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RYES > SEC Filings for RYES > Form 10-Q on 17-Mar-2017All Recent SEC Filings

Show all filings for RISE RESOURCES INC.

Form 10-Q for RISE RESOURCES INC.


17-Mar-2017

Quarterly Report


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

SPECIAL NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS

CERTAIN STATEMENTS IN THIS REPORT, INCLUDING STATEMENTS IN THE FOLLOWING DISCUSSION, ARE WHAT ARE KNOWN AS "FORWARD LOOKING STATEMENTS", WHICH ARE BASICALLY STATEMENTS ABOUT THE FUTURE. FOR THAT REASON, THESE STATEMENTS INVOLVE RISK AND UNCERTAINTY SINCE NO ONE CAN ACCURATELY PREDICT THE FUTURE. WORDS SUCH AS "PLANS", "INTENDS", "WILL", "HOPES", "SEEKS", "ANTICIPATES", "EXPECTS" AND THE LIKE OFTEN IDENTIFY SUCH FORWARD LOOKING STATEMENTS, BUT ARE NOT THE ONLY INDICATION THAT A STATEMENT IS A FORWARD LOOKING STATEMENT. SUCH FORWARD LOOKING STATEMENTS INCLUDE STATEMENTS CONCERNING OUR PLANS AND OBJECTIVES WITH RESPECT TO PRESENT AND FUTURE OPERATIONS, AND STATEMENTS WHICH EXPRESS OR IMPLY THAT SUCH PRESENT AND FUTURE OPERATIONS WILL OR MAY PRODUCE REVENUES, INCOME OR PROFITS. NUMEROUS FACTORS AND FUTURE EVENTS COULD CAUSE US TO CHANGE SUCH PLANS AND OBJECTIVES OR FAIL TO SUCCESSFULLY IMPLEMENT SUCH PLANS OR ACHIEVE SUCH OBJECTIVES, OR CAUSE SUCH PRESENT AND FUTURE OPERATIONS TO FAIL TO PRODUCE REVENUES, INCOME OR PROFITS. THEREFORE, THE FOLLOWING DISCUSSION SHOULD BE CONSIDERED IN LIGHT OF THE DISCUSSION OF RISKS AND OTHER FACTORS CONTAINED IN THIS QUARTERLY REPORT ON FORM 10-Q AND IN OUR OTHER FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. NO STATEMENTS CONTAINED IN THE FOLLOWING DISCUSSION SHOULD BE CONSTRUED AS A GUARANTEE OR ASSURANCE OF FUTURE PERFORMANCE OR FUTURE RESULTS.

Description of Business

The Company is a mineral exploration company and its primary asset is a major past producing high grade property near Grass Valley, California, United States, which it owns outright. The Company also has a copper/gold property under option in British Columbia, Canada, and several other potential mineral properties in British Columbia, Canada. The Company's common stock is currently traded on the OTC Markets under the symbol "RYES", and listed on the Canadian Securities Exchange (the "CSE") under the symbol "UPP". The Company ceased to be an OTC reporting issuer in Canada on February 2, 2016.

On May 18, 2015, the Company entered into an option agreement (the "Option Agreement") with Eastfield Resources Ltd., a British Columbia company with its common shares listed for trading on the TSX Venture Exchange under the symbol "ETF" ("Eastfield"), pursuant to which Eastfield granted the Company the exclusive and irrevocable option to acquire up to a 75% undivided interest in and to certain mineral claims known as the Indata property located in the Omineca Mining Division in British Columbia, Canada (the "Indata Property"). In order to earn the initial 60% interest, the Company is required to pay Eastfield an aggregate of $350,000 in cash and incur a minimum of $2,000,000 in aggregate exploration expenditures on the Indata Property by April 3, 2019. In order to earn the additional 15% interest, it is required to pay Eastfield $100,000 within 90 days of earning the 60% interest and incur a further $500,000 in aggregate annual exploration expenditures on the Indata Property until such time as the Company is able to complete a feasibility study on the property. Upon the completion of a feasibility study, the additional 15% interest will be deemed to have been earned.

Prior to entering into the Option Agreement, the Company was a development stage company engaged in exploring and evaluating potential strategic transactions in multiple industries, including but not limited to mineral properties and technology.

On May 31, 2016, the Company entered into a property purchase agreement (the "Purchase Agreement") with Klondike Gold Corp., a British Columbia company with its common shares listed for trading on the TSX Venture Exchange under the symbol "KG" ("Klondike"), regarding the purchase of a portfolio of seven gold and base metal properties in southeast British Columbia consisting of 150 mining claims with a total area of 28,000 hectares (collectively, the "Klondike Properties"). Under the Purchase Agreement, on July 13, 2016 (the "First Closing"), the Company paid Klondike $50,000 in cash, issued 1,500,000 shares of the Company's common stock, and issued


1,500,000 warrants exercisable at a price of $0.227 per share until July 13, 2018. On the one year anniversary of the First Closing, the Company is required to pay Klondike $150,000 in cash, issue 2,000,000 shares of the Company's common stock, and issue 1,000,000 warrants. Klondike will retain a 2% net smelter return royalty ("NSR") and the Company will have the right to purchase 50% of the NSR for $1,000,000 at any time after the First Closing. Each of the warrants is exercisable for a period of two years into one share of the Company's common stock at a price that is a 20% premium to the 10-day volume-weighted average price of the stock on the CSE immediately prior to the date of issuance.

On August 30, 2016, the Company entered into an option agreement with three parties to purchase a 100% interest in and to the Idaho-Maryland Gold Mine property located near Grass Valley, California, United States; pursuant to the option agreement, in order to exercise the option, the Company must pay US$2,000,000 by November 30, 2016. Upon execution of the option agreement, the Company paid the vendors a non-refundable cash deposit in the amount of $32,758 (US$25,000), which will be credited against the purchase price of US$2,000,000 upon exercise of the option. On November 30, 2016, the Company negotiated an extension of the closing date of the option agreement to December 26, 2016, in return for a cash payment of $32,758 (US$25,000), which will be credited against the purchase price of US$2,000,000 upon exercise of the option. On December 28, 2016, the Company negotiated a further no-cost extension of the closing date of the option agreement to January 31, 2017. On January 25, 2017, the Company exercised the option by paying $2,588,625 (US$2,000,000), and acquired a 100% interest in the Idaho-Maryland Gold Mine property. In connection with the option agreement, the Company agreed to pay a cash commission of $184,000 (US$140,000) equal to 7 per cent of the purchase price of US$2,000,000; the commission was settled on January 25, 2017 through the issuance of 920,000 units valued at $0.20 per unit, each unit consisting of one share of common stock and one transferable share purchase warrant exercisable into one share of common stock at a price of $0.40 for a period of two years from the date of issuance..

The Company believes it can prepare a mineral resource estimate, exploration plan, and a preliminary mine plan through processing historic data on the Idaho-Maryland property within three months of the closing of the purchase.

On December 28, 2016, the Company completed a non-brokered private placement, issuing an aggregate of 21,044,500 units at a price of $0.20 per unit for gross proceeds of $4,208,900. Each unit consists of one share of common stock and one transferable share purchase warrant exercisable into one share of common stock at a price of $0.40 for a period of two years from the date of issuance. In connection with the private placement, the Company paid finders fees of $218,410 and issued a total of 1,104,300 agent warrants exercisable into one share of common stock at a price of $0.40 for a period of two years from the date of issuance.

On January 6, 2017, the Company entered into an option agreement with Sierra Pacific Industries Inc. to purchase a 100% interest in and to certain surface rights totalling approximately 82 acres located near Grass Valley, California, United States, contiguous to the Idaho-Maryland Gold Mine property acquired by the Company on January 25, 2017. Pursuant to the option agreement, in order to exercise the option, the Company must pay US$1,900,000 by March 31, 2017. Upon execution of the option agreement, the Company paid the vendors a non-refundable cash deposit in the amount of $132,732 (US$100,000), which will be credited against the purchase price of US$1,900,000 upon exercise of the option.

On January 25, 2017, the Company completed a non-brokered private placement, issuing an aggregate of 1,340,000 units at a price of $0.20 per unit for gross proceeds of $268,000. Each unit consists of one share of common stock and one transferable share purchase warrant exercisable into one share of common stock at a price of $0.40 for a period of two years from the date of issuance. In connection with the private placement, the Company paid finders fees of $5,220 and issued a total of 26,100 agent warrants exercisable into one share of common stock at a price of $0.40 for a period of two years from the date of issuance.

On February 5, 2017, the Company completed a non-brokered private placement, issuing an aggregate of 455,000 units at a price of $0.25 per unit for gross proceeds of $113,750. Each unit consists of one share of common stock and one transferable share purchase warrant exercisable into one share of common stock at a price of $0.40 for a period of two years from the date of issuance. In connection with the private placement, the Company paid finders fees of $2,625 and issued a total of 10,500 agent warrants exercisable into one share of common stock at a price of $0.40 for a period of two years from the date of issuance.


Plan of Operations

As at January 31, 2017, the Company had a cash balance of $597,246, compared to a cash balance of $139,021 as of July 31, 2016.

The Company's plan of operations for the next 12 months is to review the geological information acquired with the Idaho-Maryland Gold Mine property, and prepare a mineral resource estimate, exploration plan, and a preliminary mine plan. Information derived from this work and the resulting report will shape the future direction of the Company.

The Company also plans to carry out the first of a two-phase exploration program on the Indata Property in the summer of 2017 at a total cost of approximately $304,605, as follows:

Phase I: Line Cutting, Mapping, Geophysical and Geochemical Surveys

                            Description                           Amount
                                                                   ($)
      Field supervision / mapping (fees)                             40,800
      Field supervision room & board expenses                        19,125
      Line cutting (including personnel costs, room & board          84,600
      and vehicle expenses)
      Field supervision / sampling (fees)                            13,600
      Soil sampling (including personnel costs, room & board          9,180
      and vehicle expenses)
      Soil and rock sample analysis                                  20,000
      IP and magnetics survey                                        68,000
      Geophysical surveying costs (including room & board and        24,800
      vehicle expenses)
      Reporting and drafting                                         10,000
      Contingency                                                    14,500
      Total                                                         304,605

The first phase combines line cutting, soil sampling and geophysics work to provide the information needed to determine drill targets, if any, for the second phase and will achieve the exploration budget for the next 12 months required by the Option Agreement. Note that the Company has approached the optionor of the Indata property and is in discussions to amend the current option agreement to allow for this work to occur in the summer of 2017, and any further work to proceed in the summer of 2018. The Company expects to complete the second phase of the exploration program by November 30, 2018, as follows:

Phase II: Drilling Program

                               Description          Amount
                                                      ($)
                      Drilling costs                160,000
                      Site preparation               10,000
                      Sample analysis                10,000
                      Geologist / supervisor (fees)  30,000
                      Field crew  (fees)             12,000


   Field crew expenses (including room & board, vehicle expenses        38,000
   and equipment expenses)
   Data compilation / report preparation                                10,000
   Contingency                                                          13,500
   Total                                                               283,500

The Company is currently evaluating the seven southeast British Columbia properties that it purchased from Klondike. An exploration program will be compiled based on the findings from this evaluation.

In addition to the two phase program and future work on the southeast British Columbia properties, the Company anticipates spending approximately $291,500 on general operating expenses, including fees payable in connection with its filing obligations as a reporting issuer in both the United States and Canada, as follows:

                              Description                 Amount
                                                            ($)
               Consulting fees                             96,000
               Employment expenses                        130,000
               Professional fees                           22,500
               Filing and regulatory expenses               5,500
               Rent                                        12,000
               Marketing and website development expenses   4,000
               General and administrative expenses         21,500
               Total                                      291,500

The Company does not currently have sufficient funds to carry out the two-phase exploration program or cover its anticipated general operating expenses for the year, so it will require additional funding. The Company anticipates that additional funding will be in the form of equity financing from the sale of its common stock or from loans from one of several directors or officers, or companies controlled by directors or officers. The Company does not have any arrangements in place for any future equity financing or loans, and if the Company is not successful in raising additional financing, the Company anticipates that it will not be able to proceed with its business plan.

The Company anticipates incurring operating losses for the foreseeable future. It bases this expectation, in part, on the fact that very few mineral claims in the exploration stage ultimately develop into producing, profitable mines. The Company's future financial results are also uncertain due to a number of factors, some of which are outside its control. These factors include the following:

its ability to raise additional funding;

the market price for any minerals that may be discovered on the Indata Property;

the results of its proposed exploration program on the Indata Property;

the results of its current geological investigation of the Idaho-Maryland property.

The Company has not attained profitable operations and is dependent upon obtaining financing to pursue its proposed exploration activities. For these reasons the Company's auditors believe that there is substantial doubt that it will be able to continue as a going concern.


                             Results of Operations


For the Periods Ended January 31, 2017 and 2016


The Company's operating results for the periods ended January 31, 2017 and 2016
are summarized as follows:


                                                     For the          For the
                                                period ended     period ended
                                                 January 31,      January 31,
                                                        2017             2016
Consulting                                   $       195,171   $       35,270
Filing and regulatory                                 19,204           19,953
Foreign exchange                                       1,407            8,853
Gain on settlement of payables                      (11,415)         (36,934)
General and administrative                            60,006           12,794
Professional fees                                     93,752           17,912
Promotion and shareholder communication              267,673            2,470
Property investigation                                55,253                -
Salaries                                              64,225                -
Share-based payments                                 570,255                -
Loss for the period                              (1,315,531)         (60,318)

The Company's operating expenses increased during the period ended January 31, 2017 compared to the prior period primarily as a result of increased costs for consulting, filing and regulatory, professional fees and promotion and shareholder communications, driven by increases in consulting and expenses related to planning and researching the Company's mineral properties, and promotional activity involved in raising funds in the recent private placements.

                        Liquidity and Capital Resources


Working Capital

                                                                   Change between July
                                At January                            31, 2016 and
                                 31, 2017      At July 31, 2016     January 31, 2017
Current Assets               $   1,137,328   $          168,608  $             968,720
Current Liabilities                358,073              227,210                130,863
Working Capital/(Deficit)          779,255             (58,602)                837,857



Cash Flows

                                                         For the          For the
                                                    period ended     period ended
                                                     January 31,      January 31,
                                                            2017             2016
Net Cash used in Operating Activities           $    (1,182,811) $       (80,921)
Net Cash provided by Investing Activities            (2,786,872)                -
Net Cash provided by in Financing Activities           4,427,908          530,357
Net Increase (Decrease) in Cash During Period            458,255          449,436

As of July 31, 2016, the Company had $597,246 in cash, $1,137,328 in current assets, $4,671,231 in total assets, -$358,073 in current and total liabilities, a working capital of $779,255 and an accumulated deficit of $3,152,500.

During the period ended January 31, 2017, the Company used $1,182,811 (2016 - $80,921) in net cash on operating activities. The difference in net cash used in operating activities during the two periods was largely due to the


increase in the Company's net loss for the most recent year, as adjusted for an increase in prepaid expenses, and the accrual of a larger accounts payable, accrued liabilities and due to related parties balance.

During the period ended January 31, 2017, the Company used net cash of $2,786,872 (US$2,100,000) (2016 - $Nil) from investing activities for the acquisition of the Idaho-Maryland property and the recent option agreement to increase the holdings of the Idaho-Maryland property.

The Company received net cash of $4,427,908 (2016 - $530,357) from financing activities during the period ended January 31, 2017. In the current period, the Company received gross proceeds of $4,476,900 (2016 - $605,000) from private placements, $27,208 (2016 - $Nil) from the exercise of warrants, $43,750 (2016 - $Nil) from subscriptions received in advance, offset by $119,950 (2016 - $74,643) in share issuance costs.

The Company expects to operate at a loss for at least the next 12 months. It has no agreements for additional financing and cannot provide any assurance that additional funding will be available to finance its operations on acceptable terms in order to enable it to carry out its business plan. There are no assurances that the Company will be able to complete further sales of its common stock or any other form of additional financing. If the Company is unable to achieve the financing necessary to continue its plan of operations, then it will not be able to carry out any exploration work on the Indata Property or the other properties in which it owns an interest and its business may fail.

Off Balance Sheet Arrangements

The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

ITEM 3.

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