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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
For the transition period from ____________ to ____________
Commission file number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification Number) |
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(Address of principal executive offices) |
(Zip Code) |
Registrant's telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each Class | Trading Symbol | Name of each exchange on which registered |
| N/A | N/A | N/A |
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.
Indicate by check mark whether the registrant
has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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 definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act (check one):
| Large accelerated Filer ☐ | Accelerated Filer ☐ |
| Smaller reporting company | |
| Emerging growth company |
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
On August 11, 2022, there were shares of the registrant’s common stock, $.0001 par value, outstanding.
TABLE OF CONTENTS
| Page | ||
| PART I. FINANCIAL INFORMATION | 3 | |
| Item 1. | FINANCIAL STATEMENTS | 3 |
| Balance Sheets (unaudited) | 3 | |
| Statements of Operations (unaudited) | 4 | |
| Statements of Stockholders' Equity (Deficit) (unaudited) | 5 | |
| Statements of Cash Flows (unaudited) | 6 | |
| Notes to Financial Statements (unaudited) | 7 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 22 |
| Item 4. | Controls and Procedures | 22 |
| PART II. OTHER INFORMATION | 23 | |
| Item 1. | Legal Proceedings | 23 |
| Item 1A. | Risk Factors | 23 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 23 |
| Item 3. | Defaults Upon Senior Securities | 23 |
| Item 4. | Mine Safety Disclosures | 23 |
| Item 5. | Other Information | 23 |
| Item 6. | Exhibits | 23 |
| Signature | 24 | |
| 2 |
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
ATHENA GOLD CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)
| Assets | 6/30/22 | 12/31/21 | ||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Other assets | ||||||||
| Mineral Rights | ||||||||
| Total other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders' Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Note payable - related party | ||||||||
| Total current liabilities | ||||||||
| Long term liabilities | ||||||||
| Warrant liability | ||||||||
| Total long term liabilities | ||||||||
| Total liabilities | ||||||||
| Stockholders' equity | ||||||||
| Preferred stock, $ par value, shares authorized, outstanding | ||||||||
| Common stock - $ par value; shares authorized, and issued and outstanding | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders' equity | ||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||
See accompanying notes to the unaudited financial statements.
| 3 |
ATHENA GOLD CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| Three Months Ended | Six Months Ended | ||||||||||||||||
| 6/30/22 | 6/30/21 | 6/30/22 | 6/30/21 | ||||||||||||||
| Operating expenses | |||||||||||||||||
| Exploration, evaluation and project expenses | $ | $ | $ | $ | |||||||||||||
| General and administrative expenses | |||||||||||||||||
| Total operating expenses | |||||||||||||||||
| Net operating loss | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||
| Interest expense | ( | ) | ( | ) | |||||||||||||
| Revaluation of warrant liability | ( | ) | ( | ) | |||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
| Weighted average common shares outstanding – basic and diluted | |||||||||||||||||
| Loss per common share – basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | |||||||||
See accompanying notes to the unaudited financial statements.
| 4 |
ATHENA GOLD CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
| Additional | ||||||||||||||||||||
| Common Stock | Paid In | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| December 31, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Conversion of management fees | ||||||||||||||||||||
| Stock based compensation | 0 | |||||||||||||||||||
| Private placement | ||||||||||||||||||||
| Net loss | 0 | ( | ) | ( | ) | |||||||||||||||
| March 31, 2021 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Private placement | ||||||||||||||||||||
| Warrant liability | 0 | ( | ) | ( | ) | |||||||||||||||
| Stock based compensation | 0 | |||||||||||||||||||
| Net loss | 0 | ( | ) | ( | ) | |||||||||||||||
| June 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| December 31, 2021 | ( | ) | ||||||||||||||||||
| Stock based compensation | 0 | |||||||||||||||||||
| Net loss | 0 | |||||||||||||||||||
| March 31, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Private placement | ||||||||||||||||||||
| Warrant liability | 0 | ( | ) | ( | ) | |||||||||||||||
| Common stock issued for mineral property | ||||||||||||||||||||
| Stock based compensation | 0 | |||||||||||||||||||
| Net loss | 0 | ( | ) | ( | ) | |||||||||||||||
| June 30, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
See accompanying notes to the unaudited financial statements.
| 5 |
ATHENA GOLD CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| Six Months Ended | ||||||||
| 6/30/22 | 6/30/21 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Amortization of debt discount | ||||||||
| Revaluation of warrant liability | ( | ) | ||||||
| Share based compensation | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Prepaid expense and other current assets | ||||||||
| Accounts payable | ( | ) | ||||||
| Accrued liabilities and other liabilities | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchase of mineral properties | ( | ) | ||||||
| Net cash provided (used) by investing activities | ( | ) | ||||||
| Cash flows from financing activities | ||||||||
| Proceeds from private placement of stock | ||||||||
| Proceeds from related parties | ||||||||
| Payments to related parties | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash | ( | ) | ||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Noncash investing and financing activities | ||||||||
| Stock issued to payoff related party note payable | $ | $ | ||||||
| Common stock issued for mineral properties | $ | $ | ||||||
| Related party note payable for mineral property | $ | $ | ||||||
| Conversion of management fee payable | $ | $ | ||||||
| Warrant liability | $ | $ | ||||||
See accompanying notes to the unaudited financial statements.
| 6 |
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1 – Nature of Business and Summary of Significant Accounting Policies
Nature of Operations
Athena Gold Corporation (“we,” “our,” “us,” or “Athena”) is engaged in the acquisition and exploration of mineral resources. We were incorporated in Delaware on December 23, 2003 and began our mining operations in 2010.
In December 2009, we formed and organized a wholly-owned subsidiary, Athena Minerals, Inc. (“Athena Minerals”) which owns and operates mining interests and property in California. On December 31, 2020 we sold the subsidiary to Mr. John Gibbs, a related party, in a non-cash exchange.
The Company’s properties do not have any 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
We prepared these interim financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”). The accompanying unaudited interim financial statements have been prepared in accordance with GAAP for interim financial information and in accordance with Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month periods ended March 31, 2022 are not necessarily indicative of the results for the full year. While we believe that the disclosures presented herein are adequate and not misleading, these interim consolidated financial statements should be read in conjunction with the audited financial statements and the footnotes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2021.
Reclassifications
Certain reclassifications may have been made to our prior year’s consolidated financial statements to conform to our current year presentation. These reclassifications had no effect on our previously reported results of operations or accumulated deficit.
Foreign Currency Translation
The Company is exposed to currency risk on transactions and balances in currencies other than the functional currency. The Company has not entered any contracts to manage foreign exchange risk.
The functional currency of the Company is the US dollar; therefore, the Company is exposed to currency risk from financial assets and liabilities denominated in Canadian dollars.
Recent Accounting Pronouncements
The Company is not aware of any recent accounting pronouncements expected to have a material impact on the consolidated financial statements.
| 7 |
Liquidity and Going Concern
Our financial statements have been prepared on a going concern basis, which assumes that we will be able to meet our obligations and continue our operations during the next fiscal year. Asset realization values may be significantly different from carrying values as shown in our consolidated financial statements and do not give effect to adjustments that would be necessary to the carrying values of assets and liabilities should we be unable to continue as a going concern.
At June 30, 2022, we had not yet achieved profitable operations and we have accumulated losses of approximately $11,600,000 since our inception. We expect to incur further losses in the development of our business, all of which raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern depends on our ability to generate future profits and/or to obtain the necessary financing to meet our obligations arising from normal business operations when they come due.
Impairment of Long-lived Assets
We continually monitor events and changes in circumstances that could indicate that our carrying amounts of long-lived assets, including mineral rights, may not be recoverable. When such events or changes in circumstances occur, we assess the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through their undiscounted expected future cash flows. If the future undiscounted cash flows are less than the carrying amount of these assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets.
Notes Payable - Related Party
Related party payables are classified as current liabilities as the note holders are control persons and have the ability to control the repayment dates of the notes.
Exploration Costs
Mineral exploration costs are expensed as incurred. When it has been determined that it is economically feasible to extract minerals and the permitting process has been initiated, exploration costs incurred to further delineate and develop the property are considered pre-commercial production costs and will be capitalized and included as mine development costs in our consolidated balance sheets.
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 Company stock price history. The Company determines the expected life based on the simplified method given that its own historical share option exercise experience does not provide a reasonable basis for estimating expected term. 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 |
Fair Value of Financial Instruments
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 management’s best estimate of what market participants would use as fair value.
The fair value of cash, receivables and accounts payable approximates their carrying values due to their short term to maturity. The warrant liabilities are measured using level 3 inputs (Note 4).
The Company incurred a net loss for the three and six months ended June 30, 2022 and 2021, respectively. In periods where the Company has a net loss, all common stock equivalents are excluded as they would be anti-dilutive . As of June 30, 2022 there were options and warrants. As of June 30, 2021 there were options and warrants.
COVID-19 Pandemic
An occurrence of an uncontrollable event such as the COVID-19 pandemic may negatively affect our operations. The occurrence of an uncontrollable event such as the COVID-19 pandemic may negatively affect our operations. A pandemic typically results in social distancing, travel bans and quarantine, and this may limit access to our facilities, customers, management, support staff and professional advisors. These factors, in turn, may not only impact our operations, financial condition and demand for our goods and services but our overall ability to react timely to mitigate the impact of this event. Also, it may hamper our efforts to comply with our filing obligations with the Securities and Exchange Commission.
Note 2 – Mineral Rights - Excelsior Springs
Effective December 27, 2021 (“Effective Date”), the Company simultaneously executed and consummated a definitive Share Purchase Agreement (the “SPA”) with Nubian Resources, Ltd. (“Nubian”). The SPA was the result of a previously disclosed Option Agreement with Nubian dated as of December 11, 2020, as amended by First Amendment to Option Agreement dated November 10, 2021 (the “Option”). While the Option granted the Company the right to acquire up to a 100% interest in the mining claims comprising the Excelsior Springs Prospect (the “Property”) located in Esmerelda County, Nevada, the Company and Nubian agreed to restructure the transaction so that the Company purchased 100% of the issued and outstanding shares of common stock of Nubian Resources USA, Ltd (“Nubian USA”), a wholly-owned subsidiary of Nubian which held the Property. By purchasing 100% of Nubian USA, the Company effectively acquired the remaining 90% interest in the Property, the Company having previously acquired a 10% interest in the Property in December 2020 under the terms of the Option.
| 9 |
The following is a summary of the terms of the SPA, which summary is qualified in its entirety by reference to the SPA:
| · | The consideration paid to Nubian for 100% of the issued and outstanding shares of Nubian US consisted of: |
| ○ | An aggregate of 50 million shares of Athena Gold Corp. common stock, which number includes the 5 million shares of common stock previously issued to Nubian under the Option; and | |
| ○ | A 1% Net Smelter Royalty on all production from the Excelsior Springs Property. |
| · | The 50 million shares issued to Nubian were issued as “restricted securities” under the Securities Act of 1933, as amended (“Securities Act”). However, the Company has agreed to file a registration statement on Form S-1 within 90 days of the Effective Date registering the distribution by Nubian of all 50 million shares to its shareholders, pro rata. Nubian has undertaken to complete the distribution of all the shares once the S-1 registration statement has been declared effective. | |
| · | Pending completion of the S-1 and distribution of the 50 million shares issued to Nubian, for a period of 12 months following the Effective or until Nubian owns less than 4.9% of the Athena issued and outstanding shares, Nubian has agreed to exercise its voting rights with respect to such shares in a manner to support the recommendations of the Athena Board of Directors except for (i) voting on any proposed change in control transaction or (ii) voting on any proposed sale of all or substantially all of the Excelsior Property, including a property included known as Palmetto. | |
| · | Nubian shall be entitled to nominate one representative to serve on the Athena Board of Directors. |
The mineral property was valued at the December
31, 2021, the closing date for the SPA with a stock price of $0.13, resulting in a fair value consideration of $
Note 3 – Convertible Note Payable
Effective April 1, 2015, the Company executed
a convertible promissory note (the “Note”) in the principal amount of $
On April 24, 2020, the Company agreed to reduce
the conversion price from $0.0735 per share to $0.021 per share. All other terms of the convertible note remain unchanged, and therefore
did not change the cash flows of the note. The Company determined the transaction was considered an extinguishment because of the change
in conversion price in which no gain or loss was recorded according to ASC 470-50. However, because the conversion price was reduced below
the $0.03 market value on the date of the change, a beneficial conversion feature resulted from the price reduction in the amount of $
On November 30, 2021, the Company received a notice
of conversion of the Note with a principal balance of $
| 10 |
Note 4 – Common Stock and Warrants
On June 9, 2022 the Company entered into an
acquisition agreement to purchase an undivided 100% interest in the Fortunatus and Prout patented lode mining claims in Esmeralda
County, Nevada $
The Claims are currently held by the Company under a lease option agreement that expires in June 2023 and are an integral part of the Company’s flagship Excelsior Springs project including the high-grade gold historic Buster Mine.
The commercial terms of the transaction are:
| · | $ | |
| · | $ | |
| · | $ |
In
April 2022 the Company completed a private placement in which we sold units. Each unit was priced at CAD$ and consisted
of one share of the Company’s common stock and one stock purchase warrant granting the holder the right to purchase one additional
share of common stock at a price of CAD$. The warrants expire April 13, 2025. All securities issued in connection with the offering
are subject to restrictions on resale in Canada and the United States pursuant to applicable securities laws and the policies of any applicable
stock exchange. An additional
The warrants have an exercise price in Canadian dollars while the Company’s functional currency is US dollars. Therefore, in accordance with ASU 815 - Derivatives and Hedging, the warrants have a derivative liability value.
In April 2022, the warrant liability had an initial
value of $
| Fair value assumptions – warrant liability: | 4/13/22 | 6/30/22 | ||||||
| Risk free interest rate | % | % | ||||||
| Expected term (years) | ||||||||
| Expected volatility | % | % | ||||||
The broker warrants were evaluated for purposes
of classification between liability and equity. The broker warrants do not contain features that would require a liability classification
and are therefore considered equity. The Black Scholes pricing model was calculated in US dollars to estimate the fair value of $
| Fair value assumptions – broker warrants: | April 13, 2022 | |||
| Risk free interest rate | % | |||
| Expected term (years) | ||||
| Expected volatility | % | |||
During the twelve months ended December 31, 2021
we sold shares of common stock in private placements realizing proceeds of $
| 11 |
On September 30, 2021 the Company completed a
private placement in which we sold units. Each unit was priced at CAD$0.08 and consisted of one share of the Company’s
common stock and one stock purchase warrant granting the holder the right to purchase one additional share of common stock at a price
of CAD$0.15. The warrants expire
The warrants have an exercise price in Canadian dollars while the Company’s functional currency is US dollars. Therefore, in accordance with ASU 815 - Derivatives and Hedging, the warrants have a derivative liability value.
At December 31, 2021, the warrant liability was
valued at $
| Fair value assumptions – warrant liability: | 9/30/21 | 12/31/21 | 6/30/22 | |||||||||
| Risk free interest rate | % | % | % | |||||||||
| Expected term (years) | ||||||||||||
| Expected volatility | % | % | % | |||||||||
The Broker Warrants were evaluated for purposes
of classification between liability and equity. The Broker Warrants do not contain features that would require a liability classification
and are therefore considered equity. The Black Scholes pricing model was calculated in US dollars to estimate the fair value of $
| Fair value assumptions – broker warrants: | September 30, 2021 | |||
| Risk free interest rate | % | |||
| Expected term (years) | ||||
| Expected volatility | 1% | |||
On May 25, 2021 the Company completed a private
placement in which we sold units. Each unit was priced at CAD$0.08 and consisted of one share of the Company’s common
stock and one stock purchase warrant granting the holder the right to purchase one additional share of common stock at a price of CAD$0.15.
The warrants expire
The warrants have an exercise price in Canadian dollars while the Company’s functional currency is US dollars. Therefore, in accordance with ASU 815 - Derivatives and Hedging, the warrants have a derivative liability value.
At December 31, 2021, the warrant liability was
valued at $
| Fair value assumptions – warrant liability: | 5/25/21 | 12/31/21 | 6/30/22 | |||||||||
| Risk free interest rate | % | % | % | |||||||||
| Expected term (years) | ||||||||||||
| Expected volatility | % | % | % | |||||||||
| 12 |
The Broker Warrants were evaluated for purposes
of classification between liability and equity. The Broker Warrants do not contain features that would require a liability classification
and are therefore considered equity. The Black Scholes pricing model was calculated in US dollars to estimate the fair value of $
| Fair value assumptions – broker warrants: | May 25, 2021 | |||
| Risk free interest rate | % | |||
| Expected term (years) | ||||
| Expected volatility | % | |||
Total outstanding warrants of
| Warrants Issued | Total | |||||||||||||||
| Warrants issued | ||||||||||||||||
| Broker warrants issued (1) | ||||||||||||||||
| Issued date | ||||||||||||||||
| Expiration date | ||||||||||||||||
| Exercise price (Canadian $) | $ | $ | $ | |||||||||||||
| Balance at December 31, 2020 | ||||||||||||||||
| Exercised | ||||||||||||||||
| Issued | ||||||||||||||||
| Expired | ||||||||||||||||
| Balance at December 31, 2021 | ||||||||||||||||
| Exercised | ||||||||||||||||
| Issued | ||||||||||||||||
| Expired | ||||||||||||||||
| Balance at June 30, 2022 | ||||||||||||||||
| (1) |
During the quarter ended March 31, 2021, we sold 5,000,000 shares of common stock in private placements to six individuals at a price of $0.03 per share, realizing total proceeds of $150,000. Of the 5,000,000 shares sold, 1,750,000 shares were issued on May 28, 2021.
On January 1, 2021 Mr. John Power, the Company’s
CEO/CFO agreed to convert accrued management fees totaling $
On March 22, 2021 the Company issued a total of non-statutory stock options to four individuals, three of whom are Directors of the Company, the other an independent technical consultant that is helping design our 2021 exploration programs at Excelsior Spring. Upon vesting, each option is exercisable to purchase one share of common stock at a price of $0.09 per share. The options vest 50% upon issuance, and 25% on each of the first and second anniversaries of the grant date.
We estimated the fair value of the options using the Black-Scholes option pricing model, which includes assumptions for expected dividends, expected share price volatility, risk-free interest rate, and expected life of the options. Our expected volatility assumption is based on our historical weekly closing price of our stock over a period equivalent to the expected remaining life of the options. The total estimated fair value of the options utilized the following assumptions:
| Expected volatility | % | |
| Expected life | years | |
| Risk free interest rate | % |
| 13 |
The
calculations resulted in the total fair value of the options issued to be $
| Weighted | |||||||||||||
| Average | |||||||||||||
| Weighted | Remaining | ||||||||||||
| Average | Contractual | Aggregate | |||||||||||
| Number of | Exercise | Life | Intrinsic | ||||||||||
| Options | Price | (Years) | Value | ||||||||||
| Balance at December 31, 2020 | $ | – | $ | – | |||||||||
| Exercised | – | – | |||||||||||
| Issued | – | ||||||||||||
| Canceled | – | – | |||||||||||
| Balance at December 31, 2021 | |||||||||||||
| Exercised | – | – | |||||||||||
| Issued | – | – | |||||||||||
| Canceled | – | – | |||||||||||
| Balance at June 30, 2022 | – | ||||||||||||
| Options exercisable at June 30, 2022 | – | ||||||||||||
Also, on March 22, 2021 the Company agreed to issue a total of restricted stock units at a price of $0.10 per share to the independent technical consultant helping design our 2021 exploration programs at Excelsior Springs. However, the shares shall not be issued until such time the individual either provides a written request or his termination date, whichever is sooner. The shares shall have no voting rights until issued. As such, we have recorded stock-based compensation in the amount of $.
Note 6 – Commitments and Contingencies
We are subject to various commitments and contingencies.
Note 7 – Related Party Transactions
Conflicts of Interests
Magellan Gold Corporation (“Magellan”) is a company under common control. Mr. John Gibbs is a significant shareholder in both Athena and Magellan. Athena and Magellan are both involved in the business of acquisition and exploration of mineral resources.
Silver Saddle Resources, LLC (“Silver Saddle”) is also a company under common control. Mr. Power and Mr. Gibbs are the owners and managing members of Silver Saddle. Athena and Silver Saddle are both involved in the business of acquisition and exploration of mineral resources.
There exists no arrangement or understanding with respect to the resolution of future conflicts of interest. The existence of common ownership and common management could result in significantly different operating results or financial position from those that could have resulted had Athena, Magellan and Silver Saddle been autonomous.
| 14 |
Management Fees
The
Company is subject to a month-to-month management agreement with Mr. Power requiring a monthly payment of $2,500 as consideration for
the day-to-day management of Athena, $
On January 1, 2021, the Company agreed to convert
the $
Note Payable
During March 2022, the Company executed two promissory
notes with John Gibbs for $
In
June 2022, the Company executed a promissory note with John Gibbs for $
Note 8 – Subsequent Events
On July 13, 2022, The Company completed its acquisition of an undivided 100% interest in the Fortunatus and Prout patented lode mining claims in Esmeralda County, Nevada $185,000. See Note 4.
On August 12, 2022, The Company closed the 1st tranche of a private placement and received gross proceeds of CAD $304,800 and will be issuing a total of 3,810,000 units at CAD $0.08 consisting of one share and one warrant exercisable at CAD $0.12 for two years.
| 15 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We use the terms “Athena,” “we,” “our,” and “us” to refer to Athena Gold Corporation.
The following discussion and analysis provide information that management believes is relevant for an assessment and understanding of our results of operations and financial condition. This information should be read in conjunction with our audited consolidated financial statements which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, and our interim unaudited consolidated financial statements and notes thereto included with this report in Part I. Item 1.
Forward-Looking Statements
Some of the information presented in this Form 10-Q constitutes “forward-looking statements”. These forward-looking statements include, but are not limited to, statements that include terms such as “may,” “will,” “intend,” “anticipate,” “estimate,” “expect,” “continue,” “believe,” “plan,” or the like, as well as all statements that are not historical facts. Forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from current expectations. Although we believe our expectations are based on reasonable assumptions within the bounds of our knowledge of our business and operations, there can be no assurance that actual results will not differ materially from expectations.
All forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made.
Business Overview
Athena Gold Corporation (“we,” “our,” “us,” or “Athena”) is engaged in the acquisition and exploration of mineral resources. We were incorporated in Delaware on December 23, 2003 and began our mining operations in 2010.
In December 2009, we formed and organized a wholly-owned subsidiary, Athena Minerals, Inc. (“Athena Minerals”) which owns and operates mining interests and property in California. On December 31, 2020 we sold the subsidiary to Mr. John Gibbs, a related party, in a non-cash exchange.
The Company’s properties do not have any 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.
Results of Operations for the Three Months Ended June 30, 2022 and 2021
| Three Months Ended | ||||||||
| 6/30/22 | 6/30/21 | |||||||
| Operating expenses | ||||||||
| Exploration, evaluation and project expenses | $ | 113,497 | $ | 26,099 | ||||
| General and administrative expenses | 95,862 | 116,844 | ||||||
| Total operating expenses | 209,359 | 142,943 | ||||||
| Net operating loss | (209,359 | ) | (142,943 | ) | ||||
| Interest expense | 0 | (2,915 | ) | |||||
| Revaluation of warrant liability | (623,776 | ) | 62,093 | |||||
| Net loss | $ | (833,135 | ) | $ | (83,765 | ) | ||
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Results of Operations for the Six Months Ended June 30, 2022 and 2021
| Six Months Ended | ||||||||
| 6/30/22 | 6/30/21 | |||||||
| Operating expenses | ||||||||
| Exploration, evaluation and project expenses | $ | 306,063 | $ | 61,776 | ||||
| General and administrative expenses | 233,450 | 330,947 | ||||||
| Total operating expenses | 539,513 | 392,723 | ||||||
| Net operating loss | (539,513 | ) | (392,723 | ) | ||||
| Interest expense | 0 | (10,107 | ) | |||||
| Revaluation of warrant liability | (31,678 | ) | 62,093 | |||||
| Net loss | $ | (571,191 | ) | $ | (340,737 | ) | ||
Operating expenses:
For the three months ending June 30, 2022, the Company decreased general and administrative expenses by approximately $21,000. The increase was due to the following approximate year over year variances:
| Three months ending | 6/30/2022 | 6/30/2021 | Variance |
| Legal and other professional fees | $69,000 | $89,000 | ($20,000) |
| Share based compensation | 12,000 | 19,000 | (7,000) |
| Stock exchange fees and related expenses | 7,000 | 6,000 | 1,000 |
| Other general expenses | 8,000 | 3,000 | 5,000 |
| Total | $96,000 | $117,000 | ($21,000) |
For the six months ending June 30, 2022, the Company decreased general and administrative expenses by approximately $98,000. The increase was due to the following approximate year over year variances:
| Six months ending | 6/30/2022 | 6/30/2021 | Variance |
| Legal and other professional fees | $166,000 | $168,000 | ($2,000) |
| Share based compensation | $24,000 | 117,000 | (93,000) |
| Stock exchange fees and related expenses | $33,000 | 41,000 | (8,000) |
| Other general expenses | 10,000 | 5,000 | 5,000 |
| Total | $233,000 | $331,000 | ($98,000) |
| · | Legal and other professional fees remained largely unchanged for the six months ending June 30 compared to prior year. Legal fees were higher for the three months ending June 30, 2021, resulting from the listing on the Canadian Securities Exchange. | |
| · | Share based compensation was higher in 2021 with the issuance of options in March that were 50% vested on grant date with the remaining share based compensation recognized on a straight line basis for the remaining two years until the options are fully vested. | |
| · | Stock exchange fees and related expenses decreased in 2022 with the reduction of consulting fees for fund raising. | |
| · | Other general expenses is higher in 2022 with increases in travel and office expenses. |
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During the three and six months ended June 30, 2022, we incurred approximately $113,000 and $306,000, respectively of exploration costs, which were costs associated with our RC drill program on our flagship Excelsior Springs project. This is an increase from the three and six months ended June 30, 2021 of approximately $26,000 and $62,000, respectively.
Other income and expense:
On May 25, 2021, we completed a private placement in which we sold 6,250,000 units. Each unit was priced at CAD$0.08 and consisted of one share of the Company’s common stock and one stock purchase warrant granting the holder the right to purchase one additional share of common stock at a price of CAD$0.15. The warrants expire three years from the date of issuance. An additional 173,810 warrants were granted to a Canadian broker as a placement fee. We realized total proceeds of $401,823 net of offering costs.
At December 31, 2021, the warrant liability was valued at $683,063. As of June 30, 2022, the warrant liability was valued at $438,408, resulting in a gain on revaluation of warrant liability of $244,655.
On September 30, 2021 we completed a private placement in which we sold 3,108,700 units. Each unit was priced at CAD$0.08 and consisted of one share of the Company’s common stock and one stock purchase warrant granting the holder the right to purchase one additional share of common stock at a price of CAD$0.15. The warrants expire May 31, 2024. All securities issued in connection with the offering are subject to restrictions on resale in Canada and the United States pursuant to applicable securities laws and the policies of any applicable stock exchange. An additional 91,000 Broker Warrants (“Broker Warrants”) were granted to a Canadian broker as a placement fee. We realized total proceeds of $190,552 net of offering costs.
At December 31, 2021, the warrant liability was valued at $341,145. As of June 30, 2022, the warrant liability was valued at $218,793, resulting in a gain on revaluation of warrant liability of $122,352.
In April 2022 the Company completed a private placement in which we sold 6,250,000 units. Each unit was priced at CAD$0.08 and consisted of one share of the Company’s common stock and one stock purchase warrant granting the holder the right to purchase one additional share of common stock at a price of CAD$0.15. The warrants expire April 13, 2025. All securities issued in connection with the offering are subject to restrictions on resale in Canada and the United States pursuant to applicable securities laws and the policies of any applicable stock exchange. An additional 70,000 broker warrants were granted to a Canadian broker as a placement fee. We realized total proceeds of $394,082 net of offering costs.
In April 2022, the warrant liability had an initial value of $203,838. As of June 30, 2022, the warrant liability was valued at $602,523, resulting in a loss on revaluation of warrant liability of $398,685
Liquidity and Capital Resources
Going Concern
Our consolidated financial statements have been prepared on a going concern basis, which assumes that we will be able to meet our obligations and continue our operations during the next fiscal year. Asset realization values may be significantly different from carrying values as shown in our consolidated financial statements and do not give effect to adjustments that would be necessary to the carrying values of assets and liabilities should we be unable to continue as a going concern.
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At June 30, 2022, we had not yet achieved profitable operations and we have accumulated losses of approximately $11,600,000 since our inception. We expect to incur further losses in the development of our business, all of which casts substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern depends on our ability to generate future profits and/or to obtain the necessary financing to meet our obligations arising from normal business operations when they come due.
We have financed our capital requirements primarily through borrowings from related parties and equity financings. We expect to meet our future financing needs and working capital and capital expenditure requirements through additional borrowings and offerings of debt or equity securities, although there can be no assurance that our future financing efforts will be successful. The terms of future financing could be highly dilutive to existing shareholders. Currently, there are no arrangements in place for additional equity funding or new loans.
Liquidity
As of June 30, 2022, we had approximately $31,000 of cash and a negative working capital of approximately $16,000. This compares to cash on hand of approximately $73,000 and negative working capital of approximately $74,000 on December 31, 2021.
During the twelve months ended December 31, 2021, we have sold 14,358,700 shares of common stock in private placements realizing proceeds of $742,375. In April 2022 the Company completed a private placement in which we sold 6,250,000 units. We realized total proceeds of $394,082 net of offering costs. We anticipate that future funding will be in the form of additional equity financing from the sale of our common stock, or loans from officers, directors or significant shareholders.
Cash Flows
A summary of our cash provided by and used in operating, investing and financing activities is as follows:
| Six Months Ended | ||||||||
| 6/30/22 | 6/30/21 | |||||||
| Net cash used in operating activities | $ | (432,326 | ) | $ | (267,600 | ) | ||
| Net cash used in investing activities | (3,114 | ) | 0 | |||||
| Net cash provided by financing activities | 394,082 | 529,925 | ||||||
| Net increase in cash | (41,358 | ) | 262,325 | |||||
| Cash, beginning of period | 72,822 | 8,986 | ||||||
| Cash, end of period | $ | 31,464 | $ | 271,311 | ||||
Net cash used in operating activities:
Net cash used in operating activities was approximately $432,000 and approximately $268,000 during the six months ended June 30, 2022 and 2021, respectively.
Cash used in operating activities during the six months ended June 30, 2022, is primarily attributed to the change in prepaid expenses and accounts payable of $83,000.
Net cash provided by financing activities:
Cash provided by financing activities during the six months ended June 30, 2022, was approximately $394,000. The Company received net proceeds of $394,082 from a private placement on April 13, 2022.
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Off Balance Sheet Arrangements:
We do not have and never had any off-balance sheet arrangements.
Recent Accounting Pronouncements
We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.
Critical Accounting Policies
The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates, assumptions and judgments that affect the amounts reported in our financial statements. The accounting positions described below are significantly affected by critical accounting estimates.
We believe that the significant estimates, assumptions and judgments used when accounting for items and matters such as capitalized mineral rights, asset valuations, recoverability of assets, asset impairments, taxes, and other provisions were reasonable, based upon information available at the time they were made. Actual results could differ from these estimates, making it possible that a change in these estimates could occur in the near term.
Foreign Currency
The Company is exposed to currency risk on transactions and balances in currencies other than the functional currency. The Company has not entered any contracts to manage foreign exchange risk. The functional currency of the Company is the US dollar; therefore, the Company is exposed to currency risk from financial assets and liabilities denominated in Canadian dollars.
Mineral Rights
We have determined that our mining rights meet the definition of mineral rights, as defined by accounting standards, and are tangible assets. As a result, our direct costs to acquire or lease mineral rights are initially capitalized as tangible assets. Mineral rights include costs associated with: leasing or acquiring patented and unpatented mining claims; leasing mining rights including lease signature bonuses, lease rental payments and advance minimum royalty payments; and options to purchase or lease mineral properties.
If we establish proven and probable reserves for a mineral property and establish that the mineral property can be economically developed, mineral rights will be amortized over the estimated useful life of the property following the commencement of commercial production or expensed if it is determined that the mineral property has no future economic value or if the property is sold or abandoned. For mineral rights in which proven and probable reserves have not yet been established, we assess the carrying values for impairment at the end of each reporting period and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Proven and probable reserves have not been established for any mineral rights as of September 30, 2021.
Impairment of Long-lived Assets
We continually monitor events and changes in circumstances that could indicate that our carrying amounts of long-lived assets, including mineral rights, may not be recoverable. When such events or changes in circumstances occur, we assess the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through their undiscounted expected future cash flows. If the future undiscounted cash flows are less than the carrying amount of these assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets.
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Exploration Costs
Mineral exploration costs are expensed as incurred. When it has been determined that it is economically feasible to extract minerals and the permitting process has been initiated, exploration costs incurred to further delineate and develop the property are considered pre-commercial production costs and will be capitalized and included as mine development costs in our consolidated balance sheets.
Share-based Payments
We measure and recognize compensation expense or professional services expense for all share-based payment awards made to employees, directors and non-employee consultants based on estimated fair values. We estimate the fair value of stock options on the date of grant using the Black-Scholes-Merton option pricing model, which includes assumptions for expected dividends, expected share price volatility, risk-free interest rate, and expected life of the options. Our expected volatility assumption is based on our historical weekly closing price of our stock over a period equivalent to the expected life of the options.
We expense share-based compensation, adjusted for estimated forfeitures, using the straight-line method over the vesting term of the award for our employees and directors and over the expected service term for our non-employee consultants. We estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from our estimates. Our excess tax benefits, if any, cannot be credited to stockholders’ equity until the deduction reduces cash taxes payable; accordingly, we realized no excess tax benefits during any of the periods presented in the accompanying consolidated financial statements.
Income Taxes
We account for income taxes through the use of the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, and for income tax carry-forwards. A valuation allowance is recorded to the extent that we cannot conclude that realization of deferred tax assets is more likely than not. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.
We follow a two-step approach to recognizing and measuring tax benefits associated with uncertain tax positions taken, or expected to be taken in a tax return. The first step is to determine if, based on the technical merits, it is more likely than not that the tax position will be sustained upon examination by a taxing authority, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement with a taxing authority. We recognize interest and penalties, if any, related to uncertain tax positions in our provision for income taxes in the consolidated statements of operations. To date, we have not recognized any tax benefits from uncertain tax positions.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures:
Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC's rules and forms, and that such information is accumulated and communicated to management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosures. Our management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management's control objectives.
Our management, with the participation of our CEO and CFO, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were not effective as of such date as a result of a material weakness in our internal control over financial reporting due to lack of segregation of duties, a limited corporate governance structure and insufficient formal management review processes over certain financial and accounting reports as discussed in Item 9A of our Form 10-K for the fiscal year ended December 31, 2021.
While we strive to segregate duties as much as practicable, there is an insufficient volume of transactions at this point in time to justify additional full-time staff. We believe that this is typical in many exploration stage companies. We may not be able to fully remediate the material weakness until we commence mining operations at which time, we would expect to hire more staff. We will continue to monitor and assess the costs and benefits of additional staffing.
Changes in Internal Control over Financial Reporting:
There were no changes in our internal control over financial reporting that occurred during the last fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
There have been no material changes from the risk factors disclosed in Part I. Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2021.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
All sales of unregistered securities were reported on Form 8-K during the period.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
| EXHIBIT NUMBER | DESCRIPTION | |
| 31.1 | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | |
| 31.2 | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | |
| 32 | Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* | |
| 101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)** | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document** | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document** | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document** | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document** | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document** | |
| 104 | Cover Page Interactive Data File (formatted in IXBRL, and included in exhibit 101).** |
| ____________________ | ||
| * | Filed herewith | |
| ** | Furnished, not filed. | |
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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.
| ATHENA SILVER CORPORATION | ||
| Dated: August 15, 2022 | By: | /s/ John C. Power |
| John C. Power | ||
| Chief Executive Officer, President, | ||
| Secretary Director | ||
| (Principal Executive Officer) | ||
| ATHENA SILVER CORPORATION | ||
| Dated: August 15, 2022 | By: | /s/ Tyler J. Minnick |
| Tyler J. Minnick | ||
| Chief Financial Officer | ||
| (Principal Accounting Officer) | ||
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