The accompanying notes are an integral part of these condensed consolidated financial statements.
SILVER BULL RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)
|
|
Three Months Ended
April 30,
|
|
|
Six Months Ended
April 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPLORATION AND PROPERTY HOLDING COSTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration and property holding costs
|
|
|
102,536
|
|
|
|
196,578
|
|
|
|
276,640
|
|
|
|
556,775
|
|
Depreciation
|
|
|
6,763
|
|
|
|
12,981
|
|
|
|
13,880
|
|
|
|
20,663
|
|
TOTAL EXPLORATION AND PROPERTY HOLDING COSTS
|
|
|
109,299
|
|
|
|
209,559
|
|
|
|
290,520
|
|
|
|
577,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GENERAL AND ADMINISTRATIVE EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel
|
|
|
113,045
|
|
|
|
155,546
|
|
|
|
245,342
|
|
|
|
271,734
|
|
Office and administrative
|
|
|
139,123
|
|
|
|
107,248
|
|
|
|
238,089
|
|
|
|
169,177
|
|
Professional services
|
|
|
88,289
|
|
|
|
79,454
|
|
|
|
140,199
|
|
|
|
121,205
|
|
Directors’ fees
|
|
|
38,440
|
|
|
|
59,181
|
|
|
|
80,454
|
|
|
|
93,977
|
|
Provision for (recovery of) uncollectible value-added taxes (Note 5)
|
|
|
5,800
|
|
|
|
1,204
|
|
|
|
25,202
|
|
|
|
(49,966
|
)
|
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES
|
|
|
384,697
|
|
|
|
402,633
|
|
|
|
729,286
|
|
|
|
606,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(493,996
|
)
|
|
|
(612,192
|
)
|
|
|
(1,019,806
|
)
|
|
|
(1,183,565
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
129
|
|
|
|
1,396
|
|
|
|
769
|
|
|
|
1,904
|
|
Interest and finance costs (Note 9)
|
|
|
(690
|
)
|
|
|
(663
|
)
|
|
|
(1,639
|
)
|
|
|
(1,588
|
)
|
Foreign currency transaction gain (loss)
|
|
|
5,572
|
|
|
|
9,176
|
|
|
|
2,599
|
|
|
|
(4,610
|
)
|
Change in fair value of stock option liability (Note 11)
|
|
|
2,249
|
|
|
|
—
|
|
|
|
(5,792
|
)
|
|
|
—
|
|
Change in fair value of warrant derivative liability (Note 12)
|
|
|
293,225
|
|
|
|
—
|
|
|
|
(1,305,119
|
)
|
|
|
—
|
|
Miscellaneous income
|
|
|
—
|
|
|
|
5,417
|
|
|
|
225
|
|
|
|
5,417
|
|
TOTAL OTHER INCOME (EXPENSES)
|
|
|
300,485
|
|
|
|
15,326
|
|
|
|
(1,308,957
|
)
|
|
|
1,123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAXES
|
|
|
(193,511
|
)
|
|
|
(596,866
|
)
|
|
|
(2,328,763
|
)
|
|
|
(1,182,442
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE
|
|
|
236
|
|
|
|
2,237
|
|
|
|
1,562
|
|
|
|
119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
|
(193,747
|
)
|
|
|
(599,103
|
)
|
|
|
(2,330,325
|
)
|
|
|
(1,182,561
|
)
|
OTHER COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,721
|
|
COMPREHENSIVE LOSS
|
|
$
|
(193,747
|
)
|
|
$
|
(599,103
|
)
|
|
$
|
(2,330,325
|
)
|
|
$
|
(1,179,840
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED NET LOSS PER COMMON SHARE
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (Note 4)
|
|
|
202,514,499
|
|
|
|
177,894,967
|
|
|
|
200,944,274
|
|
|
|
177,894,967
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
SILVER BULL RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)
|
|
Common Stock
|
|
|
Additional
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
|
Amount
|
|
|
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Comprehensive
Income
|
|
|
Total
|
|
Balance, October 31, 2017
|
|
|
199,259,967
|
|
|
$
|
1,992,599
|
|
|
$
|
127,679,664
|
|
|
$
|
(122,335,364
|
)
|
|
$
|
92,248
|
|
|
$
|
7,429,147
|
|
Issuance of common stock as follows:
- exercise of warrants at a price of Canadian dollar (“$CDN”) 0.13 per share less costs of $750 (Note 10)
|
|
|
5,440,000
|
|
|
|
54,400
|
|
|
|
497,352
|
|
|
|
—
|
|
|
|
—
|
|
|
|
551,752
|
|
- exercise of agent warrants at a price of $CDN 0.10 per share less costs of $165 (Note 10)
|
|
|
39,375
|
|
|
|
394
|
|
|
|
2,586
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification to additional paid-in capital upon exercise of warrants at price of $CDN 0.13 (Note 12)
|
|
|
—
|
|
|
|
—
|
|
|
|
379,908
|
|
|
|
—
|
|
|
|
—
|
|
|
|
379,908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification to additional paid-up capital upon exercise of warrants at price of $CDN 0.10 (Note 12)
|
|
|
—
|
|
|
|
—
|
|
|
|
3,615
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock option activity as follows:
- Stock-based compensation for options issued to officers, employees and consultants
|
|
|
—
|
|
|
|
—
|
|
|
|
51,634
|
|
|
|
—
|
|
|
|
—
|
|
|
|
51,634
|
|
Net loss for the six month period ended April 30, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,330,325
|
)
|
|
|
—
|
|
|
|
(2,330,325
|
)
|
Balance, April 30, 2018
|
|
|
204,739,342
|
|
|
$
|
2,047,393
|
|
|
$
|
128,614,759
|
|
|
$
|
(124,665,689
|
)
|
|
$
|
92,248
|
|
|
$
|
6,088,711
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
SILVER BULL RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
|
|
|
|
|
|
|
|
|
Six Months Ended
April 30,
|
|
|
|
2018
|
|
|
2017
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,330,325
|
)
|
|
$
|
(1,182,561
|
)
|
Adjustments to reconcile net loss to net cash used by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
13,880
|
|
|
|
20,663
|
|
Provision for (recovery of) uncollectible value-added taxes
|
|
|
25,202
|
|
|
|
(49,966
|
)
|
Foreign currency transaction (gain) loss
|
|
|
(2,411
|
)
|
|
|
8,348
|
|
Change in fair value of warrant derivative liability (Note 12)
|
|
|
1,305,119
|
|
|
|
—
|
|
Change in fair value of stock option liability (Note 11)
|
|
|
5,792
|
|
|
|
—
|
|
Stock options issued for compensation
|
|
|
72,565
|
|
|
|
98,758
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Value-added tax receivable
|
|
|
(28,986
|
)
|
|
|
(44,766
|
)
|
Other receivables
|
|
|
(7,401
|
)
|
|
|
(8,326
|
)
|
Prepaid expenses and deposits
|
|
|
30,848
|
|
|
|
51,506
|
|
Accounts payable
|
|
|
37,135
|
|
|
|
115,135
|
|
Accrued liabilities and expenses
|
|
|
(95,273
|
)
|
|
|
(119,990
|
)
|
Income tax payable
|
|
|
(2,780
|
)
|
|
|
(8,024
|
)
|
Net cash used in operating activities
|
|
|
(976,635
|
)
|
|
|
(1,119,223
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Acquisition of property concessions
|
|
|
(15,541
|
)
|
|
|
—
|
|
Net cash used in investing activities
|
|
|
(15,541
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from exercise of warrants, net of costs (Note 10)
|
|
|
555,207
|
|
|
|
—
|
|
Net cash provided by financing activities
|
|
|
555,207
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rates on cash and cash equivalents
|
|
|
1,766
|
|
|
|
(2,022
|
)
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(435,203
|
)
|
|
|
(1,121,245
|
)
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents beginning of period
|
|
|
681,776
|
|
|
|
1,467,328
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents end of period
|
|
$
|
246,573
|
|
|
$
|
346,083
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
SILVER BULL RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (CONTINUED)
|
|
Six Months Ended
April 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW DISCLOSURES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid
|
|
$
|
4,599
|
|
|
$
|
8,009
|
|
Interest paid
|
|
|
1,639
|
|
|
$
|
1,588
|
|
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issuance costs included in accounts payable and accrued liability
|
|
|
475
|
|
|
|
—
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements
NOTE 1 – ORGANIZATION, DESCRIPTION OF BUSINESS AND GOING CONCERN
Silver Bull Resources, Inc. (the “Company”) was incorporated in the State of Nevada on November 8, 1993 as the Cadgie Company for the purpose of acquiring and developing mineral properties. The Cadgie Company was a spin-off from its predecessor, Precious Metal Mines, Inc. On June 28, 1996, the Company’s name was changed to Metalline Mining Company. On April 21, 2011, the Company’s name was changed to Silver Bull Resources, Inc. The Company’s fiscal year-end is October 31. The Company has not realized any revenues from its planned operations and is considered an exploration stage company. The Company has not established any reserves with respect to its exploration projects and may never enter into the development stage with respect to any of its projects.
The Company engages in the business of mineral exploration. The Company currently owns a number of property concessions in Mexico (collectively known as the “Sierra Mojada Property”). The Company conducts its operations in Mexico through its wholly-owned subsidiary corporations, Minera Metalin S.A. de C.V. (“Minera Metalin”) and Contratistas de Sierra Mojada S.A. de C.V. (“Contratistas”) and through Minera Metalin’s wholly-owned subsidiary Minas de Coahuila SBR S.A. de C.V. (“Minas”).
On April 16, 2010, Metalline Mining Delaware, Inc., a wholly-owned subsidiary of the Company, was merged with and into Dome Ventures Corporation (“Dome”). As a result, Dome became a wholly-owned subsidiary of the Company. Dome has a wholly-owned subsidiary Dome Asia Inc. (“Dome Asia”), which is incorporated in the British Virgin Islands. Dome Asia has a wholly-owned subsidiary, Dome Minerals Nigeria Limited, incorporated in Nigeria. On May 15, 2017, the Company liquidated the Company’s Gabonese subsidiary, African Resources SARL Gabon (“African Resources”).
The Company’s efforts and expenditures have been concentrated on the exploration of properties, principally the Sierra Mojada Property located in Coahuila, Mexico. The Company has not determined whether its exploration properties contain ore reserves that are economically recoverable. The ultimate realization of the Company’s investment in exploration properties is dependent upon the success of future property sales, the existence of economically recoverable reserves, and the ability of the Company to obtain financing or make other arrangements for exploration, development, and future profitable production activities. The ultimate realization of the Company’s investment in exploration properties cannot be determined at this time.
Going Concern
Since its inception in November 1993, the Company has not generated revenue and has incurred a deficit of $124,665,689. Accordingly, the Company has not generated cash flows from operations, and since inception the Company has relied primarily upon proceeds from private placements and registered direct offerings of the Company’s equity securities and warrant exercises as the primary sources of financing to fund the Company’s operations.
As of April 30, 2018, the Company had cash and cash equivalents of $246,573. Based on the Company’s limited cash and cash equivalents, and history of losses, there is substantial doubt as to whether the Company’s existing cash resources are sufficient to enable the Company to continue its operations for the next 12 months as a going concern. Management plans to pursue
possible financing and strategic options including, but not limited to, obtaining adequate equity financing (including warrant exercises).
Management has successfully pursued these options previously and believes that they alleviate the substantial doubt that the Company can continue its operations for the next 12 months as a going concern. However, there is no assurance that the Company will be successful in pursuing these plans.
These interim condensed consolidated financial statements have been prepared on a going concern basis and do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary in the event the Company can no longer continue as a going concern. Such adjustments could be material.
NOTE 2 – BASIS OF PRESENTATION
The Company’s interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and applicable rules of the U.S. Securities and Exchange Commission (“SEC”) regarding interim reporting. All intercompany transactions and balances have been eliminated during consolidation. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The interim condensed consolidated balance sheet at October 31, 2017 was derived from the audited consolidated financial statements. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended October 31, 2017.
The interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements, except as disclosed in Note 3. In the opinion of management, the interim condensed consolidated financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim periods presented. Uncertainties with respect to estimates and assumptions are inherent in the preparation of the Company’s interim condensed consolidated financial statements. Accordingly, operating results for the six months ended April 30, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending October 31, 2018.
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies are defined in the Company’s Annual Report on Form 10-K for the year ended October 31, 2017 filed on January 17, 2018, except as follows.
Income Taxes
The Tax Cuts and Jobs Act of 2017 was signed into law on December 22, 2017. The law includes significant changes to the U.S. corporate income tax system, including a Federal corporate rate reduction from 35% to 21%, limitations on the deductibility of interest expense and executive compensation, and the transition of U.S. international taxation from a worldwide tax system to a territorial tax system. The law did not have a material impact on the Company’s financial position, results of operations or cash flows and disclosures.
Recent Accounting Pronouncements Adopted in the Six-Month Period Ended April 30, 2018
Effective November 1, 2017 the Company adopted the Financial Accounting Standards Board’s (“FASB”) Accounting
Standards Update (“
ASU”) 2016-09, “Improvements to Employee Share-Based Payment Accounting,” which amends several aspects of the accounting for share-based payment transactions, including income tax consequences, the classification of awards as either equity or liabilities, and the classification on the statement of cash flows. The adoption of this update did not have a material impact on the Company’s financial position, results of operations or cash flows and disclosures.
Effective November 1, 2017,
the Company adopted the FASB’s
ASU
2015-17, “Balance Sheet Classification of Deferred Income Taxes (Topic 740),” which requires entities with a classified balance sheet to present all deferred tax assets and liabilities as noncurrent. The adoption of this update did not have a material impact on the Company’s financial position, results of operations or cash flows and disclosures.
Recent Accounting Pronouncements Not Yet Adopted
In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business,” which clarifies the definition of a business to assist entities in the evaluation of acquisitions and disposals of assets or businesses. These changes become effective for the Company’s fiscal year beginning November 1, 2018. At this time, the Company has not determined the effects of this update on the Company’s financial position, results of operations or cash flows and disclosures.
In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” which will require entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. These changes become effective for the Company’s fiscal year beginning November 1, 2018. At this time, the Company has not determined the effects of this update on the Company’s financial position, results of operations or cash flows and disclosures.
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which provides guidance on the presentation and classification of certain cash receipts and payments in the statement of cash flows. These changes become effective for the Company’s fiscal year beginning November 1, 2018. At this time, the Company has not determined the effects of this update on the Company’s financial position, results of operations or cash flows and disclosures.
In February 2016, the FASB issued ASU 2016-02, “Leases,” which will require lessees to recognize assets and liabilities for the rights and obligations created by most leases on the balance sheet. These changes become effective for the Company’s fiscal year beginning November 1, 2019. Modified retrospective adoption for all leases existing at, or entered into after, the date of initial application, is required with an option to use certain transition relief. At this time, the Company has not determined the effects of this update on the Company’s financial position, results of operations or cash flows and disclosures.
In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities,” which (i) requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income, (ii) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (iii) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset, and (iv) eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. These changes become effective for the Company’s fiscal year beginning November 1, 2018. Early application is permitted. At this time, the Company has not determined the effects of this update on the Company’s financial position, results of operations or cash flows and disclosures.
In May 2014, the FASB issued ASU 2014-09, “
Revenue from Contracts with Customers
(Topic 606
)
”
,
which has subsequently been amended to update revenue guidance under the newly-created ASC 606. The new standard provides a five-step approach to be applied to all contracts with customers and also requires expanded disclosures about revenue recognition. I
n August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” which defers the effective date of ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” to become effective for the Company’s fiscal year beginning November 1, 2018. At this time, the Company has not determined the effects of this update on the Company’s financial position, results of operations or cash flows and disclosures.
NOTE 4 – LOSS PER SHARE
The Company had stock options and warrants outstanding at April 30, 2018 and 2017 that upon exercise were issuable into 34,515,325 and 19,054,686 shares of the Company’s common stock, respectively. They were not included in the calculation of loss per share because they would have been anti-dilutive.
NOTE 5 – VALUE-ADDED TAX RECEIVABLE
Value-added tax (“VAT”) receivable relates to VAT paid in Mexico. The Company estimates net VAT of $165,058 will be received within 12 months of the balance sheet date. The allowance for uncollectible VAT was estimated by management based upon a number of factors, including the length of time the returns have been outstanding, responses received from tax authorities, general economic conditions in Mexico and estimated net recovery after commissions.
A summary of the changes in the allowance for uncollectible VAT for the six months ended April 30, 2018 is as follows:
Allowance for uncollectible VAT – October 31, 2017
|
|
$
|
67,729
|
|
Provision for VAT receivable allowance
|
|
|
25,202
|
|
Foreign currency translation adjustment
|
|
|
1,851
|
|
Write-off of VAT receivable
|
|
|
(26
|
)
|
Allowance for uncollectible VAT – April 30, 2018
|
|
$
|
94,756
|
|
NOTE 6 – OFFICE AND MINING EQUIPMENT
The following is a summary of the Company’s office and mining equipment at April 30, 2018 and October 31, 2017, respectively:
|
|
April 30,
|
|
|
October 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Mining equipment
|
|
$
|
358,513
|
|
|
$
|
358,513
|
|
Vehicles
|
|
|
53,451
|
|
|
|
53,451
|
|
Buildings and structures
|
|
|
185,724
|
|
|
|
185,724
|
|
Computer equipment and software
|
|
|
74,236
|
|
|
|
74,236
|
|
Well equipment
|
|
|
39,637
|
|
|
|
39,637
|
|
Office equipment
|
|
|
47,597
|
|
|
|
47,597
|
|
|
|
|
759,158
|
|
|
|
759,158
|
|
Less: Accumulated depreciation
|
|
|
(564,283
|
)
|
|
|
(550,403
|
)
|
Office and mining equipment, net
|
|
$
|
194,875
|
|
|
$
|
208,755
|
|
NOTE 7 – PROPERTY CONCESSIONS
The following is a summary of the Company’s property concessions for the Sierra Mojada Property as at April 30, 2018 and October 31, 2017:
Property concessions – October 31, 2017
|
|
$
|
5,004,386
|
|
Acquisitions
|
|
|
15,541
|
|
Property concessions – April 30, 2018
|
|
$
|
5,019,927
|
|
NOTE 8 – GOODWILL
Goodwill represents the excess, at the date of acquisition, of the purchase price of the business acquired over the fair value of the net tangible and intangible assets acquired.
On April 30, 2018, the Company elected to perform a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. Based on this assessment, management determined it is not more likely than not that the fair value of the reporting unit is less than its carrying amount.
The following is a summary of the Company’s goodwill balance as at April 30, 2018 and October 31, 2017:
Goodwill – April 30, 2018 and October 31, 2017
|
|
|
$
|
2,058,031
|
|
NOTE 9 – ACCRUED LIABILITIES AND EXPENSES
The Company financed an insurance premium at an interest rate of 7.99%. The insurance premium finance agreement has a maturity of less than one year and has a balance of $21,000 which is included in accrued liabilities and expenses at April 30, 2018.
NOTE 10 – COMMON STOCK
On June 6, 2018, 43,750 warrants to acquire 43,750 shares of common stock were exercised at an exercise price of $CDN 0.10 per share of common stock for aggregate gross proceeds of $3,388 ($CDN 4,375).
On May 28, 2018, 292,250 warrants to acquire 292,250 shares of common stock were exercised at an exercise price of $CDN 0.10 per share of common stock for aggregate gross proceeds of $22,479 ($CDN 29,225).
On May 7, 2018, 125,000 warrants to acquire 125,000 shares of common stock were exercised at an exercise price of $CDN 0.13 per share of common stock for aggregate gross proceeds of $12,632 ($CDN 16,250).
On May 7, 2018, 526,000 warrants to acquire 526,000 shares of common stock were exercised at an exercise price of $CDN 0.10 per share of common stock for aggregate gross proceeds of $40,889 ($CDN 52,600).
On April 4, 2018, 625,000 warrants to acquire 625,000 shares of common stock were exercised at an exercise price of $CDN 0.13 per share of common stock for aggregate gross proceeds of $63,432 ($CDN 81,250).
On March 29, 2018, 1,000,000 warrants to acquire 1,000,000 shares of common stock were exercised at an exercise price of $CDN 0.13 per share of common stock for aggregate gross proceeds of $100,822 ($CDN 130,000).
On March 28, 2018, 8,750 warrants to acquire 8,750 shares of common stock were exercised at an exercise price of $CDN 0.10 per share of common stock for aggregate gross proceeds of $678 ($CDN 875).
On March 15, 2018, 1,025,000 warrants to acquire 1,025,000 shares of common stock were exercised at an exercise price of $CDN 0.13 per share of common stock for aggregate gross proceeds of $102,248 ($CDN 133,250).
On March 14, 2018, 250,000 warrants to acquire 250,000 shares of common stock were exercised at an exercise price of $CDN 0.13 per share of common stock for aggregate gross proceeds of $25,108 ($CDN 32,500).
On March 8, 2018, 974,500 warrants to acquire 974,500 shares of common stock were exercised at an exercise price of $CDN 0.13 per share of common stock for aggregate gross proceeds of $98,000 ($CDN 126,685).
On February 20, 2018, 8,750 warrants to acquire 8,750 shares of common stock were exercised at an exercise price of $CDN 0.10 per share of common stock for aggregate gross proceeds of $693 ($CDN 875).
On February 20, 2018, 250,000 warrants to acquire 250,000 shares of common stock were exercised at an exercise price of $CDN 0.13 per share of common stock for aggregate gross proceeds of $25,749 ($CDN 32,500).
On February 16, 2018, 250,000 warrants to acquire 250,000 shares of common stock were exercised at an exercise price of $CDN 0.13 per share of common stock for aggregate gross proceeds of $25,917 ($CDN 32,500).
On February 13, 2018, 178,000 warrants to acquire 178,000 shares of common stock were exercised at an exercise price of $CDN 0.13 per share of common stock for aggregate gross proceeds of $18,365 ($CDN 23,140).
On January 29, 2018, 21,875 warrants to acquire 21,875 shares of common stock were exercised at an exercise price of $CDN 0.10 per share of common stock for aggregate gross proceeds of $1,773 ($CDN 2,188).
On January 22, 2018, 62,500 warrants to acquire 62,500 shares of common stock were exercised at an exercise price of $CDN 0.13 per share of common stock for aggregate gross proceeds of $6,522 ($CDN 8,125).
On January 15, 2018, 625,000 warrants to acquire 625,000 shares of common stock were exercised at an exercise price of $CDN 0.13 per share of common stock for aggregate gross proceeds of $65,408 ($CDN 81,250).
On January 8, 2018, 200,000 warrants to acquire 200,000 shares of common stock were exercised at an exercise price of $CDN 0.13 per share of common stock for aggregate gross proceeds of $20,931 ($CDN 26,000).
The Company incurred costs of $915 related to the warrant exercises in the six months ended April 30, 2018.
No shares of common stock were issued during the six months ended April 30, 2017.
NOTE 11 – STOCK OPTIONS
The Company has one stock option plan, the 2010 Stock Option and Stock Bonus Plan, as amended (the “2010 Plan”). Under the 2010 Plan, the lesser of (i) 30,000,000 shares or (ii) 10% of the total shares outstanding are reserved for issuance upon the exercise of options or the grant of stock bonuses.
Options are typically granted with an exercise price equal to the closing market price of the Company’s stock at the date of grant, have a graded vesting schedule over approximately one to two years and have a contractual term of five years.
A summary of the range of assumptions used to value stock options granted for the six months ended April 30, 2018 and 2017 are as follows:
|
|
Six Months Ended
April 30,
|
Options
|
|
2018
|
|
2017
|
|
|
|
|
|
Expected volatility
|
|
40%
|
|
78% – 87%
|
Risk-free interest rate
|
|
1.94%
|
|
1.35% – 1.56%
|
Dividend yield
|
|
—
|
|
—
|
Expected term (in years)
|
|
5.0
|
|
2.50 – 3.50
|
During the six months ended April 30, 2018, the Company granted options that vested immediately to acquire 350,000 shares of common stock to a consultant with a weighted-average grant-date fair value of $0.06 per share and an exercise price of Canadian dollar (“$CDN”) 0.215 per share. No options were exercised during the six months ended April 30, 2018.
During the six months ended April 30, 2017, the Company granted options to acquire 4,075,000 shares of common stock with a weighted-average grant-date fair value of $0.05 per share and an exercise price of $CDN 0.125 per share. No options were exercised during the six months ended April 30, 2017.
The following is a summary of stock option activity for the six months ended April 30, 2018:
Options
|
|
Shares
|
|
|
Weighted Average Exercise Price
|
|
|
Weighted Average Remaining Contractual Life (Years)
|
|
|
Aggregate Intrinsic Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at October 31, 2017
|
|
|
12,794,286
|
|
|
$
|
0.16
|
|
|
|
2.98
|
|
|
$
|
110,622
|
|
Granted
|
|
|
350,000
|
|
|
|
0.17
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(314,286
|
)
|
|
|
0.58
|
|
|
|
|
|
|
|
|
|
Outstanding at April 30, 2018
|
|
|
12,830,000
|
|
|
$
|
0.15
|
|
|
|
2.62
|
|
|
$
|
634,933
|
|
Exercisable at April 30, 2018
|
|
|
11,471,666
|
|
|
$
|
0.16
|
|
|
|
2.46
|
|
|
$
|
555,566
|
|
The Company recognized stock-based compensation costs for stock options of $72,565 and $98,758 for the six months ended April 30, 2018 and 2017, respectively. As of April 30, 2018, there was $32,320 of total unrecognized compensation expense, which is expected to be recognized over a weighted average period of 0.49 years.
Summarized information about stock options outstanding and exercisable at April 30, 2018 is as follows:
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
Exercise Price
|
|
|
Number
Outstanding
|
|
|
Weighted Average Remaining Contractual Life (Years)
|
|
|
Weighted Average Exercise Price
|
|
|
Number Exercisable
|
|
|
Weighted Average Exercise
Price
|
|
$
|
0.06
|
|
|
|
4,075,000
|
|
|
|
2.82
|
|
|
$
|
0.06
|
|
|
|
4,075,000
|
|
|
$
|
0.06
|
|
|
0.10 – 0.17
|
|
|
|
4,425,000
|
|
|
|
4.00
|
|
|
|
0.10
|
|
|
|
3,066,666
|
|
|
|
0.11
|
|
|
0.20 – 0.26
|
|
|
|
2,625,000
|
|
|
|
1.56
|
|
|
|
0.25
|
|
|
|
2,625,000
|
|
|
|
0.25
|
|
|
0.37
|
|
|
|
1,705,000
|
|
|
|
0.15
|
|
|
|
0.37
|
|
|
|
1,705,000
|
|
|
|
0.37
|
|
$
|
0.06 – 0.37
|
|
|
|
12,830,000
|
|
|
|
2.62
|
|
|
$
|
0.15
|
|
|
|
11,471,666
|
|
|
$
|
0.16
|
|
Stock options granted to consultants with a $CDN exercise price are classified as stock option liability on the Company’s interim condensed consolidated balance sheets upon vesting.
The following is a summary of the Company’s stock option liability at April 30, 2018 and October 31, 2017:
Stock option liability at October 31, 2017:
|
|
$
|
5,194
|
|
Grant of vested $CDN stock option to consultant
|
|
|
20,931
|
|
Change in fair value of stock option liability
|
|
|
5,792
|
|
Stock option liability at April 30, 2018
|
|
$
|
31,917
|
|
NOTE 12 – WARRANTS
A summary of warrant activity for the six months ended April 30, 2018 is as follows:
Warrants
|
|
Shares
|
|
|
Weighted Average Exercise Price
|
|
|
Weighted Average Remaining Contractual Life (Years)
|
|
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding and exercisable at October 31, 2017
|
|
|
27,164,700
|
|
|
$
|
0.10
|
|
|
|
1.70
|
|
|
$
|
9,769
|
|
Exercised
|
|
|
(5,479,375
|
)
|
|
$
|
0.10
|
|
|
|
|
|
|
|
|
|
Outstanding and exercisable at April 30, 2018
|
|
|
21,685,325
|
|
|
$
|
0.10
|
|
|
|
1.20
|
|
|
$
|
1,098,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants exercised during the six months ended April 30, 2018 and from May 1, 2018 to June 13, 2018 are discussed in Note 10.
The warrants exercised during the six months ended April 30, 2018 had an intrinsic value of $383,523.
No warrants were issued or exercised during the six months ended April 30, 2017.
Summarized information about warrants outstanding and exercisable at April 30, 2018 is as follows:
Warrants Outstanding and Exercisable
|
|
Exercise Price
|
|
|
Number
Outstanding
|
|
|
Weighted Average Remaining Contractual Life (Years)
|
|
|
Weighted Average Exercise Price
|
|
$
|
0.08
|
|
|
|
1,219,925
|
|
|
|
1.19
|
|
|
$
|
0.08
|
|
|
0.10
|
|
|
|
15,925,000
|
|
|
|
1.20
|
|
|
|
0.10
|
|
|
0.12
|
|
|
|
4,340,000
|
|
|
|
1.22
|
|
|
|
0.12
|
|
|
0.16
|
|
|
|
200,400
|
|
|
|
0.22
|
|
|
|
0.16
|
|
$
|
0.08 – 0.16
|
|
|
|
21,685,325
|
|
|
|
1.20
|
|
|
$
|
0.10
|
|
If the closing price of the common stock on the TSX is higher than $CDN 0.30 for 20 consecutive trading days, then on the 20th consecutive trading day (the "Acceleration Trigger Date") the expiry date of the above $0.12 and $0.16 warrants may be accelerated to the 20th trading day after the Acceleration Trigger Date by the issuance, within three trading days of the Acceleration Trigger Date, of a news release announcing such acceleration.
The Company’s warrants with a $CDN exercise price have been recognized as a derivative liability. The following is a summary of the Company’s warrant derivative liability at April 30, 2018 and October 31, 2017:
Warrant derivative liability at October 31, 2017:
|
|
$
|
341,717
|
|
Change in fair value of warrant derivative liability
|
|
|
1,305,119
|
|
Reclassification to additional paid-in capital upon exercise of warrants
|
|
|
(383,523
|
)
|
Warrant derivative liability at April 30, 2018
|
|
$
|
1,263,313
|
|
NOTE 13 – FINANCIAL INSTRUMENTS
Fair Value Measurements
All financial assets and financial liabilities are recorded at fair value on initial recognition. Transaction costs are expensed when they are incurred, unless they are directly attributable to the acquisition of financial assets or the assumption of liabilities carried at amortized cost, in which case the transaction costs adjust the carrying amount.
The three levels of the fair value hierarchy are as follows:
|
Level 1
|
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
|
|
Level 2
|
Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
|
|
Level 3
|
Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
|
Under fair value accounting, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value
measurement. The Company’s financial instruments consist of cash and cash equivalents, accounts payable, stock option liability and warrant derivative liability.
The carrying amounts of cash and cash equivalents and accounts payable approximate fair value at April 30, 2018 and October 31, 2017 due to the short maturities of these financial instruments.
Derivative liability
The Company classifies warrants with a $CDN exercise price on its interim condensed consolidated balance sheets as a derivative liability which is fair valued at each reporting period subsequent to the initial issuance as the functional currency of Silver Bull is the U.S. Dollar. The Company has used the Black-Scholes pricing model to determine the fair value of the warrants that do not have an acceleration feature and has used the Monte Carlo valuation model to determine the fair value of the warrants that do have an acceleration feature (Note 12). Determining the appropriate fair-value model and calculating the fair value of warrants requires considerable judgment. Any change in the estimates used may cause the value to be higher or lower than that reported. The estimated volatility of the Company’s common stock at the date of issuance, and at each subsequent reporting period, is based on the historical volatility adjusted to reflect the implicit discount to historical volatilities observed in the prices of traded warrants. The risk-free interest rate is based on rates published by the government for bonds with a maturity similar to the expected remaining life of the warrants at the valuation date. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend yield is expected to be none as the Company has not paid dividends nor does the Company anticipate paying a dividend in the foreseeable future.
The Company reclassifies stock options granted to consultants with a $CDN exercise price on its interim condensed consolidated balance sheets upon vesting as a stock option liability which is fair valued at each reporting period subsequent to reclassification as the functional currency of Silver Bull is the U.S. Dollar.
The Company has used the Black-Scholes pricing model to fair value these stock options.
Determining the appropriate fair-value model and calculating the fair value of these stock options requires considerable judgment. Any change in the estimates used may cause the value to be higher or lower than that reported. The estimated volatility of the Company’s common stock at the date of reclassification, and at each subsequent reporting period, is based on the historical volatility of the Company’s common stock and adjusted if future volatility is expected to vary from historical experience. The risk-free interest rate is based on rates published by the government for bonds with a maturity similar to the expected remaining life of the options at the valuation date. The expected life of the options is based upon historical and expected future exercise behavior. The dividend yield is expected to be none as the Company has not paid dividends nor does the Company anticipate paying any dividend in the foreseeable future.
The derivatives are not traded in an active market and the fair value is determined using valuation techniques. The estimates may be significantly different from those recorded in the interim condensed consolidated financial statements because of the use of judgment and the inherent uncertainty in estimating the fair value of these instruments that are not quoted in an active market. All changes in the fair value are recorded in the interim condensed consolidated statement of operations and comprehensive loss each reporting period. These are considered to be a Level 3 financial instrument.
The Company has the following liabilities under the fair value hierarchy:
|
|
April 30, 2018
|
|
Liability
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
Stock option liability
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
31,917
|
|
Warrant derivative liability
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,263,313
|
|
Credit Risk
Credit risk is the risk that the counterparty to a financial instrument will cause a financial loss for the Company by failing to discharge its obligations. To mitigate exposure to credit risk on financial assets, the Company has established policies to ensure liquidity of funds and ensure that counterparties demonstrate acceptable levels of creditworthiness.
The Company maintains its U.S. dollar and Canadian dollar cash and cash equivalents in bank and demand deposit accounts with major financial institutions with high credit standings. Cash deposits held in the United States are insured by the Federal Deposit Insurance Corporation (“FDIC”) for up to $250,000, and Canadian dollar cash deposits held in Canada are insured by the Canada Deposit Insurance Corporation (“CDIC”) for up to $CDN 100,000. Certain United States and Canadian bank accounts held by the Company exceed these federally insured limits or are uninsured as they relate to U.S. dollar deposits held in Canadian financial institutions. As of April 30, 2018, and October 31, 2017, the Company’s cash and cash equivalent balances held in United States and Canadian financial institutions included $157,303 and $578,773, respectively, which was not insured by the FDIC or CDIC, respectively. The Company has not experienced any losses on such accounts, and management believes that using major financial institutions with high credit ratings mitigates the credit risk to cash and cash equivalents.
The Company also maintains cash in bank accounts in Mexico. These accounts are denominated in the local currency and are considered uninsured. As of April 30, 2018, and October 31, 2017, the U.S. dollar equivalent balance for these accounts was $11,177 and $25,408, respectively.
Interest Rate Risk
The Company holds substantially all of its cash and cash equivalents in bank and demand deposit accounts with major financial institutions. The interest rates received on these balances may fluctuate with changes in economic conditions. Based on the average cash and cash equivalent balances during the six months ended April 30, 2018, a 1% decrease in interest rates would have resulted in a reduction of approximately $769 in interest income for the period.
Foreign Currency Exchange Risk
The Company is not subject to any significant market risk related to foreign currency exchange rate fluctuations.
NOTE 14 – COMMITMENTS AND CONTINGENCIES
Compliance with Environmental Regulations
The Company’s exploration activities are subject to laws and regulations controlling not only the exploration and mining of mineral properties, but also the effect of such activities on the environment. Compliance with such laws and regulations may necessitate additional capital outlays or affect the economics of a project, and cause changes or delays in the Company’s activities.
Property Concessions in Mexico
To properly maintain property concessions in Mexico, the Company is required to pay a semi-annual fee to the Mexican government and complete annual assessment work.
Royalty
The Company has agreed to pay a 2% net smelter return royalty on certain property concessions within the Sierra Mojada Property based on the revenue generated from production. Total payments under this royalty are limited to $6.875 million (the “Royalty”).
Litigation and Claims
On May 20, 2014, a cooperative named Sociedad Cooperativa de Exploración Minera Mineros Norteños, S.C.L. (“Mineros Norteños”) filed an action in the Local First Civil Court in the District of Morelos, State of Chihuahua, Mexico, against the Company’s subsidiary, Minera Metalin, claiming that Minera Metalin breached an agreement regarding the development of the Sierra Mojada Property. Mineros Norteños sought payment of the Royalty, including interest at a rate of 6% per annum since August 30, 2004, even though no revenue has been produced from the applicable mining concessions. It also sought payment of wages to the cooperative’s members since August 30, 2004, even though none of the individuals were hired or performed work for Minera Metalin under this agreement and Minera Metalin did not commit to hiring them. On January 19, 2015, the case was moved to the Third District Court (of Federal jurisdiction). On October 4, 2017, the court ruled that Mineros Norteños was time barred from bringing the case. On October 19, 2017, Mineros Norteños appealed this ruling. The Company and the Company’s Mexican legal counsel believe that it is unlikely that the court’s ruling will be overturned. The Company has not accrued any amounts in its interim condensed consolidated financial statements with respect to this claim.
On February 15, 2016, Messrs. Jaime Valdez Farias and Maria Asuncion Perez Alonso (collectively, “Valdez”) filed an action before the Local First Civil Court of Torreon, State of Coahuila, Mexico, against the Company’s subsidiary, Minera Metalin, claiming that Minera Metalin had breached an agreement regarding the development of the Sierra Mojada Property. Valdez sought payment in the amount of $5.9 million for the alleged breach of the agreement. On April 28, 2016, Minera Metalin filed its response to the complaint, asserting various defenses, including that Minera Metalin terminated the agreement before the payment obligations arose and that certain conditions precedent to such payment obligations were never satisfied by Valdez. The Company and the Company’s Mexican legal counsel asserted all applicable defenses. In May 2017, a final judgment was entered finding for the Company, the defendant, acquitting the Company of all of the plaintiff’s claims and demands. The Company did not accrue any amounts in its interim condensed consolidated financial statements with respect to this claim.
From time to time, the Company is involved in other disputes, claims, proceedings and legal actions arising in the ordinary course of business. The Company intends to vigorously defend all claims against the Company, and pursue its full legal rights in cases where the Company has been harmed. Although the ultimate outcome of these proceedings cannot be accurately predicted due to the inherent uncertainty of litigation, in the opinion of management, based upon current information, no other currently pending or overtly threatened proceeding is expected to have a material adverse effect on the Company’s business, financial condition or results of operations.
NOTE 15 – SEGMENT INFORMATION
The Company operates in a single reportable segment: the exploration of mineral property interests. The Company has mineral property interests in Sierra Mojada, Mexico.
Geographic information is approximately
as follows:
|
For the Three Months Ended
|
|
For the Six Months Ended
|
|
|
April 30,
|
|
April 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
Mexico
|
|
$
|
(117,000
|
)
|
|
$
|
(198,000
|
)
|
|
$
|
(318,000
|
)
|
|
$
|
(606,000
|
)
|
Canada
|
|
|
(77,000
|
)
|
|
|
(401,000
|
)
|
|
|
(2,012,000
|
)
|
|
|
(663,000
|
)
|
Gabon
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
86,000
|
|
Net Loss
|
|
$
|
(194,000
|
)
|
|
$
|
(599,000
|
)
|
|
$
|
(2,330,000
|
)
|
|
$
|
(1,183,000
|
)
|
The following table details the allocation of assets included in the accompanying balance sheet at April 30, 2018:
|
|
Canada
|
|
|
Mexico
|
|
|
Total
|
|
Cash and cash equivalents
|
|
$
|
235,000
|
|
|
$
|
11,000
|
|
|
$
|
246,000
|
|
Value-added tax receivable, net
|
|
|
-
|
|
|
|
165,000
|
|
|
|
165,000
|
|
Other receivables
|
|
|
11,000
|
|
|
|
2,000
|
|
|
|
13,000
|
|
Prepaid expenses and deposits
|
|
|
72,000
|
|
|
|
14,000
|
|
|
|
86,000
|
|
Office and mining equipment, net
|
|
|
-
|
|
|
|
195,000
|
|
|
|
195,000
|
|
Property concessions
|
|
|
-
|
|
|
|
5,020,000
|
|
|
|
5,020,000
|
|
Goodwill
|
|
|
-
|
|
|
|
2,058,000
|
|
|
|
2,058,000
|
|
|
|
$
|
318,000
|
|
|
$
|
7,465,000
|
|
|
$
|
7,783,000
|
|
The following table details the allocation of assets included in the accompanying balance sheet at October 31, 2017:
|
|
Canada
|
|
|
Mexico
|
|
|
Total
|
|
|
Cash and cash equivalents
|
|
$
|
657,000
|
|
|
$
|
25,000
|
|
|
$
|
682,000
|
|
Value-added tax receivable, net
|
|
|
-
|
|
|
|
157,000
|
|
|
|
157,000
|
|
Other receivables
|
|
|
4,000
|
|
|
|
1,000
|
|
|
|
5,000
|
|
Prepaid expenses and deposits
|
|
|
102,000
|
|
|
|
15,000
|
|
|
|
117,000
|
|
Office and mining equipment, net
|
|
|
-
|
|
|
|
209,000
|
|
|
|
209,000
|
|
Property concessions
|
|
|
-
|
|
|
|
5,004,000
|
|
|
|
5,004,000
|
|
Goodwill
|
|
|
-
|
|
|
|
2,058,000
|
|
|
|
2,058,000
|
|
|
|
$
|
763,000
|
|
|
$
|
7,469,000
|
|
|
$
|
8,232,000
|
|
The Company has significant assets in Coahuila, Mexico. Although Mexico is generally considered economically stable, it is always possible that unanticipated events in Mexico could disrupt the Company’s operations. The Mexican government does not require foreign entities to maintain cash reserves in Mexico.
The following table details the allocation of exploration and property holding costs for the exploration properties:
|
For the Three Months Ended
|
|
For the Six Months Ended
|
|
|
April 30,
|
|
April 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Exploration and property holding (costs) recovery for the period
|
|
|
|
|
|
|
|
|
Mexico Sierra Mojada
|
|
$
|
(109,000
|
)
|
|
$
|
(210,000
|
)
|
|
$
|
(291,000
|
)
|
|
$
|
(611,000
|
)
|
Gabon Mitzic
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
34,000
|
|
|
|
$
|
(109,000
|
)
|
|
$
|
(210,000
|
)
|
|
$
|
(291,000
|
)
|
|
$
|
(577,000
|
)
|
NOTE 16 – SUBSEQUENT EVENTS
On June 1, 2018, the Company and its subsidiaries Minera Metalin and Contratistas entered into an Option Agreement (the “Option Agreement”) with South32 International Investment Holdings Pty Ltd (“South32”), a wholly owned subsidiary of South32 Limited (ASX/JSE/LSE: S32), whereby the Company granted South32 an option to purchase 70% of the equity of Minera Metalin (the “Option”) and oversee the mineral exploration of Minera Metalin’s Sierra Mojada Property located in Coahuila, Mexico (the “Project”). The Option Agreement provides that, upon the terms and subject to the conditions set forth in the Option Agreement, in order for South32 to maintain its Option, South32 must contribute to Minera Metalin a minimum of $10 million in tranches over the first four years including aggregate amounts of $3 million, $6 million, $8 million and $10 million by the end of years one, two, three, and four of the Option for Project funding (the “Initial Funding”). South32 may exercise the Option at any time by contributing $100 million to Minera Metalin (the “Subscription Payment”), less the amount of Initial Funding previously contributed by South32. Once the full amount of the Subscription Payment is advanced by South32 and the Option is exercised, the Company and South32 will be obligated to contribute funding to Minera Metalin on a 30/70 pro rata basis. If South32 elects not to continue with the Project during the four-year option period, the Project will remain 100% owned by the Company. The exploration program will be initially managed by the Company.
The foregoing description of the Option Agreement is qualified in its entirety by Exhibit 10.1 to that certain Form 8-K filed by the Company with the Securities and Exchange Commission on June 7, 2018, which is incorporated herein by reference as Exhibit 10.1.