GOLD TORRENT, INC. - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations

Edgar Glimpses |

Forward Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions.

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this report. Except as required by applicable law, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our unaudited interim consolidated financial statements for the Nine months ended are expressed in US dollars and are prepared in accordance with generally accepted accounting principles in the United States of America. They reflect all adjustments (all of which are normal and recurring in nature) that, in the opinion of management, are necessary for fair presentation of our interim financial information. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for our fiscal year ending . Our unaudited consolidated financial statements and notes included therein have been prepared on a basis consistent with and should be read in conjunction with our audited financial statements and notes for the year ended , as filed in our annual report on Form 10-K.

The following discussion should be read in conjunction with our interim financial statements and the related notes that appear elsewhere in this quarterly report.




Business Overview



Gold Torrent, Inc. (the "Company") was incorporated in Nevada as Celldonate Inc. on . Historically we were in the business of developing mobile monetization solutions and applications. On , certain shareholders, including the Company's current Chief Executive Officer and its President, acquired approximately 53% of the Company's issued and outstanding common stock resulting in a change of control. In connection with the transaction, Daniel Kunz was appointed Executive Chairman and Ryan Hart was appointed Chief Executive Officer and President. Thereafter the Company began to focus on acquiring ownership in late-stage exploration to development stage gold mining projects and/or royalty or streaming interests in low capital intensity, late-stage mining projects in North America. On , the Company changed its name to "Gold Torrent, Inc." in order to better reflect the direction and business of the Company. On that date, the Company also amended its Articles of Incorporation to (i) effectuate a reverse split of the Company's common stock on a 1 for 5 basis; and (ii) increase the number of the Company's authorized capital stock to 220,000,000 of which 200,000,000 were classified as common stock and 20,000,000 were classified as "blank check" preferred stock. On , the Company entered into a Spin-off Agreement (the "Agreement") with a company controlled by a former shareholder to sell all intellectual property and assets associated with the previous business of the Company, pursuant to which the Company was released from certain liabilities amounting to $420,653. Daniel Kunz was subsequently named Chief Executive Officer and Chairman and Mr. Hart was named President.

Going forward, the Company plans to focus on acquiring ownership in late-stage exploration to development-stage gold mining projects and/or royalty or streaming interests in low capital intensity, late-stage mining projects in North America but may pursue other profitable business opportunities that are available to us. Our main focus will be on identifying solid resources, and then utilize funding to bring a distressed asset into production, while either securing equity ownership or rights of title in the form of royalties. We are targeting pre-production resource projects that are well understood and show strong financial projections and low capital intensity, where we can apply capital to take the projects into production within 12-36 months.

On , the Company signed an Exploration and Option to Enter Joint Venture Agreement with Miranda U.S.A., Inc. ("Miranda") for the Willow Creek project in Alaska (the "Exploration and Option Agreement"). The Exploration and Option Agreement provides the Company with the right to earn up to 70% interest in a joint venture with Miranda Gold Corp. by making certain expenditures over the next three years totaling US$10 million. The initial principal terms of the Exploration and Option Agreement provided that the Company would earn an initial 20% interest in the Willow Creek gold project by incurring an initial work commitment of $1,070,000 before in costs related to exploration and development of the project. On Miranda granted the Company a Nine-month extension to the dates related to the earn-in. Therefore, the Company would earn an initial 20% interest in the Willow Creek gold project by incurring an initial work commitment of $1,070,000 before in costs related to exploration and development of the project. While the Company shall be the manager of the initial joint venture, the management committee during the initial earn-in period shall be comprised of one nominee from the Company and one nominee from Miranda.



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Upon completion of the initial work commitment, the Company could then either terminate the agreement or exercise an option to enter into a limited liability company ("JV") with Miranda under the following terms:



  ? Miranda will assign the underlying twenty-year lease that includes 8,700 acres
    of patented mining claims and State Claims on the
    Lucky Shot project to the JV and Miranda will retain a 30% participating
    interest in the JV;

  ? The Company will solely fund the next US$8.93 million of expenditures on the
    JV to earn a 70% interest in the JV while Miranda
    will hold the remaining 30%; and

  ? The Company shall be entitled to 90% of the cash flow from production at the
    Lucky Shot project until it recovers its US$10 million
    initial capital investment, and 80% of the cash flow from production
    thereafter until it recovers any of its initial investment that
    exceeds $10 million, and thereafter shall be entitled to 70% of project cash
    flows. Miranda shall be entitled to 10%, 20% and 30%,
    respectively, of the Lucky Shot cash flow.



The Company plans to complete initial engineering, resource, permitting, and economic studies during the initial earn-in period with a goal to bring the Lucky Shot project, beginning initially in the Coleman area gold resource area, into production as soon as possible. Expansion and exploration drilling is planned during construction and during commercial production and is expected to expand the initial known mineralization well beyond the current levels.

On , and the Company paid $150,000 for a Lease Agreement between Miranda USA Inc. and a private company, and the amount was included in prepaid expenses and expensed over 12 months. In addition, the Company is committed to paying $150,000 each year on . The purpose of this lease is to afford Miranda USA Inc. the opportunity to enter onto and produce minerals from certain patented and State of Alaska mining claims located in the State of Alaska. This lease is to be transferred by Miranda to the joint venture upon the Company earning its initial 20% interest.

On , the Company received formal notice from Miranda that the Company has acquired a permanent 20% interest in the Lucky Shot project by virtue of meeting the initial earning required expenditures.

The Company engaged third party consultants to complete a Preliminary Feasibility Study on its Lucky Shot Project. The Preliminary Feasibility Study for the Lucky Shot Project was completed . The study concludes, "The Project is projected to have robust economics at the base case gold and silver prices of $1,175/oz. and $15.00/oz. respectively. The Project would be economically viable based on the parameters considered in this study. The base case scenario produces approximately 79,100 salable ounces of gold and 7,700 salable ounces of silver over a 4.5-year period. The Project is most sensitive to the gold price and to operating costs, but not as sensitive to capital costs. The base case economic analysis of the Project shows an After-Tax NPV-10 of $5.28 million using a 200-tonne/day crushing/grinding/gravity separation plant. The total required initial and working capital is $16.2 million and reaches pay-back in 1.9 years at an after tax IRR of 21.8%."

On , the Company purchased for $100,507 a 30-acre parcel of private, undeveloped land in Alaska near the Lucky Shot project for the siting of a gold recovery plant.

During , the Company conducted assessment work on the project's State of Alaska claim blocks. One 640-foot surface core drill hole was completed in an area underlain by the eastern extension of the Murphy Vein block. This drill hole was designed to test the concept that the zone encountered in the 2005 - 2009 prior owner drilling program extends across the valley floor at a depth of about 350 feet. The success of the drill hole provides a much larger resource target area for future exploration drilling.

During the period, a mining contractor mobilized temporary equipment and initiated underground rehabilitation work on the Enserch adit. The contractor slashed the existing 9 by 9-foot tunnel to an increased area of 12 by 12 feet for a total distance of 800 feet. The contractor helped to establish a safety program and provided a safety plan to the relevant regulators.



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Additional work included: The portal area was enlarged with fill material and approximately 1000 feet of road access to the portal has been improved including construction of berms and widening of the running surface to accommodate larger equipment. The man-camp has been leased from the owner and a new diesel fired generator has been installed to provide power. At the Enserch portal, several portable connex containers have been installed and tools, parts, and supplied fitted in them. A guard shack has been erected at the entrance to the portal area to control access. A new portal ventilation access was excavated and a ventilation fan and fan bagging installed. A heavy equipment repair area was refurbished in the old Enserch mill building. This building will not be used for milling but rather to repair large equipment. An avalanche control plan was engineered and a geotechnical study was completed to address ground support plans and rock bolting underground. A rock dump near the portal is being constructed from the waste rock from the adit enlargement. A 400 Kw generator has been purchased and installed at the portal for electrical power during the startup period. A compressor, portable refuse station, and a small project office were installed near the portal. MSHA plans and submittals were completed and made to the federal agency and approved for operation. A detailed design was engineered and completed for a 2800 feet ramp from the enlarged Enserch adit at a run rate of 15% up approximately 300 vertical feet to the Coleman ore deposit. A service company was hired to provide camp cooking and cleaning services for the underground miners. A 2.2 cu yd underground loader wad refurbished and brought into good working order. A new small equipment repair shop 40 ft x 60 ft fabric structure was ordered and shipped to the project and at the portal area a cement slab poured for the structure to sit on. A series of mine-related electrical switch gears, transformers and distribution equipment items were purchased in used condition and are undergoing a refurbishment by a contractor in Salt Lake City. A list of mine and mechanic new tools and supplies were purchased. A used, good condition ATCO change house building was purchased and installed near the man-camp for underground miners to use including lockers and furnishments. A diesel fuel storage tank was purchased and installed at the mine portal area. Two blasting powder magazines were leased from the supplier and located near the portal. Conceptual design of the gold recovery plant, preliminary design and engineering of the plant, metallurgical test work of ore material, detailed engineering and design of the plant and construction drawings and equipment selection engineering. A new pre-engineered metal clad building was erected and insulated. A septic system was designed and built. A water well was drilled, tested, and plumped with a pump and pipeline to the building. Access to the local power company line near the entrance to the site was secured. Engineering and completion of detailed construction drawing for the interior layout of the mill equipment was undertaken. A list of equipment to be purchased for the gold recovery plant interior was compiled and at least two independent price quotations solicited from suppliers. A new pre-engineered mezzanine level structural steel and decking for inside the building was designed, purchased and shipped to site. An ore storage Quonset building 100 ft x 40 ft was purchased and shipped to site.

Detailed design and engineering work for the gold recovery plant was continued through the reporting period. The gravity only gold recovery plant design and final engineering is near complete and ready for construction drawings and plant to be completed. Logistics analyses have been completed for shipment of required plant equipment, materials and supplies from various vendors to the project site. The mine engineering work continued for the period on portal and surface logistics and requirements.

On the Company entered into a convertible preferred note and investment agreement ("Agreement") with CRH Mezzanine Pte. Ltd., a Singapore private limited company and CRH Funding II Pte. Ltd., a Singapore private limited company (collectively, "CRH") for a $2,000,000 convertible preferred note and a $11,250,000 gold and silver prepayment arrangement for the Company's Lucky Shot Gold Project (the "Streaming Agreement").

Concurrent with the closing and funding of the convertible preferred note, the Company and Miranda U.S.A., Inc., a wholly-owned subsidiary of Miranda Gold Corp of Canada, executed a joint venture operating agreement and formed Alaska Gold Torrent LLC, an Alaska limited liability company under which the Company now owns a seventy percent (70%) undivided interest in the Project.

Under the terms of the Agreement, the Company borrowed $2,000,000 from the Preferred Note Investor evidenced by convertible preferred notes which will convert into 15% of the shares of common stock of the Company on a post-money basis on the earlier of: (i) a Canadian Going Public Transaction or (ii) funding of the Gold and Silver Prepayment Agreement and following an equity raise by the Company of $5,000,000 or more of which $2,000,000 will be the conversion of the preferred notes. The obligations under the preferred notes are secured by a first priority security interest in all of the assets of the Company pursuant to the terms of a security and pledge agreement.

The Company also entered into the Streaming Arrangement among the Stream Investor, the Company, Miranda and Alaska Gold Torrent LLC, under which the Stream Investor will invest up to US$11,250,000, which will be credited to the Company's investment in Alaska Gold Torrent LLC, as follows:



  (i)  US$6,500,000 upon satisfaction of certain Tranche 1 conditions; and,

  (ii) US$4,750,000 upon satisfaction of certain Tranche 2 conditions including
       receipt of all necessary permits.



The obligations of Alaska Gold Torrent LLC under the Streaming Agreement are secured by a deed of trust, and guaranteed by the Company. In consideration of the $11,250,000 investment by the Stream Investor, Alaska Gold Torrent LLC's Project will deliver 18% of its annual production of refined gold and silver to the Stream Investor until it has received 20,000 Ounces of gold equivalent; 10% of the annual production until an additional 5,000 Ounces have been delivered; and 5% of the annual production thereafter coming from the patented mining claims of Alaska Gold Torrent LLC and 2.5% of the production coming from the unpatented mining claims. The delivery of Ounces and the repayments under the Gold and Silver Prepayment Agreement shall be borne entirely from the Company's interest from its Alaska Gold Torrent LLC allocations and cash distributions. Miranda shall be entitled to receive it allocations and the resulting cash distributions using calculations that determine the after-tax cash flow distributions that would have occurred on an "all equity" basis showing cash distributions and allocations assuming the financing had not occurred. The Company is entitled to 90% of the Alaska Gold Torrent LLC cash flow until $10,000,000 is returned, 80% until the remainder of its investment in Alaska Gold Torrent LLC in excess of $10,000,000 is returned and 70% thereafter.



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Alaska Gold Torrent LLC is subject to certain events of default under the Gold and Silver Prepayment Agreement including if, from the date of the Tranche 1 drawdown, Alaska Gold Torrent LLC fails to produce at least 5,000 Ounces and deliver to the Stream Investor at least 1,000 Ounces by the 18th month; produce at least 10,000 and deliver to the Stream Investor at least 2,000 Ounces by the 24th month; produce 20,000 and deliver to the Stream Investor at least 4,000 Ounces by the 36th month; deliver to the Stream Investor at least 10,000 Ounces by the 48th month; deliver to the Stream Investor at least 19,400 Ounces by the 60th month; and deliver to the Stream Investor at least 23,900 Ounces by the 72nd month.

In consideration for the commitments under the Agreement, the Company issued the Preferred Note Investor common stock purchase warrants to purchase two million shares of common stock of the Company at an exercise price of US$0.50 per share for a period of three years from the date of issuance. In conjunction with the transaction, the Company and the Preferred Note Investor also entered into an Investor Rights Agreement, and an Indemnity Agreement. The convertible preferred note and warrants were issued in reliance upon the exemption from registration afforded by Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D as promulgated by the SEC under the Securities Act.

As part of the Agreement, CRH nominated Mr. Pat Okita, PhD to join the Gold Torrent board of directors and the board has unanimously approved his appointment. Mr Okita joins the board effective

On the Company received $1,900,000 in proceeds from the note, net of CRH's legal expenses, to be used as part of the Company's initial investment in the Project.

On , the Company and the Stream Investor agreed, after the satisfaction by the Company of a majority of the Tranche 1 closing conditions, to amend certain provisions of the Streaming Agreement and concurrently close on one-half of Tranche 1 in the amount of $3,250,000. The second half, also in the amount of $3,250,000, has been consummated on upon satisfaction of the final closing conditions.

The Company has acquired a permanent 70% interest in the Lucky Shot project by virtue of meeting the earn-in required expenditures. In addition, Miranda contributed mineral property leases valued at $4,285,714 to the Lucky Shot project.

As at , mineral property interest consists of:

Mineral property leases $ 4,285,714

Cumulative Funding to Alaska Gold Torrent LLC:

As at , the Company provided funding to Alaska Gold Torrent, LLC in the total amount of $9,886,925. This consists of cumulative acquisition, exploration, engineering costs and capital contributions of $2,886,925 as at , and $7,000,000 in additional funding during the three months ended :




As at                       $ 2,886,925
Current period funding                        500,000

Tranche 1 Streaming Agreement financing 6,500,000

                                          $ 9,886,925



On , Gold Torrent, Inc. and its subsidiary Alaska Gold Torrent, LLC, entered into a Mining Services Agreement with Mining & Environmental Services, LLC ("MES") for development of the Registrant's Luck Shot Mine, and other related mining services, including the development of the land located around the mine. If fully completed, it is estimated the Registrant will pay approximately $4,500,000 for such services. The Agreement contains customary representations, warranties and covenants by the parties for like transactions. On the Company issued a notice of suspension to MES due to the decision to slow down activities for the winter period and until further funding could be arranged. On the MES contract was terminated for convenience.

Planning continues for project permitting, staffing, training and project initiation.

On , the Company entered into a binding letter agreement ("Letter Agreement") that amends certain terms and obligations of the parties in connection with the Prepayment Agreement.

The Letter Agreement with CRH adds a new defined term Required Capital that means the amount of capital that the Company is anticipating raising from the capital markets through a non-brokered private placement to complete the construction and development of the Lucky Shot Project to Commercial Production. Before Alaska Gold Torrent LLC can make the US$4.75 million Second Tranche draw, the Required Capital shall be at least US$10 million, or greater amount, as determined by the Company, or stated in the updated preliminary feasibility analysis that the Company is currently conducting. The second tranche closing date must occur before or AGT is subject to default under the terms of the credit facility.



  (i)  The Letter Agreement also adds an additional condition precedent to the
       advance of the second tranche requiring that the Company shall have raised
       the Required Capital and have received the full amount of such Required
       Capital in escrow or in cash, and be in compliance with all conditions in
       related subscription agreements, subscription receipts agreements, and
       subscription receipt certificates.

  (ii) The Letter Agreement also amends the Royalty Rate CRH receives of the
       Produced Minerals until such time that AGT has delivered a cumulative total
       of 23,000 Gold Equivalent Ounces to CRH. On any gold and silver production
       through , the percentage determined by the month in which the
       AGT reaches Commercial Production, is based on the following schedule:




  ? 14% if Seller reaches Commercial Production before 

  ? 15% if Seller reaches Commercial Production in 

  ? 16% if Seller reaches Commercial Production in 

  ? 17% if Seller reaches Commercial Production in 

  ? 18% if Seller reaches Commercial Production in March or 

  ? 19% if Seller reaches Commercial Production in 

  ? 20% if Seller reaches Commercial Production in  or later

  ? And on production after  and before the Seller has delivered
    23,000 Gold Equivalent Ounces to the Purchaser, the percentage that is the
    greater of 18% or the percentage determined in the schedule above.




  (iii) The Letter Agreement adds an additional condition to Alaska Gold Torrent
        LLC events of default that if Alaska Gold Torrent LLC has not reached
        Commercial Production of at least 650 ounces of gold per month by ; or after which date, fails for two consecutive months to maintain
        Commercial Production.



The Letter Agreement provides that the Company is subject to default provisions under the credit facility in the event that the additional capital is not raised by the Company by . There can be no assurances that the Company will be successful in raising the additional capital or that it will be to raise capital on terms that are favourable to the Company. Funding is subject to market conditions, gold price changes, and other factors out of the Company's control. In addition, since the Company has limited funds, it has suspended all development activities until the required funding can be secured.



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The Company) entered on into an Agreement and Plan of Merger with Gold Torrent Canada Inc., a wholly-owned subsidiary of the Company organized under the laws of the Province of British Columbia, Canada and US Merger Co, a Nevada corporation and wholly-owned subsidiary of Gold Torrent Canada. Pursuant to the terms of the Merger Agreement, the parties would effect a merger transaction that will effectively change the jurisdiction of incorporation of the corporate parent from Nevada to British Columbia, Canada

Pursuant to the terms of the Merger Agreement, US Merger Co. will be merged with and into the Company, with the Company continuing as the surviving corporation, and each share of Company common stock outstanding immediately prior to the effective time of the Redomicile Transaction will be cancelled and converted into the right to receive one common share of Gold Torrent Canada. At the effective time of the Redomicile Transaction and pursuant to the terms of the Merger Agreement, all outstanding options to purchase shares of the Company's common stock, all outstanding shares of restricted stock, and all other equity-based awards granted to employees and directors of the Company or any of its subsidiaries under the Company's equity incentive plans prior to the effective time of the Redomicile Transaction will entitle the holder to purchase or receive, or receive benefits or amounts based on, as applicable, an equal number of common shares in Gold Torrent Canada. All such equity-based awards will generally be subject to the same terms and conditions as were applicable to such awards immediately prior to the effective time of the Redomicile Transaction.

The consummation of the Redomicile Transaction will be conditioned on (1) the affirmative vote of a majority of the outstanding shares of the Company's common stock entitled to vote on the adoption of the Merger Agreement, (2) the Securities and Exchange Commission (the "SEC") declaring effective a registration statement registering the distribution of common shares of Gold Torrent Canada in the Redomicile Transaction filed by Gold Torrent Canada on Form S-4 under the Securities Act of 1933, as amended, and (4) other customary conditions.

Since our inception, we have incurred operational losses. We have also accumulated net losses since our inception and incurred a net loss for the most recent audited and interim periods. To finance our operations, we have received advances from related parties, loan payables and completed several rounds of financing, raising $9,128,775 through private placements of our common stock and investors funding.




Results of Operations



For the Three Months ended

During the three months ended , we recognized $2,594 interest income, compared to $nil during the same period in the prior year.

During the three month period ended , we recognized a loss from continuing operations of $2,354,136, compared to a loss of $466,445 during the same period in the prior year.

Our net loss per share for the three months ended was $0,09. Our net loss per share for the three months ended was $0.04,

During the three months ended , we incurred total expenses of $2,356,730, compared to total expenses of $466,445 during the same period in the prior year.

Our total expenses during the three months ended consisted of $34,811 in accounting and legal fees, $1,330,321 in development costs, $411,991 in executive compensation and payroll, $19,940 in Professional Services, $64,118 in insurance, $125,000 in share based payments, $Nil in Advertising, $17,289 in licenses and fees, $289,434 in bank charges and interest, $1,840 in amortization, $18,780 in travel costs, and $43,206 in office expenses. For the same period ended , we incurred expenses of $21,311 in accounting and legal fees, $308,731 in exploration and evaluation costs, $121,250 in executive compensation, $4,614 in licenses and fees, $208 in bank charges and finance fees, $8,743 in travel costs, and $1,588 in office expenses. Our total expenses are significantly higher for nearly all expenses. The increase in expenses is mainly due to the increased activities and progress of the Lucky Shot property start up.

For the Nine Months ended

During the Nine months ended , we recognized $2,594 in interest income, compared to $nil during the same period in the prior year.



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During the Nine month period ended , we recognized a loss from continuing operations of $8,107,624, compared to a loss of $1,214,456 during the same period in the prior year.

Our net loss per share for the Nine months ended was $0.32. Our net loss per share for the Nine months ended was $0.09,

During the Nine months ended , we incurred total expenses of $8,110,218, compared to total expenses of $1,280,456 during the same period in the prior year.

Our total expenses during the Nine months ended consisted of $209,132 in accounting and legal fees, $3,488,082 in development costs, $1,134,166 in executive compensation and payroll, $2,449,000 in share based payments, $278,013 in insurance, $12,049 in Advertising, $28,980 in licenses and fees, $290,227 in bank charges and interest, $5,521 in amortization, $43,682 in Professional Services, $1,432 in Property tax, $57,322 in travel costs, and $112,612 in office expenses.

For the same period ended , we incurred expenses of $96,864 in accounting and legal fees, $723,091 in exploration and evaluation costs, $363,750 in executive compensation, $55,113 in licenses and fees, $1,792 in bank charges and interest, $31,938 in travel costs, and $7,908 in office expenses. Our total expenses are significantly higher for nearly all expenses. The increase in expenses is mainly due to the increased activities and progress of the Lucky Shot property start up.

Liquidity and Capital Resources

We have limited operational history, and did not generate any revenues. As of , we had $1,316,452 in cash, $747,639 in advances and $25,836 in prepaid expenses for a total of $2,089,927 in current assets and $1,011,759 in current liabilities and a working capital of $1,078,168.

As of , we had $6,245,626 in long term assets, $8,500,000 in long term liabilities As of , we had an accumulated deficit of $9,995,879. We are dependent on funds raised through equity financing, related parties, and loan payables. Our operations were funded by equity financing and stream agreement funding. We anticipate that we will incur substantial losses for the foreseeable future and our ability to generate any revenues in the next 12 months continues to be uncertain.

During the Nine months ended , we used $6,093,180 in cash on continuing operating activities, and used $1,560,028 in investing activities and received net $7,384,975 from cash provided by financing activities and reduced cash by $268,232. During the same period in fiscal 2016 we used $1,078,789 in cash on continuing operating activities, and received net $1,116,207 from cash provided by financing activities and increased cash by $63,089.

During the Nine months ended , we received $884,975 in proceeds from issuance of common stock, and $6,500,000 in gold pre-purchase. We received $4,285,714 in mineral property leases from Miranda USA Inc. For the period ending we made payments of approximately $93,793 on the outstanding stockholders' loan balance and received an additional $1,210,000 in proceeds from issuance of common stock. For the period ending the Company has accrued interest of $185,458 and amortization of $5,521(March 31, 2016 - $936 and $nil).

During the Nine months ended , our monthly cash requirements to fund our operating activities, including advances from former related parties, was approximately $674,417 compared to approximately $119,865 during the same period in fiscal 2016. In the absence of the continued sale of our common stock or advances from the former or new related parties, our cash of $1,316,452 as of is insufficient to cover our current monthly burn rate for the foreseeable future and just enough to pay our current liabilities balance of $1,011,759.




Future Financings



The Company entered into the Streaming Arrangement among the Stream Investor, the Company, Miranda and Alaska Gold Torrent LLC, under which the Stream Investor will invest up to US$11,250,000, which will be credited to the Company's investment in Alaska Gold Torrent LLC, as follows:



  (i)  US$6,500,000 upon satisfaction of certain Tranche 1 conditions; and,

  (ii) US$4,750,000 upon satisfaction of certain Tranche 2 conditions including
       receipt of all necessary permits.




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Alaska Gold Torrent LLC is subject to certain events of default under the Gold and Silver Prepayment Agreement including if, from the date of the Tranche 1 drawdown, Alaska Gold Torrent LLC fails to produce at least 5,000 and deliver to the Stream Investor at least 1,000 Ounces by the 18th month; produce at least 10,000 and deliver to the Stream Investor at least 2,000 Ounces by the 24th month; produce 20,000 and deliver to the Stream Investor at least 4,000 Ounces by the 36th month; deliver to the Stream Investor at least 10,000 Ounces by the 48th month; deliver to the Stream Investor at least 19,400 Ounces by the 60th month; and deliver to the Stream Investor at least 23,900 Ounces by the 72nd month.

The development plan is to initiate gold production based on the PFS and not based on a full feasibility study of the mineral reserves demonstrating that level of economic and technical viability. In , the Company determined that the total PFS-stated capital required to develop the project would be increased about 40% from approximately $18.5 million to approximately $26.5 million. The Company presented the capital increase to its partner Miranda and to the Stream Investor for approval. On , our partner approved the new capital budget. The Stream Investor is working with the Company to provide its approval contingent upon the Company and Miranda providing the additional funds. The capital budget adjustment is based on an internal review of all capital costs incurred and expected to be incurred and consideration of local Alaska-based costs for labor, supplies and engineering that would be part of the development costs. Readers are cautioned that there is increased uncertainty and higher risk of economic and technical failure associated with such production decisions.

The Registrant, Alaska Gold and the Stream Investor agreed, after the satisfaction by the Registrant of a majority of the Tranche 1 closing conditions, to amend certain provisions of the Streaming Agreement and concurrently close on one-half of Tranche 1 in the amount of $3,250,000. It is anticipated that the second half of the first tranche, also in the amount of US $3,250,000, will be consummated on or about thirty (30) days, upon satisfaction of the final closing conditions.

On , the closing conditions were met and the second amount of $3,250,000 was received. On , the Company and Stream Investor agreed to defer drawing upon Tranche 2 until additional funds are secured to complete the project. The Company issued suspension notices to certain contractors and service providers and has undertaken a plan to conserve cash and reduce expenditures.

We have not generated any revenues, have achieved losses since our inception, and rely upon the sale of our securities, loans and advances from related parties to fund our operations. We anticipate that we will incur substantial losses for the foreseeable future, and we are dependent upon outside financing to carry out our operations. The Company's continuance as a going concern is dependent on the success of the efforts of its directors and principal stockholders in providing financial support in the short-term, securing additional financing, and achieving profitable operations. In the event that such resources are not secured, the assets may not be realized or liabilities discharged at their carrying amounts, and the difference from the carrying amounts reported in these consolidated financial statements could be material. Our unaudited consolidated interim financial statements for the period ended have been prepared on a going concern basis and do not include any adjustments that might result from the outcome of this uncertainty.

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements.



Critical Accounting Policies


Our unaudited interim financial statements are affected by the accounting policies used and the estimates and assumptions made by management during their preparation. A complete summary of these policies is included in Note 2 of the notes to our unaudited interim financial statements. We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows, and which require the application of significant judgment by our management.



Foreign Currency Translation


Our unaudited financial statements are presented in United States dollars. Transactions in currencies other than the U.S. dollar are translated into U.S. dollars at the exchange rate in effect at the balance sheet date for monetary assets and liabilities, and at historical exchange rates for non-monetary assets and liabilities. Expenses are translated at the average rates for the period, excluding amortization, which is translated on the same basis as the related assets. Resulting translation gains or losses are reflected in net loss.



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Share-Based Payments


The Company records all share-based payments at fair value. Where equity instruments are granted to employees, they are recorded at the fair value of the equity instrument granted at the grant date. The grant date fair value is recognized through profit or loss over the vesting period, described as the period during which all the vesting conditions are to be satisfied.

Where equity instruments are granted to non-employees, they are recorded at the fair value of the goods or services received. When the value of goods or services received in exchange for the share-based payment cannot be reliably estimated, the fair value is measured by use of a valuation model.

At each balance sheet date, the amount recognized as an expense is adjusted to reflect the actual number of stock options expected to vest. On the exercise of stock options, common stock is recorded for the consideration received and for the fair value amounts previously recorded to contributed surplus. The Company uses the Black-Scholes option pricing model to estimate the fair value of share-based payments.

Recent Accounting Guidance Adopted

The Company has adopted Accounting Standards Update ("ASU") 2014-10, Development Stage Entities, which eliminates certain financial reporting requirements. As such, these interim financial statements no longer present inception-to-date information on the statements of operations, cash flows, and stockholders' deficiency. In addition, these interim financial statements are no longer labeled as a, "development stage entity".

In , the Financial Accounting Standards Board ("FASB") issued ASU 2014-15, Presentation of Financial Statements-Going Concern. This ASU is intended to define management's responsibility to evaluate whether there is substantial doubt about an organization's ability to continue as a going concern and to provide related footnote disclosures. It is effective for annual periods beginning after , with early adoption permitted. The Company does not expect it to have a material effect on the Company's financial condition, results of operations, and cash flows.

In , the FASB issued ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This ASU amends ASC 360, Property, Plant and Equipment and expands the disclosures for discontinued operations, and requires new disclosures for disposals of individually significant components that do not meet the new definition of a discontinued operation and are classified as assets held for sale. These provisions are effective for annual and interim periods beginning after . The Company does not expect it to have a material effect on the Company's financial condition, results of operations, and cash flows.



Inflation


The amounts presented in the unaudited interim financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.

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Comments

Emerging Growth

Margaux Resources Ltd.

Margaux Resources Ltd is a Calgary based resource company. The Company is focused on its Jersey Emeral Tungsten-Zinc property located in the southeast portion of British Columbia.