrued payroll, benefits and taxes |
|
| 3,946 |
|
|
| 13,647 |
|
Net cash used by operating activities |
|
| (3,686,561 | ) |
|
| (2,715,608 | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Purchase of mineral rights |
|
| (54,000 | ) |
|
| (64,000 | ) |
Refund of reclamation bond |
|
| 10,053 |
|
|
| 0 |
|
Proceeds from lease of mineral rights |
|
| 0 |
|
|
| 78,571 |
|
Net cash provided (used) by investing activities |
|
| (43,947 | ) |
|
| 14,571 |
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from sale of common stock and warrants, net |
|
| 4,439,587 |
|
|
| 1,788,334 |
|
Proceeds from subscribed shares |
|
| 0 |
|
|
| 333,333 |
|
Proceeds from exercise of warrants |
|
| 146,499 |
|
|
| 617,750 |
|
Net cash provided by financing activities |
|
| 4,586,086 |
|
|
| 2,739,417 |
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
| 855,578 |
|
|
| 38,380 |
|
|
|
|
|
|
|
|
|
|
CASH AT BEGINNING OF PERIOD |
|
| 3,327,352 |
|
|
| 2,520,726 |
|
|
|
|
|
|
|
|
|
|
CASH AT END OF PERIOD |
| $ | 4,182,930 |
|
| $ | 2,559,106 |
|
|
|
|
|
|
|
|
|
|
Non-cash financing and investing activities: |
|
|
|
|
|
|
|
|
Shares of common stock to be issued under subscription |
| $ | - |
|
| $ | 2,492,493 |
|
See accompanying notes to consolidated financial statements.
|
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS:
Timberline Resources Corporation (“Timberline” or “the Company) was incorporated in August of 1968 under the laws of the State of Idaho as Silver Crystal Mines, Inc., for the purpose of exploring for precious metal deposits and advancing them to production. In 2008, the Company reincorporated into the State of Delaware, pursuant to a merger agreement approved by its shareholders.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. | Basis of Presentation and Going Concern – The unaudited condensed consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, as well as the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of the Company’s management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair 2023. |
|
|
| For further information refer to the consolidated financial statements and footnotes thereto in the Company’s Annual Report on Form 10-K for the year ended September 30, |
|
|
The accompanying condensed consolidated financial statements have been prepared under the assumption that the Company will continue as a going concern. The Company has incurred losses since its inception. The Company has sufficient cash to fund normal operations and meet all of its obligations for the next 12 months without raising additional funds. However, we are an exploration company with exploration programs that require significant cash expenditures. A significant drilling program, such are those we have planned, can result in depletion of cash and return us to a position of insufficient cash to support normal operations for 12 months. The Company currently has no historical recurring source of revenue, and its ability to continue as a going concern is dependent on its ability to raise equity and/or debt capital to fund future exploration and working capital requirements, or the Company’s ability to profitably execute its business plan. The Company’s plans for the long-term return to and continuation as a going concern include financing its future operations through sales of common stock and/or debt and the eventual profitable exploitation of its mining properties. While the Company has been successful in the past in obtaining financing, there is no assurance that it will be able to obtain adequate financing in the future or that such financing will be on terms acceptable to the Company. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. If the going concern basis were not appropriate for these condensed consolidated financial statements, adjustments would be necessary in the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used. | |
|
|
b. | 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 condensed consolidated financial statements upon adoption. |
c. | Principles of Consolidation – The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, BH Minerals USA, Inc.; Lookout Mountain LLC; Wolfpack Gold (Nevada) Corp.; Staccato Gold Resources, Ltd.; and Talapoosa Development Corp., after elimination of intercompany accounts and transactions. |
|
|
|
|
| |
|
|
|
| Net Income (Loss) per Share – Basic earnings per share (“EPS”) is computed as net income (loss) available to common shareholders 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, warrants, and other convertible securities. |
The dilutive effect of convertible and outstanding securities as of December 31, 2022 and 2021 is as follows: |
The dilutive effect of convertible and outstanding securities as of June 30, 2022 and 2021 is as follows:
December 31, 2022 | December 31, 2021 | |||||||
Stock options | 8,335,000 | 8,335,000 | ||||||
Warrants | 50,534,031 | 62,391,319 | ||||||
Total potential dilution | 58,869,031 | 70,726,319 |
|
| June 30, 2022 |
|
| June 30, 2021 |
| ||
Stock options |
|
| 8,335,000 |
|
|
| 8,722,500 |
|
Warrants |
|
| 57,414,898 |
|
|
| 67,628,336 |
|
Total potential dilution |
|
| 65,749,898 |
|
|
| 76,350,836 |
|
F-6 |
Table of Contents |
At June 30,
At December 31, 2022 and 2021, the effect of the Company’s common stock equivalents would have been anti-dilutive. Accordingly, only basic EPS is presented. |
NOTE 3 – PROPERTY, MINERAL RIGHTS, AND EQUIPMENT:
The following is a summary of property, mineral rights, and equipment and accumulated depreciation at June 30,December 31, 2022 and September 30, 2021,2022, respectively:
|
| Expected Useful Lives (years) |
|
| June 30, 2022 |
|
| September 30, 2021 |
|
| Expected Useful Lives (years) |
|
| December 31, 2022 |
|
| September 30, 2022 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Mineral rights - Eureka |
| - |
| $ | 13,758,608 |
| $ | 13,704,608 |
| ||||||||||||||
Mineral rights – Other |
| - |
|
| 65,000 |
|
|
| 65,000 |
| |||||||||||||
Mineral rights – Eureka |
| - |
| $ | 13,804,608 |
| $ | 13,786,608 |
| ||||||||||||||
Mineral rights – Seven Troughs, New York Canyon and other |
| - |
|
| 166,724 |
|
|
| 142,770 |
| |||||||||||||
Total mineral rights |
|
|
| 13,823,608 |
| 13,769,608 |
|
|
|
| 13,971,332 |
| 13,929,378 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Equipment and vehicles |
| 2-5 |
| 53,678 |
| 53,678 |
|
| 2-5 |
| 53,678 |
| 53,678 |
| |||||||||
Office equipment and furniture |
| 3-7 |
| 70,150 |
| 70,150 |
|
| 3-7 |
| 70,150 |
| 70,150 |
| |||||||||
Land |
| - |
|
| 51,477 |
|
|
| 51,477 |
|
| - |
|
| 51,477 |
|
|
| 51,477 |
| |||
Total property and equipment |
| - |
| 175,305 |
| 175,305 |
|
|
|
| 175,305 |
| 175,305 |
| |||||||||
Less accumulated depreciation |
| - |
|
| (123,828 | ) |
|
| (123,828 | ) |
|
|
|
| (123,828 | ) |
|
| (123,828 | ) | |||
Property, mineral rights, and equipment, net |
| - |
| $ | 13,875,085 |
|
| $ | 13,821,085 |
|
|
|
| $ | 14,022,809 |
|
| $ | 13,980,855 |
|
ForDepreciation expense for the ninethree months ended June 30,December 31, 2022 and 2021, was $0 for each period.
Seven Troughs:
In its fiscal 2012, Timberline announced the acquisition from CIT Microprobe Holdings, LLC (California Institute of Technology) (“CIT”) of CIT’s interest in 3,900 acres (6.1 square miles) of patented and unpatented mining claims comprising the majority of the Seven Troughs gold mining district near Lovelock, Nevada. The acquired interest is as lessee under the terms of a 50-year lease, originally executed in 1975. Terms of the purchase agreement included a cash payment of $50,000 and a 2-percent NSR production royalty reserved to CIT. While the Company received mineralis certain of its rights and obligations under the lease, the lessor’s identification became somewhat clouded over the years due to passing of the early lessor principal to the agreement and a lack of full clarity as to all the eventual inheritors of the property. The Company has met its obligations under the lease and has located and secured agreements with the heirs to acquire any of their residual rights. The Company is moving to have the agreements adjudicated appropriately. The Company has the option to purchase at any time one-half of the NSR production royalty for $1 million.
On April 26, 2022, the Company entered into a Memorandum of Agreement with Normandy Gold Limited (“NDY”) to grant NDY a 12-month exclusive option to enter into an earn-in joint venture agreement with the Company regarding the Seven Troughs property. The MOA is still in effect at December 31, 2022. Subject to negotiation and execution of a definitive agreement, the option may provide NDY with the opportunity to solely fund $5,000,000 of exploration over 6 years, make cash payments of $nil and $78,571, respectively, from a third party on two property blocks$250,000 to the Company leases atand issue 2,000,000 NDY shares to the Company’s EurekaCompany to ultimately earn a 75% interest in the property. These receipts are
Earn-In Period:
To earn an initial 51% interest in the project, NDY must spend $2,000,000 in exploration expenditures and make cash payments of $250,000, as follows:
· | $100,000 of committed expenditures within the first 12 months from exercising the exclusive option; | |
· | $500,000 of expenditures (an additional $400,000) within 24 months from exercising the exclusive option; | |
· | Payment to the Company of $100,000 in cash at 24 months from exercising the exclusive option or at such time as the Company demonstrates receipt of full title in the Seven Troughs claims, whichever is later; | |
· | $2,000,000 of expenditures (an additional 1,500,000) within 36 months from exercising the exclusive option; and | |
· | Payment to the Company of $150,000 in cash at 36 months from exercising the exclusive option. |
During the Earn-In Period, NDY will be the operator of the project and be responsible for payment of annual federal and county claim fees. NDY may withdraw from the Earn-In after spending $100,000, or if the transfer of claims ownership to the Company is not successfully completed within 24 months of commencement of the Earn-In Period.
F-7 |
Table of Contents |
Joint Venture Period:
Upon completion of the Earn-In Period, NDY will hold 51% interest and the Company will have the option (for a period of up to 60 business days) to elect to fund and participate in a Joint Venture on the basis of its 49% interest in the project.
If the Company elects not to participate or fails to provide such notice within the 60-business day period, NDY can earn an additional 24% interest (for a total interest of 75%) in the project by:
· | spending $3,000,000 in exploration expenditures within three years from commencement of the joint venture, and | |
· | Issuing the Company 2,000,000 common shares in the stock of NDY. |
The Company received $50,000 of the initial non-refundable cash payment in May 2022 and recorded it as a reduction to property,the carrying amount of mineral rights during that period. The Memorandum of Agreement is in force as of the filing of this report.
New York Canyon:
On August 23, 2022, the Company purchased one patented mining claim, comprising of a total of 13.77 acres commonly known as the South Wales #1 patent within the New York Canyon claim block, from Newmont Capital Limited for a total of $41,310. In conjunction with this purchase, the Company granted a 1.5% net smelter return royalty to the seller.
On September 28, 2022, the Company purchased five patented mining claims, comprising of a total of 28.82 acres commonly known as the Tiger Lilly, Eureka Giant, Southern Cross, Maria and equipment.Best & Belcher patents with and near the New York Canyon claim block, from the University of Nevada, Reno Foundation for a total of $86,460. In conjunction with this purchase, the Company granted a 1.5% net smelter return royalty to the seller. Two of the patented claims are not within the New York Canyon claim block but will be included with this designation on the Company’s claims record references.
During the fourth quarter of fiscal 2022 and first quarter of fiscal 2023, the Company purchased an interest in three patented claims within the New York Canyon claim block from private parties for $10,933. In conjunction with the purchase, the Company granted a 0.5% net smelter return royalty to the sellers.
NOTE 4 – RELATED-PARTY TRANSACTIONS:
A senior unsecured note payable and interest accrued thereon payable to William Matlack, a shareholder and director of the Company, is disclosed in Note 5.
The Company reimburses the health insurance premiums for a former director. At June 30, 2022 and September 30, 2021, the Company owed $19,790 and $3,536, respectively, for related party expenses. No remittance was made during the nine months ended June 30, 2022, and $16,254 was recognized as expense during the period.
NOTE 5 – SENIOR UNSECURED NOTE PAYABLE – RELATED PARTY:
On July 30, 2018, the Company entered into a loan agreement and promissory note with William Matlack, a significant shareholder and a director as of October 29, 2019, (the “Lender”), thereafter becoming a related party. Under the loan agreement, the Lenderdirector. Mr. Matlack loaned the Company $300,000 in the form of a senior unsecured note payable, with the principal bearing interest at an annual rate of 18%, compounded monthly. The loan is unsecured and has a maturity date of January 20, 2023.
Subsequent to December 31, 2022, the Company entered into an agreement with Mr. Matlack to extend the due date of the note for a period of six months to mature on July 20, 2023. At JuneDecember 31, 2022 and September 30, 2022, and at September 30, 2021, the senior unsecured note payable balance was $270,991.
|
The accrued interest on the senior unsecured note payable – related party was $43,482$73,117 and $4,145$57,966 at June 30,December 31, 2022 and September 30, 2021,2022, respectively. Interest expense related to the senior unsecured notenotes payable to this related party was $13,701$15,151 and $22,035$13,004 for the three months ended June 30,December 31, 2022 and June 30, 2021, respectively, and $39,337 and $64,658 for the nine months ended June 30, 2022 and June 30,December 31, 2021, respectively.
The $270,991 senior unsecured note payable would be senior to any other debt obtained by the Company subsequent to September 30, 2021. The note requires that when the Company enters into any other financings, 25% of the proceeds of such financings will be paid toward reduction of the principal and interest accrued on thethis note. At August 30, 2021, the LenderMay 2, 2022 and continuing through December 31, 2022, Mr. Matlack provided a waiver of default on the Note that would otherwise have existed due to a non-payment of cash from sales of common stock for cash under this contract term for the note. Payment of the remainder of the note’s principal balance will not be required until the next qualifying financing, whether debt or equity. On August 30, 2021, $250,000 was paid to the Lender in conjunction with the common stock private placement financing that occurred in June 2021, consisting of $29,009 of principal and $220,991 of interest. At June 30, 2022, the Lender provided a verbal waiver of default on the note that would otherwise have existed due to a non-payment under this contract term for the note. The Company is completing an operating budget to determine an amount that can be remitted toward the note under this verbal waiver agreement.
NOTE 65 – COMMON STOCK, WARRANTS AND WARRANTS:PREFERRED STOCK:
At the Annual General Meeting of shareholders held on April 14, 2021, the shareholders approved an increase in the number of authorized common shares of the Company from 200,000,000 to 500,000,000, with no change in par value and no split or other modification to any outstanding shares. The Certificate of Incorporation of the Company in the State of Delaware was amended to reflect that change in October 2021.
On May 2, 2022, the Company closed a non-brokered private placement of the Company to accredited investors at a price of $0.25 per common share. The Company issued 18,933,705 common shares for cash proceeds of $4,733,426. Finders fees in the amount of $293,839 and 1,016,022 Series N Warrants were paid and issued, respectively, to licensed brokers and consultants in association with the offering. The warrants have a term of 18 months and are exercisable at $0.25 per common share.
During the nine months ended June 30, 2022, 6,825,000 Series E warrants, 5,000,000 Series G warrants and 4,446,016 Series H warrants expired. Also, holders of Series H Warrants exercised 1,546,425 warrants for $0.14 per share to acquire 1,546,425 shares of the Company’s common stock for total cash proceeds of $146,499 and a subscription receivable of $70,000 to the Company. The warrant holder decided not to exercise the 500,000 warrants subscribed, the $70,000 was refunded and the warrants expired, resulting in a total of 1,046,425 shares being issued.
On June 25, 2021, the Company closed on total subscriptions for a private placement offering for 23,070,798 Units of the Company at a price of $0.20 per Unit. Each Unit consisted of one share of common stock of the Company and one-half common share purchase Series M Warrant (each whole such warrant a “Warrant”), with each Warrant exercisable to acquire an additional share of common stock of the Company at a price of $0.30 per share until the Warrant expiration date of May 31, 2023. A total of 8,941,666 shares and 5,304,166 Warrants were paid for and issued during the quarter ended June 30, 2021, for net proceeds of $1,788,334 to the Company. Another $333,333 was received for shares subscribed but not yet issued as of the end of the quarter. Additionally, 102,000 broker Warrants were issued for finders fees. No cash was paid for finders fees during the quarter ended June 30, 2021. The units subscribed but not yet paid for at June 30, 2021 were accounted for as subscriptions receivable of $2,492,493. Subsequent to the close of the quarter ended June 30, 2021, and prior to the issuance of the financial statements for that period, cash of $2,375,393, net of $117,100 finders fees, was received and 14,129,132 shares and 6,725,481 Warrants were issued to complete the private placement transactions, including 494,248 Warrants issued for finders fees.
During the three months ended June 30, 2021, holders of Series D Warrants exercised 1,775,000 warrants for $0.14 per share to acquire 1,775,000 shares of the Company’s common stock for total cash proceeds of $248,500 to the Company. Also, holders of Series H Warrants exercised 375,000 warrants for $0.14 per share to acquire 375,000 shares of the Company’s common stock for total cash proceeds of $52,500 to the Company. During the three months ended June 30, 2021, 9,000,000 Series D warrants expired.
During the nine months ended June 30, 2021, holders of Series D Warrants exercised 3,500,000 warrants for 0.14 per share to acquire 3,500,000 shares of the Company’s common stock for total cash proceeds of $490,000 to the Company. Also, holders of Series E Warrants exercised 537,500 warrants for $0.14 per share to acquire 537,500 shares of the Company’s common stock for total cash proceeds of $75,250 to the Company. Also, holders of Series H Warrants exercised 375,000 warrants for $0.14 per share to acquire 375,000 shares of the Company���s common stock for total cash proceeds of $52,500 to the Company.
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During the quarter ended December 31, 2022, 2,880,867 Series C warrants expired.
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At June 30,December 31, 2022, the Company has a total of 57,414,89850,534,031 warrants outstanding with a weighted average exercise price of $0.22 withand a weighted average remaining contractual term of 0.87 year..67 years.
NOTE 76 – STOCK-BASED AWARDS:
During the year ended September 30, 2021, the Company’s shareholders approved an increase to the number of shares of common stock reserved for issuance under the Plan to 15,000,000 shares of common stock, including 10,000,000 shares of common stock reserved for incentive stock options. Upon exercise of options or other awards, shares are issued from the available authorized shares of the Company. Option awards are granted with an exercise price equal to the trading price of the Company’s stock at the date of grant.
On October 8, 2020, the Company granted a total of 750,0001,100,000 options to purchase shares of the Company’s common stock that vest over a three-year period. These vesting options had a total fair value of $177,284, with $44,321 recognized immediately and $44,321 being recognized on each of the three grant anniversary dates.
On May 6, 2021, the Company granted a total of 2,785,000 options to employees, consultants, officers and directors to purchase shares of the Company’s common stock that expire in five years with an exercise price of $0.25.$0.25 in conjunction with the appointment of officers and a director. These granted options had a total fair value of $519,400. All$259,985. These options vested immediately, with the exception of 750,000 options that vest at 25% upon grant.
The share-based compensation recognized forgrant with the option awards vested during the nine months ended June 30, 2022 and 2021 was $44,321 and $519,400, respectively. No options were granted duringremaining 75% vesting over a three-year period. During the three months ended June 30,December 31, 2022 or 2021. The unvested options will be recognized as compensation expense in the amount ofand 2021, $51,708 and $44,321 in each of the following two years covered by the vesting period. Fair values of options issued were measured on the date of the grant with a Black-Scholes option-pricing model using the assumptions noted in the following table:has been expensed to share-based compensation.
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| Options Granted at May 6, 2021 |
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| Options Granted at October 8, 2020 |
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Expected volatility |
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| 167.9 | % |
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| 171.9 | % |
Stock price on date of grant |
| $ | 0.20 |
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| $ | 0.25 |
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Exercise price |
| $ | 0.25 |
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| $ | 0.25 |
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Expected dividends |
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| 0 |
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| 0 |
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Expected term (in years) |
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| 5 |
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| 5 |
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| 0.05 | % |
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| 0.09 | % |
Expected forfeiture rate |
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| 0 | % |
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| 0 | % |
Fair value at grant date |
| $ | 519,400 |
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| $ | 259,985 |
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The following is a summary of activity for the fiscal year ended September 30, 2021options issued and the nine months ended June 30, 2022:outstanding:
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| Weighted Average Exercise Price |
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Outstanding at September 30, 2020 |
| 5,400,000 |
| $ | 0.16 |
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Granted |
| 3,885,000 |
| 0.12 |
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Expired |
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| (950,000 | ) |
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| (0.43 | ) | ||||||||
Outstanding at September 30, 2021 |
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| 8,335,000 |
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| 0.18 |
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| 8,335,000 |
| 0.18 |
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| 0 |
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Expired |
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| - |
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| 0 |
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| - |
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| - |
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Outstanding at June 30, 2022 |
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| 8,335,000 |
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| $ | 0.18 |
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Outstanding and exercisable at June 30, 2022 |
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| 7,960,000 |
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| $ | 0.17 |
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Outstanding at September 30, 2022 |
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| 8,335,000 |
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| $ | 0.18 |
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Granted |
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Expired |
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| - |
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Outstanding at December 31, 2022 |
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| 8,335,000 |
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| 0.18 |
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Outstanding and exercisable at December 31, 2022 |
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| 8,147,500 |
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| 2.56 |
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| 2.07 |
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The aggregate of options exercisable as of June 30,December 31, 2022 had an intrinsic value of $222,000,$136,500 for both outstanding and vested options, based on the closing price of $0.16$0.13 per share of the Company’s common stock on June 30,December 31, 2022.
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NOTE 87 – COMMITMENTS AND CONTINGENCIES:
The Company has the following commitments and contingencies:
Mineral Exploration
A portion of the Company’s mining claims on the Company’s properties are subject to lease and option agreements including advance minimum royalty payments, with various terms, obligations, and royalties payable in certain circumstances. Total mining claim lease, option agreements and royalty agreements total $82,000 per year.
The Company pays federal and county claim maintenance fees on unpatented claims that are included in the Company’s mineral exploration properties. Should the Company continue to explore all of the Company’s mineral properties, it expectsestimates annual fees to total approximately $236,277 per year in the future.
Real Estate Lease Commitments
At June 30, 2022, the Company’s office in Coeur d’Alene, Idaho and its facilities in Eureka, Nevada are rented on a month-to-month basis.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
As used in herein, the terms “Timberline,” the “Company,” “we,” “us,” and “our” refer to Timberline Resources Corporation.
This discussion and analysis contains forward-looking statements that involve known or unknown risks, uncertainties and other factors that may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Except for historical information, the matters set forth herein, which are forward-looking statements, involve certain risks and uncertainties that could cause actual results to differ. Potential risks and uncertainties include, but are not limited to, unexpected changes in business and economic conditions; significant increases or decreases in gold prices; changes in interest and currency exchange rates; unanticipated grade changes; metallurgy, processing, access, availability of materials, equipment, supplies and water; results of current and future exploration and production activities; local and community impacts and issues; timing of receipt and maintenance of government approvals; accidents and labor disputes; environmental costs and risks; competitive factors, including competition for property acquisitions; and availability of external financing at reasonable rates or at all, and those set forth under the heading “Risk Factors” in our Form 10-K filed with the United States Securities and Exchange Commission (the “SEC”) on December 20, 2021. Forward-looking29, 2022. Forward- looking statements can be identified by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continues” or the negative of these terms or other comparable terminology. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievements. Forward-looking statements are made based on management’s beliefs, estimates, and opinions on the date the statements are made, and the Company undertakes no obligation to update such forward-looking statements if these beliefs, estimates, and opinions should change, except as required by law.
This discussion and analysis should be read in conjunction with the accompanying unaudited consolidated financial statements and related notes. The discussion and analysis of the financial condition and results of operations are based upon the unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis the Company reviews its estimates and assumptions. The estimates were based on historical experience and other assumptions that the Company believes to be reasonable under the circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions, but the Company does not believe such differences will materially affect our condensed consolidated financial position or results of operations. Critical accounting policies, the policies the Company believes are most important to the presentation of its consolidated financial statements and require the most difficult, subjective and complex judgments are outlined below in “Critical Accounting Policies” and have not changed significantly.
Corporate Overview
Our business is mineral exploration in Nevada with a focus on district-scale gold projects such as our district-scale Eureka Project, where weProject. We are focused on delivering high-grade Carlin-type gold discoveries.discoveries at Eureka. The Eureka propertyProperty includes the historic Lookout Mountain and Windfall Mines in a total property position of approximately 2428 square miles (62(72 square kilometers). The Eureka mineral resourceLookout Mountain Resource was reported in compliance with Canadian NI 43-101 in an Updated Technical Report on the Lookout Mountain Project by Mine Development Associates, Effective March 1, 2013, filed on SEDAR April 12, 2013:
Resource Category | Tonnage (million short tons) | Grade (oz/ton) | Grade (grams/tonne) | Contained Au (troy oz) |
Measured
| 3.04
| 0.035
| 1.20
| 106,000
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Indicated
| 25.90
| 0.016
| 0.55
| 402,000
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Inferred
| 11.71
| 0.012
| 0.41
| 141,000
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Effective January 1, 2021, the Securities and Exchange Commission (“SEC”) adopted amendments to modernize the property disclosure requirements for mining registrants and related guidance, which are currently set forth in Item 102 of Regulation S-K Subpart 1300 under the Securities Act of 1933 and the Securities Exchange Act of 1934. The amendments more closely align the SEC’s disclosure requirements and policies for mining properties with current industry and global regulatory practices and standards.
We are also operator of the Paiute Joint Venture Project with Nevada Gold Mines in the Battle Mountain District. These properties all lie on the prolific Battle Mountain-Eureka gold trend. We also control the Seven Troughs Project in northern Nevada, which is one of the state’sstate's highest-grade former gold producers. We control over 43 square miles (111 square kilometers) of mineral rights in Nevada.
During our fiscal year ended September 30, 2022 and continuing in the quarter ended December 31, 2022, we have also acquired significant claims holdings within the New York Canyon claim block.
Detailed maps and mineral resourceresources estimates for the Eureka Project and NI 43-101 technical reports for its projects may be viewed at http://timberlineresources.co/.
Summary of the exploration activities for the three months ended June 30,December 31, 2022:
Summary of the exploration activities for the three months ended June 30, 2022:
Exploration activitiesThe 2022 drill program at our 100%-controlled Eureka Project in Nevada was terminated during the quarter ending June 30, 2022 focusedDecember 31, 2022. We reported the final results from that program on the Eureka Project, where a sizableJanuary 17, 2023. Eight drill campaign concluded during the middle of January 2022. That drilling was concentrated onholes were reported in that news release, including four from the Water Well Zone (WWZ), near the Lookout Mountain Resource, andthree from the Oswego target, and one large step out into the South Pediment area (Figure 1). Six of the eight holes were drilled with diamond core (or a pre-collar with reverse circulation and core tail), and two of the holes were completed with reverse circulation only. These eight holes constitute approximately 1km to2,549 meters of the east. The Company received, interpreted, and reported results from that6,662-meter drill program through May 2022. Having reported strong drill resultsat Eureka.
Each of the holes in the WWZ encountered significant Carlin-type gold mineralization, confirming that the basal contact of the Dunderberg formation is consistently mineralized over a large area. Three drill holes (BHSE-225C, 231C, and 241C) near BHSE-212C (the best hole in the southern part of the WWZ, see Company believed warranted follow-up, work began during the quarternews release dated March 24, 2022) yielded significant thicknesses of gold ranging from 8.5 to plan the 2022 drill campaign. Timberline worked with its environmental and permitting contractor to update the work program within its Lookout Mountain plan of operations with the Bureau of Land Management.29.0 meters.
Highlights from this phase of the 2021-2022 exploration program completed during January 2022 include:drilling are included below. These are drill hole widths using a cut-off grade of 0.3 g/t for gold; true thickness is not yet known:
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During the quarter ending March 31, 2022, the Company reported the majority of the drill results from the 2021 drill campaign, including the following highlights:
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· | BHSE-231C: 8.5m at 2.38 g/t gold from |
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· | BHSE-241C: 25.9m at 0.72 g/t gold from 314.6m depth; including | |||
o | 7.6m at 1.3 g/t gold from 314.6m depth; and | |||
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During the quarter ending June 30, 2022, Timberline reported the final results from the 2021-2022 drilling campaign, these included several drill holes from the Oswego target, one hole fromGeology and Interpretation of the WWZ and final multielement results from one hole into the Graben Zone.
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DrillingResults
Due to a lack of availability of drill crews in Nevada, we were forced to split our 2021 drill program into two phases. The first phase was comprised of five RC holes that were completed during July and August 2021; we reported those results on October 27, 2021. The RC drill rig returned to the property in October and drilled until mid-December 2021. A diamond core rig joined the drill program in November and worked until mid-January 2022. The assay results from this second phase of drilling were reported during the quarters ending March 31 and June 30, 2022.
This second phase of drilling included completion of 23 drill holes totaling 4,859 meters (15,942 feet) aimed primarily at the WWZ and Oswego Targets. (Figure 1). A summary of the drill program RC, diamond core (core), and RC with core tails is included in Table 1.
The WWZ is immediately adjacent to the Lookout Mountain Resource and has the potential to significantly expand the resource at higher gold grades. Fourteen new drill holes, including sixfour core holes in the second phasesouthern part of this drill program have added many more gold assays and much more geologic information to the WWZ target. We also drilled a corewere directed at filling in the geological details around the thick zone of high-grade gold encountered in BHSE-212C. That drill hole passed through very well-developed collapse breccias at the contact between the Dunderberg and Hamburg formations that were intensely carbonized and clay-altered and infiltrated by arsenic and fine-grained pyrite. The heart of that 41.0-meter-thick interval included 19.8m averaging 9.5 g/t gold. These zones of intensely altered and mineralized breccia are believed to be best developed near faults. The latest drilling has confirmed continuity of the WWZ mineralization to the east, west, and north from BHSE-212C, but the assays also returned lower grades in each of the WWZ as a testthese intercepts.
BHSE-225C was collared approximately 35m west of the significant IP anomaly in the Graben Zone. We also completed nine RC holes at the Oswego Target,BHSE-212C, and BHSE-231C was located approximately one kilometer56m east of the WWZ, testinghigh-grade hole. BHSE-241C was drilled inclined to the downdip extensionwest from the same drill pad as BHSE-231C such that it penetrated the target horizon approximately 20m north of the high-grade surface sampling reportedgold intercept in December (see our news release dated December 6, 2021).BHSE-212C. The cross section in Figure 2 shows the geometry of these new drill holes relative to the earlier drill holes and the geology of the area.
Table 1. Compilation of 2021-2022 Phase 2 Drilling, Eureka Project (October – January)
Hole Type | No. of Holes | Meters Drilled | Target Area(s)* |
Reverse Circulation (RC) | 16 | 2,527 | WWZ (6); Oswego (9); LM (1) |
Diamond Core | 4 | 1,363 | WWZ (3), Graben Zone IP (1) |
RC/Core Tails | 3 | 969 | WWZ (3) |
Total | 23 | 4,859 |
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*WWZ: Water Well Zone; Oswego: Road-cut Au occurrence/Dugout Tunnel Fault; LM: Lookout Mountain Resource area |
The RC cuttings and drill core were logged in the Company’s Eureka, Nevada facility. Approximately 3,300 samples were collected and submitted to ALS Global, in Elko, Nevada for preparation and analysis.
Water Well Zone
The WWZ emerged during the last two quarters as hosting significant higher-grade gold intercepts over a large area. Repeated drill hole intercepts through the base of the Dunderberg Shale have yielded strong gold mineralization associated with a well-developed breccia horizon that has been intensely altered with increased presence of carbon, silica, and sulfides. Core holes BHSE-220C and 212C are the best holes drilled to date in the WWZ and they are separated by approximately 400 meters north to south. BHSE-220C is the northernmost hole in the WWZ and the intercept is open to the north and east. BHSE-212C is the farthest south hole in the WWZ, and the intercept is open to the south and east. We also reported results from a core hole approximately midway between these two holes (BHSE-192C). This hole confirmed a strong interval of gold mineralization in the same geologic unit (the base of the Dunderberg Shale). This mineralized interval is also open to the east. The current footprint of the WWZ is shown in Figure 1. Timberline’s objectives for ongoing exploration in the WWZ will be to both improve our understanding of the continuity of the zone and to grow it beyond its current footprint. To achieve these objectives, Timberline is planning to add more drill holes within this footprint and beyond it to the north, south, and east.
We also documented during the last two quarters that some of the RC drilling into the WWZ may have been biased low with respect to gold grade. The Company’s February 24, 2022, and March 24, 2022 news releases described comparative results from RC and core drilling in the northern portion of the WWZ. BHSE-220C was a core twin of BHSE-205, which was a RC hole. The final results from BHSE-220C indicated that core drilling recovered significantly higher grades from mineralized intervals than corresponding RC drilling.
This part of the WWZ mineralization is below the water table, which can affect sample quality in RC drilling. Fine-grained material may be washed away during the drilling and sampling process, and drill cuttings may be washed downhole from higher up. Either circumstance could result in under-reporting of gold grades when sampling with RC drilling below the water table. Core drilling is generally regarded as superior to RC drilling for the quality of both assays and geological information, but it is also much more costly.
The initial indication from incomplete and expedited assays was that the core drilling yielded considerably higher-grade gold than did the RC drilling. The complete results for BHSE-220C confirmed that both drill holes encountered a zone of very similar geology and thickness, and the grades over the full interval are significantly higher in the drill core.
Table 2 – Comparison of Average Mineralized Intervals in Twinned* Drill Holes
Hole | Type | Inclination (°) | From (m) | To (m) | Interval (m) | Gold (g/t) |
BHSE-205 | RC | -90 | 138.7 | 175.3 | 36.6 | 1.06 |
BHSE-220C | Core | -90 | 140.8 | 185.0 | 44.2 | 4.10 |
* - Drill holes collared approximately 2 meters apart from same drill pad |
Figure 1. Location of 2021-2022 Drilling at the Eureka Project, the Water Well Zone and Oswego Targets
The additional assays received since the earlier news release were from a lower-grade interval below the previously reported high-grade. Both the RC and core drilling encountered this lower-grade zone, and a direct comparison between the assays in the two drill holes is shown in Figure 2. The overall grade of the core interval also increased slightly from the February report due to the inclusion of one overlimit assay (a repeat assay on samples that assay above 10 g/t in the initial analysis).
Much of the drilling in the WWZ encountered significant groundwater inflow during drilling. As previously reported in October 2021, Timberline increased the proportion of core drilling in the WWZ during this program to evaluate the reliability of gold grades and increase the confidence of geological interpretations. This newly discovered part of the WWZ is much thicker and higher grade than expected, and it is wide open for follow-up drilling to the north, northwest, and east. The intercept from BHSE-220C, which is 400m south from BHSE-220C, confirmed the highest grade and thickness yet drilled in the WWZ (See Company news release dated March 9, 2022).
Figure 2 - Comparison of Geology & Gold in Twinned Holes at WWZ
This phenomenon of drill sampling below the water table is well known in the gold exploration industry, as anecdotal reports and some comprehensive studies have demonstrated higher gold grades from core drilling in comparison to twin RC drill holes. The difference reported here is higher than expected, but this result is from only one pair of twin holes. The data so far suggest that the recent RC drilling in the WWZ may have underestimated the actual gold grade. The Company continues to assess the geology, assay, and quality control data before drawing conclusions from these data but plans to twin additional RC holes during 2022.
At the time of this writing, the Company has commenced its 2022 drill program but has not yet reported new results. The current drill plan includes additional core holes in close proximity to RC holes that encountered significant gold during the 2020 or 2021 drill programs. In addition, the 2022 drill plan includes primarily core drilling within the WWZ footprint, though RC drilling has been used to drill the upper portions of several of these core holes (above the water table). This technique, known as pre-collaring, saves considerable expense by utilizing cheaper RC drilling for the upper part of deeper drill holes. It should also be noted that Timberline has also changed RC drilling contractors for the 2022 drill program. Our technical team will continue to evaluate the efficacy and appropriateness of RC drilling at the Water Well Zone, but the less expensive drilling method clearly has a place in a well managed exploration project.
Oswego Target
The Oswego Target lies approximately 1.0km from the eastern margin of the WWZ, or 1.2km from the Lookout Mountain Resource. Oswego is a historic gold showing with limited historic mining (late 19th and/or early 20th century) and exploration during the early 1990s. The area is cut by a large north-south fault zone known as the Dugout Tunnel Fault (DTF). The DTF is analogous to the Lookout Mountain Fault zone that occurs just west of Timberline’s Lookout Mountain resource. Surface sampling at Oswego has repeatedly returned high-grade gold from the fault itself, where the Eldorado Dolomite is highly silicified. During the 2021 program, we drilled 9 RC holes in and around the Oswego Target area. The 2021 drilling was aimed at confirming historic drill results and testing the downdip continuity of the surface gold zone.
Prior to the drilling, we also completed systematic channel sampling at the Oswego Target during the quarter ending December 31, 2021. Our geologists collected 67 channel and rock samples along the 65-meter strike length of an exposed fault scarp, where historic results had indicated the presence of high-grade gold. Sampling was focused along the Trench Fault and associated cross structures. There is a zone of alteration and mineralization approximately 10 meters wide, which is pervasively oxidized at surface. The sampling consisted of continuous chip and channel samples utilizing diamond saws and hammer drills. However, due to limited access and cliff-forming outcrops, some of the samples are along the strike of the fault in highly silicified Eldorado Dolomite (channel samples). Where possible, we employed an excavator to cut trenches across the structure. In the trenches, the sampling likely represents true width of mineralization perpendicular to the fault (trench samples).
The results from the surface sampling at Oswego corroborate historic sampling that indicated a long zone of outcropping structure containing 12 to 13 g/t gold (See Company news release dated June 12, 2018). The newer data provided better information on the continuity and dimensions of the mineralized structure. The results are summarized in Figure 3.
Oswego is separated from the Lookout – WWZ trend by a basin with volcanic rocks at surface and underlain by extensive faulting, potential host rocks for Carlin-type gold, and fine-grained altered intrusive rocks (see Company news release dated March 24, 2022). This structural corridor includes both Cambrian and Ordovician aged host rocks that Timberline intends to drill test. These rocks include the Dunderberg Shale, the host of Carlin-type mineralization at the WWZ and Lookout Mountain, and the Goodwin and Ninemile Formations, which are prolific hosts of gold at the Ruby Hill Mine (i80 Gold Corp.) in the north of the Eureka District. We completed nine shallow RC holes into the Oswego alteration zone to test the downdip extension of the surface mineralization.
Timberline reported the results of the 2021 drilling at Oswego in May of 2022, some highlights are shown below:
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Figure 31 – Geology, Sampling,Plan View of New Drilling along Lookout Trend and Drilling at the Oswego Target
Most of the 2021 Oswego drill holes (BHSE-202, 207, and 213 – 217) were positioned west of the fault zone and drilled at an angle to undercut surface mineralization and cut across the structure. The logs
Careful examination of the drill cuttings indicatecore and assay data suggests that the high-grade intercept in BHSE-212C occupies a topographic low or trough within the top of the Hamburg formation. The Dunderberg formation also appears to thin a bit to the east. These phenomena are most of these holes were collaredlikely related to one or more faults in the Secret Canyon Formation,area (shown in blue with question marks on the cross section), which consists of platy brown to orange chips of argillaceous material (shale) with a high carbonate content. Drilling progressed throughjuxtapose the shalekey Dunderberg-Hamburg contact into an apparent faulted contactclose proximity with the Eldorado Dolomite, whichimportant Highwall Fault. The position of any individual drill hole relative to these newly realized faults and the Highwall or Buried Normal faults may be a determinant of the thickness and grade of gold in this part of the WWZ. These sorts of gaps and variability in grade and thickness are expected in Carlin-type deposits when chopped into segments and offset by numerous faults.
Importantly, the high-grade zone was normally brownalready extended approximately 75m to reddish-brown or black, very fine-grained jasperoid (silicified sedimentary rock)the south with drillhole BHSE-226C (22.8m at 4.39 g/t gold, including 7.6m at 11.56 g/t gold, as reported in a Company news release dated September 14, 2022). The relationshiphigh-grade portion of the faultWWZ remains untested to the shalesouth and dolomite is complex,southeast for more than 500m. Drill hole BHSE-228C in this phase of results was an offset of approximately 60m southwest from BHSE-226C. The mineralized contact was present in this hole at the expected depth, but allit comprised only 15.2m of 0.57 g/t gold.
The Lookout Mountain gold resource continues for more than 1.0 kilometre south from this latest drilling. Hence, Timberline geologists expect similar downdip targets, such as the WWZ, to occur in favorable settings along its eastern front. BHSE-229C was the Company’s first attempt to chase the Dunderberg-Hamburg contact into this South Pediment area. While the drill hole did not cut significant high-grade mineralization, it did encounter 3.7m that averaged 0.63 g/t of oxide gold mineralization at the top of the drill holes in this area bottomedHamburg formation beneath structurally thinned Dunderberg formation. There is clear evidence of major faulting in the dolomite.hole, so the team will be working to better understand the geology here before following up.
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The gold mineralization at Oswego is most often associatedFigure 2 – Cross Section of Line 4363875N through the South WWZ with or centered upon, the silicified fault (jasperoid). However, someNew Drilling
Geology and Interpretation of the highestOswego Results
This round of drilling did not return significant gold grades occur in altered dolomite or in sediments atresults from the marginsOswego target. Two of the jasperoid. Drillholes BHSE-213three holes (BHSE-232 and -207 tested the southern extent of high gold in surface samples. The shallow gold zone appears to be cut off on the south, and additional mapping and sampling is required to understand the controls of gold in that area. All the drillholes235) in this area encountered highly anomalous gold (>0.100 g/t) well into the Eldorado Dolomite. None of the drillwere RC holes reached sufficient depth to test other favorable host rocks that are interpreted to lie at depth along this structure, such as the Ninemile Formation.
The 2022 drill program will include several drill holes at the Oswego target, aimed at testing for downdip and lateral extensionssignificant expansions of the surface and shallow drill indicated gold mineralization along this major fault structure. BHSE-232 did not encounter the western splay of the Dugout Tunnel fault as expected, so this means that a major break between Cambrian and Ordovician rocks is likely between here and the IP anomaly occupying the Graben Zone.
The location of BHSE-235 was dictated in part by road access due to the steep topography at Oswego. It was a vertical hole into the Eldorado dolomite, which is an important host of silver in the district. There was anomalous gold over about 37m of the hole, including 1.5m of 0.34 g/t, but there was silver mineralization averaging 2.25 g/t over approximately 27m. As is typical of the Carbonate Replacement Deposits (CRD) of the district, the silver is associated with elevated antimony, lead, and zinc.
Timberline also drilled the first core hole ever into the Oswego target, BHSE-240C. The hole was aimed to the east underneath the strong surface and shallow drill indicated gold reported in late 2021 and early 2022. There may also be deeper drilling intoOnce again, the graben westgold results were below expectations (29m of weakly anomalous gold with a maximum assay of 0.35 g/t), but there was a 15m zone of enriched silver (> 1.0 g/t) accompanied by antimony, lead, and zinc.
The shallow gold at Oswego to examine possible connections between Oswego and the Lookout/WWZ zones and possibly linkedremains open to the geophysical anomalies innorth and northeast, but it appears to occupy a complex fault system that may truncate or offset it at depth. Silicification and sulfidation are intense over a large area, and this area.is new evidence of CRD-type veining and replacement style mineralization that may constitute a separate target.
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Results of Operations for the ninethree months ended June 30,December 31, 2022 and 2021
Consolidated Results
(US$) |
| Three Months Ended June 30, |
| Nine months Ended June 30, |
|
| Three Months Ended December 31, |
| ||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||
Exploration expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Eureka |
| $ | 808,519 |
| $ | 330,599 |
| $ | 2,462,543 |
| $ | 1,471,948 |
|
| $ | 442,037 |
| $ | 1,312,960 |
| ||||
Other exploration properties |
|
| 87,946 |
|
|
| 97,309 |
|
|
| 234,254 |
|
|
| 356,032 |
|
|
| 80,606 |
|
|
| - |
|
Total exploration expenditures |
|
| 896,465 |
|
|
| 427,908 |
|
|
| 2,696,797 |
|
|
| 1,827,980 |
|
|
| 522,643 |
|
|
| 1,312,960 |
|
Non-cash expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Stock option expenses |
| - |
| 519,400 |
| 44,321 |
| 646,422 |
|
| 51,708 |
| 44,321 |
| ||||||||||
Depreciation, amortization and accretion |
|
| 1,478 |
|
|
| 1,408 |
|
|
| 4,434 |
|
| 4,224 |
|
|
| 1,715 |
|
| 1,408 |
| ||
Total non-cash expenses |
|
| 1,478 |
|
|
| 520,808 |
|
|
| 48,755 |
|
|
| 650,646 |
|
|
| 53,423 |
|
|
| 45,729 |
|
Professional fees expenses |
| 61,234 |
| 39,384 |
| 155,938 |
| 160,257 |
|
| 62,859 |
| 65,632 |
| ||||||||||
Insurance expenses |
| 43,204 |
| 38,766 |
| 116,651 |
| 102,367 |
|
| 44,528 |
| 31,480 |
| ||||||||||
Salaries and benefits expenses |
| 71,819 |
| 74,584 |
| 219,750 |
| 230,502 |
|
| 60,456 |
| 76,320 |
| ||||||||||
Interest and other (income) expense |
| 228,479 |
| 44,564 |
| 251,505 |
| 74,616 |
|
| 11,447 |
| 13,753 |
| ||||||||||
Other general and administrative expenses |
|
| 148,270 |
|
|
| 117,245 |
|
|
| 283,499 |
|
|
| 286,163 |
|
|
| 126,187 |
|
|
| 78,350 |
|
Net loss |
| $ | 1,450,949 |
|
| $ | 1,263,259 |
|
| $ | 3,772,895 |
|
| $ | 3,332,531 |
|
| $ | 881,543 |
|
| $ | 1,624,224 |
|
Our consolidated net loss for the three months ended June 30,December 31, 2022 was $1,450,949,$881,543, compared to a consolidated net loss of $1,263,259$1,624,224 for the three months ended June 30, 2021. Total exploration expenses of $896,465 were recorded on our statement of operations for the three months ended June 30, 2022, compared with $427,908 for the three months ended June 30,December 31, 2021. The year-over-year increasedecrease in net loss is largely due to the significant increasedecrease in exploration expenses made possible by the infusion of cash that occurred in May 2022, an increase in professional fees related to that financing, and increases in foreign exchange losses resulting from our private placement of May 2022, offset by reduced share-based compensation during the three months ended June 30, 2022 compared with June 30, 2021. Insurance expense was somewhat higher in the comparative period due to the normal increases the industry is experiencing.
Our consolidated net loss for the nine months ended June 30, 2022 was $3,772,895, compared to a consolidated net loss of $3,332,531 for the nine months ended June 30, 2021. Total exploration expenses of $2,696,797 were recorded on our statement of operations for the nine months ended June 30, 2022, compared with $1,827,980 for the nine months ended June 30, 2021. The year-over-year increase in net loss is due to the significant increase in exploration expenses made possible by the infusion of cash that occurred near the close of fiscal year 2020, exercises of warrants during the period and the May 2022 private placement, and increases in foreign exchange losses resulting from our private placement of May 2022. These were offset by a decrease in share-based compensation with no new stock options issued to directors, officers and consultants. Insurance expense was somewhat higher in the first nine months of 2021 due to the normal increases the industry is experiencing.expenses.
Subject to adequate funding in 2022,2023, we expect to continue to incur exploration expenses for the advancement of our Eureka Project.
Financial Condition and Liquidity
At June 30,December 31, 2022, we had assets of $18,637,789,$15,584,398, consisting of cash in the amount of $4,182,930,$956,147; property, mineral rights and equipment of $13,875,085,$14,022,809, net of depreciation, reclamation bonds of $528,643, and prepaid expenses, deposits and other assets in the amount of $51,131.$76,799.
On June 30,December 31, 2022, we had total liabilities of $634,015$599,471 and total assets of $18,637,789.$15,584,398. This compares to total liabilities of $570,144$1,157,467 and total assets of $17,716,406$16,972,229 on September 30, 2021.2022. As of June 30,December 31, 2022, our liabilities consist of $122,681$138,895 for asset retirement obligations, $270,991 of senior unsecured note payable – related party, and $177,071$189,586 of trade payables and accrued liabilities and $63,272 of interest and expenses payable to related parties.liabilities. Of these liabilities, $511,334$460,576 are due within twelve months. The liabilities compared to September 30, 2021,2022 have changed as a result of a slight decrease in accrueddecreased, due to cash paid for trade payables offset by increases inand accrued liabilities and accrued interest - related party. The increase in total assets was due toduring the increase in -cash from warrant exercises and the May 2022 private placement, with small increases to prepaid expense and other assets and mineral rights.three months ended December 31, 2022.
On June 30December 31, 2022, we had working capital of $3,717,027$566,670 and stockholders’ equity of $18,003,774$14,984,927 compared to working capital of $3,170,019$1,423,723 and stockholders’ equity of $17,146,262$15,814,762 for the year ended September 30, 2021.2022. Working capital experienced a favorablean unfavorable change because of the increasedecrease in cash associated equity infusions and an increase in accounts payable and increases in accrued expenses –with payments related party and accrued interest - related party. These were offset somewhat by a decrease in accrued expenses.to our operations.
During the ninethree months ended June 30,December 31, 2022, we used cash from operating activities of $3,686,561,$1,453,507, compared to cash used of $2,715,608$1,454,738 for the ninethree months ended June 30,December 31, 2021. The use of cash from operating activities results primarily from the net loss of $3,772,895$881,543 for the nine-monththree-month period ended June 30,December 31, 2022 compared to net loss of $3,332,531$1,624,224 for the nine monthsquarter ended June 30,December 31, 2021. Each of the comparable periods experienced significantly different non-cash effects as a result of changes in stock-based compensation. Changes to the net loss for the comparative periods are described above.
During the nine-monththree-month period ended June 30,December 31, 2022, cash of $43,947$28,933 was used by investment activities, compared with cash of $14,571 provided$18,000 used for the nine-monththree-month period ended June 30, 2022.December 31, 2021. During the nine monthsquarter ended June 30, 2021,December 31, 2022, we paid $54,000$28,933 for mineral rights, and received a refund on our reclamation bonds of $10,053, compared to at June 30, 2021, we received $78,571 for lease payments to us for company-owned mineral properties offset by $64,000$18,000 paid for mineral rights.rights for the quarter ended December 31, 2021.
During the nine-month periodthree-month periods ended June 30,December 31, 2022 $4,586,086and 2021, $nil was provided by financing activities, compared to cash of $2,739,417 provided during the nine-month period ended June 30, 2021. For the nine-month period ended June 30, 2022, cash of $4,439,587 was provided through the sale of stock and warrants, net of issuance costs, and $146,499 was provided by the exercise of warrants. For the nine-month period ended June 30, 2021, cash of $1,788,334 was provided through the sale of stock and warrants, $617,750 provided by the exercise of warrants and $333,333 from the proceeds from stock subscriptions paid for which stock had not yet been issued.activities.
7 |
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Going Concern:
The audit opinion and notes that accompany our consolidated financial statements for the year ended September 30, 20212022 disclose a ‘going concern’ qualification to our ability to continue in business. These consolidated financial statements have been prepared on the basis that the Company is a going concern, which contemplates the realization of our assets and the settlement of our liabilities in the normal course of our operations. Disruptions in the credit and financial markets over the past several years have had a material adverse impact on a number of financial institutions and investors and have limited access to capital and credit for many companies. In addition, commodity prices and mining equities have seen significant volatility which increases the risk to precious metal investors. Market disruptions and alternative investment options, among other things, make it more difficult for us to obtain, or increase our cost of obtaining, capital and financing for our operations. Our access to additional capital may not be available on terms acceptable to us or at all. If we are unable to obtain financing through equity investments, we will seek multiple solutions including, but not limited to, asset sales, corporate transactions, credit facilities or debenture issuances in order to continue as a going concern.
At December 31, 2022, we had working capital of $566,670. We had $460,576 outstanding in current liabilities and a cash balance of $956,147. As of the date of this report on Form 10-Q, we have sufficient cash to meet our normal operating commitments for the next 12 months, without consideration of new exploration programs. Therefore, we do not expect to be required to engage in financial transactions to increase our cash balance or decrease our cash obligations in the near term. However, we are an exploration company with exploration programs that require significant cash expenditures. A significant drilling program, such as that we have recently executed, can result in depletion of cash and return us to a position of insufficient cash to support normal operations for the following 12 months. Such cash-raising efforts may include equity financings, corporate transactions, joint venture agreements, sales of assets, credit facilities or debenture issuances, or other strategic transactions.
The condensed consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern. We believe that the going concern condition cannot be removed with confidence until the Company has entered into a business climate where funding of its activities is more assured. If the going concern basis were not appropriate for these financial statements, adjustments would be necessary in the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used.
At June 30, 2022, we had working capital of $3,717,027. We have a cash balance of $4,182,930 and $634,015 outstanding in total liabilities. As of the date of this report on Form 10-Q, we have sufficient cash to meet our normal operating commitments for the next 12 months. Therefore, we do not expect to be required to engage in financial transactions to increase our cash balance or decrease our cash obligations in the near term. However, we are an exploration company with exploration programs that require significant cash expenditures. A significant drilling program, such as those we have planned, will result in depletion of cash and return us to a position of insufficient cash to support normal operations for the following 12 months. Cash-raising efforts may include equity financings, corporate transactions, joint venture agreements, sales of assets, credit facilities or debenture issuances, or other strategic transactions.
We plan, as funding allows, to follow up on our positive drill results on our Eureka and Paiute Projects. Principally, we plan to execute drilling as part of the ongoing exploration program at Eureka. Also, subject to available capital, we may continue prudent exploration programs on our material exploration properties and/or fund some exploratory activities on early-stage properties.
We will require additional funding and/or reductions in exploration and administrative expenditures in future periods. Given current economic conditions, we cannot provide assurance that necessary financing transactions will be available on terms acceptable to us, or at all. Without additional financing, we would have to curtail our exploration and other expenditures while we seek alternative funding arrangements to provide sufficient capital to meet our ongoing, non-discretionary expenditures, and maintain our primary mineral properties. If we cannot obtain sufficient additional financing, we may be unable to make required property payments on a timely basis and be forced to return some or all of our leased or optioned properties to the underlying owners.
Financing Activities
On May 2, 2022, we closed a non-brokered private placement of the Company to accredited investors at a price of $0.25 per common share. We issued 18,933,705 common shares for cash proceeds of $4,733,426. Finders fees in the amount of $293,839 and 1,016,022 Series N Warrants were paid to licensed brokers and consultants in association with the offering. The warrants have a term of 18 months and are exercisable at $0.25 per common share.None
Subsequent Events
None
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity or capital expenditures.
Critical Accounting Policies and Estimates
See Note 2There have been no significant changes to the financial statements contained in this Quarterly Report for a summary of the significant accounting policies used in the presentation of our financial statements. We are required to make estimates and assumptions that affect the reported amounts and related disclosures of assets, liabilities, revenue and expenses. We believe that our most critical accounting estimates are related to asset impairments and asset retirement obligations.
Our critical accounting policies and estimates are as follows:
Asset Impairments - Carrying Valuedisclosed in Management’s Discussion and Analysis of Property, Mineral RightsFinancial Condition and Equipment
Significant property acquisition payments for active exploration properties are capitalized. The evaluationResults of Operation in our mineral properties for impairment is based on market conditions for minerals, underlying mineralized material associated with the properties, and future costs that may be required for ultimate realization through mining operations or by sale. If no mineable ore body is discovered, or market conditions for minerals deteriorate, there is the potential for a material adjustment to the value assigned to such mineral properties.
We review the carrying value of equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment or abandonment loss is recognized equal to an amount by which the carrying value exceeds the fair value of the asset. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the equipment is used, and the effects of obsolescence, demand, competition, and other economic factors.2022 Form 10K.
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Asset Retirement Obligations
We have an obligation to reclaim our properties after the surface has been disturbed by exploration methods at the site. As a result, we have recorded a liability for the fair value of the reclamation costs we expect to incur at our Lookout Mountain Target on our Eureka Project, and our Paiute Project. We estimate applicable inflation and credit-adjusted risk-free rates as well as expected reclamation time frames. To the extent that the estimated reclamation costs change, such changes will impact future reclamation expense recorded. A liability is recognized for the present value of estimated environmental remediation (asset retirement obligation) in the period in which the liability is incurred if a reasonable estimate of fair value can be made. The offsetting balance is charged to the related long-lived asset. Adjustments are made to the liability for changes resulting from passage of time and changes to either the timing or amount of the original present value estimate underlying the obligation.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Conclusions of Management Regarding Effectiveness of Disclosure Controls and Procedures
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 Principal Executive Officer and the Principal Financial Officer of the effectiveness of the design and operations of our disclosure controls and procedures (as defined in Rule 13a – 15(e) and Rule 15d – 15(e) under the Exchange Act) as of the end of the period covered by this report. Basedreport.Based upon that evaluation, it was concluded that our disclosure controls were effective as of the end of the period covered by this report, to ensure that: (i) information required to be disclosed by the Company in the reports that it files under the Exchange Act is recorded, processed, summarized, and reported within required time periods specified by the Securities & Exchange Commission rules and forms, and (ii) material information required to be disclosed in reports filed under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Accounting Officer, as appropriate, to allow for accurate and timely decision regarding required disclosure.
Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. This internal control system has been designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair statement of the Company’s published financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Our management has assessed the effectiveness of the Company’s internal control over financial reporting as of June 30,December 31, 2022. To make this assessment, we used the criteria for effective internal control over financial reporting described in Internal Control-Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment, we believe that, as of June 30,December 31, 2022, the Company’s internal control over financial reporting is not effective, due to the current inability to segregate duties inherent with limited staffing.
Management’s Remediation Initiatives
Management’s remediation initiatives included implementing additional controls over cash receipt and payment transactions through reviews and approvals performed by our Chief Executive Officer and Chief Financial Officer. These detective controls significantly mitigate segregation of duties issues that exist by oneover cash management, specifically in bank account reviews and reconciliations. An additional person, havingindependent of the abilityprocessing of processing of vendor invoices and payments has been engaged and assigned to enter paymentsperform the reviews and receipts intoreconciliations of bank accounts on a monthly basis. Those responsibilities were initiated during the accounting software, process paymentquarter ended December 31, 2022 and deposits into the accounting softwareare expected to be fully in place and reconciling bank statements.operation for subsequent quarters. The Company has three employees, and management has concluded that anticipated business growth and the accompanying expansion of staffing will improve effectiveness of the Company’s internal controls over financial reporting.
Changes in Internal Control over Financial Reporting
There werewas no changesmaterial change in our internal control over financial reporting in the nine monthsquarter ended June 30, 2022.December 31,
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PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We are not aware of any material pending litigation or of any proceedings known to be contemplated by governmental authorities which are, or would be, likely to have a material adverse effect upon us or our operations, taken as a whole. No director, officer or affiliate of Timberline and no owner of record or beneficial owner of more than 5% of our securities or any associate of any such director, officer or security holder is a party adverse to Timberline or has a material interest adverse to Timberline in reference to any currently pending litigation.
ITEM 1A. RISK FACTORS
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 September 30, 2021,2022, which was filed with the SEC on December 20, 2021.29, 2022.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
AllThere were no sales of unregistered equity securities during the fiscal quarter covered by this Quarterly Report on Form 10-Q were previously reported on Form 8-K.10-Q.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES
We consider health, safety and environmental stewardship to be a core value for the Company.
Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, 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 with respect to mining operations and properties in the United States that are subject to regulation by the Federal Mine Safety and Health Administration (“MSHA”) under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”). During the nine monthsquarter ended June 30,December 31, 2022, our U.S. exploration properties were not subject to regulation by the MSHA under the Mine Act.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS.
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101.INS* |
| XBRL Instance 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 |
* - Filed herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| TIMBERLINE RESOURCES CORPORATION | ||
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| By: | /s/ Patrick Highsmith |
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President and Chief Executive Officer | |
(Principal Executive Officer) |
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| Date: |
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| By: | /s/ Ted R. Sharp |
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| Ted R. Sharp | |
Chief Financial Officer | |||
(Principal Financial and Accounting Officer) |
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| Date: |
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