Recent Developments

Dakota Territory entered into an agreement with JR Resources Corp. (“JR”) in May 2020 (“Agreement”) whereby JR loaned the Company $1,150,000 and the Company granted JR the right to purchase up to 142,566,667 shares of common stock at $0.15 per share (approximate 64.24% on a fully diluted basis) in one or more closings on or prior to October 15, 2020 (“Termination Date”). The Agreement allows Dakota to advance its current mineral property acquisition strategy with a seasoned team of mining and exploration executives with a track record of building mines and mining companies from quality assets. The Company intends to use proceeds from this loan to acquire up to $350,000 of mineral interests or properties, up to $500,000 to conduct an airborne geophysical survey, and the balance for general corporate and working capital purposes.

Upon execution of this Agreement, JR and the Company entered into an amended and restated promissory note in the amount of $1,450,000, of which $300,000 was advanced in February 2020 and $1,150,000 was advanced in May 2020. The note is unsecured and bears interest at the annual rate of 0.25%, compounded annually, payable on December 31, 2021. Upon a closing of a change of control transaction with JR as a result of the purchase of shares of common stock pursuant to the Agreement (“Change of Control Closing”), JR will be required to exercise, and will in fact be deemed to have exercised, its right to convert the principal of and accrued interest on the note into Company common stock at the rate of $0.15 per share. On the maturity date, the principal amount of the note, together with any accrued but unpaid interest, will be due and payable in cash, provided that, if and to the extent that the Company does not pay this note in cash on the maturity date, then JR will be required to exercise, and will in fact be deemed to have exercised, its right to convert such unpaid portion of the note into shares of Company common stock. The conversion price is $0.15 per share through December 31, 2020 and, thereafter, the lesser of $0.15 per share and the volume weighted average price of Company common stock for the five consecutive trading days immediately preceding the date of such conversion (with a floor of $0.10 per share). The note has customary event of default provisions and, upon an event of default, JR will be required to convert the unpaid portion of the note into the shares of Company common stock, if not paid prior thereto in cash by the Company.

Subject to the terms and conditions set forth in the Agreement, JR shall have the right, prior to the Termination Date, to purchase the 142,566,667 shares (for a purchase price of up to $21,385,000, reduced by the amount of note converted) in one or more closings from the Company. Each closing is subject to negotiation of closing deliverables and satisfaction of closing conditions to be mutually agreed upon by the Company and JR, including agreement on how the proceeds will be utilized. In the event of a Change of Control Closing, the closing deliverables to be negotiated and mutually agreed upon include the application of the use of proceeds, negotiation of employment agreements, agreement on equity grants pursuant to an equity compensation plan to be adopted, and amended bylaws to be adopted that will govern the appointment of JR director designees. There is no assurance that closing deliverables will be agreed upon and that any closing will occur, as JR is not obligated to purchase any of the 142,566,667 shares of common stock.

JR and the Company agree to set up a technical committee to identify and pursue attractive acquisition opportunities, plan and conduct field programs, develop a framework and platform for the Company’s database, conduct data research, compile and assemble data, organize work programs to evaluate potential mineral inventories and develop long term exploration and mining strategies including capital and operating budgets.

Until the Termination Date, the Company has agreed to conduct its business in the ordinary course consistent with past practice, and without the prior consent of JR the Company shall not:

adopt or propose any amendment to its articles of incorporation or bylaws;  

effect any equity financings in excess of $250,000, exclusive of any common stock issued upon, and any proceeds received from, the exercise of outstanding derivative securities and common stock issued upon conversion by JR of the note;  

incur any additional debt or issue any debt securities other than in the ordinary course of business;  

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make any material loans or advances or assume or guarantee any obligations, except for existing financing arrangements or otherwise in the ordinary course of business;  

sell, transfer, assign, relinquish or dispose of any material asset or property; and  

other than in the ordinary course of business, modify or amend in any material respect or terminate any material contract.  

If and upon a Change of Control Closing, it is contemplated that the Company board shall consist of JR designees and certain current Company directors, as Company designees, it being understood that the number of Company directors shall not exceed five, and that the number of JR designees at any given time shall be one more than the number of Company designees. In the event of any vacancy in the office of any JR designee, a majority of the remaining JR designees shall have the right to designate a replacement, and in the event of any vacancy in the office of any Company designee, a majority of the remaining Company designees shall have the right to designate a replacement, in each case to fill such vacancy. These rights will be incorporated in amended bylaws to be negotiated and mutually agreed upon. Prior to such appointment of JR director nominees, the Company shall cause a Schedule 14f-1 to be filed with the SEC and mailed to the Company shareholders. It is expected that the amended bylaws shall provide for, among other things, the board composition mechanisms during the Standstill Period (as defined in the following sentence). The Standstill Period means the period ending on the earlier of (i) 18 months from a Change of Control Closing and (ii) the uplisting of the Company common stock (or the common stock of a successor-in-interest to the Company) to the NYSE or the Nasdaq Stock Market.

During the Standstill Period, JR has agreed to the following corporate governance provisions, among others:

to not vote its shares of common stock to remove any Company designee without the consent of a majority of the Company designees or approve a material amendment to the articles of incorporation or the amended bylaws unless approved and recommended by a majority of the Company Designees;  

JR shall vote its shares of common stock for the election of Company designees;  

any transaction between JR or any of its affiliates, on the one hand, and the Company, on the other hand (including, without limitation, the issuance of Company capital stock or derivative securities to JR or any of its affiliates and entering into certain business combinations by and between JR, the Company and any of their respective affiliates), shall be subject to approval by the Company designees and the JR designees shall recuse themselves from voting on the approval of such transactions; and  

not to engage in proxy solicitations or certain communications (other than in connection with a sale of the Company to a third party), or acquire additional shares of Company common stock or assets of the Company, in each case without the approval of the Company designees.  

In June 2020, the Company secured the services of New-Sense Geophysics Ltd. (“New-Sense”) to undertake a high resolution helicopter-borne district scale magnetic and radiometric survey of the Northern Black Hills of South Dakota. New-Sense is an industry leader in the collection and data processing of airborne geophysics. Robert B. Ellis (EGC Inc.) has also been engaged to consult on the design of the survey for Dakota Territory and will oversee data acquisition, provide additional processing and modeling of the data, and work with the Dakota Territory’s technical team to integrate the high resolution geophysics with the Company’s geology and geochemistry data sets.

Corporate History

The Company was incorporated in Nevada in 2002. The Company has been in the exploration stage since its formation and has not realized any revenues from operations. The Company’s gold initiatives included:

The September 2012 acquisition of North Homestake Mining Company, a private Nevada corporation that owned the Blind Gold Property located in the Black Hills of South Dakota. The Blind Gold Property was initially comprised of eighty-four unpatented mining claims covering approximately 1,600 acres and is located approximately four miles northwest of the historic Homestake Gold Mine. The Blind Gold Property is underlain by the Homestake Formation, an iron-formation that is the unique host for gold mineralization at the Homestake Mine. The two founders of North Homestake have 44-years of combined exploration, mining and management experience at the Homestake Mine, and own a 5% net smelter return royalty recorded on the original eighty-four claims that comprised the property acquired through the transaction.  

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The December 2012 acquisition of three groups of unpatented lode mining claims from Black Hills Gold Exploration LLC. Comprised of fifty-seven unpatented lode mining claims, the property acquisition covers approximately 853 acres in total. Twenty-three of the claims acquired are situated to the west, south and southeast of the Company's Blind Gold Property, with the balance of the claims establishing the Homestake Paleoplacer and City Creek Properties. All three groups of unpatented claims are brownfields exploration targets based on the previous work performed by Homestake Mining Company. With the addition of the new property in 2012, Dakota Territory increased the size of its land package in the Black Hills by approximately 50% to nearly 2,466 acres in total. 

The February 2014 acquisition of surface and mineral title to the 26.16 acres of the Squaw and Rubber Neck Lodes that comprise Mineral Survey 1706 in the Black Hills of South Dakota. Located immediately to the north and adjoining the Company’s Homestake Paleoplacer Property, Mineral Survey 1706 was explored by Homestake Mining Company in the late 1980’s.  

The March 2014 acquisition of approximately 565.24 mineral acres in the Northern Black Hills of South Dakota. The acquisition increased our mineral interests in the Homestake District by nearly 23%, to over 3,057 acres. As part of the property acquisition, we purchased an additional 64.39 mineral acres located immediately southwest and contiguous to our Paleoplacer Property, including mineral title to the historic Gustin, Minerva and Deadbroke Gold Mines. The March 2014 acquisition consolidated and extended our Paleoplacer Property position to a distance extending approximately 3,100 feet along the trend of the channel. 

The April 2017 acquisition of a combination of surface and mineral title to 284 acres in the Homestake District of the Northern Black Hills of South Dakota. The acquisition included 61 acres located immediately south and contiguous with our City Creek Property; 82 acres located approximately one half mile south of our Blind Gold Property at the western fringe of the historic Maitland Gold Mine; and 141 acres located immediately north and contiguous to our Homestake Paleoplacer Property, which added approximately 2,600 feet of the channel trend to our property position.  

The March 6, 2020 acquisition of 65 unpatented lode mining claims covering approximately 1,152 acres in the Homestake District of the Black Hills of South Dakota. The property is contiguous to the Company's Blind Gold Property and is the subject to historic prospecting activity that we believe suggests the occurrence of gold and/or silver mineralization at multiple locales on the property. We believe that the property is also a target for Pre-Cambrian Homestake style gold mineralization under the younger cover rocks based on the Company’s projections of the Homestake stratigraphic sequence (Ellison, Homestake, and Poorman Formations) and inversion modeling of geophysical survey data completed by our technical team in late 2018.  

U.S. Investors are cautioned not to assume that any defined resources will ever be converted into SEC Guide 7 Compliant Reserves. We have not established that any of our properties contain proven or probable reserves under SEC Industry Guide 7.

Competitors

The mining industry is highly competitive. We will be competing with numerous companies, some with greater financial resources available to them. We therefore will be at a significant disadvantage in the course of acquiring mining properties and obtaining materials, supplies, labor, and equipment. Additionally, there are established and well-financed companies active in the mining industry that will have an advantage over us if they are competing for the same properties.

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Government Approvals

The exploration, drilling and mining industries operate in a legal environment that requires permits to conduct virtually all operations. Thus, permits are required by local, state and federal government agencies. Local authorities, usually counties, also have control over mining activity. The various permits address such issues as prospecting, development, production, labor standards, taxes, occupational health and safety, toxic substances, air quality, water use, water discharge, water quality, noise, dust, wildlife impacts, as well as other environmental and socioeconomic issues.

Prior to receiving the necessary permits to explore or mine, the operator must comply with all regulatory requirements imposed by all governmental authorities having jurisdiction over the project area. Very often, in order to obtain the requisite permits, the operator must have its land reclamation, restoration or replacement plans pre-approved. Specifically, the operator must present its plan as to how it intends to restore or replace the affected area. Often all or any of these requirements can cause delays or involve costly studies or alterations of the proposed activity or time frame of operations, in order to mitigate impacts. All these factors make it more difficult and costly to operate and have a negative and sometimes fatal impact on the viability of the exploration or mining operation. Finally, it is possible that future changes in these laws or regulations could have a significant impact on our business, causing those activities to be economically re-evaluated at that time.

Effect of Existing or Probable Government and Environmental Regulations

Mineral exploration, including mining operations are subject to governmental regulation. Our operations may be affected in varying degrees by government regulation such as restrictions on production, price controls, tax increases, expropriation of property, environmental and pollution controls or changes in conditions under which minerals may be marketed. An excess supply of certain minerals may exist from time to time due to lack of markets, restrictions on exports, and numerous factors beyond our control. These factors include market fluctuations and government regulations relating to prices, taxes, royalties, allowable production and importing and exporting minerals. The effect of these factors cannot be accurately determined, and we are not aware of any probable government regulations that would impact the Company. This section is intended as a brief overview of the laws and regulations described herein and is not intended to be a comprehensive treatment of the subject matter.

Overview. Like all other mining companies doing business in the United States, we are subject to a variety of federal, state and local statutes, rules and regulations designed to protect the quality of the air and water, and threatened or endangered species, in the vicinity of its operations. These include “permitting” or pre-operating approval requirements designed to ensure the environmental integrity of a proposed mining facility, operating requirements designed to mitigate the effects of discharges into the environment during exploration, any mining operations, and reclamation or post-operation requirements designed to remediate the lands affected by a mining facility once any commercial mining operations have ceased.

Federal legislation in the United States and implementing regulations adopted and administered by the Environmental Protection Agency, the Forest Service, the Bureau of Land Management (“BLM”), the United States Fish and Wildlife Service (“USFWS”), the Army Corps of Engineers and other agencies—in particular, legislation such as the federal Clean Water Act, the Clean Air Act, the National Environmental Policy Act, the Endangered Species Act, the National Forest Management Act, the Wilderness Act, and the Comprehensive Environmental Response, Compensation and Liability Act—have a direct bearing on domestic mining operations. These federal initiatives are often administered and enforced through state agencies operating under parallel state statutes and regulations.

The Clean Water Act. The federal Clean Water Act is the principal federal environmental protection law regulating mining operations in the United States as it pertains to water quality.

At the state level, water quality is regulated by the Department of Environment and Natural Resources of the State of South Dakota. If our exploration or any future development activities might affect a ground water aquifer, it will have to apply for a Ground Water Discharge Permit from the Ground Water Quality Bureau in compliance with the Groundwater Regulations. If exploration affects surface water, then compliance with the Surface Water Regulations is required.

The Clean Air Act. The federal Clean Air Act establishes ambient air quality standards, limits the discharges of new sources and hazardous air pollutants and establishes a federal air quality permitting program for such discharges. Hazardous materials are defined in the federal Clean Air Act and enabling regulations adopted under the federal Clean Air Act include various metals. The federal Clean Air Act also imposes limitations on the level of particulate matter generated from mining operations.

National Environmental Policy Act (NEPA). NEPA requires all governmental agencies to consider the impact on the human environment of major federal actions as therein defined.

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Endangered Species Act (ESA). The ESA requires federal agencies to ensure that any action authorized, funded or carried out by such agency is not likely to jeopardize the continued existence of any endangered or threatened species or result in the destruction or adverse modification of their critical habitat. In order to facilitate the conservation of imperiled species, the ESA establishes an interagency consultation process. When a federal agency proposes an action that “may affect” a listed species, it must consult with the USFWS and must prepare a “biological assessment” of the effects of a major construction activity if the USFWS advises that a threatened species may be present in the area of the activity.

National Forest Management Act. The National Forest Management Act, as implemented through title 36 of the Code of Federal Regulations, provides a planning framework for lands and resource management of the National Forests. The planning framework seeks to manage the National Forest System resources in a combination that best serves the public interest without impairment of the productivity of the land, consistent with the Multiple Use Sustained Yield Act of 1960.

Wilderness Act. The Wilderness Act of 1964 created a National Wilderness Preservation System composed of federally owned areas designated by Congress as “wilderness areas” to be preserved for future use and enjoyment.

The Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). CERCLA imposes clean-up and reclamation responsibilities with respect to discharges into the environment, and establishes significant criminal and civil penalties against those persons who are primarily responsible for such discharges.

The Resource Conservation and Recovery Act (RCRA). RCRA was designed and implemented to regulate the disposal of solid and hazardous wastes. It restricts solid waste disposal practices and the management, reuse or recovery of solid wastes and imposes substantial additional requirements on the subcategory of solid wastes that are determined to be hazardous. Like the Clean Water Act, RCRA provides for citizens’ suits to enforce the provisions of the law.

National Historic Preservation Act. The National Historic Preservation Act was designed and implemented to protect historic and cultural properties. Compliance with the Act is necessary where federal properties or federal actions are undertaken, such as mineral exploration on federal land, which may impact historic or traditional cultural properties, including native or Indian cultural sites.

In the fiscal year ended March 31, 2020, we incurred minimal costs in complying with environmental laws and regulations in relation to our operating activities, although costs may increase in future periods.

Employees

We have no employees. Our management, all of whom are consultants, conducts our operations. Given the early stage of our exploration properties, we intend to continue to outsource our professional and personnel requirements by retaining consultants on an as needed basis. However, if we are successful in our initial and any subsequent drilling programs, we may retain employees.

Insurance

We currently do not maintain any insurance coverage to cover losses or risks incurred in the ordinary course of business.

Research and Development

The Company has spent only nominal amounts during each of the last two fiscal years on research and development activities.

Office Facilities

Our principal executive offices are located at 10580 N. McCarran, Building 115-208, Reno, NV 89503. Our telephone number is (713) 542-5161.

Item 1A. Risk Factors

Much of the information included in this annual report includes or is based upon estimates, projections or other “forward-looking statements”. Such forward-looking statements include projections or estimates made by the Company in connection with its business operations. These forward-looking statements, and any assumptions upon which they are based, reflect our current judgment regarding the direction of our business. Actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions, or other future performance suggested herein.

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Such estimates, projections or other “forward-looking statements” involve various risks and uncertainties as outlined below. We caution readers of this annual report that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other “forward-looking statements”.

Risk Associated with Our Business

All of our properties are in the exploration stage. There is no assurance that we can establish the existence of any mineral resource on any of our properties in commercially exploitable quantities. Until we can do so, we cannot earn any revenues from these properties, and our business could fail.

We have not established that any of our mining properties contain commercially viable mineral or metal reserves, nor can there be any assurance that our properties will contain commercially viable mineral or metal reserves. The ability of us to conclude that an individual prospect having a mineral or metal reserve that meets the requirements of Guide 7 of the SEC Industry Guides requires further efforts and any funds that we spend on exploration may be lost. Even if we do eventually discover commercially viable mineral or metal reserves on one or more of our properties, there can be no assurance that they can be developed into producing mines and we can extract those resources. Both mineral exploration and development involve a high degree of risk and few properties, which are explored and mined, are ultimately developed into commercially viable producing mines.

The commercial viability of an established mineral deposit will depend on a number of factors including, by way of example, the size, grade and other attributes of the mineral or metal deposit, the proximity of the resource to infrastructure, roads and a point for shipping, government regulation and market prices. Most of these factors will be beyond our control, and any of them could increase costs and make extraction of any identified mineral resource unprofitable.

Even if commercial viability of a mineral or metal deposit is established, we may be required to expend significant resources until production is possible, during which time the economic feasibility of production may change. Substantial expenditures are required to both establish proven and probable reserves and then in order to implement drilling operations. Because of these uncertainties, no assurance can be given that any of our potential drilling programs will result in commercially viable operations and the establishment or expansion of resources or reserves, the failure of which will adversely impact our Company and business.

If we establish the existence of commercially viable mineral or metal resources on any of our properties in a commercially exploitable quantity, we will require additional capital in order to develop the property into production. If we cannot raise this additional capital, we will not be able to exploit the resource, and our business could fail.

If we do discover mineral and metal resources in commercially exploitable quantities on any of our properties, we will be required to expend substantial sums of money to establish the extent of the resource, engage in drilling operations and develop extraction and processing facilities (or make arrangements therefor) and infrastructure. We do not have adequate capital to develop necessary facilities and infrastructure and will need to raise additional funds. Although we may derive substantial benefits from the discovery of a commercially exploitable deposits, there can be no assurance that such a resource will be large enough to justify commercial operations, nor can there be any assurance that we will be able to raise the funds required for development on a timely basis. If we cannot raise the necessary capital or complete the necessary facilities and infrastructure, our business may fail.

Our exploration and extraction activities may not be commercially successful.

While we believe there are positive indicators that our properties may contain commercially exploitable minerals and metals, such belief has been based solely on preliminary tests that we have conducted and data provided by third parties. There can be no assurance that the tests and data upon which we have relied is correct or accurate. Moreover, mineral exploration is highly speculative in nature, involves many risks and is frequently non-productive. Unusual or unexpected geologic formations and the inability to obtain suitable or adequate machinery, equipment or labor are risks involved in the conduct of exploration programs. The success of mineral exploration and development is determined in part by the following factors:

the identification of potential mineralization based on analysis; 

the availability of permits; 

the quality of our management and our geological and technical expertise; and 

the capital available for mining operations. 

Our potential revenue and profitability based upon exploitation and development of the Blind Gold, City Creek, Tinton, West Corridor and Homestake Paleoplacer Properties is contingent upon our gaining certain governmental permits and approvals. We must apply and go through regulatory approval in order to implement any development plans. If we fail to obtain the governmental permits and approvals, we may have difficulty implementing our exploration, mining and business plans.

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Substantial expenditures and time are required to establish existing proven and probable reserves through drilling and analysis, and to develop the mines and facilities and infrastructure at any site chosen for mining. Whether a mineral or metal deposit will be commercially viable depends on a number of factors, which include, without limitation, the particular attributes of the deposit, such as size, grade and proximity to infrastructure; metal prices, which fluctuate widely, and government regulations, including, without limitation, regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals and environmental protection. If our exploration and extraction activities are not successful, our business will likely fail.

There may be challenges to the title of our mineral properties.

The Company has acquired properties held primarily by unpatented claims and mineral and surface ownership. The validity of title to many types of natural resource property depends upon numerous circumstances and factual matters (many of which are not discoverable of record or by other readily available means) and is subject to many uncertainties of existing law and its application. We cannot assure you that the validity of our titles to our properties will be upheld or that third parties will not otherwise invalidate those rights. In the event the validity of our titles are not upheld, such an event would have a material adverse effect on us.

Mineral operations are subject to applicable law and government regulations. Even if we discover a mineral resource in a commercially exploitable quantity, these laws and regulations could restrict or prohibit the exploitation of that mineral resource. If we cannot exploit any mineral resource that we might discover on our properties, our business may fail.

Both mineral exploration and extraction require permits from various foreign, federal, state, provincial and local governmental authorities and are governed by laws and regulations, including those with respect to prospecting, mine development, mineral production, transport, export, taxation, labor standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters.

Companies such as ours that plan to engage in exploration and extraction activities often experience increased costs and delays in production and other schedules as a result of the need to comply with applicable laws, regulations and permits. Issuance of permits for our activities is subject to the discretion of government authorities, and we may be unable to obtain or maintain such permits. Permits required for future exploration or development may not be obtainable on reasonable terms or on a timely basis. There can be no assurance that we will be able to obtain or maintain any of the permits required for the continued exploration or development of our mineral properties or for the construction and operation of a mine on our properties at economically viable costs. If we cannot accomplish these objectives, our business could face difficulty and/or fail.

We believe that we are in compliance with all material laws and regulations that currently apply to our activities but there can be no assurance that we can continue to do so. Current laws and regulations could be amended and we might not be able to comply with them, as amended. Further, there can be no assurance that we will be able to obtain or maintain all permits necessary for our future operations, or that we will be able to obtain them on reasonable terms. To the extent such approvals are required and are not obtained, we may be delayed or prohibited from proceeding with planned exploration or development of our mineral properties.

Environmental hazards unknown to us, which have been caused by previous or existing owners or operators of the properties, may exist on the properties in which we hold an interest. It is possible that our properties could be located on or near the site of a Federal Superfund cleanup project. Although we will endeavor to avoid such sites, it is possible that environmental cleanup or other environmental restoration procedures could remain to be completed or mandated by law, causing unpredictable and unexpected liabilities to arise. We are not currently aware of any environmental issues or litigation relating to any of our current or former properties. Neighboring landowners and other third parties could file claims based on environmental statutes and common law for personal injury and property damage allegedly caused by the release of hazardous substances or other waste material into the environment on or around our properties. There can be no assurance that our defense of such claims will be successful. A successful claim against us could have an adverse effect on our business prospects, financial condition and results of operation.

The exploration, possible future development and any production phases of our business will be subject to federal, state and local environmental regulation. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation and set out limitations on the generation, transportation, storage and disposal of solid and hazardous waste. Environmental legislation is evolving in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments, and a heightened degree of responsibility for companies and their officers, directors and employees. Future changes in environmental regulations, if any, may adversely affect our operations. If we fail to comply with any of the applicable environmental laws, regulations or permit requirements, we could face regulatory or judicial sanctions. Penalties imposed by either the courts or administrative bodies could delay or stop our operations or require a considerable capital expenditure. Although we intend to comply with all environmental laws and permitting obligations in conducting our business, there is a possibility that those opposed to exploration and mining will attempt to interfere with our operations, whether by legal process, regulatory process or otherwise.

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Competition in the mining industry is intense, and we have limited financial and personnel resources with which to compete.

Competition in the mining industry for desirable properties, investment capital, equipment and personnel is intense. Numerous companies headquartered in the United States, Canada and elsewhere throughout the world compete for properties on a global basis. We are currently an insignificant participant in the mining industry due to our limited financial and personnel resources. We may be unable to attract the necessary investment capital or a joint venture partner to fully develop our mineral properties, be unable to acquire other desirable properties, be unable to attract and hire necessary personnel, or be unable to purchase necessary equipment.

The nature of mineral exploration and production activities involves a high degree of risk and the possibility of uninsured losses.

The business of exploring for and extracting minerals and metals involves a high degree of risk. Few properties are ultimately developed into producing mines. Whether a mineral deposit can be commercially viable depends upon a number of factors, including the particular attributes of the deposit, including size, grade and proximity to infrastructure, metal prices, which can be highly variable, and government regulation, including environmental and reclamation obligations. These factors are not within our control. Uncertainties as to the metallurgical amenability of any minerals discovered may not warrant the mining of these metals or minerals on the basis of available technology. Our operations are subject to all of the operating hazards and risks normally incident to exploring for and developing mineral or metal properties, such as, but not limited to:

encountering unusual or unexpected formations; 

environmental pollution; 

personal injury, flooding and landslides; 

variations in grades of minerals or metals; 

labor disputes; and 

a decline in the price of gold. 

We currently have no insurance to guard against any of these risks. If we determine that capitalized costs associated with any of our mineral interests are not likely to be recovered, we would incur a write-down on our investment in such property interests. All of these factors may result in losses in relation to amounts spent which are not recoverable. The payment of any liabilities that arise from any such occurrence would have a material, adverse impact on our Company.

No assurance that the May 2020 purchase right will be exercised.

In May 2020, the Company granted JR the right to purchase up to 142,566,667 shares of Company common stock on or before October 15, 2020 at a purchase price of $0.15 per share (for up to $21,385,000). There can be no assurance that JR will exercise this option, in full or in part, prior to its expiration date. The failure of JR to exercise this purchase right may delay or restrict the Company from implementing its business strategy to acquire additional properties in the Black Hills and conduct operations, causing us to seek financing from other parties, the availability of which is uncertain.

We have had historically negative cash flows from operations and if we are not able to obtain further financing our business operations may fail.

To date we have had negative cash flows from operations and we have been dependent on sales of our equity securities and debt financing to meet our cash requirements and have incurred a net loss of approximately $1,114,000 for the year ended March 31, 2020, and cumulative losses of approximately $5,378,000 as of March 31, 2020. We do not expect to generate positive cash flow from operations in the near future. There is no assurance that actual cash requirements will not exceed our estimates. Any decision to further expand our operations is anticipated to involve consideration and evaluation of several significant factors that could adversely affect our ability to meet our business plans including, but not limited to:

Costs to bringing the property into production, including, but not limited to: exploration work, preparation of production feasibility studies, and allowance for production facilities; 

Availability and costs of financing; 

Ongoing costs of production; 

Environmental compliance regulations and restraints; and 

Political climate and/or governmental regulation and control. 

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We depend almost exclusively on outside capital to pay for the exploration and development of our property. Such outside capital may include the sale of additional stock and/or commercial borrowing. Capital may not be available if necessary to meet these continuing development costs or, if the capital is available, that it will be on terms acceptable to us. The issuance of additional equity securities by us may result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments. If we are unable to obtain financing in the amounts and on terms deemed acceptable to us, we may be unable to continue our business and, as a result, we may be required to scale back, diversify or cease our business operations, the result of which would be that our stockholders would lose some or all of their investment.

A decline in the price of our common stock or gold prices in general could affect our ability to raise further working capital and adversely impact our operations.

A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. Because our operations have been primarily financed through the sale of equity securities, a decline in the price of our common stock could be especially detrimental to our liquidity and our continued operations. Any reduction in our ability to raise equity capital in the future would force us to reallocate funds from other planned uses and may have a significant negative effect on our business plans and operations, including our ability to develop new products and continue our current operations. If our stock price declines, we may not be able to raise additional capital or generate funds from operations sufficient to meet our obligations.

The value of our assets, our ability to raise capital and any future economic returns are substantially dependent on the prices of gold. The gold price fluctuates on a daily basis and is affected by numerous factors beyond our control. Factors tending to influence gold prices include:

gold sales or leasing by governments and central banks or changes in their monetary policy, including gold inventory management and reallocation of reserves; 

speculative short positions taken by significant investors or traders in gold; 

the relative strength of the U.S. dollar; 

expectations of the future rate of inflation; 

interest rates; 

changes to economic activity in the United States, China, India and other industrialized or developing countries; 

geopolitical conflicts; 

changes in industrial, jewelry or investment demand; 

changes in supply from production, disinvestment and scrap; and 

forward sales by producers in hedging or similar transactions. 

We have a history of losses and fluctuating operating results that raises doubt about our ability to continue as a going concern.

From inception through March 31, 2020, we have incurred aggregate losses of approximately $5,378,000. There is no assurance that we will operate profitably or will generate positive cash flow in the future. In addition, our operating results in the future may be subject to significant fluctuations due to many factors not within our control, such as general economic conditions, market price of minerals and exploration and development costs. If we cannot generate positive cash flows in the future, or raise sufficient financing to continue our operations, then we may be forced to scale down or even close our operations. Until such time as we generate revenues, we expect an increase in development costs and operating costs. Consequently, we expect to incur operating losses and negative cash flow until our properties enter commercial production (if such event occurs).

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We have a limited operating history and if we are not successful in continuing to grow our business, then we may have to scale back or even cease our ongoing business operations.

We have no history of revenues from operations, no earnings and there can be no assurance that we will ever operate profitably. We have a limited operating history and must be considered in the exploration stage. The success of our Company is significantly dependent on a successful acquisition, exploration, development and production program. Our operations will be subject to all the risks inherent in the establishment of a developing enterprise and the uncertainties arising from the absence of a significant operating history. We may be unable to locate recoverable reserves or operate on a profitable basis. We are in the exploration stage and potential investors should be aware of the difficulties normally encountered by enterprises in the exploration stage. If our business plan is not successful, and we are not able to operate profitably, investors may lose some or all of their investment in our company.

We will be subject to operating hazards and risks that may adversely affect our financial condition.

Exploration involves many risks, which even a combination of experience, knowledge and careful evaluation may not be able to overcome. Our operations will be subject to all the hazards and risks normally incidental to exploration, development and production, such as unusual or unexpected formations, cave-ins or pollution, all of which could result in work stoppages, damage to property and possible environmental damage. We currently do not have general liability insurance. We intend to obtain such liability insurance upon a successful financing by the Company and before we commence exploration. Payment of any liabilities as a result could have a materially adverse effect upon our company's financial condition.

We currently rely on certain key individuals and the loss of one of these certain key individuals could have an adverse effect on our company.

Our success depends to a certain degree upon certain key members of our management, including specifically our chief executive officer. These individuals are a significant factor in our company's growth and success. We do not have key employee insurance in place in respect of any of our senior officers or personnel and we do not anticipate obtaining such insurance in the near future. The loss of the service of members of our management and certain key contractors could have a material adverse effect on our company.

Dependence on our ability to hire qualified contractors required to conduct exploration drill programs and the ability to hire qualified and experienced technical staff and or consultants materially impacts our business operations.

Future success is also dependent on our ability to identify, hire, train and retain other qualified contractors, technical staff and consultants. Competition for these entities and individuals is intense and we may not be able to attract, assimilate, or retain qualified contractors and technical personnel. Failure to do so could have a material adverse effect on our business, financial condition and results of operations.

Uncertainty of agreements to secure access to property from adjacent landowners may affect our ability to remain in business.

Our potential revenue and profitability based upon our exploitation and development of the Blind Gold, City Creek and Homestake Paleoplacer Properties may be contingent upon our gaining additional access to the properties through ingress and egress routes that are owned by private land owners. We may require agreements with those landowners to facilitate ingress and egress to our properties. If we fail to enter into such agreements on favourable terms, we may have difficulty conducting exploration, development and mining operations, which may result in our inability to implement our business plans.

Pandemics, including the recent outbreak of the coronavirus, could cause delays in our exploration and development activities and could negatively impact the availability and cost of future borrowings.

In March 2020, the World Health Organization designated the new coronavirus (“COVID-19”) as a global pandemic. Federal, state and local governments have mandated orders to slow the transmission of the virus, including but not limited to shelter-in-place orders, quarantines, restrictions on travel, and work restrictions that prohibit many employees from going to work. Uncertainty with respect to the economic effects of the pandemic has resulted in significant volatility in the financial markets. The restrictions put in place by federal, state and local governments could delay our exploration and any development plans related to our properties. Furthermore, the impact of the pandemic on the global economy could also negatively impact the availability and cost of future borrowings should the need arise.

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Risks Associated with Our Common Stock

Investors' interests in our company will be diluted and investors may suffer dilution in their net book value per share if we issue additional shares or raise funds through the sale of equity securities.

Our articles of incorporation authorize the issuance of 310,000,000 shares, consisting of 300,000,000 shares of common stock and 10,000,000 shares of preferred stock. As of June 12, 2020, we have 66,914,964 shares of common stock issued and outstanding. If the May 2020 purchase right is exercised in full, 142,566,667 shares of common stock will be issued to JR, resulting in JR owning approximately 64.24% of the common stock to be issued and outstanding. This will result in the significant dilution of current ownership percentages of existing shareholders. The issuance of any additional shares to raise financing may be dilutive, depending on the price at which such securities are sold. If we issue any such additional shares, such issuances will cause a reduction in the proportionate ownership and voting power of all other shareholders.

Trading in our common shares on the OTC:QB is limited and sporadic, making it difficult for our shareholders to sell their shares or liquidate their investments.

Our common shares are currently quoted on the OTC:QB. The trading price of our common shares has been subject to wide fluctuations. Trading prices of our common shares may fluctuate in response to a number of factors, many of which will be beyond our control. The stock market has generally experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies in the development stage. There can be no assurance that trading prices previously experienced by our common shares will be matched or maintained. These broad market and industry factors may adversely affect the market price of our common shares, regardless of our operating performance. In the past, following periods of volatility in the market price of a company's securities, securities class-action litigation has often been instituted. Such litigation, if instituted, could result in substantial costs and a diversion of management's attention and resources.

Because of the early stage of exploration and the nature of our business, our securities are considered highly speculative.

Resource exploration is a speculative business, characterized by a number of significant risks including, among other things, unprofitable efforts resulting not only from the failure to discover valuable deposits, but from finding deposits which, though present, are insufficient in quantity and quality to return a profit from production. The marketability of resources acquired or discovered by us may be affected by numerous factors which are beyond our control and which cannot be accurately predicted, such as market fluctuations, the proximity and capacity of milling facilities, mineral markets and processing equipment and such other factors as government regulation, including regulations relating to royalties, allowable production and environmental protection, the combination of which factors may result in our Company not generating an adequate return on investment capital.

Trading of our stock may be restricted by the SEC’s “Penny Stock” regulations that may limit a stockholder's ability to buy and sell our stock.

The SEC has adopted regulations which generally define “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors.” The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of, our common stock.

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The Financial Industry Regulatory Authority, or FINRA, sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.

In addition to the “penny stock” rules described above, the FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

We have never paid any cash dividends.

We have never declared or paid any cash or stock dividends on our capital stock.

The sale of our common stock by existing stockholders may depress the price of our common stock due to the limited trading market that exists.

Any sales of a significant amount of common stock by existing shareholders may depress the price of our common stock and the price of our common stock may decline.

A small number of existing shareholders own a significant portion of our common stock, which could limit your ability to influence the outcome of any shareholder vote.

Under our articles of incorporation and Nevada law, the vote of a majority of the shares outstanding is generally required to approve most shareholder action. As a result, these individuals and entities will be able to influence the outcome of shareholder votes for the foreseeable future, including votes concerning the election of directors, amendments to our articles of incorporation or proposed mergers or other significant corporate transactions. If JR exercises its option in full, it will be the majority holder of our outstanding shares of common stock.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

We have not established that any of our properties, mineral interests or rights contain proven or probably reserves, as defined under SEC Industry Guide 7. Exploration by us on our properties has been limited to field sampling programs, field mapping programs and a campaign to acquire historic data sets that were known to exist for our property and the balance of the Homestake District. Much of the important historic data has been digitized and assembled to our new database in electronic form. In the case of historic geophysical data, the data has been digitized and reprocessed.

Drill plans and budgets have been prepared for each of the Homestake Paleoplacer Property, City Creek Property, Tinton Property and the Blind Gold Property iron-formation and tertiary aged replacement targets. The Homestake Paleoplacer Property has been permitted with SDDENR and we believe to be ready to drill upon on deposit of the $25,000 reclamation bond. Current drill plans for the City Creek Property, Tinton Property and Blind Gold Property may be modified pending the results of the Company’s airborne magnetic and radiometric survey that is scheduled to be flown in the summer of 2020. The airborne program is funded and awarded, as is the interpretation and modeling of the data to be acquired. Dakota Territory’s technical team has field programs planned and funded to reconcile geologic conditions with the high-resolution geophysics and to integrate new data with the Company’s extensive geology and geochemistry data sets.

None of our property is sufficiently drilled to prepare a preliminary economic assessment. However, our management and technical teams have prepared internal scoping studies for the Homestake Paleoplacer Property and the Blind Gold Property iron-formation and tertiary aged replacement targets. Based on our experience in the district, Dakota Territory has modeled the exploration, development, mining and closure for the size and grade of similar deposits in a similar geological setting elsewhere in the district for those properties. The strategy of this financial modeling is to determine whether, if we are technically successful defining our deposit expectation with drill holes, any identified deposit would make commercial sense to ultimately develop.

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The Black Hills has well developed power infrastructure. All four of our properties has power on the property now, with the potential to be upgraded for production if exploration proves successful. The Company believes access to water will not be a significant issue for any development purpose at any property.

Gold Properties - Black Hills General

Dakota Territory maintains 100% ownership of four mineral properties in the district comprised of 404 unpatented claims and a combination of surface leases and mineral ownership covering a total of approximately 7,166 acres. located in the Black Hills of South Dakota, including the Blind Gold, City Creek, Tinton and Homestake Paleoplacer Properties, all of which are located in the heart of the Homestake District.

The Homestake District is a favorable geologic gold setting with three unique gold deposit types that we believe have yielded approximately 44.6 million ounces of gold production over the past 140 years, including Proterozoic-age Homestake iron-formation hosted gold deposits, Tertiary-age replacement gold deposits and Eo-Cambrian Homestake Paleoplacer gold deposits.

Dakota Territory has based the acquisition of its Black Hills property position on more than 44 years of combined mining and exploration experience in the Homestake District and the knowledge gained from previous exploration and mining efforts. We believe that the Blind Gold, City Creek, Tinton and Homestake Paleoplacer properties offer exploration targets for all three gold deposit types known to exist in the district.

The Black Hills is a low cost jurisdiction with well - developed infrastructure and an existing experienced mining and exploration workforce. South Dakota's regulatory authorities have historically demonstrated a willingness to work with responsible operators to permit well-planned compliant projects and South Dakota’s exploration and mining regulations are reasonable and comparable to other jurisdictions within the United States.

Our business strategy is to focus on the search of a repeat of the Homestake Deposit in the iron-formation host that is distributed across the district, largely under the cover of the younger igneous and sedimentary rocks that dominate the surface. The Company continues to expand its land position in the district with the objective of simultaneously developing less capital-intensive lower risk gold targets that could be brought into production in the near term.

Blind Gold Property

The Blind Gold Property consists of 221 unpatented lode-mining claims and combination of surface and mineral title to property located near the Historic Maitland Gold Mine. In total, the Blind Gold Property covers approximately 3,204 acres in the western portion of Lawrence County, South Dakota, USA. More specifically the claims lie within the Black Hills Meridian, Township 5N, Ranges 2 and 3 E and cover portions of Sections 1, 2, 11, 12 13 and 14 in Range 2E and Sections 5,6,7,8 and 18 in Range 3E.

The Company acquired 84 of the claims through the acquisition of North Homestake Mining Company in September 2012. In December 2012, the Company's Blind Gold Property position was increased through the acquisition of 23 additional claims from Black Hills Gold Exploration LLC. In April 2017, the Company completed the acquisition of an additional 82 acres of mineral property through an exploration and mining lease and option to purchase property agreement with Trucano Novelty Inc., of South Dakota. The Company added 114 contiguous claims on its west and southern western property boundary in February 2020. The Company owns a 100% interest in the 221 claims that comprise the main block of the Blind Gold Property with no known encumbrance. There are no known private surface rights owners within the bounds of the main block of the Blind Gold Property with all surface rights under the control of the US Forest Service. Annual claim maintenance fees are $165 per claim, or a total of $36,465 for the 221 claims that comprise the main block of the Blind Gold Property. Annual claim maintenance fees are due before September 1st of each year. An additional 82 acres are located approximately one-half mile south of the main block of the Blind Gold Property and adjacent to the Historic Maitland Gold Mine.

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Notice must be filed with and approved by the US Forest Service (“USFS”), and the South Dakota Division of Environment and Natural Resources (“SDDENR”) prior to undertaking any exploration activities. The notice describes the proposed exploration activities and any remedial reclamation deemed necessary. The various government agencies review the application to ensure there will be no deleterious impacts as a result of activity on the claims prior to granting any approvals for the proposed work. 

Access to the property is gained by traveling 4.3 miles south-southeast from the City of Spearfish along the Maitland Road (Forest Service 195). Alternately, the area can be accessed from the south via the same Maitland Road from Central City. The northern segment of the property can be accessed from the Maitland Road via Forest Service Road 195-2A and the southern portion can be accessed via the Paradise Gulch Road. In addition, various forest service roads exist within the property.

The Blind Gold Property is located approximately 4 miles northwest and on structural trend with the Homestake Gold Mine. In the 1980′s and 1990’s Homestake Mining Company’s work in the District extended and Homestake iron-formation host under cover and demonstrated the repeatability of Homestake iron-formation hosted gold deposits within the structural corridor extending northwest of the mine.

In addition to the exploration potential for gold hosted in the Homestake iron-formation, the Blind Gold Property holds exploration potential for Tertiary-aged gold and silver replacement deposits typical of the District, with the mineralization hosted in the Cambrian Deadwood formation and to a lesser degree the Paha Sapa limestone. The formation of Tertiary-age gold-silver replacement deposits is generally dependent on fault and fracture structures necessary to the transportation of mineralizing fluids and proximity to the preferential intrusive bodies, both of which are present at the Blind Gold Property. Tertiary-age gold mineralization is evidenced across the Blind Gold Property by numerous mapped prospect workings dating from the turn of the century in the Paha Sapa Limestone, Phonolite intrusive and Deadwood formation where it outcrops at the southwest corner of the property. The Blind Gold Property is an exploration target for the on-trend continuation of Tertiary aged gold-silver replacement deposits in the preferred Deadwood formation host under the cover of the Paha Sapa limestone.

Homestake Paleoplacer Property

The Homestake Paleoplacer Property consists of a total of 365 mineral acres covering approximately 5,700 feet of the projected northward extension of the Homestake Paleoplacer Channel Trend in the western portion of Lawrence County, South Dakota, USA. More specifically the claims lie within the Black Hills Meridian, Township 5N, Range 3 E and cover portions of Sections 20 and 21.

The Company acquired its original 14 unpatented Homestake Paleoplacer claims from Black Hills Gold Exploration LLC in December 2012. The Company owns a 100% interest in the 14 unpatented claims with no known encumbrance of any kind. There are no known private surface rights owners within the bounds of the property with all surface rights under the control of the US Forest Service. Annual claim maintenance fees are $165 per claim, or a total of $2,310 total for the 14 claims that comprise the original Homestake Paleoplacer Property. Annual claim maintenance fees are due before September 1st of each year.

Notice must be filed with and approved by the BLM, the USFS, and the SDDENR prior to undertaking any exploration activities. The notice describes the proposed exploration activities and any remedial reclamation deemed necessary. The various government agencies review the application to ensure there will be no deleterious impacts as a result of activity on the claims prior to granting any approvals for the proposed work.

In February 2014, the Company entered into an agreement to acquire surface and mineral title to 26.16 acres of the Squaw and Rubber Neck Lodes that comprise Mineral Survey 1706 in the Black Hills of South Dakota. The property is located immediately to the north and adjoining the Company’s 14 original unpatented claims group and was explored by Homestake Mining Company in the 1980’s.

In March 2014, the Company successfully closed a transaction with Deadbroke Mining Company, Inc. to purchase approximately 565.24 mineral acres in the Northern Black Hills of South Dakota. As part of the Deadbroke Mining Company Inc. property acquisition, Dakota Territory purchased an additional 64.39 mineral acres located immediately southwest and contiguous to the Company’s original unpatented claims group, including the historic Gustin, Minerva and Deadbroke Gold Mines.

In April 2017, the Company added an additional 141 acres of mineral property to the Homestake Paleoplacer Property through an Exploration and Mining Lease and Option to Purchase Property Agreement with Trucano Novelty Inc., of South Dakota. The property acquisition is located immediately north and contiguous to the original Homestake Paleoplacer Property.

Access to the property is gained by traveling 0.75 miles west-northwest from Central City along the Maitland Road (Forest Service 195). Alternately, the area can be accessed by traveling approximately 1.75 miles west-northwest from the City of Deadwood on the Mount Roosevelt Road (Forest Service 133).

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The first significant Black Hills gold event occurred approximately 1.74 billion years ago, depositing gold in the Homestake iron-formation. From the time of iron-formation gold deposition, Proterozoic erosion removed approximately 30,000 feet of rock from the earth’s crust and exposed the Homestake lode to an erosional event that distributed gold into drainages on the regolith surface forming high-grade gold paleoplacer deposits. The Homestake Paleoplacer deposit is characterized by gold bearing quartz pebble conglomerates, similar to the Jacobina conglomerate gold deposits of Bahia, Brazil, that were deposited to the north and away from the elevated exposure of the mineralized Homestake iron-formation source lode. Multi-ounce per ton gold grades were historically not uncommon to paleoplacer deposits, principally because the source gold lode was up graded by lateritic weathering processes prior to erosion and distribution of the gold into the ancient paleochannels.

At 560 million years ago, the Cambrian seas advanced and deposited marine sediments that eventually covered the primordial Black Hills highlands and sealed the paleoplacer gold deposits under cover.

Tertiary-age rhyolite intrusive rocks dominate the outcrop on the Homestake Paleoplacer Property, along with limited outcrops of Cambrian Deadwood formation contained within the rhyolite intrusive. The rhyolite is in the form of a sill/laccolith, 50 to 500 feet thick, that overlies the basal quartz pebble conglomerate units of Deadwood formation and the extensions of gold bearing paleoplacers sourced from the Homestake Lode.

Dakota Territory’s Paleoplacer Property includes the past producing Gustin, Minerva and Deadbroke Mines, which were the last three mines that produced from the channel and are located furthest to the north at the point where the channel disappears under the cover of the younger Cambrian sedimentary and Tertiary igneous rocks. The Deadbroke Mine began operations in the earliest days of the 1870’s Black Hills Gold Rush and continued to produce gold through the 1920’s by underground room and pillar methods at depths ranging from 100 to 200 feet below surface.

In 1973, Homestake Mining Company entered into a mining lease on the Deadbroke Property based on interest generated by a report authored by Homestake Geologist, Ross R. Grunwald and entitled “Ore Potential of The Deadbroke Mine and Other Northern Black Hills Conglomerate Ores”. In 1974, Homestake dewatered the Deadbroke Mine and conducted a comprehensive mine mapping and sampling program. A total of 214 channel samples were collected by Homestake Geologists from the perimeter of accessible stope and development headings, as well as from pillars left in stopes. The results of the 1974 Deadbroke Mine sampling program led to a subsequent 27-hole drill program in the 1980’s designed to explore for the extension of the paleochannel north of the Deadbroke Mine.

City Creek Property

The City Creek Property consists of a group of 63 unpatented lode-mining claims and Fidelity, Cresson, Danube, Confidence, Perhaps, Combination No. 1, Combination No. 2 and Cuba patented lode claims, M.S. 1644, covering a total of approximately 1,167 acres in the western portion of Lawrence County, South Dakota, USA. More specifically the claims lie within the Black Hills Meridian, Township 5N, Range 3 E and cover portions of Sections 9, 10, 15, 16, 21 and 22.

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The Company acquired the original block of 21 City Creek claims from Black Hills Gold Exploration LLC in December, 2012. The patented lode claims Fidelity, Cresson, Danube, Confidence, Perhaps, Combination No. 1, Combination No. 2 and Cuba that comprise M.S. 1644 were acquired from Trucano Novelty Inc. in April, 2017 and an addition 42 unpatented lode mining claims were acquired by staking in November 2018. The Company owns a 100% interest in the property with no known encumbrance of any kind. There are no known private surface rights owners within the bounds of the property with all surface rights on the unpatented portion of the property under the control of the US Forest Service. Annual claim maintenance fees are $165 per claim, or a total of $10,395 total for the 63 claims that comprise the City Creek Property. Annual claim maintenance fees are due before September 1st of each year.

Notice must be filed with and approved by the BLM, the USFS, and the SDDENR prior to undertaking any exploration activities. The notice describes the proposed exploration activities and any remedial reclamation deemed necessary. The various government agencies review the application to ensure there will be no deleterious impacts as a result of activity on the claims prior to granting any approvals for the proposed work.

Access to southwest end of the property is gained by traveling 0.6 miles west-northwest from the City of Deadwood along the Mount Roosevelt Road (Forest Service 133). Alternately, the area can be accessed by traveling approximately 2.8 miles west on the Mount Roosevelt Road (Forest Service 133) from US Highway 85 in the City of Deadwood.

The City Creek Property is located one mile northeast of the Homestake Open Cut, one mile northwest of the City of Deadwood and is a target for Homestake iron-formation hosted gold mineralization. The City Creek Property geology is dominated by rocks of the Homestake stratigraphic sequence, including the Ellison, Homestake and Poorman formations that outcrop across the property. The Homestake iron-formation outcrop on the City Creek Property is complexly folded and represents the continuous Homestake iron-formation extension northeast of the Homestake Mine.  

Numerous gold prospect pits and shallow underground workings in quartz-veined Homestake formation have been located at the City Creek Property and the stratigraphy has been mapped by both Homestake Mining Company and USGS geologists. The City Creek Property was also diamond drilled by Homestake Mining Company in the 1970’s and 1980’s.

Tinton Property

The Tinton Property, consists of a group of 106 unpatented lode-mining claims covering approximately 1,167 acres in the western portion of Lawrence County, South Dakota, USA. More specifically the claims lie within the Black Hills Meridian, Township 5N, Range 1 E and cover portions of Sections 14, 15, 22, 23,27, 26, 34, and 35.

The Company acquired the claims in September 2019 with no known encumbrance of any kind. There are no known private surface rights owners within the bounds of the claims with all surface rights on the unpatented portion of the property under the control of the US Forest Service. Annual claim maintenance fees are $165 per claim, or a total of $17,490 total for the 106 claims that comprise the Tinton Property. Annual claim maintenance fees are due before September 1st of each year.

Notice must be filed with and approved by the BLM, the USFS, and the SDDENR prior to undertaking any exploration activities. The notice describes the proposed exploration activities and any remedial reclamation deemed necessary. The various government agencies review the application to ensure there will be no deleterious impacts as a result of activity on the claims prior to granting any approvals for the proposed work.

Access to the property is gained by traveling 8 miles south-southwest from the City of Spearfish along a series of paved and aggregate secondary roads. A network of these roads cut the property. Alternative ingress can be gained on similar roads from the town of Lead (via Savoy), located approximately 9 miles east-southeast of the property. Some of these roads are seasonal, as they are not plowed during the winter months.

Placer gold was first discovered in the Tinton area in 1876 and the local drainages were worked during the late 19th and early 20th centuries. No source-lode has yet been located for the modern gold placer deposits.

In the mid 1990’s, Homestake Mining Company undertook an exploration program at Tinton that was based on the deposition models for the paleoplacer and modern placers associated with the Homestake Lode. Preliminary ground work at that time indicated that the most likely source of the gold originated from an area east of the placer workings, over which a district wide ground gravity survey was conducted in an effort to locate iron-formation host rocks under the younger limestone beds that dominate the surface in the Tinton area. Based on the results of the geophysical survey, two deep core holes were subsequently drilled with intercepted rocks interpreted to be comparable with the suite of rocks at the site of the Homestake Mine. Dakota Territory intends to resume the exploration begun by Homestake by building off the substantial work already invested in narrowing the search area.

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Item 3. Legal Proceedings.

No legal proceedings, government actions, administrative actions, investigations or claims are currently pending against us or involve the Company.

Item 4. Mine Safety Disclosures

Pursuant to Section 1503(a) of the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act (The “Dodd-Frank Act”), issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities. During the fiscal year ended March 31, 2020, our exploration properties were not subject to regulation by the Federal Mine Safety and Health Administration (“MSHA”) under the Federal Mine Safety and Health Act of 1977 (the "Mine Act").

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PART II

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

Our common stock is listed for quotation on the OTC:QB operated by OTC Markets Group Inc. under the symbol “DTRC.” The market for our common stock on the OTC:QB is limited, sporadic and highly volatile. The quotations reflect inter-dealer prices without retail mark-up, mark-down or commission and may not represent actual transactions. The following table sets forth the range of high and low bid prices during the periods indicated.

The last bid price of our common stock on June 12, 2020 was $0.47 per share.

Holders

The approximate number of holders of record of our common stock as of June 12, 2020 was approximately 206.

Dividends

We have not paid any cash dividends on our equity security. We are not prohibited from paying any dividends pursuant to any agreement or contract.

Repurchase of Securities

During the fiscal year ended March 31, 2020, we did not affect any repurchase of securities.

Equity Compensation Plan Information

On January 25, 2015, the Company’s board of directors adopted a plan entitled the “2015 Omnibus Incentive Plan.” The plan has a total of 15,000,000 common share options available to award to the executive officers and consultants. As of March 31, 2020, a total of 4,350,000 shares of our common stock remained available for future grants under the plan.

Recent Sales of Unregistered Securities During Fiscal 2019 and 2020

Outside of the below recent sales of unregistered securities, all other sales of unregistered securities during the fiscal years ended March 31, 2020 and 2019, were previously reported under our quarterly reports on Form 10-Q and current reports on Form 8-K.

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(1)With respect to sales designated by “Section 4(a)(2),” these shares were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act as privately negotiated, isolated, non-recurring transactions not involving any public offer or solicitation. Each purchaser represented that such purchaser’s intention to acquire the securities for investment only and not with a view toward distribution. We requested our stock transfer agent to affix appropriate legends to the stock certificate issued to each purchaser and the transfer agent affixed the appropriate legends. Each purchaser was given adequate access to sufficient information about us to make an informed investment decision. None of the securities were sold through an underwriter and accordingly, there were no underwriting discounts or commissions involved. ⁽¹⁾  

(2)Represents options issued with no cash proceeds. Upon exercise of the options, the Company is entitled to the exercise price of $0.08 per share.  

Item 6. Selected Financial Data

Not Applicable.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

This management’s discussion and analysis should be read in conjunction with the financial statements of Dakota Territory Resource Corp. and notes thereto as set forth herein. Readers are also urged to carefully review and consider the various disclosures made by us, which attempt to advise interested parties of the factors which affect our business, including without limitation, the disclosures made under “Risk Factors.”

Our audited financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.

Overview

The Black Hills of South Dakota has yielded approximately 44.6 million ounces of gold production from a 100 square mile area known as the Homestake District. Despite the gold endowment of the area, we believe the District is generally underexplored and lacks a concerted effort to search for gold under the cover of younger sedimentary and igneous rocks that dominate the surface. The Black Hills of South Dakota is a safe low-cost jurisdiction with well-developed mining infrastructure and is a jurisdiction in which regulatory authorities have consistently demonstrated a willingness to work with responsible operators to permit well-planned compliant projects.

Since 2012, we have consistently pursued a strategy of expanding our portfolio of brownfields exploration properties located exclusively within the Homestake District to build a dominant land position with the goal of consolidating the remaining mineral potential. Our property acquisitions have been based on our past exploration experiences, the extensive data sets we have assembled over the past 8 years, and new research the Company has conducted on the gold system that created the District. Dakota Territory currently holds four exploration properties covering a total of approximately 7,166 mineral acres. We have not established that any of our projects or properties contain any proven or probable reserves under SEC Industry Guide 7.

Current Plan of Operations

Our planned operations during fiscal 2021 are focussed on advancing our Blind Gold, City Creek, Tinton and Homestake Paleoplacer gold exploration properties and to continue to build on our overall property position in the Homestake District of the Black Hills of South Dakota.

We are planning to fly a broad high definition airborne geophysical survey to enhance our current drill targets, as well as to screen other areas of interest within the district. We have budgeted for several field sampling /mapping programs and to continue to locate and add to our extensive data sets. We have planned to complete site preparations, and to conduct our first drill program on the Paleoplacer Property. Additionally, our budget provides for the commencement of necessary permit work for the Blind Gold and City Creek Properties and provides for our general operating expenses and the maintenance of the Company’s Mining Claims and leases.

26

Our operations for fiscal year 2021 are planned and budgeted at approximately $1,450,000.

Since we are an exploration stage company and have not generated revenues to date, our cash flow projections are subject to numerous contingencies and risk factors beyond our control, including exploration and development risks, competition from well-funded competitors, and our ability to manage growth. We can offer no assurance that our expenses will not exceed our projections.

Liquidity and Capital Resources

As of March 31, 2020, we had a working capital deficit of approximately $2,794,000 and our accumulated deficit as of March 31, 2020 was approximately $5,378,000. We had a net loss for the year ended March 31, 2020 of approximately $1,114,000.

During the fiscal year ended March 31, 2020, we generated cash from the sale of the Company’s common stock through a private placement in the amount of approximately $150,000. We also generated cash from the issuance of a note payable to an investor in the amount of $300,000. In May 2020, JR and the Company entered into an amended and restated promissory note in the amount of $1,450,000, of which $300,000 was advanced in February 2020, as noted above, and $1,150,000 was advanced in May 2020. The note is unsecured and bears interest at the annual rate of 0.25%, compounded annually, payable on December 31, 2021. On the maturity date, the principal amount of the note, together with any accrued but unpaid interest, will be due and payable in cash, provided that, if and to the extent that the Company does not pay this note in cash on the maturity date, then JR will be required to exercise, and will in fact be deemed to have exercised, its right to convert such unpaid portion of the note into shares of Company common stock. The conversion price is $0.15 per share through December 31, 2020 and, thereafter, the lesser of $0.15 per share and the volume weighted average price of Company common stock for the five consecutive trading days immediately preceding the date of such conversion (with a floor of $0.10 per share). The note has customary event of default provisions and, upon an event of default, JR will be required to convert the unpaid portion of the note into the shares of Company common stock, if not paid prior thereto in cash by the Company.

During our fiscal year ending March 31, 2021, we plan to spend approximately $90,000 for field programs, $410,000 for geophysical surveys, and approximately $650,000 for expenses related to land acquisition. The timing of these expenditures is dependent upon a number of factors, including the availability of contractors. We estimate that general and administrative expenses during fiscal year ending March 31, 2020 will be approximately $300,000 to include payroll, legal and accounting services and other general and other expenses necessary to conduct our operations.

We have no employees. Our management, all of whom are consultants, conduct our operations. Given the early stage of our exploration properties, we intend to continue to outsource our professional and personnel requirements by retaining consultants on an as needed basis. However, if we are successful in our initial and any subsequent drilling programs, we may retain employees.

We currently do not have sufficient funds to complete exploration and development work on our properties, which means that we will be required to raise additional capital, enter into joint venture relationships or find alternative means to finance placing one or more of our properties into commercial production, if warranted. In May 2020, the Company granted JR the right to acquire up to 142,566,667 shares of common stock at a purchase price of $0.15 per share (up to $21,385,000, reduced by the amount of the $1,450,000 note converted). There is no assurance that JR will purchase any or all of these shares on or prior to October 15, 2020, the expiration of this purchase right. If JR exercises all or a portion of this purchase right, the Company will utilize these proceeds to fund potential acquisitions and for working capital and other corporate purposes. Failure to obtain sufficient financing may result in the delay or indefinite postponement of exploration and development. We cannot be certain that additional capital or other types of financing will be available when needed or that, if available, the terms of such financing will be favorable or acceptable to us. Our ability to arrange additional financing in the future will depend, in part, on the prevailing capital market conditions as well as our business performance.

Subsequent to March 31, 2020, outstanding warrants entitling the holders to purchase an aggregate of 2,200,000 shares of common stock were exercised. We received proceeds in the amount of $220,000 from the exercise of these warrants.

27

Results of Operations

Fiscal years ended March 31, 2020 and 2019

Revenue

We had no operating revenues during the fiscal years ended March 31, 2020 and 2019. We are not currently profitable. As a result of ongoing operating losses, we had an accumulated deficit of approximately $5,378,000 as of March 31, 2020.

Exploration Costs

During the years ended March 31, 2020 and 2019, our exploration costs were for payments of annual claim maintenance fees related to our mineral properties.

General and Administrative

Our general and administrative expenses for the year ended March 31, 2020 and March 31, 2019 were approximately $1,001,000 and $553,000, respectively. These expenditures were primarily for legal, accounting & professional fees, investor relations and other general and administrative expenses necessary for our operations. Included in our general and administrative expenses is approximately $196,000 of non-cash stock compensation for services.

We had losses from operations for the fiscal years ended March 31, 2020 and 2019 totaling approximately $1,101,000 and $606,000, respectively. We had a net loss for the fiscal year ended March 31, 2020 of approximately $1,114,000 and net income for the fiscal year ended March 2019 of approximately $21,000. We incurred interest expense from notes payable for the fiscal years ended March 31, 2020 and 2019, respectively, in the amounts of approximately $13,000 and $33,000.

We recognized income from the extinguishment of debt for the fiscal year end March 31, 2019 in the amount of approximately $660,239. We had four notes payable, one convertible note payable and associated accrued interest owed to two entities. Under the statute of limitations in Nevada the debt is no longer enforceable and these noteholders are no longer in existence.

Off-Balance Sheet Arrangements

For the fiscal years ended March 31, 2020 and 2019, we have off-balance sheet arrangements for annual payments in relation to the mineral leases as disclosed in Note 4 of the financial statements.

Critical Accounting Estimates

Management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. Preparation of financial statements requires management to make assumptions, estimates and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and the related disclosures of contingencies. Management bases its estimates on various assumptions and historical experience, which are believed to be reasonable; however, due to the inherent nature of estimates, actual results may differ significantly due to changed conditions or assumptions. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are fairly presented in accordance with U.S. GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. Management believes that the following critical accounting estimates and judgments have a significant impact on our financial statements; Valuation of options granted to Directors and Officers using the Black-Scholes model, and fair value of mineral properties. The accounting policies are described in greater detail in Note 2 to our audited annual financial statements for the fiscal year ended March 31, 2020.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 8. Financial Statements and Supplementary Data

28

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Dakota Territory Resource Corp.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Dakota Territory Resource Corp. (the “Company”) as of March 31, 2020 and 2019, and the related statements of operations, changes in shareholders’ deficit, and cash flows for each of the years in the two-year period ended March 31, 2020, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the two-year period ended March 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has not generated any revenues since inception, has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, 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.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/S/ HAM, LANGSTON & BREZINA, L.L.P.

We have served as the Company’s auditor since 2019.

Houston, Texas

June 27, 2020

F-1

DAKOTA TERRITORY RESOURCE CORP.

BALANCE SHEETS

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

F-2

DAKOTA TERRITORY RESOURCE CORP.

STATEMENTS OF OPERATIONS

For the Years Ended March 31, 2020 and 2019

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

F-3

DAKOTA TERRITORY RESOURCE CORP.

STATEMENTS OF CASH FLOWS

For the Years Ended March 31, 2020 and 2019

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

F-4

DAKOTA TERRITORY RESOURCE CORP.

STATEMENTS OF CHANGES SHAREHOLDERS’ DEFICIT

For the Years Ended March 31, 2020 and 2019

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

F-5

DAKOTA TERRITORY RESOURCE CORP.

NOTES TO FINANCIAL STATEMENTS

for the years ended MARCH 31, 2020 AND 2019

Note 1 Organization and Nature of Business

Dakota Territory Resource Corp., (“the Company”) was incorporated in the State of Nevada on February 6, 2002, has been in the exploration stage since its formation, and has not realized any revenues to date from its planned operations. Our Company is engaged in the business of acquisition and exploration of mineral properties within the Homestake Gold District of the Black Hills of South Dakota. To date, while no development or mining activities have commenced, our strategy is to move projects from exploration to development and finally on to mining as results of exploration may dictate. Dakota Territory’s management and technical teams have extensive mining and exploration experience in the Homestake District and we intend to leverage our experience together with our business presence in South Dakota to create value for our shareholders. The Company currently holds four brownfield project areas in the district comprised of 404 unpatented claims and a combination of surface and mineral leases covering a total of approximately 7,166 acres. Our goal is to obtain sufficient capital to advance our current property portfolio, to fund acquisition of additional prospective mineral property, and for the general working capital needs of the Company.

In September 2012, the Company closed on the agreement with North Homestake Mining Company (“NHMC”) to exchange common stock to affect the acquisition of North Homestake’s gold exploration properties located in South Dakota. Since 2012, our Company has pursued a strategy of expanding our portfolio of brownfields exploration properties located exclusively within the Homestake District with the goal to build a dominant land position. Our property acquisitions have been based on our past exploration experiences, the extensive data sets we have assembled over the past 8 years, and new research the Company has conducted on the gold system that created the District. We have not established that any of our projects or properties contain any proven or probable reserves under SEC Industry Guide 7.

Uncertainties and Economic Development

In March 2020, the World Health Organization designated the new coronavirus (“COVID-19”) as a global pandemic. Federal, state and local governments have mandated orders to slow the transmission of the virus, including but not limited to shelter-in-place orders, quarantines, restrictions on travel, and work restrictions that prohibit many employees from going to work. Uncertainty with respect to the economic effects of the pandemic has resulted in significant volatility in the financial markets.

The restrictions put in place by federal, state and local governments could delay our exploratory programs on our mineral properties. Furthermore, the impact of the pandemic on the global economy could also negatively impact the availability and cost of future borrowings should the need arise.

Going Concern

These financial statements have been prepared assuming that the Company will continue as a going concern. The Company has an accumulated deficit from inception through March 31, 2020 of approximately $5,378,000 and has yet to achieve profitable operations, and projects further losses in the development of its business.

At March 31, 2020, the Company had a working capital deficit of approximately $2,794,000. The Company’s ability to continue as a going concern is dependent upon its ability to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. These financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that may be necessary should we be unable to continue as a going concern. We anticipate that additional funding will be in the form of equity financing from the sale of common stock, such as the JR Resources Corp. transaction discussed further in Note 10 – Subsequent Events, and/or debt financing. However, there can be no assurance that the JR Resources transaction will close or that other capital will be available on terms acceptable to the Company. The issuances of additional equity securities by the Company would result in a dilution in the equity interests held by current shareholders. The Company may also seek to obtain short-term loans from the directors of the Company.

Based on these factors, there is substantial doubt as the Company’s ability to continue as a going concern.

F-6

DAKOTA TERRITORY RESOURCE CORP.

NOTES TO FINANCIAL STATEMENTS

for the years ended MARCH 31, 2020 AND 2019

Note 2 Summary of Accounting Policies

Basis of Presentation

Our financial records are maintained on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of 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.

Cash and Cash Equivalents

We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents consist of demand deposits at commercial banks.

Revenue Recognition

The Company recognizes revenue when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for the goods or services. The Company has yet to generate any revenue.

Mineral Property Costs

We have been in the exploration stage since inception and have not yet realized any revenues from our planned operations. All exploration expenditures are expensed as incurred. Costs of acquisition and option costs of mineral rights are capitalized upon acquisition. Mine development costs incurred to develop new ore deposits, to expand the capacity of mines, or to develop mine areas substantially in advance of current production are also capitalized once proven and probable reserves exist and the property is a commercially mineable property. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. If we do not continue with exploration after the completion of the feasibility study, the associated capitalized costs will be expensed at that time. Costs of abandoned projects are charged to mining costs including related property and equipment costs.

To determine if the capitalized mineral property costs are in excess of their recoverable amount, we conduct periodic evaluation of the carrying value of capitalized costs and any related property and equipment costs based upon expected future cash flows and/or estimated salvage value in accordance with Accounting Standards Codification (ASC) 360-10-35-15, Impairment or Disposal of Long-Lived Assets.

F-7

DAKOTA TERRITORY RESOURCE CORP.

NOTES TO FINANCIAL STATEMENTS

for the years ended MARCH 31, 2020 AND 2019

Note 2 Summary of Accounting Policies (Continued)

Fair Value Measurements

We account for assets and liabilities measured at fair value in accordance with ASC 820, Fair Value Measurements and Disclosures. ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).The three levels of inputs used to measure fair value are as follows:

Level 1: Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets. 

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. 

Level 3: Inputs that are generally unobservable. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. 

Our financial instruments consist principally of cash, accounts payable, accrued liabilities and notes payable. The carrying amounts of such financial instruments in the accompanying financial statements approximate their fair values due to their relatively short-term nature or the underlying terms are consistent with market terms. It is management’s opinion that the Company is not exposed to any significant currency or credit risks arising from these financial instruments.

Environmental Costs

Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue general, are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable, and the cost can be reasonably estimated. Generally, the timing of these accruals coincides with the earlier of completion of a feasibility study or the Company’s commitments to plan of action based on the then known facts.

Income Taxes

Income taxes are computed using the asset and liability method, in accordance with ASC 740, Income Taxes. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax basis of assets and liabilities, and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.

Basic and Diluted Loss Per Share

The Company computes basic and diluted income (loss) per share amounts pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic loss per share is computed by dividing net income (loss) available to common shareholders, by the weighted average number of shares of common stock outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted income (loss) per share is computed by dividing net income (loss) available to common shareholders by the diluted weighted average number of shares of common stock during the period. The diluted weighted average number of common shares outstanding is the basic weighted number of shares adjusted for the dilutive effect of potential future issuances of common stock related to outstanding options and warrants.

The dilutive effect of outstanding options and warrants is reflected in diluted earnings per share by application of the treasury stock method. The effect of the Company’s outstanding options and warrants were excluded for the years ended March 31, 2020 and 2019, because they were anti-dilutive.

F-8

DAKOTA TERRITORY RESOURCE CORP.

NOTES TO FINANCIAL STATEMENTS

for the years ended MARCH 31, 2020 AND 2019

Note 2 Summary of Accounting Policies (Continued)

Stock-Based Compensation

The Company estimates the fair value of share-based compensation using the Black-Scholes valuation model, in accordance with the provisions of ASC 718, Compensation - Stock Compensation and ASC 505, Equity. Key inputs and assumptions used to estimate the fair value of stock options include the grant price of the award, the expected option term, volatility of our stock, the risk-free rate, and dividend yield. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by the option holders, and subsequent events are not indicative of the reasonableness of the original estimates of fair value made by the Company.

Recent Accounting Pronouncements

In June 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this ASU expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. This new guidance is effective for the Company for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted. The Company adopted this ASU, effective April, 2019, resulting in share-based payment awards issued to consultants during the twelve months ended March 31, 2020, being valued at the grant date and expense recognition over the vesting period. The Company had no awards outstanding at the adoption date requiring remeasurement.

Pronouncements between March 31, 2020 and the date of this filing are not expected to have a significant impact on our operations, financial position, or cash flow, nor does the Company expect the adoption of recently issued, but not yet effective, accounting pronouncements to have a significant impact on our results of operations, financial position or cash flows.

Note 3 Revision and Immaterial Correction of an Error in Previously Issued Financial Statements

During the quarter ended March 31, 2020, we identified certain errors related to accounts payable and corresponding general and administrative expenses recognized in connection with a consulting agreement entered into in June 2014. In our previously issued audited financial statements for the years ended March 31, 2016 and 2015, we erroneously recognized accounts payable and a corresponding charge to consulting expense of $30,000 and $70,000, respectively, related to the agreement. Subsequently, we concluded that the agreement contained no cash consideration, only the issuance of 1,000,000 shares of common stock. Accordingly, we determined that the accounts payable and corresponding consulting expense should not have been recognized. During the quarter ended March 31, 2020, we also identified an error in our previously issued March 31, 2019 audited financial statements related to a duplicate entry to recognize 300,000 shares with a grant date fair value of $1,512. In accordance with ASC 250, Accounting Changes and Error Correction, we evaluated the materiality of the errors from quantitative and qualitative perspectives and concluded that the errors, as described above, were immaterial to the Company’s previously issued March 31, 2019, 2016 and 2015 audited financial statements. Since these revisions were not material to any previously issued financial statements, no amendments to previously filed periodic reports are required. Consequently, the Company has adjusted for these errors by revising the March 31, 2019 financial statements included herein.

The table below presents the effect of the financial statement adjustments related to the revisions discussed above of the Company’s previously reported financial statements as of and for the year ended March 31, 2019. The cumulative tax effect of the revisions are reflected in the twelve months ended March 31, 2020 financial statements presented in Note 6. This misstatement had no net impact on the Company’s consolidated statements of cash flows.

F-9

DAKOTA TERRITORY RESOURCE CORP.

NOTES TO FINANCIAL STATEMENTS

for the years ended MARCH 31, 2020 AND 2019

Note 3 Revision and Immaterial Correction of an Error in Previously Issued Financial Statements (Continued)

The effect of the immaterial correction of an error in our previously filed consolidated financial statements as of and for the year ended March 31, 2019 is as follows:

F-10

DAKOTA TERRITORY RESOURCE CORP.

NOTES TO FINANCIAL STATEMENTS

for the years ended MARCH 31, 2020 AND 2019

Note 4 Related Party Transactions

Effective February 24, 2012, we began paying consulting fees to Jerikodie, Inc., a company controlled by our CEO, President and a director of the Company. The agreement provides a fixed fee of $9,000 per month plus approved expenses. During the fiscal year ended March 31, 2019, Mr. Aberle, the chief executive officer and a director of the Company, and/or his affiliates loaned the Company an aggregate of $20,500, which loans are unsecured obligations of the Company, bearing interest at an annual rate of 3%, and are currently due on demand or past due in the amount of $21,171 as of March 31, 2020.

Mr. Aberle is owed approximately $720,000 in accrued salary and consulting fees as of March 31, 2020, of which $108,000 relates to accruals during the fiscal year ended March 31, 2020 and $108,000 relates to accruals during the fiscal year ended March 31, 2019. The accrued salary and consulting fees are included in accounts payable – related party in the accompanying balance sheets.

Effective October 1, 2005, we began paying a management consulting fee to Minera Teles Pires Inc., a company controlled by the Chief Geological Officer (“CGO”) and director of the Company. The agreement provides a fixed fee of $10,000 per month of which $5,000 is paid and the other $5,000 deferred until financing is obtained by us. Additionally, the agreement provides for a payment of $1,500 per month for office rent and expenses. As of March 31, 2020, the Company owed Mr. Bachman, the President and a director of the Company, and/or his affiliates a principal amount of $305,145 and accrued interest of $81,164 These loans are unsecured obligations of the Company, bearing interest at annual rates of between 3% and 4%, and are due on demand or past due; of which $7,000 was advanced during the fiscal year ended March 31, 2019.

Mr. Bachman is owed approximately $920,000 in accrued salary, consulting fees and rent reimbursement as of March 31, 2020, of which $103,500 relates to accruals during the fiscal year ended March 31, 2020 and $138,000 relates to accruals during the fiscal year ended March 31, 2019. Such amounts are included in accounts payable – related party in the accompanying balance sheets.

As of March 31, 2020 and 2019, the Company owes Mr. Mathers, the chief financial officer, approximately $151,000 for consulting fees which is included in accounts payable – related party in the accompanying balance sheet.

In September 2018, Mr. O’Rourke, a director of the Company, purchased 750,000 shares of our common stock in a private placement for $75,000. Additionally, Mr. O’Rourke, through his consulting firm, entered into a one-year consulting agreement with the Company (i) in September 2018 whereby he was issued a consulting fee of 1,000,000 shares for services rendered, and (ii) in September 2019 whereby he was issued a five-year option to purchase 1,000,000 shares of our common stock at an exercise price of $0.08 per share.

During the quarter ended March 31, 2020, Mr. Kamin billed the Company $48,000 for consulting services rendered.

Messrs. Aberle and Bachman own a 5% net smelter return royalty on the original eighty-four unpatented mining claims comprising the Blind Gold Property.

Note 5 Mineral Properties

On September 26, 2012, the Company was re-organized with North Homestake Mining Company. With this re-organization, the Company acquired 84 unpatented lode mining claims covering approximately 1,600 acres known as the Blind Gold Property located in the Black Hills of South Dakota.

On December 28, 2012, the Company acquired 57 unpatented lode mining claims covering approximately 853 acres known as the West False Bottom Creek and Paradise Gulch Claim Group, the City Creek Claims Group, and the Homestake Paleoplacer Claims Group, all located in the Black Hills of South Dakota. The West False Bottom Creek and Paradise Gulch Claims were contiguous to the Blind Gold Property and have been incorporated into the Blind Gold Property. The purchase price was 1,000,000 restricted common shares valued at $0.15 per share, or $150,000.

F-11

DAKOTA TERRITORY RESOURCE CORP.

NOTES TO FINANCIAL STATEMENTS

for the years ended MARCH 31, 2020 AND 2019

Note 5 Mineral Properties (Continued)

On March 3, 2014, the Company completed the acquisition of approximately 565.24 mineral acres in the Northern Black Hills of South Dakota. The acquisition increased our mineral interests in the Homestake District by nearly 23%, to over 3,057 acres. As part of the property acquisition, the Company purchased an additional 64.39 mineral acres located immediately southwest and contiguous to our Paleoplacer Property, including mineral title to the historic Gustin, Minerva and Deadbroke Gold Mines. The purchase price of the mineral interests was $33,335.

On April 5, 2017 the Company acquired options to purchase a combination of surface and mineral titles to 284 acres in the Homestake District of the Northern Black Hills of South Dakota. The acquisition included 61 acres located immediately south and contiguous with our City Creek Property; 82 acres located approximately one half mile south of our Blind Gold Property at the western fringe of the historic Maitland Gold Mine; and 141 acres located immediately north and contiguous to our Homestake Paleoplacer Property. The Company is required to make annual lease payments totaling $20,000 for a period of 5 years, of which $20,000 was due upon execution of the agreement. The Company has an option to purchase the mineral properties for total price of $626,392. As of March 31, 2019 the Company is current on all required annual lease payments.

In November 2018, we acquired 42 unpatented lode mining claims covering approximately 718 acres located immediately to the north and adjacent to the Company’s City Creek Property. Through this staking, the City Creek project area was expanded from approximately 449 acres to 1,167 acres.

In September, 2019 the Company completed the acquisition of 106 unpatented lode mining claims covering approximately 1,167 acres in close proximity to the historic Tinton Gold Camp. The Tinton area was the site of placer mining activity between 1876 and the turn of the century.

On March 6, 2020 the Company completed the acquisition of 65 unpatented lode mining claims covering approximately 1,152 acres in the Homestake District of the Black Hills of South Dakota. The new property is contiguous to the Company's Blind Gold Property.

The Company plans to commence an exploratory program on these mineral properties in June, 2020.

Note 6 Income Taxes

The following table sets forth a reconciliation of the statutory federal income tax for the years ended March 31:

The tax effects of the temporary differences between reportable financial statement income and taxable income are recognized as a deferred tax asset and liability. Significant components of the deferred tax assets are set out below along with a valuation allowance to reduce the net deferred tax asset to zero.

In order to comply with generally accepted accounting principles in the United States of America, management has decided to establish a valuation allowance because of the potential that the tax benefits underlying deferred tax asset may not be realized. Significant components of our deferred tax asset at March 31 are as follows:

F-12

DAKOTA TERRITORY RESOURCE CORP.

NOTES TO FINANCIAL STATEMENTS

for the years ended MARCH 31, 2020 AND 2019

Note 6 Income Taxes (Continued)

As a result of a change in control effective in September 2012, our net operating losses prior to that date may be partially or entirely unavailable, by law, to offset future income and, accordingly, are excluded from the associated deferred tax asset.

The net operating loss carry forward in the approximate amount of $3,348,000 will begin to expire in 2027. We file income tax returns in the United States and in one state jurisdiction.

We follow the provisions of ASC 740 relating to uncertain tax provisions and have commenced analyzing filing positions in all of the federal and state jurisdictions where we are required to file income tax returns, as well as all open tax years in these jurisdictions. As a result of adoption, no additional tax liabilities have been recorded. There are no unrecognized tax benefits as of March 31, 2020 or March 31, 2019. The Company files income tax returns in the U.S. federal jurisdiction and in certain state jurisdictions. The Company has not been subjected to tax examinations for any year and the statute of limitations has not expired. The Company’s tax returns remain open for examination by the applicable authorities, generally 3 years for federal and 4 years for state.

Note 7 Notes Payable

In February 2020, we borrowed $300,000 from JR, which the note was amended and restated as described in Note 11, Subsequent Events.

For the year ended March 31, 2019, the Company extinguished debt due to two entities in the amount of $660,239 consisting of $405,550 in principal and $254,689 in accrued interest. Under the statute of limitations in Nevada the debt is no longer enforceable, and the noteholders are no longer in existence. The Company recorded this transaction as gain on extinguishment of debt in the accompanying statement of operations for year ended March 31, 2019.

Notes Payable to Related Party

During the fiscal year ended March 31, 2019, Mr. Aberle and/or his affiliates loaned the Company an aggregate of $20,500, which loans are unsecured obligations of the Company, bearing interest at an annual rate of 3%, and are currently due on demand or past due in the amount of $21,171 as of March 31, 2020.

As of March 31, 2020, the Company owed Mr. Bachman and/or his affiliates $386,309, which includes accrued interest in the amount of $81,164. These loans are unsecured obligations of the Company, bearing interest at annual rates of between 3% and 4%, and are due on demand or past due; of which $7,000 was advanced during the fiscal year ended March 31, 2019.

Note 8 Line of Credit

The Company executed a line of credit with Wells Fargo Bank in California. The line of credit allows the Company to borrow up to $47,500. The Line of Credit bears interest at 7.75% per annum, is unsecured, and due on demand. The balance on this line of credit at March 31, 2020 and 2019 was $30,082 and $35,165, respectively.

F-13

DAKOTA TERRITORY RESOURCE CORP.

NOTES TO FINANCIAL STATEMENTS

for the years ended MARCH 31, 2020 AND 2019

Note 9 Common Stock

Our authorized capital stock consists of 300,000,000 shares of common stock, with a par value of $0.001 per share, and 10,000,000 preferred shares with a par value of $0.001 per share.

During the 12 months ended March 31, 2020, the Company issued (i) an aggregate of 1,000,000 shares of common stock for $100,000, (ii) 500,000 shares for $50,000 upon the exercise of stock options, and (iii) 1,000,000 shares of common stock valued at $85,000 in exchange for consulting services. The Company also issued options and warrants to purchase an aggregate of 3,200,000 shares of common stock at exercise prices ranging between $0.08 and $0.10 per share, expiring through January 2025.

At March 31, 2020, the total issued and outstanding shares were 65,416,787.

Common Stock Options and Warrants

The Company’s 2015 Omnibus Incentive Plan (the “Omnibus Plan”) authorizes the Company to grant or issue non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, cash-based awards or other stock-based awards up to a total of 15 million shares. Under the terms of the Omnibus Plan, awards may be granted to employees, directors and third-party service providers. Awards issued under the Omnibus Plan vest as determined by the board of directors at the time of grant. Any shares related to an award granted under the Omnibus Plan that terminates by expiration, forfeiture, or otherwise without the issuance of the shares shall be available again for grant under the Omnibus Plan. As of March 31, 2020, a total of 4,350,000 shares remained available for future grants under the Omnibus Plan.

Outstanding stock options under the Omnibus Plan have terms ranging from 5 to 10 years. Outstanding stock options granted to third-party service providers generally vest over the period of the contract, which is typically one year. The Company recognized stock-based compensation related to issuance of stock options totaling $110,897 and $117,559 during the years ended March 31, 2020 and 2019, respectively, which is included in general and administrative expenses in the accompanying statements of operations.

A summary of the Company's stock option activity and related information for the period ended March 31, 2020 is as follows:

The weighted-average grant-date fair value of stock options granted during the year ended March 31, 2020 was $0.09 per share. At March 31, 2020, there was approximately $125,000 of unrecognized compensation expense related to stock options that is expected to be recognized over a weighted-average period of 0.60 years.

During the year ended March 31, 2020, we estimated the fair value of each stock option on the date of grant using a Black Scholes valuation model. The weighted-average assumptions used to calculate the grant date fair value were as follows: (i) risk-free interest rate of 1.52%, (ii) estimated volatility of 249%, (iii) dividend yield of 0%, and (iv) expected life of 5 years.

F-14

DAKOTA TERRITORY RESOURCE CORP.

NOTES TO FINANCIAL STATEMENTS

for the years ended MARCH 31, 2020 AND 2019

Note 9 Common Stock (Continued)

Common Stock Options and Warrants (Continued)

A summary of the Company's stock warrant activity and related information for the period ended March 31, 2020 is as follows:

Note 10 Subsequent Events

On May 18, 2020 the Company announced that its land holdings in the Black Hills had been increased through the staking of 70 unpatented lode mining claims covering approximately 1,120 acres located on the western margin of the structural corridor that extends north of the Homestake Gold Mine. The West Corridor property is located just south of the mineral property Dakota Territory acquired from Deadbroke Mining Company in the Maitland Area in March of 2014, just north of the producing Wharf Mine (Coeur Mining) and just to the south and east of the former Richmond Hill Mine (Barrick Gold). The property is a target for both Homestake Iron Formation hosted gold mineralization under the cover of younger sedimentary and igneous rocks that also host tertiary-aged replacement gold and silver mineralization in the area.

Dakota Territory entered into an agreement with JR Resources Corp. (“JR”) on May 26, 2020 (“Agreement”) whereby JR loaned the Company $1,150,000 and the Company granted JR the right to purchase up to 142,566,667 shares of common stock at $0.15 per share (approximate 64.24% on a fully diluted basis) in one or more closings on or prior to October 15, 2020 (“Termination Date”). The Agreement allows Dakota to advance its current mineral property acquisition strategy with a seasoned team of mining and exploration executives with a track record of building mines and mining companies from quality assets. The Company intends to use proceeds from this loan to acquire up to $350,000 of mineral interests or properties, up to $500,000 to conduct an airborne geophysical survey, and the balance for general corporate and working capital purposes.

Upon execution of this Agreement, JR and the Company entered into an amended and restated promissory note in the amount of $1,450,000, of which $300,000 was advanced in February 2020 and $1,150,000 was advanced in May 2020 as noted above. The note is unsecured and bears interest at the annual rate of 0.25%, compounded annually, payable on December 31, 2021. Upon a closing of a change of control transaction with JR as a result of the purchase of shares of common stock pursuant to the Agreement (“Change of Control Closing”), JR will be required to exercise, and will in fact be deemed to have exercised, its right to convert the principal of and accrued interest on the note into Company common stock at the rate of $0.15 per share. On the maturity date, the principal amount of the note, together with any accrued but unpaid interest, will be due and payable in cash, provided that, if and to the extent that the Company does not pay this note in cash on the maturity date, then JR will be required to exercise, and will in fact be deemed to have exercised, its right to convert such unpaid portion of the note into shares of Company common stock. The conversion price is $0.15 per share through December 31, 2020 and, thereafter, the lesser of $0.15 per share and the volume weighted average price of Company common stock for the five consecutive trading days immediately preceding the date of such conversion (with a floor of $0.10 per share). The note has customary event of default provisions and, upon an event of default, JR will be required to convert the unpaid portion of the note into shares of Company common stock, if not paid prior thereto in cash by the Company.

F-15

DAKOTA TERRITORY RESOURCE CORP.

NOTES TO FINANCIAL STATEMENTS

for the years ended MARCH 31, 2020 AND 2019

Note 10 Subsequent Events (Continued)

Subject to the terms and conditions set forth in the Agreement, JR shall have the right, prior to the Termination Date, to purchase the 142,566,667 shares (for a purchase price of up to $21,385,000, reduced by the amount of note converted) in one or more closings from the Company. Each closing is subject to negotiation of closing deliverables and satisfaction of closing conditions to be mutually agreed upon by the Company and JR, including agreement on how the proceeds will be utilized. In the event of a Change of Control Closing, the closing deliverables to be negotiated and mutually agreed upon include the application of the use of proceeds, negotiation of employment agreements, agreement on equity grants pursuant to an equity compensation plan to be adopted, and amended bylaws to be adopted that will govern the appointment of JR director designees. There is no assurance that closing deliverables will be agreed upon and that any closing will occur, as JR is not obligated to purchase any of the 142,566,667 shares of common stock.

On June 3, 2020 the Company secured the services of New-Sense Geophysics Ltd. to undertake a high resolution helicopter-borne district scale magnetic and radiometric survey of the Northern Black Hills of South Dakota. Robert B. Ellis (EGC Inc.) has also been engaged to consult on the design of the survey for Dakota Territory and will oversee data acquisition, provide additional processing and modeling of the data, and work with the Dakota Territory’s technical team to integrate the high resolution geophysics with the Company’s extensive geology and geochemistry data sets. This work is budgeted to be approximately $410,000.

Subsequent to March 31, 2020, outstanding warrants entitling the holders to purchase an aggregate of 2,200,000 shares of common stock were exercised. We received proceeds in the amount of $220,000 from the exercise of these warrants.

F-16

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

Effective February 6, 2020, LBB & Associates Ltd, LLP (“LBB”), our prior independent registered public accounting firm, was suspended by the SEC. As a result of this suspension, on March 2, 2020, LBB resigned as the independent registered public accounting firm for the Company.

The audit reports of LBB on the Company’s financial statements for the years ended March 31, 2019 and March 31, 2018 did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles.

During the two most recent fiscal years ended March 31, 2019 and through the subsequent interim period preceding LBB’s resignation, there were no disagreements between the Company and LBB on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of LBB would have caused them to make reference thereto in their reports on the Company’s financial statements for such years.

During the two most recent fiscal years ended March 31, 2019 and through the subsequent interim period preceding LBB’s resignation, there were no reportable events within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K.

On March 6, 2020, our Board of Directors appointed Ham, Langston and Brezina, L.L.P. (“HLB”) to serve as our independent registered public accounting firm for the fiscal year ending March 31, 2020. 

During our two most recent fiscal years and through the interim period through March 6, 2020, neither we nor anyone on our behalf consulted HLB regarding (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our consolidated financial statements, and no written report or oral advice was provided by HLB to us that HLB concluded was an important factor considered by us in reaching a decision as to the accounting, auditing or financial reporting issue, or (ii) any matter that was either the subject of a disagreement (as described in Item 304(a)(1)(iv) of regulation S-K and the related instructions) or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).

Item 9A. Controls and Procedures.

Disclosure Controls and Procedures

At the end of the period covered by this annual report on Form 10-K for the fiscal year ended March 31, 2020, an evaluation was carried out under the supervision of and with the participation of our management, including the chief executive officer (“CEO”) and chief financial officer (“CFO”), of the effectiveness of the design and operations of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act). Based on that evaluation the CEO and the CFO have concluded that as of the end of the period covered by this annual report, our disclosure controls and procedures were not effective in ensuring that: (i) information required to be disclosed by us in reports that we file or submit to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and (ii) material information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow for accurate and timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America (“GAAP”). Management has assessed the effectiveness of internal control over financial reporting based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. A material weakness, as defined by SEC rules, is a control deficiency, or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses in internal control over financial reporting that were identified are:

a)We did not maintain sufficient personnel with an appropriate level of technical accounting knowledge, experience, and training in the application of GAAP commensurate with our complexity and our financial accounting and reporting requirements. We have limited experience in the areas of financial reporting and disclosure controls and procedures. Also, we do not have an independent audit committee. As a result, there is a lack of monitoring of the financial reporting process and there is a reasonable possibility that material misstatements of the consolidated financial statements, including disclosures, will not be prevented or detected on a timely basis; and 

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b)Due to our small size, we do not have a proper segregation of duties in certain areas of our financial reporting process. The areas where we have a lack of segregation of duties include cash receipts and disbursements, approval of purchases and approval of accounts payable invoices for payment. This control deficiency, which is pervasive in nature, results in a reasonable possibility that material misstatements of the financial statements will not be prevented or detected on a timely basis. 

As a result of the existence of these material weaknesses as of March 31, 2020, management has concluded that we did not maintain effective internal control over financial reporting as of March 31, 2020, based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.

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 our independent registered public accounting firm pursuant to rules of the SEC that permit the company to provide only management's report in this annual report.

Changes to Internal Controls and Procedures over Financial Reporting

We intend that our internal control over financial reporting will be modified once we have adequate funding to allow adding additional advisors to address deficiencies in the financial closing, review and analysis process, which will improve our internal control over financial reporting.

Management’s Remediation Plans

We will look to increase our personnel resources and technical accounting expertise within the accounting function as funds become available. Management believes that hiring additional knowledgeable personnel with technical accounting expertise will remedy the following material weakness: insufficient personnel with an appropriate level of technical accounting knowledge, experience, and training in the application of GAAP commensurate with our complexity and our financial accounting and reporting requirements.

Item 9B. Other Information.

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

Management and Board of Directors

All directors hold office until the next annual general meeting of the shareholders or until their successors are elected and qualified. The officers are appointed by our board of directors and hold office until their earlier death, retirement, resignation or removal.

Our current directors and executive officers are:

Mr. Gerald Aberle

Mr. Aberle graduated in 1980 from South Dakota School of Mines and Technology with a bachelor of science degree in mining engineering. Mr. Aberle has over 40 years of experience in the minerals industry, including 22 years with Homestake Mining Company at the Homestake gold mine in Lead, S.D. Mr. Aberle's mining background includes extensive engineering, operations management and project management experience. Mr. Aberle has consulted in the mining, underground construction and minerals exploration business for clients including Homestake Mining Co., Barrick Gold Corp., the State of South Dakota and the University of Washington in connection with the planning and development of the National Science Foundation's national deep underground science and engineering laboratory. Mr. Aberle has held numerous corporate management positions for public companies operating in the junior exploration business and has more than 24 years of private business experience in the United States, primarily in the land development and construction industries. We believe that Mr. Aberle’s extensive experience as an executive officer in the mining industry provides him with the necessary qualifications to serve as a director.

Richard Bachman.

Mr. Bachman has been a director of our company since September 2005. Mr. Bachman served as our chief executive officer from September 2005 through July 2018. Mr. Bachman has served as chief geological officer since July 2018. Mr. Bachman’s work experience includes 22 years working with Homestake Mining Company from 1980 to 2002 in various capacities ranging from exploration to mine operations. From 1995 to 1998, he was the regional geologist for Brazil where he directed a staff of 46 and was responsible for a $2.5 million annual exploration budget. He conducted a countrywide assessment that resulted in the acquisition of a one million hectare property in a 20 million ounce gold district in the Amazon. From 1999 to 2000 Mr. Bachman was the regional geologist for Peru where he directed a staff of 10 and refocused Homestake’s existing exploration program, which resulted in the evaluation of 83 properties in 24 months and yielded one new discovery. From 2001 to 2002, he was Homestake’s regional geologist, International Special Projects, where he designed and successfully implemented reconnaissance programs in southern Argentina that resulted in the evaluation of 63 properties with five advancing and the coordination and field review of 22 properties. From 2002 until now, Mr. Bachman has acted as President and Consulting Professional Geologist for Minera Teles Pires Inc., a Reno, Nevada company. Mr. Bachman holds a Bachelor’s of Science degree in Geological Engineering from the South Dakota School of Mines and Technology and is a Certified Professional Geologist with the American Institute of Professional Geologists. We believe that Mr. Bachman’s extensive experience as an executive officer in the mining industry provides him with the necessary qualifications to serve as a director.

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Mr. Wm Chris Mathers

Mr. Mathers has served as chief financial officer of the Company for over five years. Mr. Mathers is a senior finance and accounting professional with more than 35 years of experience in financial accounting, mergers and acquisition, SEC compliance and operational and administrative support. Mr. Mathers holds a BBA in Accounting from Southwestern University in Georgetown, Texas, and is a certified public accountant. Mr. Mathers began his career in public accounting in 1981 with the accounting firm of Price Waterhouse focusing on multi-national public audits. From 1983 through 1989, Mr. Mathers was in private practice focusing on tax preparation, and the financial audits of corporations, partnerships and individuals. From 1989 through 1993, Mr. Mathers was a controller and administrative officer of GJR Investments, Inc., a national real estate firm. Beginning in 1994, Mr. Mathers began work as chief financial officer for several privately and publicly held companies, including: InterSystems, Inc. of Houston, Texas, a multi-state manufacturing firm; Nexus Custom Electronics, Inc., a manufacturer of circuit boards to private industry and the U.S. Department of Defense; Interactive Nutrition International, Inc., Ottawa, Canada, a manufacturer of Nutritional products; and, Texas Mineral Resources Corp., a Texas based mining company engaged in the business of the acquisition, exploration and development of mineral properties.

Mr. Stephen T. O’Rourke

Mr. O’Rourke served as president of global petroleum exploration for BHP Billiton (BHP:NYSE) and was a member of its senior management team for the corporation. Other key roles at BHPB included vice president of development planning and vice president of appraisal and petroleum engineering. Prior to joining BHPB he held various senior technical and management roles for Shell Oil Company. Mr. O’Rourke is a founding partner of Strategic Management Partners LLC, a consulting firm based in Rapid City, SD specializing in energy, minerals & business development. He serves as managing director for Heat Mining LLC, a geothermal technology development company and is a managing partner for Geoparks International LLC, a geologic consulting group focused on the Black Hills of South Dakota. He is currently a non-executive board member of RESPEC, an engineering consulting firm also based in Rapid City, SD. Stephen serves as a member of the South Dakota School of Mines & Technology (SDSM&T) Geological Engineering advisory board and is vice chair of the SDSM&T Foundation Executive Committee. Mr. O’Rourke holds a BSc in Geological Engineering and an Honorary Doctorate of Public Service from SDSM&T and is a graduate of the Wharton School of Business Advanced Management Program. We believe that Mr. O’Rourke’s experience as an executive officer in a NYSE-listed public company, as well as his extensive mining industry experience, provides him with the necessary qualifications to serve as a director.

Committees of the Board & Director Independence

Our board of directors is currently composed of three directors, none of which is independent. We are not subject to corporate governance rules that require that a board of directors be composed of a majority of independent directors. The Board has not established any committees and, accordingly, the Board serves as the audit, compensation, and nomination committee, and we have no audit committee financial expert.

As of March 31, 2020, we did not affect any material changes to the procedures by which our shareholders may recommend nominees to our board of directors. Our board of directors does not have a policy with regards to the consideration of any director candidates recommended by our shareholders. Our board of directors has determined that it is in the best position to evaluate our company’s requirements as well as the qualifications of each candidate when the board considers a nominee for a position on our board of directors. If shareholders wish to recommend candidates directly to our board, they may do so by sending communications to the President of our company at the address on the cover of this annual report.

There have been no changes to the procedures by which security holders may recommend nominees to the Board of Directors.

Family Relationships

There are no family relationships among our directors or officers.

Involvement in Certain Legal Proceedings

Our directors, executive officer and control persons have not been involved in any of the following events during the past five years:

1.Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; 

2.Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); 

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3.Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or 

4.Being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated. 

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who beneficially own more than 10% of our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Executive officers, directors and greater than 10% beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To our knowledge based on a review of Section 16(a) filings, our officers and directors timely filed during our last fiscal ended March 31, 2020, except for Mr. O’Rourke, who has not filed his Form 3.

Code of Ethics

On May 14, 2013, we amended our code of ethics which applies to all our directors, officers and employees. A copy of our amended “Code of Ethics” was filed as exhibit 14.1 to the annual report on Form 10-K for the year ended March 31, 2013.

Item 11. Executive Compensation

The following summary compensation tables set forth information concerning the annual and long-term compensation for services in all capacities to the Company for the years stated for those persons who were, at March 31, 2020 named executive officers. “Named Executive Officer” means: (a) the chief executive officer, (b) the chief financial officer, (c) each of the three most highly compensated executive officers, or the three most highly compensated individuals acting in a similar capacity, other than the chief executive officer and chief financial officer, at the end of the most recently completed financial year; and (d) each individual who would be a named executive officer under paragraph (c) but for the fact that the individual was neither an executive officer of the Company, nor acting in a similar capacity, at the end of that financial year.

⁽¹⁾Mr. Bachman resigned as CEO in July 2018. 

⁽²⁾Mr. Aberle was appointed CEO in July 2018. 

⁽³⁾Mr. Mathers was issued an option to purchase, on a cashless basis, 1,300,000 shares of common stock at an exercise price of $0.08 per share in May 2018. 

All employment arrangements with our officers are on an at-will basis. There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. Our directors and executive officers may receive stock options at the discretion of our board of directors in the future. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of our board of directors from time to time. We have no plans or arrangements in respect of remuneration received or that may be received by our executive officers to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control.

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Compensation Committee Interlocks and Insider Participation

No executive or director of the Company serves as a member of the compensation committee or board of directors of another entity, one of whose executive officers serves on the board of directors of the Company.

Executive Compensation Agreements and Summary of Executive Compensation

During the year ended March 31, 2020, the Board of Directors was responsible for establishing a compensation policy and administering the compensation programs of the Company’s executive officers. We do not currently have a compensation committee. The amount of compensation paid by the Company to each of the Company’s officers and the terms of those persons’ employment is determined by the Board of Directors. The Board evaluates past performance and considers future incentive and retention in considering the appropriate compensation for the Company’s officers. The Company believes that the compensation paid to the Company’s directors and officers is fair to the Company. The Board of Directors believes that the use of equity compensation is at times appropriate for employees, and in the future intends to use equity compensation awards to reward outstanding service or to attract and retain individuals with exceptional talent and credentials. The use of stock options and other awards is intended to strengthen the alignment of interests of executive officers and other key employees with those of our stockholders.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth the stock options held by the Company’s Named Executive Officers as of March 31, 2020. No stock appreciation rights were awarded.

⁽¹⁾Consists of (i) an option to purchase 300,000 shares of common stock expiring in 2025 and (ii) an option to purchase 1,300,000 shares of common stock expiring in 2028.  

⁽²⁾Mr. Mathers exercised, on a cashless basis, his option to purchase 1,300,000 shares in June 2020 which resulted in the net issuance of 1,083,333 shares of Company common stock.  

Director Compensation

We did not pay any director's fees or other cash compensation for services rendered as a director for the fiscal year ended March 31, 2020. We currently have no formal plan for compensating our directors for their service in their capacity as directors. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. Our board of directors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director.

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

The following table sets forth, as of June 12, 2020, the number and percentage of outstanding shares of common stock owned by: (a) each person who is known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock; (b) each of our directors; (c) the Named Executive Officers; and (d) all current directors and executive officers, as a group. As of June 12, 2020, there were 66,914,964 shares of common stock issued and outstanding.

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Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act. Under this rule, certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire shares (for example, upon exercise of an option or warrant) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares is deemed to include the amount of shares beneficially owned by such person by reason of such acquisition rights. As a result, the percentage of outstanding shares of any person as shown in the following table does not necessarily reflect the person’s actual voting power at any particular date. To our knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them.

⁽¹⁾Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Except as otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable.  

⁽²⁾Consists of (i) 14,205,368 shares of common stock held in the name of Richard Bachman, (ii) 531,202 shares of common stock held in an entity controlled by Mr. Bachman, and (iii) an option currently exercisable to purchase 2,000,000 shares of common stock issued in January 2015 at an exercise price of $0.08 per share expiring in 2025. 

⁽³⁾Consists of (i) 14,000,000 shares of common stock, and (ii) an option currently exercisable to purchase 2,000,000 shares of common stock issued in January 2015 at an exercise price of $0.08 per share expiring in 2025. 

⁽⁴⁾Mr. Kamin (i) indirectly owns 550,000 shares through RLR Services Partnership, over which he has voting and investment power, (ii) indirectly owns 2,250,000 shares through Composite Resources, LLC, over which he has voting and investment power, (iii) indirectly owns 250,000 shares owned by Alpha Nexus Partners, over which he has voting and investment power, and (iv) an option currently exercisable to purchase 600,000 shares of common stock at an exercise price of $0.08 per share.  

⁽⁵⁾Consists of (i) 1,233,333 shares of common stock and (ii) an option currently exercisable to purchase 300,000 shares of common stock at an exercise price of $0.08 issued in January 2015 expiring in 2025. 

⁽⁶⁾Includes an option to purchase up to 250,000 shares of common stock at an exercise price of $0.06 per share, expiring February 2021. 

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⁽⁷⁾Consists of (i) 1,750,000 shares of common stock and (ii) an option currently exercisable to purchase 1,000,000 shares of common stock at an exercise price of $0.08 per share.  

Description of Capital Stock

Common Stock

The holders of common stock are entitled to one vote per share with respect to all matters required by law to be submitted to stockholders. The holders of common stock have the sole right to vote. The common stock does not have any cumulative voting, preemptive, subscription or conversion rights. Election of directors requires the affirmative vote of a plurality of shares represented at a meeting, and other general stockholder action (other than an amendment to our Articles of Incorporation) requires the affirmative vote of a majority of shares represented at a meeting in which a quorum is represented. The outstanding shares of common stock are validly issued, fully paid and non-assessable.

The holders of common stock are entitled to receive dividends, if declared by our Board, out of funds legally available. In the event of liquidation, dissolution or winding up of the affairs of the Company, the holders of common stock are entitled to share ratably in all assets remaining available for distribution to them after payment or provision for all liabilities.

The authorized but unissued shares of our common stock are available for future issuance without stockholder approval. These additional shares may be used for a variety of corporate purposes, including future offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued shares of common stock may enable our Board to issue shares of stock to persons friendly to existing management, which may deter or frustrate a takeover of the Company.

Indemnification of Directors and Officers

Our certificate of incorporation and bylaws provide that we will indemnify our directors, officers, employees and agents to the extent and in the manner permitted by the provisions of the Delaware General Corporation Law, as amended from time to time (“DGCL”), subject to any permissible expansion or limitation of such indemnification, as may be set forth in any stockholders’ or directors’ resolution or by contract. We are also permitted to maintain insurance on behalf of any director, officer, employee or other agent for liability arising out of his actions, whether or not the DGCL would permit indemnification.

Derivative Securities

As of the date of this annual report, there are warrants and options outstanding to purchase up to 12,150,000 shares of common stock at prices ranging from $0.06 to $0.13 per share, expiring the later of 2028. Additionally, in May 2020, the Company granted a purchase right to JR to acquire up to 142,566,667 shares of common stock at a purchase price of $0.15 per share expiring October 15, 2020.

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

During the fiscal year ended March 31, 2019, Mr. Aberle and/or his affiliates loaned the Company an aggregate of $20,500, which loans are unsecured obligations of the Company, bearing interest at an annual rate of 3%, and are currently due on demand or past due in the amount of $21,171 as of March 31, 2020.

Mr. Aberle is owed approximately $739,000 in accrued salary and consulting fees as of March 31, 2020, of which $108,000 relates to accruals during the fiscal year ended March 31, 2020 and $108,000 relates to accruals during the fiscal year ended March 31, 2019. Compensation during the current fiscal year continues to accrue.

As of March 31, 2020, the Company owed Mr. Bachman and/or his affiliates $386,309, which loans are unsecured obligations of the Company, bearing interest at annual rates of between 3% and 4%, and are due on demand or past due; of which $7,000 was advanced during the fiscal year ended March 31, 2019.

Mr. Bachman is owed approximately $920,000 in accrued salary, consulting fees and rent reimbursement as of March 31, 2020, of which $103,500 relates to accruals during the fiscal year ended March 31, 2020 and $138,000 relates to accruals during the fiscal year ended March 31, 2019.

In September 2018, Mr. O’Rourke purchased 750,000 shares of our common stock in a private placement for $75,000. Additionally, Mr. O’Rourke, through his consulting firm, entered into a one-year consulting agreement with the Company (i) in September 2018 whereby he was issued a consulting fee of 1,000,000 shares for services rendered, and (ii) in September 2019 whereby he was issued a five-year option to purchase 1,000,000 shares of our common stock at an exercise price of $0.08 per share.

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During the quarter ended March 31, 2020, Mr. Kamin billed the Company $48,000 for consulting services rendered.

Messrs. Aberle and Bachman own a 5% net smelter return royalty on the original eighty-four unpatented mining claims comprising the Blind Gold Property.

Item 14. Principal Accountant Fees and Services.

Audit Fees

Audit fees consist of fees related to professional services rendered in connection with the audit of our annual financial statements and the review of the financial statements included in each of our quarterly reports on Form 10-Q. Tax fees consist of fees for professional services rendered in connection with preparation and filing of our federal income tax returns and limited tax consulting.

Our Board’s policy (the Board also serves as our audit committee) is to pre-approve all audit and permissible non-audit services performed by the independent accountants. These services may include audit services, audit-related services, tax services and other services. Under our Board’s policy, pre-approval is provided for particular services or categories of services, including planned services, project based services and routine consultations. In addition, we may also pre-approve particular services on a case-by-case basis. We approved all services that our independent accountants provided to us in the past two fiscal years.

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Item 15. Exhibits.

Exhibits Required by Item 601 of Regulation S-B

The following Exhibits are filed with this annual report, subject to the Registrant’s right under Rule 12b-32 under the Exchange Act to incorporate previously filed Exhibits by reference:

*Management contract or compensatory plan or arrangement. 

(1)Filed herewith 

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

DAKOTA TERRITORY RESOURCE CORP.

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