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EX-31 - CERTIFICATION - PATRIOT GOLD CORPpatriot_10k-ex31.htm

 

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

 

For the fiscal year ended May 31, 2014

Commission file number: 0--32919

 

PATRIOT GOLD CORP.

(Exact name of registrant as specified in its charter)

 

Nevada   86-0947048
(State of incorporation)   (I.R.S. Employer Identification No.)

 

3651 Lindell Road, Suite D165

Las Vegas, Nevada, 89103

(Address of principal executive offices)

 

702-456-9565

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

None

 

Securities registered pursuant to Section 12(g) of the Exchange Act:

Common Stock, $0.001 par value

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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. Yes x No ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

 

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer o Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company) Smaller Reporting Company x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

 

The issuer’s revenues for its most recent fiscal year were $Nil

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the average bid and asked price of such common equity as of November 30, 2013 was approximately $1,660,012

 

The number of shares of the issuer’s common stock issued and outstanding as of August 15, 2014 was 48,175,604 shares.

 

 
 

 

TABLE OF CONTENTS

 

    Page
   
Glossary of Mining Terms 3
   
PART I    
  Item 1 Business 6
  Item 1A Risk Factors 10
  Item 1B Unresolved Staff Comments 13
  Item 2 Properties 13
  Item 3 Legal Proceedings 33
  Item 4 Mine Safety Disclosures 33
       
PART II    
  Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 34
  Item 6 Selected Financial Data 35
  Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations 36
  Item 7A Quantitative and Qualitative Disclosures About Market Risk 37
  Item 8 Financial Statements and Supplementary Data 37
  Item 9 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 38
  Item 9A Controls and Procedures 38
  Item 9B Other Information 39
       
PART III    
  Item 10 Directors, Executive Officers and Corporate Governance 40
  Item 11 Executive Compensation 41
  Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 42
  Item 13 Certain Relationships and Related Transactions, and Director Independence 43
  Item 14 Principal Accountant Fees and Services 43
       
PART IV    
  Item 15 Exhibits, Financial Statement Schedules 44
       
SIGNATURES   46

 

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Glossary of Mining Terms

Adit(s). Historic working driven horizontally, or nearly so into a hillside to explore for and exploit ore.

 

Adularia. A potassium-rich alteration mineral – a form of orthoclase.

 

Air track holes. Drill hole constructed with a small portable drill rig using an air-driven hammer.

 

BLEG sampling. Bulk leach sampling. A large sample of soil or rock that is leached using cyanide to determine gold and silver content down to a detection limit of as little as 1.0 parts per billion.

 

CSMT Survey. A Controlled Source Magneto-telluric geophysical method used to map the variation of the Earth’s resistance to conduct electricity by measuring naturally occurring electric and magnetic fields at the Earth’s surface.

 

Controlled Source Magneto-telluric Survey (CSMT). The recording of variations in a generated electrical field using sophisticated geophysical survey methods.

 

Core holes. A hole in the ground that is left after the process where a hollow drill bit with diamond chip teeth is used to drill into the ground. The center of the hollow drill fills with the core of the rock that is being drilled into, and when the drill is extracted, a hole is left in the ground.

 

Felsic Tertiary Volcanic Rocks. Quartz-rich rocks derived from volcanoes and deposited between two and sixty-five million years ago.

 

Geochemical sampling. Sample of soil, rock, silt, water or vegetation analyzed to detect the presence of valuable metals or other metals which may accompany them. For example, arsenic may indicate the presence of gold.

 

Geologic mapping. Producing a plan and sectional map of the rock types, structure and alteration of a property.

 

Geophysical survey. Electrical, magnetic, gravity and other means used to detect features, which may be associated with mineral deposits

 

Ground magnetic survey. Recording variations in the earth’s magnetic field and plotting same.

 

Ground radiometric survey. A survey of radioactive minerals on the land surface.

 

Leaching . Leaching is a cost effective process where ore is subjected to a chemical liquid that dissolves the mineral component from ore, and then the liquid is collected and the metals extracted from it.

 

Level(s), Main underground passage driven along a level course to afford access to stopes or workings and provide ventilation and a haulage way for removal of ore.

 

Magnetic lows. An occurrence that may be indicative of a destruction of magnetic minerals by later hydrothermal (hot water) fluids that have come up along faults. These hydrothermal fluids may in turn have carried and deposited precious metals such as gold and/or silver.

 

Patented or Unpatented Mining Claims. In this Annual Report, there are references to “patented” mining claims and “unpatented” mining claims. A patented mining claim is one for which the United States government has passed its title to the claimant, giving that person title to the land as well as the minerals and other resources above and below the surface. The patented claim is then treated like any other private land and is subject to local property taxes. An unpatented mining claim on United States government lands establishes a claim to the locatable minerals (also referred to as stakeable minerals) on the land and the right of possession solely for mining purposes. No title to the land passes to the claimant. If a proven economic mineral deposit is developed, provisions of federal mining laws permit owners of unpatented mining claims to patent (to obtain title to) the claim. If one purchases an unpatented mining claim that is later declared invalid by the United States government, one could be evicted.

 

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Plug. A vertical pipe-like body of magma representing a volcanic vent similar to a dome.

 

Quartz Monzonite. A medium to coarse crystalline rock composed primarily of the minerals quartz, plagioclase and orthoclase.

 

Quartz Stockworks. A multi-directional system of quartz veinlets.

 

RC holes. Short form for Reverse Circulation Drill holes. These are holes left after the process of Reverse Circulation Drilling.

 

Resource. An estimate of the total tons and grade of a mineral deposit defined by surface sampling, drilling and occasionally underground sampling of historic diggings when available.

 

Reverse circulation drilling. A less expensive form of drilling than coring that does not allow for the recovery of a tube or core of rock. The material is brought up from depth as a series of small chips of rock that are then bagged and sent in for analysis. This is a quicker and cheaper method of drilling, but does not give as much information about the underlying rocks.

 

Rhyolite plug dome. A domal feature formed by the extrusion of viscous quartz-rich volcanic rocks.

 

Scintillometer survey. A survey of radioactive minerals using a scintillometer, a hand-held, highly accurate measuring device.

 

Scoping Study. A detailed study of the various possible methods to mine a deposit.

 

Silicic dome. A convex landform created by extruding quartz-rich volcanic rocks

 

Stope(s) , An excavation from which ore has been removed from sub-vertical openings above or below levels.

 

Tertiary. That portion of geologic time that includes abundant volcanism in the western U.S.

 

Trenching. A cost effective way of examining the structure and nature of mineral ores beneath gravel cover. It involves digging long usually shallow trenches in carefully selected areas to expose unweathered rock and allow sampling.

 

Volcanic center. Origin of major volcanic activity

 

Volcanoclastic. Coarse, unsorted sedimentary rock formed from erosion of volcanic debris.

 

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Forward-Looking Statements

 

This Annual Report on Form 10-K contains forward-looking information. Forward-looking information includes statements relating to future actions, prospective products, future performance or results of current or anticipated products, sales and marketing efforts, costs and expenses, interest rates, outcome of contingencies, financial condition, results of operations, liquidity, business strategies, cost savings, objectives of management of Patriot Gold Corp. (hereinafter referred to as the “Company,” “Patriot Gold” or “we”) and other matters. Forward-looking information may be included in this Annual Report on Form 10-K or may be incorporated by reference from other documents filed with the Securities and Exchange Commission (the “SEC”) by the Company. One can find many of these statements by looking for words including, for example, “believes,” “expects,” “anticipates,” “estimates” or similar expressions in this Annual Report on Form 10-K or in documents incorporated by reference in this Annual Report on Form 10-K. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events.

 

The Company has based the forward-looking statements relating to the Company’s operations on management’s current expectations, estimates and projections about the Company and the industry in which it operates. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that we cannot predict. In particular, we have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Accordingly, the Company’s actual results may differ materially from those contemplated by these forward-looking statements. Any differences could result from a variety of factors, including, but not limited to general economic and business conditions, competition, and other factors.

 

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PART I

 

Item 1.          Description of Business

 

We are engaged in natural resource exploration and anticipate acquiring, exploring, and if warranted and feasible, developing natural resource properties. Currently we are in the exploration state and are undertaking exploration programs in Arizona and Nevada.

 

Development of Business

 

We were incorporated in the State of Nevada on November 30, 1998. We were originally organized to engage in the business of breeding, raising and marketing ostriches, ostrich meat and ostrich by-products to the wholesale and retail markets. We operated from November 30, 1998 through approximately May 31, 2000 when we ceased all operations due to lack of capital.

 

In June, 2003, we filed Amended and Restated Articles of Incorporation with the Secretary of State of the State of Nevada changing the name of our Company to Patriot Gold Corp. and moving the Company into its current business of natural resource exploration and mining. On June 17, 2003, we adopted a new trading symbol - PGOL- to reflect the name change. The Company has been in the resource exploration and mining business since June, 2003.

 

On April 16, 2010, we caused the incorporation of our wholly owned subsidiary, Provex Resources Inc. (“Provex”) under the laws of Nevada.

 

On April 16, 2010, the Company entered into an Assignment Agreement, with Provex to assign the exclusive option to an undivided right, title and interest in the Bruner and Vernal properties and the Bruner Expansion property, to Provex. Pursuant to the Assignment Agreements, Provex assumed the rights, and agreed to perform all of the duties and obligations, of the Company arising under the Bruner and Vernal Property Option Agreement and the Bruner Property Expansion Option Agreement. Provex’s only assets are the aforementioned agreements and it does not have any liabilities.

 

On May 28, 2010, Provex entered into an exclusive right and option agreement with Canamex Resources Corp. (“Canamex”) whereby Canamex may earn up to 75% in the Bruner and the Bruner Property Expansion. Canamex must spend an aggregate total of US $6 million on exploration and related expenditures over the next seven years whereupon Provex will grant the right and option to earn a vested seventy percent (70%) and an additional five percent (5%) upon delivery of a bankable feasibility study.

 

On February 28, 2011, the Company entered into an Exploration and Option to Enter Joint Venture Agreement with Idaho State Gold Company, LLC, (“ISGC”) whereby the Company will grant the option and right to earn a vested seventy percent (70%) interest in the property and the right and option to form a joint venture for the management and ownership of the property called the Moss Mine Property, Mohave County, Arizona. Upon execution of the agreement ISGC paid the Company $500,000 USD and must spend an aggregate total of US$8 million on exploration and related expenditures over the next five years. Subsequent to exercise of the earn-in, ISGC and the Company shall form a 70/30 joint venture.

 

In March, 2011, ISGC transferred its rights to the Exploration and Option to Enter Joint Venture Agreement dated February 28, 2011, to Northern Vertex Capital Inc. (“Northern Vertex”). As of May 31, 2014, Patriot continues to own 100% of the Moss Mine Property. Northern Vertex has reported that they have fulfilled the required exploration and related expenditures; however, they have not completed the requirements of the bankable feasibility study. Patriot has not audited Northern Vertex’s expenditures.

 

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Business Operations

 

We are a natural resource exploration and mining company with an objective of acquiring, exploring, and if warranted and feasible, developing natural resource properties. Our primary focus in the natural resource sector is gold. We are an exploration stage company.

 

Though we have the expertise on our Board of Directors to take a resource property that hosts a viable ore deposit into mining production, the costs and time frame for doing so are considerable, and the subsequent return on investment for our shareholders would be very long term. Therefore, we anticipate selling or partnering any ore bodies that we may discover to a major mining company. Many major mining companies obtain their ore reserves through the purchase of ore bodies found by junior exploration companies. Although these major mining companies do some exploration work themselves, many of them rely on the junior resource exploration companies to provide them with future deposits for them to mine. By selling or partnering a deposit found by us to these major mining companies, it would provide an immediate return to our shareholders without the long time frame and cost of putting a mine into operation ourselves, and it would also provide future capital for the Company to continue operations.

 

The search for valuable natural resources as a business is extremely risky. We can provide investors with no assurance that the properties we have either optioned or purchased in Nevada and Arizona contain commercially exploitable reserves. Exploration for natural reserves is a speculative venture involving substantial risk. Few properties that are explored are ultimately developed into producing commercially feasible reserves. Problems such as unusual or unexpected formations and other conditions are involved in mineral exploration and often result in unsuccessful exploration efforts. In such a case, we would be unable to complete our business plan and any money spent on exploration would be lost.

 

Natural resource exploration and development requires significant capital and our assets and resources are limited. Therefore, we anticipate participating in the natural resource industry through the selling or partnering of our properties, the purchase of small interests in producing properties, the purchase of properties where feasibility studies already exist or by the optioning of natural resource exploration and development projects. To date we have several properties under option. One of the properties is in the early stages of exploration. The second property exploration program is well under way and working towards establishing a resource. Further exploration will be required before a final evaluation as to the economic and legal feasibility is determined.

 

Financing

 

There was $823,000 of fund raising activities undertaken by the Company during the fiscal year ended May 31, 2014 through the issuance of common stock and warrants. Management estimates that the Company will require approximately $250,000 to fund the Company’s planned operations for the next twelve months. Therefore, management believes current cash on hand is sufficient to fund planned operations for 2014. Our policy is to pay all operational expenses when due, provided that the vendor, in the normal course of business, has satisfied all necessary conditions for payment. Management plans to seek the additional capital through private placements and public offerings of its common stock but there can be no assurance that management would be successful in its attempt to raise the additional funds.

 

Competition

 

The mineral exploration industry, in general, is intensely competitive and even if commercial quantities of ore are discovered, a ready market may not exist for sale of same. Numerous factors beyond our control may affect the marketability of any substances discovered. These factors include market fluctuations, the proximity and capacity of natural resource markets and processing equipment, government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in our not receiving an adequate return on invested capital.

 

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Compliance with Government Regulation and Regulatory Matters

 

Mining Control and Reclamation Regulations

 

The Surface Mining Control and Reclamation Act of 1977 ("SMCRA") is administered by the Office of Surface Mining Reclamation and Enforcement ("OSM") and establishes mining, environmental protection and reclamation standards for all aspects of U.S. surface mining, as well as many aspects of underground mining. Mine operators must obtain SMCRA permits and permit renewals for mining operations from the OSM. Although state regulatory agencies have adopted federal mining programs under SMCRA, the state becomes the regulatory authority. States in which we expect to have active future mining operations have achieved primary control of enforcement through federal authorization.

 

SMCRA permit provisions include requirements for prospecting including mine plan development, topsoil removal, storage and replacement, selective handling of overburden materials, mine pit backfilling and grading, protection of the hydrologic balance, subsidence control for underground mines, surface drainage control, mine drainage and mine discharge control and treatment and re-vegetation.

 

The U.S. mining permit application process is initiated by collecting baseline data to adequately characterize the pre-mining environmental condition of the permit area. We will develop mine and reclamation plans by utilizing this geologic data and incorporating elements of the environmental data. Our mine and reclamation plans incorporate the provisions of SMCRA, state programs and complementary environmental programs which impact mining. Also included in the permit application are documents defining ownership and agreements pertaining to minerals, oil and gas, water rights, rights of way and surface land and documents required of the OSM’s Applicant Violator System, including the mining and compliance history of officers, directors and principal stockholders of the applicant.

 

Once a permit application is prepared and submitted to the regulatory agency, it goes through a completeness and technical review. Public notice of the proposed permit is given for a comment period before a permit can be issued. Some SMCRA mine permit applications take over a year to prepare, depending on the size and complexity of the mine and often take six months to two years to be issued. Regulatory authorities have considerable discretion in the timing of the permit issuance and the public has the right to comment on, and otherwise engage in, the permitting process including public hearings and intervention by the courts.

 

Surface Disturbance

 

All mining activities governed by the Bureau of Land Management ("BLM") require reasonable reclamation. The lowest level of mining activity, "casual use," is designed for the miner or weekend prospector who creates only negligible surface disturbance (for example, activities that do not involve the use of earth-moving equipment or explosives may be considered casual use). These activities would not require either a notice of intent to operate or a plan of operation. For further information regarding surface management terms, please refer to 43 CFR Chapter II Subchapter C, Subpart 3809.

 

The second level of activity, where surface disturbance is 5 acres or less per year, requires a notice advising the BLM of the anticipated work 15 days prior to commencement. This notice must be filed with the appropriate field office. No approval is needed although bonding is required. State agencies must be notified to ensure all requirements are met.

 

For operations involving more than 5 acres total surface disturbance on lands subject to 43 CFR 3809, a detailed plan of operation must be filed with the appropriate BLM field office. Bonding is required to ensure proper reclamation. An Environmental Assessment (EA) is to be prepared for all plans of operation to determine if an Environmental Impact Statement is required. A National Environmental Policy Act review is not required for casual use or notice level operations unless those operations involve occupancy as defined by 43 CFR 3715. Most occupancies at the casual use and notice level in Arizona are covered by a programmatic EA.

 

An activity permit is required when use of equipment is utilized for the purpose of land stripping, earthmoving, blasting (except blasting associated with an individual source permit issued for mining), trenching or road construction.

 

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Future legislation and regulations are expected to become increasingly restrictive and there may be more rigorous enforcement of existing and future laws and regulations and we may experience substantial increases in equipment and operating costs and may experience delays, interruptions or termination of operations. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal fines or penalties, the acceleration of cleanup and site restoration costs, the issuance of injunctions to limit or cease operations and the suspension or revocation of permits and other enforcement measures that could have the effect of limiting production from our future operations.

 

Trespassing

 

The BLM will prevent abuse of public lands while recognizing valid rights and uses under the mining laws. The BLM will take appropriate action to eliminate invalid uses, including unauthorized residential occupancy. The Interior Board of Land Appeals (IBLA) has found that a claim may be declared void by the BLM when it has been located and held for purposes other than the mining of minerals. The issuance of a notice of trespass may occur if an unpatented claim/site is:

 

  (1) used for a home site, place of business, or for other purposes not reasonably related to mining or milling activities;

 

  (2) used for the mining and sale of leasable minerals or mineral materials, such as sand, gravel and certain types of building stone; or

 

  (3) located on lands that for any reason have been withdrawn from location after the effective date of the withdrawal.

 

Trespass actions are taken by the BLM Field Office.

 

Environmental Laws

 

We may become subject to various federal and state environmental laws and regulations that will impose significant requirements on our operations. The cost of complying with current and future environmental laws and regulations and our liabilities arising from past or future releases of, or exposure to, hazardous substances, may adversely affect our business, results of operations or financial condition. In addition, environmental laws and regulations, particularly relating to air emissions, can reduce our profitability. Numerous federal and state governmental permits and approvals are required for mining operations. When we apply for these permits or approvals, we may be required to prepare and present to federal or state authorities data pertaining to the effect or impact that a proposed exploration for, or production or processing of, may have on the environment. Compliance with these requirements can be costly and time-consuming and can delay exploration or production operations. A failure to obtain or comply with permits could result in significant fines and penalties and could adversely affect the issuance of other permits for which we may apply.

 

Clean Water Act

 

The U.S. Clean Water Act and corresponding state and local laws and regulations affect mining operations by restricting the discharge of pollutants, including dredged or fill materials, into waters of the United States. The Clean Water Act provisions and associated state and federal regulations are complex and subject to amendments, legal challenges and changes in implementation. As a result of court decisions and regulatory actions, permitting requirements have increased and could continue to increase the cost and time we expend on compliance with water pollution regulations. These and other regulatory requirements, which have the potential to change due to legal challenges, Congressional actions and other developments increase the cost of, or could even prohibit, certain current or future mining operations. Our operations may not always be able to remain in full compliance with all Clean Water Act obligations and permit requirements. As a result we may be subject to compliance orders and private party litigation seeking fines, penalties or changes to our operations.

 

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Clean Water Act requirements that may affect our operations include the following:

 

Section 404

 

Section 404 of the Clean Water Act requires mining companies to obtain U.S. Army Corps of Engineers (“ACOE”) permits to place material in streams for the purpose of creating slurry ponds, water impoundments, refuse areas, valley fills or other mining activities.

 

Our construction and mining activities, including our surface mining operations, will frequently require Section 404 permits. ACOE issues two types of permits pursuant to Section 404 of the Clean Water Act: nationwide (or "general”) and “individual” permits. Nationwide permits are issued to streamline the permitting process for dredging and filling activities that have minimal adverse environmental impacts. An individual permit typically requires a more comprehensive application process, including public notice and comment, however an individual permit can be issued for ten years (and may be extended thereafter upon application).

 

The issuance of permits to construct valley fills and refuse impoundments under Section 404 of the Clean Water Act, whether general permits commonly described as the Nationwide Permit 21 (NWP 21) or individual permits, has been the subject of many recent court cases and increased regulatory oversight. The results may materially increase our permitting and operating costs, permitting delays, suspension of current operations and/or prevention of opening new mines.

 

Employees

 

Currently, we have no full time employees. Our officers and directors provide planning and organizational services for us on a part-time basis.  All field work is tendered out and completed by service providers and/or exploration partners.

 

Subsidiaries

 

On April 16, 2010, we caused the incorporation of our wholly owned subsidiary, Provex Resources, Inc., (“Provex”) under the laws of Nevada.  On April 16, 2010, the Company entered into an Assignment Agreement to assign the exclusive option to an undivided right, title and interest in the Bruner and Vernal property; and the Bruner Property Expansion to Provex. Pursuant to the Assignment Agreement, Provex assumed the rights, and agreed to perform all of the duties and obligations, of the Company arising under the Bruner and Vernal Property Option Agreement; and the Bruner Property Expansion Option Agreement.  Provex’s only assets are the aforementioned agreements and it does not have any liabilities.

 

On May 28, 2010, Provex Resources, Inc. entered into an exclusive right and option agreement with Canamex Resources Corp. (“Canamex”) whereby Canamex may earn up to 75%  undivided interest in the Bruner and the Bruner Property Expansion.  Canamex must spend an aggregate total of US $6 million on exploration and related expenditures over the next seven years whereupon the Company will grant the right and option to earn a vested seventy percent (70%) and an additional five percent (5%) upon delivery of a bankable feasibility study.

 

Item 1A.          Risk Factors

 

Factors that May Affect Future Results

 

1. We will require additional funds to achieve our current business strategy and our inability to obtain funding will cause our business to fail.

 

We expect to incur operating losses in future periods. This will happen because there are expenses associated with the acquisition and exploration of natural resource properties. We will need to raise additional funds in the future through public or private debt or equity sales in order to fund our future operations and fulfill contractual obligations. These financings may not be available when needed. Even if these financings are available, it may be on terms that we deem unacceptable or are materially adverse to your interests with respect to dilution of book value, dividend preferences, liquidation preferences, or other terms. Our inability to obtain financing would have an adverse effect on our ability to implement our current exploration in Arizona and Nevada, and as a result, could require us to diminish or suspend our operations and possibly cease our existence. Obtaining additional financing would be subject to a number of factors, including the market prices for gold, silver and other minerals. These factors may make the timing, amount, terms or conditions of additional financing unavailable to us.

 

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2. Because our Directors serve as officers and directors of other companies engaged in mineral exploration, a potential conflict of interest could negatively impact our ability to acquire properties to explore and to run our business.

 

Our Directors and Officers may work for other mining and mineral exploration companies.  Due to time demands placed on our Directors and Officers, and due to the competitive nature of the exploration business, the potential exists for conflicts of interest to occur from time to time that could adversely affect our ability to conduct our business. The Officers and Directors’ employment and affiliations with other entities limit the amount of time they can dedicate to us. Also, our Directors and Officers may have a conflict of interest in helping us identify and obtain the rights to mineral properties because they may also be considering the same properties. To mitigate these risks, we work with several geologists in order to ensure that we are not overly reliant on any one of our Officers and Directors to provide us with geological services.  However, we cannot be certain that a conflict of interest will not arise in the future.  To date, there have not been any conflicts of interest between any of our Directors or Officers and the Company.

 

3. Because of the speculative nature of exploration and development, there is a substantial risk that our business will fail.

 

The search for valuable natural resources as a business is extremely risky. We can provide investors with no assurance that the properties in Arizona and Nevada contain commercially exploitable reserves. Exploration for natural reserves is a speculative venture involving substantial risk. Few properties that are explored are ultimately developed into producing commercially feasible reserves. Problems such as unusual or unexpected formations and other conditions are involved in mineral exploration and often result in unsuccessful exploration efforts. In such a case, we would be unable to complete our business plan.

 

4. Because we are in the early stages of business operations, we face a high risk of business failure due to our inability to predict the success of our business

 

We are in the early stages of exploration of our mineral claims and thus have no way to evaluate the likelihood that we will be able to operate our business successfully. To date have been involved primarily in organizational activities, and the acquisition and exploration of the mineral claims. We have not earned any revenues as of the date of this report.

 

5. Because of the unique difficulties and uncertainties inherent in mineral exploration and the mining business, we face a high risk of business failure

 

Potential investors should be aware of the difficulties normally encountered by early-stage mineral exploration companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the mineral properties that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates.

 

In addition, the search for valuable minerals involves numerous hazards. As a result, we may become subject to liability for such hazards, including pollution, cave-ins and other hazards against which we cannot insure or against which we may elect not to insure. The payment of such liabilities may have a material adverse effect on our financial position.

 

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6. Because we anticipate our operating expenses will increase prior to our earning revenues, we may never achieve profitability

 

Prior to completion of our exploration stage, we anticipate that we will incur increased operating expenses without realizing any revenues. Therefore, we expect to incur potentially significant losses into the foreseeable future. We recognize that if we are unable to generate significant revenues from the exploration of our mineral claims we will not be able to earn profits or continue operations. There is no history upon which to base any assumption as to the likelihood that we will prove successful, and we can provide investors with no assurance that we will generate any operating revenues or ever achieve profitable operations. If we are unsuccessful in addressing these risks, our business will most likely fail.

 

7. Because access to our mineral claims may be restricted by inclement weather, we may be delayed in our exploration

 

Access to our mineral properties may be restricted through some of the year due to weather in the area. As a result, any attempt to test or explore the property is largely limited to the times when weather permits such activities. These limitations can result in significant delays in exploration efforts. Such delays can have a significant negative effect on our results of operations.

 

8. Because our President has only agreed to provide his services on a part-time basis, he may not be able or willing to devote a sufficient amount of time to our business operations, causing our business to fail

 

Because we are in the early stages of our business, Mr. Coale will not be spending all of his time working for the Company. Mr. Coale will expend enough time to undertake the work programs that have been approved by the Company. Later, if the demands of our business require additional time from Mr. Coale, he is prepared to adjust his timetable to devote more time to our business. However, it still may not be possible for Mr. Coale to devote sufficient time to the management of our business, as and when needed, especially if the demands of Mr. Coale’s other interests increase. Competing demands on Mr. Coale’s time may lead to a divergence between his interests and the interests of our shareholders.

 

9. Because of the speculative nature of exploration of mineral properties, there is substantial risk that no mineral deposits will be found and this business will fail.

 

The search for valuable minerals as a business is extremely risky. Exploration for minerals is a speculative venture involving substantial risk. The expenditures to be made by us in the exploration of the mineral claims may not result in the discovery of mineral deposits. Problems such as unusual or unexpected formations and other conditions are involved in mineral exploration and often result in unsuccessful exploration efforts. In such a case, we would be unable to complete our business plan.

 

10. If we do not complete the required option payments and capital expenditure requirements mandated in any prospective agreements, we will lose our interest in that respective property and our business may fail.

 

If we do not make all of the property payments or incur the required expenditures in accordance with any prospective property option agreements, we will lose our option to purchase the respective property for which we have not made the payments and may not be able to continue to execute our business objectives if we are unable to find an alternate exploration interest. Our payment obligations are non-refundable and if we do not make required payments, we will lose all amounts previously paid and all our rights to the prospective property.

 

11. Because the search for viable natural resources is extremely risky, no assurance can be made that we will obtain financing which will likely have a negative impact on our financial condition.

 

We are a natural resource exploration company with an objective of acquiring, exploring, and if warranted and feasible, exploiting natural resource properties. The search for viable natural resources is extremely risky. A critical component of our operating plan impacting our continued existence is the ability to obtain additional capital through equity and/or debt financing. Since inception, we have financed our cash flow requirements through private placement issuances of common stock and debt financing. No assurance can be made that such financing will be available, and if available it may take either the form of debt or equity, and will likely have a negative impact on our financial condition.

 

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12. Because of the inherent dangers involved in mineral exploration, there is a risk that we may incur liability or damages as we conduct our business.

 

The search for valuable minerals involves numerous hazards. As a result, we may become subject to liability for such hazards, including pollution, cave-ins and other hazards against which we cannot insure or against which we may elect not to insure. The payment of such liabilities may have a material adverse effect on our financial position.

 

13. We are heavily dependent on our CEO and President.  

 

Our success depends heavily upon the continued contributions of our CEO and President, whose knowledge, leadership and technical expertise would be difficult to replace. Our success is also dependent on our ability to retain and attract experienced engineers, geoscientists and other technical and professional staff.  We do not maintain any key man insurance. If we were to lose our CEO and President, our ability to execute our business plan would be harmed and we may be forced to cease operations until such time, if ever, as we could hire a suitable replacement.

 

Risks Related To Legal Uncertainties and Regulations

 

9.  As we undertake exploration of our mineral claims, we will be subject to compliance with government regulation that may increase the anticipated cost of our exploration programs

 

There are several governmental regulations that materially restrict mineral exploration. We will be subject to the federal, state and local laws as we carry out our exploration program. We may be required to obtain work permits, post bonds and perform remediation work for any physical disturbance to the land in order to comply with these laws. While our planned exploration program budgets for regulatory compliance, there is a risk that new regulations could increase our costs of doing business and prevent us from carrying out our exploration programs.

 

Item 1B.          Unresolved Staff Comments

 

There are no unresolved staff comments.

 

Item 2.          Description of Properties.

 

We do not lease or own any real property for our corporate offices. We currently maintain our corporate office on a month-to-month basis at 3651 Lindell Road, Suite D165 Las Vegas, Nevada, 89103. Management believes that our office space is suitable for our current needs.

 

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Bruner, Bruner Expansion and Vernal Properties

 

 

Map showing the location of our Bruner and Vernal properties located in Central Western Nevada.

 

Acquisition of Interests - Bruner, Bruner Expansion and Vernal Properties

 

Pursuant to a Property Option Agreement (“BV Agreement”), dated as of July 25, 2003, with MinQuest, Inc., a Nevada corporation (“MinQuest”), we acquired the option to earn a 100% interest in the Bruner and Vernal mineral exploration properties located in Nevada. Together, these two properties originally consisted of 28 unpatented mining claims on a total of 560 acres in the northwest trending Walker Lane located in western central Nevada. The Bruner position was subsequently expanded from 16 unpatented mining claims to 80 unpatented mining claims bringing the total at Bruner to approximately 1,653 acres. Any additional claims agreed by the Company to be staked by MinQuest within 2 miles from the existing perimeter of the Property boundaries shall form part of the BV Agreement.

 

In order to earn a 100% interest in these two properties, option payments totaling $92,500 and an additional $500,000 in exploration expenditures were required. All mining interests in the property are subject to MinQuest retaining a 3% royalty of the aggregate proceeds received by us from any smelter or other purchaser of any ores, concentrates, metals or other material of commercial value produced from the property, minus the cost of transportation of the ores, concentrates or metals, including related insurance, and smelting and refining charges.

 

Pursuant to the BV Agreement, we have a one-time option to purchase up to 2% of MinQuest’s royalty interest at a rate of $1,000,000 for each 1%. We must exercise our option 90 days following completion of a bankable feasibility study of the Bruner and Vernal properties, which, as it relates to a mineral resource or reserve, is an evaluation of the economics for the extraction (mining), processing and marketing of a defined ore reserve that would justify financing from a banking or financing institution for putting the mine into production.

 

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To date, the Company has paid the option payments totaling $92,500, and has accumulated approximately $625,070 and $79,760 of exploration expenditures on the Bruner and Vernal properties respectively. These expenditures have satisfied the requirements of the BV Agreement and 100% interest in these two properties have been transferred to Patriot, subject to MinQuest retaining a 3% royalty.

 

On April 1, 2009, the Company entered into a Property Option Agreement (the “AIV Agreement”) with American International Ventures Inc. (“AIV”), to acquire the exclusive option to an undivided right, title and interest in 28 patented Federal mining claims and millsites located in Nye County, Nevada. Simultaneous with the execution and delivery of the Agreement, the Company paid AIV $30,000. In order to earn its option in the Property, the Company must make annual property option payments each year on April 1 consisting of $35,000 in 2010, $40,000 in 2011, $45,000 in 2012, $50,000 in 2013, $55,000 in 2014, $60,000 in 2015, and $1,185,000 in 2016. Following which the Company shall be deemed to have exercised its option under the Agreement and shall be entitled to an undivided 100% right, title and interest in and to the Bruner Property Expansion subject to a 1.5% Net Smelter Return (“NSR”) royalty payable to AIV and a 2% NSR payable to the former Property owner. The 2% NSR royalty may be purchased by the Company for a total payment of $500,000 and 1% of AIV’s 1.5% NSR royalty can be purchased by the Company for an additional payment of $500,000 at any time up to 30 days after beginning mine construction. The claims optioned under the agreement with AIV are contiguous with the Company’s existing Bruner property claims and therefore are also subject to the terms and conditions of the original BV Agreement with MinQuest.

 

On April 16, 2010, the Company entered into an Assignment Agreement with its wholly owned subsidiary, Provex Resources, Inc., a Nevada corporation (“Provex”), to assign the exclusive option to an undivided right, title and interest in the Bruner, Bruner Expansion and Vernal Properties to Provex. Pursuant to the Agreement, Provex assumed the rights, and agreed to perform all of the duties and obligations, of the Company arising under the original property option agreements.

 

On May 28, 2010 Provex entered into an exclusive right and option agreement with Canamex Resources Corp. (“Canamex”) whereby Canamex may earn up to 75% undivided interest in the Bruner, and Bruner Expansion properties, herein after collectively referred to as (the “Bruner Properties”). Upon the completion of the terms of the Agreement by Optionee, and upon earning its’ initial interest, the parties have agreed to negotiate a definitive joint venture agreement in good faith which will supersede the current agreement

 

Bruner Properties

 

Description and Location of the Bruner Properties

 

The Bruner Property is located approximately 130 miles east-southeast of Reno, Nevada at the northern end of the Paradise Range. Access from Fallon, the closest town of any size, is by 50 miles of paved highway and 16 miles of gravel roads. There is no mining plant or equipment located within the property boundaries. Currently, there is no power or water supply to the mineral claims.

 

We hold the Bruner property via 80 unpatented mining claims (approximately 1,653 acres) and 28 patented claims (approximately 477 acres). Canamex has subsequently added new unpatented claims to the northern end of the Bruner Property which are now part of the aforementioned May 28, 2010 option agreement with Canamex and the area of interest. The Bruner claims presently do not have any identified mineral reserves.

 

Exploration History of the Bruner Properties

 

The Bruner mining district is underlain by a sequence of intermediate to felsic Tertiary volcanic rocks (which are quartz-rich rocks derived from volcanoes and deposited between two and sixty-five million years ago), including ash flow tuffs, tuffaceous sediments, and flows. A volcanic center, the origin of major volcanic activity, is thought to underlie the district, with associated silicic domes (a convex landform created by extruding quartz-rich volcanic rocks) and plugs (landform similar to a dome, but smaller) intruding the volcanic section. The exposed stratigraphic section measures over 2,500 feet in thickness. The “Duluth Tuff”, a variably crystal rich ash flow tuff, is the host for gold and silver mineralization. Flow banded silicic volcanics, volcanoclastics (coarse, unsorted sedimentary rock formed from volcanic rocks) and andesite underlie the tuff and flow-banded rhyolite overlies the host unit. Two generations of intrusive rocks have been described within the district. Ore in the Bruner district is hosted by vuggy, fractured, quartz-adularia (potassium-rich alteration mineral) veined and/or stockworked tuff. Mineralization is primarily fault controlled, although some disseminated values do occur.

 

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The original operators at the Bruner Properties were varied. Prospecting at the property began in the early 1900’s and underground mining began in 1920.  Mining on several of the veins located within the property occurred up to 1949 producing over 58,500 gold equivalent ounces. The average gold to silver ratio from the Penelas mine was 1:4.5 for recorded production from 1935 to 1942.

 

The 28 patented claims contain the Duluth set of workings on the south end of the claim group comprising over 1000 feet of workings in 3 shafts and numerous stopes. Past production from the Duluth is reported as $70,000 of gold and silver from 1935 to 1944. This amount is based on a gold price of $35 per ounce and a silver price averaging $0.43 per ounce.  The Paymaster mine is located on the north end of the patented claim group. It has a 375-foot shaft with 2,000 feet of workings on three levels. The Paymaster has no recorded production.

 

The unpatented claims contain the Penelas workings with 1000 feet of shaft and 4,000 feet of crosscuts on nine levels. Past production from the Penelas is recorded at over 26,000 ounces of gold and 120,000 ounces of silver from 1935 to 1942. Other historic workings include the Bruner adit with over 1,000 feet of workings and several shafts, and the Derelict mine with a 300 foot shaft and small open pit.

 

Modern exploration of the Bruner Properties began in 1979 and included the following work:

 

In 1983, Kennecott Minerals Company drilled fifteen RC (reverse circulation drilling) holes on the property.

 

In 1988-1990, Newmont Exploration Ltd. drilled approximately 10 RC holes; conducted detailed geologic mapping (producing a plan map of the rock types, structure and alteration), geochemical surveys (which is sampling of rocks or soil and determination of the abundances of elements), air and ground magnetic surveys (recording variations in the earth’s magnetic field and plotting same), and ground radiometric surveys (a survey of radioactive materials on the land surface).

 

In 1990-1995, Miramar Mining Corp. (“Miramar”) drilled 5 RC holes and conducted BLEG (bulk leach extractable gold) sampling and air photo interpretation. BLEG sampling involves a large sample of soil or rock that is leached using cyanide to determine the mettalurgy and parameters required to recover the gold and silver content from the sample material. In their 1991 Annual Report, Miramar reported 82% extraction of gold in 56 days from a column test run on unagglomerated -3/8 inch particle size material from the historic resource area, with low cyanide consumption. The head grade was unreported.

 

In July 2003, members of our Board of Directors and geology team made an onsite inspection of the Bruner Properties. From this visit, an exploration plan was determined and a schedule to begin work on the properties was organized to commence in the month of September 2003. The Company completed an exploration program consisting of geologic mapping, surface geochemical sampling, a Global Positioning System (GPS) survey of grid based magnetic survey, drill holes and cultural features, and a CSMT geophysical survey (electrical, magnetic and other means used to detect features, which may be associated with mineral deposits) was also conducted. Such a survey measures the magnetic variations within the underlying rocks.

 

Since then, a ground magnetics survey and detailed mapping and rock sampling of the western portion of the claim block on the Bruner Properties has been completed. The rock sampling is a collection of a series of rock chips over a measured distance, which is then submitted for assays, a chemical analysis to determine the metallic content over the sampled interval. The magnetics indicate the presence of northwesterly and northerly trending faults under the pediment cover that may host gold mineralization. Faults, which are breaks in the rock along which the movement has taken place, are often the sites for the deposition of metallic rich fluids. A pediment cover is a broad, gently sloping surface at the base of a steeper slope. Geologic mapping of rocks exposed in the western portion of our claims shows several small quartz bearing structures trending northwest and dipping steeply to the northeast. These small structures are thought to be related to a much larger vein system, often filled with quartz, and contained within a fault or break in the rock (a fault-hosted vein system) under gravel cover in the broad valley south of the mapping. Approximately 1 square mile of ground magnetics was completed at Bruner. The survey was conducted on 50 meter spaced lines, running north-south, using a GPS controlled Geometrics magnetometer, which is the geophysical instrument used in collecting magnetic data with an attached GPS that allows the operator to more precisely determine the location of each station where the magnetic signature is taken.

 

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The interpretation shows numerous northwest and north-south trending magnetic lows associated with faults. Magnetic lows are an occurrence that may be indicative of a destruction of magnetic minerals by later hydrothermal (hot water) fluids that have come up along these faults. These hydrothermal fluids may in turn have carried and deposited precious metals such as gold and/or silver. A much more continuous northwest trending feature that has not been drill tested is located to the southeast, under gravel cover (where there is no exposure of rock at the surface). Data were sufficiently encouraging that an expanded CSMT survey was conducted to trace these structures in the third dimension.

 

In October 2004, we received the approval of a Notice of Intent for Exploration Drilling, and an environmental bond filed with the Nevada office of the Bureau of Land Management. A total of 18 drill sites were located to target both extensions of the gold intercepts in previous drilling and in geophysical anomalies found by a CSMT survey. With the proper approvals in place, we began drilling on the Bruner Properties on December 20, 2004. This drilling program was completed in March 2005 at a total cost of approximately $153,800, with a total of 3,200 feet of reverse circulation (RC) drilling in 7 holes. The depths of the holes ranged from 300 to 750 feet. We have received assays for all holes and the results were encouraging enough that additional drilling was conducted.

 

Because of the favorable drilling results from the drilling program we began on December 20, 2004, we decided to conduct additional drill testing on the Bruner Properties, including both reverse circulation and core drilling. In April 2005, we filed an amended drilling plan with the Bureau of Land Management that allowed three fences of drill holes with the fences spaced 400 feet apart along the apparent trend of the mineralization.  This program was completed in the fall of 2005 with 11 holes totaling 4,205 feet being drilled.

 

The Board of Directors approved a 2007 exploration budget of approximately $120,000 for the Bruner Properties. In November 2007, the Company drilled three holes at Bruner to test deeper targets within the gold-bearing tuffaceous host rocks.  The holes were drilled using an RC drill rig and totaled 3,240 feet. The holes were spaced roughly 400 feet apart on a line running east-northeast. All holes were angled steeply to the north to cut projected, south-dipping shear zones. Drill hole B-18 and B-19 were drilled to a depth of 1,000 and B-20 was drilled 1,240 feet deep. All three holes contained intermittent gold at various depths.

 

The results show a distinct increase in gold grade from the southwest (B-18) to the northeast (B-20). Only hole B-20 contained significant gold grades over any significant width. Further drilling north and east of B-20 may be warranted to vector in on the strongest part of the gold system. The drill program confirmed that gold mineralization continues at depth and is hosted by tuffaceous rocks.

 

The compilation of patented claims has identified at least four viable drill targets separate from the Company’s original target. These targets include the Duluth, Penelas, Paymaster and Bruno which have seen moderate to intense drill programs in the past due to surface mineralization and alteration consistent with large precious metals systems located in other parts of the Great Basin.

 

In October 2011, a two phase gold-silver drilling program totaling approximately 9,150 meters (30,000 feet) in 57 drill holes was initiated. Phase I was designed to consist of 12 holes testing two target types: 1) high - grade veins that were mined historically the first half of the 20th century but largely ignored by exploration drilling in the second half of the century; and 2) the extension of the 385,000 ounce historical resource reported by Miramar Mining in 1993. This resource is not NI 43 - 101 compliant and the Company cannot currently verify the resource. The Phase I drilling results will be analyzed and compiled for finalization of the Phase two program, intended for the 2012 field season.

 

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In November 2011 the Phase I exploration drilling program commenced at the Bruner Properties. In March 2012, the final geochemical results from this program were announced which consisted of 2,434 meters (7,985 feet) in 13 angled RC drill holes. Two of the first three holes drilled into the Penelas East Vein System intersected +10 g/t (+.292 oz/ton) gold. Drill hole B-1115 penetrated a vein nearly 400 feet below the surface and 400 feet south of the historic drill intercepts in BRU-085 and BRU-105.

 

In May 2012, column leach test work was initiated on a bulk sample from underground on the Bruner Properties. Approximately 650 kilograms (1500 lbs.) of minus 6-inch material collected from the Upper Adit at the Bruner gold-silver project were delivered to a metallurgical test facility which specializes in cyanidation tests for heap leaching. The final cyanide column leach results showed a +85% gold extraction in 83 days on the sample with +80% extractions in both -3 inch and -3/4 inch crush sizes in 40 days.

 

In May 2012, Phase II drilling was proposed to test the extensions to the high-grade gold-silver intersected in the Penelas East vein in drill hole B-1115. The drilling is intended to test the strike extension and the dip extension of the intercept in B-1115 between 30-60 meters (100-200 feet) along strike to the north and to the south and 30-60 meters (100- 200 feet) below the elevation of the intercept in B-1115 to evaluate the potential for continuity along strike and increased potential with depth per the epithermal vein model.

 

In August 2012 the first of 6 Reverse circulation (RC) drill holes for the Phase II drilling program, drill hole B-1201 intersected 360 feet of 0.119 oz/ton gold (Au) or (118 m of 4.08 grams per tonne (g/t) Au), delivering the best intercepts ever drilled to date at the project. In October 2012 we announced further assay results from hole B-1278C  which intersected 172 feet (52.4 meters) averaging 0.064 opt (2.21 gpt) Au. The hole intersected two zones of gold mineralization: an upper zone of 52 feet at 188-240 feet grading 0.060 opt (15.85 meters of 2.07 gpt) Au, and a lower zone of 120 feet at 564-684 feet grading 0.066 opt (36.58 meters of 2.27 gpt) Au. The upper interval included a 4-ft. intercept grading 0.537 opt (18.4 gpt) Au and the lower zone included a 4-ft. interval grading 0.983 opt (33.7 gpt) Au. A total of sixteen holes are planned for this phase of drilling of the new discovery at Penelas East to test the continuity of this mineralization both to the north and the south.

 

In March 2013 a Reverse Circulation ("RC") drill program of 22,000 feet was announced and scheduled to commence at the Bruner Properties. The drilling phase will begin on the west side of the northern extension of the former producing July-Duluth mine sites and then move east to the Penelas East discovery area, where drilling in 2012 encountered a mineralized interval of 360 feet grading 0.119 ounces per ton (118.11 meters of 4.08 grams per tonne) gold (Au). Metallurgical test work is underway on drill samples from the Penelas East discovery deposit area with results to be reported shortly.

 

In July 2013 the company announced results of a high-grade gold intercept at the Penelas East discovery area. The preliminary results indicated 37.9 GPT Au over 1.5 meters for drill hole B-1316 with an average of 4.27 GPT Au over 21.3 meters with additional drill intercepts for holes B-1317 and B-1318 appearing to have similar characteristics to drill hole B-1316.In April 2014 the Company announced a new 53 hole drill program for both the Historic Resource and Penelas East discovery areas. The program will consist of approximately 1000 meters (3,280 feet) of core drilling and 9,000 meters (29,500 feet) of reverse circulation (RC) drilling. Core drilling in the Historic Resource area will start with an offset of RC hole B-1340, which tested at 93%-97% gold extraction levels after bottle roll cyanidation tests on hole composites were performed in early 2014. A total of 5 core holes and 24 RC holes are planned to test this high-grade feeder zone. Drilling at the Penelas East discovery area will focus on testing the prominent VLF-EM current density and concident gold-in-soil anomalies. A total of 24 holes are planned in the Penelas East discovery area, which will expand the total number of holes drilled in this area to 62.

In April 2014 the Company reported the acquisition of an additional 20 acre patented mining claim known as the Elk Lode claim. The Elk Lode claim complements the Company’s existing holdings at the Bruner site and brings the total patented land position to approximately 500 acres.

 

In May 2014 the Company provided the results highlighted below from the ongoing 2014 core drilling program.

 

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Key Highlights

 

·Core hole B-1404C intersects 70.1 meters grading 3.17g/tonne Au (230 feet grading 0.092 oz/ton Au), becoming the second best drill hole intercept found in the historic resource area since 2013; core hole B-1406C intersects 88.4 meters grading 0.645 g/tonne Au (290 feet grading 0.019 oz/ton Au).
·The section containing the two drill hole intercepts (B-1404C and B-1406C) tested is located near the approximate center of the historic resource area.
·Drilling on five other sections is already underway with the RC drill to further define this high-grade portion of the historic resource area and determine the strike length of this mineralized zone.
·Reverse Circulation (RC) drilling also continues at Penelas East discovery area with results to be reported separately once analysis has been completed.

 

Mineralized intercepts in drill hole B-1406C are:

 

 

 

Together, the two drill hole intercepts B-1404C and B-1406C have tested the approximate center of this portion of the historic resource area. The mineralized zone for the section containing these two core holes is approximately 250 feet (76.2 meters) thick, 400 feet (122 meters) wide, lying approximately 100 feet (30.5 meters) below the surface. Drilling on five other sections, targeting two inclined holes per section, is underway with the RC drill to further define this high-grade portion of the historic resource area and determine the strike length of this mineralized zone.

 

Core holes B-1402C and B-1403C were drilled on the southern end of the mineralized trend and intersected the distal tail of the mineralized zone as summarized in the following intercept table:

 

 

 

In addition, core hole B-1408C was drilled 100 feet beneath historic drill hole BRU-094, which intersected 80 feet grading 0.038 oz/ton Au (24.4 meters at 1.31 gm/tonne Au) from 5 to 85 feet (1.5-24.4 meters). However, there are currently no descriptions from this historic hole to place the intercept in a geologic context and results are pending.

 

The results reported above demonstrate that there are high-grade zones (cores or roots) within the historic resource area that have not been identified or adequately tested by historic drilling. Continued drilling is needed to define these zones which are considerably higher in grade than the reported average grade of the historic resource area.

 

In June 2014 the Company provided further results from ongoing core and reverse circulation (RC) drilling programs in progress.

 

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Key Highlights

 

·Preliminary results from drill hole B-1412 include a 20 foot (6.1 meters) intersection with estimated grades of 11.24 g/tonne of gold (Au) and 203.975 g/tonne of silver (Ag).
·The intercept in drill hole B-1412 demonstrates continuity of a high-grade portion within the main mineralized zone of the area that appears to be more silver-rich than previously shown.
·Results from shallower drill hole sites also show promising results, including five foot (1.5 meters) intersections at drill holes B-1414 and B-1416 with estimated grades of 12.80 g/tonne Au and 30.9 g/tonne Au, respectively.
·Results for drill holes demonstrate that there is a high-grade interior zone within the historic resource area that is surrounded by a lower grade halo. Current results support the Company's belief that there are zones that have not been identified or adequately tested by earlier historic drilling.

 

Mineralized intercepts in drill hole B-1412 are:

 

 

 

Reverse circulation (RC) drill hole B-1413 was drilled above drill hole B-1412, and intersected the mineralized zone approximately 75 feet above the 220-240 feet intercept in hole B-1412. Drill hole B-1413 intersected two zones totaling 90 feet grading 0.015 oz/ton (27.4 meters grading 0.54 g/tonne) as reported below:

 

 

 

Reverse circulation drilling was completed recently at four additional drill holes located in the same section but at shallower depths. Results for RC drill holes B-1414, B-1415, B-1416 and B-1417 are presented as follows:

 

 

 

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Together, the six drill hole intercepts have tested the southern portion of the historic resource area. On the section containing the B-1412 and B-1413 core holes, the main mineralized zone is approximately 100 feet (30.5 meters) thick, 350 feet (106 meters) wide, lying approximately 60 feet (18.3 meters) below the surface. The section containing B-1414 and B-1415 core holes, the main mineralized zone is approximately 150 feet (45.7 meters) wide, 350 feet (106 meters) thick and lies immediately below the surface. The B-1416 and B-1417 core holes are in a main mineralized zone that is approximately 210 feet (64 meters) wide, 350 feet (106 meters) thick and lies immediately below the surface.

 

Lastly, core hole B-1408C intersected 70 feet grading 0.050 oz/ton Au (21.3 meters grading 1.698 g/tonne Au) from 47-117 feet (14.3-35.7 meters). B-1408C was drilled beneath historic drill hole BRU-094, which intersected 80 feet grading 0.038 oz/ton Au (24.4 meters at 1.31 g/tonne Au) from 5 to 85 feet (1.5-24.4 meters). These two holes characterize the east mineralized zone which remains largely untested both along strike and down dip of the north-striking and steeply dipping mineralized structure. Additional drilling of this shallow mineralized zone is in the planning stages.

 

RC drilling is continuing on adjacent sections, targeting two inclined holes per section. The results reported above demonstrate that there are high-grade zones (cores or roots) within the historic resource area that have not been identified or adequately tested by historic drilling.

 

Vernal Property

 

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Description and Location of the Vernal Property

 

The Vernal Property is located approximately 140 miles east-southeast of Reno, Nevada on the west side of the Shoshone Mountains. Access from Fallon, the closest town of any size, is by 50 miles of paved highway and 30 miles of gravel roads. We hold the property via 12 unpatented mining claims (approximately 248 acres).

 

Exploration History of the Vernal Property

 

Historical work includes numerous short adits constructed on the Vernal Property between 1907 and 1936. There appears to have been little or no mineral production.

 

The Vernal Property is underlain by a thick sequence of Tertiary age rhyolitic volcanic rocks including tuffs, flows and intrusives. A volcanic center is thought to underlie the district, with an intruding rhyolite plug dome (a domal feature formed by the extrusion of viscous quartz-rich volcanic rocks) thought to be closely related to mineralization encountered by the geologists of Amselco, the U.S. subsidiary of a British company, who explored the Vernal Property back in the 1980’s, and who in 1983 mapped, sampled and drilled the Vernal Property. Amselco has not been involved with the Vernal Property over the last 20 years and is not associated with our option on the Vernal Property or the exploration work we are doing there. A 225 foot wide zone of poorly outcropping quartz stockworks (a multi-directional quartz veinlet system) and larger veining trends exist northeast from the northern margin of the plug. The veining consists of chalcedony containing 1-5% pyrite. Clay alteration of the host volcanics is strong. Northwest trending veins are also present but very poorly exposed. Both directions carry gold values. Scattered vein float is found over the plug. The most significant gold values in rock chips come from veining in tuffaceous rocks north of the nearly east-west contact of the plug. This area has poor exposure, but sampling of old dumps and surface workings show an open-ended gold anomaly that measures 630 feet by 450 feet.

 

The Vernal claims presently do not have any mineral reserves. The property that is the subject of our mineral claims is undeveloped and does not contain any commercial scale open-pits. Numerous shallow underground excavations occur within the central portion of the property. No reported historic production is noted for the property. There is no mining plant or equipment located on the property that is the subject of the mineral claim. Currently, there is no power supply to the mineral claims. Our planned exploration program is exploratory in nature and no mineral reserves may ever be found. Although drill holes are present within the property boundary, there is no drilled resource on our claims.

 

In July 2003, members of our Board of Directors and geology team made an onsite inspection of the Vernal property. Mapping (the process of laying out a grid on the land for area identification where samples are taken) and sampling (the process of taking small quantities of soil and rock for analysis) have been completed.  In March 2005, we initiated the process to secure the proper permits for trenching and geochemical sampling from the U.S. Forest Service.

 

Our exploration of the Vernal property to date has consisted of geologic mapping, trenching and rock chip geochemical sampling. The Board of Directors approved a budget of approximately $55,000 (including the refundable bond of $900) for the Vernal property. An exploration program was conducted in November, 2008. The program consisted of 200 feet of trenching, sampling and mapping, and opening, mapping and sampling of an underground workings consisting of approximately 275 feet of workings.  The Company is currently evaluating the results of the program at the Vernal property.

 

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Moss Property

 

 

 

Moss Property

 

The Moss Property consists of 104 unpatented claims and 15 patented claims located in the Oatman Mining District of Mohave County, Arizona. The Company acquired these claims in a series of transactions during fiscal 2004 and 2005.

 

Acquisition of Interests

 

Gintoff Claim

 

On November 14, 2003, the Company entered into a letter of intent to acquire a single patented claim from Gregory Gintoff. The total purchase price of $50,000 was made in two installments of $10,000 in December 2003 and $40,000 in February 2004.

 

MinQuest Claims

 

We hold the MinQuest claims via 104 unpatented mining claims that were acquired from MinQuest.  On March 4, 2004 the Company signed a Letter Agreement (the “Agreement”) that earned it a 100% interest in these claims by paying MinQuest a one-time fee of $50,000. This $50,000 fee was paid on July 7, 2004. Subject to the terms and conditions of the Agreement, MinQuest will retain a 3% NSR on any and all production derived from the unpatented mining claims listed under the Agreement and on public lands within 1 mile of MinQuest, Inc’s outside perimeter of the present claim boundary; a 1.0% NSR on patented claims with no other royalty within the property; and a 0.5% overriding NSR on all production within the property derived from patented claims with other royalty interests.

 

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Williams Property

 

The property is comprised of six patented claims, which as a group, we call the Williams Property. These claims were held collectively by as many as 23 owners within an extended family who were represented by Barbara Williams, a realtor, and a member of this extended family, who put together the letter of intent and arranged for the signing of the agreement by the numerous owners. None of these owners, including Barbara Williams, has or has had any relationship or affiliation with us prior to the agreement for the Williams Property.

 

In October 2003, former Director, Robert Sibthorpe (who is a geologist by training), had evaluated the proposal for the purchase of the Williams Property. His recommendation was to visit the site, and if the visual inspection supported the information presented in the proposal, then an offer to purchase should be drawn up. In November 2003, the Company executed a letter of intent to purchase a 100% interest in Williams Property owned by the extended family. This property is unrelated to and separate from the MinQuest Claims. The sellers delivered to Patriot all information in their possession regarding the Williams Property.

 

In January 2004, Mr. Robert Coale P.E, current President and Director, visited the site to see the overall geological setting and occurrence of mineralization and evaluated the drilling program proposed by MinQuest. At that time, the metallurgical data and reports that had been collected from the sellers were reviewed. Mr. Coale’s analysis revealed that reagent (liquid chemicals used for leaching) consumptions are acceptable and deleterious compounds (minerals present in the ore that would be difficult to work with) were not apparent. He recommended bulk sampling at a selected location in the future once the definition of the ore body was further advanced through drilling. On May 31, 2004, Robert Sibthorpe presented his report to Management with a summary of the property, a review of a draft budget and a layout of the drilling program planned for the property.

 

The drilling was conducted throughout the spring and early summer of 2004, and in June 2004, Mr. Sibthorpe presented a report to Management incorporating the results of the drill program which encouraged the Company to pursue the project.

 

On February 19, 2004, the Company executed a formal agreement to purchase the Williams Property for $350,000. On November 11, 2004, the purchase was completed and the Company now owns 100% interest in the Williams Property.

 

Greenwood Claim

 

On January 18, 2005, the Company acquired a single patented claim from a group of individuals represented by an escrow agent, for $150,000.

 

Martinez Claims

 

The Company acquired five patented claims from Ramon and Edna Martinez for a total of $150,000. The Company made one payment of $75,000 on November 8, 2004, and made the final payment of $75,000 on February 14, 2005.

 

Ruth and Rattan Claims

 

On January 18, 2005, the Company acquired two patented claims known as the Ruth and Rattan claims for a single payment of $25,000.

 

Description and Location of the Moss Property

 

The Moss Property is located in Mohave County, Arizona in the historic Oatman District, and is located some 5 miles northwest of the town of Oatman, with Kingman, Arizona to the east, Laughlin, Nevada to the west and Las Vegas, Nevada to the north. Access is via paved and gravel roads from Bullhead City.

 

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Exploration History of the Moss Property

 

Discovered in 1864, the Moss Mine was the first gold discovery made in the Oatman District.  Historical records show that the Oatman District produced up to two million ounces of gold mostly from underground mines. The Moss Property contains the site of the former Moss Mine. The Moss Mine reportedly produced high-grade gold values of $114,000 from two tons of ore at $20 per ounce of gold.  A reported $240,000 of gold and silver were produced from the Moss property before 1880. The mine was worked intermittently through the 1930’s but produced only minor amounts of gold after the initial bonanza grades. The mine lay idle until the early 1980’s when a number of mining companies explored the district. These companies included Billiton Minerals, Magma Copper, Golconda Resources and Addwest Minerals. The most significant historic mining at Moss Mine occurred on narrow veins that trend sub-parallel to the Moss Mine vein and dip steeply to the north. These veins should intersect the Moss Mine vein at depth. The project area is underlain by Tertiary quartz monzonite (a coarsely crystalline rock composed primarily of the minerals quartz, plagioclase and orthoclase) intruding tertiary volcanics. Precambrian basement rocks underlie the volcanics. The veins consist of quartz-calcite and lesser adularia. The principal vein is up to 45 feet thick and can be followed on surface for over 5,000 feet. The hanging wall commonly has several tens of feet of stockwork veining. Gold values are somewhat erratic but appear to be highest in the thicker and deeper parts of the vein explored to date.

 

The Company’s initial exploration of the Moss Property has consisted of geologic mapping, vein geochemical sampling and drill testing of the identified veins.  Numerous drill holes from past drilling programs, combined with sampling of underground workings within the patented mining claims, have culminated in a pre-feasibility study based on drill results from pre-1992 exploration.

 

In the Spring of 2004, the Company commenced Phase 1 drilling at the Moss Property. By the year end, a total of 36 holes were drilled totaling 8,807 feet. Thirty holes were drilled on the Gintoff Claim on the Moss Property, and six holes were drilled on one of the adjacent parcels of land. The easternmost section of the Property, which was mostly untested by drilling, was drilled with thirty reverse circulation holes. This allowed accurate cross-sections to be made for this area. The coverage on this section is generally two or three holes on 100 foot sections testing grades and widths from 50-250 feet down dip. In the western area, limited confirmation drilling was carried out and the results obtained were generally in line with the values obtained by previous operators. Geological information obtained may now provide a structural explanation for the lack of success obtained here to date by previous operators. A study of all drilling results through 2004 at the Moss Property indicated a tendency for total gold content to increase with intercept depth. Roughly 60% of the deeper holes have better intercepts than shallow holes.

 

In April 2005, the Company initiated an expanded Phase II drilling program to test for possible high-grade (0.30 ounces per ton or above) down-dip extensions of the Moss vein. The program originally included 10-15 holes ranging from 500 to 1300 feet for a total of approximately 12,000 feet of reverse circulation (RC) drilling. The budget for this program was $643,700. The first portion of this expanded drilling program was expected to be completed by the fall of 2005, however, after eight holes were attempted, drilling was halted because of inadequate capabilities of the drill rig to penetrate the granites. The remainder of the program was completed when the Company completed 6 core holes from November 2006 to February 2007 for a total amount drilled of 3,917 feet. The exploration program failed to find higher grades but it did show that the vein system continues to at least 800 feet below the surface and appears to be thickening.

 

In the spring of 2008, the Company submitted core samples to a laboratory where leach testing was conducted. Leaching was conducted in both bench scale (Bottle rolls) and in columns using crushed ore as the feed sample.  Three column leach tests at 3 different crush sizes were completed on the Moss drilling samples. They were leached for 120 days. The fine crush of ¼ inch had 66% of the gold and 42% of the silver recovered in 120 days. The recovery curve is still not flat at the end of 120 days indicating additional gold/silver could be recovered. The recoveries are already near the 70% gold and 50% silver that is average for the industry.  The 1 inch crush column recovered 39% of the gold and 14% of the silver after 120 days, but the leach curve again indicates no significant decrease in percent recovery by month indicating that greater recoveries may be obtained over longer periods of time.

 

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Using the column leach data obtained from the testing program completed in April 2008 as well as additional information, the Company may engage an outside firm to conduct a preliminary economic analysis that will evaluate the overall value of the property considering metallurgical recovery, volume and gold grade of mineralized rock, capital and operating costs, and other factors.  This information would be used to define additional work needed to enhance the value of the property.

 

In May 2009, the Board of Directors approved a $200,000 Phase III exploration budget for the Moss Property.  A program of six or seven core holes was planned to test the down-dip extension of the Moss vein system. Total drilling footage was estimated at 3,000 feet. The drilling tested approximately 2,000 feet of strike length of the vein.  The goal of this program was to further define the trend and depth of mineralization as well as provide additional metallurgical material for column leach tests.

 

In January 2010, the Company engaged Mr. Paul D. Noland, a registered professional geologist, to conduct an independent resource study.  The report concluded that the Moss Property hosts a drill indicated gold-silver estimate and requires systematic in-fill and down-dip drilling to be placed into a final reserve category. No economic or mining feasibility parameters were applied however, a cursory examination of several sections in the heart of the resource area suggests that the entire resource (Main Zone and Hanging wall Zone) may be exploited by an open pit with a stripping ratio of between 3:1 and 4:1, and average pit wall slope of 45 degrees. This estimate was determined using the assumption that the deposit will be an open pit, bulk minable, heap leach mine. To keep mining and grade control cost minimal, sub-cut off grade material within the boundary of the resource was allowed to dilute the final grade.

 

The likelihood of finding additional bulk minable ore on the property is considered very good. Patriot Gold geologists have suggested the likelihood of main zone mineralization continuing at depth in previous reports. The main body of mineralization appears to widen to the west along strike, but the grade decreases. However, with the lower grades needed for an open pit, heap leachable deposit, this material is now part of the resource. This means the deposit is open-ended to the west. Much of the Main Zone remains untested down dip. Continued drill evaluation of down-dip and strike extensions is recommended.

 

In March 2010, Patriot Gold engaged an outside firm to initiate a series of metallurgical tests to focus on the amenability of the Moss deposit to heap leaching gold/silver recovery.  Core from Moss was tested in four column leach tests with crush sizes up to 2 inches. The crushed ore was leached in 5 feet high columns for a minimum of 200 days. The tests results determined maximum obtainable gold and silver recoveries from the sample material using leaching as well as the leach times needed for maximum recovery.

 

Moss Property Option Agreement

 

On February 28, 2011, the Company entered into an Exploration and Option to Enter Joint Venture Agreement (the “Moss Agreement”), with Idaho State Gold Company, LLC, (“ISGC”) whereby the Company granted the option and right to earn a vested seventy percent (70%) interest in the property and the right and option to form a joint venture for the management and ownership of the properties called the Moss Mine Property, Mohave County, Arizona.  Pursuant to the Moss Agreement, ISGC paid US $500,000 upon execution, and must spend an aggregate total of US $8 million on exploration and related expenditures over the next five years and subsequent to exercise of the earn-in, ISGC and Patriot Gold will form a 70/30 joint venture. Under this agreement financing of future work on the property would be on a proportional basis under the direction of a management committee with voting rights proportional to ownership percentage. Either party may be diluted on the basis of a standard formula if they do not contribute to the planned programs. If either party is diluted below 10 percent, their interest will convert to a three percent NSR (net smelter return) royalty. An existing 3-3.5 percent NSR exists on the Moss Mine Property.

 

In March, 2011, ISGC transferred its rights to the Exploration and Option Agreement dated February 28, 2011, to Northern Vertex Mining Corp. (“Northern Vertex”).

 

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Shortly thereafter, drilling equipment and personnel were mobilized to the site to take additional core and reverse circulation samples. The purpose of its Phase I drilling campaign was to correlate and corroborate the results of previous work and to provide step-out drilling to further define the limits of the deposit.

 

In April 2011, an additional 144 claims adjacent to and contiguous to the Moss Property were staked. As per the Moss Agreement, any claims staked by either party within one mile of the claim boundaries are subject to the terms of the original agreement.

 

Through July 2011, 15 drill holes by both reverse-circulation (RC) and coring techniques were completed as part of the Phase I Moss Property drilling program. The purpose of these holes was to evaluate and test the extensions of the mineralized zone as well as to confirm the results of prior drilling and exploration work. We announced the findings from the results received from the drilling which demonstrate the thicknesses and grades encountered are compatible with historical drill results where 30 to 50 m intervals of 1+ gram gold.

 

Phase I Drilling Highlights

 

Hole ID From (m) To (m) Int. (m) Au (gpt) Ag (gpt) Au Eq. (gpt)*
AR-57 105.16 166.12 60.96 0.41 5.87 0.56
including 152.4 161.54 9.14 1.11 13.3 1.44
AR-58 54.86 74.68 19.82 1.35 14.08 1.71
including 59.44 71.63 12.19 2.06 19.68 2.55
AR-59 112.78 167.64 54.86 0.53 6.98 0.70
including 112.78 123.44 10.66 1.13 14.73 1.49
AR-60 79.25 158.5 79.25 0.45 3.77 0.55
including 140.21 150.88 10.67 1.67 8.8 1.89
AR-61 115.82 182.88 67.06 0.45 3.94 0.54
including 128.02 129.54 1.52 5.86 61.3 7.39
including 163.07 172.21 9.14 0.72 8.16 0.93
AR-62 100.58 172.21 71.63 0.83 11.16 1.11
including 109.74 117.35 7.61 3.42 47.89 4.62
including 109.74 143.26 33.52 1.27 18.28 1.73
AR-63 7.62 82.3 74.68 0.36 5.27 0.49
including 7.62 18.29 10.67 0.82 9.01 1.04
AR-64 131.06 175.26 44.2 0.71 8.69 0.92
including 143.26 173.74 30.48 0.94 10.84 1.21
AR-66 150.89 184.4 33.51 1.25 30.17 2.01
including 163.08 173.74 10.66 2.89 67.89 4.58
AR-67R 80.77 126.49 45.72 1.47 20.0 1.97
including 105.16 114.3 9.14 4.43 52.4 5.74
AR-68R 83.82 134.11 50.29 1.24 13 1.57
including 108.2 126.49 18.29 1.81 18.3 2.27
AR-78R 47.24 80.77 33.53 1.12 22.9 1.69
including 64.01 73.15 9.14 2.83 52 4.13
AR-79R 111.25 176.78 65.53 0.25 4.7 0.37
AR-80R 60.96 70.1 9.14 0.83 10.8 1.1
AR-82R 149.35 172.21 22.86 0.39 4.9 0.51

 

* AuEq (gpt) = Au (gpt) + 1/40th Ag (gpt). gpt = grams / metric tonne. Please visit www.northernvertex.com/extras/drillresults.pdf for complete drill results and estimates results.

 

In October 2011, a National Instrument 43-101 compliant Independent Resource Calculation was completed by Scott E. Wilson Consulting.

 

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In February 2012, we announced Phase II results of the Moss Property for the first 18 holes of the planned 20,000 foot (6500 meter) in-fill drill and resource expansion program. It was reported that all five of the Phase II infill holes, AR124, 125, 127, 128 and 133 were successful, with each hole intersecting 24+ meter widths of mineralized material. The significant intersections returned from Phase II drilling are consistent with results from our Phase I drill program. Importantly, they demonstrate the consistent internal distribution of gold we’ve come to expect from the Moss gold-silver system.

 

Highlights from the first 18 holes of Phase II Drilling – Moss Property

   

Hole AR 121:          0.51+ gpt Gold Eqv over 84+ meters including 2.13 gpt Gold Eqv over 7.6 m

Hole AR 123:          0.52+ gpt Gold Eqv over 22+ meters including 0.89 gpt Gold Eqv over 6.1 m

Hole AR 124:          1.45+ gpt Gold Eqv over 24+ meters including 2.27 gpt Gold Eqv over 13.7 m

Hole AR-128:          0.75+ gpt Gold Eqv over 57+ meters including 1.46 gpt Gold Eqv over 15.2 m

Hole AR 136:          19.39 gpt Gold Eqv over 1.52 meters

 

In May 2012 we reported further successful results from drilling core as the final part of the Phase II infill drill and resource expansion program. This completed drill results for all 41 holes in the current drilling program: 18 RC (reverse circulation) drill holes and 23 diamond drill (core) holes.

 

Highlights from core holes 19 through 41 are as in the table below:

 

Hole ID Interval

Grade

AuEq

From To Au Ag
  (m) (gpt) (m) (m) (gpt) (gpt)
AR-141C 42.06 0.71 0 42.06 0.65 2.2
  9.14 1.42 2.44 11.58 1.35 2.9
  52.27 0.57 62.94 115.21 0.44 5.0
  1.52 2.67 87.78 89.31 2.46 8.3
AR-144C 17.07 1.03 0 17.07 0.91 4.9
  1.37 5.09 2.44 3.81 4.45 25.3
  43.28 0.68 35.36 78.64 0.55 5.1
  0.76 0.99 151.18 151.94 0.66 13.2
AR-146C 12.19 0.39 7.32 19.51 0.32 3.0
  1.52 2.05 53.04 54.56 2.03 0.8
AR-150C 13.56 0.39 93.12 106.68 0.23 6.5
  43.89 0.42 126.49 170.38 0.33 3.8
  35.36 0.57 178.00 213.36 0.44 5.2
AR-155C 15.54 0.37 15.85 31.39 0.29 3.0
AR-159C 9.14 1.02 0 9.14 0.44 23.5
  1.52 3.11 0 1.52 0.56 101.9
  30.18 0.39 21.34 51.51 0.27 4.9
  15.54 1.04 74.37 89.92 0.71 13.2

* AuEq (gpt) = Au (gpt) + 1/40th Ag (gpt)

* gpt = grams / metric tonne

 

The update identified that the gold/silver mineralized structure now spans 6,000 ft on strike, remaining open to the West, East and at depth. High-grade feeder veins were intersected to the south and are believed to be associated with historic mining activity dating back to the early 1900's. We continue to encounter multi-meter, 1+ gpt Gold Eqv intervals and multi-gram hot spots, contained within 40+ meter intersections, running well above internal cut-off grades.

 

In July 2012 we reported on channel samples taken underground near the vicinity of the Allen Shaft at the Moss Property. The sampling taken at five foot intervals across the roof of drifts and cross-cuts on the -60 level consistently shows 1.5+ gpt gold equivalent grades returned, further demonstrating the remarkable uniformity of the Moss stockwork vein Gold-Silver system both on strike and at depth. The main drift east averaged 4.73 gpt gold equivalent over 6.1m and stopped in 7.58 gpt gold equivalent mineralization.

 

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Underground sampling results are provided below:

 

Underground Sampling Area Interval

Grade

AuEq

From To Au Ag
  (m)

(gpt)

(m) (m) (gpt) (gpt)
South X-Cut off Main Drift Sta 30' W 6.10 1.98 1.52 7.62 1.83 6.4
North X-Cut off Main Drift Sta 40' W 13.72 1.92 1.52 15.24 1.64 11.2
  4.57 2.51 1.52 6.10 2.28 9.0
  1.52 6.03 9.14 10.67 5.29 29.4
North X-Cut off Main Drift Sta 60' W 7.62 1.28 1.52 9.14 0.98 12.1
North X-Cut off Main Drift Sta 150' W 12.19 1.73 1.52 13.72 1.49 9.5
  1.52 4.43 6.10 7.62 3.69 29.7
North X-Cut off Main Drift Sta 200' W 1.52 2.14 9.14 10.67 1.88 10.3
Sub-Drift East from Office X-Cut at Sta 260' N 4.57 2.79 1.52 6.10 2.40 15.5
Sub-Drift East from Office X-Cut at Sta 275' N 3.05 1.39 1.52 4.57 1.24 6.0

* AuEq (gpt) = Au (gpt) + 1/40th Ag(gpt)

* gpt = grams / metric tonne

 

In October 2012, we announced plans to commence a resource definition drill program to expand the parameters of a potential starter pit at the Moss Property. The program would focus on two central hills on patented (private) ground within the property where mineralization is exposed at the surface. Drilling is designed to assist the technical team in the preliminary design and modeling of a starter pit in the central area of the mineralized gold-silver corridor. The upcoming drill program is also expected to allow the construction of a mine plan and mine design as required by Arizona Dept. of Environmental Quality (AZ DEQ) for an Aquifer Protection Permit (APP).

 

In November 2012, we provided a comprehensive update on exploration and development plans for the Moss Property. Some key highlights of the update were as summarized below:

 

·Additional resource definition drill program currently underway to increase resources adjacent to proposed pits and for data use in mine design and planning.

 

·Low strip ratio in initial mining areas possible.

 

·Amenable to low cost, heap leach, open pit mining.

 

·Major stockwork vein system outcropping at surface for 5,000 feet.

 

·Metallurgical test-work underway.

 

·3 Phase Mine Development Plan to include:

 

oApplication for Aquifer Protection Permit for 90,000 tonne Pilot Phase I quarry/leach pad will be submitted to Arizona Department of Environmental Quality (DEQ) by month end.

 

oPhase II production target, 5,000 tpd.

 

oPhase III production target 10,000 tpd.

 

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The 3 Phase Mine Development Plan is designed to sequentially progress the project from conceptual design and laboratory test work to pilot plant testing in the field and, if this is successful, to secure financing and permitting approval for building a 5000 tonnes per day mine initially and, if this is successful, then move to 10,000 tonnes per day ultimately.  The mine, should it proceed to production, will be a classic heap leach operation.

 

The business plan has been specifically designed to take advantage of the natural attributes of the Moss deposit while minimizing the capital required to get into production and minimizing the lead time in doing so, thereby reducing project development risk and capital risk. Our Optionee/Operator has completed a Preliminary Economic Assessment (PEA) of the Moss Project which incorporates mine, processing and heap leach designs. This includes estimates of capital and operating costs and pre-tax cash flows for Phases I and II. A scoping level analysis will be subsequently prepared for Phase III. Phase I pilot plant operations commenced mid 2013. Phase II operations are expected to commence in 2014 at a rate of 5,000 tpd. Phase III operations are expected to commence in 2017 at a rate of 10,000 tpd.   A Bankable Feasibility Study is also now underway and expected to be completed in 2014. Please refer to the Patriot Gold Corp. website at www.patriotgoldcorp.com for further information.

 

1) Amended PEA

 

In June 2013 the Company announced the completion of an amended Preliminary Economic Assessment ("PEA") for the Moss Mine Project, dated June 18, 2013.

The principal conclusions of the Amended PEA are generally consistent with the original amended PEA that was disclosed in Patriot Gold's April 10, 2013 news release. A summary of the changes to the previously highlighted results from the April 10th news release is described below:

A link to the amended PEA is on our website. The amended PEA includes the following:

 

·Enhanced disclosure of the qualifications of the responsible Qualified Persons ("QP") who co- authored the report as well as the addition of Robert Lambeth, P.Eng to the QP team;
·Augmented information about the rationale for the channel-shaped "trench" open pit model for the near-surface Moss vein stock-work system versus using underground mining methods to mine the deposit.
·Additional description of the geology of the Moss vein stock-work mineralized system to further assist the reader in assessing the open pit mining model used in the report versus using underground mining methods.
·Further disclosure about the prior underground mining and its minimal effect on the estimated resource base.
·Additional information about the choice of a 0.3 grams/tonne cut-off for the resource estimates included in the PEA.
·Additional explanation of the oxide/non-oxide nature of the deposit and the influence of that on metallurgical recoveries.
·Further explanations of the extensive surface, and subsurface, geotechnical work carried out on the Moss Mine rock structures.
·Effects of the approximately 2% NSR royalty on the Moss Mine Gold-Silver Project economics.
·Additional sensitivity analysis to show the effect of percentage changes in metals prices, capital costs and operating costs on the project's base case economics.
·Inclusion of updated consensus price forecasts information as part of the $1500/ounce gold and $30/ounce silver price assumptions.
·Information about the tax structure in the jurisdiction in which mining would take place and recognition that while tax effects are not quantified they will reduce project net present value and internal rate of return.
·Revised recommendation to increase drilling (and related assaying and reporting) from 2200 to 3700 meters at an approximate additional cost of $442,000 ($904,000 total cost of drilling). The PEA conclusions are not dependent on the outcome of the drilling which is designed with the goal of upgrading resources lying outside of the first two phases of the project.

 

The Company reiterates that the Amended PEA is preliminary in nature and that there is no certainty that the preliminary economic assessment will be realized.

 

In July 2013 the Company provided and update on the Phase I pilot plant operations.

 

Construction commenced May 1, 2013 on the infrastructure necessary to carry out pilot scale open pit mining and heap leach processing of an aggregate of approximately 90,000 tonnes of mineralized rock. The Pilot Plant leach pad, designed to test the economic and technical viability of heap leaching finely crushed, agglomerated material, is approximately 700 feet in length and 300 feet wide. The Phase I pit will be surface mined at a strip ratio of 0.79:1 and a production rate of 1,000 tonnes of mineralized rock, crushed to 95% -1/4 inch, per day.

 

Initial placement of fine crushed agglomerated material (95% -1/4 inch) onto leach pads was completed ahead of schedule on June 28, 2013. Initial treatment of solution through carbon columns for heap leaching is scheduled to be completed by July 18, 2013. Total Phase I mineralized material of 90,000 mt expected to be placed onto the leach pads by September 15, 2013.

 

In July 2013 the Company announced the results from a 15 hole drilling program and metallurgical results obtained from heap leach cyanidation (column leach) testwork on a mineralized material low grade bulk sample.

 

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Key Highlights:

 

·Results from the drilling program include completed assay results ranging from 1.16 g/t to 5.02 g/t of gold equivalent values (AuEq)
·Strong gold (Au) recovery results were achieved from test work on agglomerated samples of low grade material using heap leach cyanidation processing
·Gold recovery rate was more rapid for the low grade mineralized material vs. the high grade mineralized material (as previously reported in the Amended Preliminary Economic Assessment dated June 18, 2013)
·The column leach test recoveries were 82.7% for gold (Au) and 36% for silver (Ag) at a 73 day leach time on low grade materials 

 

The 2,527 meter exploration diamond drilling program was completed as part of a recommended $1.15 million exploration program, of which approximately two-thirds has now been spent. Assay results are presented below:

 

 

 

In September 2013 the Company announced the official opening of the Moss Mine Reactivation Project Pilot Plant and highlighted the significant development milestones which have been reached for the Phase I - Pilot Plant.

 

·Construction on all major items for Phase I – Pilot Plant are completed.
·Operations are in full swing with the focus on completion of mining, crushing, agglomerating and stacking operations for the 90,000 tonnes planned in the Preliminary Economic Assessment.
·Leaching of the stacked mineralized material is also underway and will continue for the next 9-12 months with continual sampling and assaying of the leached material being performed.

 

In October the Company announced additional positive results from the remaining assays that have now been received for Phase 4 drilling, a 19-hole 2,643.8 meter drilling program.

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Key Highlights:

 

·Results now complete for AR-196, 197, 199, 200, 201, 206, 207, 208, 210, 211, and 212, with assays for all drill holes in the 15-hole drill program received
·Confirmation that near surface stockwork mineralization does extend in the western section of the deposit
·Extended depth drilling up to 220 meters from the surface indicates mineralization is continuing to occur at depth and remains open to depth in the eastern and central portions of the deposit
·An upgrade in resource classification (from ‘inferred to ‘indicated’) may be possible based on additional information received in the eastern portion of the Moss deposit
·Additional assay results received allow pit slope optimization studies to progress further given sufficient data gathered from the oriented core drilling and structural mapping as a result of this program

 

All holes were drilled on patented claims as part of the Mine Exploration and Geotechnical Programs with regards to the Moss Mine heap leach project.

 

 

 

In December 2013 the Company announced that the first gold pour has been processed from its Moss Mine project in Mojave County, Arizona. The precious metals were sold based on the price of US$1326/oz Au and US22.30/oz Ag.

 

According to the PEA (Preliminary Economic Assessment) for Phase I of the project, 91,000 metric tonnes (mt) of mineralized material was to be extracted from the mine. Mining commenced at the beginning of June 2013 and a total of 90,199 mt have now been mined. Crushing, screening, agglomerating, and conveying of the nearly 90,000 mt has been undertaken. Leaching activities that began in mid-August 2013 will continue well into 2014.

 

Patriot's Optionee/Operator has now gathered enough data from processing to allow for optimization of the leach pad design which allows for a potential increase in the permissible tonnage under the present PEA guidelines for Phase I of the Pilot Plant.

 

In April 2014 the Company announced the results of an airborne magnetic survey of its Moss Gold-Silver project located in the historic and active Oatman Mining District near Bullhead City, Arizona. Results of the survey included use of magnetic, field mapping and historic mineral and workings data.

 

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Key Highlights:

 

·The main Moss resource and hosting structure lies along a well-defined magnetic high and includes three kilometers of unexplored potential on one structure.
·Nine magnetic linear anomalies associated with known mineral occurrences and historic workings were found as part of the Moss structure, indicating potential for hosting new discoveries along these structures.
·One structure includes nearly six kilometers of a mapped extension of the Gold Road deposit which previously produced nearly 500,000 ounces at 0.32 opt gold.
·The implications of the new data indicate that the exploration potential of the Moss site is very good and that there is the likelihood of further discoveries on the Moss property.
·Following the interpreted results of the survey, the Company's Optionee/Operator, is currently designing an exploration program to assess the potential of the additional structures identified that would run concurrently with Phase II – Operations Phase of the Moss project plan.

 

The survey found a total of 21 kilometers of potential strike length along the entire Moss Mine property. In addition, several other linear magnetic lows and highs were found that would require ground work to determine if they are mineralized.

 

In April 2014 the Optionee/Operator provided a more detailed update on Phase I – Pilot Plant operations.

 

Key Highlights:

·A total of 3,389 ounces of gold and 13,211 ounces of silver has been recovered, processed and sold, with the net result being applied to costs.
·Gold recovery rates on Cells 1-5 were 80.51% after an average of 192 days, exceeding Preliminary Economic Assessment (PEA) estimates.
·Gold recovery rates in Cells 6A and 6B were 55.87% after 96 days.
·Gold recovery in all cells is scheduled to continue through mid-year.
·An additional 600 ounces of gold and 12,000 ounces of silver are estimated to be recovered over the next several months.

 

As of April 6, 2014, Cells 1-5 consisting of 81,630 tonnes of mineralized material containing 3,656.7 ounces of gold and 36,912 ounces of silver were under continued leaching which showed recovery rates of 80.51% with average leaching time of 192 days (leaching times varied from 218 days for cell 1 to 163 days for cell 5). Gold recovery attributed to cells 1-5 total 2,944.4 ounces yielding a pre-completion recovery of 80.51% Au compared to PEA based on 75% gold recovery after 9 months. Gold is still being recovered from all 5 cells. Silver recoveries are at 38.72% as gold is being preferentially absorbed onto the carbon resulting in high silver recycling values in the leach solution.

 

Item 3.          Legal Proceedings

 

There are no pending legal proceedings in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company.

 

Item 4.          Mine Safety Disclosures

 

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”) and Item 104 of Regulation S-K require certain mine safety disclosures to be made by companies that operate mines regulated under the Federal Mine Safety and Health Act of 1977. However, the requirements of the Act and Item 104 of Regulation S-K do not apply as the Company does not engage in mining activities. Therefore, the Company is not required to make such disclosures.

 

33
 

 

PART II

 

Item 5.          Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

Market Information

 

Our common stock is traded on the on the OTCBB and the OTCQB, a marketplace developed by the OTC Markets Group, Inc.  (“OTCQB”) under the ticker symbol “PGOL.” The following table sets forth the range of quarterly high and low closing bid prices of the common stock as reported on http://www.otcmarkets.com during the years ending May 31, 2014 and May 31, 2013:

 

Financial Quarter Bid Price Information *
Year Quarter High Bid Price Low Bid Price
2014 Fourth Quarter $0.12 $0.07
  Third Quarter $0.09 $0.06
  Second Quarter $0.17 $0.08
  First Quarter $0.12 $0.07
2013 Fourth Quarter $0.15 $0.07
  Third Quarter $0.24 $0.13
  Second Quarter $0.25 $0.11
  First Quarter $0.20 $0.03

 

*The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

 

Holders

 

On May 31, 2014, there were approximately seventy-nine (79) holders of record of the Company’s common stock.

 

Dividends

 

The Company has not declared or paid any cash dividends on its common stock nor does it anticipate paying any in the foreseeable future. Furthermore, the Company expects to retain any future earnings to finance its operations and expansion. The payment of cash dividends in the future will be at the discretion of its Board of Directors and will depend upon its earnings levels, capital requirements, any restrictive loan covenants and other factors the Board considers relevant.

 

Warrants or Options

 

There were 26,962,500 warrants issued during the fiscal year ending May 31, 2014.  For further information, see Note 7 - Common Stock in the financial statements included in this 10-K filing.

 

There were no stock options issued during the fiscal year ending May 31, 2014. Additionally, no stock options were exercised and 800,000 were cancelled.  For further information, see Note 6 - Stock Options in the financial statements included in this 10-K filing.

 

34
 

 

Securities Authorized for Issuance under Equity Compensation Plans

 

We do not have any equity compensation plans that were approved by our shareholders. Set forth below is certain information as of May 31, 2014, the end of our most recently completed fiscal year, regarding equity compensation plans that have not been approved by our stockholders.

 

Equity compensation plans not approved by stockholders as of May 31, 2014
Plan Category  

Number of securities to be issued upon exercise of outstanding options, warrants and rights

 

Weighted average exercise price of outstanding options, warrants and rights

 

Number of securities remaining available for future issuance

 
                 
2003 Stock Option Plan*   0     0   0  
2005 Stock Option Plan*   200,000     $0.25   1,800,000  
2012 Stock Option Plan   0     0   3,780,000  
Share Purchase Warrants   0     N/A   N/A  

 

* As of May 26, 2013, the 2003 Plan expired therefore there are no shares available for grant under this plan.

 

The following discussion describes material terms of grants made pursuant to the stock option plans as of May 31, 2014:

 

Pursuant to the  2005 and 2012 Stock Option Plans, grants of shares can be made to employees, officers, directors, consultants and independent contractors of non-qualified stock options as well as stock options to employees that qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986 (“Code”). The Plans are administered by the Option Committee of the Board of Directors (the “Committee”), which has, subject to specified limitations, the full authority to grant options and establish the terms and conditions for vesting and exercise thereof. Currently the Board of Directors functions as the Committee.

 

In order to exercise an option granted under the Plans, the optionee must pay the full exercise price of the shares being purchased. Payment may be made either: (i) in cash; or (ii) at the discretion of the Committee, by delivering shares of common stock already owned by the optionee that have a fair market value equal to the applicable exercise price; or (iii) with the approval of the Committee, with monies borrowed from us.

 

Subject to the foregoing, the Committee has broad discretion to describe the terms and conditions applicable to options granted under the Plans. The Committee may at any time discontinue granting options under the Plans or otherwise suspend, amend or terminate the Plans and may make such modification of the terms and conditions of such optionee’s option as the Committee shall deem advisable.

 

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities.

 

For further information see Note. 7 Common Stock in the financial statements included in this 10-K filing.

 

Purchases of Equity Securities by the Company and Affiliated Purchasers.

 

There was no purchase of equity securities by the Company and affiliated purchasers during the fiscal year ended May 31, 2014.

 

Item 6.          Selected Financial Data

 

A smaller reporting company, as defined by Item 10 of Regulation S-K, is not required to provide the information required by this item.

 

35
 

 

Item 7.          Management’s Discussion and Analysis or Plan of Operation.

 

Overview

 

As a natural resource exploration company our focus is to locate and explore prospective properties that may host mineral reserves that could eventually be put into mining production. With this in mind, we have identified and secured interests in several mining claims with respect to properties in the Walker Lane area of Nevada and the historic Oatman mining district of Arizona. Current cash on hand is sufficient to fund planned operations for 2014; however, management plans to seek additional capital through private placements and public offerings of its common stock. There can be no assurance that management would be successful in its attempt to raise the additional funds needed to sustain operations going forward.

 

We do not have any employees. Outside advisors, attorneys and consultants will continue to be utilized to support operations as needed. Management is confident that it will be able to operate in this manner and continue during the next twelve months.

 

Plan of Operation

 

During the twelve-month period ending May 31, 2015, our objective is to continue to monitor the exploration of our properties in accordance with our property option agreements. Management believes the funds in treasury are sufficient to sustain planned and budgeted activities for the year moving forward.

 

We continue to run our operations with the use of contract operators and third party consultants and do not anticipate a change to our company staffing levels. We remain focused on keeping the staff compliment, which currently consists of our three directors, at a minimum, to conserve capital. Our staffing in no way hinders our operations, as outsourcing of necessary operations continues to be the most cost effective and efficient manner of conducting the business of the Company.

 

We do not anticipate any equipment purchases in the twelve months ending May 31, 2015.

 

Results of Operations

 

The Twelve Months Ended May 31, 2014 compared to the Twelve Months Ended May 31, 2013

 

During the year ended May 31, 2014, we had no revenues as we have not commenced principal operations as a natural resource production company. We are currently exploring our properties and engaged in the search for mineral deposits.

 

Net loss for the year ended May 31, 2014 was $226,804 compared to net loss of $334,035 for the year ended May 31, 2013, for an approximate $107,000 decrease. The decrease is primarily comprised of an approximate $20,000 decrease in mineral expenses, an approximate $92,000 decrease in general and administration expenses due to a reduction in the need for certain consultant services as the company’s project demands naturally fluctuate over time and an approximate $5,000 increase in foreign exchange loss.

 

For the years ended May 31 2014 and 2013, mineral and exploration expenses were $1,970 and $22,205, respectively, for an approximate $20,000 decrease. The decrease is due to fewer geological exploration expenses as the optionee partners are responsible for ongoing exploration costs.

 

For the years ended May 31 2014 and 2013, general and administrative expenses were $219,681 and $311,926, respectively, for an approximate $92,000 decrease. The decrease is comprised of an approximate $124,000 decrease in consulting expenses attributed to a reduced need for consulting work and the deployment of different service providers and a $26,000 increase in professional consulting services due to project and market vetting and other services required.

 

For the years ended May 31 2014 and 2013, other income and expense was ($5,154) and $96, respectively, for an approximate $5,000 decrease. This decrease is due to a change in foreign exchange rates.

 

36
 

 

Liquidity and Capital Resources

 

We had total assets of $699,436 at May 31, 2014 consisting of cash of $592,142, stock subscriptions receivable of $32,000 prepaid expenses of $62,039 and reclamation deposits of $13,255.  We had total liabilities of $19,197 at May 31, 2014 all of which are current liabilities consisting of accounts payable and accrued liabilities.

 

We anticipate that we will incur the during the year ended to May 31, 2015:

 

·$250,000 for operating expenses, including working capital and general, legal, accounting and administrative expenses associated with reporting requirements under the Securities Exchange Act of 1934.

 

Cash used in operations was $246,653 and $374,623 for the years ended May 31, 2014 and 2013, respectively. The decrease in cash used in operations was due to a decrease in operating expenses primarily Primarily attributed to a decrease in consulting services when compared to the prior year.

 

Investing activities for the years ended May 31, 2014 and 2013 were $900 received from the refund of a reclamation deposit and nil, respectively.

 

Financing activities during the years ended May 31, 2014 and 2013 generated cash of $791,000 and $219,600 through a series of private placements and stock option exercises.  For further information see Note. 7 Common Stock in the financial statements included in this 10-K filing.

 

Going Concern Consideration

 

Management estimates that the Company will require approximately $250,000 to fund the Company’s planned operations for the next twelve months.  Therefore, current cash on hand is sufficient to fund planned operations for 2015; however, we anticipate generating losses and therefore we may be unable to continue operationsin the future. No adjustment has been made in the accompanying financial statements to the amounts and classification of assets and liabilities that could result from this uncertainty.

 

We currently have no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources.

 

Accordingly, our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Item 7A.          Quantitative and Qualitative Disclosure About Market Risk

 

A smaller reporting company, as defined by Item 10 of Regulation S-K, is not required to provide the information required by this item.

 

Item 8.         Financial Statements.

 

The financial statements are set forth immediately preceding the signature page.

 

37
 

 

Item 9.          Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.

 

None.

 

Item 9A.          Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Our management, under supervision and with the participation of the Chief Executive Officer, evaluated the effectiveness of our disclosure controls and procedures, as defined under Exchange Act Rule 13a-15(e). Based upon this evaluation, the Chief Executive Officer concluded that, as of May 31, 2014, our disclosure controls and procedures were effective.

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Management’s Report on Internal Controls over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined under Exchange Act Rules 13a-15(f) and 14d-14(f). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

 

All internal control systems, no matter how well designed, have inherent limitations and may not prevent or detect misstatements. Therefore, even those systems determined to be effective can only provide reasonable assurance with respect to financial reporting reliability and financial statement preparation and presentation. In addition, projections of any evaluation of effectiveness to future periods are subject to risk that controls become inadequate because of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate.

 

Management assessed the effectiveness of the Company’s internal control over financial reporting as of May 31, 2014. In making the assessment, management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission’s (COSO) 1992 Internal Control-Integrated Framework. Based on its assessment, management concluded that, as of May 31, 2014, the Company’s internal controls over financial reporting were effective.

 

As defined by Auditing Standard No. 5, “An Audit of Internal Control Over Financial Reporting that is Integrated with an Audit of Financial Statements and Related Independence Rule and Conforming Amendments,” established by the Public Company Accounting Oversight Board (“PCAOB”), a material weakness is a deficiency or combination of deficiencies that results in more than a remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected. In connection with the assessment described above, management concluded the Company does not have control deficiencies that represent material weaknesses as of May 31, 2014.

 

Attestation Report of Registered Public Accounting Firm

 

This annual report 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 the Company’s independent registered public accounting firm pursuant to permanent rules of the SEC that permit the Company to provide only management’s report in this annual report.

 

38
 

 

Changes in Internal Controls over Financial Reporting

 

As of May 31, 2014 and to date, management assessed the effectiveness of our internal control over financial reporting and based on that evaluation, they concluded the internal controls and procedures were effective. During the course of their evaluation, we did not discover any fraud involving management or any other personnel who play a significant role in our disclosure controls and procedures or internal controls over financial reporting.

 

We believe that our financial statements contained in our Form 10-K for the twelve months ended May 31, 2014, fairly present our financial position, results of operations and cash flows for the years covered thereby in all material respects.  We are committed to improving our financial organization. We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements as necessary.

 

Item 9B.          Other Information

 

None.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

39
 

 

PART III

 

Item 10.          Directors, Executive Officers and Corporate Governance

 

Directors and Officers

 

All Directors of our Company hold office until the next annual general meeting of the stockholders or until their successors are elected and qualified. The Officers of our Company are appointed by our Board of Directors and hold office until their earlier death, retirement, resignation or removal. Our Directors, Executive Officers and other significant employees, their ages, positions held and duration each person has held that position, are as follows:

 

Name Position Held with the Company Age Date First Appointed
Robert Coale President, Chief Executive Officer, Secretary Treasurer, and Director 74 Oct. 13, 2005(1)
Jared Beebe Director 63 September 5, 2008
Karl Boltz (2) Vice President, Business Development and Director 50 July 9, 2012

 

(1) Mr. Coale was first appointed as a Director on June 23, 2003. On September 12, 2008 Mr. Coale resigned as an officer of the Company but remained a Director. Subsequently, on October 18, 2010, Mr. Coale was reappointed as the Company’s President, Chief Executive Officer, Secretary and Treasurer.

 

(2) Mr. Boltz resigned as Director on October 14, 2013.

 

Business Experience

 

The following is a brief account of the education and business experience of each director, executive officer and key employee during at least the past five years, indicating each person’s principal occupation during the period, and the name and principal business of the organization by which he was employed.

 

Robert Coale has been a Director since June 2003 and has served as our President, Chief Executive Officer, Secretary and Treasurer for two terms: (i) October 2005 to September 2008; and (ii) October 18, 2010 to present.   Mr. Coale has over 50 years of resource related business and management experience and is currently an independent consulting engineer specializing in mineral processing and natural gas fueling systems, including development of projects for converting low-grade or stranded natural gas sources into liquefied natural gas.  Mr. Coale is also a Technical Advisor for Premium Exploration Inc. and a past Director of Goldfields International Inc. and Francisco Gold Corporation and past Technical Advisor to Andean American Gold Corp.  Mr. Coale is a Professional Engineer and holds two degrees in Engineering (1963 - MetE. - Colorado School of Mines, 1971 - MSc. - University of the Witwatersrand in South Africa) as well as an MBA from the University of Minnesota (1982).

 

Jared Beebe is an experienced geologist with an extensive background in mineral exploration.   In his nearly 28 years of working in the mining industry, he has worked for a variety of exploration companies in Canada and the United States.  He is currently an independent consulting Project Manager.  He previously worked for Soho Resources from 2007 to 2008, for Globex Mining in 2006, for Scorpio Mining in 2005 and from 1999 to 2004 he worked as a researcher at the University of Quebec where he studied Geographic Information Systems.  Mr. Beebe earned a Bachelor of Science degree in Geology from Metropolitan State College, Denver, Colorado, in 1981.  He is a member of the Association of Applied Geochemists, the Geological Society of Nevada, the Ordre du Géologues du Québec, and the Society of Economic Geologists. Mr. Beebe is currently a Director of Goldfields International Inc. and Director/Vice President of Exploration for Duke Mountain Resources.

 

Karl Boltz has been involved as a professional in the mineral exploration sector since 1994, both as an investment broker and also an industry executive. He is currently the President of Bronco Gold and Silver Corp., a privately owned exploration company. From 2009 to 2011, Mr. Boltz served as Vice President (Corporate Development) for Dia Bras Exploration, a TSX-V listed company. From 2004 through 2009, Mr. Boltz served as co-founder and President of EXMIN Resources Inc., a TSX-V listed company, which was later acquired by Dia Bras. Mr. Boltz served as professional financial advisor for more than six years, specializing in the mineral and commodities sectors. Mr. Boltz holds a Bachelor of Science degree from Arizona State University.

 

There are no family relationships among our directors or officers. None of our Directors or Officers have been affiliated with any company that has filed for bankruptcy within the last five years. We are not aware of any proceedings to which any of our officers or directors, or any associate of any such officer or director, is a party adverse to our company or has a material interest adverse to it.

 

Audit Committee Financial Expert .

 

The Board of Directors has not established an audit committee and does not have an audit committee financial expert. Currently the Board of Directors function as the audit committee.

 

40
 

Section 16(a) Beneficial Ownership Reporting Compliance .

 

Section 16(a) of the Securities Exchange Act of 1934 requires officers and directors of the Company and persons who own more than ten percent of a registered class of the Company’s equity securities to file reports of ownership and changes in their ownership with the Securities and Exchange Commission, and forward copies of such filings to the Company. During the most recent fiscal year, none of the directors, officers, and beneficial owners of more than ten percent of the equity securities of the Company registered pursuant to Section 12 of the Exchange Act has failed to file such forms on a timely basis.

 

Code of Ethics .

 

The Company has not adopted a Code of Ethics due to the size and limited resources of the Company.

 

Changes to Procedures for Recommendations of Director Nominees .

 

During the fiscal year ended May 31, 2014, there were no material changes to the procedures by which security holders may recommend nominees to our Board of Directors.

 

Item 11.          Executive Compensation.

 

Summary Compensation

 

The following table sets forth information concerning the compensation paid or earned during the fiscal years ended May 31, 2014 and 2013 for services rendered to our Company in all capacities by the following persons: (i) all individuals who served as the principal executive officer or acting in a similar capacity during the fiscal year ended May 31, 2014, regardless of compensation level; (ii) all individuals who served as officers at May 31, 2014 and whose total compensation during the fiscal year ended May 31, 2014 exceeded $100,000; and (iii) up to two additional individuals who served as officers during the fiscal year ended May 31, 2014 and whose total compensation during the fiscal year ended May 31, 2014 exceeded $100,000, regardless of whether they were serving as officers at the end of such fiscal year.

 

SUMMARY COMPENSATION TABLE
Name and principal position (a)

Year

(b)

Salary ($)

(c)

Bonus ($)

(d)

Stock

Awards ($)

(e)

Option Awards ($)

(f)

Non-Equity Incentive Plan Compensation ($)

(g)

Nonqualified Deferred Compensation Earnings ($)

(h)

All Other Compensation ($)

(i)

Total ($)

(j)

Robert Coale (2) 2014 17,025 0 0 0 0 0 0 17,025
  2013 10,088 0 0 0 0 0 0 10,088

 

Outstanding Equity Awards

 

The table set forth below presents certain information concerning unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officer above outstanding as of May 31, 2014.

 

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
OPTION AWARDS STOCK AWARDS

Name

(a)

Number of Securities Underlying Unexercised Options

(#)

Exercisable

(b)

Number of Securities Underlying Unexercised Options

(#)

Unexercisable

(c)

Equity

Incentive Plan Awards:

Number of Securities Underlying Unexercised Unearned Options

(#)

(d)

Option Exercise Price

($)

(e)

Option Expiration Date

(f)

Number of Shares or Units of Stock That Have Not

Vested

(#)

(g)

Market Value

of Shares or Units of

Stock That

Have Not

Vested

($)

(h)

Equity

Incentive Plan Awards:

Number of Unearned Shares, Units

or Other

Rights That Have Not

Vested

(#)

(i)

Equity

Incentive Plan Awards:

Market or Payout Value

of Unearned Shares, Units

or Other

Rights That Have Not

Vested

(#)

(j)

Robert Coale 200,000(1) 0 0 0.25 March 10, 2016 0 0 0 0

 

(1) On March 10, 2006, Mr. Coale was granted the right to purchase 200,000 common shares at an exercise price of $0.25 per option pursuant to the 2005 Stock Option Plan. The $0.25 options vest in equal installments of 33,333 commencing September 10, 2006 and ending March 10, 2009 and had a fair market value at issuance of $41,839. These options have fully vested.

41
 

 

Compensation of Directors

 

The following table sets forth information concerning the compensation paid or earned during the fiscal year ended May 31, 2014 for services rendered by the Directors.

 

Name Fees earned or paid in cash($) Stock Awards ($) Option Awards Non-Equity Incentive Plan Compensation ($) Nonqualified Deferred Compensation Earnings ($) All Other Compensation ($) Total ($)
Robert Coale (1) 17,025(2) 0 0 0 0 0 17,025
Jared Beebe (3) 6,000 0 0 0 0 0 6,000

 

(1) Mr. Coale was originally appointed as a Director on June 23, 2003. On September 12, 2008 Mr. Coale resigned as an officer of the Company but remained a Director. Subsequently, on October 18, 2010, Mr. Coale was reappointed as the Company’s President, Chief Executive Officer, Secretary and Treasurer.

(2) Compensation is also reflected in Item 11 - Executive Compensation. The total compensation for Mr. Coale as Executive Officer and Director for fiscal year ending 5/31/14 is $17,025.

(3) Mr. Beebe was appointed on September 5, 2008.

 

Item 12.          Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

The following table lists, as of May 31, 2014, the number of shares of common stock of the Company beneficially owned by (i) each person or entity known to the Company to be the beneficial owner of more than 5% of the outstanding common stock; (ii) each officer and director of the Company; and (iii) all officers and directors as a group. Information relating to beneficial ownership of common stock by our principal stockholders and management is based upon information furnished by each person using “beneficial ownership” concepts under the rules of the Securities and Exchange Commission. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the Securities and Exchange Commission rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest. Except as noted below, each person has sole voting and investment power.

 

The percentages below are calculated based upon 54,187,351 shares of Common Stock which includes vested options and warrants issued and outstanding as of May 31, 2014.  

 

Name of Beneficial Owner   Amount and Nature of Beneficial Ownership  

Percentage

of Class

 
Robert D. Coale   6,300,000 (1) 11.6%  
Jared Beebe   -   -  
           
Directors and Officers as a Group (2 individuals)   6,300,000   11.6%  
           
KF Business Ventures, LP       11%  

 

(1) Includes 200,000 options pursuant to the 2005 Plan to purchase common stock at a purchase price of $0.25 per share.

 

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Shareholder Agreements

 

Mr. Robert Coale is a party to two shareholder agreements with the Company for shares held by Mr. Coale; the first dated January 22, 2004 for 3,000,000 common shares, and the second dated September 5, 2008, for 3,000,000 common shares whereby Mr. Coale grants the Company the option to purchase all or any portion of the shares referenced in the agreements for a purchase price of $0.01 per share.

 

We are unaware of any other contract or other arrangement the operation of which may at a subsequent date result in a change in control of our company.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

Information regarding our equity compensation plans is set forth above under Part II, Item 5.

 

Item 13.          Certain Relationships and Related Transactions, and Director Independence.

 

Related Party Transactions

 

None

 

Director Independence

 

We are not subject to the listing requirements of any national securities exchange or national securities association and, as a result, we are not at this time required to have our board comprised of a majority of “independent directors.” We do not believe that any of our directors currently meet the definition of “independent.”

 

Item 14.          Principal Accounting Fees and Services

 

Change in Independent Public Accountants

 

As disclosed in a Current Report on Form 8-K that we filed with the Securities and Exchange Commission on July 22, 2014, we entered into an engagement letter on June 15, 2014 with Peterson Sullivan LLP (“Peterson Sullivan”) pursuant to which we engaged Peterson Sullivan as our independent registered public accounting firm for purposes of performing an audit of our financial statements for the fiscal years ended May 31, 2014 and May 31, 2013.

Robison, Hill & Co. previously served as the principal accountants for our company.

 

Fees Billed by Independent Public Accountants

 

Total fees paid to our independent registered public accounting firms for the years ended May 31, 2014 and 2013 are set forth below.

 

   

Fiscal year ending

May 31, 2014

   

Fiscal year ending

May 31, 2013

 
Audit Fees   $13,510     $20,034  
Audit Related Fees   NIL     NIL  
Tax Fees   NIL     NIL  
All Other Fees   NIL     NIL  

 

All of the principal accounting fees and services were approved by the Board of Directors, currently acting in place of the Audit Committee in accordance with the By-Laws of the Company.

 

43
 

 

Item 15.          Exhibits.

 

EXHIBIT

NUMBER

DESCRIPTION
3.1 Articles of Incorporation of Registrant. (1)
3.2 Registrant’s Restated Articles of Incorporation. (2)
3.3 By-Laws of Registrant. (1)
4.1 Specimen common stock certificate. (1)
10.1 Property Option Agreement dated as of July 25, 2003 between MinQuest Inc. and Patriot Gold Corporation. (9)
10.2 2003 Stock Option Plan (4)
10.3 Agreement dated as of September 2, 2003 by and between Patriot Gold Corp. and Bruce Johnstone. (5)
10.5 Agreement dated January 22, 2004 executed by Bruce Johnstone with respect to registration rights. (8)
10.6 Letter of Intent dated November 13, 2003 between Patriot Gold Corp. and Ms. Barbara Williams. (9)
10.7 Purchase Contract dated February 19, 2004 between the Company, the parties identified therein as the Seller and First American Title Insurance Company of Yavapai County, as escrow agent. (7)
10.8 Binding Letter Agreement, dated March 4, 2004, by and between the Company and MinQuest, Inc. (8)
10.9 Agreement with Shareholder.com (10)
10.10 2005 Stock Option Plan (11)
10.11 Buy-Back Option Agreement, dated March 10, 2006, between the Company and Robert Coale (12)
10.12 Buy-Back Option Agreement, dated March 10, 2006, between the Company and Robert Sibthorpe (12)
10.13 Redemption Agreement, dated March 10, 2006, between the Company and Ronald C. Blomkamp (12)
10.14 Letter Agreement, dated July 24, 2007, between MinQuest Inc. and the Company (13)
10.15 Assignment and Assumption Agreement dated January 29, 2008 between the Company and American Goldrush Corp. (14)
10.19 Assignment and Assumption Agreement dated May 30, 2008 between the Company and American Goldfields Inc. (16)
10.20 Bruner Property Option Agreement, dated April 1, 2009 between the Company and American International Ventures Inc. (17)
10.21 Resource Report for Moss Mine Gold Property(18)
10.22 2012 Stock Option Plan (19)
31 Rule 13a-14(a)/15d14(a) Certifications (attached hereto)
32 Section 1350 Certifications (attached hereto)

 

(1) Previously filed with the Company’s Form 10SB12g submitted to the SEC on June 25, 2001, SEC file number 0-32919.

(2) Previously filed as an exhibit to the Company’s Information Statement submitted to the SEC on May 21, 2003.

(3) Previously filed as exhibits to the Company’s May 31, 2003 Form 10-K submitted to the SEC on August 26, 2003.

(4) Previously filed as Exhibit 4.1 to the Company’s Form S-8 on May 30, 2003, SEC File Number 333-105691, as amended by the Company’s Post-Effective Amendment of Form S-8 filed on September 23, 2003.

(5) Previously filed as an exhibit to the Company’s August 31, 2003 Form 10-QSB submitted to the SEC on October 14, 2003.

(6) Previously filed with the Company’s registration statement on Form SB-2, Registration No. 333-112424, submitted to the SEC on February 2, 2004.

(7) Previously filed as an exhibit to the Company’s February 29, 2004 Form 10-QSB submitted to the SEC on April 9, 2004.

(8) Previously filed with the amendment No. 2 to the Company’s registration statement on Form SB-2/A, Registration No. 333-112424, submitted to the SEC on July 16, 2004.

(9) Previously filed with the amendment No. 3 to the Company’s registration statement on Form SB-2/A, Registration No. 333-112424, submitted to the SEC on October 6, 2004.

(10) Previously filed with the amendment No. 4 to the Company’s registration statement on Form SB-2/A, Registration No. 333-112424, submitted to the SEC on December 27, 2004.

(11) Previously filed as Exhibit 4.1 to the Company’s Form S-8 filed on November 18, 2005 File Number 333-129840.

(12) Previously filed with the Company’s Form 8-K submitted to the SEC on March 10, 2006.

(13) Previously filed as an exhibit to the Company’s May 31, 2007 Form 10-K submitted to the SEC on August 29, 2008.

(14) Previously filed with the Company’s Form 8-K submitted to the SEC on February 1, 2008.

(15) Previously filed with the Company’s Form 8-K submitted to the SEC on March 20, 2008.

(16) Previously filed with the Company’s Form 8-K submitted to the SEC on June 3, 2008.

(17) Previously filed with the Company’s Form 8-K submitted to the SEC on April 1, 2009.

(18) Previously filed with the Company’s Form 8-K submitted to the SEC on January 29, 2010.

(19) Previously filed as Exhibit 4.1 to the Company’s Form S-8 filed on July 20, 2013 File Number 000-32919.

 

44
 

 

 

 

 

PATRIOT GOLD CORP.

 

(An Exploration State Company)

 

CONSOLIDATED FINANCIAL STATEMENTS

 

May 31, 2014 and 2013

 

 

 

 

45
 

 


Contents   Page
       
Report of Independent Registered Public Accountants   F-2
       
Consolidated Balance Sheets as of    
  May 31, 2014 and 2013   F-3
       
Consolidated Statements of Operations for the    
  Years Ended May 31, 2014 and 2013   F-4
       
Consolidated Statement of Stockholders’ Equity for the    
  Years Ended May 31, 2014 and 2013   F-5
       
Consolidated Statements of Cash Flows for the    
  Years Ended May 31, 2014 and 2013   F-6
       
Notes to Consolidated Financial Statements   F-7

 

 

F-1
 

 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

 

To the Board of Directors and Stockholders

Patriot Gold Corp.

 

 

We have audited the accompanying consolidated balance sheets of Patriot Gold Corp. (‘the Company") as of May 31, 2014 and 2013, and the related consolidated statements of operations, stockholder’s equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Patriot Gold Corp. as of May 31, 2014 and 2013, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

 

 

/S/ PETERSON SULLIVAN LLP

 

 

Seattle, Washington

August 15, 2014

 

F-2
 

 

PATRIOT GOLD CORP.

CONSOLIDATED BALANCE SHEETS

 

   May 31, 2014   May 31, 2013 
ASSETS          
Current assets          
Cash  $592,142   $46,895 
Stock subscriptions receivable   32,000     
Prepaid expenses   62,039    25,033 
Total current assets   686,181    71,928 
           
Reclamation Deposits  (Note 4)   13,255    14,155 
           
Total assets  $699,436   $86,083 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
Current liability          
Accounts payable and accrued liabilities  $19,197   $2,040 
           
Stockholders' equity          
Preferred stock, par value $.001 authorized 20,000,000 shares; no shares issued at May 31, 2014 and 2013        
Common stock, par value $.001 authorized 100,000,000 shares; issued and outstanding shares: 46,938,647 at May 31, 2014 and 28,976,147 at May 31, 2013   46,939    28,976 
Additional paid-in capital   27,412,841    26,607,804 
Accumulated other comprehensive income   (16,361)   (16,361)
Retained deficit   (26,763,180)   (26,536,376)
Total stockholders' equity   680,239    84,043 
           
Total liabilities and stockholders' equity  $699,436   $86,083 

 

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

 

F-3
 

  

PATRIOT GOLD CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

   For the Years Ended May 31, 
   2014   2013 
         
Revenues  $   $ 
Cost of revenues        
           
Gross margin        
           
Expenses          
Mineral costs   1,970    22,205 
General and administrative   219,681    311,926 
           
Net loss from operations   (221,651)   (334,131)
           
Other income / (expense)          
Currency exchange   (5,153)   96 
           
Net loss  $(226,804)  $(334,035)
           
Earnings per share - basic and diluted          
Income (loss) per common share   (0.01)   (0.01)
Weighted Average Shares Outstanding   33,307,209    27,787,265 

 

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

 

F-4
 

  

PATRIOT GOLD CORP.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

 

               Accumulated         
           Additional   Other         
   Preferred Stock   Common Stock   Paid-In   Comprehensive   Retained     
   Shares   Par Value   Shares   Par Value   Capital   Income   Deficit   Total 
                                         
Balance May 31, 2012      $    26,224,400   $26,224   $26,381,625   $(16,361)  $(26,202,341)  $189,147 
                                         
Common stock option grants                   9,331            9,331 
                                         
Exercise of common stock options           220,000    220    9,380            9,600 
                                         
Issuance of common stock and warrants           2,531,747    2,532    207,468            210,000 
                                         
Net loss                           (334,035)   (334,035)
                                         
Balance May 31, 2013           28,976,147    28,976    26,607,804    (16,361)   (26,536,376)   84,043 
                                         
Issuance of common stock and warrants           17,962,500    17,963    805,037            823,000 
                                         
Net loss                           (226,804)   (226,804)
                                         
Balance May 31, 2014      $    46,938,647   $46,939   $27,412,841   $(16,361)  $(26,763,180)  $680,239 

 

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

 

F-5
 

 

PATRIOT GOLD CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

   For the Twelve Months Ended 
   May 31, 
   2014   2013 
Cash flows from operating activities:          
Net loss  $(226,804)  $(334,035)
Adjustments to reconcile net loss to net cash used in operating activities:          
Compensation expense of stock options       9,331 
Change in operating assets and liabilities:          
(Increase) in prepaid expenses   (37,006)   (14,509)
Increase (decrease) in accounts payable   17,157    (35,410)
Net cash flows from operating activities   (246,653)   (374,623)
           
Cash flows from investing activity:          
Proceeds from refund of reclamation deposit   900     
           
Cash flows from financing activities:          
Proceeds from sale of common stock   791,000    210,000 
Proceeds from exercise of stock options       9,600 
Net cash flows from financing activities   791,000    219,600 
           
Net increase (decrease) in cash and  equivalents   545,247    (155,023)
Cash and equivalents, beginning of period   46,895    201,918 
Cash and equivalents, end of period  $592,142   $46,895 
           
           
Supplemental disclosure of cash paid for:          
Interest  $   $ 
Income taxes  $   $ 
           
Supplemental disclosure of non-cash financing and investing :          
Issuance of stock subscriptions receivable  $32,000   $ 

 

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

 

F-6
 

 

PATRIOT GOLD CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

NOTE 1 – NATURE OF BUSINESS AND OPERATIONS

 

The Company has no products or services as of May 31, 2014. The Company operated from November 30, 1998 through approximately May 31, 2000 in the production of ostrich meat. On June 1, 2000, the Company ceased operations.

 

In June 2003, Management decided to change the direction of the Company to natural resource exploration. The Company is currently engaged in the acquisition, exploration, and if warranted and feasible, development of natural resource properties.

 

All 3 properties are in the early stages of exploration. One of the property’s exploration programs is well under way and working towards establishing a resource. Further exploration will be required before a final evaluation as to the economic feasibility is determined.

 

The Company’s activities are subject to significant risks and uncertainties. The search for valuable natural resources as a business is extremely risky. There are no assurances that the properties the Company has contain commercially exploitable reserves. Additionally, natural resource exploration and development requires significant capital and the Company’s assets and resources are limited. The Company may fail to secure additional funding to support necessary exploration and development.

 

On April 16, 2010, we caused the incorporation of our wholly owned subsidiary, Provex Resources, Inc., (“Provex”) under the laws of Nevada. On April 16, 2010 the Company entered into an Assignment Agreement to assign the exclusive option to an undivided right, title and interest in the Bruner and Vernal property and the Bruner Expansion property to Provex. Pursuant to the Assignment Agreement, Provex assumed the rights, agreed to perform all duties and obligations of the Company arising under the Bruner and Vernal Property Option Agreement and the Bruner Expansion Property Option Agreement.  Provex’s only assets are the aforementioned agreements and it does not have any liabilities.

 

NOTE 2 – LIQUIDITY

 

As shown in the accompanying consolidated financial statements, the Company has not realized any revenue from its present operations. During the year ended May 31, 2014, the Company incurred a net operating loss of $226,804. The Company had an accumulated deficit of $26,763,180 at May 31, 2014.

 

Over the past year, the Company’s operations have been funded through private equity raising a total of $823,000. As of May 31, 2014, the Company had approximately $590,000 of unrestricted cash. Management estimates that the Company will require approximately $250,000 to fund the Company’s planned operations for fiscal year 2015. Therefore, the Company currently has sufficient cash to meet its operating requirements over the next year. However, the Company has experienced and continues to experience negative operating margins and negative cash flows from operations, as well as an ongoing requirement for substantial additional capital investment. In order to develop its properties, the Company will need to obtain financing in the future. Management plans to seek the additional capital through private placements and public offerings of its common stock but there can be no assurance that management will be successful in its attempt to raise the additional funds.

 

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Provex. Collectively, they are referred to herein as “the Company”. Inter-company accounts and transactions have been eliminated.

 

F-7
 

 

Management’s Estimates and Assumptions

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Exploration and Development Costs

 

Mineral exploration costs and payments related to the acquisition of the mineral rights are expensed as incurred. When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs incurred to acquire and develop such property will be capitalized. Such costs will be amortized using the units-of-production method over the estimated life of the probable reserve.

 

Cash and Cash Equivalents

 

The Company considers all investment instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes. The Company had no cash equivalent as of May 31, 2014.

 

Foreign Currency Translation

 

The Company’s functional currency and reporting currency is the U.S. dollar. Monetary items denominated in foreign currency are translated to U.S. dollars at exchange rates in effect at the balance sheet date and non-monetary items are translated at rates in effect when the assets were acquired or obligations incurred. Revenue and expenses are translated at rates in effect at the time of the transactions. Foreign exchange gains and losses are included in the consolidated statements of operations.

 

Concentration of Credit Risk

 

The Company has no off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. The Company maintains the majority of its cash balances with one financial institution in the form of demand deposits.

 

Income/Loss per Share

 

Basic earnings per share is computed by dividing the net income by the weighted average number of shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted-average number of common shares plus dilutive potential common shares outstanding during the period. As of the years ended May 31, 2014 and 2013, the Company had 200,000 and 1,000,000, respectively, common stock options outstanding and exercisable and 32,774,247 and 7,987,747, respectively, warrants outstanding of which 5,811,747 and 4,456,000, respectively, were exercisable. At May 31, 2014 and 2013, the effect of the Company’s outstanding options and warrants would have been anti-dilutive. Accordingly, only basic income per common share is presented for 2014 and 2013.

 

Comprehensive Income

 

The Company has adopted ASC 220 (formerly SFAS No. 130, “Reporting Comprehensive Income”), which establishes standards for reporting and display of comprehensive income, its components and accumulated balances. The Company has disclosed this information on its Statement of Operations. Comprehensive income is comprised of net income (loss) and all changes to capital deficit except those resulting from investments by owners and distribution to owners.

 

The Company has no items of other comprehensive income in any period presented. Therefore, net income as presented in the Company’s Statement of Operations equals comprehensive income.

 

Accumulated other comprehensive income at May 31, 2014 and 2013, consists solely of foreign currency adjustments related to the Company changing its functional currency from Canadian to U.S. dollar in 2003.

 

F-8
 

 

Stock Options

 

The Company measures all employee stock-based compensation awards using a fair value method on the date of grant and recognizes such expense in its consolidated financial statements over the requisite service period. The Company uses the Black-Scholes pricing model to determine the fair value of stock-based compensation awards on the date of grant. The Black-Scholes pricing model requires management to make assumptions regarding option lives, expected volatility, and risk free interest rates.

 

Fair Value of Financial Instruments

 

The carrying value of the Company's financial instruments, including receivables, prepaids, accounts payable, and accrued liabilities, at May 31, 2014 and 2013 approximates their fair values due to the short-term nature of these financial instruments. Management is of the opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments.

 

Related Party Transactions

 

A related party is generally defined as (i) any person who holds 10% or more of the Company’s securities and their immediate families, (ii) the Company’s management, (iii) someone who directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

 

Income Taxes

 

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets, including tax loss and credit carryforwards, and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on their characteristics. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

 

Interest costs related to unrecognized tax benefits are classified as “Interest expense, net” in the accompanying statements of operations. Penalties, if any, would be recognized as a component of “Selling, general and administrative expenses”. The Company recognized $0 of interest expense related to unrecognized tax benefits for the years ended May 31, 2014 and 2013.

 

New Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) that are adopted by the Company as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards did not or will not have a material impact on the Company’s consolidated financial statements upon adoption.

 

On June 10, 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation, which removes all incremental financial reporting requirements from GAAP for development stage entities, including the removal of Topic 915 from the FASB Accounting Standards Codification. The presentation and disclosure requirements in Topic 915 will no longer be required for the first annual period beginning after December 15, 2014. The revised consolidation standards are effective one year later, in annual periods beginning after December 15, 2015. Early adoption is permitted. The Company adopted ASU No. 2014-10 effective as of May 31, 2014. As a result the Company has revised its consolidated statements of operations, cash flows and equity statement to exclude reporting for the period from date of inception through May 31, 2014.

 

F-9
 

 

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). ASU 2014-09 is intended to improve the financial reporting requirements for revenue from contracts with customers by providing a principle based approach. The core principle of the standard is that revenue should be recognized when the transfer of promised goods or services is made in an amount that the entity expects to be entitled to in exchange for the transfer of goods and services. ASU 2014-09 also requires disclosures enabling users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. This standard will be effective for financial statements issued by public companies for annual reporting periods beginning after December 15, 2016. Early adoption is not permitted. The Company is currently evaluating the potential impact of ASU 2014-09 on the consolidated financial statements.

 

There are no other recently issued accounting pronouncements that are expected to have a material impact on our financial condition, results of operations or cash flows.

 

NOTE 4 – RECLAMATION DEPOSITS

 

The Company has been granted an exploration permit from the State of Nevada for its Vernal property. As part of the application process, the Company was required to pay a refundable deposit to the State as surety for the estimated reclamation costs associated with the planned exploration program. During the year ended May 31, 2014, the Company received a refund for the reclamation bond relating to the Vernal property in the amount of $900.

 

In addition, as part of the Company’s acquisition and subsequent termination of the Imperial Property Option Agreement, the reclamation bond for this property was transferred to the Company. Upon completion of the required reclamation, the Company will receive a refund of the deposit.

 

NOTE 5 – MINERAL PROPERTIES

 

Bruner and Vernal Properties

 

Pursuant to a Property Option Agreement (“BV Agreement”), dated as of July 25, 2003, with MinQuest, Inc., a Nevada corporation (“MinQuest”), we acquired the option to earn a 100% interest in the Bruner and Vernal mineral exploration properties located in Nevada. Together, these two properties originally consisted of 28 unpatented mining claims on a total of 560 acres in the northwest trending Walker Lane located in western central Nevada. The Bruner position was subsequently expanded from 16 unpatented mining claims to 80 unpatented mining claims bringing the total at Bruner to approximately 1,653 acres. Any additional claims agreed by the Company to be staked by MinQuest within 2 miles from the existing perimeter of the Property boundaries shall form part of the BV Agreement.

 

In order to earn a 100% interest in these two properties, option payments totaling $92,500 and an additional $500,000 in exploration expenditures were required. All mining interests in the property are subject to MinQuest retaining a 3% royalty of the aggregate proceeds received by us from any smelter or other purchaser of any ores, concentrates, metals or other material of commercial value produced from the property, minus the cost of transportation of the ores, concentrates or metals, including related insurance, and smelting and refining charges, including penalties.

 

Pursuant to the BV Agreement, we have a one-time option to purchase up to 2% of MinQuest’s royalty interest at a rate of $1,000,000 for each 1%. We must exercise our option 90 days following completion of a bankable feasibility study of the Bruner and Vernal properties, which, as it relates to a mineral resource or reserve, is an evaluation of the economics for the extraction (mining), processing and marketing of a defined ore reserve that would justify financing from a banking or financing institution for putting the mine into production.

 

To date, the Company has paid the option payments totaling $92,500, and has accumulated approximately $625,070 and $79,760 of exploration expenditures on the Bruner and Vernal properties respectively. These expenditures have satisfied the requirements of the BV Agreement and 100% interest in these two properties have been transferred to Patriot, subject to MinQuest retaining a 3% royalty.

 

F-10
 

 

On April 1, 2009, the Company entered into a Property Option Agreement (the “AIV Agreement”) with American International Ventures Inc. (“AIV”), to acquire the exclusive option to an undivided right, title and interest in 28 patented Federal mining claims and mill sites located in Nye County, Nevada.  Simultaneous with the execution and delivery of the Agreement, the Company paid AIV $30,000. In order to earn its option in the Property, the Company must make annual property option payments each year on April 1 consisting of $35,000 in 2010, $40,000 in 2011, $45,000 in 2012, $50,000 in 2013, $55,000 in 2014, $60,000 in 2015, and $1,185,000 in 2016. Following which the Company shall be deemed to have exercised its option under the Agreement and shall be entitled to an undivided 100% right, title and interest in and to the Bruner Property Expansion subject to a 1.5% Net Smelter Return (“NSR”) royalty payable to AIV and a 2% NSR payable to the former Property owner. The 2% NSR royalty may be purchased by the Company for a total payment of $500,000 and 1% of AIV’s 1.5% NSR royalty can be purchased by the Company for an additional payment of $500,000 at any time up to 30 days after beginning mine construction. The claims optioned under the agreement with AIV are contiguous with the Company’s existing Bruner property claims and therefore are also subject to the terms and conditions of the original BV Agreement with MinQuest.

 

On April 16, 2010, the Company entered into an Assignment Agreement with its wholly owned subsidiary, Provex Resources, Inc., a Nevada corporation (“Provex”), to assign the exclusive option to an undivided right, title and interest in the Bruner, Bruner Expansion and Vernal Properties to Provex. Pursuant to the Agreement, Provex assumed the rights, and agreed to perform all of the duties and obligations, of the Company arising under the original property option agreements.

 

On May 28, 2010 Provex entered into an exclusive right and option agreement with Canamex Resources Corp. (“Canamex”) whereby Canamex may earn up to 75% undivided interest in the Bruner, and Bruner Expansion properties, herein after collectively referred to as (the “Bruner Properties”). Upon the completion of the terms of the Agreement by Optionee, and upon earning its’ initial interest, the parties have agreed to negotiate a definitive joint venture agreement in good faith which will supersede the current agreement.

 

Moss Property

 

The Moss Property consists of 104 unpatented claims and 15 patented claims located in the Oatman Mining District of Mohave County, Arizona. The Company acquired these claims in a series of transactions during fiscal 2004 and 2005.

 

We hold the MinQuest claims via 104 unpatented mining claims that were acquired from MinQuest. On March 4, 2004 the Company signed a Letter Agreement (the “Agreement”) that earned it a 100% interest in these claims by paying MinQuest a one-time fee of $50,000. This $50,000 fee was paid on July 7, 2004. Subject to the terms and conditions of the Agreement, MinQuest will retain a 3% NSR on any and all production derived from the unpatented mining claims listed under the Agreement and on public lands within 1 mile of MinQuest, Inc.’s outside perimeter of the present claim boundary; a 1.0% NSR on patented claims with no other royalty within the property; and a 0.5% overriding NSR on all production within the property derived from patented claims with other royalty interests.

 

On February 28, 2011, the Company entered into an Exploration and Option to Enter Joint Venture Agreement (the “Moss Agreement”), with Idaho State Gold Company, LLC, (“ISGC”) whereby the Company granted the option and right to earn a vested seventy percent (70%) interest in the property and the right and option to form a joint venture for the management and ownership of the properties called the Moss Mine Property, Mohave County, Arizona. Pursuant to the Moss Agreement, ISGC paid US $500,000 upon execution, and must spend an aggregate total of US $8 million on exploration and related expenditures over the next five years and subsequent to exercise the earn-in, ISGC and Patriot Gold will form a 70/30 joint venture. Under this agreement financing of future work on the property would be on a proportional basis under the direction of a management committee with voting rights proportional to ownership percentage. Either party may be diluted on the basis of a standard formula if they do not contribute to the planned programs. If either party is diluted below 10 percent, their interest will convert to a three percent NSR (net smelter return) royalty. An existing 3-3.5 percent NSR exists on the Moss Mine Property.

 

In March, 2011, ISGC transferred its rights to the Exploration and Option Agreement dated February 28, 2011, to Northern Vertex Mining Corp. (“Northern Vertex”).

 

F-11
 

 

During the year ended May 31, 2014, MinQuest earned a 1.0% NSR totaling $26,598 generated from minerals recovered and sold during a Phase 1 plant operation completed by Northern Vertex. In accordance with the agreements, Northern Vertex paid the NSR to the Company and the Company paid the NSR to MinQuest. The receipt and disbursement of the NSR are recorded in mineral exploration expenses on the Consolidated Statement of Operations for a net effect of $nil.

 

As of May 31, 2014, the Company has incurred approximately $1,516,320 of exploration expenses on the Moss Property, $160 and $5,528 were spent on exploration for the years ended May 31, 2014 and 2013, respectively.

 

NOTE 6 – STOCK OPTIONS

 

Approval of 2012 Stock Plan

 

On July 9, 2012, the Board of Directors adopted the 2012 Stock Option Plan (the "2012 Plan"). The 2012 Plan provides for the authority to grant options to purchase 3,900,000 shares (subject to adjustment) of Patriot's common stock to officers, directors, consultants and agents of Patriot and its subsidiaries. Options granted to officers under the 2012 Plan may be incentive stock options or non-qualified stock options. Options granted to others under the 2012 Plan are limited to non-qualified stock options.

 

The 2012 Plan is administered by the Board of Directors or a committee designated by the Board of Directors. The Board of Directors currently has the authority to administer the 2012 Plan. Subject to the provisions of the 2012 Plan, the Board of Directors or the Committee has the authority to determine the directors, officers, consultants and advisors to whom options will be granted, the number of shares covered by each option, vesting rights and the terms and conditions of each option that is granted to them. However, the aggregate fair market value (determined at the time the option is granted) of the shares with respect to which incentive stock options are exercisable for the first time by an optionee during any calendar year cannot exceed $100,000. Options granted pursuant to the 2012 Plan are exercisable no later than ten years after the date of grant. The exercise price per share of common stock for options granted under the 2012 Plan shall be determined by the Board of Directors or the designated committee, except for incentive stock options granted to a holder of ten percent or more of Patriot's common stock, for whom the exercise price per share will not be less than 110% of the fair market value. No option can be granted under the 2012 Plan after July 9, 2022.

 

As of May 31, 2014, there were 3,780,000 shares available for grant.

 

2003 and 2005 Stock Option Plans

 

The Company’s Board of Directors adopted the 2003 Stock Option Plan in May 2003 which has reserved 5,546,000 (amended) shares of common stock and adopted the 2005 Stock Option Plan in November 2005 which has reserved an additional 2,000,000 shares of common stock reserved for grant to employees, officers, directors, consultants and independent contractors. As of May 31, 2014 there were 0 shares of common stock available for grant under the 2003 Plan as the plan expired on May 26, 2013. As of May 31, 2014 there were 1,800,000 shares of common stock available for grant under the 2005 Plan.

 

In general, options are granted with an exercise price equal to the fair value of the underlying common stock on a 30 day rolling average. Options generally have a contractual life of 10 years and vest over periods ranging from being fully vested as of the grant dates to four years.

 

Pursuant to the 2005 and 2003 Stock Option Plans, grants of shares can be made to employees, officers, directors, consultants and independent contractors of non-qualified stock options as well as for the grant of stock options to employees that qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986 (“Code”) or as non-qualified stock options. The Plan is administered by the Option Committee of the Board of Directors (the “Committee”), which has, subject to specified limitations, the full authority to grant options and establish the terms and conditions for vesting and exercise thereof. Currently the entire Board functions as the Committee.

 

F-12
 

 

Stock Option Activity

 

On July 9, 2012, the Board of Directors of the Company granted options to a Director of the Company to purchase 700,000 shares of the Company’s common stock under the 2003 Plan. The stock options vested on January 9, 2013 and have an exercise price of $0.10 per share and expire 10 years from the grant date. On October 14, 2013, the option grant was cancelled upon the resignation of the director.

 

On July 9, 2012, the Board of Directors of the Company granted options to a Director of the Company to purchase 1,700,000 shares of the Company’s common stock purchase under the 2005 plan. The stock options have a three year vesting schedule as follows: 100,000 option shares vest on January 9, 2013, 800,000 option shares vest on the January 9, 2014, and 800,000 options shares vest on January 9, 2015. The options have exercise prices of $0.10, $0.20 and $0.30 corresponding to their vesting dates and expire 10 years from the grant date. On May 31, 2013, the unvested options granted to this Director totaling 1,600,000 stock options were cancelled. In accordance with ASC 718-20, all unrecognized stock compensation expense was immediately recognized in the Statement of Consolidated Operations in the amount of $4,180. On October 14, 2013, the remaining 100,000 outstanding and vested options were cancelled upon the resignation of the director.

 

On July 12, 2012, the Board of Directors of the Company granted options to a consultant to purchase 100,000 shares of the Company’s common stock under the 2012 Plan. The stock options vested immediately, have an exercise price of $0.03 per share, and expire 10 years from the date of grant. On July 27, 2012, the 100,000 common stock purchase options were exercised for cash proceeds to the Company totaling $3,000.

 

On September 6, 2012, the Board of Directors of the Company granted options to a consultant to purchase 20,000 shares of the Company’s common stock under the 2012 Plan. The stock options vested immediately, had an exercise price of $0.08 per share, and expire 10 years from the date of grant. On October 30, 2012, the 20,000 common stock purchase options were exercised for cash proceeds to the Company totaling $1,600.

 

On May 15, 2013, 100,000 common stock purchase options granted June 23, 2003 were exercised for cash proceeds to the Company totaling $5,000, or $0.05 per share.

 

There were no stock options granted during the year ended May 31, 2014.

 

The fair value of each stock option is estimated at the date of grant using the Black-Scholes option pricing model. The estimated weighted-average fair value of stock options granted in 2013 was approximately $0.004 per share. Assumptions regarding volatility, expected term, dividend yield and risk-free interest rate are required for the Black-Scholes model. The volatility assumption is based on the Company’s historical experience. The risk-free interest rate is based on a U.S. treasury note with a maturity similar to the option award’s expected life. The expected life represents the average period of time that options granted are expected to be outstanding. The assumptions for volatility, expected life, dividend yield and risk-free interest rate are presented in the table below:

 

  2013
Weighted average risk-free interest rate 0.22%
Expected life in years 1.4
Weighted average expected volatility 110.40%
Expected dividend yield $0
Weighted average grant date fair value $0.0037

 

 

F-13
 

 

The following table summarizes stock option activity and related information for the years ended May 31, 2014 and 2013:

 

   Number of Stock Options Outstanding   Weighted Average Exercise Price   Weighted Average Remaining Contractual Life (Years)   Aggregate Intrinsic Value 
Balance, May 31, 2012   300,000   $0.18    1.06   $0.00 
Option granted   2,520,000    0.19           
Options cancelled   (1,600,000)   0.25           
Options exercised   (220,000)   0.04           
Balance, May 31, 2013   1,000,000    0.13    7.8    0.00 
Option granted                  
Options cancelled   (800,000)   0.10           
Options exercised                  
Balance May 31, 2014   200,000    0.25    1.8    0.00 
                     
Exercisable at May 31, 2014   200,000    0.25    1.8    0.00 

 

For the years ended May 31, 2014 and 2013, total stock compensation expense recognized in general and administrative expenses in the Consolidated Statement of Operations was $nil and $9,331, respectively.

 

As of May 31, 2014 and 2013, all outstanding options were fully vested and exercisable. As a result there was no unrecognized stock compensation expense.

 

The Company issues new stock when options are exercised.

 

NOTE 7 – COMMON STOCK

 

The Company may issue up to 100,000,000 shares of $.001 par value common stock. As of May 31, 2014 the Company had 46,938,647 common shares outstanding.

 

During the year ended May 31, 2014, the Company completed multiple private placements issuing 12,662,500 units ranging in price from $0.04 to $0.08 per unit where a unit consists of one share of the Company’s common stock and one Class A Warrant. Total proceeds were $591,000 of which $354,723 was allocated to the warrants. The relative fair value was determined using a Black-Scholes option pricing model and was recorded in the equity section of the balance sheet. Each warrant allows for the purchase of one share of the Company’s common stock for prices ranging from $0.06 to $0.12. The vesting period of the warrants is one year from the date of grant.

 

During the year ended May 31, 2014, the Company completed multiple private placements issuing 4,500,000 units ranging in price from $0.04 to $0.05 per unit where a unit consists of one share of the Company’s common stock, one Class A Warrant, one Class B Warrant and one Class C Warrant. Total proceeds were $200,000 of which $162,492 was allocated to the warrants. The relative fair value was determined using a Black-Scholes option pricing model and recorded in the equity section of the balance sheet. Each warrant allows for the purchase of one share of the Company’s common stock. The Class A Warrants have an exercise price ranging from $0.06 to $0.10 per warrant and have a vesting period ranging from 6 to 12 months. The Class B Warrants have an exercise price ranging from $0.09 to $0.12 per warrant and have a vesting period ranging from 12 to 24 months. The Class C Warrants have an exercise price ranging from $0.12 to $0.15 per warrants and have a vesting period ranging from 18 to 36 months.

 

On April 14, 2014, the Company issued 300,000 units for $0.04 per unit for $12,000 where a unit consists of one share of the Company’s common stock and one Class A Warrant. Each warrant allows for the purchase of one share of the Company’s common stock for $0.06. The vesting period of the warrants is one year from the date of grant. The relative fair value of the warrants was determined to be $7,719 using the Black-Scholes option pricing model which was recorded in the equity section of the balance sheet. The sale was recorded as stock subscription receivable and received by the Company on June 2, 2014.

 

F-14
 

 

On May 14, 2014, the Company issued 500,000 units for $0.4 per unit for a total of $20,000 where a unit consists of one share of the Company’s common stock and one Class A Warrant. Each warrant allows for the purchase of one share of the Company’s common stock for $0.06. The vesting period of the warrants is one year from the date of grant. The relative fair value of the warrants was determined to be $12,232 using the Black-Scholes option pricing model which was recorded in the equity section of the balance sheet. The sale was recorded as stock subscription receivable and received by the Company on June 5, 2014.

 

During the year ended May 31, 2013, the Company completed private placements issuing 1,531,747 shares of its common shares and 4,531,747 warrants. The purchase prices ranged from $0.05 to $018 for a total $150,000. Each warrant entitles the holder to purchase one additional share of common stock. The vesting period of the warrants ranges from 6 to 18 months. The warrants have exercise prices ranging from $0.08 to $0.21. The fair value of the warrants was estimated at $82,708 using a Black-Scholes option pricing model. The relative fair value of the warrants was recorded in the equity section of the balance sheet.

 

During the year ended May 31, 2013, the Company completed a private placement issuing 1,000,000 units with a purchase price of $0.06 per unit where a unit consists of one share of the Company’s common stock, one Class A Warrant, one Class B Warrant and one Class C Warrant. Total proceeds were $60,000. The Class A Warrants have an exercise price of $0.10 per warrant and have a vesting of 6 months. The Class B Warrants have an exercise price of $0.14 per warrant and have a vesting period of 12 months. The Class C Warrants have an exercise price of $0.18 per warrants and have a vesting period of 18 months. The relative fair value of the warrants was estimated at $38,801 using a Black-Scholes option pricing model. The fair value of the warrants was recorded in the equity section of the balance sheet.

 

The following table summarizes the assumptions used in the Black-Scholes models to estimate the fair value of the warrants:

 

  2014   2013
Volatility 115.06% - 137.82%   111.25% - 129.34%
Expected life 3 - 7 years   2.5 - 5.75 years
Risk-free interest rate 0.660% - 2.280%   0.335% - 0.680%
Dividend yield $0   $0
Weighted average grant date fair value $0.033   $0.086

 

The following table summarizes warrant activity during the years ended May 31, 2014 and 2013.

 

   Number of Warrants   Weighted Average Exercise Price   Warrants Exercisable   Weighted Average Exercise Price 
Outstanding May 31, 2012   3,456,000   $0.96    3,456,000   $0.96 
Issued   4,531,747   $0.14           
Canceled / expired / exercised                  
Outstanding May 31, 2013   7,987,747   $0.49    4,456,000   $0.49 
Issued   26,962,500   $0.09           
Canceled / exercised                  
Expired   (2,176,000)  $1.48           
Outstanding May 31, 2014   32,774,247   $0.09    5,811,747   $0.13 

 

F-15
 

 

The following tables summarizes outstanding warrants as of May 31, 2014:

 

    Warrants Outstanding   Warrants Exercisable 
Range of Exercise Price   Number of Warrants   Weighted Average Exercise Price   Remaining Contractual Life   Number of Warrants   Weighted Average Exercise Price   Remaining Contractual Life 
 $0.06 - $0.08    19,260,000   $0.08    4.76    1,460,000   $0.07    1.92 
 $0.09 - $0.14    9,839,643   $0.11    6.96    2,677,143   $0.12    5.84 
 $0.15 - $0.21    3,674,604   $0.17    6.56    1,674,604   $0.19    5.19 
                                 
      32,774,247              5,811,747           

 

On March 1, 2014, the Company decreased the exercise price on the remaining outstanding warrants issued on November 27, 2003, as follows: 320,000 Class A warrants exercise price decreased from $1.40 to $0.06; 320,000 Class B warrants exercise price decreased from $1.45 to $0.07; 320,000 Class C warrants exercise price decreased from $1.50 to $0.08; and 320,000 Class D warrants exercise price decreased from $1.55 to $0.09. These warrants are exchangeable for one share of the Company’s common stock. On October 23, 2012, the expiration date on these Warrants was extended from November 27, 2013 to November 27, 2015. The Company determined there was no material financial statement impact due to the extension of the expiration date and the reduction of the exercise price as the warrants were originally classified as equity when issued and modifications were done primarily as a benefit to the Company. Accordingly, no additional warrant expense has been recorded for the year ended May 31, 2014.

 

NOTE 8 – PREFERRED STOCK

 

The Preferred Stock may be issued in one or more series, from time to time, with each such series to have such designation, relative rights, preferences or limitations, as shall be stated and expressed in the resolution or resolutions providing for the issue of such series adopted by the Board of Directors of the Company. 

 

The Company has authorized a total of 20,000,000 shares of Preferred Stock with a par value of $0.001 of which 13,500,000 Preferred Stock have been designated as the Series A, 7% Redeemable Preferred Stock, par value of $0.001. The Corporation is under no obligation to pay dividends on the Series A Redeemable Preferred Stock, and the stock is redeemable at the option of the Company. In the event of any liquidation, dissolution or winding-up of the Corporation, the holders of outstanding shares of Series A Preferred shall be entitled to be paid out of the assets of the Corporation available for distribution to shareholders, before any payment shall be made to or set aside for holders of the Common Stock, at an amount of $.001 plus any unpaid and accrued dividends per share. A holder of Series A Preferred has the right to one vote per share in the case of matters provided for in the General Corporation Law of the State of Nevada or the Amended and Restated Articles of Incorporation or Bylaws to be voted on by the holders of the Series A Preferred Stock as a separate class. In the case of matters to be voted on by the holders of Common Stock and the holders of Series A Preferred voting together as a single class, each share of Series A Preferred, has full voting rights and powers equal to the voting rights and powers of the holders of the Common Stock.

 

As of May 31, 2014, there are no preferred shares outstanding.

 

NOTE 9 – INCOME TAXES

 

As of May 31, 2014, the Company had a net operating loss (“ NOL “) carryforward for income tax reporting purposes of approximately $10,350,000 that may be offset against future taxable income through 2034. Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited. No tax benefit has been reported in the financial statements, because the Company believes there is a 50% or greater chance the carryforwards will expire unused. Accordingly, the potential tax benefits of the loss carryforwards are offset by a valuation allowance of the same amount.

 

Deferred tax assets of the Company are as follows:

 

   2014   2013 
Loss carry-forwards  $3,519,000   $3,434,000 
Less: Valuation allowance   -3,519,000    -3,434,000 
Deferred tax asset recognized  $   $ 

 

F-16
 

 

A valuation allowance has been recorded to reduce the net benefit recorded in the financial statements related to these deferred tax assets. The valuation allowance is deemed necessary as a result of the uncertainty associated with the ultimate realization of these deferred tax assets.

 

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate of 34% (2013 – 34%) to net loss for the year. The sources and tax effect of the differences are as follows:

 

   2014   2013 
Computed “expected” tax benefit (liability)  $77,114   $113,572 
Permanent differences   (128)   (2,265))
Depreciation & amortization of exploration expenses   15,566    42,500 
Other   (7,552)   (1,807)
Change in Valuation Allowance   (85,000)   (152,000)
Income tax provision  $   $ 

 

With few exceptions, the Company is generally no longer subject to U.S. federal, state, local or non-U.S. income tax examinations by tax authorities for years before 2011.

 

NOTE 10 – SUBSEQUENT EVENTS

 

The Company has evaluated all events occurring after May 31, 2014, the date of the most recent balance sheet, for possible adjustment to the financial statements or disclosures through the date these financial statements were issued. The following items should be disclosed:

 

·During June 2014, the Company closed private placements totaling 1,236,957 units at a range of at $0.046 to $0.05 per unit for a total offering price of $57,500. Each unit consists one Class A Warrant which is exercisable twelve months from issuance for a period of four years at an exercise price ranging from $0.069 to $0.08.

 

·On June 20, 2014, the Board of Directors of the Company granted an aggregate 4,500,000 common stock options to three consultants of the Company. The stock options vest in three equal installments of 1,500,000 shares on the date of grant, on June 20, 2015, and June 20, 2016. The options have an exercise price of $0.10 per share and expire on June 20, 2024. The Company will recognize stock option compensation expense over the vesting period of approximately $430,000.

 

·On June 20, 2014, the Board of Directors of the Company granted an aggregate 1,070,000 common stock options to eight consultants of the Company. The stock options vest in three equal installments of 356,667 on the anniversary dates of June 20, 2015, 2016 and 2017. The options have an exercise price of $0.10 per share and expire on June 20, 2024. The Company will recognize stock option compensation expense over the vesting period of approximately $103,000.  

 

The Company has concluded that there are no other significant or material transactions to be reported.

 

F-17
 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

PATRIOT GOLD CORP.
   
Dated: August 15, 2014 By: /s/ Robert Coale
  Name: Robert Coale
  Title: President

 

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

 

SIGNATURE   TITLE   DATE
         

/s/ Robert Coale

Robert Coale

  Director   August 15, 2014
         

/s/ Jared Beebe

Jared Beebe

  Director   August 15, 2014

 

 

 

 

 

46