UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
For the transition period from _________ to _________.
(Exact Name of Registrant as Specified in its Charter)
| (State or Other Jurisdiction | (Commission | (I.R.S. Employer | ||
| of Incorporation) | File Number) | Identification No.) |
(Address of Principal Executive Offices)
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| OTC |
Securities registered pursuant to Section 12(g) of the Act:
N/A
(Title of class)
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 preceding 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. ☒ NO ☐
Note: The Registrant has voluntarily filed all periodic reports under the Securities Exchange Act of 1934 for the preceding 12 months.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). ☒ 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.
(Check One):
| Large Accelerated filer ☐ | Accelerated filer ☐ |
| Smaller
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 Regulation 12b-2 of the Exchange Act): YES ☐ NO
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of September 5, 2024, the issuer had shares issued, issuable, and outstanding.
IDAHO COPPER CORPORATION
QUARTERLY REPORT ON FORM 10-Q
July 31, 2024
TABLE OF CONTENTS
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, that involve substantial risks and uncertainties. Forward-looking statements include statements preceded by, followed by or that include the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project,” “intend” and similar words or expressions. In addition, any statements that refer to expectations, projections, or other characterizations of future events or circumstances are forward-looking statements. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements. Investors should carefully consider all of such risks before making an investment decision with respect to the Company’s stock. The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements for Idaho Copper Corporation. Any forward-looking statement made by us in this Form 10Q is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.
| 2 |
PART I. FINANCIAL INFORMATION
ITEM 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
IDAHO COPPER CORPORATION
(UNAUDITED)
Contents
| 3 |
IDAHO COPPER CORPORATION
Condensed Consolidated Balance Sheet
(unaudited)
| July 31, | January 31, | |||||||
| 2024 | 2024 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Right of use asset | ||||||||
| Deposit | ||||||||
| Total assets | $ | $ | ||||||
| CURRENT LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accrued expenses to related parties | ||||||||
| Accrued interest, current portion | ||||||||
| Lease liability | ||||||||
| Bond liabilities | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Bond liabilities | ||||||||
| Convertible notes payable, net of discounts | ||||||||
| Accrued interest, non-current portion | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 7) | ||||||||
| Stockholders’ deficit | ||||||||
| Preferred stock, $ par value, shares authorized, and shares issued and outstanding at July 31, 2024 and January 31, 2024, respectively | ||||||||
| Common stock, $ par value, shares authorized, and shares issued and outstanding at July 31, 2024 and January 31, 2024, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Subscription receivable | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| 4 |
IDAHO COPPER CORPORATION
Condensed Consolidated Statement of Operations
(unaudited)
| Three Months Ended | For the Six Months Ended | |||||||||||||||
| July 31, | July 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Operating expenses | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Payroll and related expenses | ||||||||||||||||
| Rent expense | ||||||||||||||||
| Stock-based compensation | ||||||||||||||||
| Other general and administrative expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Amortization of beneficial conversion feature | ( | ) | ( | ) | ||||||||||||
| Amortization of debt discount | ( | ) | ( | ) | ( | ) | ||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted net loss per common share | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Basic and diluted weighted average common shares outstanding | ||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
| 5 |
IDAHO COPPER CORPORATION
Condensed Consolidated Statements of Changes in Stockholders’ Deficit
For the Six Months Ended July 31, 2024 and 2023
(unaudited)
| Additional | ||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Subscription | Accumulated | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Receivable | Deficit | Total | |||||||||||||||||||||||||
| Balance, January 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||
| Common stock options issued for services | - | |||||||||||||||||||||||||||||||
| Net loss for the period ended April 30, 2023 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, April 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||
| Warrants issued | - | - | ||||||||||||||||||||||||||||||
| Net loss for the period ended July 31, 2023 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, July 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||
| Balance, January 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Adoption of ASU 2020-06 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Sale of preferred stock | - | |||||||||||||||||||||||||||||||
| Conversion of convertible notes payable | - | |||||||||||||||||||||||||||||||
| Exercise of options | - | ( | ) | |||||||||||||||||||||||||||||
| Exercise of options | - | ( | ) | |||||||||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||||||
| Net loss for the period ended April 30, 2024 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, April 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||
| Exercise of options | - | - | ||||||||||||||||||||||||||||||
| Sale of preferred stock | - | |||||||||||||||||||||||||||||||
| Stock based compensation | - | |||||||||||||||||||||||||||||||
| Exercise of warrant | - | ( | ) | |||||||||||||||||||||||||||||
| Costs related to sale of preferred stock | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net loss for the period ended July 31, 2024 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance, July 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 6 |
IDAHO COPPER CORPORATION
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended July 31,
(unaudited)
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation | ||||||||
| Amortization of beneficial conversion feature | ||||||||
| Amortization of debt discount | ||||||||
| Change in assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ( | ) | ( | ) | ||||
| Accrued expenses - related party | ||||||||
| Accrued interest | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from convertible notes payable | ||||||||
| Proceeds from sale of preferred stock | ||||||||
| Net cash provided by financing activities | ||||||||
| Net increase in cash | ( | ) | ||||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Conversion of convertible notes payable | $ | $ | ||||||
| Cashless exercise of warrants and options | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 7 |
IDAHO COPPER CORPORATION
and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
July 31, 2024
(unaudited)
NOTE 1 – NATURE OF OPERATIONS
The accompanying consolidated financial statements include the financial statements of Idaho Copper Corporation (formerly known as Joway Health Industries Group Inc.) (referred to herein as “Idaho Copper”). Idaho Copper is hereinafter referred to as the “Company,” “we” and “us.”
On February 3, 2022, the Company consummated the transactions contemplated by the Stock Purchase Agreement dated as of January 31, 2022 (the “Purchase Agreement”), by and among the Company, Crystal Globe Limited, a company incorporated under the laws of British Virgin Islands (the “Seller”), and JHP Holdings, Inc., a Nevada corporation (the “Buyer”), pursuant to which the Buyer purchased shares of common stock of the Company from the Seller.
On January 23, 2023, the Company entered into and consummated the transactions contemplated by a share exchange agreement (the “Share Exchange Agreement”) by and among the Company, International CuMo Mining Corporation, an Idaho corporation (“ICUMO”), and all of the shareholders of ICUMO (collectively, the “ICUMO Shareholders”). Pursuant to the terms of the Share Exchange Agreement (the “RTO”), the ICUMO Shareholders transferred all the issued and outstanding shares of common stock of ICUMO to the Company in exchange for shares of the Company’s common stock, par value $ per share. As a result of this share exchange (the “Exchange”), ICUMO became a wholly owned subsidiary of the Company. See Note 7. For financial reporting purposes, the acquisition of ICUMO and the change of control in connection with the acquisition represented a “reverse merger” and ICUMO is deemed to be the accounting acquirer in the transaction. ICUMO is the acquirer for financial reporting purposes, and the Company is the acquired company. Consequently, the assets and liabilities and the operations that are reflected in the historical financial statements prior to the acquisition are those of ICUMO.
The Company continues to be a “smaller reporting company,” as defined under the Exchange Act of 1934, as amended (the “Exchange Act”) following the Exchange, however, as a result of the Exchange, the Company has ceased to be a “shell company” (as such term is defined in Rule 12b-2 under the Exchange Act).
ICUMO Background
ICUMO is an exploration and development company with mineral right interests in the United States of America. ICUMO was originally incorporated under the laws of Nevada in 2005, as Mosquito Mining Corp. In 2013, the Company was moved to Idaho and the name changed to Idaho CuMo Mining Corporation. In early February 2023 the name was changed to Idaho Copper Corporation.
Nature of Operations
The Company is in the process of exploring its mineral rights interests in the United States and at the date of these consolidated financial statements, has not yet determined whether any of its mineral properties contain economically recoverable mineral reserves. Accordingly, the carrying amount of mineral right interests represents cumulative expenditures incurred to date and does not necessarily reflect present or future values. The recovery of these costs is dependent upon the discovery of economically recoverable mineral reserves and the ability of the Company to obtain the necessary financing to complete their exploration and development and to resolve any environmental, regulatory, or other constraints. Uncertainty also exists with respect to the recoverability of the carrying value of certain mineral rights interests. The ability of the Company to realize its investment in resource properties is contingent upon the resolution of the uncertainties and confirmation of the Company’s title to the mineral properties.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company follows the accrual basis of accounting in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) and has a year-end of January 31. On March 9, 2023, the Company filed with the State of Nevada for a year-end change from December 31 to January 31. The condensed consolidated financial statements are based on the balance sheets and statements of operations of ICUMO on a post-merger basis.
The unaudited condensed consolidated financial statements of the Company for the six-month periods ended July 31, 2024, and 2023 have been prepared in accordance with US GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X. Accordingly, they do not include all the information and footnotes required by US GAAP for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments unless otherwise indicated), which are, in the opinion of management, necessary for the fair presentation of the financial position and the results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The condensed consolidated balance sheet information as of January 31, 2024, was derived from the audited financial statements included in the Company’s financial statements as of and for the year ended January 31, 2024, included as an exhibit to the Company’s Quarterly Report on Form 10-Q for the period ended July 31, 2024, as filed with the Securities and Exchange Commission (the “SEC”). These condensed consolidated financial statements should be read in conjunction with that report.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant intercompany balances and transactions have been eliminated in the consolidation. The condensed consolidated financial statements included herein, presented in accordance with US GAAP and stated in United States dollars, have been prepared by the Company, pursuant to the rules and regulations of the SEC.
| 8 |
Liquidity and Going Concern
We
have incurred recurring losses since inception and expect to continue to incur losses as a result of legal and professional fees and
our corporate general and administrative expenses. On July 31, 2024, we had $
Use of Estimates
The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash
Cash
is comprised of cash balances. Cash is held at major financial institutions and is subject to credit risk to the extent that those balances
exceed applicable Federal Deposit Insurance Corporation (“FDIC”) insurance amounts of $
The Company accounts for stock-based instruments issued to employees in accordance with ASC Topic 718, Compensation – Stock Compensation, and Certain Redeemable Financial Instruments. Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued to employees. The value of the portion of an award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method.
Fair Value of Financial Instruments
The book values of cash, accounts receivable, and accounts payable approximate their respective fair values due to the short-term nature of these instruments. The fair value hierarchy under US GAAP distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs).
The hierarchy consists of three levels
| ● | Level one — Quoted market prices in active markets for identical assets or liabilities; | |
| ● | Level two — Inputs other than level one inputs that are either directly or indirectly observable; and | |
| ● | Level three — Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use. |
Determining which category an asset or liability falls within the hierarchy requires significant judgment. We evaluate our hierarchy disclosures each quarter.
Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by FASB, ASC Topic 260, Earnings per Share. Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. The Company has dilutive shares (related to the convertible notes (see Note 4)) of common stock as of July 31, 2024.
Income Taxes
The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and loss carryforwards and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income (loss) in the years in which those temporary differences are expected to be recovered or settled.
The effect of a change in tax rules on deferred tax assets and liabilities is recognized in operations in the year of change. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.
Tax benefits of uncertain tax positions are recognized only if it is more likely than not that the Company will be able to sustain a position taken on an income tax return. The Company has no liability for uncertain tax positions as of July 31, 2024. Interest and penalties, if any, related to unrecognized tax benefits would be recognized as interest expense. The Company does not have any accrued interest or penalties associated with unrecognized tax benefits, nor was any significant interest expense recognized during the six months ended July 31, 2024.
| 9 |
Recently Issued and Adopted Accounting Pronouncements
In
August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for convertible Instruments and Contracts in an
Entity’s Own Equity, to address the complexity in accounting for certain financial instruments with characteristics of liabilities
and equity. This ASU significantly changes the guidance on the issuer’s accounting for convertible instruments and the guidance
on the derivative scope exception for contracts in an entity’s own equity so that fewer conversion features will require separate
recognition, and fewer freestanding instruments, like warrants with require liability treatment. ASU 2020-06 is effective for smaller
reporting companies for fiscal years beginning after December 15, 2023. The Company adopted this standard on February 1, 2024. As a result,
the Company derecognized $
Convertible Debentures
The Company presents convertible debentures separately in its debt and equity components within the balance sheet. The fair value of a compound instrument at issuance is assigned to its respective debt and equity components. The fair value of the debt component is established first with the equity component being determined by the residual amount.
The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date in which they are granted. Estimating fair values for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant.
The fair value of the Company’s stock option and warrant grants are estimated using the Black-Scholes-Merton Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or warrants, and future dividends. Compensation expenses are recorded based upon the value derived from the Black-Scholes-Merton Option Pricing model and based on actual experience. The assumptions used in the Black-Scholes-Merton Option Pricing model could materially affect compensation expense recorded in future periods.
Unproven Mineral Right Interests
The Company will capitalize into intangible assets all costs, net of any recoveries, of acquiring, exploring, and evaluating an unproven mineral right interest, until the rights to which they relate are placed into production, at which time these deferred costs will be amortized over the estimated useful life of the rights upon commissioning the property, or written-off if the rights are disposed of, impaired or abandoned, when applicable.
Management reviews the carrying amounts of mineral rights annually or when there are indicators of impairment and will recognize impairment based upon current exploration results and upon assessment of the probability of profitable exploitation of the rights. An indication of impairment includes but is not limited to expiration of the right to explore, substantive expenditure in the specific area is neither budgeted nor planned, and if the entity has decided to discontinue exploration activity in a specific area. Management’s assessment of the mineral right’s fair value is also based upon a review of other mineral right transactions that have occurred in the same geographic area as that of the rights under review.
Costs will include the cash consideration and the fair value of shares issued on the acquisition of mineral rights. Rights acquired under option or joint venture agreements, whereby payments are made at the sole discretion of the Company, are not accrued and are only recorded in the accounts when the payments are made. Proceeds from property option payments received by the Company are netted against the deferred costs of the related mineral rights, with any excess being included in operations.
The application of the Company’s accounting policy for unproven mineral right interests requires judgment in determining whether it is likely that future economic benefits will flow to the Company, which may be based on assumptions about future events or circumstances. Estimates and assumptions may change if new information becomes available. If, after expenditures are capitalized, information becomes available suggesting that the recovery of the expenditures is unlikely, the amount capitalized is impaired with a corresponding charge to profit or loss in the period in which the new information becomes available.
There may be material uncertainties associated with the Company’s title and ownership of its unproven mineral right interests. Ordinarily the Company does not own the land upon which an interest is located, and title may be subject to unregistered prior agreements or transfers or other undetected defects.
Impairment of Long-Lived Assets
The Company’s future long-lived assets and other assets (consisting of property and equipment) will be reviewed for impairment in accordance with the guidance of the FASB ASC Topic 360-10, Property, Plant, and Equipment. Long lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the undiscounted future net cash flows expected to be generated by that asset. If the carrying amount of an asset exceeds its estimated future undiscounted cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.
Reclamation provision
An obligation to incur restoration, rehabilitation and environmental costs arises when environmental disturbance is caused by the exploration, development, or ongoing production of a mineral property interest. Such costs arising from the decommissioning of plant and other site preparation work, discounted to their net present value, are provided and capitalized at the start of each project to the carrying amount of the asset, as soon as the obligation to incur such costs arises. Discount rates using a pre-tax rate that reflect the time value of money are used to calculate the net present value. These costs are charged against profit or loss over the economic life of the related asset, through amortization using either the unit-of-production or straight-line method. The related liability is adjusted for each period for the unwinding of the discount rate and for changes to the current market-based discount rate, amount or timing of the underlying cash flows needed to settle the obligation. Costs for restoration of subsequent site damage which is created on an ongoing basis during production are provided for at their net present values and charged against profits as extraction progresses. As of July 31, 2024, there are no costs as production has not yet commenced.
| 10 |
Related party transactions
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or significant common influence, related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. Related party transactions that are in the normal course of business and have commercial substance are measured at the exchange amount, which is determined on a cost recovery basis.
Stock Purchase Warrants
The Company accounts for warrants issued to purchase shares of its common stock as equity in accordance with FASB ASC 480, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, Distinguishing Liabilities from Equity. We determine the accounting classification of warrants we issue, as either liability or equity classified, by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, then in accordance with ASC 815-40, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock. Under ASC 480, warrants are considered liability classified if the warrants are mandatorily redeemable, obligate us to settle the warrants or the underlying shares by paying cash or other assets, and warrants that must or may require settlement by issuing variable number of shares. If warrants do not meet the liability classification under ASC 480-10, we assess the requirements under ASC 815-40, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature.
If the warrants do not require liability classification under ASC 815-40, in order to conclude equity classification, we also assess whether the warrants are indexed to our common stock and whether the warrants are classified as equity under ASC 815-40 or other US GAAP. After all such assessments, we conclude whether the warrants are classified as liability or equity. Liability classified warrants require fair value accounting at issuance and subsequent to initial issuance with all changes in fair value after the issuance date recorded in the statements of operations. Equity classified warrants only require fair value accounting at issuance with no changes recognized subsequent to the issuance date.
NOTE 3 – RECLAMATION BONDS AND PROVISIONS
Reclamation Bonds and Provisions
During
2016, the Company entered into a surety agreement that guarantees the reclamation bond on the CuMo Property. In order to maintain the
good standing of this surety, the Company is required to make an annual payment of $
The security deposit is refundable when the Company completes the required reclamation clean-up costs.
| 11 |
NOTE 4 – CONVERTIBLE NOTES
The
Company has $
| Issue | Maturity | Conversion | Conversion | Warrants | Exercise | Warrant | ||||||||||||||||||||||||||||||
| Balance | Collateral | Date | Date | Price | Shares | Shares | Price | Expiration | ||||||||||||||||||||||||||||
| Steven Rudofsky | $ | $ | $ | |||||||||||||||||||||||||||||||||
| Feehan Partners, LP | $ | $ | $ | |||||||||||||||||||||||||||||||||
| The Jeffrey V. and Karin R. Hembrock Revocable Trust | $ | $ | $ | |||||||||||||||||||||||||||||||||
| The Gaitonde Living Trust, Girish Gaitonde Trustee | $ | $ | $ | |||||||||||||||||||||||||||||||||
| Corey Redfield | $ | $ | $ | |||||||||||||||||||||||||||||||||
| PV Partners, LP | $ | $ | $ | |||||||||||||||||||||||||||||||||
| Shaun Dykes | $ | $ | $ | |||||||||||||||||||||||||||||||||
| Patricia Czerniej | $ | $ | $ | |||||||||||||||||||||||||||||||||
| James Dykes | $ | $ | $ | |||||||||||||||||||||||||||||||||
| Jason Czerniej | $ | $ | $ | |||||||||||||||||||||||||||||||||
| Louise Dykes | $ | $ | $ | |||||||||||||||||||||||||||||||||
| Andrew Brodkey | $ | $ | $ | |||||||||||||||||||||||||||||||||
| Feehan Partners, LP | $ | $ | $ | |||||||||||||||||||||||||||||||||
| Gil Atzmon | $ | $ | $ | |||||||||||||||||||||||||||||||||
| Jon Powell | $ | $ | $ | |||||||||||||||||||||||||||||||||
| Total | $ | |||||||||||||||||||||||||||||||||||
As
of January 31, 2024, there were debt discounts and beneficial conversion features on the above notes payable of $
On
April 5, 2024, holders of $
| 12 |
NOTE 5 – BOND LIABILITIES
The Company has bond liabilities as of July 31, 2024, as follows:
| Principal Amount | Interest Rate | Note Date | Maturity Date | Colla-teral | Origi-nation | Features | ||||||||||||||||||
| Yin Yin Silver Limited | $ | % | (1) | (2) | (5) | |||||||||||||||||||
| Yin Yin Silver Limited | $ | % | (1) | (2) | (5) | |||||||||||||||||||
| Yin Yin Silver Limited | $ | % | (1) | (2) | (5) | |||||||||||||||||||
| Barry Swenson | $ | % | (1) | (2) | (5) | |||||||||||||||||||
| Don H. Adair or Joanne Adair | $ | % | (1) | (3) | (6) (7) | |||||||||||||||||||
| Joseph Swinford or Danielle Swinford | $ | % | (1) | (3) | (6) (7) | |||||||||||||||||||
| Brandon Swain or Sierra Swain | $ | % | (1) | (3) | (6) (7) | |||||||||||||||||||
| Scott Collins or Kendra Collins | $ | % | (1) | (3) | (6) (7) | |||||||||||||||||||
| Carl Collins or Ellen Collins | $ | % | (1) | (3) | (6) | |||||||||||||||||||
| Jim Hammerel | $ | % | (1) | (2) | (5) | |||||||||||||||||||
| Bret Renaud | $ | % | (1) | (2) | (5) | |||||||||||||||||||
| Elatam Group Ltd | $ | % | (1) | (2) | (6) | |||||||||||||||||||
| James Hardy | $ | % | (1) | (2) | (6) | |||||||||||||||||||
| Acepac Holdings | $ | % | (1) | (4) | (6) | |||||||||||||||||||
| Rick Ward | $ | % | (1) | (2) | (6) | |||||||||||||||||||
| Robert & Joan Sweetman | $ | % | (1) | (2) | (6) | |||||||||||||||||||
| Michael Swenson | $ | % | (1) | (2) | (6) | |||||||||||||||||||
| Connie Sun | $ | % | (1) | (2) | (6) | |||||||||||||||||||
| Elizabeth Enoch | $ | % | (1) | (2) | (6) | |||||||||||||||||||
| William C. Stanton and Carol Stanton | $ | % | (1) | (2) | (6) | |||||||||||||||||||
| Total | $ | |||||||||||||||||||||||
| (1) | ||
| (2) | ||
| (3) | ||
| (4) | ||
| (5) | ||
| (6) | ||
| (7) |
| 13 |
NOTE 6 – RELATED PARTY TRANSACTIONS
As
of July 31, 2024, the Company has accrued compensation of $ for its officers as recorded in accrued expenses to related parties.
The Company compensated its officers $
On
January 23, 2023, the Company issued convertible notes payable to the following: Steven Rudofsky (“Rudofsky”), former Chairman
and CEO, for $
On April 3, 2024, the officers of the company, Rudofsky, Brodkey, and Scannell each elected to exercise vested stock options with a strike price of $ and an expiration date of September 30, 2027. All options were exercised on a cashless basis, resulting in the issuance of shares per officer, or a total of common shares.
On April 4, 2024, Feehan and Brodkey executed cashless conversion of and warrants, respectively, into and shares of common stock, respectively.
On April 6, 2024, Dykes executed cashless conversion of warrants into shares of common stock.
On April 8, 2024, Rudofsky executed cashless conversion of warrants into shares of common stock.
On May 1, 2024, Rudofsky, Brodkey, and Scannell each elected to convert accrued compensation of $, $, and $, respectively, into , , and shares of common stock, respectively.
As
of July 31, 2024, the Company has payables of $
NOTE 7 – STOCKHOLDERS’ EQUITY
Preferred Stock
The Company has authorized share capital of shares of preferred stock with par value of $.
The
warrants issued through January 31, 2024, had a Black-Scholes fair value of $
| Stock price | $ | – | ||
| Exercise price | $ | |||
| Expected volatility | % | |||
| Expected term (years) | ||||
| Risk free rate | % | |||
| Dividends | % |
Between
February and July 2024, we entered into subscription agreements (each a “Subscription Agreement”) with certain accredited
investors (each, a “Subscriber” and collectively, the “Subscribers”), pursuant to which the Company offered and
sold to the Subscribers in a private placement offering (the “Offering”), units (each, a “Unit” and, collectively,
the “Units”), for a purchase price of $ per Unit, for gross proceeds of $
As of July 31, 2024, and January 31, 2024, the Company had and of Series A Preferred Stock issued and outstanding, respectively.
Common Stock
The Company has authorized share capital consisted of shares of common stock with par value of $.
As described in Note 4, the Company issued certain shares of its common stock for the conversion of convertible notes payable during the period ended July 31, 2024.
As described in Note 6, the Company issued certain shares of its common stock to related parties during the period ended July 31, 2024.
On May 1, 2024, Rudofsky, Brodkey, and Scannell each elected to convert accrued compensation of $, $, and $, respectively, into , , and shares of common stock, respectively.
| 14 |
During May 2024, the Company issued shares of common stock to an officer as a result of the cashless exercise of their warrants.
For the six months ended July 31, 2024, the Company issued shares of common stock for non-officer services.
As of July 31, 2024, the Company had shares issued, issuable, and outstanding.
Options
On January 23, 2023, as part of the RTO, the Company accepted the assignment of the stock options for common stock from ICUMO to the Company, as consented by the parties. The Company has options issued to various officers, directors, and employees, based on milestones. As of January 31, 2024, and July 31, 2024, and options are vested. The exercise price for the options is $ and they expire on . The Company recognized $ the period ended July 31, 2024, in stock-based compensation expense related to the estimated vesting of these options. As of July 31, 2024, none of the remaining milestones necessary for these options to vest have been met. The remaining additional compensation to be recognized as these options vest is approximately $ thousand during fiscal 2025 based on the current estimated time to reach the milestones.
On April 3, 2024, Brodkey, Scannell, Rudofsky, and Dykes executed cashless conversions of vested options each into shares of common stock each.
Warrants
On April 4, 2024, Feehan and Brodkey executed cashless conversion of and warrants, respectively, into and shares of common stock, respectively.
On April 6, 2024, Dykes executed cashless conversion of warrants into shares of common stock.
On April 6, 2024, four warrant holders executed cashless conversion of warrants into shares of common stock.
On April 8, 2024, Rudofsky executed cashless conversion of warrants into shares of common stock.
As
of July 31, 2024, the Company had
Stock-based Compensation Expense
The Company recognizes stock-based compensation using the straight-line method over the requisite service period or derived service period. The Company recognized stock-based compensation for the three months ended July 31, 2024 and 2023 of $ and $, respectively, and for the six months ended July 31, 2024 and 2023 of $ and $, respectively.
NOTE 8 – COMMITMENTS AND CONTINGENCIES
The Company is subject, from time to time, to claims by third parties under various legal disputes. The defense of such claims, or any adverse outcome relating to any such claims, could have a material adverse effect on the Company’s liquidity, financial condition and cash flows.
Certain conditions may exist as of the date the condensed consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s condensed consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.
The
Company entered into a new long-term lease agreement for warehouse space in Idaho. The lease began on April 1, 2024, with an initial
period of
Initially, the Company measure the right of use asset and liability associated with its office lease using the following inputs:
| Remaining lease term (in years) | ||||
| Discount rate | % |
The
remaining term of the lease was based on the amount of time left before the Company may exercise its right to cancel the lease which
is
The
Company considered whether it was probable it would exercise and extend beyond the initial
| 15 |
The Company records rent on straight-line basis over the terms of the underlying lease. Estimated future minimum lease payments under the lease are as follows:
| Year Ending January 31, | Amount | |||
| 2025 | $ | |||
| Total remaining lease payments | ||||
| Less: imputed interest | ||||
| Present value of remaining lease payments | $ | |||
The rent expense for the six months July 31, 2024, and 2023 was $143,085 and $21,000 respectively.
NOTE 9 – INCOME TAXES
As
of July 31, 2024, and January 31, 2024, the Company has net operating loss carry forwards of $
The
Company’s tax expense differs from the “expected” tax expense for Federal income tax purposes (computed by applying
the United States Federal tax rate of
| July 31, 2024 | January 31, 2024 | |||||||
| Tax expense (benefit) at the statutory rate | $ | ( | ) | $ | ( | ) | ||
| State income taxes, net of federal income tax benefit | ( | ) | ( | ) | ||||
| Change in valuation allowance | ||||||||
| Total | $ | $ | ||||||
The tax effects of the temporary differences between reportable financial statement income and taxable income are recognized as deferred tax assets and liabilities.
The tax year 2023 remains open for examination by federal agencies and other jurisdictions in which it operates.
The tax effect of significant components of the Company’s deferred tax assets and liabilities at July 31, 2024 and January 31, 2024 are as follows:
| July 31, 2024 | January 31, 2024 | |||||||
| Deferred tax assets: | ||||||||
| Net operating loss carryforward | $ | $ | ||||||
| Timing differences | ||||||||
| Total gross deferred tax assets | ||||||||
| Less: Deferred tax asset valuation allowance | ( | ) | ( | ) | ||||
| Total net deferred taxes | $ | $ | ||||||
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.
Because
of the historical earnings history of the
NOTE 10 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events from the condensed consolidated balance sheet through the date of this filing and determined there were no events to disclose or that require recognition in the accompanying condensed consolidated financial statements.
Offering
The
Company filed a registration statement on Form S-1 with the Securities and Exchange Commission (“SEC”) on July 11, 2024,
to offer and resell up to shares of common stock by selling stockholders consisting of (i) up to shares of common
stock issuable upon the conversion of shares of Series A Convertible Non-Voting Preferred Stock, $ par value per share sold
in a private placement offering with Newbridge Securities Corporation acting as the sole placement agent (the “Newbridge Private
Placement Offering”) (ii) up to
The registration statement has not yet been declared effective by the SEC.
| 16 |
ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The statements contained in the following MD&A and elsewhere throughout this Quarterly Report on Form 10-Q, including any documents incorporated by reference, that are not historical facts, including statements about our beliefs and expectations, are “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements preceded by, followed by or that include the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project,” “intend” and similar words or expressions. In addition, any statements that refer to expectations, projections, or other characterizations of future events or circumstances are forward-looking statements.
These forward-looking statements, which reflect our management’s beliefs, objectives, and expectations as of the date hereof, are based on the best judgment of our management. All forward-looking statements made by us in this Form 10-Q are based only on information currently available to us and speak only as of the date on which they are made. Such forward-looking statements are subject to certain risks, uncertainties and assumptions relating to factors that could cause actual results to differ materially from those anticipated in such statements, including, without limitation, the following: economic, social and political conditions, global economic downturns resulting from extraordinary events such as the COVID-19 pandemic and other securities industry risks; interest rate risks; liquidity risks; credit risk with clients and counterparties; risk of liability for errors in clearing functions; systemic risk; systems failures, delays and capacity constraints; network security risks; competition; reliance on external service providers; new laws and regulations affecting our business; net capital requirements; extensive regulation, regulatory uncertainties and legal matters; failure to maintain relationships with employees, customers, business partners or governmental entities; the inability to achieve synergies or to implement integration plans and other consequences associated with risks and uncertainties detailed in our filings with the SEC, including our most recent filings on Forms 8-K, 10-K and 10-Q.
We caution that the foregoing list of factors is not exclusive, and new factors may emerge, or changes to the foregoing factors may occur, that could impact our business. We undertake no obligation to publicly update or revise these statements, whether as a result of new information, future events or otherwise, except to the extent required by the federal securities laws.
This discussion should be read in conjunction with our financial statements filed on our Form 8-K on January 27, 2023, our 2024 Form 10-K, and our condensed consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report on Form 10-Q.
Nature of Operations
The Company is in the process of exploring its mineral right interests in the United States and at the date of these condensed consolidated financial statements, has not yet determined whether any of its mineral properties contain economically recoverable mineral reserves. Accordingly, the carrying amount of mineral right interests represents cumulative expenditures incurred to date and does not necessarily reflect present or future values. The recovery of these costs is dependent upon the discovery of economically recoverable mineral reserves and the ability of the Company to obtain the necessary financing to complete their exploration and development and to resolve any environmental, regulatory, or other constraints. Uncertainty also exists with respect to the recoverability of the carrying value of certain mineral right interests. The ability of the Company to realize its investment in resource properties is contingent upon the maintenance and integrity of the Company’s title to such properties.
Mining Property
To determine material mining operations in accordance with subpart 1300 of SEC Regulation S-K, management considered both quantitative and qualitative factors, assessed in the context of the Company’s overall business and financial condition. The Company concluded that, as of the date of the filing of this Report, its sole material mining operation is the CuMo Project. The Company will update its assessment of individual material mines on an annual basis.
The information relating to such sole material mining operation is contained in the technical report summary (“TRS”) relating to the CuMo Project prepared in compliance with the Item 601(b)(96) and subpart 1300 of Regulation S-K. Reference should be made to the full text of the TRS, a copy of which was filed as Exhibit 96.1 to the Current Report on Form 8-K, dated January 27, 2023.
Pursuant to Item 1302(b)(5) of Regulation S-K (17 C.F.R. §229.1302(b)(5)), the Company states that the TRS was prepared by Shaun M. Dykes, M. Sc. (Eng), P.Geo of Geologic Systems, Ltd. Mr. Dykes is also serving as a technical advisor to the registrant. Mr. Dykes meets the qualifications specified under the definition of “qualified person” under Item 1300 of Regulation S-K.
The CuMo Project currently consists of one hundred and twenty-six (126) federal unpatented lode mining claims, and six (6) patented mining claims. In total, the project comprises approximately 2,640 acres. The unpatented lode mining claims and patented claims are situated in an unorganized mining district, in Boise County, Idaho, spanning Sections in Township 7N and 8N, Range 5E and 6E, Boise Meridian.
No assurances can be given that any of these plans will come to fruition or that if implemented they will necessarily yield positive results.
Independent Valuation
On March 3, 2023, an independent valuation firm issued a valuation of the assets, specifically the CuMo project in Boise County, Idaho, acquired by the Company in the ICUMO transaction. The CuMo project is a molybdenum-copper deposit that will be developed as an open pit mining operation. The fair market value of the assets were $23,919,754.
Recent Developments
As a result of the Exchange, which was consummated January 23, 2023, we are no longer a shell company. However, for the fiscal year ended as of December 31, 2022, we were a shell company and did not generate any revenues.
On February 7, 2023, the Board and the holder of 121,343,700 shares of Common Stock, representing approximately 59.98% of the Company’s voting equity, approved by written consent, in accordance with the applicable provisions of Nevada law, the execution and filing of the Amendment with the Nevada Secretary of State, to effect the change of the Company’s name from “Joway Health Industries Group Inc.” to “Idaho Copper Corporation.” On March 9, 2023, the Company filed the Amendment with the Nevada Secretary of State, with immediate effect.
| 17 |
Off-balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and notes thereto for the six months ended July 31, 2024, and 2023, and related management discussion herein.
Our condensed consolidated financial statements are stated in U.S. Dollars and are prepared in accordance with US GAAP.
Going Concern Qualification
Several conditions and events cast substantial doubt about the Company’s ability to continue as a going concern. The Company has incurred cumulative net losses of $34,085,857 from its inception to July 31, 2024, and requires capital for its contemplated operational and marketing activities to take place. The Company’s ability to raise additional capital through debt or future issuances of capital stock is unknown. The obtainment of additional financing, the successful development of the Company’s contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raises substantial doubt about the Company’s ability to continue as a going concern.
For the three months ended July 31, 2024, compared to the three months ended July 31, 2023
Revenue
The Company has had no revenue historically to date.
Operating Expenses
The Company had operating expenses of $943,460 for the three months ended July 31, 2024, compared to $398,940 for the three months ended July 31, 2023. The increase was primarily due to the increase in stock-based compensation ($364,808 for the three months ended July 31, 2024 compared to $0 for the same period in 2023), rent expense ($29,385 for the three months ended July 31, 2024 compared to $10,500 for the same period in 2023), and other general and administrative expenses ($272,423 for the three months ended July 31, 2024 compared to $10,784 for the same period in 2023), offset by the decrease in professional fees ($81,694 for the three months ended July 31, 2024 compared to $127,656 for the same period in 2023) and payroll and related expenses ($195,150 for the three months ended July 31, 2024 compared to $250,000 for the same period in 2023. The increase in stock-based compensation was primarily due to the conversion of officers’ accrued compensation into common stock. The increase in rent expense was due to larger facility needs. The increase in other general and administrative costs was primarily due to scanning services for the quarter. The decrease in payroll and related expenses was primarily due to officers converting accrued compensation into common stock.
Other Income / Expenses
The Company had other expenses, net, of $92,521 for the three months ended July 31, 2024, compared to $188,590 of expense for the three months ended July 31. 2023.
Net Loss
The Company had a net loss of $1,035,981 for the three months ended July 31, 2024, compared to $587,530 for the three months ended July 31, 2023.
For the six months ended July 31, 2024, compared to the six months ended July 31, 2023
Revenue
The Company has had no revenue historically to date.
Operating Expenses
The Company had operating expenses of $1,918,422 for the six months ended July 31, 2024, compared to $800,096 for the six months ended July 31, 2023. The increase was primarily due to the increase in payroll and related expenses ($452,650 for the six months ended July 31, 2024 compared to $357,000 for the same period in 2024), rent expense ($143,085 for the six months ended July 31, 2024 compared to $21,000 for the same period in 2023), and other general and administrative expenses ($428,022 for the six months ended July 31, 2024 compared to $24,554 for the same period in 2023), stock-based compensation ($554,056 for the six months ended July 31, 2024 compared to $140,741 for the same period in 2023), and professional fees ($340,609 for the six months ended July 31, 2024 compared to $256,801 for the same period in 2023. The increase in payroll and related expenses is related to a pay increase for two officers. The increase in rent expense is primarily due to a settlement of $100,000 and the larger facility rented. The increase in other general and administrative expenses was primarily due to scanning services of $363,268. The increase in stock-based compensation was primarily due to conversions of accrued compensation for officers and the issuances of common stock to various third parties for services. The increase in professional fees relates to increased services required for funding activities and the preparation for the filing of Form S-1.
Other Income / Expenses
The Company had other expenses, net, of $161,825 for the six months ended July 31, 2024, compared to $362,435 of income for the six months ended July 31. 2023.
| 18 |
Net Loss
The Company had a net loss of $2,080,247 for the six months ended July 31, 2024, compared to $1,162,531 for the six months ended July 31, 2023.
Liquidity and Capital Resources
As of July 31, 2024, the Company had cash of $454,256. We do not have sufficient resources to effectuate our business. We expect to incur expenses offset by revenues during the next twelve months of operations. We estimate that these expenses will be comprised primarily of general expenses including overhead, legal and accounting fees. The Company does not project revenue for the next few years, as is typical in mining companies. The Company has and will continue to raise capital to fund the expenses. To maintain our plan of growth, we need to raise a minimum of an additional $750,000. These factors raise substantial doubts about the Company’s ability to continue as a going concern.
Operations used cash of $1,599,274 for the six months ended July 31, 2024, compared to cash used of $579,634 for the same period in 2023.
We used cash in financing activities of $0 for the six months ended July 31, 2024, compared to $0 for the same period in 2023.
We had cash provided by financing activities for the six months ended July 31, 2024, of $2,023,384 compared to $201,200 for the same period in 2023.
We will have to raise funds to pay for our expenses. We may have to borrow money from shareholders or issue debt or equity or enter into a strategic arrangement with a third party. There can be no assurance that additional capital will be available to us. We currently have no arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources. Since we have no such arrangements or plans currently in effect, our inability to raise funds for our operations will have a severe negative impact on our ability to remain a viable company.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a company’s controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its chief executive and chief financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information that it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC’s rules and forms and that information required to be disclosed is accumulated and communicated to the chief executive and interim chief financial officer to allow timely decisions regarding disclosure.
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer / Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer / Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are not effective as of such date. The Chief Executive Officer / Chief Financial Officer have determined that the Company continues to have the following deficiencies which represent a material weakness:
| ● | The Company does not have a majority of independent directors; | |
| ● | Lack of in-house personnel with the technical knowledge to identify and address some of the reporting issues surrounding certain complex or non-routine transactions. With material, complex and non-routine transactions, management has and will continue to seek guidance from third-party experts and/or consultants to gain a thorough understanding of these transactions; | |
| ● | Insufficient personnel resources within the accounting function to segregate the duties over financial transaction processing and reporting; | |
| ● | Insufficient written policies and procedures over accounting transaction processing and period end financial disclosure and reporting processes; and | |
| ● | To remediate our internal control weaknesses, management intends to implement the following measures: as funding permits, the Company will add sufficient accounting personnel to properly segregate duties and to effect a timely, accurate preparation of the financial statements; the Company will hire staff technically proficient at applying U.S. GAAP to financial transactions and reporting; and upon the hiring of additional accounting personnel, the Company will develop and maintain adequate written accounting policies and procedures. |
The additional hiring is contingent upon The Company’s efforts to obtain additional funding through equity or debt and the results of its operations. Management hopes to secure funds in the coming fiscal year but provides no assurances that it will be able to do so.
Limitations on the Effectiveness of Controls
The Company’s officers do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of the control system must reflect that there are resource constraints and that the benefits must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
Changes in Internal Control Over Financial Reporting
During the fiscal quarter covered by this Quarterly Report, there has been a significant change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. With the transaction with ICUMO, the Company has an independent accounting company which has provided a separation of duties.
| 19 |
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these, or other matters may arise from time to time that may harm our business. Except as set forth below, we are currently not aware of any such pending or threatened legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition, or operating results.
Item 1A. Risk Factors
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
The enacted Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) requires the operators of mines to include in each periodic report filed with the SEC certain specified disclosures regarding the Company’s history of mine safety. The Company did not operate any mines during the period covered by this Report and currently does not operate any mines and, as such, is not subject to disclosure requirements regarding mine safety that were imposed by the Dodd-Frank Act.
Item 5. Other Information
None.
| 20 |
Item 6. Exhibits
| * | Filed herewith |
| 21 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| SIGNATURE | TITLE | DATE | ||
| /s/Andrew Brodkey | President and Chief Executive Officer (Principal Executive Officer) | September 5, 2024 | ||
| Andrew Brodkey | ||||
| /s/ Robert Scannell | Chief Financial Officer (Principal Financial and Accounting Officer) | September 5, 2024 | ||
| Robert Scannell |
| 22 |