# U.S. GOLD CORP. (USAU) FY 2023 MD&A

Verbatim Item 7 Management's Discussion and Analysis from U.S. GOLD CORP.'s 10-K for fiscal year 2023.

SEC filing source: https://www.sec.gov/Archives/edgar/data/27093/000149315223026120/form10-k.htm
Accession: 0001493152-23-026120
Filing date: 2023-07-31
Report date: 2023-04-30
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/
Previous year: /company/USAU/mda/fy2022/ (FY 2022)
Next year: /company/USAU/mda/fy2024/ (FY 2024)

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 Project 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.

Summary
of Activities for the Year ended April 30, 2023

During
the year ended April 30, 2023, we focused primarily on advancing our CK Gold Project in Wyoming with the submittal of two major permits;
our permit to mine application and reclamation plan filed on September 13, 2022 and an Industrial Siting permit for the construction
and operation of the proposed CK Gold project, agreement with the Wyoming Office of State Lands and Investments on a reduced royalty
rate, and continued 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, the sale of our interest in the Maggie Creek
Project in Nevada, and analyzed the historic geological data on the Challis Gold Project in Idaho. Management focused on investor relations
and awareness, resulting in the completion of an equity financing in April 2023.

30

An
overview of certain significant events follows:

CK
Gold Project, Wyoming

[[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]]

[[GREPCENT_TABLE]]
[["","\u25cf","On September 9, 2022, we submitted an application for a Permit to Mine and the Mine Reclamation Plan to the WDEQ for our CK Gold project. Additionally, on September 13, 2022, we submitted an internal electronic transfer of the information supporting the application to WDEQ."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","On November 16, 2022, we received notification from WDEQ that they had successfully performed the requisite completeness review of our application submission. Accordingly, the steps of public notice and WDEQ\u2019s technical review will commence."]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","On February 21, 2023, we submitted our Industrial Siting Permit with the Industrial Siting Division (\u201cISD\u201d) of the WDEQ. On May 10, 2023, we had a hearing with the ISD and on June 20, 2023, we received notification from the ISD that an Industrial Siting Permit was granted to us for the construction and operation of the proposed facility."],["","\u25cf","In February 2023, we executed a Water Development and Purchase Agreement with the Cheyenne Board of Public Utilities securing a firm supply of up to 600 gallons per minute of water for the life of the CK Gold project."],["","\u25cf","On April 6, 2023, the Board of the Wyoming Office of State Lands and Investments (\u201cOSLI\u201d) approved a reduction in the royalty rate for our CK Gold Project to a fixed 2.1% of net receipts."]]
[[/GREPCENT_TABLE]]

Keystone
Project, Cortez Trend, Nevada

[[GREPCENT_TABLE]]
[["","\u25cf","We continue systematic exploration investigations at our highly prospective Keystone Project looking for potential drill targets. We conducted a hyperspectral survey on the property identifying evidence of potential mineralization. Numerous anomalies often associated with mineralization were identified. Field investigation of the anomalies will commence during the 2023 field season."]]
[[/GREPCENT_TABLE]]

Maggie
Creek Project, Carlin Trend, Nevada

[[GREPCENT_TABLE]]
[["","\u25cf","On November 9, 2022, we assigned our interest in the Exploration Earn-in Agreement for the Maggie Creek property to NGM and received $2.75 million in cash from NGM, plus we have the potential to retain a 0.5% Net Smelter Returns royalty on the Maggie Creek property if certain conditions are met."]]
[[/GREPCENT_TABLE]]

Challis
Gold Project, Idaho

[[GREPCENT_TABLE]]
[["","\u25cf","We continue towards the completion of a Plan of Operations as the next phase of exploration."]]
[[/GREPCENT_TABLE]]

31

Sales
of Common Shares to raise a total of $5.0 million in cash

On
April 10, 2023, we completed a registered direct offering with a single institutional investor for the issuance of 870,000 shares of
common stock at a price of $5.75 per share and warrants (the “April 2023 Warrants”) to purchase 870,000 shares of the Company’s
common stock at an exercise price of $6.16 per share (the “April 2023 Registered Offering”). The April 2023 Warrants are
exercisable six months following issuance and will expire five years from the initial exercise date. The aggregate gross proceeds of
the April 2023 Registered Offering was approximately $5.0 million.

In
connection with the April 2023 Registered Offering, we agreed to amend, effective as of the closing of the April 2023 Registered Offering,
certain existing warrants to purchase up to 625,000 shares of the Company at an exercise price of $8.60 per share and a termination date
of September 18, 2027, so that the amended warrants will have a reduced exercise price of $6.16 per share and a termination date of October
10, 2028.

Shareholder
Meeting, Appointment of Directors and Corporate Matters

On November 22, 2022, Ryan Zinke notified us of his intent to resign from our Board effective December 31, 2022 (the “Effective Date”). Mr. Zinke was re-elected to our Board at our Annual Meeting of Stockholders held on December 16, 2022 and served as a director until the Effective Date. Following the Effective Date, our board is comprised of five members.  

On December 16, 2022, we held our annual meeting of stockholders. At that meeting, among other matters, shareholders re-elected the six 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, 2023.

Results
of Operations

The
years ended April 30, 2023 and 2022:

Net
Revenues

We
are a development stage company with no operations, and we generated no revenues for the years ended April 30, 2023 and 2022.

Operating
Expenses

Total
operating expenses for the year ended April 30, 2023 as compared to the year ended April 30, 2022, were approximately $9,401,000 and
$14,952,000, respectively. The approximate $5,551,000 decrease in operating expenses for the year ended April 30, 2023 as compared to
the year ended April 30, 2022, is comprised of (i) a decrease in compensation of approximately $494,000 primarily due to a decrease in
cash compensation of $293,000 and a decrease in stock-based compensation from RSUs and stock option grants to our officers and employees
as compared to prior period of $200,000 (ii) a decrease of approximately $5,426,000 in exploration expenses on our mineral properties
due to a decrease in exploration activities on our CK Gold property and also at the Maggie Creek property, (iii) an increase in professional
and consulting fees of approximately $32,000 primarily due to increases in general strategic and permitting consulting services of $135,000,
an increase in legal fees of $154,000, and an increase in accounting fees of $105,000, offset by decreases in director fees of $8,000,
investor relation fees of $31,000 and stock-based consulting fees of $324,000 and (iv) an increase in general and administrative expenses
of approximately $337,000 due primarily to increases related to advertising expenses, conference expenses, option expense, research and
development expenses, permit fees, and travel expenses.

Loss
from Operations

We
reported loss from operations of approximately $9,401,000 and $14,952,000 for the years ended April 30, 2023 and 2022, respectively.

Other
Income

We
reported other income of approximately $1,786,000 and $1,021,000 for the years ended April 30, 2023 and 2022, respectively. We reported
a decrease in the fair value of the warrant liability of approximately $1,560,000 and $1,212,000 for the years ended April 30, 2023 and
2022, respectively. We reported an increase in change in fair value due to modification of warrants of approximately $263,000 for the
year ended April 30, 2023.

We
also reported a gain from sale of asset of $763,393 for the year ended April 30, 2023 related to the sale of our Maggie Creek asset on
November 9, 2022.

Net
Loss

We
reported a net loss of approximately $7,614,000 and $13,931,000 for the years ended April 30, 2023 and 2022, respectively.

32

Liquidity
and Capital Resources

The
following table summarizes total current assets, liabilities and working capital at April 30, 2023 compared to April 30, 2022, and the
changes between those periods:

[[GREPCENT_TABLE]]
[["","","April 30, 2023","","","April 30, 2022","","","Increase (decrease)"],["Current Assets","","$","8,433,070","","","$","9,899,414","","","$","(1,466,344",")"],["Current Liabilities","","$","378,798","","","$","1,136,035","","","$","(757,237",")"],["Working Capital","","$","8,054,272","","","$","8,763,379","","","$","(709,107",")"]]
[[/GREPCENT_TABLE]]

As
of April 30, 2023, we had working capital of $8,054,272, as compared to working capital of $8,763,379 as of April 30, 2022, a decrease
of $709,107.

We
are obligated to file annual, quarterly and current reports with the Commission pursuant to the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). In addition, the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and the rules subsequently
implemented by the Commission and the Public Company Accounting Oversight Board have imposed various requirements on public companies,
including requiring changes in corporate governance practices. We expect to spend between $175,000 and $250,000 in legal and accounting
expenses annually to comply with our reporting obligations and Sarbanes-Oxley. These costs could affect profitability and our results
of operations.

Our
unaudited condensed 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 years ended April 30, 2023 and 2022, we incurred net losses in
the amounts of approximately $7,600,000 and $13,900,000, respectively. For the year ended April 30, 2023, cash used in operating
activities was approximately $8,700,000. As of April 30, 2023, we had cash of approximately $7,800,000, working capital of
approximately $8,100,000, and an accumulated deficit of approximately $66,000,000. Our primary source of operating funds since
inception has been equity financings. As of April 30, 2023, we may have sufficient cash to fund our corporate activities and general
and administrative costs and currently undertaken project activities related to permitting and engineering studies over the next
twelve months. However, in order to advance any of our projects past the aforementioned objectives, we do not have sufficient cash
and will need to raise additional funds. These matters raise substantial doubt about our ability to continue as a going concern for
the twelve months following the issuance of these financial statements.

We
have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently
expect. Our future capital requirements will depend on many factors, including potential acquisitions, changes in exploration programs
and related studies and other operating strategies. 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
Used in Operating Activities

Net
cash used in operating activities totaled $8,690,766 and $12,575,412 for the years ended April 30, 2023 and 2022, respectively. Net cash
used in operating activities during the year ended April 30, 2023 decreased primarily due to net changes of approximately $806,000 in
operating assets and liabilities which is primarily due to a decrease in accounts payable and accrued liabilities of approximately $729,000
as compared to the year ended April 30, 2022, the decrease in fair value of the warrant liability of approximately $1,560,000 and gain
from sale of asset of $763,000. Additionally, we expensed approximately $1,675,000 in total stock-based compensation for shares, RSUs,
stock options issued to officers, employee, and consultants during the year ended April 30, 2023 as compared to approximately $2,200,000
for the year ended April 30, 2022.

33

Cash
Used in Investing Activities

Net
cash used in investing activities was $2,572,487 primarily from proceeds received from the sale of Maggie Creek of $2,750,000 related
to the Assignment and Assumption Agreement dated on November 9, 2022 offset by $177,513 primarily for the purchase of property and equipment
for the year ended April 30, 2023 as compared to approximately $178,972 primarily for purchase of property and equipment for the year
ended April 30, 2022.

Cash
Provided by Financing Activities

Net
cash provided by financing activities totaled $4,829,697 for the year ended April 30, 2023 primarily due to the sale of our common stock
and warrants for approximately $4,800,000 in April 2023, net of offering costs. Net cash provided by financing activities totaled approximately
$8,220,491 for the year ended April 30, 2022 primarily due to the sale of our common stock and warrants for approximately $7,200,000
in February 2022 and March 2022, net of offering costs and proceeds received from the exercise of warrants of approximately $1,000,000
million.

Off-Balance
Sheet Arrangements

As
of April 30, 2023, we did not have, and do not have any present plans to implement, any off-balance sheet arrangements.

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, valuation of warrant liability, asset retirement
obligations and the valuation of deferred tax assets and liabilities.

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.

Mineral
Rights

Costs
of leasing, exploring, carrying and retaining unproven mineral lease properties are expensed as incurred. The Company expenses all mineral
exploration costs as incurred. Where the Company has 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) the Company receives the requisite operating permits, b)
completion of a favorable Feasibility Study and c) approval from the Board of director’s authorizing the development of the ore
body. Until such time all these criteria have been met the Company records pre-development costs to expense as incurred.

34

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. The Company assesses 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, the Company has expensed 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:

[[GREPCENT_TABLE]]
[["\u25cf","The value beyond proven and probable reserves (\u201cVBPP\u201d) to the extent that a market participant would include VBPP in determining the fair value of the assets."],["\u25cf","The effects of anticipated fluctuations in the future market price of minerals in a manner that is consistent with the expectations of market participants."]]
[[/GREPCENT_TABLE]]

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

Warrant
Liability

The
Company accounts for the warrants issued in March 2022 and April 2023, in accordance with the guidance contained in ASC 815 “Derivatives
and Hedging” whereby under that provision these warrants do not meet the criteria for equity treatment and must be recorded as
a liability. Accordingly, the Company classifies these warrant instruments as a liability at fair value and adjusts the instruments to
fair value at each reporting period. This liability is re-measured at each balance sheet date until the warrants are exercised or expire,
and any change in fair value will be recognized in the Company’s statement of operations. The fair value of these warrants are
estimated using a Monte Carlo simulation model. Such warrant classification is also subject to re-evaluation at each reporting period.