UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 10-Q
(Mark One) |
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For quarterly period ended September 30, 2016 |
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[ ] 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 333-164908
BULLFROG GOLD CORP.
(Exact name of registrant as specified in its charter)
Delaware | 41-2252162 |
(State or other jurisdiction of | (I.R.S. Employer |
incorporation or organization) | Identification No.) |
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897 Quail Run Drive |
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Grand Junction, Colorado | 81505 |
(Address of principal executive offices) | (Zip Code) |
(970) 628-1670
(Registrants telephone number, including area code)
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. Yes [X] 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | [ ] | Accelerated filer | [ ] |
Non-accelerated filer (Do not check if a smaller reporting company) | [ ] | Smaller reporting company | [X] |
Indicate by check mark whether the registrant is a shell company (as defined in 12b-2 of the Exchange Act.) Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date: 90,232,096 shares of common stock, par value $0.0001, were issued and outstanding as of October 14, 2016.
BULLFROG GOLD CORP.
TABLE OF CONTENTS TO FORM 10-Q
2
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
BULLFROG GOLD CORP.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2016 AND DECEMBER 31, 2015
(unaudited)
Assets | 9/30/16 | 12/31/15 |
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Current assets |
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Cash | $3,352 | $1,024 |
Deposits | 10,682 | 10,682 |
Total current assets | 14,034 | 11,706 |
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Other assets |
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Mineral properties | 130,425 | 270,425 |
Deferred financing fees | 0 | 3,666 |
Total other assets | 130,425 | 274,091 |
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Total assets | $144,459 | $285,797 |
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Liabilities and Stockholders' Equity (Deficit) |
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Current liabilities |
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Accounts payable | $16,172 | $23,488 |
Related party payable | 313,055 | 487,767 |
Note payable | 0 | 2,949,063 |
Accrued interest | 0 | 45,840 |
Other liabilities | 113 | 25,331 |
Total current liabilities | 329,340 | 3,531,489 |
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Total liabilities | 329,340 | 3,531,489 |
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Stockholders' equity (deficit) |
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Preferred stock Series A, 5,000,000 shares authorized, $.0001 par value; zero issued and outstanding as of 9/30/16 and 12/31/15 | 0 | 0 |
Preferred stock Series B, 45,000,000 shares authorized, $.0001 par value; 29,562,500 and 400,000 issued and outstanding as of 9/30/16 and 12/31/15, respectively | 2,956 | 40 |
Common stock, 200,000,000 shares authorized, $ .0001 par value; 89,932,096 and 52,774,892 shares issued and outstanding as of 9/30/16 and 12/31/15, respectively | 8,993 | 5,277 |
Additional paid in capital | 7,703,268 | 6,449,275 |
Accumulated deficit | (7,900,098) | (9,700,284) |
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Total stockholders' equity (deficit) | (184,881) | (3,245,692) |
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Total liabilities and stockholders' equity (deficit) | $144,459 | $285,797 |
See accompanying notes to consolidated financial statements
3
BULLFROG GOLD CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(unaudited)
| Three Months Ended |
| Nine Months Ended | ||||
| 9/30/16 |
| 9/30/15 |
| 9/30/16 |
| 9/30/15 |
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Revenue | $0 |
| $0 |
| $0 |
| $0 |
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Operating expenses |
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General and administrative | 311,991 |
| 92,932 |
| 403,084 |
| 332,186 |
Exploration costs | 0 |
| 29,338 |
| 0 |
| 29,338 |
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Total operating expenses | 311,991 |
| 122,270 |
| 403,084 |
| 361,524 |
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Net operating loss | (311,991) |
| (122,270) |
| (403,084) |
| (361,524) |
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Gain on extinguishment of debt | 0 |
| 0 |
| 2,523,813 |
| 0 |
Loss on asset abandonment | 0 |
| 0 |
| (164,850) |
| 0 |
Interest expense | (8,066) |
| (70,270) |
| (155,693) |
| (207,336) |
Revaluation of warrant liability | 0 |
| 6 |
| 0 |
| 20 |
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Net income (loss) | $(320,057) |
| $(192,534) |
| $1,800,186 |
| $(568,840) |
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Weighted average common shares outstanding - basic | 88,843,207 |
| 50,189,624 |
| 78,661,666 |
| 47,243,863 |
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Weighted average common shares outstanding - diluted | 88,843,207 |
| 50,189,624 |
| 88,506,110 |
| 47,243,863 |
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Income (loss) per common share - basic | $(0.00) |
| $(0.00) |
| $0.02 |
| $(0.01) |
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Income (loss) per common share - diluted | $(0.00) |
| $(0.00) |
| $0.02 |
| $(0.01) |
See accompanying notes to consolidated financial statements
4
BULLFROG GOLD CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(unaudited)
| Nine Months Ended | ||
| 9/30/16 |
| 9/30/15 |
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Cash flows from operating activities |
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Net income (loss) | $1,800,186 |
| $(568,840) |
Adjustments to reconcile net income (loss) to net cash used in operating activities |
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|
Gain on extinguishment of debt | (2,523,813) |
| 0 |
Interest capitalized to note payable | 114,751 |
| 142,897 |
Revaluation of warrant liability | 0 |
| (20) |
Loss on asset abandonment | 164,850 |
| 0 |
Stock-based compensation - options | 0 |
| 78,045 |
Stock issued for services | 237,000 |
| 0 |
Amortization of deferred financing fees | 3,666 |
| 8,250 |
Change in operating assets and liabilities: |
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Accounts payable | (7,316) |
| (1,593) |
Related party payable | 173,624 |
| 214,070 |
Accrued interest | 12,598 |
| 20,628 |
Other liabilities | (25,218) |
| 21,247 |
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Net cash used in operating activities | (49,672) |
| (85,316) |
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Cash flows from investing activity |
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Acquisition of mineral properties | (10,000) |
| 0 |
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Cash flows from financing activities |
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Proceeds from private placement of common stock | 312,000 |
| 89,341 |
Payoff of note payable | (250,000) |
| 0 |
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Net cash provided by financing activities | 62,000 |
| 89,341 |
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Net increase in cash | 2,328 |
| 4,025 |
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Cash, beginning of period | 1,024 |
| 790 |
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Cash, end of period | $3,352 |
| $4,815 |
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Supplemental disclosure of cash flow information |
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Non-cash investing and financing activities |
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Stock issued for debt conversion - related party | $278,438 |
| $0 |
Stock issued for lease payment | $14,850 |
| $4,000 |
Stock issued to payoff note payable | $70,000 |
| $0 |
Stock issued to payoff related party payable | $348,336 |
| $0 |
See accompanying notes to consolidated financial statements
5
BULLFROG GOLD CORP.
Notes to Consolidated Financial Statements
(unaudited)
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Bullfrog Gold Corp. (the Company) is a junior exploration company engaged in the acquisition and exploration of properties that may contain gold, silver and other metals in the United States. The Companys target properties are those that have been the subject of historical exploration. The Company owns, controls or has acquired mineral rights on Federal patented and unpatented mining claims in the state of Nevada for the purpose of exploration and potential development of gold, silver and other metals on a total of approximately 2,200 acres. The Company plans to review opportunities and acquire additional mineral properties with current or historic precious and base metal mineralization with meaningful exploration potential.
The Companys properties do not have any proven reserves. The Company plans to conduct exploration programs on these properties with the objective of ascertaining whether any of its properties contain economic concentrations of precious and base metals that are prospective for mining.
Basis of Presentation
The consolidated unaudited financial statements included in this Form 10-Q have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q. Accordingly, these financial statements do not include all of the disclosures required by U.S. generally accepted accounting principles for complete financial statements. These consolidated unaudited interim financial statements should be read in conjunction with the audited financial statements for the fiscal year ended December 31, 2015 in our Annual Report on Form 10-K. The financial information furnished herein reflects all adjustments consisting of normal, recurring adjustments which, in the opinion of management, are necessary for a fair presentation of our financial position, the results of operations and cash flows for the periods presented. Operating results for the three and nine months ended September 30, 2016 are not necessarily indicative of results for future quarters or periods in the fiscal year ending December 31, 2016.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Standard Gold Corp. (Standard Gold) a Nevada corporation and Rocky Mountain Minerals Corp. (RMM) a Nevada corporation. All significant inter-entity balances and transactions have been eliminated in consolidation.
Going Concern and Managements Plans
The Company has incurred losses from operations since inception and has an accumulated deficit of approximately $7,900,098 as of September 30, 2016. The Companys financial statements have been prepared on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Companys continuation as a going concern is dependent upon attaining profitable operations through achieving revenue growth.
The Company has no operating revenues and does not expect to in 2016. Should we be unable to continue as a going concern, we may be unable to realize the carrying value of our assets and to meet our obligations as they become due. To continue as a going concern, we are dependent on continued fund raising. However, we have no commitment from any party to provide additional capital and there is no assurance that such funding will be available when needed, or if available, that its terms will be favorable or acceptable to us.
Cash and Cash Equivalents and Concentration
The Company considers all highly liquid investments with a maturity of three months or less when acquired to be cash equivalents. The Company places its cash with a high credit quality financial institution. The Companys account at this institution is insured by the Federal Deposit Insurance Corporation up to $250,000. At September 30, 2016, the Companys cash balance was approximately $3,000. To reduce its risk associated with the failure of such financial institution, the Company will evaluate at least annually the rating of the financial institution in which it holds deposits.
6
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Actual results could differ from those estimates.
Mineral Property Acquisition and Exploration Costs
Mineral property acquisition and exploration costs are expensed as incurred until such time as economic reserves are quantified. To date, the Company has not established any proven or probable reserves on its mineral properties. Costs of lease, exploration, carrying and retaining unproven mineral lease properties are expensed as incurred. The Company has chosen to expense all mineral exploration costs as incurred given that it is still in the exploration stage. Once the Company has identified proven and probable reserves in its investigation of its properties and upon development of a plan for operating a mine, it would enter the development stage and capitalize future costs until production is established. When a property reaches the production stage, the related capitalized costs will be amortized over the estimated life of the probable-proven reserves. When the Company has capitalized mineral properties, these properties will be periodically assessed for impairment of value and any diminution in value. To date, the Company has not established the commercial feasibility of any exploration prospects; therefore, all costs are being expensed. During the three months ended September 30, 2016 and 2015, the Company did not incur exploration costs. Costs of property acquisitions are being capitalized, and a required payment of $10,000 was made to Mojave Gold Mining Corporation (Mojave) as part of the Option to Purchase Agreement (Option).
Deferred Financing Fees
In conjunction with the NPX Convertible Note (as discussed in Note 4) the Company paid financing fees of approximately $22,000 in cash in April 2014. These fees were capitalized as deferred financing fees and were amortized over the life of the Note using the effective interest method. Amortization of deferred financing fees included in interest expense during the three months ended September 30, 2016 and 2015 was approximately $0 and $2,750, respectively and during the nine months ended September 30, 2016 and 2015 was approximately $3,666 and $8,250, respectively .
Fair Value Measurement
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair value:
Level 1 - Valuation based on quoted market prices in active markets for identical assets and liabilities.
Level 2 - Valuation based on quoted market prices for similar assets and liabilities in active markets.
Level 3 - Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring managements best estimate of what market participants would use as fair value.
The Company does not have any assets or liabilities measured using Level 1 or 2 inputs. The Companys Level 3 financial liabilities measured at fair value consisted of the warrant liability.
Fair Value of Financial Instruments
The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash, accounts payable, and other liabilities. The warrant liability, a long-term liability, is already recorded at fair value.
Income Taxes
Income taxes are accounted for under the asset and liability method in accordance with ASC 740, "Income Taxes". Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial carrying amounts of existing assets and liabilities and their respective tax bases as well as operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the periods 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 income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance to the extent that the recoverability of the asset is unlikely to be recognized.
7
The Company reports a liability, if any, for unrecognized tax benefits resulting from uncertain tax positions taken, or expected to be taken, in an income tax return. The Company has elected to classify interest and penalties related to unrecognized income tax benefits, if and when required, as part of income tax expense in the statement of operations. No liability has been recorded for uncertain income tax positions, or related interest or penalties as of September 30, 2016 or December 31, 2015. The periods ended December 31, 2015, 2014, 2013 and 2012 are open to examination by taxing authorities.
Long Lived Assets
The Company assesses the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. When the Company determines that the carrying value of long-lived assets may not be recoverable based upon the existence of one or more indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows.
Preferred Stock
The Company accounts for its preferred stock under the provisions of the ASC on Distinguishing Liabilities from Equity, which sets forth the standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. This standard requires an issuer to classify a financial instrument that is within the scope of the standard as a liability if such financial instrument embodies an unconditional obligation to redeem the instrument at a specified date and/or upon an event certain to occur. The Company has determined that its preferred stock does not meet the criteria requiring liability classification as its obligation to redeem these instruments is not based on an event certain to occur. Future changes in the certainty of the Companys obligation to redeem these instruments could result in a change in classification.
Derivative Financial Instruments
The Company accounts for derivative instruments in accordance with Financial Accounting Standards Board (FASB) ASC 815, Derivatives and Hedging (ASC 815), which requires additional disclosures about the Companys objectives and strategies for using derivative instruments, how the derivative instruments and related hedged items are accounted for, and how the derivative instruments and related hedging items affect the financial statements. The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risk. Terms of convertible debt and equity instruments are reviewed to determine whether or not they contain embedded derivative instruments that are required under ASC 815 to be accounted for separately from the host contract, and recorded on the balance sheet at fair value. The fair value of derivative liabilities, if any, is required to be revalued at each reporting date, with corresponding changes in fair value recorded in current period operating results. Pursuant to ASC 815, an evaluation of specifically identified conditions is made to determine whether the fair value of warrants issued is required to be classified as equity or as a derivative liability.
Stock-Based Compensation
Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). This ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.
The estimated fair value of each stock option as of the date of grant was calculated using the Black-Scholes pricing model. The Company estimates the volatility of its common stock at the date of grant based on the volatility of a comparable peer company which is publicly traded. The Company determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms, vesting schedules and post-vesting forfeitures. The Company uses the risk-free interest rate on the implied yield currently available on U.S. Treasury issues with an equivalent remaining term approximately equal to the expected life of the award. The Company has never paid any cash dividends on its common stock and does not anticipate paying any cash dividends in the foreseeable future. The shares of common stock subject to the stock-based compensation plan shall consist of unissued shares, treasury shares or previously issued shares held by any subsidiary of the Company, and such number of shares of common stock are reserved for such purpose.
8
On March 31, 2015 we granted options to purchase 4,500,000 shares of our common stock of the 4,500,000 shares of common stock under our 2011 Equity Incentive Plan.
Net Income (Loss) per Common Share
The following table shows basic and diluted earnings per share
| Three Months Ended | Nine Months Ended | ||
| 9/30/16 | 9/30/15 | 9/30/16 | 9/30/15 |
Basic and Diluted Earnings (Loss) per Common Share |
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Earnings (loss) per common share | $(320,057) | $(192,534) | $1,800,186 | $(586,840) |
Basic weighted average shares outstanding | 88,843,207 | 50,189,624 | 78,661,666 | 47,243,863 |
Dilutive effect of common stock equivalents | - | - | 9,844,444 | - |
Diluted weighted average common shares outstanding, assuming conversion of common stock equivalents | 88,843,207 | 50,189,624 | 88,506,110 | 47,243,863 |
Basic Earnings (Loss) Per Common Share | - | - | .02 | (.01) |
Diluted Earnings (Loss) Per Common Share | - | - | .02 | (.01) |
11,000,000 and 18,562,500 of preferred shares issued in July 2016 and August 2016 respectively were included in the computation of diluted shares. 4,500,000 of stock options were included in the computation for the nine months ended September 30, 2016. 9,668,660 of warrants were not included in the diluted weighted average shares calculation because they were out-of-the money for the nine month period ending September 30, 2016. The NPX Convertible Loan could convert into shares of the Companys common shares at a conversion price equal to $0.25 per common share; which was not included in the computation of diluted shares, however, this loan was paid off with the issuance of 18,562,500 series B preferred shares. In periods where the Company has a net loss, all common stock equivalents are excluded as they would be anti-dilutive.
Risks and Uncertainties
Our limited operating history makes it difficult for potential investors to evaluate our business or prospective operations. Since our formation, we have not generated any revenues. As an early stage company, we are subject to all the risks inherent in the initial organization, financing, expenditures, complications and delays inherent in a new business. Investors should evaluate an investment in us in light of the uncertainties encountered by developing companies in a competitive environment. Our business is dependent upon the implementation of our business plan. There can be no assurance that our efforts will be successful or that we will ultimately be able to attain profitability.
Natural resource exploration, and exploring for gold in particular, is a business that by its nature is very speculative. There is a strong possibility that we will not discover gold or any other resources which can be mined or extracted at a profit. Even if we do discover gold or other deposits, the deposit may not be of the quality or size necessary for us or a potential purchaser of the property to make a profit from actually mining it. Few properties that are explored are ultimately developed into producing mines. Unusual or unexpected geological formations, geological formation pressures, fires, power outages, labor disruptions, flooding, explosions, cave-ins, landslides and the inability to obtain suitable or adequate machinery, equipment or labor are just some of the many risks involved in mineral exploration programs and the subsequent development of gold deposits.
Our business is exploring for gold and other minerals. In the event that we discover commercially exploitable gold or other deposits, we will not be able to make any money from them unless the gold or other minerals are actually mined or we sell all or a part of our interest. Accordingly, we will need to find some other entity to mine our properties on our behalf, mine them ourselves or sell our rights to mine to third parties. Mining operations in the United States are subject to many different federal, state and local laws and regulations, including stringent environmental, health and safety laws. In the event we assume any operational responsibility for mining our properties, it is possible that we will be unable to comply with current or future laws and regulations, which can change at any time. It is possible that changes to these laws will be adverse to any potential mining operations. Moreover, compliance with such laws may cause substantial delays and require capital outlays in excess of those anticipated, adversely affecting any potential mining operations. Our future mining operations, if any, may also be subject to liability for pollution or other environmental damage. It is possible that we will choose to not be insured against this risk because of high insurance costs or other reasons.
9
Recent Accounting Pronouncements
There are several new accounting pronouncements issued by the FASB which are not yet effective. Management does not believe any of these accounting pronouncements will be applicable and therefore will not have a material impact on the Company's financial position or operating results.
NOTE 2 - STOCKHOLDERS EQUITY
Recent Sales of Unregistered Securities
On June 26, 2015, the Company issued Arden Larson 200,000 shares of the Companys common stock for a total of $4,000 in settlement of an option payment to purchase the Klondike Project.
On July 22, 2015, the Company sold an aggregate of 5,583,847 shares of common stock with gross proceeds to the Company of $89,341 to a certain accredited investor pursuant to a subscription agreement. The proceeds from this offering were used primarily for general corporate purposes.
On October 29, 2015, the Company issued Mojave 1,250,000 shares (valued at $20,125) of the Companys common stock in settlement of an option and work commitment payment as part of the October 29, 2014 Option.
On February 2, 2016, the Board of Directors of the Company approved a stock compensation distribution to David Beling, CEO and President, as full payment of his salary from June 2014 through December 2015. There were a total of 24,687,204 shares awarded to Mr. Beling on February 12, 2016 at a price of $0.01411 per share.
On June 21, 2016, the Company sent a notice of termination to Arden Larson with respect to the Option Agreement dated June 11, 2012 and amended May 6, 2015 for the Klondike Project in Nevada. The Company issued Larson 270,000 shares (valued at $14,850) of common stock as full and final payment. The Company will have no further obligations.
On June 30, 2016, the Company has settled all debts and obligations with respect to a December 12, 2012 Facility Agreement with RMB Australia Holdings Limited (RMB). The principal and interest due RMB under the Agreement as of June 30, 2016 was $2,843,813. Components of the payout were $250,000 of cash paid to RMB on June 30, 2016, which was raised from recent private placements, and issuance of one million shares of BFGC common stock on July 5, 2016 valued at $70,000.
Effective June 30, 2016, the Company sold an aggregate of 18,666,667 shares (11,000,000 series B preferred shares and 7,666,667 common shares) with gross proceeds to the Company of $280,000 to certain accredited investors pursuant to a stock agreement.
On August 1, 2016, the Company issued 18,562,500 series B preferred shares to NPX Metals. See Note 4 for additional discussion.
On August 24, 2016, the Company issued 2,500,000 common shares for consulting services.
On August 29, 2016, the Company sold an aggregate of 500,000 common shares with gross proceeds to the Company of $32,000 to certain accredited investors pursuant to a stock agreement.
On September 22, 2016, the Company issued 133,333 common shares for consulting services.
On October 4, 2016, the Company issued Kjeld Thygesen, the Companys newly appointed independent Director, 300,000 common shares.
10
Convertible Preferred Stock
In August 2011, the Board of Directors designated 5,000,000 shares of its Preferred Stock as Series A Preferred Stock. Each share of Series A preferred stock par value $0.0001 per share (Preferred Stock) is convertible into one share of common stock at the option of the preferred holder. The Series A Preferred Stock is not entitled to receive dividends and does not possess redemption rights. The Company is prohibited from effecting the conversion of the Series A Preferred Stock to the extent that, as a result of the conversion, the holder of such shares beneficially owns more than 4.99% (or, if this limitation is waived by the holder upon no less than 61 days prior notice to us, 9.99%) in the aggregate of the issued and outstanding shares of our common stock calculated immediately after giving effect to the issuance of shares of common stock upon conversion of the Series A Preferred Stock. The holders of the Companys Series A Preferred Stock are also entitled to certain liquidation preferences upon the liquidation, dissolution or winding up of the business of the Company.
In October 2012, the Board of Directors designated 5,000,000 shares of its Preferred Stock as Series B Preferred Stock. In July 2016, the Board of Directors amended the total Series B Preferred Stock to 45,000,000. Each share of Series B Preferred Stock is convertible into one share of common stock at the option of the preferred holder. The Series B Preferred Stock is not entitled to receive dividends and does not possess redemption rights. The Company is prohibited from effecting the conversion of the Series B Preferred Stock to the extent that, as a result of the conversion, the holder of such shares beneficially owns more than 4.99% (or, if this limitation is waived by the holder upon no less than 61 days prior notice to us, 9.99%) in the aggregate of the issued and outstanding shares of our common stock calculated immediately after giving effect to the issuance of shares of common stock upon conversion of the Series B Preferred Stock. For a period of 24 months from the issue date, the holder of Series B Preferred Stock is entitled to price protection as determined in the subscription agreement. The Company has evaluated this embedded lower price issuance feature in accordance with ASC 815 and determined that is clearly and closely related to the host contract and is therefore accounted for as an equity instrument.
As of September 30, 2016, the Company had outstanding 29,562,500 series B preferred shares.
Common Stock Options
On September 30, 2011, the Board of Directors and stockholders adopted the 2011 Stock Incentive Plan (the 2011 Plan). Under the 2011 Plan, options may be granted which are intended to qualify as Incentive Stock Options under Section 422 of the Internal Revenue Code of 1986 (the "Code") or which are not intended to qualify as Incentive Stock Options thereunder. In addition, direct grants of stock or restricted stock may be awarded. The 2011 Plan has reserved 4,500,000 shares of common stock for issuance.
There were a total of 4,500,000 options granted from the 2011 Plan in March 2015 (the March 2015 Options). These options issued are nonqualified stock options and were 100% vested on grant date. All expense related to these stock options has been recognized.
A summary of the March 2015 Options is presented below:
March 2015 Options |
| Options |
| Strike Price |
| Term |
|
|
Officer |
| 1,775,000 |
| $0.025 |
| 10 years |
| (1) |
Consultant |
| 250,000 |
| $0.025 |
| 10 years |
|
|
Consultant |
| 355,000 |
| $0.025 |
| 10 years |
|
|
Consultant |
| 705,000 |
| $0.025 |
| 10 years |
|
|
Director |
| 1,415,000 |
| $0.025 |
| 10 years |
| (2) |
TOTAL |
| 4,500,000 |
|
|
|
|
|
|
(1) Issued to David Beling, the Company's Chief Executive Officer and President
(2) Issued to Alan Lindsay, the Company's Chairman of the Board of Directors.
11
The Black Scholes option pricing model was used to estimate the fair value of $78,045 of the March 2015 Options with the following inputs:
Options | Exercise Price | Term | Volatility | Risk Free Interest Rate | Fair Value |
4,500,000 | $0.025 | 6 years | 87.1% | 1.71% | $78,045 |
A summary of the stock options as of September 30, 2016 and changes during the period are presented below:
|
| Number of Options |
|
| Weighted Average Exercise Price |
|
| Weighted Average Remaining Contractual Life (Years) |
| Aggregate Intrinsic Value | |||
Balance at December 31, 2014 |
|
| - |
|
|
| - |
|
|
| - |
| - |
Granted |
|
| 4,500,000 |
|
| $ | 0.025 |
|
|
| 10.00 |
| - |
Exercised |
|
| - |
|
|
| - |
|
|
| - |
| - |
Forfeited |
|
| - |
|
|
| - |
|
|
| - |
| - |
Canceled |
|
| - |
|
|
| - |
|
|
| - |
| - |
Balance at December 31, 2015 |
|
| 4,500,000 |
|
| $ | 0.025 |
|
|
| 9.25 |
| - |
Granted |
|
| - |
|
|
| - |
|
|
| - |
| - |
Exercised |
|
| - |
|
|
| - |
|
|
| - |
| - |
Forfeited |
|
| - |
|
|
| - |
|
|
| - |
| - |
Canceled |
|
| - |
|
|
| - |
|
|
| - |
| - |
Balance at September 30, 2016 |
|
| 4,500,000 |
|
| $ | 0.025 |
|
|
| 8.50 |
| - |
Options exercisable at September 30, 2016 |
|
| 4,500,000 |
|
| $ | 0.025 |
|
|
| 8.50 |
| - |
NOTE 3 - DERIVATIVE FINANCIAL INSTRUMENTS
In applying current accounting standards to the financial instruments issued in the 2012 Private Placement, February 2013 Private Placement, August 2013 Private Placement and October 2013 Private Placement, the Company first considered the classification of the Series A and Series B Preferred Stock under ASC 480 Distinguishing Liabilities from Equity, and the Warrants under ASC 815 Derivatives and Hedging. The Series A and Series B Preferred Stock is perpetual preferred stock without redemption or dividend provisions, contingent or otherwise. Further, the Series A and Series B Preferred Stock is convertible into a fixed number of shares of Common Stock with adjustments to the conversion price solely associated with equity restructuring events such a stock splits and recapitalization. Generally redemption provisions that provide for the mandatory payment of cash to the Investor to settle the contract or certain provisions that cause the number of linked shares of Common Stock to vary result in liability classification; and, in some instances, classification outside of stockholders equity. There being no such provisions associated with the Series A or Series B Preferred Stock, it is classified as a component of stockholders equity.
The warrants were also evaluated for purposes of classification. The warrants issued contain a feature that is not consistent with the concept of stockholders equity. The exercise price of the warrants is subject to adjustment upon the issuance of common stock or common share linked contracts at prices below the contractual exercise prices. The 2012 Private Placement and February 2013 Private Placement warrants price adjustment expires four years after the date of issuance. The August 2013 Private Placement and October 2013 Private Placement warrants were amended on December 2, 2013 and allows for a price adjustment that expires three years after the date of original issuance. Current accounting standards provide that such provisions are not consistent with the concept of stockholders equity. As a result, all warrants with price adjustment features require classification in liability as derivative warrants. Derivative warrants are carried initially at fair value (up to the value of cash received) and subsequently at fair value with changes in fair value reflected in income.
12
|
| Closing date of private placement |
|
| |||||||||||||||||
|
| 11/19/12 |
| 12/17/12 |
| 02/04/13 |
| 06/21/13 |
| 08/15/13 |
| 10/09/13 |
| Total warrant liability | |||||||
Ending balance at December 31, 2014 |
| $ | 13 |
| $ | 5 |
| $ | 2 |
| $ | - |
| $ | - |
| $ | - |
| $ | 20 |
Change in fair value of warrant liability |
|
| (13) |
|
| (5) |
|
| (2) |
|
| - |
|
| - |
|
| - |
|
| (20) |
Ending balance at December 31, 2015 |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
Change in fair value of warrant liability |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
|
| - |
Ending balance at September 30, 2016 |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
| $ | - |
The estimated fair value of the warrants was calculated using the Black-Scholes pricing model, however we concluded the estimated fair value of the warrants was not material and does not require separate disclosure of calculation inputs.
Warrants contain limitations on exercise, including the limitation that the holders may not convert their warrants to the extent that upon exercise the holder, together with its affiliates, would own in excess of 4.99% of our outstanding shares of common stock (subject to an increase upon at least 61-days notice by the subscriber to us, of up to 9.99%).
The second classification-related accounting consideration related to the possibility that the conversion option embedded in the Series A and Series B Preferred Stock may require classification outside of stockholders equity. Generally, an embedded feature in a hybrid financial instrument (such as the Series A and Series B Preferred Stock) that both meets the definition of a derivative financial instrument and is not clearly and closely related to the host contract in term of risks would require bifurcation and accounting under derivative standards. The embedded conversion option is a feature that embodies risks of equity. The Company has concluded that the Series A and Series B Preferred Stock is a contract that affords solely equity risks.
NOTE 4 - NOTES PAYABLE
RMB Facility (the Facility)
On December 10, 2012 (the Closing Date), the Company entered into the Facility with RMB, as the lender, in the amount of $4,200,000. The loan proceeds from the Facility were used to fund an agreed work program relating to the Newsboy gold project located in Arizona and for agreed general corporate purposes. Standard Gold, the Companys wholly owned subsidiary is the borrower under the Facility and the Company is the guarantor of Standard Golds obligations under the Facility. Standard Gold paid an arrangement fee of 7% of the Facility amount due upon the first draw down of the Facility. The Facility funds were available to drawdown until March 31, 2014 with the final repayment date due 24 months after the Closing Date, which was December 10, 2014. The Facility bears interest at the rate of LIBOR plus 7% with interest payable quarterly in cash.
On December 15, 2014, RMB amended the Facility to extend the repayment date to December 15, 2015. All interest accrued but unpaid as of December 15, 2014 was capitalized and added to the outstanding principal balance. On December 15, 2015, RMB amended the Facility to extend the repayment date to December 15, 2016.
As stated in Note 2, on June 30, 2016, the Company has settled all debts and obligations with respect to the Facility Agreement with RMB. The principal and interest due RMB under the Agreement as of June 30, 2016 was $2,843,813. Components of the payout were $250,000 of cash paid to RMB on June 30, 2016, which was raised from recent private placements, and issuance of one million shares of the Companys common stock with a value of $70,000 resulting in a gain on settlement of $2,523,813.
13
NPX Convertible Note
On April 25, 2014 (NPX Closing Date), the Company entered into a Securities Purchase Agreement for an unsecured 12.5% convertible promissory note (the Note) with NPX Metals, Inc (NPX), as the lender, in the amount of $220,000. The Note proceeds were used to fund the Klondike Project and for general corporate purposes. The Company paid an arrangement fee of 10% of the Note and issued 220,000 warrants to purchase one full share at a price of $0.35 within three years from the NPX Closing Date. The Note principal and unpaid accrued interest were due and payable 24 months from the NPX Closing Date. The president of NPX is Johnathan Lindsay, the son of the chairman of the board of the Company Alan Lindsay. During the term of the Note, NPX could elect by giving five days to convert their Note and any accrued but unpaid interest thereon, into shares of the Companys common shares at a conversion price equal to $0.25 per common share. Additionally, for each common share purchased there will be a three year warrant to purchase one hundred percent of the number of shares purchased at a per share exercise price of $0.35.
On July 25, 2016, the Company has settled all debts and obligations with respect the Note. The principal and interest due NPX under the Note as of July 25, 2016 was $278,438. As settlement of the Note the Company issued NPX 18,562,500 shares of Series B Preferred Stock on August 1, 2016. As a result of NPX being a related party, zero gain was realized on settlement.
The ability of NPX to exercise the warrants is not contingent upon the conversion of the Note and, accordingly, we determined that the warrant was detachable from the Note. The estimated fair value of the warrant was calculated on the date of issuance using the Black-Scholes pricing model, however we concluded the estimated fair value of the warrant was not material and does not require separate accounting treatment. The warrant also contains a provision that the warrant will be adjusted under certain conditions in the event future warrants are issued with more favorable terms.
Related Party
As of September 30, 2016 the Company has a related party payable with David Beling, CEO and President, of $313,055. This amount consists of $200,480 of expense reports plus interest of $33,825 and salary of $75,000 plus interest of $3,750.
NOTE 5 - COMMITMENTS
On June 11, 2012, the Company entered into an option agreement that was amended on May 6, 2015 with Arden Larson, an unrelated party, to purchase a 100% interest in the Klondike Project (Klondike) that currently includes 109 unpatented mining claims. Klondike is located in the Alpha Mining District about 40 miles north of Eureka, Nevada.
As stated in Note 2, on June 21, 2016, the Company sent a notice of termination to Arden Larson with respect to the Option Agreement dated June 11, 2012 and amended May 6, 2015 for the Klondike Project in Nevada. The Company issued Larson 270,000 shares of common stock as full and final payment, this resulted in a loss on abandonment of $164,850. The Company will have no further obligations.
On March 23, 2015 (Effective Date), RMM entered into a Mineral Lease and Option to Purchase Agreement (the Barrick Agreement) with Barrick Bullfrog Inc. (Barrick Bullfrog) involving patented mining claims, unpatented mining claims, and mill site claims (Properties) located three miles west of Beatty, Nevada. These Properties are strategically located adjacent to the Companys Bullfrog Gold Project and include two patents that cover the southwest half of the Montgomery-Shoshone (M-S) open pit gold mine. In October 2014 the Company optioned the northeast half of the M-S pit and now controls the entire pit.
RMM shall expend as minimum work commitments for the benefit of the Properties prior to the 5th anniversary of the Effective Date per the schedule below:
Anniversary of Effective Date | Minimum Project Work Commitment ($) |
First | 100,000 |
Second | 200,000 |
Third | 300,000 |
Fourth | 400,000 |
Fifth | 500,000 |
14
Item 2. Managements Discussion And Analysis Of Financial Condition And Results Of Operations
Certain statements in this Management's Discussion and Analysis (MD&A), other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements generally can be identified by the use of forward-looking terminology such as may, would, expect, intend, could, estimate, should, anticipate, or believe, and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers should carefully review the risk factors and related notes included under Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission on March 30, 2016.
The following MD&A is intended to help readers understand the results of our operation and financial condition, and is provided as a supplement to, and should be read in conjunction with, our Interim Unaudited Financial Statements and the accompanying Notes to Interim Unaudited Financial Statements under Part 1, Item 1 of this Quarterly Report on Form 10-Q.
Growth and percentage comparisons made herein generally refer to the nine months ended September 30, 2016 compared with the nine months ended September 30, 2015 unless otherwise noted. Unless otherwise indicated or unless the context otherwise requires, all references in this document to we, us, our, the Company, and similar expressions refer to Bullfrog Gold Corp., and depending on the context, its subsidiaries.
Company History and Recent Events
Bullfrog Gold Corp., was incorporated under the laws of the State of Delaware on July 23, 2007 as Kopr Resources Corp. On July 19, 2011, the Companys Board of Directors (the Board) approved the filing of an Amended and Restated Certificate of Incorporation of the Company to authorize (i) the change of the name of the Company to "Bullfrog Gold Corp." from "Kopr Resources Corp." (ii) the increase in the authorized capital stock to 250,000,000 shares and (iii) the change in par value of the capital stock to $0.0001 per share. The Company is in the exploration stage of its resource business.
Company Overview
We are an exploration stage company engaged in the acquisition and exploration of properties that may contain gold and other mineralization primarily in the United States.
Bullfrog Project
The Bullfrog Project lies approximately 4 miles west of the town of Beatty and 120 miles northwest of Las Vegas, Nevada. Standard Gold initially acquired in 2011 a 100% right, title and interest in 79 lode claims and 2 patented claims that contain approximately 1,600 acres subject to a 3% net smelter royalty.
On October 29, 2014, Rocky Mountain Minerals Corp. (RMM) a wholly owned subsidiary of the Company, entered into an Option Agreement (the Option) with Mojave. Mojave holds and possesses the purchase rights to 100% of 12 patented mining claims located in Nye County, Nevada. This property is contiguous to the Companys Bullfrog Project and covers approximately 156 acres, including the northeast half of the Montgomery-Shoshone (M-S) pit mined by Barrick Gold in the 1990s.
Mojave granted to RMM the sole and immediate working right and option with respect to the property until the 10th anniversary of the closing date, to earn a 100% interest in and to the property free and clear of all charges encumbrances and claims, save and except a sliding scale NSR Royalty.
15
In order to maintain in force the working right and Option granted to it, and to exercise the Option, RMM granted Mojave 750,000 shares of common stock and paid $16,000. RMM must pay to Mojave a total of $190,000 over the next 10 years. For reference, Barrick Bullfrog (Barrick) terminated a lease on these patents after they ceased operations in late 1999.
On March 23, 2015, RMM entered into a Mineral Lease and Option to Purchase Agreement with Barrick involving 6 patented mining claims, 20 unpatented mining claims, and 8 mill site claims located four miles west of Beatty, Nevada and covers approximately 444 acres. These properties are strategically located adjacent to the Companys Bullfrog Gold Project and include two patents that cover the southwest half of the M-S open pit from which Barrick produced approximately 220,000 ounces of gold by the late 1990s. Underground mining in the early 1900s produced approximately 70,000 ounces of gold from the M-S deposit. Also included in the agreement is the northern one third of the main Bullfrog deposit where Barrick mined approximately 2.1 million additional ounces by open pit and underground methods. In addition to prospective adjacent lands, these acquisitions provide the potential to expand the M-S deposit along strike and at depth and in the northern part of the main Bullfrog deposit.
The Company also has access to Barricks substantial data base within a 1.5 mile radius of the leased lands to further advance its exploration and development programs. To maintain the lease and option, the Company must spend $1.5 million dollars within five years on the Barrick properties and then pay Barrick 3.25 million shares of the Companys common stock while providing a 2% gross royalty on production from the Barrick properties. Overriding royalties of 5% net smelter returns and 5% gross proceeds are respectively limited to three claims and two patents in the main Bullfrog pit area. Barrick has retained a back-in right to reacquire a 51% interest in the Barrick properties, subject to definition of a mineral resource on the Barrick properties meeting certain criteria, and reimbursing the Company in an amount equal to two and one half times Company expenditures on the Barrick properties.
Company management estimated in April 2015 that 41,000 ounces of gold in 1.44 million tons of material averaging 0.97 gram per ton remains within a cutoff depth up to 75 meters under the existing M-S pit. This manual estimate was based on cross sections typically spaced 15 meters apart, a cutoff grade of 0.3 gram gold per ton at the top and bottom of mineral intervals, and drill data and pit surveys completed by Barrick. Notwithstanding, Barrick makes no representation concerning the accuracy or completeness of the data used by the Company or any estimates made by the Company. Additional drilling is required to confirm some of the Companys mineral projections and to test for extensions at greater depths and along strike beyond the existing pit limits.
Half of this M-S mineralization is on two Barrick patents within the pit and half is on two of the 12 Mojave patents. The direct ratio of waste to mineral tons within a cross-sectional preliminary pit outline is 0.97:1, but this does not include waste removal required for ramps and other considerations that would otherwise be included in a future pit plan based on computerized block modelling and 3-D mine planning and design programs. It is cautioned that the Companys current and expanded properties contain no reserves or resources and that the estimates and additional potential mineralization discussed herein may never become viable, feasible or economic. These estimates were mainly prepared to assess the available M-S information and plan additional drilling.
Significant drilling is required to test projections of mineralized trends and structures that extend for considerable distances to the north and east of the M-S pit on the original lands acquired by the Company in 2011. Located east of the M-S pit is an area 700 meters by 1,300 meters in which there is only one shallow hole from which there is no data available. Only a small portion of this area may be prospective, but the area certainly warrants additional study and exploration drilling.
There is only one drill hole located about 150 meters northeast of the M-S pit limit and another hole 1,000 meters northeast of the pit along strike of a major geologic structure. In this regard, the Companys lands extend nearly 5,000 meters north-northeast of the pit and there has been very little drilling in this area, even though several structures have been mapped by Barrick and others.
Barrick drilled twelve deep holes in the M-S area ranging from 318 meters to 549 meters. Notable mineral intercepts from four holes below the central part of the pit are summarized below:
16
| Intercept Data, Meters | Gold | |
Hole No. | Thickness | Under Pit | g/t |
717 | 51.8 | 70 | 1.35 |
| 18.3 | 135 | 0.59 |
| 15.2 | 150 | 0.68 |
| 160.0 | 180 | 0.96 |
732 | 10.7 | 200 | 0.84 |
| 79.2 | 330 | 0.74 |
733 | 12.2 | 130 | 1.14 |
| 13.7 | 220 | 0.75 |
| 29.0 | 250 | 0.70 |
734 | 4.6 | 15 | 6.03 |
| 21.3 | 70 | 1.43 |
| 22.9 | 130 | 0.89 |
| 4.6 | 190 | 1.04 |
These results demonstrate that substantial amounts of gold occur in an exceptionally large epithermal system that has good potential for expansion and possibly higher grades at depth. Three of these intercepts are less than 75 meters below the existing pit. Two holes located 40 meters and 90 meters east of the 160 meter interval in hole #717 contained no significant mineralization at this depth, whereas the 29 meters of mineral in hole #733 is 60 meters west and the mineral zone is open to the north, south and west.
For reference, Barrick terminated all mining and milling operations in the autumn of 1999 when their cash production costs exceeded gold prices that averaged less than $300 per ounce for the year and reached a low of $258/oz in August 1999. The economic margins for heap leaching lower grades at current gold prices near $1200/oz are deemed better than in 1999, and the Company is positioned to explore such opportunities. Furthermore, Barrick never controlled or had access to a patented claim on the immediate east and north limits of the M-S pit, but this patent is owned by the Company.
During the past year the Company has studied Barricks entire electronic data base and much of their paper data base obtained from their Elko, Nevada and Salt Lake City, Utah offices. On April 11, 2016 the Company distributed a press release that included a mineral inventory estimate of 470,000 ounces of gold, as summarized below.
Mineral Inventory Estimates
| Tonnes | Gold | Gold |
Pit Areas | Millions | G/T | Ounces |
M-S Shallow | 1.1 | 1.06 | 38,612 |
M-S Deeper | 0.9 | 0.93 | 26,813 |
Bullfrog North | 13.3 | 0.88 | 375,051 |
BF NE Mystery Hill | 0.9 | 0.80 | 26,813 |
Total/Average | 16.4 | 0.89 | 469,961 |
Based on cross sectional estimation methods using a nominal gold cut-off grade of 0.3 g/t. Average waste to mineral ratio was estimated at less than 5 to 1.
These estimates are supported by close-spaced drill holes upon which Barrick produced 2.3 million ounces of gold from proven and probable ore reserves during 1989 to 1999. As a result, it would not require much more drilling or expense to upgrade these inventories to much higher classifications and meet US and Canadian industry standards. For reference, the large electronic data base acquired from Barrick includes 253,900 meters or 157 miles of drilling in 1,298 holes and a paper data base that may weigh 2,000 pounds. In this regard, the Company is the only entity that examined the Bullfrog Project data base after it was re-located to Barricks Elko and Salt Lake City offices in 2000 and performed detailed evaluations of mineralization remaining around the M-S and Bullfrog mines. Notwithstanding, Barrick makes no representation concerning the accuracy, completeness or application of their data by the Company. It is further cautioned that the Bullfrog Project contains no reserves or resources and that the mineral inventory estimates and other forward looking statements herein may never become viable, feasible or economic.
17
Metallurgy
In 1994 Kappes Cassiday of Reno, NV performed simulated heap leach column tests on 250 kg samples with results as follows:
Size, inch | -1.5 | -3/8 |
Calc. Head, gold opt | .035 | .029 |
Rec., % | 71.4 | 75.9 |
Leach time, days | 41 | 41 |
In 1995, Barrick performed a pilot heap leach test on 844 tons that were crushed to -½ inch and averaged 0.019 gold opt. In only 41 days of leaching, 67% of the gold was recovered while cyanide and lime consumptions were exceptionally low.
In 1986 St Joe column leached a 22-ton composite of minus 12-inch material grading 0.037 gold opt to simulate heap leaching material at a coarse run-of-mine (ROM) size and recovered 49% in 59 days of leaching, which they projected to 54% for leaching 90 days.
In summary, the Bullfrog Project mineralization has good heap leach gold recoveries for crushing to 1.5 inch or less and at ROM size. The latter is particularly important since much additional low grade under 0.3 g/t that must be excavated from a pit could be ROM heap leached to supplement production.
Results of Operations
Three Months Ended September 30, 2016 Compared to September 30, 2015
| Three Months Ended | ||
| 9/30/16 |
| 9/30/15 |
|
|
|
|
Revenue | $0 |
| $0 |
|
|
|
|
Operating expenses |
|
|
|
General and administrative | 311,991 |
| 92,932 |
Exploration costs | 0 |
| 29,338 |
|
|
|
|
Total operating expenses | 311,991 |
| 122,270 |
|
|
|
|
Net operating loss | (311,991) |
| (122,270) |
|
|
|
|
Interest expense | (8,066) |
| (70,270) |
Revaluation of warrant liability | 0 |
| 6 |
|
|
|
|
Net income (loss) | $(320,057) |
| $(192,534) |
18
Nine Months Ended September 30, 2016 Compared to September 30, 2015
| Nine Months Ended | ||
| 9/30/16 |
| 9/30/15 |
|
|
|
|
Revenue | $0 |
| $0 |
|
|
|
|
Operating expenses |
|
|
|
General and administrative | 403,084 |
| 332,186 |
Exploration costs | 0 |
| 29,338 |
|
|
|
|
Total operating expenses | 403,084 |
| 361,524 |
|
|
|
|
Net operating loss | (403,084) |
| (361,524) |
|
|
|
|
Gain on extinguishment of debt | 2,523,813 |
| 0 |
Loss on asset abandonment | (164,850) |
| 0 |
Interest expense | (155,693) |
| (207,336) |
Revaluation of warrant liability | 0 |
| 20 |
|
|
|
|
Net income (loss) | $1,800,186 |
| $(568,840) |
We are still in the exploration stage and have no revenues to date.
During the nine months ended September 30, 2016 we had a net income compared to a net loss for the three months ended September 30, 2016. The net income was a result of the final note payoff to RMB that came with a gain on extinguishment of debt of approximately $2,500,000. The terms of the payoff have been discussed throughout the body of this Form 10Q and a complete disclosure can be found on the Form 8K filed with the Securities and Exchange Commission on July 7, 2016. Additionally, David Beling, President & CEO, agreed to a 50% salary reduction effective January 1, 2016 which results in an annual salary of $100,000 and a reduction to general and administrative costs. Additionally, the Klondike Project agreement was terminated in June 2016 resulting in a loss on asset abandonment of $164,850. The increase in general and administrative expense during the three and nine months ended September 30, 2016 was due to the issuance of stock for services.
Liquidity and Capital Resources
Losses from operations have been incurred since inception, with the exception of the three months ended June 30, 2016, and there is an accumulated deficit of $7,900,098 as of September 30, 2016. Continuation as a going concern is dependent upon raising additional funds and attaining profitable operations. On December 10, 2012, the Company entered into the Facility with RMB, as the lender, in the amount of $4.2 million.
As previously discussed the RMB debt was paid off on June 30, 2016.
On March 31, 2015 we granted options to purchase 4,500,000 shares of our common stock of the 4,500,000 shares of common stock available under our 2011 Equity Incentive Plan.
On March 23, 2015 (Effective Date), RMM the 100% owned subsidiary of the Company entered into a Mineral Lease and Option to Purchase Agreement (Agreement) with Barrick Bullfrog involving patented mining claims, unpatented mining claims, and mill site claims (Properties) located three miles west of Beatty, Nevada. These Properties are strategically located adjacent to the Companys Bullfrog Gold Project and include two patents that cover the southwest half of the Montgomery-Shoshone (M-S) open pit gold mine. In October 2014 the Company optioned the northeast half of the M-S pit and now controls the entire pit.
19
RMM shall expend as minimum work commitments for the benefit of the Properties prior to the fifth anniversary of the effective date per the schedule below:
Anniversary of Effective Date | Minimum Project Work Commitment ($) |
First | 100,000 |
Second | 200,000 |
Third | 300,000 |
Fourth | 400,000 |
Fifth | 500,000 |
As previously stated, the Company received $280,000 from certain accredited investors to pay off the RMB debt on June 30, 2016.
On July 22, 2015, the Company sold an aggregate of 5,583,847 shares of common stock with gross proceeds to the Company of $89,341 to a certain accredited investor pursuant to a subscription. The proceeds from this offering will be used primarily for general corporate purposes.
On August 29, 2016, the Company sold an aggregate of 500,000 common shares with gross proceeds to the Company of $32,000 to certain accredited investors pursuant to a stock agreement.
Additional expenses will require funding for the entirety of the amount that we spend in 2016. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. The trading price of our common stock and a downturn in the U.S. equity and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock.
We have no revenues and do not expect to have revenues in 2016. The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. Should we be unable to continue as a going concern, we may be unable to realize the carrying value of our assets and to meet our obligations as they become due. To continue as a going concern, we are dependent on continued fund raising. However, we have no commitment from any party to provide additional capital and there is no assurance that such funding will be available when needed, or if available, that its terms will be favorable or acceptable to us.
There can be no assurance that additional financing will be available at all or on acceptable terms. If additional financing is not available, we may have to substantially reduce or cease operations.
Off Balance Sheet Arrangements
We do not engage in any activities involving variable interest entities or off-balance sheet arrangements.
Critical Accounting Policies and Use of Estimates
Stock based compensation is measured at grant date, based on the fair value of the award, and is recognized as an expense over the employees requisite service period. We estimate the fair value of each stock option as of the date of grant using the Black-Scholes pricing model. The Company estimates the volatility of its common stock at the date of grant based on the volatility of comparable peer companies which are publicly traded. The Company determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms, vesting schedules and post-vesting forfeitures. The Company uses the risk-free interest rate on the implied yield currently available on U.S. Treasury issues with an equivalent remaining term approximately equal to the expected life of the award. The Company has never paid any cash dividends on its common stock and does not anticipate paying any cash dividends in the foreseeable future.
20
The Company accounts for derivative instruments in accordance with FASB ASC 815, Derivatives and Hedging, which requires additional disclosures about the Companys objectives and strategies for using derivative instruments, how the derivative instruments and related hedged items are accounted for, and how the derivative instruments and related hedging items affect the financial statements. The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risk. Terms of convertible debt and equity instruments are reviewed to determine whether or not they contain embedded derivative instruments that are required under ASC 815 to be accounted for separately from the host contract, and recorded on the balance sheet at fair value. The fair value of derivative liabilities, if any, is required to be revalued at each reporting date, with corresponding changes in fair value recorded in current period operating results. Pursuant to ASC 815, an evaluation of specifically identified conditions is made to determine whether the fair value of warrants issued is required to be classified as equity or as a derivative liability.
Item 3. Quantitative And Qualitative Disclosures And Market Risk
As a smaller reporting company, as that term is defined in Item 10(f)(1) of Regulation S-K, we are not required to provide information required by this Item.
Item 4. Controls And Procedures
Disclosure Controls and Procedures
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of September 30, 2016 our management concluded its evaluation of the effectiveness of the design and operation of our disclosure controls and procedures.
Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating and implementing possible controls and procedures.
Our management does not expect that our disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control systems objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls 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, 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. The design of any system of controls is based in part upon 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.
With respect to the quarterly period and nine months ending September 30, 2016, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934. Based upon our evaluation regarding the quarterly period and nine months ending September 30, 2016, our management, including our Chief Executive Officer, has concluded that its disclosure controls and procedures were effective.
Changes in Internal Controls
There have been no changes in the Companys internal control over financial reporting during the three months ended September 30, 2016 that have materially affected, or are reasonably likely to materially affect, the Companys internal controls over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We know of no material, active or pending legal proceedings against the Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
Item 1A. Risk Factors
There have been no changes to the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015
Item 2. Unregistered Sales Of Equity Securities And Use Of Proceeds
On October 4, 2016, the Company issued 300,000 common shares of restricted common stock as a result of his election to the Board of Directors.
On September 22, 2016, the Company issued 133,333 common shares for consulting services. The shares were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act of 1933, as amended (the Securities Act).
On August 29, 2016, the Company sold an aggregate of 500,000 common shares with gross proceeds to the Company of $32,000 to certain accredited investors pursuant to a stock agreement. The common shares were issued to accredited investors, as such term is defined in the Securities Act and were offered and sold in reliance on the exemption from registration afforded by Section 4(a)(2) and Regulation D (Rule 506) under the Securities Act.
On August 24, 2016, the Company issued 2,500,000 common shares for consulting services. The shares were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act.
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
None
Item 5. Other Information
None
Item 6. Exhibits
Exhibit Number | Description |
31 | Certification of Chief Executive Officer and Chief Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* |
32 | Certification of Chief Executive Officer and Chief Financial Officer filed pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* |
101.ins | XBRL Instance Document |
101.sch | XBRL Taxonomy Schema Document |
101.cal | XBRL Taxonomy Calculation Document |
101.def | XBRL Taxonomy Linkbase Document |
101.lab | XBRL Taxonomy Label Linkbase Document |
101.pre | XBRL Taxonomy Presentation Linkbase Document |
*Filed herein
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SIGNATURE
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.
Date: October 24, 2016 | BULLFROG GOLD CORP. |
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| By: | /s/ David Beling |
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| Name: David Beling |
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| Title: President, Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial and Accounting Officer) |
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EXHIBIT 31
CERTIFICATION OF PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, David Beling, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Bullfrog Gold Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. designed such disclosure controls and procedures, or caused such internal control over financial reporting to be designed under my supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that was materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the board of directors of the registrant's board of directors (or other persons performing the equivalent functions):
a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial data; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: October 24, 2016 |
| BULLFROG GOLD CORP. |
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| By: | /s/ David Beling |
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| Name: David Beling |
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| Title: President, Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial and Accounting Officer) |
EXHIBIT 32
CERTIFICATION OF PRESIDENT, CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Bullfrog Gold Corp. (the Company), does hereby certify, that:
The Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2016 (the Form 10-Q) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: October 24, 2016 |
| BULLFROG GOLD CORP. |
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| By: | /s/ David Beling |
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| Name: David Beling |
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| Title: President, Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial and Accounting Officer) |
Document and Entity Information |
9 Months Ended |
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Sep. 30, 2016
shares
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Document and Entity Information | |
Entity Registrant Name | Bullfrog Gold Corp. |
Document Type | 10-Q |
Document Period End Date | Sep. 30, 2016 |
Amendment Flag | false |
Entity Central Index Key | 0001448597 |
Current Fiscal Year End Date | --12-31 |
Entity Common Stock, Shares Outstanding | 89,932,096 |
Entity Filer Category | Smaller Reporting Company |
Entity Current Reporting Status | Yes |
Entity Voluntary Filers | No |
Entity Well-known Seasoned Issuer | No |
Document Fiscal Year Focus | 2016 |
Document Fiscal Period Focus | Q3 |
Trading Symbol | bfgc |
Consolidated Balance Sheets - USD ($) |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Current assets: | ||
Cash | $ 3,352 | $ 1,024 |
Deposits | 10,682 | 10,682 |
Total current assets | 14,034 | 11,706 |
Other assets: | ||
Mineral properties | 130,425 | 270,425 |
Deferred financing fees | 3,666 | |
Total other assets | 130,425 | 274,091 |
Total assets | 144,459 | 285,797 |
Current liabilities: | ||
Accounts payable | 16,172 | 23,488 |
Related party payable | 313,055 | 487,767 |
Notes payable, current | 2,949,063 | |
Accrued interest, current | 45,840 | |
Other liabilities | 113 | 25,331 |
Total current liabilities | 329,340 | 3,531,489 |
Long term liabilities: | ||
Total liabilities | 329,340 | 3,531,489 |
Stockholders' equity (deficit) | ||
Preferred stock value | 2,956 | 40 |
Common stock value | 8,993 | 5,277 |
Additional paid-in capital | 7,703,268 | 6,449,275 |
Accumulated deficit | (7,900,098) | (9,700,284) |
Total stockholders' equity (deficit) | (184,881) | (3,245,692) |
Total liabilities and stockholders' equity (deficit) | $ 144,459 | $ 285,797 |
Balance Sheets (Parenthetical) - $ / shares |
Sep. 30, 2016 |
Dec. 31, 2015 |
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Preferred Stock, Par Value | $ 0.0001 | $ 0.0001 |
Preferred Stock, Shares Authorized | 50,000,000 | 50,000,000 |
Preferred Stock, Issued | 29,562,500 | 400,000 |
Common Stock, Par Value | $ 0.0001 | $ 0.0001 |
Common Stock, Shares Authorized | 200,000,000 | 200,000,000 |
Common Stock, Issued | 89,932,096 | 52,774,892 |
Common Stock, Outstanding | 89,932,096 | 52,774,892 |
Preferred Series B | ||
Preferred Stock, Par Value | $ 0.0001 | $ 0.0001 |
Preferred Stock, Issued | 29,562,500 | 400,000 |
Consolidated Statements of Operations - USD ($) |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
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Income Statement | ||||
Revenue | ||||
Operating expenses: | ||||
General and administrative expenses | 311,991 | 92,932 | 403,084 | 332,186 |
Exploration costs | 29,338 | 29,338 | ||
Total operating expenses | 311,991 | 122,270 | 403,084 | 361,524 |
Operating loss | (311,991) | (122,270) | (403,084) | (361,524) |
Gain on extinguishment of debt | 2,523,813 | |||
Loss on asset abandonment | (164,850) | |||
Interest expense | 8,066 | 70,270 | 155,693 | 207,336 |
Revaluation of warrant liability | 6 | 20 | ||
Net income (loss) | $ (320,057) | $ (192,534) | $ 1,800,186 | $ (568,840) |
Basic and diluted loss per share | $ 0.03 | $ 0.00 | $ 0.02 | $ (0.01) |
Weighted average number of common shares outstanding - basic | 88,843,207 | 50,189,624 | 78,661,666 | 47,243,863 |
Weighted average number of common shares outstanding - diluted | 88,843,207 | 50,189,624 | 88,506,110 | 47,243,863 |
Nature of Business and Summary of Significant Accounting Policies |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||
Notes | ||||||||||||||||||||||||||||||||||||||||||||||
Nature of Business and Summary of Significant Accounting Policies | NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business Bullfrog Gold Corp. (the Company) is a junior exploration company engaged in the acquisition and exploration of properties that may contain gold, silver and other metals in the United States. The Companys target properties are those that have been the subject of historical exploration. The Company owns, controls or has acquired mineral rights on Federal patented and unpatented mining claims in the state of Nevada for the purpose of exploration and potential development of gold, silver and other metals on a total of approximately 2,200 acres. The Company plans to review opportunities and acquire additional mineral properties with current or historic precious and base metal mineralization with meaningful exploration potential.
The Companys properties do not have any proven reserves. The Company plans to conduct exploration programs on these properties with the objective of ascertaining whether any of its properties contain economic concentrations of precious and base metals that are prospective for mining.
Basis of Presentation The consolidated unaudited financial statements included in this Form 10-Q have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q. Accordingly, these financial statements do not include all of the disclosures required by U.S. generally accepted accounting principles for complete financial statements. These consolidated unaudited interim financial statements should be read in conjunction with the audited financial statements for the fiscal year ended December 31, 2015 in our Annual Report on Form 10-K. The financial information furnished herein reflects all adjustments consisting of normal, recurring adjustments which, in the opinion of management, are necessary for a fair presentation of our financial position, the results of operations and cash flows for the periods presented. Operating results for the three and nine months ended September 30, 2016 are not necessarily indicative of results for future quarters or periods in the fiscal year ending December 31, 2016.
Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Standard Gold Corp. (Standard Gold) a Nevada corporation and Rocky Mountain Minerals Corp. (RMM) a Nevada corporation. All significant inter-entity balances and transactions have been eliminated in consolidation.
Going Concern and Managements Plans The Company has incurred losses from operations since inception and has an accumulated deficit of approximately $7,900,098 as of September 30, 2016. The Companys financial statements have been prepared on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Companys continuation as a going concern is dependent upon attaining profitable operations through achieving revenue growth.
The Company has no operating revenues and does not expect to in 2016. Should we be unable to continue as a going concern, we may be unable to realize the carrying value of our assets and to meet our obligations as they become due. To continue as a going concern, we are dependent on continued fund raising. However, we have no commitment from any party to provide additional capital and there is no assurance that such funding will be available when needed, or if available, that its terms will be favorable or acceptable to us.
Cash and Cash Equivalents and Concentration The Company considers all highly liquid investments with a maturity of three months or less when acquired to be cash equivalents. The Company places its cash with a high credit quality financial institution. The Companys account at this institution is insured by the Federal Deposit Insurance Corporation up to $250,000. At September 30, 2016, the Companys cash balance was approximately $3,000. To reduce its risk associated with the failure of such financial institution, the Company will evaluate at least annually the rating of the financial institution in which it holds deposits.
Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Actual results could differ from those estimates.
Mineral Property Acquisition and Exploration Costs Mineral property acquisition and exploration costs are expensed as incurred until such time as economic reserves are quantified. To date, the Company has not established any proven or probable reserves on its mineral properties. Costs of lease, exploration, carrying and retaining unproven mineral lease properties are expensed as incurred. The Company has chosen to expense all mineral exploration costs as incurred given that it is still in the exploration stage. Once the Company has identified proven and probable reserves in its investigation of its properties and upon development of a plan for operating a mine, it would enter the development stage and capitalize future costs until production is established. When a property reaches the production stage, the related capitalized costs will be amortized over the estimated life of the probable-proven reserves. When the Company has capitalized mineral properties, these properties will be periodically assessed for impairment of value and any diminution in value. To date, the Company has not established the commercial feasibility of any exploration prospects; therefore, all costs are being expensed. During the three months ended September 30, 2016 and 2015, the Company did not incur exploration costs. Costs of property acquisitions are being capitalized, and a required payment of $10,000 was made to Mojave Gold Mining Corporation (Mojave) as part of the Option to Purchase Agreement (Option).
Deferred Financing Fees In conjunction with the NPX Convertible Note (as discussed in Note 4) the Company paid financing fees of approximately $22,000 in cash in April 2014. These fees were capitalized as deferred financing fees and were amortized over the life of the Note using the effective interest method. Amortization of deferred financing fees included in interest expense during the three months ended September 30, 2016 and 2015 was approximately $0 and $2,750, respectively and during the nine months ended September 30, 2016 and 2015 was approximately $3,666 and $8,250, respectively.
Fair Value Measurement Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair value:
Level 1 - Valuation based on quoted market prices in active markets for identical assets and liabilities. Level 2 - Valuation based on quoted market prices for similar assets and liabilities in active markets. Level 3 - Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring managements best estimate of what market participants would use as fair value.
The Company does not have any assets or liabilities measured using Level 1 or 2 inputs. The Companys Level 3 financial liabilities measured at fair value consisted of the warrant liability.
Fair Value of Financial Instruments The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash, accounts payable, and other liabilities. The warrant liability, a long-term liability, is already recorded at fair value.
Income Taxes Income taxes are accounted for under the asset and liability method in accordance with ASC 740, "Income Taxes". Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial carrying amounts of existing assets and liabilities and their respective tax bases as well as operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the periods 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 income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance to the extent that the recoverability of the asset is unlikely to be recognized.
The Company reports a liability, if any, for unrecognized tax benefits resulting from uncertain tax positions taken, or expected to be taken, in an income tax return. The Company has elected to classify interest and penalties related to unrecognized income tax benefits, if and when required, as part of income tax expense in the statement of operations. No liability has been recorded for uncertain income tax positions, or related interest or penalties as of September 30, 2016 or December 31, 2015. The periods ended December 31, 2015, 2014, 2013 and 2012 are open to examination by taxing authorities.
Long Lived Assets The Company assesses the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. When the Company determines that the carrying value of long-lived assets may not be recoverable based upon the existence of one or more indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows.
Preferred Stock The Company accounts for its preferred stock under the provisions of the ASC on Distinguishing Liabilities from Equity, which sets forth the standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. This standard requires an issuer to classify a financial instrument that is within the scope of the standard as a liability if such financial instrument embodies an unconditional obligation to redeem the instrument at a specified date and/or upon an event certain to occur. The Company has determined that its preferred stock does not meet the criteria requiring liability classification as its obligation to redeem these instruments is not based on an event certain to occur. Future changes in the certainty of the Companys obligation to redeem these instruments could result in a change in classification.
Derivative Financial Instruments The Company accounts for derivative instruments in accordance with Financial Accounting Standards Board (FASB) ASC 815, Derivatives and Hedging (ASC 815), which requires additional disclosures about the Companys objectives and strategies for using derivative instruments, how the derivative instruments and related hedged items are accounted for, and how the derivative instruments and related hedging items affect the financial statements. The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risk. Terms of convertible debt and equity instruments are reviewed to determine whether or not they contain embedded derivative instruments that are required under ASC 815 to be accounted for separately from the host contract, and recorded on the balance sheet at fair value. The fair value of derivative liabilities, if any, is required to be revalued at each reporting date, with corresponding changes in fair value recorded in current period operating results. Pursuant to ASC 815, an evaluation of specifically identified conditions is made to determine whether the fair value of warrants issued is required to be classified as equity or as a derivative liability.
Stock-Based Compensation Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). This ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.
The estimated fair value of each stock option as of the date of grant was calculated using the Black-Scholes pricing model. The Company estimates the volatility of its common stock at the date of grant based on the volatility of a comparable peer company which is publicly traded. The Company determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms, vesting schedules and post-vesting forfeitures. The Company uses the risk-free interest rate on the implied yield currently available on U.S. Treasury issues with an equivalent remaining term approximately equal to the expected life of the award. The Company has never paid any cash dividends on its common stock and does not anticipate paying any cash dividends in the foreseeable future. The shares of common stock subject to the stock-based compensation plan shall consist of unissued shares, treasury shares or previously issued shares held by any subsidiary of the Company, and such number of shares of common stock are reserved for such purpose.
On March 31, 2015 we granted options to purchase 4,500,000 shares of our common stock of the 4,500,000 shares of common stock under our 2011 Equity Incentive Plan.
Net Income (Loss) per Common Share The following table shows basic and diluted earnings per share
11,000,000 and 18,562,500 of preferred shares issued in July 2016 and August 2016 respectively were included in the computation of diluted shares. 4,500,000 of stock options were included in the computation for the nine months ended September 30, 2016. 9,668,660 of warrants were not included in the diluted weighted average shares calculation because they were out-of-the money for the nine month period ending September 30, 2016. The NPX Convertible Loan could convert into shares of the Companys common shares at a conversion price equal to $0.25 per common share; which was not included in the computation of diluted shares, however, this loan was paid off with the issuance of 18,562,500 series B preferred shares. In periods where the Company has a net loss, all common stock equivalents are excluded as they would be anti-dilutive.
Risks and Uncertainties Our limited operating history makes it difficult for potential investors to evaluate our business or prospective operations. Since our formation, we have not generated any revenues. As an early stage company, we are subject to all the risks inherent in the initial organization, financing, expenditures, complications and delays inherent in a new business. Investors should evaluate an investment in us in light of the uncertainties encountered by developing companies in a competitive environment. Our business is dependent upon the implementation of our business plan. There can be no assurance that our efforts will be successful or that we will ultimately be able to attain profitability.
Natural resource exploration, and exploring for gold in particular, is a business that by its nature is very speculative. There is a strong possibility that we will not discover gold or any other resources which can be mined or extracted at a profit. Even if we do discover gold or other deposits, the deposit may not be of the quality or size necessary for us or a potential purchaser of the property to make a profit from actually mining it. Few properties that are explored are ultimately developed into producing mines. Unusual or unexpected geological formations, geological formation pressures, fires, power outages, labor disruptions, flooding, explosions, cave-ins, landslides and the inability to obtain suitable or adequate machinery, equipment or labor are just some of the many risks involved in mineral exploration programs and the subsequent development of gold deposits.
Our business is exploring for gold and other minerals. In the event that we discover commercially exploitable gold or other deposits, we will not be able to make any money from them unless the gold or other minerals are actually mined or we sell all or a part of our interest. Accordingly, we will need to find some other entity to mine our properties on our behalf, mine them ourselves or sell our rights to mine to third parties. Mining operations in the United States are subject to many different federal, state and local laws and regulations, including stringent environmental, health and safety laws. In the event we assume any operational responsibility for mining our properties, it is possible that we will be unable to comply with current or future laws and regulations, which can change at any time. It is possible that changes to these laws will be adverse to any potential mining operations. Moreover, compliance with such laws may cause substantial delays and require capital outlays in excess of those anticipated, adversely affecting any potential mining operations. Our future mining operations, if any, may also be subject to liability for pollution or other environmental damage. It is possible that we will choose to not be insured against this risk because of high insurance costs or other reasons.
Recent Accounting Pronouncements There are several new accounting pronouncements issued by the FASB which are not yet effective. Management does not believe any of these accounting pronouncements will be applicable and therefore will not have a material impact on the Company's financial position or operating results. |
Stockholder's Equity Disclosure |
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Stockholder's Equity Disclosure | NOTE 2 - STOCKHOLDERS EQUITY
Recent Sales of Unregistered Securities On June 26, 2015, the Company issued Arden Larson 200,000 shares of the Companys common stock for a total of $4,000 in settlement of an option payment to purchase the Klondike Project.
On July 22, 2015, the Company sold an aggregate of 5,583,847 shares of common stock with gross proceeds to the Company of $89,341 to a certain accredited investor pursuant to a subscription agreement. The proceeds from this offering were used primarily for general corporate purposes.
On October 29, 2015, the Company issued Mojave 1,250,000 shares (valued at $20,125) of the Companys common stock in settlement of an option and work commitment payment as part of the October 29, 2014 Option.
On February 2, 2016, the Board of Directors of the Company approved a stock compensation distribution to David Beling, CEO and President, as full payment of his salary from June 2014 through December 2015. There were a total of 24,687,204 shares awarded to Mr. Beling on February 12, 2016 at a price of $0.01411 per share.
On June 21, 2016, the Company sent a notice of termination to Arden Larson with respect to the Option Agreement dated June 11, 2012 and amended May 6, 2015 for the Klondike Project in Nevada. The Company issued Larson 270,000 shares (valued at $14,850) of common stock as full and final payment. The Company will have no further obligations.
On June 30, 2016, the Company has settled all debts and obligations with respect to a December 12, 2012 Facility Agreement with RMB Australia Holdings Limited (RMB). The principal and interest due RMB under the Agreement as of June 30, 2016 was $2,843,813. Components of the payout were $250,000 of cash paid to RMB on June 30, 2016, which was raised from recent private placements, and issuance of one million shares of BFGC common stock on July 5, 2016 valued at $70,000.
Effective June 30, 2016, the Company sold an aggregate of 18,666,667 shares (11,000,000 series B preferred shares and 7,666,667 common shares) with gross proceeds to the Company of $280,000 to certain accredited investors pursuant to a stock agreement.
On August 1, 2016, the Company issued 18,562,500 series B preferred shares to NPX Metals. See Note 4 for additional discussion.
On August 24, 2016, the Company issued 2,500,000 common shares for consulting services.
On August 29, 2016, the Company sold an aggregate of 500,000 common shares with gross proceeds to the Company of $32,000 to certain accredited investors pursuant to a stock agreement.
On September 22, 2016, the Company issued 133,333 common shares for consulting services.
On October 4, 2016, the Company issued Kjeld Thygesen, the Companys newly appointed independent Director, 300,000 common shares.
Convertible Preferred Stock In August 2011, the Board of Directors designated 5,000,000 shares of its Preferred Stock as Series A Preferred Stock. Each share of Series A preferred stock par value $0.0001 per share (Preferred Stock) is convertible into one share of common stock at the option of the preferred holder. The Series A Preferred Stock is not entitled to receive dividends and does not possess redemption rights. The Company is prohibited from effecting the conversion of the Series A Preferred Stock to the extent that, as a result of the conversion, the holder of such shares beneficially owns more than 4.99% (or, if this limitation is waived by the holder upon no less than 61 days prior notice to us, 9.99%) in the aggregate of the issued and outstanding shares of our common stock calculated immediately after giving effect to the issuance of shares of common stock upon conversion of the Series A Preferred Stock. The holders of the Companys Series A Preferred Stock are also entitled to certain liquidation preferences upon the liquidation, dissolution or winding up of the business of the Company.
In October 2012, the Board of Directors designated 5,000,000 shares of its Preferred Stock as Series B Preferred Stock. In July 2016, the Board of Directors amended the total Series B Preferred Stock to 45,000,000. Each share of Series B Preferred Stock is convertible into one share of common stock at the option of the preferred holder. The Series B Preferred Stock is not entitled to receive dividends and does not possess redemption rights. The Company is prohibited from effecting the conversion of the Series B Preferred Stock to the extent that, as a result of the conversion, the holder of such shares beneficially owns more than 4.99% (or, if this limitation is waived by the holder upon no less than 61 days prior notice to us, 9.99%) in the aggregate of the issued and outstanding shares of our common stock calculated immediately after giving effect to the issuance of shares of common stock upon conversion of the Series B Preferred Stock. For a period of 24 months from the issue date, the holder of Series B Preferred Stock is entitled to price protection as determined in the subscription agreement. The Company has evaluated this embedded lower price issuance feature in accordance with ASC 815 and determined that is clearly and closely related to the host contract and is therefore accounted for as an equity instrument.
As of September 30, 2016, the Company had outstanding 29,562,500 series B preferred shares.
Common Stock Options On September 30, 2011, the Board of Directors and stockholders adopted the 2011 Stock Incentive Plan (the 2011 Plan). Under the 2011 Plan, options may be granted which are intended to qualify as Incentive Stock Options under Section 422 of the Internal Revenue Code of 1986 (the "Code") or which are not intended to qualify as Incentive Stock Options thereunder. In addition, direct grants of stock or restricted stock may be awarded. The 2011 Plan has reserved 4,500,000 shares of common stock for issuance.
There were a total of 4,500,000 options granted from the 2011 Plan in March 2015 (the March 2015 Options). These options issued are nonqualified stock options and were 100% vested on grant date. All expense related to these stock options has been recognized.
A summary of the March 2015 Options is presented below:
(1) Issued to David Beling, the Company's Chief Executive Officer and President (2) Issued to Alan Lindsay, the Company's Chairman of the Board of Directors.
The Black Scholes option pricing model was used to estimate the fair value of $78,045 of the March 2015 Options with the following inputs:
A summary of the stock options as of September 30, 2016 and changes during the period are presented below:
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Derivative Financial Instruments Disclosure |
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Derivative Financial Instruments Disclosure | NOTE 3 - DERIVATIVE FINANCIAL INSTRUMENTS
In applying current accounting standards to the financial instruments issued in the 2012 Private Placement, February 2013 Private Placement, August 2013 Private Placement and October 2013 Private Placement, the Company first considered the classification of the Series A and Series B Preferred Stock under ASC 480 Distinguishing Liabilities from Equity, and the Warrants under ASC 815 Derivatives and Hedging. The Series A and Series B Preferred Stock is perpetual preferred stock without redemption or dividend provisions, contingent or otherwise. Further, the Series A and Series B Preferred Stock is convertible into a fixed number of shares of Common Stock with adjustments to the conversion price solely associated with equity restructuring events such a stock splits and recapitalization. Generally redemption provisions that provide for the mandatory payment of cash to the Investor to settle the contract or certain provisions that cause the number of linked shares of Common Stock to vary result in liability classification; and, in some instances, classification outside of stockholders equity. There being no such provisions associated with the Series A or Series B Preferred Stock, it is classified as a component of stockholders equity.
The warrants were also evaluated for purposes of classification. The warrants issued contain a feature that is not consistent with the concept of stockholders equity. The exercise price of the warrants is subject to adjustment upon the issuance of common stock or common share linked contracts at prices below the contractual exercise prices. The 2012 Private Placement and February 2013 Private Placement warrants price adjustment expires four years after the date of issuance. The August 2013 Private Placement and October 2013 Private Placement warrants were amended on December 2, 2013 and allows for a price adjustment that expires three years after the date of original issuance. Current accounting standards provide that such provisions are not consistent with the concept of stockholders equity. As a result, all warrants with price adjustment features require classification in liability as derivative warrants. Derivative warrants are carried initially at fair value (up to the value of cash received) and subsequently at fair value with changes in fair value reflected in income.
The estimated fair value of the warrants was calculated using the Black-Scholes pricing model, however we concluded the estimated fair value of the warrants was not material and does not require separate disclosure of calculation inputs.
Warrants contain limitations on exercise, including the limitation that the holders may not convert their warrants to the extent that upon exercise the holder, together with its affiliates, would own in excess of 4.99% of our outstanding shares of common stock (subject to an increase upon at least 61-days notice by the subscriber to us, of up to 9.99%).
The second classification-related accounting consideration related to the possibility that the conversion option embedded in the Series A and Series B Preferred Stock may require classification outside of stockholders equity. Generally, an embedded feature in a hybrid financial instrument (such as the Series A and Series B Preferred Stock) that both meets the definition of a derivative financial instrument and is not clearly and closely related to the host contract in term of risks would require bifurcation and accounting under derivative standards. The embedded conversion option is a feature that embodies risks of equity. The Company has concluded that the Series A and Series B Preferred Stock is a contract that affords solely equity risks. |
Notes Payable Disclosure |
9 Months Ended |
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Sep. 30, 2016 | |
Notes | |
Notes Payable Disclosure | NOTE 4 - NOTES PAYABLE
RMB Facility (the Facility) On December 10, 2012 (the Closing Date), the Company entered into the Facility with RMB, as the lender, in the amount of $4,200,000. The loan proceeds from the Facility were used to fund an agreed work program relating to the Newsboy gold project located in Arizona and for agreed general corporate purposes. Standard Gold, the Companys wholly owned subsidiary is the borrower under the Facility and the Company is the guarantor of Standard Golds obligations under the Facility. Standard Gold paid an arrangement fee of 7% of the Facility amount due upon the first draw down of the Facility. The Facility funds were available to drawdown until March 31, 2014 with the final repayment date due 24 months after the Closing Date, which was December 10, 2014. The Facility bears interest at the rate of LIBOR plus 7% with interest payable quarterly in cash.
On December 15, 2014, RMB amended the Facility to extend the repayment date to December 15, 2015. All interest accrued but unpaid as of December 15, 2014 was capitalized and added to the outstanding principal balance. On December 15, 2015, RMB amended the Facility to extend the repayment date to December 15, 2016.
As stated in Note 2, on June 30, 2016, the Company has settled all debts and obligations with respect to the Facility Agreement with RMB. The principal and interest due RMB under the Agreement as of June 30, 2016 was $2,843,813. Components of the payout were $250,000 of cash paid to RMB on June 30, 2016, which was raised from recent private placements, and issuance of 1,000,000 shares of the Companys common stock with a value of $70,000 resulting in a gain on settlement of $2,523,813.
NPX Convertible Note On April 25, 2014 (NPX Closing Date), the Company entered into a Securities Purchase Agreement for an unsecured 12.5% convertible promissory note (the Note) with NPX Metals, Inc (NPX), as the lender, in the amount of $220,000. The Note proceeds were used to fund the Klondike Project and for general corporate purposes. The Company paid an arrangement fee of 10% of the Note and issued 220,000 warrants to purchase one full share at a price of $0.35 within three years from the NPX Closing Date. The Note principal and unpaid accrued interest were due and payable 24 months from the NPX Closing Date. The president of NPX is Johnathan Lindsay, the son of the chairman of the board of the Company Alan Lindsay. During the term of the Note, NPX could elect by giving five days to convert their Note and any accrued but unpaid interest thereon, into shares of the Companys common shares at a conversion price equal to $0.25 per common share. Additionally, for each common share purchased there will be a three year warrant to purchase one hundred percent of the number of shares purchased at a per share exercise price of $0.35.
On July 25, 2016, the Company has settled all debts and obligations with respect the Note. The principal and interest due NPX under the Note as of July 25, 2016 was $278,438. As settlement of the Note the Company issued NPX 18,562,500 shares of Series B Preferred Stock on August 1, 2016. As a result of NPX being a related party, zero gain was realized on settlement.
The ability of NPX to exercise the warrants is not contingent upon the conversion of the Note and, accordingly, we determined that the warrant was detachable from the Note. The estimated fair value of the warrant was calculated on the date of issuance using the Black-Scholes pricing model, however we concluded the estimated fair value of the warrant was not material and does not require separate accounting treatment. The warrant also contains a provision that the warrant will be adjusted under certain conditions in the event future warrants are issued with more favorable terms.
Related Party As of September 30, 2016 the Company has a related party payable with David Beling, CEO and President, of $313,055. This amount consists of $200,480 of expense reports plus interest of $33,825 and salary of $75,000 plus interest of $3,750. |
Commitments Disclosure |
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Commitments Disclosure | NOTE 5 - COMMITMENTS
On June 11, 2012, the Company entered into an option agreement that was amended on May 6, 2015 with Arden Larson, an unrelated party, to purchase a 100% interest in the Klondike Project (Klondike) that currently includes 109 unpatented mining claims. Klondike is located in the Alpha Mining District about 40 miles north of Eureka, Nevada.
As stated in Note 2, on June 21, 2016, the Company sent a notice of termination to Arden Larson with respect to the Option Agreement dated June 11, 2012 and amended May 6, 2015 for the Klondike Project in Nevada. The Company issued Larson 270,000 shares of common stock as full and final payment, this resulted in a loss on abandonment of $164,850. The Company will have no further obligations.
On March 23, 2015 (Effective Date), RMM entered into a Mineral Lease and Option to Purchase Agreement (the Barrick Agreement) with Barrick Bullfrog Inc. (Barrick Bullfrog) involving patented mining claims, unpatented mining claims, and mill site claims (Properties) located three miles west of Beatty, Nevada. These Properties are strategically located adjacent to the Companys Bullfrog Gold Project and include two patents that cover the southwest half of the Montgomery-Shoshone (M-S) open pit gold mine. In October 2014 the Company optioned the northeast half of the M-S pit and now controls the entire pit.
RMM shall expend as minimum work commitments for the benefit of the Properties prior to the 5th anniversary of the Effective Date per the schedule below:
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Nature of Business and Summary of Significant Accounting Policies: Nature of Business (Policies) |
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Nature of Business | Nature of Business Bullfrog Gold Corp. (the Company) is a junior exploration company engaged in the acquisition and exploration of properties that may contain gold, silver and other metals in the United States. The Companys target properties are those that have been the subject of historical exploration. The Company owns, controls or has acquired mineral rights on Federal patented and unpatented mining claims in the state of Nevada for the purpose of exploration and potential development of gold, silver and other metals on a total of approximately 2,200 acres. The Company plans to review opportunities and acquire additional mineral properties with current or historic precious and base metal mineralization with meaningful exploration potential.
The Companys properties do not have any proven reserves. The Company plans to conduct exploration programs on these properties with the objective of ascertaining whether any of its properties contain economic concentrations of precious and base metals that are prospective for mining. |
Nature of Business and Summary of Significant Accounting Policies: Basis of Presentation (Policies) |
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Sep. 30, 2016 | |
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Basis of Presentation | Basis of Presentation The consolidated unaudited financial statements included in this Form 10-Q have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q. Accordingly, these financial statements do not include all of the disclosures required by U.S. generally accepted accounting principles for complete financial statements. These consolidated unaudited interim financial statements should be read in conjunction with the audited financial statements for the fiscal year ended December 31, 2015 in our Annual Report on Form 10-K. The financial information furnished herein reflects all adjustments consisting of normal, recurring adjustments which, in the opinion of management, are necessary for a fair presentation of our financial position, the results of operations and cash flows for the periods presented. Operating results for the three and nine months ended September 30, 2016 are not necessarily indicative of results for future quarters or periods in the fiscal year ending December 31, 2016. |
Nature of Business and Summary of Significant Accounting Policies: Principles of Consolidation Policy (Policies) |
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Principles of Consolidation Policy | Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Standard Gold Corp. (Standard Gold) a Nevada corporation and Rocky Mountain Minerals Corp. (RMM) a Nevada corporation. All significant inter-entity balances and transactions have been eliminated in consolidation. |
Nature of Business and Summary of Significant Accounting Policies: Going Concern and Management's Plans (Policies) |
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Sep. 30, 2016 | |
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Going Concern and Management's Plans | Going Concern and Managements Plans The Company has incurred losses from operations since inception and has an accumulated deficit of approximately $7,900,098 as of September 30, 2016. The Companys financial statements have been prepared on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Companys continuation as a going concern is dependent upon attaining profitable operations through achieving revenue growth.
The Company has no operating revenues and does not expect to in 2016. Should we be unable to continue as a going concern, we may be unable to realize the carrying value of our assets and to meet our obligations as they become due. To continue as a going concern, we are dependent on continued fund raising. However, we have no commitment from any party to provide additional capital and there is no assurance that such funding will be available when needed, or if available, that its terms will be favorable or acceptable to us. |
Nature of Business and Summary of Significant Accounting Policies: Cash and Cash Equivalents and Concentration (Policies) |
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Sep. 30, 2016 | |
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Cash and Cash Equivalents and Concentration | Cash and Cash Equivalents and Concentration The Company considers all highly liquid investments with a maturity of three months or less when acquired to be cash equivalents. The Company places its cash with a high credit quality financial institution. The Companys account at this institution is insured by the Federal Deposit Insurance Corporation up to $250,000. At September 30, 2016, the Companys cash balance was approximately $3,000. To reduce its risk associated with the failure of such financial institution, the Company will evaluate at least annually the rating of the financial institution in which it holds deposits. |
Nature of Business and Summary of Significant Accounting Policies: Use of Estimates Policy (Policies) |
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Use of Estimates Policy | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Actual results could differ from those estimates. |
Nature of Business and Summary of Significant Accounting Policies: Mineral Property Acquisition and Exploration Costs Policy (Policies) |
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Sep. 30, 2016 | |
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Mineral Property Acquisition and Exploration Costs Policy | Mineral Property Acquisition and Exploration Costs Mineral property acquisition and exploration costs are expensed as incurred until such time as economic reserves are quantified. To date, the Company has not established any proven or probable reserves on its mineral properties. Costs of lease, exploration, carrying and retaining unproven mineral lease properties are expensed as incurred. The Company has chosen to expense all mineral exploration costs as incurred given that it is still in the exploration stage. Once the Company has identified proven and probable reserves in its investigation of its properties and upon development of a plan for operating a mine, it would enter the development stage and capitalize future costs until production is established. When a property reaches the production stage, the related capitalized costs will be amortized over the estimated life of the probable-proven reserves. When the Company has capitalized mineral properties, these properties will be periodically assessed for impairment of value and any diminution in value. To date, the Company has not established the commercial feasibility of any exploration prospects; therefore, all costs are being expensed. During the three months ended September 30, 2016 and 2015, the Company did not incur exploration costs. Costs of property acquisitions are being capitalized, and a required payment of $10,000 was made to Mojave Gold Mining Corporation (Mojave) as part of the Option to Purchase Agreement (Option). |
Nature of Business and Summary of Significant Accounting Policies: Deferred Financing Fees Policy (Policies) |
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Deferred Financing Fees Policy | Deferred Financing Fees In conjunction with the NPX Convertible Note (as discussed in Note 4) the Company paid financing fees of approximately $22,000 in cash in April 2014. These fees were capitalized as deferred financing fees and were amortized over the life of the Note using the effective interest method. Amortization of deferred financing fees included in interest expense during the three months ended September 30, 2016 and 2015 was approximately $0 and $2,750, respectively and during the nine months ended September 30, 2016 and 2015 was approximately $3,666 and $8,250, respectively. |
Nature of Business and Summary of Significant Accounting Policies: Fair Value Measurement Policy (Policies) |
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Fair Value Measurement Policy | Fair Value Measurement Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair value:
Level 1 - Valuation based on quoted market prices in active markets for identical assets and liabilities. Level 2 - Valuation based on quoted market prices for similar assets and liabilities in active markets. Level 3 - Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring managements best estimate of what market participants would use as fair value.
The Company does not have any assets or liabilities measured using Level 1 or 2 inputs. The Companys Level 3 financial liabilities measured at fair value consisted of the warrant liability. |
Nature of Business and Summary of Significant Accounting Policies: Fair Value of Financial Instruments Policy (Policies) |
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Fair Value of Financial Instruments Policy | Fair Value of Financial Instruments The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash, accounts payable, and other liabilities. The warrant liability, a long-term liability, is already recorded at fair value. |
Nature of Business and Summary of Significant Accounting Policies: Income Taxes Policy (Policies) |
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Income Taxes Policy | Income Taxes Income taxes are accounted for under the asset and liability method in accordance with ASC 740, "Income Taxes". Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial carrying amounts of existing assets and liabilities and their respective tax bases as well as operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the periods 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 income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance to the extent that the recoverability of the asset is unlikely to be recognized.
The Company reports a liability, if any, for unrecognized tax benefits resulting from uncertain tax positions taken, or expected to be taken, in an income tax return. The Company has elected to classify interest and penalties related to unrecognized income tax benefits, if and when required, as part of income tax expense in the statement of operations. No liability has been recorded for uncertain income tax positions, or related interest or penalties as of September 30, 2016 or December 31, 2015. The periods ended December 31, 2015, 2014, 2013 and 2012 are open to examination by taxing authorities. |
Nature of Business and Summary of Significant Accounting Policies: Long Lived Assets Policy (Policies) |
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Sep. 30, 2016 | |
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Long Lived Assets Policy | Long Lived Assets The Company assesses the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. When the Company determines that the carrying value of long-lived assets may not be recoverable based upon the existence of one or more indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows. |
Nature of Business and Summary of Significant Accounting Policies: Preferred Stock Policy (Policies) |
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Preferred Stock Policy | Preferred Stock The Company accounts for its preferred stock under the provisions of the ASC on Distinguishing Liabilities from Equity, which sets forth the standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. This standard requires an issuer to classify a financial instrument that is within the scope of the standard as a liability if such financial instrument embodies an unconditional obligation to redeem the instrument at a specified date and/or upon an event certain to occur. The Company has determined that its preferred stock does not meet the criteria requiring liability classification as its obligation to redeem these instruments is not based on an event certain to occur. Future changes in the certainty of the Companys obligation to redeem these instruments could result in a change in classification. |
Nature of Business and Summary of Significant Accounting Policies: Derivative Financial Instruments Policy (Policies) |
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Derivative Financial Instruments Policy | Derivative Financial Instruments The Company accounts for derivative instruments in accordance with Financial Accounting Standards Board (FASB) ASC 815, Derivatives and Hedging (ASC 815), which requires additional disclosures about the Companys objectives and strategies for using derivative instruments, how the derivative instruments and related hedged items are accounted for, and how the derivative instruments and related hedging items affect the financial statements. The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risk. Terms of convertible debt and equity instruments are reviewed to determine whether or not they contain embedded derivative instruments that are required under ASC 815 to be accounted for separately from the host contract, and recorded on the balance sheet at fair value. The fair value of derivative liabilities, if any, is required to be revalued at each reporting date, with corresponding changes in fair value recorded in current period operating results. Pursuant to ASC 815, an evaluation of specifically identified conditions is made to determine whether the fair value of warrants issued is required to be classified as equity or as a derivative liability. |
Nature of Business and Summary of Significant Accounting Policies: Stock-based Compensation Policy (Policies) |
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Sep. 30, 2016 | |
Policies | |
Stock-based Compensation Policy | Stock-Based Compensation Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). This ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.
The estimated fair value of each stock option as of the date of grant was calculated using the Black-Scholes pricing model. The Company estimates the volatility of its common stock at the date of grant based on the volatility of a comparable peer company which is publicly traded. The Company determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms, vesting schedules and post-vesting forfeitures. The Company uses the risk-free interest rate on the implied yield currently available on U.S. Treasury issues with an equivalent remaining term approximately equal to the expected life of the award. The Company has never paid any cash dividends on its common stock and does not anticipate paying any cash dividends in the foreseeable future. The shares of common stock subject to the stock-based compensation plan shall consist of unissued shares, treasury shares or previously issued shares held by any subsidiary of the Company, and such number of shares of common stock are reserved for such purpose.
On March 31, 2015 we granted options to purchase 4,500,000 shares of our common stock of the 4,500,000 shares of common stock under our 2011 Equity Incentive Plan. |
Nature of Business and Summary of Significant Accounting Policies: Net Income (loss) Per Common Share Policy (Policies) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||
Policies | ||||||||||||||||||||||||||||||||||||||||||||||
Net Income (loss) Per Common Share Policy | Net Income (Loss) per Common Share The following table shows basic and diluted earnings per share
11,000,000 and 18,562,500 of preferred shares issued in July 2016 and August 2016 respectively were included in the computation of diluted shares. 4,500,000 of stock options were included in the computation for the nine months ended September 30, 2016. 9,668,660 of warrants were not included in the diluted weighted average shares calculation because they were out-of-the money for the nine month period ending September 30, 2016. The NPX Convertible Loan could convert into shares of the Companys common shares at a conversion price equal to $0.25 per common share; which was not included in the computation of diluted shares, however, this loan was paid off with the issuance of 18,562,500 series B preferred shares. In periods where the Company has a net loss, all common stock equivalents are excluded as they would be anti-dilutive. |
Nature of Business and Summary of Significant Accounting Policies: Risks and Uncertainties Policy (Policies) |
9 Months Ended |
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Sep. 30, 2016 | |
Policies | |
Risks and Uncertainties Policy | Risks and Uncertainties Our limited operating history makes it difficult for potential investors to evaluate our business or prospective operations. Since our formation, we have not generated any revenues. As an early stage company, we are subject to all the risks inherent in the initial organization, financing, expenditures, complications and delays inherent in a new business. Investors should evaluate an investment in us in light of the uncertainties encountered by developing companies in a competitive environment. Our business is dependent upon the implementation of our business plan. There can be no assurance that our efforts will be successful or that we will ultimately be able to attain profitability.
Natural resource exploration, and exploring for gold in particular, is a business that by its nature is very speculative. There is a strong possibility that we will not discover gold or any other resources which can be mined or extracted at a profit. Even if we do discover gold or other deposits, the deposit may not be of the quality or size necessary for us or a potential purchaser of the property to make a profit from actually mining it. Few properties that are explored are ultimately developed into producing mines. Unusual or unexpected geological formations, geological formation pressures, fires, power outages, labor disruptions, flooding, explosions, cave-ins, landslides and the inability to obtain suitable or adequate machinery, equipment or labor are just some of the many risks involved in mineral exploration programs and the subsequent development of gold deposits.
Our business is exploring for gold and other minerals. In the event that we discover commercially exploitable gold or other deposits, we will not be able to make any money from them unless the gold or other minerals are actually mined or we sell all or a part of our interest. Accordingly, we will need to find some other entity to mine our properties on our behalf, mine them ourselves or sell our rights to mine to third parties. Mining operations in the United States are subject to many different federal, state and local laws and regulations, including stringent environmental, health and safety laws. In the event we assume any operational responsibility for mining our properties, it is possible that we will be unable to comply with current or future laws and regulations, which can change at any time. It is possible that changes to these laws will be adverse to any potential mining operations. Moreover, compliance with such laws may cause substantial delays and require capital outlays in excess of those anticipated, adversely affecting any potential mining operations. Our future mining operations, if any, may also be subject to liability for pollution or other environmental damage. It is possible that we will choose to not be insured against this risk because of high insurance costs or other reasons. |
Nature of Business and Summary of Significant Accounting Policies: Recent Accounting Pronouncements (Policies) |
9 Months Ended |
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Sep. 30, 2016 | |
Policies | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements There are several new accounting pronouncements issued by the FASB which are not yet effective. Management does not believe any of these accounting pronouncements will be applicable and therefore will not have a material impact on the Company's financial position or operating results. |
Nature of Business and Summary of Significant Accounting Policies: Net Income (loss) Per Common Share Policy: Schedule of Earnings Per Share, Basic and Diluted (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||
Tables/Schedules | ||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted |
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Stockholder's Equity Disclosure: Summary of the March 2015 Options (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Summary of the March 2015 Options |
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Stockholder's Equity Disclosure: Schedule of Stock Options, Valuation Assumptions (Tables) |
9 Months Ended | ||||||||||||
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Sep. 30, 2016 | |||||||||||||
Tables/Schedules | |||||||||||||
Schedule of Stock Options, Valuation Assumptions |
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Stockholder's Equity Disclosure: Summary of Stock Options Activity (Tables) |
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Summary of Stock Options Activity |
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Derivative Financial Instruments Disclosure: Schedule of Derivative Liabilities (Tables) |
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Schedule of Derivative Liabilities |
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Commitments Disclosure: Schedule of Minimum Work Commitments (Tables) |
9 Months Ended | ||||||||||||
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Sep. 30, 2016 | |||||||||||||
Tables/Schedules | |||||||||||||
Schedule of Minimum Work Commitments |
|
Nature of Business and Summary of Significant Accounting Policies: Going Concern and Management's Plans (Details) - USD ($) |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Details | ||
Accumulated deficit | $ 7,900,098 | $ 9,700,284 |
Nature of Business and Summary of Significant Accounting Policies: Deferred Financing Fees Policy (Details) - NPX Convertible Note - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | |
---|---|---|---|---|
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2014 |
|
Payment of deferred financing fees | $ 22,000 | |||
Amortization of deferred financing fees included in interest expense | $ 2,750 | $ 3,666 | $ 8,250 |
Nature of Business and Summary of Significant Accounting Policies: Net Income (loss) Per Common Share Policy: Schedule of Earnings Per Share, Basic and Diluted (Details) - $ / shares |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Details | ||||
Weighted average number of shares outstanding, basic | 88,843,207 | 50,189,624 | 78,661,666 | 47,243,863 |
Weighted average number of shares outstanding, diluted | 88,843,207 | 50,189,624 | 88,506,110 | 47,243,863 |
Basic earnings (loss) per share | $ 0.02 | $ (0.01) | ||
Diluted earnings (loss) per share | $ 0.02 | $ (0.01) |
Nature of Business and Summary of Significant Accounting Policies: Net Income (loss) Per Common Share Policy (Details) |
9 Months Ended |
---|---|
Sep. 30, 2016
shares
| |
Preferred shares excluded - July 2016 issuance | |
Anti-dilutive shares | 11,000,000 |
Preferred shares excluded - August 2016 issuance | |
Anti-dilutive shares | 18,562,500 |
Warrant shares excluded | |
Anti-dilutive shares | 9,668,660 |
Stockholder's Equity Disclosure (Details) - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|---|
Oct. 04, 2016 |
Mar. 31, 2015 |
Sep. 30, 2016 |
Dec. 31, 2015 |
Dec. 31, 2012 |
Dec. 31, 2011 |
|
Designated convertible preferred stock | 5,000,000 | |||||
Preferred shares outstanding | 29,562,500 | |||||
Stock options granted | 4,500,000 | |||||
NPX Convertible Note | ||||||
Series B Preferred Stock issued for debt settlement | 18,562,500 | |||||
Klondike Project | ||||||
Shares of common stock issued for mineral claim purchase option | 270,000 | 200,000 | ||||
Value associated with common stock issued for mineral claim option | $ 14,850 | $ 4,000 | ||||
Accredited investors, private placement - Common Shares | ||||||
Shares of stock sold | 500,000 | 5,583,847 | ||||
Value or proceeds from stock issued | $ 32,000 | $ 89,341 | ||||
Mojave Gold Mining Corporation | ||||||
Shares of common stock issued for mineral claim purchase option | 1,250,000 | |||||
Value associated with common stock issued for mineral claim option | $ 20,125 | |||||
CEO and President Award | ||||||
Common stock issued as compensation | 24,687,204 | |||||
Accredited investors, private placement - Common and Preferred | ||||||
Shares of stock sold | 18,666,667 | |||||
Value or proceeds from stock issued | $ 280,000 | |||||
Common stock issued for services - August 24, 2016 | ||||||
Stock issued for services | 2,500,000 | |||||
Common stock issued for services - September 22, 2016 | ||||||
Stock issued for services | 133,333 | |||||
Director (1) | ||||||
Common stock issued as compensation | 300,000 | |||||
Stock options granted | 1,415,000 | |||||
Series A Preferred Stock | ||||||
Preferred stock par value | $ 0.0001 | |||||
Preferred stock conversion features | The Company is prohibited from effecting the conversion of the Series A Preferred Stock to the extent that, as a result of the conversion, the holder of such shares beneficially owns more than 4.99% (or, if this limitation is waived by the holder upon no less than 61 days prior notice to us, 9.99%) in the aggregate of the issued and outstanding shares of our common stock calculated immediately after giving effect to the issuance of shares of common stock upon conversion of the Series A Preferred Stock. | |||||
Series B Preferred Stock | ||||||
Designated convertible preferred stock | 5,000,000 | |||||
Preferred stock conversion features | The Company is prohibited from effecting the conversion of the Series B Preferred Stock to the extent that, as a result of the conversion, the holder of such shares beneficially owns more than 4.99% (or, if this limitation is waived by the holder upon no less than 61 days prior notice to us, 9.99%) in the aggregate of the issued and outstanding shares of our common stock calculated immediately after giving effect to the issuance of shares of common stock upon conversion of the Series B Preferred Stock. For a period of 24 months from the issue date, the holder of Series B Preferred Stock is entitled to price protection as determined in the subscription agreement. | |||||
2011 Stock Incentive Plan | ||||||
Common stock shares reserved for issuance under the stock plan | 4,500,000 |
Stockholder's Equity Disclosure: Summary of the March 2015 Options (Details) - $ / shares |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2015 |
Dec. 31, 2015 |
|
Stock options granted | 4,500,000 | |
Officer (1) | ||
Stock options granted | 1,775,000 | |
Strike price | $ 0.025 | |
Term | 10 years | |
Consultant (1) | ||
Stock options granted | 250,000 | |
Strike price | $ 0.025 | |
Term | 10 years | |
Consultant (2) | ||
Stock options granted | 355,000 | |
Strike price | $ 0.025 | |
Term | 10 years | |
Consultant (3) | ||
Stock options granted | 705,000 | |
Strike price | $ 0.025 | |
Term | 10 years | |
Director (1) | ||
Stock options granted | 1,415,000 | |
Strike price | $ 0.025 | |
Term | 10 years |
Stockholder's Equity Disclosure: Schedule of Stock Options, Valuation Assumptions (Details) |
3 Months Ended |
---|---|
Mar. 31, 2015
USD ($)
| |
Details | |
Expected term | 6 years |
Volatility | 87.10% |
Risk Free Interest Rate | 1.71% |
Fair value of options granted | $ 78,045 |
Stockholder's Equity Disclosure: Summary of Stock Options Activity (Details) - $ / shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Sep. 30, 2016 |
|
Details | ||
Weighted average exercise price of options granted | $ 0.025 | |
Stock options outstanding | 4,500,000 | 4,500,000 |
Stock options exercisable | 4,500,000 |
Derivative Financial Instruments Disclosure: Schedule of Derivative Liabilities (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Details | ||
Derivative warrant liability balance | $ 20 | |
Change in fair value of warrant liability | $ (20) |
Commitments Disclosure (Details) |
9 Months Ended |
---|---|
Sep. 30, 2016
USD ($)
| |
Loss on asset abandonment | $ 164,850 |
Klondike Project in Nevada | |
Loss on asset abandonment | $ 164,850 |
Commitments Disclosure: Schedule of Minimum Work Commitments (Details) |
Sep. 30, 2016
USD ($)
|
---|---|
First Anniversary of Effective Date | |
Minimum Project Work Commitment - RMM | $ 100,000 |
Second Anniversary of Effective Date | |
Minimum Project Work Commitment - RMM | 200,000 |
Third Anniversary of Effective Date | |
Minimum Project Work Commitment - RMM | 300,000 |
Fourth Anniversary of Effective Date | |
Minimum Project Work Commitment - RMM | 400,000 |
Fifth Anniversary of Effective Date | |
Minimum Project Work Commitment - RMM | $ 500,000 |
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