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PGOL > SEC Filings for PGOL > Form 10-K on 29-Aug-2012All Recent SEC Filings

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Form 10-K for PATRIOT GOLD CORP


29-Aug-2012

Annual Report


Item 7. Management's Discussion and Analysis or Plan of Operation.

Overview

As a natural resource exploration company our focus is to locate prospective properties that may host mineral reserves that could eventually be put into mining production. With this in mind, we have to this date identified and secured interests in several mining claims with respect to properties in the Walker Lane area of Nevada and the historic Oatman mining district of Arizona. Current cash on hand is not sufficient to fund planned operations for 2013. Management plans to seek the additional capital through private placements and public offerings of its common stock but there can be no assurance that management would be successful in its attempt to raise the additional funds.

We do not intend to use any employees, with the exception of part-time clerical assistance on an as-needed basis. Outside advisors, attorneys or consultants will only be used if they can be obtained for a minimal cost or for a deferred payment basis. Management is confident that it will be able to operate in this manner and continue during the next twelve months.


Plan of Operation

During the twelve-month period ending May 31, 2013, our objective is to continue to monitor the exploration of our properties in accordance with our option agreements (the funds in our treasury are not sufficient to meet all planned activities as outlined below). Management plans to seek the additional capital through private placements and public offerings of its common stock but there can be no assurance that management would be successful in its attempt to raise the additional funds.

We continue to run our operations with the use of contract operators, and as such do not anticipate a change to our company staffing levels. We remain focused on keeping the staff compliment, which currently consists of our four directors, at a minimum to conserve capital. Our staffing in no way hinders our operations, as outsourcing of necessary operations continues to be the most cost effective and efficient manner of conducting the business of the Company.

We do not anticipate any equipment purchases in the twelve months ending May 31, 2013.

Results of Operations

The Twelve Months Ended May 31, 2012 compared to the Twelve Months Ended May 31, 2011

The Company had no revenues during the fiscal years ended May 31, 2012 and 2011as it is in the exploration state and accordingly has not realized revenue from operations. Net loss for the year ended May 31, 2012 was $479,687 compared to net income of $74,259 for the year ended May 31, 2011. The significant decrease in net income is due to $500,000 received in 2011 for the sale of mineral property rights to a third party, which was recorded in "Other income (expense)".

The net loss from operations for the years ended May 31, 2012 and 2011 were $479,770 compared to $431,892, respectively, representing an increase in operating expenses of approximately $48,000. The increase is due to an approximate $122,000 increase in general and administrative expenses arising from an increase in consulting fees as the Company evaluates future business opportunities and an increase in professional fees as the Company revamped its operations. The increases were offset by an approximate $74,000 decrease in exploration expenses as the Company's joint venture partners were responsible for exploration expenses during the year ended May 31, 2012.

During the year ended May 31, 2011, the company received $500,000 from the sale of mineral rights to a third party, which was recorded in "Other Income (Expense)".

The Twelve Months Ended May 31, 2011 compared to the Twelve Months Ended May 31, 2010

The Company had no revenues during the fiscal years ended May 31, 2011 and May 31, 2010 because it was in the exploration state during such fiscal years. The net loss from operations for fiscal 2011 was $431,892 compared to $559,821 in fiscal 2010. The net loss from operations decreased significantly in 2011 compared to 2010 largely due to a decrease in exploration expenses to $133,629 in 2011 from $266,302 in 2010, a decrease of $132,673. In 2011, there were no property option payments made whereas in 2010 there was $35,000.


General and administrative expenses were $298,263 in 2011 compared to $293,519 in 2010, an increase of $4,744. The difference relates to higher costs associated with the Company's corporate development activities, countered with increased costs to consulting.

Interest income decreased to $1,300 in 2011 from $7,694 in 2010. The decrease is largely due to lower average invested cash balances and a decrease in interest rates on invested cash balances.

During the year ended May 31, 2011, the company received $500,000 from the sale of mineral rights to a third party, which was recorded in "Other Income (Expense)".

Liquidity and Capital Resources

We had total assets of $226,597 at May 31, 2012 consisting of cash of $201,918, prepaid expenses of $10,524 and reclamation deposits of $14,155. We had total liabilities of $37,450 at May 31, 2012 all of which are current liabilities consisting of accounts payable and accrued liabilities.

We anticipate that we will incur the following to May 31, 2012:

$250,000 for operating expenses, including working capital and general, legal, accounting and administrative expenses associated with reporting requirements under the Securities Exchange Act of 1934.

Cash used in operations was $458,860 for the year ended May 31, 2012 while cash provided by operations was $54,277 in 2011. The decrease in cash provided by operations for the year ended May 31, 2012 was due to cash received from the sale of mineral properties of $500,000 in the year ended May 31, 2011.

Cash from operations from inception to date has not been sufficient to provide the operating capital necessary to operate. In November 2003 we issued 864,000 shares of common stock and 864,000 Class A warrants, 864,000 Class B warrants, 864,000 Class C warrants and 864,000 Class D warrants. This private offering generated gross proceeds of $1,080,000.. The Class A-1 warrants are exercisable on November 27, 2004 with an expiration date of November 23, 2013 at an exercise price of $1.40 per share of common stock; the Class B-1 warrants are exercisable on November 27, 2005 with an expiration date of November 23, 2013 at an exercise price of $1.45; the Class C-1 warrants are exercisable on November 27, 2006 with an expiration date of November 23, 2013 at an exercise price of $1.50; and the Class D-1 warrants are exercisable on November 27, 2007 with an expiration date of November 23, 2013 at an exercise price of $1.55. The Company has the right, in its sole discretion, to accelerate the exercise date of the warrants, to decrease the exercise price of the warrants and/or extend the expiration date of the warrants. On June 8, 2009 the expiry date on all of the warrants was extended from November 27, 2009 to November 27, 2011. On May 26, 2010 the expiry date on all of the warrants was extended from November 27, 2011 to November 27, 2013.

Investing activities in 2012 and 2011 were $nil. There were no financing activities in either 2012 or 2011.


Going Concern Consideration

Management estimates that the Company will require approximately $250,000 to fund the Company's planned operations for the next twelve months. Therefore, current cash on hand is not sufficient to fund planned operations for 2013. We anticipate generating losses and therefore we may be unable to continue operations in the future as a going concern. No adjustment has been made in the accompanying financial statements to the amounts and classification of assets and liabilities that could result should we be unable to continue as a going concern.

We currently have no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources.

Accordingly, our independent auditors included an explanatory paragraph in their report on the accompanying financial statements regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

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