NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2013
NOTE 1 - NATURE OF OPERATIONS
Star Gold Corp. (the "Company") was initially incorporated as Elan Development, Inc., in the State of Nevada on December 8, 2006. The Company was originally organized to explore mineral properties in British Columbia, Canada but the Company is currently focusing on gold-bearing properties in Nevada.
The financial statement represents those of an exploration stage company whose main focus is in the exploration of gold bearing properties. The Company's main business is putting together land packages and mining claims that the Company perceives to have some potential for mineral reserves. The Company then spends capital to explore these claims by drilling, geophysical work or other exploration work deemed necessary. The business is a high risk business as there is no guarantee that the Company's exploration work will ultimately discover or produce any economically viable minerals.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
This summary of significant accounting policies is presented to assist in understanding the financial statements. The financial statements and notes are representations of the Companys management, which is responsible for their integrity and objectivity. These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States. The Company has not produced any revenue from its principal business and is an exploration stage company as defined by the Accounting Standard Codification (ASC) Topic 915 Accounting and Reporting by Development Stage Enterprises.
Use of Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use of management assumptions and estimates relate to asset impairments and stock option valuation. Actual results could differ from these estimates and assumptions and could have a material effect on the Companys reported financial position and results of operations.
Exploration Stage Enterprise
The Company's financial statements are prepared using the accrual method of accounting and according to "Accounting for Development Stage Enterprises," as it devotes substantially all of its efforts to acquiring and exploring mining interests that will eventually provide sufficient net profits to sustain the Company's existence. Until such interests are engaged in commercial production, the Company will continue to prepare its financial statements and related disclosures in accordance with entities in the exploration stage.
Cash and cash equivalents
For the purposes of the statement of cash flows, the Company considers all highly liquid investments with original maturities of three months or less when acquired to be cash equivalents.
Restricted cash
Restricted cash represents collateral for bonds held for exploration permits.
Fair Value Measures
ASC Topic 820 "Fair Value Measurements and Disclosures" ("ASC 820") requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Page
42
of
62
STAR GOLD CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2013
Level 1: Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets
or liabilities.
Level 2: Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quote prices for similar assets or liabilities in active markets; quoted prices for identical assets in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3: Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology
that are significant to the measurement of the fair value of the assets or liabilities.
Mining Interests and Mineral Exploration Expenditures
Exploration costs are expensed in the period in which they occur. The Company capitalizes costs for acquiring and leasing mining properties and expenses costs to maintain mineral rights as incurred. Should a property reach the production stage, these capitalized costs would be amortized using the units-of-production method on the basis of periodic estimates of ore reserves. Mining interests are periodically assessed for impairment of value, and any subsequent losses are charged to operations at the time of impairment. If a property is abandoned or sold, its capitalized costs are charged to operations.
Equipment
Equipment are stated at cost. Depreciation of equipment is calculated using the straight-line method over the estimated useful lives of the assets, which ranges from three to seven years. Maintenance and repairs are charged to operations as incurred. Significant improvements are capitalized and depreciated over the useful life of the assets. Gains or losses on disposition or retirement of property and equipment are recognized in operating expenses.
Reclamation and Remediation
The Company's operations are subject to standards for mine reclamation that have been established by various governmental agencies. In the period in which the Company incurs a contractual obligation for the retirement of tangible long-lived assets, the Company will record the fair value of an asset retirement obligation as a liability. A corresponding asset will also be recorded and depreciated over the life of the asset. After the initial measurement of an asset retirement obligation, the liability will be adjusted at the end of each reporting period to reflect changes in the estimated future cash flows underlying the obligation. To date, the Company has not incurred any contractual obligation requiring recording either a liability or associated asset.
Impaired Asset Policy
The Company periodically reviews its long-lived assets to determine if any events or changes in circumstances have transpired which indicate that the carrying value of its assets may not be recoverable, pursuant to guidance established in ASC Topic 360, "Accounting for the Impairment or Disposal of Long-lived Assets". The Company determines impairment by comparing the undiscounted net future cash flows estimated to be generated by its assets to their respective carrying amounts. If impairment is deemed to exist, the assets will be written down to fair value.
Stock-based Compensation
The Company estimates the fair value of options to purchase common stock using the Black-Scholes model, which requires the input of some subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them (expected life), the estimated volatility of the Companys common stock price over the expected term (volatility), employee forfeiture rate, the risk-free interest rate and the dividend yield. Changes in the subjective assumptions can materially affect the estimate of fair value of stock-based compensation. Options granted have a ten year maximum term and varying vesting periods as determined by the Board. The value of common stock awards is determined based on the closing price of the Companys stock on the date of the award.
Page
43
of
62
STAR GOLD CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2013
Loss Per Share
Basic Earnings Per Share ("EPS") is computed as net income (loss) available to common stockholders divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options, warrants, and other convertible securities.
The dilutive effect of convertible and outstanding securities for the years ended April 30, 2013 and 2012, would be as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
2,523,000
|
|
|
805,000
|
Warrants
|
|
|
1,727,948
|
|
|
7,690,000
|
|
|
Total possible dilution
|
|
|
4,250,948
|
|
|
8,495,000
|
|
|
|
|
|
|
|
|
|
|
At April 30, 2013 and 2012, the effect of the Company's outstanding options and common stock equivalents would have been anti-dilutive.
Income Taxes
Deferred income tax liabilities or assets at the end of each period are determined using the tax rates expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on deferred tax assets when it is more likely than not that some or all of these deferred tax assets will not be realized.
Reclassifications
Certain reclassifications have been made to the 2012
financial statements in order to conform to the 2013 presentation. These reclassifications have no effect on net loss, total assets or accumulated deficit as restated.
NOTE 3 RECEIVABLE FROM SALE OF STOCK
As of April 30, 2013, certain shareholders gave written notice of their intent to exercise 2,226,667 share purchase warrants at $0.15 per share. Proceeds of $334,000 were not received until shortly after year end.
NOTE 4 PREPAID EXPENSES
The following is a summary of the Companys prepaid expenses at April 30, 2013 and 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2013
|
|
April 30, 2012
|
Exploration expense
|
|
|
|
|
41,849
|
|
$
|
92,424
|
Legal retainer
|
|
|
|
|
-
|
|
|
15,000
|
Directors and officers liability insurance
|
|
|
|
|
26,633
|
|
|
26,130
|
|
|
Total
|
|
|
|
$
|
68,842
|
|
$
|
133,554
|
At April 30, 2013, exploration expense was prepaid as deposit on unbilled drilling activity. The prepaid balance will be reduced as invoices are applied to ongoing drilling and exploration activities in the future which the Company expects to recognize as exploration expense during the remainder of its fiscal year ending April 30, 2014.
NOTE 5 EQUIPMENT AND MINING INTERESTS
The following is a summary of the Company's equipment and mining interests at April 30, 2013 and 2012, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
Equipment
|
|
$
|
28,992
|
|
$
|
27,007
|
Less accumulated depreciation
|
|
|
(7,266)
|
|
|
(1,351)
|
|
Equipment, net of accumulated depreciation
|
|
|
21,726
|
|
|
25,656
|
Page
44
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62
STAR GOLD CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2013
|
|
|
|
|
|
|
|
|
|
Mining interests
|
|
|
362,999
|
|
|
300,999
|
|
Total
|
|
$
|
384,725
|
|
$
|
326,655
|
|
|
|
|
|
|
|
|
|
|
Excalibur Property
On April 11, 2008, the Company executed a property purchase agreement (the "Excalibur Agreement") with MinQuest, Inc. ("MinQuest") granting the Company the right to acquire 100% of the mining interests of the Nevada mineral exploration property known as the Excalibur Property. The Excalibur Property is located in Mineral County, Nevada. On June 18, 2009 the Company entered into an amending agreement to add an additional 42 claims surrounding the original 8 claims, expanding the total claims to 50 claims held.
The Company has completed an initial exploration program on the Excalibur Property, which included geological mapping, rock sampling and assaying. Based on this analysis the Company decided to move forward with the exploration of this property and drilling program. The permitting was completed in June 2010 and the drilling program originally commenced the week of June 20, 2010.
The Excalibur Agreement requires cash payments, from the Company to MinQuest, totaling $100,000 over five (5) years and the issuance, to MinQuest, of 200,000 stock options based on fair market price over the same five-year period. The Company also agreed to make work commitments, on the Property, of $275,000 over the same 5 year period. Following the fifth anniversary, if the Company has made all cash payments, issued all required options and all of the required work commitments have been met, the Company shall receive, from MinQuest, a quitclaim for 100% interest in the Property with MinQuest reserving a 3% Net Smelter Return. The Excalibur Property Option Agreement was amended on January 30, 2012 revising the payment date of the final required expenditure to August 31, 2012 and thereafter amended on August 31, 2012 extending the payment date of the final expenditure to August 31, 2013. The Excalibur Property Option Agreement was subsequently amended on September 7, 2012, revising the payment date on the final required expenditure to October 31, 2013. The schedule of remaining annual payments, minimum expenditures and number of stock options to be issued pursuant to the Excalibur Property agreement is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Required expenditure
|
|
Payment to optioner
|
|
Annual stock option obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2013
|
$
|
100,000
|
|
$
|
20,000
|
|
|
50,000
|
|
|
Total
|
$
|
100,000
|
|
$
|
20,000
|
|
|
50,000
|
The Longstreet Property
On January 15, 2010, the Company signed an option agreement (the Longstreet Agreement) for the Sole Exclusive Rights to lease and obtain the option to acquire 60 unpatented mining claims totaling approximately 490 hectares known as the Longstreet Property. On July 9, 2010, the Company and MinQuest entered into an amending agreement to add an additional 10 claims and expanding the total to 70 claims, all of which are unpatented. In addition, Star Gold reimburses MinQuest for 5 claims leased from a third party, Roy Clifford.
The terms of the Longstreet Agreement included an initial cash payment, MinQuest, of $20,000, issuance, to MinQuest, of 25,000 common shares and 25,000 stock options based on fair market price. The Longstreet Agreement terms also include cash payments, to MinQuest, totaling $250,000 payable over seven (7) years and the issuance of 175,000 common shares and 175,000 stock options based on fair market price over the same 7 year period. The Company also agreed to make work commitments totaling $3,550,000 over the same 7 year period. Following the seventh anniversary of the agreement, if all terms have been met, the Company shall receive a quitclaim deed for a 100% interest in the property with MinQuest retaining a 3% Net Smelter Return.
The schedule of remaining annual payments, minimum expenditures and number of stock options to be issued pursuant to the Longstreet Agreement is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Required expenditure
|
|
Payment to
optioner
|
|
Annual stock option obligation
|
|
Annual stock
grant obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
January 15, 2014
|
$
|
450,000
|
$
|
36,000
|
|
25,000
|
|
25,000
|
January 15, 2015
|
|
550,000
|
|
56,000
|
|
25,000
|
|
25,000
|
January 15, 2016
|
|
750,000
|
|
56,000
|
|
25,000
|
|
25,000
|
January 15, 2017
|
|
1,000,000
|
|
56,000
|
|
25,000
|
|
25,000
|
|
|
|
|
$
|
2,750,000
|
$
|
204,000
|
|
100,000
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
45
of
62
STAR GOLD CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2013
The Jet Property
On July 7, 2010, the Company acquired, pursuant to the Jet Agreement, the right to earn a 100% mining interest in the Jet Property located in Nevada. The Jet Agreement calls for the Company to invest a total of $110,000 (consisting of $40,000 in direct payments and $70,000 in expenditures towards development of the project) over the seven year period commencing with the execution of the agreement. Under the Jet Agreement, MinQuest is also entitled to receive residual payments if and when the project enters into production. The Jet Property Option Agreement was amended on September 7, 2012 revising the payment date of the required 2013 expenditure from July 7, 2013 to August 31, 2013; the extension was granted only for the 2013 payment. The schedule of remaining annual payments and minimum expenditures pursuant to the Jet Agreement is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Required expenditure
|
|
Payment to
Optioner
|
|
|
|
|
|
|
|
|
|
|
|
|
July 7, 2013
|
|
|
|
$
|
-
|
|
$
|
5,000
|
August 31, 2013
|
|
|
|
|
20,000
|
|
|
-
|
July 7, 2014
|
|
|
|
|
10,000
|
|
|
5,000
|
July 7, 2015
|
|
|
|
|
10,000
|
|
|
5,000
|
July 7, 2016
|
|
|
|
|
10,000
|
|
|
5,000
|
July 7, 2017
|
|
|
|
|
10,000
|
|
|
5,000
|
|
|
|
Total
|
|
|
|
$
|
60,000
|
|
$
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a summary of capitalized mineral interests as of April 30, 2013 and April 30, 2012, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2013
|
|
April 30, 2012
|
|
|
Longstreet Property
|
|
$
|
171,499
|
|
$
|
114,499
|
|
|
Excalibur Property
|
|
|
176,500
|
|
|
176,500
|
|
|
Jet Property
|
|
|
15,000
|
|
|
10,000
|
|
|
|
Total
|
|
$
|
362,999
|
|
$
|
300,999
|
NOTE 6 - INCOME TAXES
The components of the Company's deferred tax asset is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30,
|
|
|
|
|
2013
|
|
2012
|
|
|
Deferred tax asset:
|
|
|
|
|
|
|
|
|
|
Exploration costs
|
|
$
|
403,509
|
|
$
|
156,806
|
|
|
|
Property and equipment, net of accumulated depreciation
|
|
|
336
|
|
|
459
|
|
|
|
Stock-based compensation
|
|
|
131,945
|
|
|
20,359
|
|
|
|
Charitable contribution carryover
|
|
|
1,339
|
|
|
1,218
|
|
|
|
Federal operating net losses
|
|
|
586,931
|
|
|
351,434
|
|
|
|
Deferred tax assets
|
|
|
1,124,060
|
|
|
530,277
|
|
|
Deferred tax liability:
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
|
1,124,060
|
|
|
530,277
|
|
|
|
Less valuation allowance
|
|
|
(1,124,060)
|
|
|
(530,277)
|
|
|
Deferred tax asset
|
|
$
|
-
|
|
$
|
-
|
There was no income tax expense for the years ended April 30, 2013 and 2012 due to the Companys net losses. Deferred income taxes arise from timing differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. A deferred tax asset valuation allowance is recorded when it is more likely than not that deferred tax assets will not be realized. As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the net deferred tax asset, a valuation allowance equal to 100% of the net deferred tax asset has been recorded at April 30, 2013 and 2012. The Company utilizes an effective federal tax rate of 35%. There is no state tax effect.
A reconciliation between the statutory federal income tax rate and the Company's tax provision is as follows:
Page
46
of
62
STAR GOLD CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30,
|
|
|
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected income tax benefit based on statutory rate
|
|
(746,229)
|
|
(35%)
|
|
$
|
(1,184,064)
|
|
(35%)
|
|
|
Permanent differences
|
|
|
|
|
|
|
|
|
|
|
|
|
Extinguishment of debt
|
|
|
|
|
|
|
573,851
|
|
17%
|
|
|
|
Interest expense from debt discount
|
|
41,937
|
|
2%
|
|
|
264,110
|
|
8%
|
|
|
|
Stock issuance costs
|
|
210
|
|
-%
|
|
|
|
|
|
|
|
|
Share based compensation
|
|
140,062
|
|
7%
|
|
|
|
|
|
|
|
|
Meals and entertainment
|
|
1,461
|
|
-%
|
|
|
3,792
|
|
-%
|
|
|
|
Effect of state taxes
|
|
(31,224)
|
|
(2%)
|
|
|
|
|
|
|
|
Non-recognition due to increase in valuation account
|
|
593,783
|
|
28%
|
|
|
342,311
|
|
10%
|
|
|
|
Total income tax benefit
|
$
|
-
|
|
-%
|
|
$
|
-
|
|
-%
|
The Company has concluded that the guidance regarding accounting for uncertainty in income taxes had no significant impact on its results of operations or financial position as of April 30, 2013 or 2012. Therefore, the Company does not have an accrual for uncertain tax positions as April 30, 2013 or 2012. As a result, tabular reconciliation of beginning and ending balances would not be meaningful. If interest and penalties were to be assessed, the Company would charge interest to interest expense, and penalties to other operating expense. It is not anticipated that unrecognized tax benefits would significantly increase or decrease within 12 months of the reporting date.
At April 30, 2013 and 2012 respectively, the Company had federal net operating loss carry forwards of approximately $1,630,364 and $1,004,096 which will expire in fiscal years ending April 30, 2029 through April 30, 2032.
NOTE 7 RELATED PARTY TRANSACTIONS
On September 1, 2011, the Company moved its offices to Coeur dAlene, Idaho and leased office space for $2,500 per month plus a proportionate share of utilities and insurance from Marlin Property Management, LLC (Marlin) an entity owned by the spouse of the Company President. For the year ended April 30, 2013 and 2012, $34,693 and $23,348, respectively, was paid to this related entity inclusive of the Companys pro-rata share of common expenses.
During the year ended April 30, 2012, the Company entered into a series of short term promissory notes, with the spouse of the Companys then President (and current Chairman of the Board) Lindsay Gorrill, in the amount of $145,400. The notes matured October 1, November 1, December 1, 2011 and January 1, 2012 and bore interest at 12% per annum and were subsequently extended at the payor's option for an additional six months each. The Company recognized interest expense of $4,415 year ended April 30, 2012. Accrued interest of $5,816 was paid through issuance of 9,693 shares of common stock at $0.60 per share which approximated fair value of the shares at the date of issuance and is included in Common stock payable on the Companys balance sheet at April 30, 2012.
On or about February 17, 2012, the balance of the short term promissory notes were subsequently converted into debentures as discussed in Note 8.
NOTE 8 - CONVERTIBLE DEBENTURES
On February 17 and 24, 2012, the Company issued a total of $900,000 in five percent (5%) convertible debentures which were due one (1) year after their original issue date and were convertible into a total of 9,000,000 shares of the Companys common stock at the conversion price of $.10 per share. In connection with the issuance the Company issued common stock purchase warrants convertible into a total of 9,000,000 shares of the Companys common stock at the exercise price of $.15 per share. The warrants were scheduled to expire one (1) year from their original issue date; the exercise expiration date was subsequently extended as set forth in Note 11 below.
Management recognized a debt discount of $667,571 representing the relative fair value of the detachable warrants, to be amortized over the term of the associated debt. Management determined the fair value of the detachable warrants using a Black-Scholes pricing model with the following inputs:
Page
47
of
62
STAR GOLD CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
February 17, 2012
|
|
February 24, 2012
|
|
Stock price
|
|
|
$0.60
|
|
|
$1.15
|
|
Exercise price
|
|
|
$0.15
|
|
|
$0.15
|
|
Expected life
|
|
|
1 year
|
|
|
1 year
|
|
Weighted average volatility
|
|
|
373.9%
|
|
|
376.2%
|
|
Risk-free rate
|
|
|
0.18%
|
|
|
0.18%
|
Management determined the embedded conversion feature in the debentures constituted a beneficial conversion feature, and recognized a debt discount of $87,029. In calculating the accounting conversion rate of the beneficial conversion feature, the intrinsic value exceeded the debt instrument itself. Therefore, the amount of discount assigned to the feature was limited to the proceeds allocated to the convertible instrument.
$145,400 of related-party short term promissory notes (see Note 7) were converted into the debentures February 17, 2012. The Company has considered the impact of ASC 470-50 Debt-Modifications and Extinguishments on the conversion of the related-party short term promissory notes and concluded that it constituted a substantial modification and therefore was accounted for as an extinguishment of debt. During the year ended April 30, 2012, the Company recognized a loss on extinguishment of the short term promissory notes of $1,639,575 representing the difference between the fair value of the debt and warrants and the carrying value of the original notes.
On April 30, 2012, the Company elected to convert all of the outstanding debentures issued on February 17, 2012, into common shares pursuant to the terms of the debentures. Therefore, all remaining debt discount was recognized as an expense as of that date.
On June 18, 2012, the Company closed on a private placement. The placement consisted of issuing two hundred fifty thousand dollars ($250,000) in five percent (5%) convertible debentures. The debentures were due one (1) year from their original issue date and were convertible into a total of 833,334 shares of the Companys common stock, at the conversion price of $.30 per share, at any time before maturity, solely at the option of the Company. The placement also included the issuance of warrants to the debenture holders, giving the holders thereof the ability to purchase, at the exercise price of $.75 per share, one (1) share of common stock of the Company for each share of Companys common stock issuable to the holder upon conversion of the debentures issued in conjunction with the warrants. The warrants expire two (2) years from their original issue date.
Management recognized a debt discount of $119,821 representing the relative fair value of the detachable warrants, to be amortized over the term of the associated debt. Management determined the fair value of the detachable warrants using a Black-Scholes pricing model with the following inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock price
|
|
|
$0.30
|
|
|
|
|
Exercise price
|
|
|
$0.75
|
|
|
|
|
Expected life
|
|
|
2 years
|
|
|
|
|
Weighted average volatility
|
|
|
275.0%
|
|
|
|
|
Risk-free rate
|
|
|
1.00%
|
|
|
|
On June 18, 2012, the Company elected to convert all the debentures into common shares pursuant to the terms of the debentures. Therefore, all remaining debt discount was recognized as an expense as of that date.
NOTE 9 - COMMON STOCK PAYABLE
On April 30, 2012, the Company elected to convert all convertible debentures (Note 8) into 9,000,000 shares of the Company's common stock at the conversion price of $0.10 per share as per terms of the debenture agreement. The Company also elected to convert $22,276 of accrued interest associated with the debentures to 27,434 shares of common stock at $0.60 per share which approximated fair value of the shares at the date of conversion.
As per terms of their respective employment agreements, the Company authorized the issuance of common stock to executives and management for accrued compensation through April 30, 2012 of $92,000 or 130,333 shares of common stock valued at $0.71 per share which is the average end of month closing price for the period in which compensation was earned. The shares were issued June 1, 2012.
Page
48
of
62
STAR GOLD CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2013
NOTE
10 - REVERSE STOCK SPLIT
On or about November 30, 2011 the Company received written consents in lieu of a special meeting of the Board and of the Shareholders authorizing the Board to undertake a 1:6 reverse split of the Company's common shares.
Pursuant to the reverse split, holders of Star Gold common stock, as of November 30, 2011 (the "Record Date"), received one (1) share of Star Gold common stock in exchange for every six (6) shares of Star Gold common stock held by the shareholder on the Record Date (the "Reverse Split"). The Company's shares immediately prior to the Reverse stock split totaled 63,710,000, which were adjusted to 10,618,333 shares as a result of the Reverse Stock Split. The Reverse Stock Split became effective February 2, 2012 when the Financial Industry Regulatory Authority ("FINRA") approved the Reverse Stock Split.
The Company's common stock began trading at its post Reverse Stock Split price at the beginning of trading on February 3, 2012. Share, per share, and stock option amounts for all periods presented within this report for common stock and additional paid-in capital have been retroactively adjusted to reflect the Reverse Stock Split.
NOTE 11 - WARRANTS
The following is a summary of the Companys warrants outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted Average Exercise Price
|
|
Expiration Date
|
|
|
|
|
|
|
|
|
|
Outstanding at April 30, 2011
|
|
131,667
|
$
|
1.75
|
|
|
|
|
Issued
|
|
9,000,000
|
|
0.15
|
|
April 30, 2013
|
|
|
Exercised
|
|
(1,350,000)
|
|
(0.15)
|
|
|
|
|
Expired
|
|
(91,667)
|
|
1.20
|
|
|
|
Outstanding at April 30, 2012
|
|
7,690,000
|
$
|
0.16
|
|
|
|
|
Issued
|
|
1,727,948
|
|
0.67
|
|
January 18, 2015
|
|
|
Exercised
|
|
(7,593,233)
|
|
(0.15)
|
|
|
|
|
Expired
|
|
(96,767)
|
|
(1.33)
|
|
|
|
Outstanding at April 30, 2013
|
|
1,727,948
|
$
|
0.67
|
|
|
In February, 2012, the Company closed a private placement in which it issued $900,000 in 5% convertible debentures, and warrants to purchase common stock of the Company at the price of $.15 per share. As of February 17, 2013, some of those warrants were still outstanding and were scheduled to expire on February 17, 2013. On February 17, 2013, the Board of Directors voted to extend the expiration date, for all remaining outstanding warrants issued as part of the February 2012 offering, until April 30, 2013. All other terms of the warrants remained the same.
NOTE 12 - STOCK OPTIONS
In consideration for mining interests on several properties (see Note 5), the Company is obligated to issue a total of 400,000 stock options based on "fair market price" which is considered to be the closing price of the Company's common stock on the grant dates.
The Company has estimated the fair value of these option grants using the Black-Scholes model for years ended April 30, 2013 and 2012, respectively, with the following information and range of assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2013
|
|
|
April 30, 2012
|
|
Options issued
|
|
|
25,000
|
|
|
75,000
|
|
Weighted average volatility
|
|
|
326.4%
|
|
|
373.8%
|
|
Expected dividends
|
|
|
-
|
|
|
-
|
|
Expected term (years)
|
|
|
10.00
|
|
|
3.00
|
|
Risk-free rate
|
|
|
1.86%
|
|
|
2.5%
|
The following is a summary of the Companys options issued and outstanding in conjunction with certain mining interest agreements on several properties:
Page
49
of
62
STAR GOLD CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For year ended April 30, 2013
|
|
For the year ended April 30, 2012
|
|
|
|
|
|
Shares
|
|
Price (a)
|
|
Shares
|
|
Price (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance outstanding
|
|
|
275,000
|
|
$0.36
|
|
200,000
|
|
$0.28
|
|
|
Issued
|
|
|
25,000
|
|
0.42
|
|
75,000
|
|
0.56
|
|
|
Expired
|
|
|
-
|
|
-
|
|
-
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Ending balance outstanding
|
|
|
300,000
|
|
$0.37
|
|
275,000
|
|
$0.36
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
Weighted average exercise price per share.
Future stock option obligations under the terms of property agreements detailed in Note 5 are as follows:
|
|
|
|
|
|
|
|
|
Fiscal year ending April 30,
|
|
Stock Options
|
|
|
|
2014
|
|
|
25,000
|
|
|
|
|
2015
|
|
|
25,000
|
|
|
|
|
2016
|
|
|
25,000
|
|
|
|
|
2017
|
|
|
25,000
|
|
|
|
|
|
|
|
100,000
|
|
|
|
As per an agreement fully executed on October 3, 2012, in consideration for consulting and advisory services rendered, the Company is obligated to issue a total of 1,000 stock options based on 5 day variable weighted-average price (VWAP) at the end of each month of the associated consulting contract. The consultant options vest on the first day of the following month of service and are exercisable for a period of six months following the termination of the agreement. The Company has estimated the fair value of these option grants using the Black-Scholes model for the year ended April 30, 2013, with the following information and range of assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options issued
|
|
|
8,000
|
|
|
|
|
Weighted average volatility range
|
|
|
364.9% to 473.9%
|
|
|
|
|
Expected dividends
|
|
|
-
|
|
|
|
|
Expected term (years)
|
|
|
1.00
|
|
|
|
|
Risk-free rate
|
|
|
0.14% to 0.18%
|
|
|
|
The following is a summary of the Companys options issued and outstanding associated with certain consulting agreements:
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2013
|
|
|
|
|
Shares
|
|
|
Price (a)
|
|
Beginning balance outstanding
|
|
|
-
|
|
|
-
|
|
|
Issued
|
|
|
8,000
|
|
|
$0.46
|
|
|
Expired or forfeited
|
|
|
-
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
-
|
|
Ending balance outstanding
|
|
|
8,000
|
|
|
$0.46
|
(a)
Weighted average exercise price per share.
The fair value of the consultant options issued as of April 30, 2013 was $4,400. Total charged against operations under the option grants for consulting services was $3,583 for the year ended April 30, 2013. These costs are classified under management and administrative expense.
The Company established the 2011 Stock Option/Restricted Stock Plan. The Stock Option Plan is administered by the Board of Directors and provides for the grant of stock options to eligible individual including directors, executive officers and advisors that have furnished bona fide services to the Company not related to the sale of securities in a capital-raising transaction.
The Stock Option Plan has a fixed maximum percentage of 10% of the Company's outstanding shares that are eligible for the plan pool, whereby the number of Shares under the plan increases automatically increases as the total number of shares outstanding increase. The number of shares subject to the Stock Option Plan and any outstanding awards will be adjusted appropriately by the
Page
50
of
62
STAR GOLD CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2013
Board of Directors if the Company's common stock is affected through a reorganization, merger, consolidation, recapitalization, restructuring, reclassification dividend (other than quarterly cash dividends) or other distribution, stock split, spin-off or sale of substantially all of the Company's assets.
The Stock Option plan also has terms and limitations, including without limitations that the exercise price for stock options granted under the Stock Option Plan must equal the stock's fair market value, based on the closing price per share of common stock, at the time the stock option is granted. The fair value of each option award is estimated on the date of grant utilizing the Black-Scholes model and commonly utilized assumptions associated with the Black-Scholes methodology. Options granted under the Plan have a ten year maximum term and varying vesting periods as determined by the Board.
On May 30, 2011 the Board of Directors authorized the grant of 326,667 options to purchase shares of common stock of the Company to various directors, officers and advisors. On March 22, 2012, the Board of Directors authorized the grant of 236,667 options to purchase shares of the Company to various directors, officers and advisors.
On June 18, 2012 the Board of Directors authorized the grant of 1,725,000 options to purchase shares of common stock of the Company to various directors, officers and advisors. The options have a strike price of $0.30 based on the closing price of the Company's common stock on the date of grant and vest over one year.
The fair value of each option award was estimated on the date of the grant using the information and assumptions noted in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 30, 2011
|
|
March 22, 2012
|
|
June 18, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options issued
|
|
326,666
|
|
|
236,667
|
|
|
1,725,000
|
|
|
Exercise price
|
|
$0.90
|
|
|
$0.78
|
|
|
$0.30
|
|
|
Weighted average volatility
|
|
276.1%
|
|
|
350.2%
|
|
|
302.2%
|
|
|
Expected dividends
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Expected term (years)
|
|
3.1
|
|
|
3.1
|
|
|
3.1
|
|
|
Risk-free rate
|
|
3.07%
|
|
|
0.56%
|
|
|
0.41%
|
The following is a summary of the Companys options issued and outstanding in conjunction with the Companys Stock Option Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended April 30, 2013
|
|
Year ended
April 30, 2012
|
|
|
|
|
|
Shares
|
|
Price (a)
|
|
Shares
|
|
Price (a)
|
|
Beginning balance outstanding (b)
|
|
|
530,000
|
|
$0.83
|
|
266,667
|
|
$1.80
|
|
|
Granted
|
|
|
1,725,000
|
|
0.30
|
|
563,333
|
|
$0.84
|
|
|
Forfeited or rescinded
|
|
|
(40,000)
|
|
0.51
|
|
(300,000)
|
|
($1.70)
|
|
|
Exercised
|
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Ending balance outstanding
|
|
|
2,215,000
|
|
$0.43
|
|
530,000
|
|
$0.83
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
Weighted average exercise price per share.
(b)
The options were granted to employees, management and advisors by the Board of Directors and had vesting
periods from immediate to three years.
The following table summarizes additional information about the options under the Companys Stock Option Plan as of April 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
|
Date of Grant
|
|
Shares
|
|
Price (a)
|
|
Life (b)
|
|
Shares
|
|
Price (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 27, 2011
|
|
283,333
|
|
$0.90
|
|
8.50
|
|
283,333
|
|
$0.90
|
|
March 22, 2012
|
|
231,667
|
|
$0.78
|
|
8.90
|
|
113,357
|
|
$0.78
|
Page
51
of
62
STAR GOLD CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 18, 2012
|
|
1,700,000
|
|
$0.30
|
|
9.14
|
|
1,700,000
|
|
$0.30
|
|
|
Total options
|
|
2,215,000
|
|
|
|
9.03
|
|
2,096,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The total value of the stock option awards is expensed ratably over the vesting period of the employees receiving the awards. As of April 30, 2013, total unrecognized compensation cost related to stock-based options and awards is $88,209 and the related weighted average period over which it is expected to be recognized is approximately .40 years. There are 2,096,690 options vested under the Plan at April 30, 2013, and 118,310 unvested options as of the same date.
The average remaining contractual term of the options both outstanding and exercisable at April 30, 2013 was 9.03 years. No options were exercised during the year ended April 30, 2013.
Total compensation charged against operations under the plan for employees and advisors was $780,521 and $168,150 for the years ended April 30, 2013 and 2012, respectively. These costs are classified under management and administrative expense.
The aggregate intrinsic value of options exercisable at April 30, 2013, was $481,220 based on the Company's closing price of $0.55 per common share at April 30, 2013. The Company's current policy is to issue new shares to satisfy option exercises.
The following is a summary of the Companys stock options outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted Average Exercise Price
|
|
Expiration Date
|
|
|
|
|
|
|
|
|
|
Stock options issued in conjunction with mineral interest agreements
|
|
300,000
|
$
|
0.37
|
|
April 11, 2019 through Jan 15, 2023
|
|
Stock options issued pursuant to 2011 Stock Option Plan
|
|
2,215,000
|
|
0.43
|
|
May 30, 2021 through June 18, 2022
|
|
Stock options issued in lieu of cash for services
|
|
8,000
|
|
0.46
|
|
Oct 1, 2013 through January 1, 2014
|
|
Outstanding at April 30, 2013
|
|
2,523,000
|
$
|
0.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total vested stock options
|
|
2,404,690
|
$
|
0.42
|
|
|
|
|
|
|
|
|
|
|
NOTE 13 STOCKHOLDERS EQUITY (DEFICIT)
On November 26, 2010, the Company completed a private placement with one individual to issue 240,000 common shares and 240,000 share purchase warrants at a price of $0.50 per unit. Each unit comprises of one common share and one share purchase warrant. The term of the warrant is for two years, and may be exercised at $0.75 during the first year and $1.00 during the third year. No commissions were paid and no registration rights have been granted.
On or about November 26, 2010 an individual exercised 650,000 share purchase warrants at $0.20 per share.
On November 1, 2010, the Company issued 25,000 shares of its common stock pursuant to the Longstreet Agreement. The shares were valued at $0.60 as of the date of the agreement based on the current market price of the Company's common stock.
On December 18, 2010, the Company issued 25,000 shares of its common stock pursuant to the Longstreet Agreement. The shares were valued at $0.28 as of the date of the agreement based on the current market price of the Company's common stock.
The table below details common shares issued for the year ended April 30, 2012:
Page
52
of
62
STAR GOLD CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date
|
Debenture Conversion
|
Private Placement
|
Interest
|
Exercise of warrants
|
Compensation for services
|
Mining interests
|
Share Price
|
|
Shares issued
|
September 1, 2011
|
$ -
|
$ -
|
$ -
|
$ -
|
$ 9,000
|
$ -
|
$ 0.36
|
|
25,000
|
October 1, 2011
|
-
|
-
|
-
|
-
|
9,000
|
-
|
0.36
|
|
25,000
|
November 1, 2011
|
-
|
-
|
-
|
-
|
9,000
|
-
|
0.36
|
|
25,000
|
December 1, 2011
|
-
|
-
|
-
|
-
|
9,000
|
-
|
0.36
|
|
25,000
|
January 1, 2012
|
-
|
-
|
-
|
-
|
9,000
|
-
|
0.36
|
|
25,000
|
February 1, 2012
|
-
|
-
|
-
|
-
|
9,000
|
-
|
0.36
|
|
25,000
|
March 1, 2012
|
-
|
-
|
-
|
-
|
18,750
|
-
|
0.75
|
|
25,000
|
March 23, 2012
|
-
|
-
|
-
|
150,000
|
-
|
-
|
0.15
|
|
1,000,000
|
April 12, 2012
|
-
|
-
|
-
|
37,500
|
-
|
-
|
0.15
|
|
250,000
|
April 20, 2012
|
-
|
-
|
-
|
15,000
|
-
|
-
|
0.15
|
|
100,000
|
|
$ -
|
$ -
|
$ -
|
$202,500
|
$ 72,750
|
$ -
|
|
|
1,525,000
|
|
|
|
|
|
|
|
|
|
|
The table below details common shares issued for the year ended April 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date
|
Debenture Conversion
|
Private Placement
|
Interest
|
Exercise of warrants
|
Compensation for services
|
Mining interests
|
Share Price
|
|
Shares issued
|
May 10, 2012
|
$ 900,000
|
$ -
|
$ -
|
$ -
|
$ -
|
$ -
|
$ 0.15
|
|
9,000,000
|
May 10, 2012
|
-
|
-
|
16,461
|
-
|
-
|
-
|
0.60
|
|
27,475
|
May 16, 2012
|
-
|
-
|
-
|
37,500
|
-
|
-
|
0.15
|
|
250,000
|
May 25, 2012
|
-
|
-
|
-
|
30,000
|
-
|
-
|
0.15
|
|
200,000
|
June 1, 2012
|
-
|
-
|
-
|
-
|
92,000
|
-
|
0.71
|
|
130,333
|
June 6, 2012
|
-
|
-
|
-
|
-
|
-
|
2,250
|
0.09
|
|
25,000
|
June 13, 2012
|
-
|
-
|
-
|
4,500
|
-
|
-
|
0.15
|
|
30,000
|
June 15, 2012
|
-
|
-
|
-
|
50,000
|
-
|
-
|
0.15
|
|
333,333
|
June 27, 2012
|
50,000
|
-
|
-
|
-
|
-
|
-
|
0.30
|
|
166,667
|
June 27, 2012
|
-
|
-
|
146
|
-
|
-
|
-
|
0.30
|
|
486
|
August 20, 2012
|
-
|
-
|
-
|
7,500
|
-
|
-
|
0.15
|
|
50,000
|
August 22, 2012
|
200,000
|
-
|
-
|
-
|
-
|
-
|
0.30
|
|
666,667
|
September 5, 2012
|
-
|
-
|
-
|
45,000
|
-
|
-
|
0.15
|
|
300,000
|
September 5, 2012
|
-
|
-
|
5,815
|
-
|
-
|
-
|
0.60
|
|
9,693
|
October 12, 2012
|
-
|
-
|
-
|
18,000
|
-
|
-
|
0.15
|
|
120,000
|
October 29, 2012
|
-
|
-
|
-
|
39,231
|
-
|
-
|
0.15
|
|
261,543
|
October 30, 2012
|
-
|
-
|
-
|
25,000
|
-
|
-
|
0.15
|
|
166,666
|
January 15, 2013
|
-
|
-
|
-
|
-
|
-
|
10,500
|
0.42
|
|
25,000
|
January 18, 2013
|
-
|
357,846
|
-
|
-
|
-
|
-
|
0.40
|
|
894,614
|
February 14, 2013
|
-
|
-
|
-
|
43,560
|
-
|
-
|
0.15
|
|
290,398
|
February 15, 2013
|
-
|
-
|
-
|
215,798
|
-
|
-
|
0.15
|
|
1,438,653
|
February 22, 2013
|
-
|
-
|
-
|
-
|
7,000
|
-
|
0.35
|
|
20,000
|
March 18, 2013
|
-
|
-
|
-
|
-
|
3,900
|
-
|
0.39
|
|
10,000
|
April 10, 2013
|
-
|
-
|
-
|
25,796
|
-
|
-
|
0.15
|
|
171,973
|
April 28, 2013
|
-
|
-
|
-
|
-
|
8,750
|
-
|
0.35
|
|
25,000
|
April 29, 2013
|
-
|
-
|
-
|
77,000
|
-
|
-
|
0.15
|
|
513,334
|
April 30, 2013
|
-
|
-
|
-
|
520,100
|
-
|
-
|
0.15
|
|
3,467,333
|
|
$ 1,150,000
|
$ 357,846
|
$22,422
|
$1,138,985
|
$ 111,650
|
$12,750
|
|
|
18,594,168
|
Page
53
of
62
STAR GOLD CORP.
(An Exploration Stage Company)
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2013
NOTE
14 -SUBSEQUENT EVENTS
On May 22, 2013 the Board of Directors authorized the grant of 675,000 options to purchase shares of common stock of the Company to various directors, officers and consultants. The options have a strike price of $0.30 which approximates the fair market value of the Company's common equity on the date of the grant based on the closing price as quoted by the National Quotation Bureau on the day of grant. The Company will recognize stock option expense related to these grants in subsequent periods.
On July 12, 2013, the Jet Property Option Agreement was amended revising the payment date of the required 2013 expenditure from August 31, 2013 to October 31, 2014.
On July 12, 2013, the Excalibur Property Option Agreement was amended revising the payment date of the final required expenditure from August 31, 2013 to October 31, 2014.
Page
54
of
62