# Dakota Gold Corp.: Form 10-Q for the period ended Jun 30, 2022

- Company: [Dakota Gold Corp.](/companies/dc.md) (CIK 1852353)
- Form: 10-Q
- Filed: 2022-08-10
- Accepted by EDGAR: Aug 10, 2022, 16:06 ET
- Period: 2022-06-30
- Accession: 0001062993-22-017622
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1852353/000106299322017622/form10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1852353/000106299322017622/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Operating income | 3 months, 2022-04-01 to 2022-06-30 | −$7.1m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2022-04-01 to 2022-06-30 | $0 | us-gaap:InterestExpense |
| Net income | 3 months, 2022-04-01 to 2022-06-30 | −$5.8m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-04-01 to 2022-06-30 | −$0.08 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-04-01 to 2022-06-30 | −$0.08 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-04-01 to 2022-06-30 | 70,958,194 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2022-04-01 to 2022-06-30 | −$6.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2022-04-01 to 2022-06-30 | $102.8k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2022-06-30 | $35.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-06-30 | $36.7m | us-gaap:AssetsCurrent |
| Total assets | at 2022-06-30 | $115.0m | us-gaap:Assets |
| Current liabilities | at 2022-06-30 | $2.5m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-06-30 | $5.0m | us-gaap:Liabilities |
| Shareholders' equity | at 2022-06-30 | $110.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 20,801 characters.

*You should read the following discussion and analysis of the Company's financial condition and results of operations together with the Company's financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q may also contain statistical data and estimates the Company obtained from industry publications and reports generated by third parties. Although the Company believes that the publications and reports are reliable, it has not independently verified their data.*

### Forward-Looking Statements

This Quarterly Report on Form 10-Q and the exhibits attached hereto contain "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 concerning our anticipated results and developments of our operations in future periods, planned exploration and development of our properties, plans related to our business and other matters that may occur in the future. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management.

Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as "expects", "anticipates", "plans", "estimates" or "intends", the negatives thereof, variations thereon and similar expressions, or stating that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q, include, but are not limited to:

the progress, potential and uncertainties of the Company's exploration program at its properties located in the Homestake District of South Dakota (the "Black Hills Property");

the success of getting the necessary permits for future drill programs and future project exploration;

expectations regarding the ability to raise capital and to continue the Company's exploration plans on the Company's properties; and

plans regarding anticipated expenditures at the Black Hills Property.

Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors which could cause actual events or results to differ from those expressed or implied by the forward-looking statements, including, without limitation:

- risks associated with the Company's history of losses and need for additional financing,
- risks associated with its limited operating history,
- risks associated with its properties all being in the exploration stage,
- risks associated with its lack of history in producing metals from its properties,
- risks associated with its need for additional financing to develop a producing mine, if warranted,
- risks associated with its exploration activities not being commercially successful,
- risks associated with ownership of surface rights at its Black Hills Property,
- risks associated with increased costs affecting its financial condition,
- risks associated with a shortage of equipment and supplies adversely affecting its ability to operate,
- risks associated with mining and mineral exploration being inherently dangerous,
- risks associated with mineralization estimates,
- risks associated with changes in mineralization estimates affecting the economic viability of its properties,
- risks associated with uninsured risks,
- risks associated with mineral operations being subject to market forces beyond its control,
- risks associated with fluctuations in commodity prices,
- risks associated with permitting, licenses and approval processes,
- risks associated with governmental and environmental regulations,
- risks associated with future legislation regarding the mining industry and climate change,
- risks associated with potential environmental lawsuits,
- risks associated with its land reclamation requirements,
- risks associated with gold mining presenting potential health risks,
- risks associated with possible amendments to mining laws, mineral withdrawals of similar actions,
- risks associated with any material weaknesses that have been identified in our internal controls over financial reporting,
- risks associated with the COVID-19 pandemic,
- risks associated with cybersecurity and cyber-attacks,
- risks related to title in its properties,
- risks related to competition in the gold and silver mining industries,
- risks related to economic conditions,
- risks related to its ability to manage growth,
- risks related to the potential difficulty of attracting and retaining qualified personnel,
- risks related to its dependence on key personnel,
- risks related to its SEC filing history, and
- risks related to its securities.

This list is not exhaustive of the factors that may affect the Company's forward-looking statements. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those described in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Except as required by law, the Company disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. **The Company qualifies all the forward-looking statements contained in this Quarterly Report on Form 10-Q by the foregoing cautionary statements.**

This management's discussion and analysis should be read in conjunction with the Company's financial statements and notes thereto as set forth herein. Readers are also urged to carefully review and consider the various disclosures made by the Company, which attempt to advise interested parties of the factors which affect its business, including without limitation, the disclosures made under "Risk Factors" of its most recent Form 10-K.

The Company's unaudited financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.

Since the Company is an exploration stage company and has not generated revenues to date, its business is subject to numerous contingencies and risk factors beyond its control, including exploration and development risks, competition from well-funded competitors, and its ability to manage growth.

### Overview

The Company's goal is to create stockholder value through the acquisition, responsible exploration, and future development of high caliber gold properties in the Homestake District of South Dakota (the "Homestake District"). Management and the technical teams cumulatively have several hundred years of international mining and exploration experience. Key personnel have more than fifty combined years of mining and exploration experience in the Homestake District, mostly with the Homestake Mining Company, as well as other exploration companies that have operated in the region. The Company believes this experience uniquely positions the Company and will allow it to leverage its direct experience and knowledge of past exploration and mining activities in the Homestake District. Combined with the use of modern exploration and mining techniques, and new geologic understanding from experience in other mines, new research and information extracted from its new geophysical surveys, the Company hopes to focus its programs and build upon dominance where the historic Homestake Mining Company left off in the 1990's.

The Homestake District has yielded approximately 44.6 million ounces of gold production with most of it coming from within a small area. The production ledges of the old mine define a cumulative surface projection area of much less than 3 square miles. Homestake Mining Company's historic gold production and exploration in the Homestake District was overwhelmingly focused on the underground mine. Modern statistical studies of ore deposit trends and understanding of the distribution of large gold camps around the world identifies that large gold deposits generally form in distinct camps and normally occur in clusters that show predictable distributions (Zipf's Law Applied to Ore Deposits). The Company believes this might be true for the Homestake District. Outside of the mine area, the Homestake District has been underexplored and lacks the modern exploration efforts required to search for other deposits especially under the cover of younger rocks that dominate the surface.

Since 2012, the Company has consistently pursued a strategy of expanding its portfolio of brownfield properties located exclusively within the Homestake District to build a dominant land position with the goal of consolidating possible mineral potential. Property acquisitions are focused and based on past exploration, the access to proprietary data sets the Company has assembled over the years, and new research and remote data acquisition (Magnetics, Gravity and Radiometric) that was recently conducted over the district that hosts the Homestake Gold Deposit.

The Company has not established that any of its projects or properties contain proven or probable mineral reserves under S-K 1300 nor do they guarantee their exploration work will ever establish an economic gold deposit. The Company believes the Homestake District is in a safe, low-cost jurisdiction with well-developed infrastructure and is in a favorable regulatory environment in which authorities have consistently demonstrated a willingness to work with responsible operators to permit well-planned compliant projects.

### Planned Activities

The Company's planned activities in fiscal 2023 will be focused on advancing exploration drilling on its Maitland, Richmond Hill, and City Creek projects. In addition, work is planned to continue exploration, permitting studies, and targeting activities on its Blind Gold and Tinton projects to bring them to a drilling stage.

The Company's technical group and consultants are continuously modeling and evaluating data acquired through its regional high-definition airborne magnetic survey, supplemented by ground gravity surveys completed in 2021, to enhance possible drill targets, as well as to screen targets on other brownfields areas of interest within the district. Field sampling and mapping programs have been initiated at the Richmond Hill, City Creek, and the Barrick Option property. The Company continues to locate, evaluate, and add to the historic information in its regional and project level data sets much of which is from the 145-year-old Homestake Mining Company files acquired in the Barrick Option agreement but also from other private and public sources.

Permitting and site preparations were completed for the first drilling program on the iron-formation target and other tertiary-age replacement targets in the Maitland area and drilling commenced in early 2022. There are now three drill rigs operating on the property - two at Maitland and one at Richmond Hill. Permit and environmental field work for the Blind Gold and Tinton project areas has also been initiated. Targets in some of the other brownfield areas may also be identified and advanced for drilling as exploration activities continue throughout the year.

| Table: Fiscal Year 2023 Proposed Cash Exploration Expenditures (millions) |  |
| --- | ---: |
| General & administrative | $ 4.7 |
| Drilling, Field programs/Met Testing/Data Compilation | $ 15.5 |
| Property Acquisition | $ 6.3 |
| **TOTAL** | $26.5 |

The Company's projects are all at the exploration stage and do not generate revenues. The Company has not established that any of its properties or projects contain proven or probable mineral reserves as defined under S-K 1300. Expenditure projections are subject to numerous contingencies and risk factors beyond the Company's control, including exploration and development risks, competition from well-funded competitors, and the Company's ability to manage growth and assessments of ongoing exploration activities and results. The Company cannot offer assurance that its expenses will either meet or exceed its projections.

### Liquidity and Capital Resources

The Company is in the exploration-stage and does not generate revenues. As such, the Company finances its operations and the acquisition and exploration of its mineral properties through the issuance of common stock, and the Company could be materially adversely affected if it is unable to raise capital because of market or other factors.

As of June 30, 2022, the Company had working capital of $34,130,021 and its retained earnings as of June 30, 2022, was $7,257,175. The Company had a net loss for the three months ended June 30, 2022, of $5,808,725.

During the three months ended June 30, 2022, the Company issued a total of 37,500 shares of common stock for proceeds of $12,000 pursuant to the exercise of stock options.

During the upcoming year, the Company plans cash expenditures for exploration of approximately $26.5 million.

The timing of expected expenditures is dependent upon a number of factors, including the availability of contractors. The Company has sufficient funds for funding its activities for the remainder of the current fiscal year.

### Results of Operations

#### Three months ended June 30, 2022, and 2021

#### Revenue

The Company had no operating revenues for the three months ended June 30, 2022, and 2021. We are not currently profitable. We had a net loss of $5,808,725 for the three months ended June 30, 2022 (three months ended June 30, 2021 - $12,842,724).

#### Exploration Costs

During the three months ended June 30, 2022 and 2021, our exploration costs totaled $3,771,517 and $2,183,641, respectively. The increase year over year primarily related to the continuation of exploration drilling and related activities which commenced in January 2022. In addition, the Company funded the airborne geophysical survey and increased the review and compilation of historical geological data. Included in these costs were payments of annual claim maintenance fees related to our mineral properties. The increase was partially offset by a decrease from $1,583,859 of exploration-related stock-based compensation expense for the three months ended June 30, 2021 to $337,066 for the three months ended June 30, 2022.

#### General and Administrative

Our general and administrative expenses for the three months ended June 30, 2022 and 2021 were $3,308,661 and $10,728,748, respectively. These expenditures were primarily for legal, accounting & professional fees, investor relations and other general and administrative expenses necessary for our operations. The decrease year over year was primarily due to a decrease in stock-based compensation allocated to administration expenses of $1,585,451 for the three months ended June 30, 2022 (three months ended June 30, 2021 - $9,245,013). The higher amount from the June 30, 2021 period primarily related to the issuance of 1,450,000 shares of common stock as compensation. With the increased capital available, the organization grew from twelve employees to over thirty, which resulted in increased general and administrative costs (excluding stock-based compensation) to $1,723,210 during the three months ended June 30, 2022 (three months ended June 30, 2021 - $1,483,735). The organization grew to support advancing the exploration activities, which include drilling activities in the current fiscal year.

We had losses from operations for the three months ended June 30, 2022 and 2021 totaling $7,080,178 and $12,912,389, respectively. We had a loss before income tax for the three months ended June 30, 2022 of $7,027,449 (three months ended June 30, 2021 - $13,017,704) and a deferred tax benefit of $1,218,724 (three months ended June 30, 2021 - $174,980), leading to a net loss for the period of $5,808,725 (three months ended June 30, 2021 - $12,842,724). The effective rate for the quarter is less than the statutory rate due to a lower tax benefit for stock-based compensation related to Restricted Share Units which settled during the period, when compared to what was recognized during the vesting period for those units. We incurred interest expense from notes payable for the three months ended June 30, 2022 and 2021, respectively, in the amounts of $0 and $37,977.

#### Cash flows used in operating activities

During the three months ended June 30, 2022 and 2021, the Company's cash flows used in operating activities were $6,210,344 and $1,940,227, respectively. Cash used in operations for the three months ended June 30, 2022 increased year over year as the Company increased the amount of land staking and associated annual claim maintenance costs. In addition, the company completed an airborne geophysical survey and engaged additional personnel to review and commence the compilation of historical geological data obtained through the Barrick option agreements. The Company also continued drilling and related activities which commenced in January 2022.

#### Cash flows used in investing activities

During the three months ended June 30, 2022 and 2021, cash used in investing activities was $160,723 and $1,041,821, respectively. In the three months ended June 30, 2022, the cash used for investing activities consisted primarily of $37,883 for the acquisition of mineral properties and $102,840 for the purchases of property and equipment. In the three months ended June 30, 2021, the cash used for investing activities consisted of $901,203 for the acquisition of mineral properties and $140,618 for the purchases of property and equipment.

#### Cash flows from financing activities

During the three months ended June 30, 2022 and 2021, cash flows from financing activities were $12,000 and $16,870,059, respectively. In the three months ended June 30, 2022, the Company issued 37,500 shares pursuant to the exercise of stock options for cash proceeds of $12,000. In the three months ended June 30, 2021, the Company issued shares for net proceeds of $351,075, and DTRC issued shares for net proceeds of $16,895,534 and repaid $376,550 to extinguish a related party note.

### Off-Balance Sheet Arrangements

As of June 30, 2022 and 2021, the Company had off-balance sheet arrangements for annual payments in relation to annual mineral lease payments related to certain properties under option as disclosed in Note 3 of the financial statements.

### Critical Accounting Estimates

Management's discussion and analysis of financial condition and results of operations is based on the Company's financial statements, which have been prepared in accordance with US GAAP. Preparation of financial statements requires management to make assumptions, estimates and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and the related disclosures of contingencies. Management bases its estimates on various assumptions and historical experience, which are believed to be reasonable; however, due to the inherent nature of estimates, actual results may differ significantly due to changed conditions or assumptions. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that the Company's financial statements are fairly presented in accordance with US GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from the Company's assumptions and estimates, and such differences could be material. Management believes that the following critical accounting estimates and judgments have a significant impact on the Company's financial statements: valuation of options granted to directors and officers using the Black-Scholes model and fair value of mineral properties. The accounting policies are described in greater detail in Note 2 to the Company's audited annual financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2022. There have been no material changes to the Company's critical accounting policies and estimates as compared to the Company's critical accounting policies and estimates described in the Form 10-K.

## Controls and procedures

As filed, 1,989 characters.

### Disclosure Controls and Procedures

At the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision of and with the participation of the Company's management, including its chief executive officer ("CEO") and chief financial officer ("CFO"), of the effectiveness of the design and operations of its disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act). Based on that evaluation, the CEO and the CFO have concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company's disclosure controls and procedures were not effective in ensuring that: (i) information required to be disclosed by us in reports that it files or submits to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and (ii) material information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including the CEO and CFO, as appropriate, to allow for accurate and timely decisions regarding required disclosure.

### Changes to Internal Controls and Procedures over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. As noted in our annual report on Form 10-K for the year ended March 31, 2022, management concluded that the Company did not maintain effective internal control over financial reporting as of March 31, 2022, based on the criteria set forth in the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control -Integrated Framework. We are continuing to take steps to remediate the material weakness in our internal control over financial reporting.

## Risk factors

As filed, 160 characters.

There have been no material changes from the risk factors as previously disclosed in the Company's Annual Report on Form 10-K for the year ended March 31, 2022.

Filed Aug 10, 2022.
Source: SEC EDGAR, the filing index for accession 0001062993-22-017622. Last ingested by Listed: Oct 24, 2026, 15:06 ET. No prices; not investment advice.