The following Management's Discussion and Analysis of Financial Condition and
Results of Operation ("MD&A") is intended to help the reader understand our
financial condition. MD&A is provided as a supplement to, and should be read in
conjunction with, our financial statements and the accompanying integral notes
("Notes") thereto. The following statements may be forward-looking in nature
and actual results may differ materially.
Plan of Operation:
FORWARD LOOKING STATEMENTS: The following discussion may contain forward-looking
statements that involve a number of risks and uncertainties. Factors that could
cause actual results to differ materially include the following: inability to
locate property with mineralization, lack of financing for exploration efforts,
competition to acquire mining properties; risks inherent in the mining industry,
and risk factors that are listed in the Company's reports and registration
statements filed with the Securities and Exchange Commission.
The Company continued advancement of the South Mountain Project in 2022 with
BeMetals Corp. - Vancouver B.C. (TSX-V: BMET) - under an option agreement to
complete the pre-development work and produce a preliminary economic analysis
(PEA). On December 30, 2022, Thunder Mountain Gold, Inc. by and through its
subsidiaries Thunder Mountain Resources, Inc., a Nevada Corporation, and South
Mountain Mines, Inc., an Idaho Corporation ("SMMI") (collectively the "Company",
"THMG", or "We", "Our" or "Us") agreed to terminate the Option Agreement, (the
"BeMetals Option Agreement") with BeMetals Corporation, a British Columbia
corporation, and BeMetals USA Corporation, a Delaware corporation ("BeMetals
BMET"). The Company's management has immediately commenced marketing the South
Mountain Project to other groups that have expressed an interest. The Company's
plan of operation for the next twelve months is to complete the South Mountain
PEA on schedule and within budget.
Results of Operations:
In 2022, the Company recorded a net loss of $1,244,739, or $0.02 per share
compared to a net loss of $571,796, or $0.01 per share for the same period of
2021. The increase in net loss was driven by a decreased of $500,000 in gain
on mineral interests as a result of payments received pursuant to the terms of
the BeMetals option agreement, for the year ending December 31, 2021. The
Company also experienced an increase in legal and accounting expenses of $28,408
as well as an increase in management and administrative expenses of $201,862.
The decrease in gain on mineral interest and increase in expenses was offset by
a decrease in unrealized loss on investment recognized on the BeMetals stock
when compared to the prior year.
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Fourth Quarter comparisons
Total revenue for the quarter ending December 31, 2022 and 2021 was $75,000 in
management services income. Total operating expenses for the three months ending
December 31, 2022 of $107,939 increased from the same respective time period in
2021 by $5,619 or 5%. Legal and accounting costs decreased in three-month period
ended December 31, 2022 compared to 2021 by $9,227 for a total of $7,388
compared to $16,615 for the same period last year. Management and
administrative expense increased by $15,490 or 18% to $103,374, this increase
relates to a $12,802 refund received from our workers compensation insurer in
November of 2021. Depreciation expense remained consistent with the prior
year.
Year end comparisons December 31,2022 vs 2021
Total revenues for the year ended December 31, 2022 decreased $500,000, or 63%,
to $300,000 compared with $800,000 in the same period last year, While
management service income remained consistent at $300,000 for both years, the
gain on mineral interest decreased by $500,000 as a result of payments receive
in 2021 pursuant to the terms of the Be Metals option agreement. The was no
provision for additional or similar payments under the Option Agreement for
2022.
Total operating expenses for the period ending December 31, 2022 of $746,270
increased from the year ending December 31, 2021 by $219,288 or 42%. Exploration
expenses decreased by $9,686 by 98% to $156 compared with $9,842 for the same
period last year. This decrease is the result of expenditures related to Trout
Creek and other potential mining projects. Legal and accounting costs increased
$28,408 to $113,717, an increase of 33%, compared with $85,309 in the prior
year. Management and administrative expenses increased by $201,862 or 47%
principally due to stock compensation of $158,341, for stock options issued to
our officers and director, on March 21, 2022, and Board of Directors
compensation of $22,200. The Company did not recognize any stock compensation
of in the year ending December 31, 2022. Depreciation expense continued to
decrease as the Company's fixed assets are almost all fully depreciated.
Liquidity and Capital Resources:
The consolidated financial statements for the year ended December 31, 2022 have
been prepared under the assumption that we will continue as a going concern.
Such an assumption contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. As shown in the consolidated
financial statements for the year ended December 31, 2022, we have cash reserves
and available for sale securities sufficient to cover normal operating
expenditures for the following 12 months.
On December 30, 2022, Thunder Mountain Gold, Inc. by and through its
subsidiaries Thunder Mountain Resources, Inc., a Nevada Corporation, and South
Mountain Mines, Inc., an Idaho Corporation ("SMMI") (collectively the "Company",
"THMG", or "We", "Our" or "Us") agreed to terminate an Option Agreement, (the
"BeMetals Option Agreement") with BeMetals Corporation, a British Columbia
corporation, and BeMetals USA Corporation, a Delaware corporation ("BeMetals
BMET").
The "BeMetals Option Agreement was entered into on February 27, 2019, the
original terms of the Option Agreement, BeMetals provided the funding to SMMI
for project expenses including Management Services Income. The Company has 8
million common shares of BMET USA with a market value of $738,612, and the
Company had cash and cash equivalents of $682,718 for the year ending December
31, 2022.
On July 19, 2021, management and certain Directors exercised options for 710,000
common shares at a price of $0.10 per share for total proceeds of $71,000 of
which $35,534 was for cash and a $35,466 reduction in current liabilities
related to advances from related parties for funds advanced by management and
foregone wages.
On May 4, 2021, the Company sold 2,000,000 shares held in BeMetals Corp. for US
$649,557 ($CAD 800,000). The shares of common stock were sold through Canaccord
Genuity at a price of US $0.325 ($CAD 0.40). This sale meets the requirements
under the terms of the BeMetals Option Agreement. The Company record a realized
gain of $92,685, on the sale of BeMetals shares (see Footnote 4).
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The liquidity of the Company's additional sources of cash, or relief of demand
for cash, includes additional external debt, the sale of shares of our stock, or
alternative methods such as mergers or sale of our assets. The Company received
10,000,000 shares of BeMetals Corp. common stock in connection with the BeMetals
Option Agreement. On May 17, 2021, the Company received US $649,557 from the
sale of 2,000,000 shares of BeMetals common stock in an arranged transaction
through Canaccord Genuity at a price of US $0.325 ($CAD 0.40) per share.
Currently, there remains 8 million shares of BeMetals common stock being held at
Canaccord Genuity that are available for sale.
Based upon current plans, Thunder Mountain Gold management is confident that the
Company will have the financial strength and opportunities to meet its financial
obligations for the next 12 months. Factors considered in substantiating this
conclusion include:
º On December 31, 2022, the Company had cash and cash equivalents of
$682,718.
º The Company has 8 million common shares of BMET USA with a market value of
$738,612, on December 31, 2022.
º The ability to raise additional equity capital based upon the results of
the exploration and development conducted by BeMetals.
While there is much work to do, it is important to note, with the termination of
BeMetals South Mountain Option Agreement. The Company's management has
immediately commenced marketing the South Mountain Project to other groups that
have expressed an interest.
We believe we have the ability to continue as a going concern, even though our
total accumulated deficit of $6,351,381 as of December 31, 2022. Our plans for
the long-term continuation as a going concern include financing our future
operations through sales of our common stock and/or debt and the eventual
profitable exploitation of our mining properties. The Company does have the
option of selling BeMetals common stock shares. If we are not successful with
our plans, equity holders could then lose all or a substantial portion of their
investment.
At December 31, 2022, we have current assets of $1,441,443. For the year ended
December 31, 2022, net cash used for operating activities was $402,136. Our
future liquidity and capital requirements will depend on many factors, including
timing, cost and progress of our exploration efforts, our evaluation of, and
decisions with respect to, our strategic alternatives, and costs associated with
the regulatory approvals. If it turns out that we do not have enough cash to
complete our exploration programs, we will make every effort to raise additional
funds from public offerings, sale of liquid stock or loans.
º On March 6, 2023, we had $555,381 cash in our bank accounts.
º We do not include in this consideration any option payments mentioned
below.
º Management is committed to managing expenses of all types to not exceed the
on-hand cash resources of the Company at any point in time, now or in the
future.
º The Company will also consider other sources of funding, including
potential mergers, the sale of all or part of the Company`s BeMetals Corp.
(TSX-V: BMET) common shares beneficially held, and/or additional farm-out
of its other exploration property.
For the year ended December 31, 2022, the Company reports net cash used by
operating activities of $402,136 compared to cash used by operating activities
of $257,816 in 2021. During the year ended December 31, 2022, net cash used by
financing activities was $71,768, which included $66,768 in payments on related
notes payables, and $5,000 to non-controlling interest. The Company reported a
net cash decrease of $473,904 for the year ended December 31, 2022, compared to
a net cash increase of $882,467 for the same period in 2021.
Our future liquidity and capital requirements will depend on many factors,
including timing, cost and progress of our exploration efforts, our evaluation
of, and decisions with respect to, our strategic alternatives, and costs
associated with the regulatory approvals. If it turns out that we do not have
enough cash to complete our exploration programs, we will attempt to raise
additional funds from a public offering, a private placement, mergers, farm-outs
or loans.
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Additional financing will be required in the future to fund our planned
operations. We do not know whether additional financing will be available when
needed or on acceptable terms, if at all. If we are unable to raise additional
financing, when necessary, we may have to delay our exploration efforts or any
property acquisitions or be forced to cease operations. Collaborative
arrangements may require us to relinquish our rights to certain of our mining
claims.
Contractual Obligations
During 2008 and 2009, three lease arrangements were made with landowners that
own land parcels adjacent to the Company's South Mountain patented and
unpatented mining claims. The leases were for a seven-year period, with options
to renew, with annual payments (based on $20 per acre) listed in the following
table. The leases have no work requirements.
Contractual obligations Payments due by period
Total* Less than 1 year 2-3 years 4-5 years More than 5 years
Acree Lease (yearly, $3,390 $3,390 - - $ -
June)(1)
Lowry Lease (yearly, $11,280 $11,280 - - $ -
October)(1)(2)
OGT LLC(3) $15,000 $5,000 $10,000 - $ -
Total $29,670 $19,670 $10,000 - $ -
(1) Amounts shown are for the lease periods years 15 through 16, a total of 2
years that remains after 2021, the lease was extended an additional 10 years at
$30/acre after 2014.
(2) The Lowry lease has an early buy-out provision for 50% of the remaining
amounts owed in the event the Company desires to drop the lease prior to the end
of the first seven-year period.
(3) OGT LLC, managed by the Company's wholly owned subsidiary SMMI, receives a
$5,000 per year payment for up to 10 years, or until a $5 million capped NPI
Royalty is paid.
Critical Accounting Policies
We have identified our critical accounting policies, the application of which
may materially affect the financial statements, either because of the
significance of the financials statement item to which they relate, or because
they require management's judgment in making estimates and assumptions in
measuring, at a specific point in time, events which will be settled in the
future. The critical accounting policies, judgments and estimates which
management believes have the most significant effect on the financial statements
are set forth below:
a) Estimates. Our management routinely makes judgments and estimates about the
effect of matters that are inherently uncertain. As the number of variables and
assumptions affecting the future resolution of the uncertainties increase, these
judgments become even more subjective and complex. Although we believe that our
estimates and assumptions are reasonable, actual results may differ
significantly from these estimates. Changes in estimates and assumptions based
upon actual results may have a material impact on our results of operation
and/or financial condition.
b) Stock-based Compensation. The Company records stock-based compensation in
accordance with ASC 718, "Compensation - Stock Compensation" using the fair
value method. All transactions in which goods or services are the consideration
received for the issuance of equity instruments are accounted for based on the
fair value of the consideration received or the fair value of the equity
instrument issued, whichever is more reliably measurable.
c) Income Taxes. We have current income tax assets recorded in our financial
statements that are based on our estimates relating to federal and state income
tax benefits. Our judgments regarding federal and state income tax rates, items
that may or may not be deductible for income tax purposes and income tax
regulations themselves are critical to the Company's financial statement income
tax items.
d) Investments. In a joint venture where the Company holds more than 50% of the
voting interest and has significant influence, the joint venture is consolidated
with the presentation of non-controlling interest. In determining whether
significant influences exist, the Company considers its participation in
policy-making decisions and its representation on the venture's management
committee.
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