PATRIOT GOLD CORP. Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking information.
Forward-looking information includes statements relating to future actions,
prospective products, future performance or results of current or anticipated
products, sales and marketing efforts, costs and expenses, interest rates,
outcome of contingencies, financial condition, results of operations, liquidity,
business strategies, cost savings, objectives of management of
The Company has based the forward-looking statements relating to the Company's operations on management's current expectations, estimates and projections about the Company and the industry in which it operates. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that we cannot predict. In particular, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Accordingly, the Company's actual results may differ materially from those contemplated by these forward-looking statements. Any differences could result from a variety of factors, including, but not limited to general economic and business conditions, competition, and other factors.
General Overview
As a natural resource exploration company, our focus is to acquire, explore and
develop natural resource properties which may host mineral reserves which may be
economical to extract commercially. With this in mind, we have identified and
secured interests in mining claims with respect to properties in
Results of Operations
Comparison of the Three and Six Months Ended
During the three months ended
Net profit for the three months ended
For the three months ended
For the three months ended
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For the three months ended
Liquidity and Capital Resources
We had total assets of
We anticipate that we will incur the following during the year ended
· $1,000,000 for operating expenses, including exploration, working capital
and general, legal, accounting and administrative expenses associated with
reporting requirements under the Securities Exchange Act of 1934 and
compliance with Canadian regulatory authorities.
Cash provided by operations was
There were no investing activities for the six months ended
Cash used in financing activities was
Management estimates that the Company will not need additional funding for the next twelve months.
We currently have no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources.
Off Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Policies Use of Estimates
The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management believes that all applicable estimates and adjustments are appropriate. Actual results could differ from those estimates.
17 Revenue Recognition
On
1. Identify the contract with the customer. The contract with Golden Vertex
is documented in the Purchase and Sale Agreement dated 5/12/16 and the
Royalty Deed dated 5/25/16.
2. Identify the performance obligations in the contract. The performance
obligation in the contract required Patriot to relinquish its 30% interest
in the Moss Mine . The Company conveyed all of its right, title and
interest in those certain patented and unpatented lode mining claims
situated in the Oatman Mining District , Mohave County, Arizona together
with all extralateral and other associated rights, water rights,
tenements, hereditaments and appurtenances belonging or appertaining
thereto, and all rights-of-way, easements, rights of access and ingress to
and egress from the claims appurtenant thereto, and in which the Company
had any interest.
3. Determine the transaction price. The transaction price was C$1,500,000
plus 3% of the Net Smelter Returns on the future production of the Moss
Mine . See Note 3 for definition of Net Smelter Returns.
4. Allocate the transaction price to the performance obligations in the
contract. The Company only has one performance obligation, the transfer of
the rights to the Moss Mine , which has already been fulfilled.
5. Recognize revenue when (or as) the entity satisfies a performance
obligation. The C$1,500,000 was recognized as a sale of the mining rights
in 2016, resulting in a gain from the disposition of the property. The 3%
net smelter returns royalty will be recognized as revenue in the period
that Golden Vertex produces and sells minerals from the Moss Mine , which
began in March 2018 . The royalties that have been received to date have
been highly variable, as the amounts are dependent upon the monthly
production, the demand of the buyers, the spot price of gold and silver,
the costs associated with refining and transporting the product, etc. As
such, management has determined that the revenue recognition shall be
treated as variable consideration as defined in ASC 606. Variable
consideration should only be recognized to the extent that it is probable
that a significant reversal of revenue will not occur when the uncertainty
associated with the variable consideration is subsequently resolved. Given
the fact that royalties to date have been highly variable with a great
degree of uncertainty, and any attempts to estimate future revenue would
likely result in a significant reversal of revenue, royalty revenue will
be recognized when payments and settlement statements are received from
Golden Vertex, in the period for which the sales were made by Golden
Vertex. It is at that time that any uncertainty related to royalty
payments is resolved. The Company applied ASC 606 using the modified
retrospective method applied to contracts not yet completed as of the date
of adoption.
Mineral Property Acquisition and Exploration Costs
Mineral exploration costs and payments related to the acquisition of the mineral
rights are expensed as incurred. When it has been determined that a mineral
property can be economically developed as a result of establishing proven and
probable reserves, the costs incurred to acquire and develop such property will
be capitalized. Such costs will be amortized using the units-of-production
method over the estimated life of the probable reserve. No costs have been
capitalized through
Deferred Taxes
The Company follows ASC 740-10-30, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Income in the period that includes the enactment date.
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The Company adopted ASC 740-10-25 ("ASC 740-10-25") with regard to uncertainty of income tax positions. ASC 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740-10-25, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. ASC 740-10-25 also provides guidance on derecognition, classification, interest and penalties on income taxes, and accounting in interim periods and requires increased disclosures.
Stock-Based Compensation
We account for equity-based transactions with nonemployees awards in accordance with the Accounting Standards Update (ASU) 2018-07, Compensation-Stock Compensation (Topic 718): ASU 2018-07 establishes that equity-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The fair value of common stock issued for payments to nonemployees is measured at the market price on the date of grant. The fair value of equity instruments, other than common stock, is estimated using the Black-Scholes option valuation model. In general, we recognize the fair value of the equity instruments issued as deferred stock compensation and amortize the cost over the term of the contract.
We account for employee stock-based compensation in accordance with the guidance of FASB ASC Topic 718, Compensation-Stock Compensation, which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. The fair value of the equity instrument is charged directly to compensation expense and credited to additional paid-in capital over the period during which services are rendered.
The Company has granted Restricted Common Stock, where the Restricted Common Stock is restricted for a period of three years following the date of grant. During the three-year period the recipient may not sell or otherwise dispose of the shares. The Company has applied a discount for illiquidity to the price of the Company's stock when determining the amount of expense to be recorded for the Restricted Common Stock issuance. The discount for illiquidity for the Restricted Common Stock was estimated on the date of grant by taking the average close price of the freely traded common shares for the period in which the services were provided, and applying an illiquidity discount of 10% for each multiple that the total Restricted Common Stock is of the average daily volume for the period, to a maximum of 50%.
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