10-Q: Patriot Gold Corp. Reports Q3 2024 Results Amidst Royalty Payment Suspension and Bankruptcy Filing

Patriot Gold Corp. reported a net loss for the third quarter of 2024, primarily due to the suspension of royalty payments from Golden Vertex and increased operating expenses.

Summary

• Patriot Gold Corp. reported a net loss of $364,517 for the three months ended September 30, 2024, compared to a net income of $13,880 for the same period in 2023.
• The company's revenue for the three months ended September 30, 2024 was $0, compared to $509,250 in 2023, due to the suspension of royalty payments from Golden Vertex.
• For the nine months ended September 30, 2024, the company reported a net loss of $1,234,000, compared to a net profit of $350,692 in 2023.
• Revenue for the nine months ended September 30, 2024 was $361,523, a significant decrease from $1,429,835 in 2023.
• The decrease in profitability is primarily attributed to a $1,068,312 decrease in royalty revenue and increases in mineral costs and general and administrative expenses.
• Mineral and exploration expenses increased to $361,553 for the nine months ended September 30, 2024, compared to $237,685 in 2023, primarily due to drilling and exploration at the Windy Peak project.
• General and administrative expenses increased to $662,726 for the nine months ended September 30, 2024, compared to $152,538 in 2023, mainly due to increased consulting fees.
• The company's cash balance decreased to $520,032 as of September 30, 2024, from $1,701,720 at the end of 2023.
• The company repurchased 1,000,000 shares of its common stock during the nine months ended September 30, 2024.
• The company has a 3% net smelter return royalty on the Moss Mine in Arizona, but royalty payments were suspended by Golden Vertex in January 2024.
• Golden Vertex and its parent company, Elevation, filed for bankruptcy protection in August 2024, which has impacted the collectability of Patriot's earned royalties.

Sentiment

Score: 3

Explanation: The document presents a negative outlook due to the significant decrease in revenue, net losses, and the uncertainty surrounding the collectability of royalties due to the bankruptcy of Golden Vertex and its parent company. The company's cash position has also weakened. While there are some positives, such as the refund of a reclamation deposit, the overall tone is negative.

Positives

• The company received a refund of $7,074 for a reclamation deposit related to the Rainbow Mountain property.
• The company has a deferred tax asset of $1,059,000.
• The company believes it has sufficient funds to cover operational costs for the next 12 months based on current cash, marketable securities, and anticipated royalty revenue.

Negatives

• The company's revenue decreased significantly due to the suspension of royalty payments from Golden Vertex.
• The company reported a net loss of $1,234,000 for the nine months ended September 30, 2024.
• The company's cash balance decreased significantly during the period.
• The bankruptcy filing of Golden Vertex and its parent company has created uncertainty regarding the collectability of outstanding royalties.
• Mineral and exploration expenses increased, impacting profitability.
• General and administrative expenses increased, further impacting profitability.

Risks

• The suspension of royalty payments from Golden Vertex poses a significant risk to the company's revenue stream.
• The bankruptcy filing of Golden Vertex and its parent company creates uncertainty regarding the collectability of outstanding royalties.
• The company's ability to generate revenue is dependent on the production and sale of minerals from the Moss Mine.
• The company's exploration and development activities are subject to various risks, including geological, environmental, and regulatory risks.
• The company's financial performance is subject to fluctuations in commodity prices.
• The company may need to raise additional capital in the future if its current cash reserves are insufficient to fund its operations.

Future Outlook

Management estimates that the Company will not need additional funding for the next twelve months. The company anticipates incurring $1,500,000 for operating expenses in 2024.

Management Comments

• Management believes they will have sufficient funds to support their business based on the collection of revenues derived from the Moss royalty, the company's marketable securities, and current cash on hand.
• Management believes that all applicable estimates and adjustments are appropriate.
• Management has determined that the revenue recognition shall be treated as variable consideration as defined in ASC 606.

Industry Context

The company operates in the natural resource exploration sector, which is subject to commodity price fluctuations and various risks. The suspension of royalty payments and the bankruptcy filing of Golden Vertex highlight the risks associated with royalty agreements and the dependence on third-party operators. The company's focus on exploration and development in Nevada is consistent with industry trends in the region.

Comparison to Industry Standards

• Patriot Gold's financial performance is significantly impacted by the suspension of royalty payments from the Moss Mine, a situation not uncommon in the junior mining sector where revenue streams can be volatile.
• Compared to other junior exploration companies, Patriot Gold's reliance on a single royalty stream makes it particularly vulnerable to operational issues at the Moss Mine.
• The increase in exploration expenses at Windy Peak is typical for companies in the exploration phase, but the lack of revenue generation puts pressure on the company's cash reserves.
• The increase in general and administrative expenses, particularly consulting fees, is higher than some peers, suggesting a need for cost management.
• The company's decision to repurchase shares is a common strategy to support the share price, but it can be a drain on cash reserves if not carefully managed.

Legal Proceedings

• In April 2024, the Company filed a complaint in the Maricopa County Superior Court for payment of the amounts owed pursuant to the NSR royalty from Golden Vertex.
• Golden Vertex and its parent company filed for bankruptcy protection in Arizona and Canada in August 2024.

Related Party Transactions

• Mr. Zachary Black, a Board Member, provides geological consulting services to the Company.
• Mr. Robert Coale, a Board Member, provides geological consulting services to the Company.
• Mr. Trevor Newton, President, Chief Financial Officer, Secretary, Treasurer and Director of the Company, provides consulting services to the Company.
• The Company owns shares of Strata Power Corporation, a related party through Trevor Newton.

Stakeholder Impact

• Shareholders are negatively impacted by the decrease in revenue, net losses, and the uncertainty surrounding the collectability of royalties.
• Employees may be impacted by potential cost-cutting measures.
• Customers and suppliers are not directly impacted by the company's financial performance.
• Creditors may be impacted by the company's financial difficulties.

Next Steps

• The company will continue to explore and develop its properties in Nevada.
• The company will pursue legal action to recover the outstanding royalty payments from Golden Vertex.
• The company will monitor the bankruptcy proceedings of Golden Vertex and its parent company.
• The company will continue to review new projects.

Key Dates

Keywords

gold, exploration, mining, royalty, net smelter return, bankruptcy, mineral properties, financial results, operating expenses, Patriot Gold Corp