Company Quick10K Filing
Lode-Star Mining
Price-0.00 EPS-0
Shares51 P/E0
MCap-0 P/FCF0
Net Debt-0 EBIT-0
TEV-0 TEV/EBIT0
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-11
10-K 2019-12-31 Filed 2020-03-24
10-Q 2019-09-30 Filed 2019-11-12
10-Q 2019-06-30 Filed 2019-08-08
10-Q 2019-03-31 Filed 2019-05-14
10-K 2018-12-31 Filed 2019-03-27
10-Q 2018-09-30 Filed 2018-11-13
10-Q 2018-06-30 Filed 2018-08-09
10-Q 2018-03-31 Filed 2018-05-14
10-K 2017-12-31 Filed 2018-03-27
10-Q 2017-09-30 Filed 2017-11-14
10-Q 2017-06-30 Filed 2017-08-14
10-Q 2017-03-31 Filed 2017-05-11
10-K 2016-12-31 Filed 2017-03-30
10-Q 2016-09-30 Filed 2016-11-10
10-Q 2016-03-31 Filed 2016-05-11
10-K 2015-12-31 Filed 2016-03-29
10-Q 2015-09-30 Filed 2015-11-13
10-Q 2015-06-30 Filed 2015-08-14
10-Q 2015-03-31 Filed 2015-05-15
10-K 2014-12-31 Filed 2015-03-25
10-Q 2014-09-30 Filed 2014-11-14
10-Q 2014-06-30 Filed 2014-08-14
10-Q 2014-03-31 Filed 2014-05-20
10-K 2013-12-31 Filed 2014-04-14
10-Q 2013-09-30 Filed 2013-11-19
10-Q 2013-06-30 Filed 2013-08-13
10-Q 2013-03-31 Filed 2013-05-15
10-K 2012-12-31 Filed 2013-04-16
10-Q 2012-09-30 Filed 2012-11-13
10-Q 2012-06-30 Filed 2012-08-20
10-Q 2012-03-31 Filed 2012-05-21
10-K 2011-12-31 Filed 2012-04-13
10-Q 2011-09-30 Filed 2011-11-14
10-Q 2011-06-30 Filed 2011-08-22
10-Q 2011-03-31 Filed 2011-05-20
10-K 2010-12-31 Filed 2011-04-15
10-Q 2010-11-11 Filed 2010-11-12
10-Q 2010-06-30 Filed 2010-08-16
10-Q 2010-03-31 Filed 2010-05-17
10-K 2009-12-31 Filed 2010-04-14
8-K 2020-01-21 Other Events
8-K 2019-10-31 Enter Agreement, Exhibits
8-K 2018-11-23 Other Events, Exhibits

LSMG 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II - Other Information
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 6. Exhibits.
EX-31.1 ex31-1.htm
EX-32.1 ex32-1.htm

Lode-Star Mining Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
0.3-0.0-0.4-0.7-1.1-1.42012201420172020
Assets, Equity
0.0-0.1-0.1-0.2-0.2-0.32012201420172020
Rev, G Profit, Net Income
0.20.10.0-0.0-0.1-0.22012201420172020
Ops, Inv, Fin

10-Q 1 form-10q.htm LODE-STAR MINING, INC. 10-Q
 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
   
FORM 10-Q

 

þ QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2020
   
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
Commission file number 000-53676

 

LODE-STAR MINING INC.
 

(Exact name of registrant as specified in its charter)

 

NEVADA 47-4347638
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)

 

1 East Liberty Street, Suite 600

Reno, NV 89501

 

 

(Address of principal executive offices, including zip code.)

 

(775) 234-5443

 

 

(Telephone number, including area code)

 

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days. YES þ NO o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer o Accelerated Filer o
Non-accelerated Filer o Smaller Reporting Company þ
Emerging Growth Company o    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES o NO þ

 

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 50,605,965 at May 8, 2020.

 

 

 

 

 

 

 

 

 

1

 

TABLE OF CONTENTS

 

  Page
PART I - FINANCIAL INFORMATION
   
Item 1. Financial Statements 3
   
Balance Sheets as of March 31, 2020 and December 31, 2019 (unaudited) 4
   
Statements of Operations for the Three Months ended March 31, 2020 and 2019 (unaudited) 5
   
Statements of Cash Flows for the Three Months ended March 31, 2020 and 2019 (unaudited) 6
   
Notes to Financial Statements (unaudited) 7
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 12
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
   
Item 4. Controls and Procedures 19
   
PART II - OTHER INFORMATION
   
Item 1A. Risk Factors 19
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 19
   
Item 6. Exhibits 20
   
SIGNATURES 21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS.

 

LODE-STAR MINING INC.

 

INTERIM FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

LODE-STAR MINING INC.

 

BALANCE SHEETS

 

(Unaudited)

 

   MARCH 31   DECEMBER 31 
   2020   2019 
         
ASSETS          
           
Current assets          
Cash  $13,731   $10,499 
Prepaid fees   22,145    2,078 
Total current assets   35,876    12,577 
           
Mineral Property Interest, unproven   230,180    230,180 
           
Total assets  $266,056   $242,757 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY          
           
Current liabilities          
Accounts payable and accrued liabilities  $28,717   $8,014 
Due to related parties and accrued interest   1,739,046    1,598,114 
Loans payable and accrued interest   -    5,819 
Total current liabilities   1,767,763    1,611,947 
           
STOCKHOLDERS’ DEFICIENCY          
           
Capital Stock          
Authorized:          
480,000,000 voting common shares with a par value of $0.001 per share          
20,000,0000 preferred shares with a par value of $0.001 per share          
Issued:   3,425    3,425 
50,605,965 common shares and no preferred shares at March 31, 2020 and December 31, 2019          
Additional Paid-In Capital   1,629,637    1,628,646 
Accumulated Deficit   (3,134,769)   (3,001,261)
Total stockholders’ deficiency   (1,501,707)   (1,369,190)
           
Total liabilities and stockholders’ deficiency  $266,056   $242,757 

 

The accompanying notes are an integral part of these unaudited interim financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

LODE-STAR MINING INC.

 

STATEMENTS OF OPERATIONS

(Unaudited)

 

   THREE MONTHS ENDED 
   MARCH 31 
   2020   2019 
         
Revenue  $-   $- 
           
Operating Expenses          
Consulting services   65,850    14,399 
Corporate support services   469    458 
Mineral option fees   24,988    24,976 
Office, foreign exchange and sundry   3,340    5,827 
Professional fees   2,270    14,625 
Transfer and filing fees   17,662    16,396 
Total operating expenses   114,579    76,681 
           
Operating Loss   (114,579)   (76,681)
           
Other Expenses          
Interest, bank and finance charges   (18,929)   (15,278)
           
Net Loss For The Period  $(133,508)  $(91,959)
           
Basic And Diluted Net Loss Per Common Share  $(0.00)  $(0.00)
           
Weighted Average Number of Common Shares Outstanding – Basic and Diluted   50,605,965    50,605,965 

 

The accompanying notes are an integral part of these unaudited interim financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5

 

LODE-STAR MINING INC.

 

STATEMENTS OF CASH FLOWS
(Unaudited)

 

   THREE MONTHS ENDED 
   MARCH 31 
   2020   2019 
         
Operating Activities          
Net loss  $(133,508)  $(91,959)
Adjustments to reconcile net loss to net cash used in operating activities:          
Foreign exchange loss   (149)   75 
Stock options issued for services   991    2,474 
Changes in operating assets and liabilities:          
Prepaid fees   (20,242)   (40)
Accounts payable and accrued liabilities   53,343    25,961 
Due to related parties   24,988    24,976 
Accrued interest payable   12,809    15,095 
Net cash used in operating activities   (61,768)   (23,418)
           
Financing Activities          
Repayment of loans payable   -    (5,000)
Proceeds from loans payable – related parties   65,000    30,000 
Net cash provided by financing activities   65,000    25,000 
           
Net Increase In Cash   3,232    1,582 
           
Cash, Beginning of Period   10,499    6,508 
           
Cash, End of Period  $13,731   $8,090 
           
Supplemental Disclosure of Cash Flow Information          
Cash paid during the period for:          
Interest  $-   $- 
Income taxes  $-   $- 
           
Non-cash Financing Activity          
Expenses paid by related party on behalf of the Company  $32,640   $17,019 

 

The accompanying notes are an integral part of these unaudited interim financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

 


LODE-STAR MINING INC.
 
NOTES TO INTERIM FINANCIAL STATEMENTS
 
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(Unaudited)
 
1.BASIS OF PRESENTATION AND NATURE OF OPERATIONS

 

Organization

 

Lode-Star Mining Inc. (“the Company”) was incorporated in the State of Nevada, U.S.A., on December 9, 2004. The Company’s principal executive offices are in Reno, Nevada. The Company was originally formed to acquire exploration stage natural resource properties. The Company acquired a mineral property interest from Lode Star Gold INC., a private Nevada corporation (“LSG”) on December 11, 2014 in consideration for the issuance of 35,000,000 common shares of the Company. As a result of this transaction, control of the Company was acquired by LSG.

 

Going Concern

 

The accompanying unaudited interim financial statements have been prepared assuming the Company will continue as a going concern. The future of the Company is dependent upon its ability to establish a business and to obtain new financing to execute its business plan. As shown in the accompanying financial statements, the Company has had no revenue and has incurred accumulated losses of $3,134,769 as of March 31, 2020. These factors raise substantial doubt about the Company’s ability to continue as a going concern. To continue as a going concern, the Company will need, among other things, additional capital resources. The Company is significantly dependent upon its ability and will continue to attempt to secure additional equity and/or debt financing. There are no assurances that the Company will be successful and without sufficient financing, it would be unlikely for the Company to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

 

Basis of Presentation

 

The unaudited interim financial information furnished herein reflects all adjustments which, in the opinion of management, are necessary to fairly state the Company’s financial position and the results of its operations for the periods presented. These financial statements should be read in conjunction with the Company’s financial statements and notes thereto included in the Company’s report on Form 10-K for the year ended December 31, 2019. The Company assumes that the users of the interim financial information herein have read, or have access to, the audited financial statements for the preceding fiscal year, and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. Accordingly, certain footnote disclosures, which would substantially duplicate the disclosures contained in the Company’s financial statements for the fiscal year ended December 31, 2019 have been omitted. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of results for the entire year ending December 31, 2020.

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgment. All dollar amounts are in U.S. dollars unless otherwise noted. The financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality.

 

The Company has implemented all applicable new accounting pronouncements that are in effect. Those pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

3.MINERAL PROPERTY INTEREST

 

The Company’s mineral property interest is a group of thirty-one claims known as the “Goldfield Bonanza Project” (the “Property”), in the State of Nevada. Pursuant to an option agreement dated October 14, 2014 with Lode Star Gold INC. (“LSG”), a private Nevada corporation, the Company acquired an initial 20% undivided interest in and to the mineral claims owned by LSG and an option to earn a further 60% interest in the claims. LSG received 35,000,000 shares of the Company’s common stock and is its controlling shareholder. Until the Company has earned the additional 60% interest, the net smelter royalty will be split 79.2% to LSG, 19.8% to the Company and 1% to the former Property owner.

 

 

 

 

 

7

 

LODE-STAR MINING INC.
 
NOTES TO INTERIM FINANCIAL STATEMENTS
 
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(Unaudited)
 
3.MINERAL PROPERTY INTEREST (Continued)

 

To earn the additional 60% interest, the Company is required to fund all expenditures on the Property and pay LSG an aggregate of $5 million in cash in the form of a net smelter royalty, commencing after December 11, 2014. If the Company failed to make any cash payments to LSG within one year of the date of the option agreement, it is required to pay LSG an additional $100,000, and in any subsequent years in which the Company fails to complete the payment of the entire $5 million, it must make quarterly cash payments to LSG of $25,000.

 

On January 11, 2017 LSG agreed to defer payment of all amounts due in accordance with the mineral option agreement until further notice. On January 17, 2017, the Company and LSG agreed that as of January 1, 2017, all outstanding balances shall carry a compound interest rate of 5% per annum. It was further agreed that the ongoing payment deferral shall apply to both interest and principal. The total amount of such fees due at March 31, 2020 was $548,901 (December 31, 2019: $523,913), with total interest due in the amount of $64,593 (December 31, 2019: $57,413).

 

On October 31, 2019, the Company and LSG executed an amendment (the “Amendment”) to their mineral option agreement dated October 4, 2014 (the “Option Agreement”). According to the terms of the Option Agreement the Company acquired an initial 20% undivided interest in and to the mineral claims owned by LSG and an option to earn a further 60% interest in the claims.

 

Under the Amendment, the exercise of the 60% option was restructured into two separate 30% options, such that the Company may now earn a 30% interest in the Property (for a total of 50%) (the “Second Option”) by completing the following actions:

 

paying LSG $5 million in cash from the Property’s mineral production proceeds in the form of a NSR royalty (the “Initial Payment”);

 

paying LSG all accrued and unpaid penalty payments under the Option Agreement;

 

repaying to LSG (i) all loans, advances or other payments made by LSG to the Company and (ii) all expenditures on the Property funded by or on behalf of LSG until the date on which the Initial Payment has been completed; and

 

funding all expenditures on the Property until the date on which the Initial Payment has been completed.

 

Following the exercise of the Second Option, the Company may earn an additional 30% interest in the Property (for a total of 80%) (the “Third Option”) by completing the following actions:

 

paying LSG a further $5 million in cash from the Property’s mineral production proceeds in the form of an NSR royalty (the “Final Payment”); and

 

funding all expenditures on the Property from the date on which the Second Option is exercised until the date on which the Final Payment has been completed.

 

The primary effect of the Amendment is therefore to increase to the purchase price for the additional 60% interest in the Property from $5 million to $10 million, while at the same time separating it into tranches.

 

The Amendment also corrects a number of inconsistences in the Option Agreement, updates the defined terms to accommodate the creation of the Second Option and Third Option, and includes acknowledgements of the Company regarding accrued and unpaid penalty payments and amounts owing by the Company to LSG as of September 30, 2019.

 

On January 22, 2020 the Company executed a toll milling agreement (the “Agreement”) with Scorpio Gold Corporation’s affiliate, Goldwedge LLC. The Agreement will allow for the processing of ore delivered from the Company’s Property to the 400 ton per day Goldwedge milling facility located in Manhattan, Nevada.

 

Based on previous metallurgical testing, the Company’s ore requires gravity combined with flotation for optimal recoveries of contained precious metals. The Goldwedge milling circuit is currently configured with a gravity recovery circuit. Under the terms of the Agreement, the Company will advance funds required for the design, engineering, permitting and modifications to the Goldwedge facility to include the addition of a flotation circuit, supporting reagent tanks/silos, secondary lining of process containment ponds, leak detection and monitoring wells associated with fluid containments.

 

The Agreement provides for the Company to recoup the advanced funds through a reduction in toll milling rates until all advanced funds have been repaid. Following repayment, the toll charges will revert to standard rates.

 

The Company assessed its mineral property interest to the date of issue of these financial statements and concluded that facts and circumstances do not suggest that the mineral property interest’s carrying value exceeds its recoverable amount and therefore no impairment is required.

8

 

LODE-STAR MINING INC.
 
NOTES TO INTERIM FINANCIAL STATEMENTS
 
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(Unaudited)
 
4.CAPITAL STOCK

 

Capitalization

 

The authorized capital of the Company is 500,000,000 shares of capital stock, divided into 480,000,000 shares of common stock with a par value of $0.001 per share, and 20,000,000 shares of preferred stock with a par value of $0.001 per share. The Company reserved 10,000,000 shares of common stock for issuance under its 2016 Omnibus Equity Incentive Plan. The Company has issued 50,605,965 common shares and no preferred shares. During the three months ended March 31, 2020, the Company did not issue any shares of its common stock.

 

Options

 

A total of 10,000,000 options are issued and outstanding, of which 9,750,000 were vested at March 31, 2020. The remaining 250,000 will vest on November 20, 2020.

 

On November 20, 2018, the Company granted 500,000 non-qualified stock options pursuant to its Equity Incentive Plan, to key outside consultants, with 50% vesting after one year and 50% vesting after two years. Each option is exercisable into one share of the Company’s common stock at a price of $0.06 per share, for a term of five years. The options had an estimated grant date fair value of $10,408. For the quarter ended March 31, 2020, $991 (Q1 2019 - $2,474) was included in consulting services expense, based on fair value estimates determined using the Black-Scholes option pricing model with an average risk-free rate of 2.88%, a weighted average life of 5 years, volatility of 195.37%, and dividend yield of 0%. At March 31, 2020, the options (including the 250,0000 unvested) had an intrinsic value of $15,000 (December 31, 2019: $7,000) based on the exercise price of $0.06 per option and a market price of $0.09 per share (December 31, 2019: $0.074).

 

On February 14, 2017, the Company granted 9,500,000 non-qualified stock options pursuant to its Equity Incentive Plan, to key corporate officers and outside consultants, with 25% vesting immediately and a further 25% vesting every six months thereafter for eighteen months. Each option is exercisable into one share of the Company’s common stock at a price of $0.06 per share, equal to the closing price of the common stock on the grant date, for a term of five years. The options had an estimated grant date fair value of $536,750. The options were fully expensed by the end of the third quarter of 2018, based on fair value estimates determined using the Black-Scholes option pricing model. Therefore, no related expense was incurred in the current or comparative periods. At March 31, 2020, the options had an intrinsic value of $285,000 (December 31, 2019: $133,000) based on the exercise price of $0.06 per option and a market price of $0.09 per share (December 31, 2019: $0.074).

 

Summary of option activity in the current three-month period and options outstanding at March 31, 2020:

 

         Years            
         Life Remaining  Years      
   Options  (Issued)  Weighted Average     Intrinsic
         Dec 31  Mar 31  Life Remaining     Value
   Issued  Vested  2019  2020  (Issued)  Expiry Date  (Issued)
                         
Issued February 14, 2017
Exercise Price: $0.06
  9,500,000  9,500,000  2.13  1.88         February 14, 2022  $285,000
                         
Issued November 20, 2018
Exercise Price: $0.06
  500,000  250,000  3.89  3.64        November 20, 2023  $15,000
                         
Balance December 31, 2019  10,000,000  9,750,000        2.21         
                         
Issued / Expired / Exercised  -  -                  
Vested  -  -                  
                         
Balance March 31, 2020  10,000,000  9,750,000           1.96     $300,000

 

 

 

9

 

LODE-STAR MINING INC.
 
NOTES TO INTERIM FINANCIAL STATEMENTS
 
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(Unaudited)
 
4.CAPITAL STOCK (Continued)

 

Warrants

 

During the three months ended March 31, 2020 and March 31, 2019, no warrants to purchase shares of common stock were issued, exercised or expired. At March 31, 2020, warrants issued in 2015 had an intrinsic value of $233,524 (December 31, 2019: $180,147), based on the exercise price of $0.02 per warrant and a market price of $0.09 per share (December 31, 2019: $0.074).

 

Summary of warrant activity in the current three-month period and warrants outstanding at March 31, 2020:

 

   Number of
Warrants
   Exercise
Price
   Weighted
Average
Exercise
Price
   Weighted
Average Life
Remaining
(Years)
  Expiry Date  Intrinsic
Value
 
Balance December 31, 2019   3,336,060   $0.02   $0.02   0.89  November 19, 2020  $180,847 
Issued / Expired / Exercised   -                      
Balance outstanding and exercisable at March 31, 2020   3,336,060   $0.02   $0.02   0.64  November 19, 2020  $233,524 

 

5.LOANS PAYABLE

 

During the quarter ended March 31, 2020, the Company repaid $5,819, which was the outstanding accrued interest due on a non-related party loan. During the year ended December 31, 2019, the Company repaid $14,929 of accrued interest and $5,000 of principal of the loan.

 

6.RELATED PARTY TRANSACTIONS AND AMOUNTS DUE

 

At March 31, 2020, the Company had the following amounts due to related parties:

 

i)$279,701 (December 31, 2019: $247,060): unsecured; interest at 5% per annum; with no specific terms of repayment, due to LSG, the Company’s majority shareholder. Accrued interest payable on the loans at March 31, 2020 was $35,614 (December 31, 2019: $32,414). During the current quarter, LSG paid expenses directly on behalf of the Company totaling $32,640 (Q1 2019: $17,512).

 

ii)$660,000 (December 31, 2019: $635,000): unsecured; interest at 5% per annum from January 1, 2015; with no specific terms of repayment, due to LSG, the Company’s majority shareholder. Accrued interest payable on the loan at March 31, 2020 was $106,575 (December 31, 2019: $98,464). During the current quarter, the Company borrowed $25,000 (Q1 2019: $30,000) from LSG.

 

iii)$3,525 (December 31, 2019: $3,850): unsecured; non-interest bearing; with no specific terms of repayment, due to the controlling shareholder of LSG. The change in value during the quarter was due to fluctuation in the US to Canadian dollar exchange rate.

 

iv)$40,000 (December 31, 2019: $0): unsecured; interest at 5% per annum; with no specific terms of repayment, due to the controlling shareholder of LSG. Accrued interest payable on the loan at March 31, 2020 was $137 (December 31, 2019: $0).

 

At March 31, 2020, total interest accrued on the above related party loans was $142,326 (December 31, 2019: 130,878).

 

During the current quarter, there was a $325 foreign exchange gain (Q1 2019: $75 loss) due to a related party loan amount in non-US currency. No stock-based compensation to related parties was incurred during the current quarter or in Q1 2019:

 

During the current quarter, the Company incurred $24,988 (Q1 2019: $24,976) in mineral option fees payable to LSG, which have been accrued as of that date. The total amount of such fees due at March 31, 2020 was $548,901 (December 31, 2019: $523,913), with total interest due in the amount of $64,593 (December 31, 2019: $57,414).

 

At March 31, 2020, the total due to related parties of $1,739,046 (December 31, 2019: $1,598,115) was comprised of the following:

 

Loans and accrued interest - $1,125,552 (December 31, 2019: $1,016,788)

 

Mineral option fees payable and accrued interest - $613,494 (December 31, 2019: $581,327)

 

 

10

 

LODE-STAR MINING INC.
 
NOTES TO INTERIM FINANCIAL STATEMENTS
 
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019
(Unaudited)
 
6.RELATED PARTY TRANSACTIONS AND AMOUNTS DUE (Continued)

 

During the current quarter, $25,000 (Q1 2019: $6,000) in consulting fees for strategic and mine development was accrued and payable to the Company’s President at March 31, 2020. Also at March 31, 2020, $996 (December 31, 2019: $0) was owing to the President for expenses outstanding in accounts payable.

 

7.CONTRACTUAL OBLIGATIONS AND COMMITMENTS

 

See Note 3 for details about the Company’s obligations and commitments regarding its Mineral Property Interest.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and related notes appearing elsewhere in this Quarterly Report. In addition to historical financial information, the following discussion includes certain forward-looking statements that reflect our plans, estimates and our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results

 

Mineral Property Interest

 

Further to a Mineral Option Agreement (the “Option Agreement”) dated October 4, 2014, on December 5, 2014, we entered into a subscription agreement (the “Subscription Agreement”) with Lode Star Gold INC., a private Nevada corporation (“LSG”) in which we agreed to issue 35,000,000 shares of our common stock, valued at $230,180, to LSG in exchange for an initial 20% undivided beneficial interest in and to LSG’s Goldfield property (the “Acquisition”), which made LSG our largest and controlling shareholder.

 

LSG’s Goldfield Bonanza property is comprised of 31 patented mineral claims owned 100% by LSG, located on approximately 460 acres in the district of Goldfield in the state of Nevada (the “Property”). The Property is clear titled, with a 1% Net Smelter Royalty (“NSR”) existing in the favor of the original property owner.

 

LSG was incorporated in the State of Nevada on March 13, 1998 for the purpose of acquiring exploration stage mineral properties. It currently has one shareholder, Lonnie Humphries, who is the spouse of Mark Walmesley, our President and Chief Financial Officer. Mr. Walmesley is also the Director of Operations and a director of LSG.

 

The execution of the Subscription Agreement was one of the closing conditions of the Option Agreement, pursuant to which we acquired the sole and exclusive option to earn up to an 80% undivided interest in and to the Property. To earn the additional 60% interest in the Property, we are required to fund all expenditures on the Property and pay LSG an aggregate of $5 million in cash from the Property’s mineral production proceeds in the form of an NSR. Until we have earned the additional 60% interest, the NSR will be split 79.2% to LSG, 19.8% to us and 1% to the former Property owner.

 

The Option Agreement can be found as Exhibit 10.1 to our report filed on Form 8-K on October 9, 2014 and is incorporated herein by reference. The Subscription Agreement can be found as Exhibit 10.7 to our report filed on Form 10-K/A on January 11, 2017 and is incorporated by reference.

 

If we fail to make any cash payments to LSG within one year of October 4, 2014, we are required to pay LSG an additional $100,000, and in any subsequent years in which we fail to complete the payment of the entire $5 million described above, we must make quarterly cash payments to LSG of $25,000 until we have earned the additional 60% interest in the Property.

 

LSG granted us a series of deferrals of the payments, with the most recent being granted on January 11, 2017. LSG agreed on that date to defer payment of all amounts due in accordance with the Option Agreement until further notice. On January 17, 2017, the Company and LSG agreed that as of January 1, 2017, all outstanding balances shall carry a compound interest rate of 5% per annum. It was further agreed that the ongoing payment deferral shall apply to interest and principal.

 

LSG acquired the leases to the Property in 1997 and became the registered and beneficial owner of the Property on September 19, 2009. Since the earlier of those dates, it has conducted contract exploration work on the Property but has not determined whether it contains mineral reserves that are economically recoverable. LSG is an exploration stage company and has not generated any revenues since its inception. The Property represents its only material asset.

 

The Property is located in west-central Nevada, in the Goldfield Mining District at Latitude 37° 42’, and Longitude 117° 14’.  The claims comprising the Property are located in surveyed sections 35 and 36, Township 2 South, Range 42 East, and in sections 1, 2, 11, and 12, Township 3 South, Range 42 East, in Esmeralda County, Nevada. The Property is accessible by traveling approximately one-half mile northeast of the community of Goldfield, along a county-maintained road that originates at U.S. Highway 95, which runs through “downtown” Goldfield. The town of Goldfield, which is the Esmeralda county seat (population 300), is approximately 200 air miles south of Reno and 180 air miles north of Las Vegas. Surface access on the Property is excellent and the relief is low, at an elevation of approximately 6,000 feet.  Vegetation is sparse, consisting largely of sagebrush, rabbitbrush, Joshua trees and grasses. Water, electricity and other sundry needs such as restaurants, lodging, minor medical needs, fire station, and police are within 1 mile of the property.

 

All properties, claims, buildings, equipment, and supplies are owned by LSG and we have free access to utilize and manage all those items. Operations are managed from a 6,000 sq. ft. office and warehouse facility complete with showers and laundry amenities. Two residential trailer sites are immediately adjacent to this building for crew needs.

 

 

 

 

 

12

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

 

The Property has one working shaft, the February Premier, which has access to the 300 ft level, with approximately 1/2 mile of ventilated drift. Underground work has identified 2 high-grade gold-bearing zones which the company plans to further explore. The program that we envision undertaking includes the mining of approximately 10,000 tons of non-NI 43-101 compliant gold mineralization at an approximate grade of 0.9 ounces per ton. The estimated grade is based on historic drilling work done by LSG, for which the 1.5-inch core samples were consumed by assay requirements. In order to provide adequate sample weights to the assaying lab, the entire core was processed for individual samples.

 

While we have encountered several additional high-grade drill anomalies throughout the property, it is important to note that we have no proven and/or probable reserves at the present time and therefore the program is exploratory in nature. Much of the property remains under-explored and it is our belief that the district’s high-grade, million-ounce ore zones repeat themselves. Further surface and underground exploration work need to be executed.

 

The Property has two operating water monitoring wells that were mandatory for us to receive a water pollution control permit. Part of the permitting application is for the allowance of the company to store its waste rock underground. The property has no milling onsite and we must rely on a third party to receive our mineralized material and tombstone our tailings.

 

Amendment to Option Agreement

 

On October 31, 2019, we entered into an amendment (the “Amendment”) to the Option Agreement with LSG.

 

Under the Amendment, the exercise of the 60% option was restructured into two separate 30% options, such that we may now earn a 30% interest in the Property (for a total of 50%) (the “Second Option”) by completing the following actions:

 

paying LSG $5 million in cash from the Property’s mineral production proceeds in the form of an NSR royalty (the “Initial Payment”);

 

paying LSG all accrued and unpaid penalty payments under the Option Agreement;

 

repaying to LSG (i) all loans, advances or other payments made by LSG to the Company and (ii) all expenditures on the Property funded by or on behalf of LSG until the date on which the Initial Payment has been completed; and

 

funding all expenditures on the Property until the date on which the Initial Payment has been completed.

 

Following the exercise of the Second Option, we may earn an additional 30% interest in the Property (for a total of 80%) (the “Third Option”) by completing the following actions:

 

paying LSG a further $5 million in cash from the Property’s mineral production proceeds in the form of a NSR royalty (the “Final Payment”); and

 

funding all expenditures on the Property from the date on which the Second Option is exercised until the date on which the Final Payment has been completed.

 

The primary effect of the Amendment is therefore to increase to the purchase price for the additional 60% interest in the Property from $5 million to $10 million, while at the same time separating it into tranches.

 

The Amendment also corrects a number of inconsistences in the Option Agreement, updates the defined terms to accommodate the creation of the Second Option and Third Option, and includes our acknowledgements regarding accrued and unpaid penalty payments and amounts owing by us to LSG as of September 30, 2019.

 

The foregoing description of the Amendment includes a summary of all the material provisions but is qualified in its entirety by reference to the complete text of the Amendment included as Exhibit 10.8 to our report filed on Form 8-K on November 6, 2019 and incorporated herein by reference.

 

We agreed with LSG that upon the successful completion of a toll milling agreement after permitting is achieved, there will be a basis to form a joint management committee to outline work programs and budgets, as contemplated in the Option Agreement and for us to act as the operator of the Property. To the date of this report LSG has borne all costs in connection with operations on the Property. We expect the first work program, entailing Property-related costs for which we will be responsible, to be approved in 2020.

 

 

 

 

 

 

13

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

 

Milling

 

On February 17, 2017, we executed an agreement with Scorpio Gold Corporation (Scorpio) for a pilot toll milling test. We completed the first test in May 2017 and both companies have determined that further testing needs to be completed to determine a definitive cost analysis and other operational details. The sample processed was historic material stockpiled on the property surface and therefore of limited metallurgical value, but indicative of material that will be run through the mill. Milling throughput did identify specific equipment configuration details that need to be considered for future runs. Both parties agree that additional milling circuitry is needed for the most optimum gold yield.

 

On January 22, 2020, we executed a toll milling agreement (the “Agreement”) with Scorpio’s affiliate, Goldwedge LLC. The Agreement will allow for the processing of ore delivered from the Property to the 400 ton per day Goldwedge milling facility located in Manhattan, Nevada.

 

Based on previous metallurgical testing, our ore requires gravity combined with flotation for optimal recoveries of contained precious metals. The Goldwedge milling circuit is currently configured with a gravity recovery circuit. Under the terms of the Agreement, we will advance funds required for the design, engineering, permitting and modifications to the Goldwedge facility to include the addition of a flotation circuit, supporting reagent tanks/silos, secondary lining of process containment ponds, leak detection and monitoring wells associated with fluid containments.

 

The Agreement provides for us to recoup the advanced funds through a reduction in toll milling rates until all advanced funds have been repaid. Following repayment, the toll charges will revert to standard rates.

 

Property - Previous Exploration Work, Mineralization and State of Exploration

 

The Property is wholly owned by LSG, our largest shareholder, and is clear titled. A 1% net smelter royalty exists in the favor of the original property owner. The property consists of 31 patented claims on approximately 460 acres. LSG, over the past 15 years and continuing, has spent close to $8 million on underground rehab of approximately 1/2 mile of drift at the 300ft sub-surface level. LSG also executed 22 surface core drill holes for a total of 10,400ft and 152 underground core drill holes for a total of 23,000ft.

 

It is important to note the following sample preparation and quality controls used by LSG and by ICN, a previous operator of the Property:

 

Lode Star Gold drill hole core sampling and analytical protocol

 

All drill core samples were prepared and delivered to ALS Minerals in Reno by Tom Temkin, our COO. Individual sampled intervals varied from one to five-foot lengths, based on geologic parameters, and included 100% of core intervals. No core splitting was conducted. No duplicate samples or standards were introduced other than those inserted and utilized by ALS for their internal quality control. Lab preparation of individual samples included crushing and grinding to minus 200 mesh, followed by a 1-ton assay for gold. All samples that initially assayed over 1.0 opt Au were systematically re-assayed.

 

ICN drill hole core and Rotary RC sampling and analytical protocol

 

All drill core samples were prepared by ICN personnel and either delivered to the assay lab or were picked up on-site by lab personnel. Rotary RC chip drilling samples were collected on-site and transported to Reno by the respective labs. The labs used included ALS Minerals and American Assay Lab. Core was sawn by ALS Minerals and/or ICN personnel. Individual core sampled intervals varied from one to five-foot lengths, based on geologic parameters, and included one-half of the original core material. Rotary RC samples were taken at five-foot intervals entirely. Quality control for all samples included a protocol of inserting duplicate samples, blanks, and known standards, at repeating intervals to maintain .08% check sampling. Lab preparation of Individual samples included crushing and grinding to minus 200 mesh, followed by a 1-ton assay for gold. All samples that initially assayed over 1.0 opt Au were systematically re-assayed.

 

Underground work has identified 2 high-grade gold-bearing zones that can support mine development utilizing our current infrastructure. The property is now permitted for production and is mine ready.

 

Third Party Assay Data Audit

 

Mine Development Associates (MDA Reno), a highly regarded third party NI 43-101 service provider, has audited our drill hole database and performed a comparative QA/QC check assay analysis on selected drilling and determined no inconsistencies to exist and assays were repeatable.

 

 

 

 

 

 

 

14

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

 

NI 43-101 Update Status

 

We filed an independent Technical Report written in accordance with National Instrument 43-101 - Standards of Disclosure for Mineral Projects (NI 43-101) on our property located in Goldfield, Nevada. Although not required for OTC listing, we had this report prepared under NI 43-101 guidelines to provide a summary of the Goldfield Bonanza Project. This NI 43-101 is required documentation for future possible business transactions and listings on Canadian exchanges. The Technical Report titled “Technical Report on the Goldfield Bonanza Project Esmeralda County Nevada U.S.A.” dated January 15, 2020 has been prepared by Mr. Robert M. Hatch, SME Registered Geologist.

 

The report is available for review on EDGAR (https://www.sec.gov/edgar/searchedgar/companysearch.html) and SEDAR (https://www.sedar.com/) under Lode-Star Mining’s issuer profile.

 

Metallurgy Reports

 

To date we have had three metallurgy reports prepared. In order they are: Kappes Cassady & Associates located in Reno, NV dated July 10,2006, Newmont Mining located in Carlin, NV dated May 27, 2010, and McClelland Laboratories, Inc. located in Reno, NV dated January 26, 2016. Indications are that we can expect at a minimum, an 85% AU recovery from floatation milling. Better recovery is achieved by Agitated Leach processing, which show results closer to +90%. The best recovery results, +95%, due to the high sulphide content of the ore, is achieved through roasting. An additional lab report was generated by Kappes Cassady & Associates to determine ore compatibility for processing at Scorpio Gold’s milling circuit.

 

Key Developments

 

On November 20, 2018 we were issued Water Pollution Control Permit NEV2017109 from the Nevada Department of Environmental Protection (NDEP) regarding production at the property. This Permit authorizes the construction, operation, and closure of approved mining facilities in Esmeralda County, Nevada. The Permit is effective for 5 years until November 20, 2023 and authorizes the processing of 10,000 tons of ore per year from Lode-Star’s underground operations. 100% of the permitting cost has been borne by our largest shareholder, Lode Star Gold INC.

 

Unique to our production permit, the Nevada Department of Environmental Protection has endorsed the Company’s intensions to temporarily store waste rock underground. Once stockpiled, waste rock is brought to the surface to backfill and remediate our historic abandoned mine shafts. This will save us the significant time and expense of having to permit and build a surface waste containment facility.

 

We have received our ATF blasting permit. Long term road closures on the Property to curtail public access and ensure safety are underway.

 

Mine Design and Utilization of Equipment

 

The mine will be designed through the interpretation of detailed drilling data in cross sections and the use of conventional software. Currently there are two areas, the Red Hills and the Church, containing high-grade gold mineralization identified that are to be incorporated into the mine plan. Currently the mine is equipped with a 1-yard scoop-tram loader. Mining activity will be conducted with the utilization of this loader, pneumatic equipment and by an existing conveyor system providing for the transfer of ore to the surface.

 

Production Mining Method

 

We intend to maximize profitability through a disciplined approach involving the separation of high-grade gold ore from waste rock during the mining stage, thus avoiding the additional cost of pre-shipment concentration. In order to maintain the highest grade of ore production the blast holes will be sampled during drilling, then assayed to determine ore boundaries prior to blasting. The current plan is to ship ore directly from the mine to an offsite mill employing a toll-milling arrangement.

 

Mine Development - Drilling the Northeast Corridor

 

For technical details, see our report filed on Form 10-K for the year ended December 31, 2019. The Property’s Red Hills and Church zones can support mine development utilizing the Company’s current infrastructure. Underground mining in the Red Hills area will extract ore on the 300-level. We anticipate mining to begin by the end of 2020. We plan to initially mine 10,000 tons of material per year at a rate of approximately 50 tons per day.

 

We have a $5.0 million exploration and mine development program that is focused on defining the Property’s existing and mineable gold mineralization; to advance the geologic modeling in preparation for mining; and bulk sampling of the Project’s current underground workings as well as for working capital purposes.

 

 

 

 

15

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

 

Details of the development program are as follows:

 

Item Major Categories Cost
1. Equipment & Mining Materials $275,000
2. Secondary Escape & Second Production Shaft $1 million
3. Red Hills/Stope & Decline Vein Zones Mining $860,000
4. Drilling the Northeast Corridor $2 million
5. Corporate & General Admin. $865,000
  Total $5 million

 

Line items 1, 2, 3 and 5 above, totalling $3.0 million are required for bulk sampling of the Property’s current workings.

 

Line item 4 accounts for the Development Drilling totalling $2.0 million required to fully assess the Northeast Corridor.

 

The estimates above are for planning purposes only. No information contained herein should be considered an official corporate offering. The application of funds shown above is an estimate and may not exactly match the actual future costs.

 

Funding

 

All of our ongoing operations, since the inception of our Mineral Option Agreement on October 4, 2014, have been funded by monies advanced to us by Lode Star Gold INC. (LSG) our largest shareholder. We do not currently have enough funds to carry out our entire plan of operations, so we intend to meet the balance of our cash requirements for the next 12 months through a combination of debt financing and equity financing through private placements. There is no assurance that we will be successful in completing any such financings

 

If we are unsuccessful in obtaining sufficient funds through our capital raising efforts, we may review other financing options, although we cannot provide any assurance that any such options will be available to us or on terms reasonably acceptable to us. Further, if we are unable to secure any additional financing then we plan to reduce the amount that we spend on our operations, including our management-related consulting fees and other general expenses, so as not to exceed the capital resources available to us. Regardless, our current cash reserves and working capital will not be sufficient for us to sustain our business for the next 12 months, even if we decide to scale back our operations.

 

Personnel

 

We have no employees. Apart from periodic consulting fees, our president and CEO, Mark Walmesley, receives no compensation for his services. We expect to continue to use outside consultants, advisors, attorneys and accountants as necessary.

 

Our Chief Operating Officer, Thomas Temkin, who is also a director, is a Certified Professional Geologist and a Qualified Person under National Instrument (NI) 43101, with more than 40 years of experience in the mining industry, primarily in exploration in the Western United States. He is currently a consulting geologist working with LSG. Mr. Temkin has been associated with LSG and the Property for over 20 years and has been instrumental through its entire exploration program to date.

 

Our Corporate Secretary, Pam Walters, has been associated with the mining industry for over 25 years and has managed the corporate finance and business operations of LSG and its owners.

 

Going Concern

 

Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our expenses. This is because we have not generated any revenues to-date and we cannot currently estimate the timing of any possible future revenues. Our only source of cash at this time is from loans or investments by others in our common stock.

 

 

 

 

 

 

 

 

 

 

 

16

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

 

Results of Operations

 

The following summary of our results of operations should be read in conjunction with our financial statements for the period ended March 31, 2020 which are included above in Part I, Item 1.

 

   Three Months Ended March 31   Change 
   2020   2019   Amount   Percentage 
   $   $   $     
Revenue   -    -    -    - 
Operating Expenses   114,579    76,681    37,898    49%
Operating Loss   (114,579)   (76,681)   (37,898)   49%
Other Income (Expense)   (18,929)   (15,278)   (3,651)   24%
Net Loss   (133,508)   (91,959)   (41,549)   45%

 

Revenues

 

We had no operating revenues during the three-months ended March 31, 2020 and 2019. We recorded a net loss of $133,508 for the current quarter and have an accumulated deficit of $3,134,769. The possibility and timing of revenue being generated from our mineral property interest remains uncertain

 

Expenses

 

Notable year over year differences in expenses for the first quarter are as follows:

 

   Three Months Ended March 31   Increase/(Decrease) 
   2020   2019   Amount   Percentage 
   $   $   $     
Consulting services   65,850    14,399    51,451    357%
Professional fees   2,270    14,625    (12,355)   (85%)
Interest, bank and finance charges   18,929    15,278    3,651    24%

 

Consulting services expense was higher in the first quarter of 2020 primarily due to a combination of the following:

 

Q1 2020 included approximately $34,000 paid to an advisory firm for assistance in exploring fund raising opportunities, with no equivalent expense in Q1 2019.

 

The expense that related to options granted during 2018 was approximately $1,000 less in Q1 2020 than in Q1 2019.

 

Consulting fees paid to our President for strategic and mine development were $19,000 higher in Q1 2020 than in Q1 2019.

 

Professional fees were lower in the first quarter of 2020 primarily due to audit services of approximately $12,000 for the 2018 year-end being invoiced in Q1 2019, while the equivalent services for the 2019 year end were not yet invoiced in 2020.

 

Interest, bank and finance charges were higher primarily due to the ongoing increase in loans from LSG.

 

Balance Sheets at March 31, 2020 and December 31, 2019

 

Items with notable period-end differences are as follows:

 

       Change 
   March 31, 2020   December 31, 2019   Amount   Percentage 
   $   $   $     
Prepaid fees   22,145    2,078    20,067    966%
Accounts payable and accrued liabilities   28,717    8,014    20,703    258%
Due to related parties and accrued interest   1,739,046    1,598,114    140,932    9%
Loans payable and accrued interest   -    5,819    (5,819)   (100%)

 

Prepaid fees increased approximately $3,000 due to a retainer paid for audit services and approximately $17,000 due to amounts paid towards the addition of the Goldwedge mill floatation circuit, which will be recovered through a milling rate reduction.

 

Accounts payable increased principally due to the accrual of $25,000 in consulting fees to our President for Q1 2020, with no equivalent at December 31, 2019. That was partially offset by the decrease of approximately $6,000 in amounts due at December 31, 2019 for legal and audit services that were paid in the current quarter.

17

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

 

The increase in Due to related parties resulted from increased related party loans and accrued interest in the current period of approximately $109,000, together with the accrual of fees and interest due under the terms of our mineral option agreement with LSG of approximately $32,000.

 

Loans payable decreased due to the repayment of all outstanding accrued interest on non-related party loans. All outstanding principal of the non-related party loans was repaid or settled in 2019.

 

Liquidity and Capital Resources

 

At March 31, 2020, our total assets were $266,056 and our total liabilities were $1,767,763. Our working capital deficiency at March 31, 2020 and December 31, 2019 and the changes between those dates were as follows:

 

       Increase/(Decrease) 
   March 31,2020   December 31,2019   Amount   Percentage 
   $   $   $     
Current Assets   35,876    12,577    23,299    185%
Current Liabilities   1,767,763    1,611,947    155,816    10%
Working Capital Deficiency   (1,731,887)   (1,599,370)   (132,517)   8%

 

The increase in our working capital deficiency from December 31, 2019 to March 31, 2020 was primarily due to the increases in Accounts payable of approximately $21,000 and in Due to related parties of approximately $141,000, partially offset by the increase in Prepaid fees of approximately $20,000, together with the decrease of approximately $6,000 in Loans payable and accrued interest (each of which are explained above) and the increase in Cash of approximately $3,000 (see below).

 

Cash Flows

 

   Three Months Ended March 31   Increase/(Decrease) 
   2020   2019   Amount   Percentage 
   $   $   $     
Cash Flows Provided By (Used In):                    
Operating Activities   (61,768)   (23,418)   (38,350)   164%
Financing Activities   65,000    25,000    40,000    160%
Net increase in cash   3,232    1,582    1,650    104%

 

We have yet to generate any revenues from our business operation and our ability to generate adequate amounts of cash to meet our needs is entirely dependent on the issuance of shares or loans, which have been our principal sources of working capital so far. For the foreseeable future, we will have to continue to rely on those sources for funding. We have no assurance that we can successfully engage in any further private sales of our securities or that we can obtain any additional loans.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

 

 

 

 

 

 

 

 

 

 

18

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures

 

We conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2020, our disclosure controls and procedures were not effective, due to the size and nature of the existing business operation. Given the size of our current operation and existing personnel, the opportunity to implement disclosure control procedures is limited. Until the organization can increase sufficiently in size to warrant an increase in personnel required to effectively execute and monitor formal disclosure control procedures, those formal procedures will not be implemented. Given the current size of the organization, there are not significant levels of supervision, review, independent directors or a formal audit committee.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

ITEM 1A. RISK FACTORS

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide information under this item. Our business is subject to risks inherent in the establishment of a new business enterprise, including, without limitation, the items listed in Item 1A RISK FACTORS in our report filed on Form 10-K for the period ended December 31, 2019.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

We had no unregistered sales of securities during the three months ended March 31, 2020.

 

Other than as disclosed in previous reports filed with the SEC, we have not issued any equity securities that were not registered under the Securities Act within the past three years.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19

 

ITEM 6. EXHIBITS.

 

The following documents are included herein:

 

Exhibit
No.
Document Description
31.1 Certification of Principal Executive and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
32.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Chief Executive and Chief Financial Officer.
   
101.INS XBRL Instance Document
   
101.SCH XBRL Taxonomy Extension Schema
   
101.CAL XBRL Taxonomy Extension Calculation Linkbase
   
101.DEF XBRL Taxonomy Extension Definition Linkbase
   
101.LAB XBRL Taxonomy Extension Label Linkbase
   
101.PRE XBRL Taxonomy Extension Presentation Linkbase

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20

 

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 8th day of May 2020.

 

  LODE-STAR MINING INC.  
       
  BY  “Mark Walmesley”  
    Mark Walmesley  
    President, Principal Executive Officer, Treasurer, Principal Financial Officer, and Principal Accounting Officer  

 

 

 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

 

Signature  Title  Date
       
/s/ Mark Walmesley  Director, President, Chief Executive Officer and Chief Financial Officer  May 8, 2020
Mark Walmesley      
       
       
/s/ Thomas Temkin  Director and Chief Operating Officer  May 8, 2020
Thomas Temkin      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

21

 

EXHIBIT INDEX

 

Exhibit
No.
Document Description
31.1 Certification of Principal Executive and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
32.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Chief Executive and Chief Financial Officer.
   
101.INS XBRL Instance Document
   
101.SCH XBRL Taxonomy Extension Schema
   
101.CAL XBRL Taxonomy Extension Calculation Linkbase
   
101.DEF XBRL Taxonomy Extension Definition Linkbase
   
101.LAB XBRL Taxonomy Extension Label Linkbase
   
101.PRE XBRL Taxonomy Extension Presentation Linkbase

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22