# U.S. GOLD CORP. (USAU) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from U.S. GOLD CORP.'s 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/27093/000149315222023030/form10-k.htm
Accession: 0001493152-22-023030
Filing date: 2022-08-15
Report date: 2022-04-30
Extracted from Item 7 to the first post-MD&A boundary after HTML sanitization.
Confidence: high

Company profile: /company/USAU/
All MD&A years: /company/USAU/mda/
Next year: /company/USAU/mda/fy2023/ (FY 2023)

Item
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

U.S.
Gold Corp., formerly known as Dataram Corporation (the “Company”), was originally incorporated in the State of New Jersey
in 1967 and was subsequently re-incorporated under the laws of the State of Nevada in 2016. Effective June 26, 2017, the Company changed
its legal name to U.S. Gold Corp. from Dataram Corporation. On May 23, 2017, the Company merged with Gold King Corp. (“Gold King”),
in a transaction treated as a reverse acquisition and recapitalization, and the business of Gold King became the business of the Company.
We are a gold and precious metals exploration company pursuing exploration and development properties. We own certain mining leases and
other mineral rights comprising the CK Gold Project in Wyoming, the Keystone and Maggie Creek Projects in Nevada and the Challis Gold
Project in Idaho. We have established an estimate of proven and probable mineral reserves under S-K 1300 at our CK Gold Project, where
we are conducting exploration and pre-development activities, and all of our activities on our other properties are exploratory in nature.

On
March 17, 2020, we filed a certificate of amendment to our Articles of Incorporation with the Secretary of State of Nevada in order to
effectuate a reverse stock split of our issued and outstanding common stock per share on a one-for-ten basis, effective as of 5:00 p.m.
(Eastern Time) on March 19, 2020. All share and per share values of our common stock for all periods presented in the accompanying consolidated
financial statements are retroactively restated for the effect of the reverse stock splits.

Summary
of Activities for the Year ended April 30, 2022

During
the year ended April 30, 2022, we focused primarily on advancing our CK Gold Project in Wyoming with the completion of an S-K 1300-compliant
Pre-Feasibility Study (“PFS”), exploration drilling to enhance the estimate of mineral resources and minerals reserves, continued
progress in the preparation of our permit to mine application submittal and further engineering studies towards the completion of a feasibility
study. Additional exploration and geologic investigations were undertaken, enhancing our understanding of the Keystone Project deposit
in Nevada, completed a drill program on our Maggie Creek Project in Nevada, analyzed the historic geological data on the Challis Gold
Project in Idaho. Management focused on investor relations and awareness, resulting in the completion of two equity financings.

An
overview of certain significant events follows:

CK
Gold Project, Wyoming

[[GREPCENT_TABLE]]
[["","\u25cf","On December 1, 2021, we released the results of our PFS and published our Technical Summary Report in accordance with S-K 1300. The PFS was prepared by Gustavson Associates, LLC with an effective date of November 15, 2021. See \u201cItems 1 and 2: Business and Properties \u2013 Our Mineral Properties and Projects \u2013 CK Gold Project, Wyoming\u201d for a discussion of the highlights of the PFS."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","On March 10, 2022, we announced that we awarded Samuel Engineering Inc. to complete the next phase of engineering for our CK Gold Project."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","On April 19, 2022, we announced that drilling during our 2021 field season extended mineralization 700 feet below the proposed open pit. These holes have discovered future mineral resource expansion potential at depth below the proposed open pit and to the southeast of the proposed pit."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","On June 21, 2022, we announced an update on the status of our preparations to file mine construction and operating permits within the next few months for consideration by the State of Wyoming authorities, principally the Wyoming Department of Environmental Quality (WDEQ) and the Office of State Lands and Investments."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","On July 12, 2022, we announced assay results of the last three holes from our 2021 field season which continues to confirm gold and copper mineralization beyond our current resource estimate. In addition, we hosted Dr. Richard Sillitoe on site at our CK Gold Project. Dr. Sillitoe confirmed previous geological examinations which theorized that the copper and gold mineralization was derived from a porphyritic granodiorite intrusion."]]
[[/GREPCENT_TABLE]]

33

Keystone
Project, Cortez Trend, Nevada

[[GREPCENT_TABLE]]
[["","\u25cf","On May 19, 2021, we received Bureau of Land Management (BLM) approval for an additional 50 acres of disturbance under our effective Plan of Operations (POO) for Keystone. We advanced the required reclamation bond. We also announced potential interest in the Keystone project from various industry partners for potential joint venture opportunities."]]
[[/GREPCENT_TABLE]]

Maggie
Creek Project, Carlin Trend, Nevada

[[GREPCENT_TABLE]]
[["","\u25cf","On June 30, 2021, we announced the successful completion of our Maggie Creek 2021 contractual exploration program, drilling 2 holes for a total of 4,440 feet (1,353 meters). With these 2 holes, we satisfied our 2021 contractual exploration commitments at Maggie Creek and plan to review the results for future potential exploration programs. During the year-ended April 30, 2022 we also satisfied our 2022 contractual exploration commitments based upon the above drilling and further analysis of the results."]]
[[/GREPCENT_TABLE]]

Challis
Gold Project, Idaho

[[GREPCENT_TABLE]]
[["","\u25cf","On May 26, 2021, we announced an exploration and operational update for our Challis Gold Project in Idaho. Highlights included:"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","-","We continue towards the completion of a Plan of Operations as the next phase of exploration;"],["","","-","We engaged in mapping, geochemical and geophysical surveys in the second half of 2021; and"],["","","-","Potential strategic joint-venture partners have expressed interest in our Challis Gold project"]]
[[/GREPCENT_TABLE]]

Sales
of Common Shares to raise a total of $7.5 million in cash

On
February 16, 2022, we completed a registered direct offering with certain institutional and accredited investors for the issuance of
384,741 shares of common stock at a price of $6.50 per share and warrants (the “February 2022 Warrants”) to purchase 192,370
shares of the Company’s common stock at an exercise price of $8.00 per share (the “February 2022 Registered Offering”).
The February 2022 Warrants are exercisable immediately following issuance and will expire five years from the issuance date. The aggregate
gross proceeds of the February 2022 Registered Offering are approximately $2.5 million.

On
March 15, 2022, we completed a registered direct offering with a single institutional investor for the issuance of 625,000 shares of
common stock at a price of $8.00 per share and warrants (the “March 2022 Warrants”) to purchase 625,000 shares of the Company’s
common stock at an exercise price of $8.60 per share (the “March 2022 Registered Offering”). The March 2022 Warrants are
exercisable six months following issuance and will expire five years from the initial exercise date. The aggregate gross proceeds of
the March 2022 Registered Offering are approximately $5.0 million.

Shareholder
Meeting, Appointment of Directors & Corporate Matters

On
September 20, 2021, we held our annual meeting of stockholders. At that meeting, among other matters, shareholders re-elected the five
incumbent Directors to hold office until the next annual meeting of stockholders and until their successors are named and qualified or
until their earlier resignation or removal and approved our audit firm for our fiscal year-ended April 30, 2022.

On
July 19, 2021, we appointed Kevin Francis as our Vice President – Exploration and Technical Services.

On
May 18, 2022, we appointed Luke Norman to serve as non-independent Chairman of our board of directors. In connection with the appointment
of Mr. Norman as Chairman, the board of directors expanded from 5 to 6 directors.

Results
of Operations

The
Years ended April 30, 2022 and 2021:

Net
Revenues

We
are a development stage company with no operations, and we generated no revenues for the years ended April 30, 2022 and 2021.

Operating
Expenses

Total
operating expenses for the year ended April 30, 2022 as compared to the year ended April 30, 2021, were approximately $14,952,000 and
$12,387,000, respectively. The approximate $2,565,000 increase in operating expenses for the year ended April 30, 2022 as compared to
the year ended April 30, 2021, is comprised of (i) a decrease in compensation of approximately $1,047,000 primarily due to decrease in
compensation related to stock-based compensation from RSU’s and stock option grants to our officers and stock-based compensation
to two former officers from the accelerated vesting of certain stock options and restricted stock units during the prior period for a
total of $1,198,000 offset by increase in cash compensation of $151,000 primarily from bonuses to our officers and hiring one full-time
employee (ii) an increase of approximately $3,211,000 in exploration expenses on our mineral properties due to an increase in exploration
activities in our CK Gold property and also at our Maggie Creek property, (iii) an increase in professional and consulting fees of approximately
$143,000 primarily due to an increase in general strategic, investor relations, and permitting consulting services of $498,000 offset
by a decrease in stock-based consulting fees of approximately $231,000, a decrease in legal fees of $76,000 and accounting fees of $48,000,
and (iv) an increase in general and administrative expenses of approximately $258,000 due primarily to increases related to insurance,
travel and conference related expenses, lease expense, advertising expenses and office expenses.

Loss
from Operations

We
reported loss from operations of approximately $14,952,000 and $12,387,000 for the years ended April 30, 2022 and 2021, respectively.

Net
Loss

We
reported a net loss of approximately $13,931,000 and $12,387,000 for the years ended April 30, 2022 and 2021, respectively.

34

Liquidity
and Capital Resources

The
following table summarizes total current assets, liabilities and working capital at April 30, 2022 compared to April 30, 2021, and the
increase (decrease) between those periods:

[[GREPCENT_TABLE]]
[["","","April 30, 2022","","","April 30, 2021","","","Increase (decrease)"],["Current Assets","","$","9,899,414","","","$","14,075,765","","","$","(4,176,351",")"],["Current Liabilities","","$","1,136,035","","","$","619,038","","","$","516,997"],["Working Capital","","$","8,763,379","","","$","13,456,727","","","$","(4,693,348",")"]]
[[/GREPCENT_TABLE]]

As
of April 30, 2022, we had working capital of $8,763,379, as compared to working capital of $13,456,727 as of April 30, 2021, a decrease
of $4,693,348.

Our
consolidated financial statements are prepared using the accrual method of accounting in accordance with U.S. GAAP and have been prepared
assuming that we will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities in
the normal course of business. For the year ended April 30, 2022 and 2021, we incurred losses in the amounts of approximately $13.9 million
and $12.4 million, respectively. As of April 30, 2022, we had cash of approximately $9.1 million, working capital of approximately $8.8
million, and an accumulated deficit of approximately $57.9 million. As a result of the utilization of cash in its operating activities,
and the development of its assets, we have incurred losses since we commenced operations. Our primary source of operating funds since
inception has been equity financings. As noted above, in February 2022, we completed a registered offering which raised gross proceeds
of $2.5 million, in March 2022 we completed another registered offering for gross proceeds of $5.0 million before deducting fees
and other estimated offering expenses and in April 2022 warrants were exercised for gross proceeds of $1.0 million.

For
the twelve months ended April 30, 2023, we anticipate that we will spend approximately $1.1 million in exploration expenses, $1.5 million
in development costs on the CK Gold Project and $3.1 million in general and administrative expenses. The actual amount of cash expenditures
that we incur during the twelve-month period ending April 30, 2023 may vary significantly from the amounts specified above and will depend
on a number of factors, including variations in the costs for continued exploration, project assessment, and advancement of the CK Gold
Project and our exploration properties. If cash expenditures are greater than anticipated, we may need to take certain actions to maintain
sufficient cash balances over the next twelve months, including asset dispositions or raising additional equity capital. As of the date
of this report, we believe we have sufficient cash for the next twelve months to fund our corporate activities and general and administrative
costs and currently undertaken project activities related to permitting and engineering studies. However, in order to advance any of
its projects past the aforementioned objectives we will need to raise additional funds.

To
the extent we require additional funding, we cannot be certain that additional funding will be available on acceptable terms, or at all.
To the extent we raise additional funds by issuing equity securities, our stockholders may experience significant dilution. Any debt
financing, if available, may involve restrictive covenants that impact our ability to conduct business. If unable to raise additional
capital when required or on acceptable terms, we may have to delay, scale back or discontinue the exploration activities or programs.

Cash
Flows from Operating Activities

Net
cash used in operating activities totaled $12.6 million and $8.6 million for the years ended April 30, 2022 and 2021, respectively. Net
cash used in operating activities during the year ended April 30, 2022 primarily increase due to increase in net loss and increase in
net changes in accounts payable and accrued liabilities as compared to the year ended April 30, 2021. Additionally, we expensed approximately
$1,670,000 in stock-based compensation for shares, RSU’s, and stock options issued to officers, employee, and consultants during
the year ended April 30, 2022 and approximately $191,000 for issuance costs related to the March 2022 warrants. Net changes of approximately
$270,000 in operating assets and liabilities are primarily due to net increases in prepaid expenses and other assets of approximately
$42,000, increase in reclamation of bond deposits of approximately $114,000, increase of approximately $466,000 in accounts payable to
trade vendors and decrease in operating lease liability of approximately $40,000.

Cash
Flows from Investing Activities

Net
cash used in investing activities totaled approximately $179,000 for the year ended April 30, 2022 primarily due to purchase of property
and equipment as compared to net cash provided by investing activities for the year ended April 30, 2021 of approximately $2,457,000
primarily consisted of proceeds received in connection with a share exchange agreement of $2,500,000 minimally offset by approximately
$43,000 from purchase of property and equipment.

Cash
Flows from Financing Activities

Net
cash provided by financing activities totaled approximately $8.2 million for the year ended April 30, 2022 primarily due to the sale
of our common stock and warrants for approximately $7.2 million, net of offering costs, in February 2022 and March 2022 for cash and
proceeds received from the exercise of warrants for approximately $1.0 million. Net cash provided by financing activities totaled approximately
$17.0 million, net of issuance costs, for the year ended April 30, 2021 primarily due to proceeds from the issuance of Series I Preferred
Stock and warrants in August 2020 for approximately $5.5 million, proceeds from exercise of stock warrants for approximately $2.5 million
and the registered direct sale of common stock and warrants in February 2021 for approximately $9.0 million.

Recently
Issued Accounting Pronouncements

See
Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements for a summary of recently issued accounting
pronouncements.

Critical
Accounting Policies

The
discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which
have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of our consolidated financial statements
requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on
various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ
from these estimates under different assumptions or conditions.

Management
believes the following critical accounting policies affect the significant judgments and estimates used in the preparation of the financial
statements.

Use
of Estimates and Assumptions

In
preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts
of assets and liabilities as of the date of the consolidated balance sheet, and revenues and expenses for the period then ended. Actual
results may differ significantly from those estimates. Significant estimates made by management include, but are not limited to, valuation
of mineral rights, stock-based compensation, the fair value of common and preferred stock, valuation of warrant liability, asset retirement
obligations and the valuation of deferred tax assets and liabilities.

35

Share-Based
Compensation

Share-based
compensation is accounted for based on the requirements of ASC 718, “Compensation—Stock Compensation” (“ASC 718”),
which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award
of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively,
the vesting period). ASC 718 also requires measurement of the cost of employee and director services received in exchange for an award
based on the grant-date fair value of the award.

ASU
2018-07 applies to all share-based payment transactions in which the grantor acquires goods and services to be used or consumed in its
own operations by issuing share-based payment awards. ASU 2018-07 also clarifies that Topic 718 does not apply to share-based payments
used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers
as part of a contract accounted for under ASC 606.

Mineral
Rights

Costs
of leasing, exploring, carrying and retaining unproven mineral lease properties are expensed as incurred. We expense all mineral exploration
costs as incurred. Where we have identified proven and probable mineral reserves on any of its properties, development costs will be
capitalized when all the following criteria have been met, (a) we receive the requisite operating permits, (b) completion of a favorable
Feasibility Study and (c) approval from our board of director’s authorizing the development of the ore body. Until such time all
these criteria have been met we record pre-development costs to expense as incurred.

When
a property reaches the production stage, the related capitalized costs will be amortized on a units-of-production basis over the proven
and probable reserves following the commencement of production. We assess the carrying costs of the capitalized mineral properties for
impairment under ASC 360-10, “Impairment of Long-Lived Assets”, and evaluates its carrying value under ASC 930-360, “Extractive
Activities—Mining”, annually. An impairment is recognized when the sum of the expected undiscounted future cash flows is
less than the carrying amount of the mineral properties. Impairment losses, if any, are measured as the excess of the carrying amount
of the mineral properties over its estimated fair value.

To
date, we have expenses all exploration and pre-development costs as none of its properties have satisfied the criteria above for
capitalization.

ASC
930-805, “Extractive Activities—Mining: Business Combinations” (“ASC 930-805”), states that mineral rights
consist of the legal right to explore, extract, and retain at least a portion of the benefits from mineral deposits. Mining assets include
mineral rights.

Acquired
mineral rights are considered tangible assets under ASC 930-805. ASC 930-805 requires that mineral rights be recognized at fair value
as of the acquisition date. As a result, the direct costs to acquire mineral rights are initially capitalized as tangible assets. Mineral
rights include costs associated with acquiring patented and unpatented mining claims.

ASC
930-805 provides that in measuring the fair value of mineral assets, an acquirer should take into account both:

●
The value beyond proven and probable reserves (“VBPP”) to the extent that a market participant would include VBPP in determining
the fair value of the assets.

●
The effects of anticipated fluctuations in the future market price of minerals in a manner that is consistent with the expectations of
market participants.

Leases
to explore for or use of natural resources are outside the scope of ASU 2016-02, “Leases”.

Warrant
Liability

We
account for certain warrants that do not meet the criteria for equity treatment in accordance with the guidance contained in ASC 815
“Derivatives and Hedging” whereby under that provision these warrants must be recorded as a liability.  Accordingly,
we classified these warrant instruments as a liability at fair value and adjusts the instruments to fair value at each reporting period.
The liability will be re-measured at each balance sheet date until the warrants are exercised or expire, and any change in fair value
will be recognized in our statement of operations. The fair value of these warrants are estimated using the Monte Carlo simulation model.
Such warrant classification is also subject to re-evaluation at each reporting period.