UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
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For the transition period from ___________to ___________
Commission file number
(Exact Name of Registrant as Specified in its charter)
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Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant (1) 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.
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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 (§ 229.405 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 or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act (Check one):
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[ ] | Smaller Reporting Company |
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| Emerging Growth Company |
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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 Act). Yes [ ] No
As of August 12, 2021, there were
2
DAKOTA TERRITORY RESOURCES CORP
JUNE 30, 2021
(UNAUDITED)
TABLE OF CONTENTS
3
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS
(Unaudited)
| June 30, 2021 |
March 31, 2021 |
|||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Mineral properties, net | ||||||||
| Property and equipment, net | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Accounts payable - related party | ||||||||
| Current portion of notes payable - related party | ||||||||
| Total current liabilities | ||||||||
| Notes payable - related party, net of current portion and discount | ||||||||
| Total liabilities | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| SHAREHOLDERS' EQUITY | ||||||||
| Preferred stock, par value $ |
||||||||
| Common stock, par value $ |
||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( |
) | ( |
) | ||||
| Total shareholders' equity | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | $ |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
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DAKOTA TERRITORY RESOURCE CORP.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended June 30, |
||||||||
| 2021 | 2020 | |||||||
| OPERATING EXPENSES | ||||||||
| Exploration costs | $ | $ | ||||||
| General and administrative expenses | ||||||||
| Total operating expenses | ||||||||
| LOSS FROM OPERATIONS | ( |
) | ( |
) | ||||
| OTHER INCOME (EXPENSE) | ||||||||
| Loss on settlement of debt | ( |
) | ||||||
| Interest income | ||||||||
| Interest expense | ( |
) | ( |
) | ||||
| Total other income (expense) | ( |
) | ( |
) | ||||
| NET LOSS | $ | ( |
) | $ | ( |
) | ||
| Net loss per share: | ||||||||
| Basic and diluted net loss per share | $ | ( |
) | $ | ( |
) | ||
| Weighted average shares outstanding: | ||||||||
| Basic and diluted | ||||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
5
DAKOTA TERRITORY RESOURCE CORP.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(Unaudited)
| Three months ended June 30, |
||||||||
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation expense | ||||||||
| Loss on settlement of debt | ||||||||
| Depreciation expense | ||||||||
| Amortization of debt discount | ||||||||
| Changes in current assets and liabilities: | ||||||||
| Prepaid expenses and other assets | ( |
) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Accounts payable - related party | ||||||||
| Net cash used in operating activities | ( |
) | ( |
) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchases of property and equipment | ( |
) | ||||||
| Purchases of mineral properties | ( |
) | ( |
) | ||||
| Net cash used in investing activities | ( |
) | ( |
) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from the issuance of note payable | ||||||||
| Proceeds from issuance of common stock | ||||||||
| Deposits received | ||||||||
| Repayment of note payable - related party | ( |
) | ( |
) | ||||
| Repayment of line of credit, net | ( |
) | ||||||
| Net cash provided by financing activities | ||||||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | ||||||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | ||||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
| Interest paid | $ | $ | ||||||
| Taxes paid | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Common stock issued for investment in mineral property | $ | $ | ||||||
| Common stock issued for payment of note payable | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
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DAKOTA TERRITORY RESOURCE CORP.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the three months ended June 30, 2021 and 2020
(Unaudited)
| Common Stock | |||||||||||||||||||
| Shares | Amount |
Additional Paid-In Capital |
Accumulated Deficit | Total | |||||||||||||||
| Balance March 31, 2020 | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||
| Cashless exercise of stock options and warrants | ( |
) | |||||||||||||||||
| Cash received for unissued shares | - | ||||||||||||||||||
| Debt discount assigned to purchase option | - | ||||||||||||||||||
| Net loss | - | ( |
) | ( |
) | ||||||||||||||
| Balance at June 30, 2020 | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||
| Balance at March 31, 2021 | $ | $ | $ | ( |
) | $ | |||||||||||||
| Common stock issued for cash | |||||||||||||||||||
| Cash received for unissued shares | - | ||||||||||||||||||
| Common stock issued for investment in mineral properties | |||||||||||||||||||
| Common stock issued upon conversion of debt | |||||||||||||||||||
| Stock-based compensation expense | |||||||||||||||||||
| Net loss | - | ( |
) | ( |
) | ||||||||||||||
| Balance at June 30, 2021 | $ | $ | $ | ( |
) | $ | |||||||||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
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DAKOTA TERRITORY RESOURCES CORP
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
Note 1-Summary of Accounting Policies
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements ("interim financial statements") of Dakota Territory Resource Corp. ("we", "us", "our", the "Company", "Dakota Territory") have been prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") and the rules of the Securities and Exchange Commission ("SEC") for interim statements, and should be read in conjunction with the audited financial statements and notes thereto contained in our Annual Report on Form 10-K, for the year ended March 31, 2021 as filed with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal year ended March 31, 2021 as reported in our Annual Report on Form 10-K, have been omitted. The year-end balance sheet data was derived from the audited financial statements. Unless otherwise noted, there have been no material changes to the footnotes from those accompanying the audited consolidated financial statements contained in the Company's Annual Report on Form 10-K.
Uncertainties and Economic Development
In March 2020, the World Health Organization designated the new coronavirus ("COVID-19") as a global pandemic. Federal, state and local governments have mandated orders to slow the transmission of the virus, including but not limited to shelter-in-place orders, quarantines, restrictions on travel, and work restrictions that prohibit many employees from going to work. Uncertainty with respect to the economic effects of the pandemic has resulted in significant volatility in the financial markets. The restrictions put in place by federal, state and local governments could delay our exploratory programs on our mineral properties. Furthermore, the impact of the pandemic on the global economy could also negatively impact the availability and cost of future borrowings should the need arise. It is unknown how long the adverse conditions associated with the pandemic will last and what the complete financial effect will be to the Company. The Company continues to monitor the impact that the pandemic, including relief bills enacted in response thereto, may have on operations. Currently, the Company is unable to determine the impact that the pandemic will have on its financial condition, results of operations, or liquidity.
Reverse Stock Split
Merger Agreement
Pursuant to the Merger Agreement, JR Resources Corp. ("JR") and the Company have incorporated a new company ("NewCo") that will acquire all of the outstanding securities of JR and of the Company in exchange for securities of NewCo (the "Merger"). Shareholders of JR will receive a number of NewCo shares of common stock equal to their percentage shareholding in JR multiplied by the 35,641,667 Dakota Territory shares that JR owns. Shareholders of the Company other than JR will receive one share of common stock of NewCo for each share of common stock of the Company.
In addition, at the closing of the Merger, (i) each outstanding option to purchase the Company's common stock, whether vested or unvested, will be assumed and converted into an option with respect to a number of shares of NewCo common stock in the manner set forth in the Merger Agreement, (ii) each outstanding warrant to purchase JR common stock, whether or not exercisable, will be assumed and converted into a warrant with respect to a number of shares of NewCo common stock in the manner set forth in the Merger Agreement, (iii) any outstanding awards of restricted stock units with respect to shares of the Company's common stock will be assumed and converted into the right to receive an award of restricted stock units representing a right to receive a number of shares of NewCo common stock in the manner set forth in the Merger Agreement and (iv) NewCo will change its name to "Dakota Gold Corp."
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Note 1-Summary of Accounting Policies, continued
The completion of the Merger is subject to customary closing conditions for a transaction of this nature, including securities law compliance, the approval of JR shareholders and the approval of the Company's shareholders. In addition, in connection with the Merger, the Company and JR intend to cause NewCo to prepare and file a registration statement on Form S-4 with the US Securities and Exchange Commission ("SEC").
On April 30, 2021, the Company incorporated Dakota Gold Services (Canada) Corp. ("Dakota Canada") under the British Columbia Business Corporations Act. These financial statements consolidate Dakota Canada, a wholly-owned subsidiary.
Note 2-Related Party Transactions
The Company engages in related party transactions that involve its officers and directors and/or companies controlled by the officers and directors. Following is an analysis of related party transactions:
Mr. Gerald Aberle is the Company's former President, Chief Executive Officer and is currently Chief Operating Officer of the Company. He is also a director and significant shareholder of the Company and the owner of Jerikodie, Inc. ("Jerikodie"). Under a February 2012 agreement, Jerikodie Inc. earns a fixed consulting fee of $
Mr. Richard Bachman is the Company's former Chief Geological Officer ("CGO"). He is also a significant shareholder of the Company and the owner of Minera Teles Pires Inc. ("Minera Teles"). Under an October 2005 agreement that expired in March 2020, Minera Teles earned a $
During the three months ended June 30, 2021, the Company paid $
In connection with the notes payable issued in 2020, as discussed above, the Company determined that the
Messrs. Aberle and Bachman own a
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Note 2-Related Party Transactions, continued
The remuneration of directors and other members of key management personnel during the three months ended June 30, 2021 and 2020 was as follows:
| June 30, 2021 | June 30, 2020 | |||||
| Directors fees | $ | $ | ||||
| Salaries | ||||||
| Consulting fees | ||||||
| Share-based compensation | ||||||
| $ | $ |
Note 3-Mineral Properties
On September 26, 2012, the Company was re-organized with North Homestake Mining Company. With this re-organization, the Company acquired
On December 28, 2012, the Company acquired
On February 24, 2014, the Company acquired surface and mineral title to the
On March 3, 2014, the Company completed the acquisition of approximately
On April 5, 2017, the Company acquired options to purchase a combination of surface and mineral titles to approximately
In November 2018, we acquired
In September 2019, the Company completed the acquisition of
On March 6, 2020, the Company completed the acquisition of
In May 2020, the Company acquired
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Note 3-Mineral Properties, continued
In July 2020, the Company staked
On September 15, 2020, we completed the acquisition of
On October 26, 2020, the Company completed the purchase of the Maitland Gold Property from Homestake Mining Company of California, a wholly owned subsidiary of Barrick Gold Corporation ("Barrick"). At closing, the Company paid Barrick $
On November 25, 2020, the Company acquired
On January 26, 2021, the Company acquired
On March 8, 2021, the Company acquired
On March 9, 2021, Dakota Territory acquired, by option,
11
Note 3-Mineral Properties, continued
On May 21, 2021, the Company purchased surface and mineral title to approximately
During the quarter ended June 30, 2021, the Company purchased an additional
In total, the Company currently holds eight brownfield project areas in the district comprised of
As of June 30, 2021 and March 31, 2021, the Company's mineral properties totaled $
Note 4-Notes Payable
JR Resources Corp.
In February 2020, we entered into a $
On October 15, 2020, and as a part of the first closing of our agreement with JR, the promissory note of $
On January 20, 2021 JR lent the Company $
In March 2021, the Company and JR effected the second and final closing under the option, whereby JR acquired
12
Note 5-Property and Equipment
As of June 30, 2021 and March 31, 2021, the Company's property and equipment consists of the following:
|
Estimated Useful Life (Years) |
June 30, 2021 | March 31, 2021 | ||||||||
| Land | $ | $ | ||||||||
| Building |
|
|||||||||
| Furniture and equipment |
|
|||||||||
| Vehicle |
|
|||||||||
| Less accumulated depreciation | ( |
) | ( |
) | ||||||
| Property and equipment, net | $ | $ |
Depreciation expense for the three months ended June 30, 2021 and 2020, was $
Note 6-Shareholders' Equity
Common Stock
Our authorized capital stock consists of
On June 23, 2021, the Company issued
During the three months ended June 30, 2021, the Company also issued (i)
During the three months ended June 30, 2020, the Company issued
At June 30, 2021, there were
Common Stock Options, Restricted Stock Units and Warrants
On March 11, 2021, the Company's board of directors adopted a plan entitled the "2021 Stock Incentive Plan." The 2021 Stock Incentive Plan has a total of
On January 25, 2015, the Company's board of directors adopted a plan entitled the "2015 Omnibus Incentive Plan." The 2015 Omnibus Incentive Plan is no longer in effect and no further securities will be issued under the 2015 Omnibus Incentive Plan, other than in respect of
13
Note 6-Shareholders' Equity, continued
Outstanding stock options under the 2021 Stock Incentive Plan have a term of five years. Outstanding stock options granted to third-party service providers generally vest over the period of the contract, which is typically one year. The Company recognized stock-based compensation related to issuance of stock options totaling $
On May 17, 2021, the Company granted
| Shares | Weighted Average Exercise Price |
Weighted Average Remaining Contractual Life (In Years) |
Aggregate Intrinsic Value |
||||||||
| Outstanding as of March 31, 2021 | $ |
|
$ | ||||||||
| Options granted |
|
||||||||||
| Outstanding as of June 30, 2021 | $ |
|
$ | ||||||||
| Options exercisable as of June 30, 2021 | $ |
|
During the three months ended June 30, 2021, we estimated the fair value of each stock option to have a weighted average grant date fair value of $
On June 4, 2021 the Company issued
There were no warrants outstanding as of June 30, 2021 and March 31, 2021.
Note 7-Subsequent Events
On August 2, 2021, the Company entered into a series of substantially similar subscription agreements pursuant to which the Company issued and sold to certain investors, in the final tranche of the Private Placement, an aggregate of
Robert Quartermain, a director and Co-Chair of the Company, purchased
14
Forward-Looking Statements
This Quarterly Report on Form 10-Q and the exhibits attached hereto contain "forward-looking statements" within the meaning of the US Private Securities Litigation Reform Act of 1995. Such forward-looking statements concern our anticipated results and developments of our operations in future periods, planned exploration and development of our properties, plans related to our business and other matters that may occur in the future. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as "expects", "anticipates", "plans", "estimates" or "intends", the negatives thereof, variations thereon and similar expressions or stating that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q, include, but are not limited to:
Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors which could cause actual events or results to differ from those expressed or implied by the forward-looking statements, including, without limitation:
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This list is not exhaustive of the factors that may affect our forward-looking statements. Although we have attempted to identify important factors that could cause actual results to differ materially from those described in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Except as required by law, we disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. We qualify all the forward-looking statements contained in this Quarterly Report on Form 10-Q by the foregoing cautionary statements.
This management's discussion and analysis should be read in conjunction with our financial statements and notes thereto as set forth herein. Readers are also urged to carefully review and consider the various disclosures made by us, which attempt to advise interested parties of the factors which affect our business, including without limitation, the disclosures made under "Risk Factors" of our most recent Form 10-K.
Our unaudited financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.
Since we are an exploration stage company and have not generated revenues to date, our business is subject to numerous contingencies and risk factors beyond our control, including exploration and development risks, competition from well-funded competitors, and our ability to manage growth.
Overview
Our goal is to create shareholder value through the acquisition, responsible exploration and future development of high caliber gold properties in the Black Hills of South Dakota. Our management and technical teams have more than 50 combined years of mining and exploration experience in the Black Hills with Homestake Mining Company, which we believe has uniquely positioned Dakota Territory to leverage our direct experience and knowledge of past exploration endeavors to focus our programs at the point where Homestake Mining Company left off in the 1990's.
The Black Hills of South Dakota has yielded approximately 44.6 million ounces of gold production from the 100 square mile area known as the Homestake District. Despite the gold endowment of the area, we believe the District is generally underexplored and lacks a concerted effort to search for gold under the cover of younger sedimentary and igneous rocks that dominate the surface. The Black Hills of South Dakota is a safe low-cost jurisdiction with well-developed mining infrastructure and is a jurisdiction in which regulatory authorities have consistently demonstrated a willingness to work with responsible operators to permit well-planned compliant projects.
Since 2012, we have consistently pursued a strategy of expanding our portfolio of brownfields exploration properties located exclusively within the Homestake District to build a dominant land position with the goal of consolidating the remaining mineral potential. Our property acquisitions have been based on our past exploration experiences, the extensive data sets we have assembled over the past 8 years, and new research we have conducted on the gold system that created the District. We currently hold eight exploration properties covering a total of approximately 19,604 mineral acres. We have not established that any of our projects or properties contain any proven or probable reserves under SEC Industry Guide 7.
Planned Activities
Our planned activities during fiscal 2022 are focussed on advancing our Maitland, Blind Gold, City Creek and Tinton gold exploration properties and to continue to build on our overall property position in the Homestake District of the Black Hills of South Dakota.
We continue to model data acquired by our broad high definition airborne geophysical survey to enhance our current drill targets, as well as to screen other areas of interest within the district. We have budgeted for several field sampling/mapping programs and to continue to locate and add historic information to our extensive data sets. We have planned to complete site preparations and to conduct our first drill program on the deep Maitland iron-formation target and other tertiary-replacement targets in the Maitland area. Additionally, our budget provides for the commencement of necessary permit work for the Blind Gold, Tinton and City Creek Properties and provides for our general operating expenses and the maintenance of the Company's mining claims and leases.
16
| Table: Fiscal Year 2022 Proposed Exploration Expenditures (millions) |
|
| General & administrative | $ 3.4 |
| Drilling, Field programs/Met Testing/Data Compilation | $ 6.2 |
| Property Acquisition | $ 3.8 |
| TOTAL | $13.4 |
Liquidity and Capital Resources
We are an exploration-stage company and do not generate revenues. As such, we finance our operations and the acquisition and exploration of our mineral properties through the issuance of share capital.
As of June 30, 2021, we had working capital of approximately $23,451,000 and our accumulated deficit as of June 30, 2021 was approximately $20,724,000. We had a net loss for the three months ended June 30, 2021 of approximately $12,181,000. On June 23, 2021, we issued 2,311,000 shares of common stock at a price of $4.50 per share, for proceeds of approximately $10,399,500.
During our fiscal year ending March 31, 2022, we plan to spend approximately $13.4 million. The timing of these expenditures is dependent upon a number of factors, including the availability of contractors.
Results of Operations
Three months ended June 30, 2021 and 2020
Revenue
We had no operating revenues for the three months ended June 30, 2021 and 2020. We are not currently profitable. As a result of ongoing operating losses, we had an accumulated deficit of approximately $20,724,000 as of June 30, 2021.
Exploration Costs
During the three months ended June 30, 2021 and 2020, our exploration costs were approximately $2,184,000 and $126,000, respectively. Included in these costs were share-based compensation and payments of annual claim maintenance fees related to our mineral properties. The increase year over year related to $1,916,030 of share-based compensation expense in the three months ended June 30, 2021 and having additional funds as a result of the financing proceeds from JR (the "Purchase Agreement"), which funded the airborne geophysical survey and review and compilation of historical geological data.
General and Administrative
Our general and administrative expenses for the three months ended June 30, 2021 and 2020 were approximately $9,906,000 and $152,000, respectively. These expenditures were primarily for $8,688,218 of share-based compensation expense in the three months ended June 30, 2021, legal, accounting & professional fees, investor relations and other general and administrative expenses necessary for our operations.
We had losses from operations for the three months ended June 30, 2021 and 2020 totaling approximately $12,089,000 and $278,000, respectively. We had total net losses for the three months ended June 30, 2021 and 2020 of approximately $12,181,000 and $346,000, respectively. We incurred interest expense from notes payable for the three months ended June 30, 2021 and 2020, respectively, in the amounts of $101 and $69,744 and recognized a loss on settlement of related party debt of $92,045 and $0, respectively. Our money market account generated interest income during the three months ended June 30, 2021 and 2020, respectively, in the amounts of $237 and $2,000.
17
Off-Balance Sheet Arrangements
For the three months ended June 30, 2021 and 2020, we have off-balance sheet arrangements for annual payments in relation to the mineral leases as disclosed in Note 3 of the financial statements.
Critical Accounting Estimates
Management's discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with US GAAP. Preparation of financial statements requires management to make assumptions, estimates and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and the related disclosures of contingencies. Management bases its estimates on various assumptions and historical experience, which are believed to be reasonable; however, due to the inherent nature of estimates, actual results may differ significantly due to changed conditions or assumptions. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are fairly presented in accordance with US GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. Management believes that the following critical accounting estimates and judgments have a significant impact on our financial statements: valuation of options granted to directors and officers using the Black-Scholes model and fair value of mineral properties. The accounting policies are described in greater detail in Note 2 to our audited annual financial statements in our Annual Report on Form 10-K for the fiscal year ended March 31, 2021.
At the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision of and with the participation of our management, including our chief executive officer ("CEO") and chief financial officer ("CFO"), of the effectiveness of the design and operations of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act). Based on that evaluation the CEO and the CFO have concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were not effective in ensuring that: (i) information required to be disclosed by us in reports that we file or submit to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and (ii) material information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow for accurate and timely decisions regarding required disclosure.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with US GAAP. Management has assessed the effectiveness of internal control over financial reporting based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control-Integrated Framework. A material weakness, as defined by SEC rules, is a control deficiency, or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses in internal control over financial reporting that were identified are:
a) We did not maintain sufficient personnel with an appropriate level of technical accounting knowledge, experience, and training in the application of US GAAP commensurate with our complexity and our financial accounting and reporting requirements. We have limited experience in the areas of financial reporting and disclosure controls and procedures. Also, we do not have an independent audit committee. As a result, there is a lack of monitoring of the financial reporting process and there is a reasonable possibility that material misstatements of the consolidated financial statements, including disclosures, will not be prevented or detected on a timely basis; and
b) Due to our small size, we do not have a proper segregation of duties in certain areas of our financial reporting process. The areas where we have a lack of segregation of duties include cash receipts and disbursements, approval of purchases and approval of accounts payable invoices for payment. This control deficiency, which is pervasive in nature, results in a reasonable possibility that material misstatements of the financial statements will not be prevented or detected on a timely basis.
18
As a result of the existence of these material weaknesses as of June 30, 2021, management has concluded that we did not maintain effective internal control over financial reporting as of June 30, 2021, based on the criteria set forth by the COSO in Internal Control-Integrated Framework.
This Quarterly Report on Form 10-Q does not include an attestation report of the Company's independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our independent registered public accounting firm pursuant to SEC rules.
Changes to Internal Controls and Procedures over Financial Reporting
We intend to modify our internal control over financial reporting once we have adequate funding to allow adding additional advisors to address deficiencies in the financial closing, review and analysis process, which will improve our internal control over financial reporting. There were no changes to our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially effect, our internal controls over financial reporting.
Management's Remediation Plans
We will look to increase our personnel resources and technical accounting expertise within the accounting function with available funds. Management believes that hiring additional knowledgeable personnel with technical accounting expertise will remedy the following material weakness: insufficient personnel with an appropriate level of technical accounting knowledge, experience, and training in the application of US GAAP commensurate with our complexity and our financial accounting and reporting requirements.
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There have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended March 31, 2021.
Except as set forth below, all unregistered sales of equity securities during the period covered by this Quarterly Report were previously disclosed in our current reports on Form 8-K.
On June 3, 2021, the Company issued 45,563 Common Shares to Gerald Aberle as partial consideration for a settlement of debt. The Company relied on the exemption from registration under Section 4(a)(2) of the Securities Act or Rule 506 of Regulation D for purposes of the issuance of issuance common stock.
On June 4, 2021, the Company issued an aggregate of 1,450,000 Common Shares to certain directors and consultants as a share bonus. The Company relied on the exemption from registration under Section 4(a)(2) of the Securities Act or Rule 506 of Regulation D for purposes of the issuance of issuance common stock.
During the quarter ended June 30, 2021, the Company issued an aggregate of 222,116 Common Shares to certain vendors of mineral properties as partial consideration for certain mineral properties. The Company relied on the exemption from registration under Section 4(a)(2) of the Securities Act or Rule 506 of Regulation D for purposes of the issuance of issuance common stock.
Not applicable.
Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities. During the three months ended June 30, 2021, our exploration properties were not subject to regulation by the Federal Mine Safety and Health Administration under the Federal Mine Safety and Health Act of 1977.
None.
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The following exhibits are attached hereto or are incorporated by reference:
(1) Filed herewith
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In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DAKOTA TERRITORY RESOURCE CORP.
| /s/ Jonathan Awde | |
| By: Jonathan Awde | |
| Chief Executive Officer, Principal Executive Officer and Director | |
| Dated: August 12, 2021 | |
| /s/ Gerald Aberle | |
| By: Gerald Aberle | |
| Chief Operating Officer and Director | |
| Dated: August 12, 2021 | |
| /s/ Stephen O'Rourke | |
| By: Stephen T. O'Rourke | |
| Director | |
| Dated: August 12, 2021 | |
| /s/ Robert Quartermain | |
| By: Robert Quartermain | |
| Director | |
| Dated: August 12, 2021 | |
| /s/ Alex Morrison | |
| By: Alex G. Morrison | |
| Director | |
| Dated: August 12, 2021 | |
| /s/ Shawn Campbell | |
| By: Shawn Campbell | |
| Chief Financial Officer | |
| Dated: August 12, 2021 |
|
|
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