Item 1. Financial Statements
WHITE MOUNTAIN TITANIUM CORPORATION
|
Condensed Consolidated Interim Balance Sheets
|
(Expressed in
US dollars)
|
As at
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
|
|
(unaudited)
|
|
|
(audited)
|
|
Assets
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Cash
|
$
|
2,016,463
|
|
$
|
396,878
|
|
Prepaid expenses
|
|
147,658
|
|
|
196,924
|
|
Receivables
|
|
1,880
|
|
|
2,203
|
|
Total Current Assets
|
|
2,166,001
|
|
|
596,005
|
|
Property and Equipment
(Note 4)
|
|
268,853
|
|
|
286,416
|
|
Mineral Properties
(Note 5)
|
|
651,950
|
|
|
651,950
|
|
|
|
|
|
|
|
|
Total Assets
|
$
|
3,086,804
|
|
$
|
1,534,371
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
$
|
405,423
|
|
$
|
135,354
|
|
Long Term Liabilities
|
|
|
|
|
|
|
Convertible Note (
Note 6
)
|
|
767,033
|
|
|
-
|
|
Derivative Liability
(Note
6)
|
|
837,751
|
|
|
-
|
|
Total Long Term Liabilities
|
|
1,604,784
|
|
|
-
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
2,010,207
|
|
|
135,354
|
|
|
|
|
|
|
|
|
Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock and Paid-in Capital in
Excess of $0.001 Par
Value
(note 7)
|
|
|
|
|
|
|
100,000,000
shares
authorized
100
(2015 Nil) shares issued and outstanding
|
|
-
|
|
|
-
|
|
Common Stock and Paid-in Capital in Excess
of $0.001 Par
Value
(note 7)
|
|
|
|
|
|
|
500,000,000
shares authorized 96,114,442 (2015
96,114,442)
shares issued and outstanding
|
|
61,467,250
|
|
|
61,052,678
|
|
|
|
|
|
|
|
|
Accumulated Deficit
|
|
(60,390,653
|
)
|
|
(59,653,661
|
)
|
|
|
|
|
|
|
|
Total Stockholders Equity
|
|
1,076,597
|
|
|
1,399,017
|
|
|
|
|
|
|
|
|
Total Liabilities and
Stockholders Equity
|
$
|
3,086,804
|
|
$
|
1,534,371
|
|
See notes to the unaudited condensed consolidated interim
financial statements.
3
WHITE MOUNTAIN TITANIUM CORPORATION
|
Condensed Consolidated Interim Statements of
Operations
|
(Unaudited -
Expressed in US dollars)
|
|
|
Three months ended March 31,
|
|
|
|
2016
|
|
|
2015
|
|
Expenses
|
|
|
|
|
|
|
Advertising and promotion
|
$
|
11,903
|
|
$
|
92,689
|
|
Amortization
|
|
17,563
|
|
|
20,691
|
|
Bank charges and interest
|
|
22,268
|
|
|
4,208
|
|
Consulting fees
|
|
72,018
|
|
|
54,208
|
|
Consulting fees directors and
officers
|
|
140,750
|
|
|
199,500
|
|
Exploration
(Note 5)
|
|
236,791
|
|
|
461,670
|
|
Filing fees
|
|
7,983
|
|
|
8,562
|
|
Insurance
|
|
10,675
|
|
|
9,108
|
|
Investor relations
|
|
286
|
|
|
26,638
|
|
Licenses and
taxes, net
|
|
-
|
|
|
142
|
|
Management fees
|
|
8,972
|
|
|
48,920
|
|
Office
|
|
23,110
|
|
|
16,355
|
|
Professional fees
|
|
102,480
|
|
|
88,864
|
|
Rent
|
|
43,741
|
|
|
54,508
|
|
Staff salaries and benefits
|
|
17,623
|
|
|
19,598
|
|
Telephone
|
|
2,387
|
|
|
5,173
|
|
Transfer agent fees
|
|
694
|
|
|
1,264
|
|
Travel and
vehicle
|
|
22,091
|
|
|
66,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss Before Other Items
|
|
(741,335
|
)
|
|
(1,178,188
|
)
|
Gain on
Derivative Liability
(Note 6)
|
|
8,070
|
|
|
-
|
|
Foreign Exchange
|
|
(3,727
|
)
|
|
(4,328
|
)
|
Interest
Income
|
|
-
|
|
|
2
|
|
|
|
|
|
|
|
|
Net Loss and
Comprehensive
Loss for Period
|
|
(736,992
|
)
|
|
(1,182,514
|
)
|
|
|
|
|
|
|
|
Basic and
Diluted Loss Per
Common Share
(Note 8)
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
Weighted Average Number of
Shares of
Common Stock Outstanding
|
|
96,114,442
|
|
|
86,099,836
|
|
See notes to the unaudited condensed consolidated interim
financial statements.
4
WHITE MOUNTAIN TITANIUM CORPORATION
|
Condensed Consolidated Statements of Interim
Stockholders Equity
|
(Unaudited -
Expressed in US dollars)
|
|
|
|
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Paid-In
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Shares of
|
|
|
Capital
|
|
|
Shares of
|
|
|
|
|
|
Stockholders
|
|
|
|
Common
|
|
|
In Excess of Par
|
|
|
Preferred
|
|
|
Accumulated
|
|
|
Equity
|
|
|
|
Stock
|
|
|
Value
|
|
|
Stock
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2015
|
|
96,114,442
|
|
$
|
61,052,678
|
|
|
-
|
|
$
|
(59,653,661
|
)
|
$
|
1,399,017
|
|
Stock-based compensation
(Note 7(c))
|
|
-
|
|
|
8,972
|
|
|
-
|
|
|
-
|
|
|
8,972
|
|
Preferred shares issued (Note
6)
|
|
-
|
|
|
-
|
|
|
100
|
|
|
-
|
|
|
-
|
|
Equity component of convertible note
(Note
6)
|
|
-
|
|
|
405,600
|
|
|
-
|
|
|
-
|
|
|
405,600
|
|
Net loss for the period
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(736,992
|
)
|
|
(736,992
|
)
|
Balance, March 31, 2016
|
|
96,114,442
|
|
$
|
61,467,250
|
|
|
100
|
|
$
|
(60,390,653
|
)
|
$
|
1,076,597
|
|
See notes to the unaudited condensed consolidated interim
financial statements.
5
WHITE MOUNTAIN TITANIUM CORPORATION
|
Condensed Consolidated Interim Statements of Cash
Flows
|
(Unaudited -
Expressed in US dollars)
|
|
|
Three months ended March 31,
|
|
|
|
2016
|
|
|
2015
|
|
Operating Activities
|
|
|
|
|
|
|
Net loss for
period
|
$
|
(736,992
|
)
|
$
|
(1,182,514
|
)
|
Items not involving cash
|
|
|
|
|
|
|
Amortization
|
|
17,563
|
|
|
20,691
|
|
Stock-based
compensation
|
|
8,972
|
|
|
48,919
|
|
Common stock issued for services
|
|
-
|
|
|
45,000
|
|
Interest accretion
on convertible note
|
|
18,442
|
|
|
-
|
|
Gain on derivative liability
|
|
(8,070
|
)
|
|
-
|
|
Changes in non-cash working
capital
|
|
|
|
|
|
|
Prepaid expenses
|
|
49,266
|
|
|
17,898
|
|
Receivables
|
|
323
|
|
|
4,978
|
|
Accounts payable and accrued liabilities
|
|
270,081
|
|
|
80,047
|
|
Cash Used in Operating Activities
|
|
(380,415
|
)
|
|
(964,981
|
)
|
|
|
|
|
|
|
|
Investing Activities
|
|
|
|
|
|
|
Additions to
property and equipment
|
|
-
|
|
|
(59
|
)
|
Cash Used in Investing Activities
|
|
-
|
|
|
(59
|
)
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
Cash received
from issuance of convertible note
|
|
2,000,000
|
|
|
-
|
|
Issuance of common stock for
cash
|
|
-
|
|
|
350,000
|
|
Cash Provided by Financing
Activities
|
|
2,000,000
|
|
|
350,000
|
|
|
|
|
|
|
|
|
Inflow (outflow) of
Cash
|
|
1,619,585
|
|
|
(615,040
|
)
|
Cash, Beginning of Period
|
|
396,878
|
|
|
949,806
|
|
Cash, End of Period
|
$
|
2,016,463
|
|
$
|
334,766
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow
Information
|
|
|
|
|
|
|
Income tax paid
|
$
|
-
|
|
$
|
-
|
|
Interest paid
|
$
|
-
|
|
$
|
-
|
|
See notes to the unaudited condensed consolidated interim
financial statements.
6
WHITE MOUNTAIN TITANIUM CORPORATION
|
Notes to Condensed Consolidated Interim Financial
Statements
|
Three months ended March 31, 2016
|
(Unaudited -
Expressed in US dollars)
|
1.
|
NATURE OF BUSINESS, BASIS OF PRESENTATION AND GOING
CONCERN
|
|
|
|
White Mountain Titanium Corporation, through its
subsidiaries, (collectively, the Company) is in the business of
exploring for titanium deposits or reserves on its Cerro Blanco mining
concessions. The Company is an exploration stage company and its principal
business is to advance exploration and development activities on the Cerro
Blanco rutile (titanium dioxide) Property (Cerro Blanco) located in
Region III of northern Chile.
|
|
|
|
The accompanying condensed consolidated interim financial
statements have been prepared by the Company without audit. In the opinion
of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results
of operations and cash flows at March 31, 2016 and for the period then
ended have been made. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
United States (US) accounting principles generally accepted in the
United States of America (US GAAP) have been condensed or omitted. These
unaudited condensed consolidated interim financial statements should be
read in conjunction with the consolidated financial statements and notes
thereto included in the Companys December 31, 2015, Annual Report on Form
10-K filed with the US Securities and Exchange Commission (SEC) on March
28, 2016. The organization and business of the Company, accounting
policies followed by the Company, other than the recently adopted
accounting pronouncements discussed below and other information are
contained in the notes to the Companys audited consolidated financial
statements for the year ended December 31, 2015 filed as part of the
Companys December 31, 2015 Annual Report on Form 10-K. The results of
operations for the period ended March 31, 2016 are not necessarily
indicative of the operating results for the full year.
|
|
|
|
These condensed consolidated interim financial statements
have been prepared by management on the basis of US GAAP applicable to a
going concern, which assumes the Company will continue to operate for the
foreseeable future and will be able to realize its assets and discharge
its liabilities in the normal course of operations. The Company has an
accumulated deficit of $60,390,653 at March 31, 2016 (December 31, 2015 -
$59,653,661), has not yet commenced revenue-producing operations, and has
significant expenditure requirements to continue to advance its
exploration and development activities on the Cerro Blanco property.
Management intends to raise additional capital through stock issuance to
finance operations. However, there is no assurance that management will be
successful in its future financing activities.
|
|
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
|
|
|
Convertible debentures
|
|
|
|
Convertible debentures and warrants are bifurcated
between debt component and equity component based on the relative fair
values of the debt and warrants, the conversion component of the debt
component is then fair valued and accounted for as additional discount to
the debt component and is treated as a derivative liability and fair
valued every balance sheet date, the resulting discount to the debt
component is amortized over the term of the debt using the effective
interest rate method.
|
|
|
|
The following accounting pronouncement was adopted by the
Company:
|
7
WHITE MOUNTAIN TITANIUM CORPORATION
|
Notes to Condensed Consolidated Interim Financial
Statements
|
Three months ended March 31, 2016
|
(Unaudited -
Expressed in US dollars)
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
(continued)
|
|
|
|
During the period the Company adopted update No. 2015-02
Consolidation (Topic 810) Amendments to the Consolidated Analysis.
The amendments in this Update affect reporting entities that are
required to evaluate whether they should consolidate certain legal
entities. All legal entities are subject to reevaluation under the revised
consolidation model. Specifically, the
amendments:
|
|
1.
|
Modify the evaluation of whether limited partnerships and
similar legal entities are variable interest entities (VIEs) or voting
interest entities
|
|
|
|
|
2.
|
Eliminate the presumption that a general partner should
consolidate a limited partnership
|
|
|
|
|
3.
|
Affect the consolidation analysis of reporting entities
that are involved with VIEs, particularly those that have fee arrangements
and related party relationships
|
|
|
|
|
4.
|
Provide a scope exception from consolidation guidance for
reporting entities with interests in legal entities that are required to
comply with or operate in accordance with requirements that are similar to
those in Rule 2a-7 of the
Investment Company Act of 1940
for
registered money market funds.
|
The amendments in this Update are
effective for fiscal years, and for interim periods within those fiscal years,
beginning after December 15, 2015.
The adoption of this standard had no
effects on the Companys condensed consolidated interim financial statements.
During the year the Company adopted
FASB Update No. 2014-12
CompensationStock Compensation (Topic 718):
Accounting for Share-Based Payments When the Terms of an Award Provide That a
Performance Target Could Be Achieved after the Requisite Service Period
(a
consensus of the FASB Emerging Issues Task Force). The adoption of this standard
had no effects on the Companys condensed consolidated interim financial
statements.
In April 2015, the FASB issued ASU No.
2015-03, InterestImputation of Interest (Subtopic 835-30): Simplifying the
Presentation of Debt Issuance Costs (ASU 2015-03). ASU 2015-03 requires debt
issuance costs to be presented in the balance sheet as a direct deduction from
the carrying value of the associated debt liability, consistent with the
presentation of a debt discount. Prior to the issuance of the standard, debt
issuance costs were required to be presented in the balance sheet as an asset.
ASU 2015-03 is effective for fiscal years, and interim periods within those
years, beginning after December 15, 2015. The adoption of this standard had no
effects on the Companys condensed consolidated interim financial statements.
In February 2016, the FASB issued ASU
No. 2016-02, Leases (Topic 842). The core principle of the standard is that a
lessee should recognize the assets and liabilities that arise from leases. A
lessee should recognize in its statement of financial position a liability to
make lease payments (the lease liability) and a right-of-use asset representing
its right to use the underlying asset for the lease term. We will be required to
adopt the new standard in the first quarter of 2019. We are currently evaluating
the impact this new standard will have on our financial statements.
8
WHITE MOUNTAIN TITANIUM CORPORATION
|
Notes to Condensed Consolidated Interim Financial
Statements
|
Three months ended March 31, 2016
|
(Unaudited -
Expressed in US dollars)
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
(continued)
|
|
|
|
In August 2014, the FASB issued Update No.
2014-15
Presentation of Financial Statements Going Concern (Subtopic
205-40): Disclosure of Uncertainties about an Entitys Ability to Continue
as a Going Concern
. The amendments in the Update provide guidance on
managements responsibility to disclose conditions or events that raise
substantial doubt about an entitys ability to continue as a going
concern. The Update requires management also to discuss plans to mitigate
the conditions or events and if the plans will alleviate the substantial
doubt by considering the probability of implementation of the plans and
mitigation effect of the plans. The new requirements are effective for
annual periods ending after December 15, 2016, The adoption of this
standard had no effects on the Companys condensed consolidated interim
financial statements.
|
|
|
3.
|
FINANCIAL INSTRUMENTS AND
RISKS
|
|
(a)
|
The Company has classified its financial instruments as
follows:
|
|
|
|
|
|
Cash as held-for-trading
|
|
|
Receivables as refundable deposits and
receivables
|
|
|
Accounts payable and accrued liabilities as other
financial liabilities
Convertible Note as other financial
liabilities
Derivative Liabilities as held for
trading
|
The carrying amounts of the Companys
cash, receivables and accounts payables and accrued liabilities approximate
their respective fair values due to the short maturities of these instruments.
The Companys Convertible Note is classified as other financial liabilities and
is carried at amortized cost. The fair value of the convertible note
approximates its face value. The three levels of the fair value hierarchy are
described below:
|
|
Level 1 - quoted prices (unadjusted) in active markets
for identical assets or liabilities;
|
|
|
Level 2 - inputs other than quoted prices included in
Level 1 that are observable for the asset or liability, either directly
(i.e., as prices) or indirectly (i.e., derived from prices); and
|
|
|
Level 3 - inputs for the asset or liability that are not
based on observable market data (unobservable inputs).
|
The following table summarizes the
fair value by level at March 31, 2016 and December 31, 2015 for assets and
liabilities measured at fair value on a recurring basis:
|
March 31, 2016
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Cash
|
$
|
2,016,463
|
|
$
|
-
|
|
$
|
-
|
|
$
|
2,016,463
|
|
|
Derivative Instruments
|
$
|
837,751
|
|
$
|
-
|
|
$
|
-
|
|
$
|
837,751
|
|
|
December 31, 2015
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Cash
|
$
|
396,878
|
|
$
|
-
|
|
$
|
-
|
|
$
|
396,878
|
|
9
WHITE MOUNTAIN TITANIUM CORPORATION
|
Notes to Condensed Consolidated Interim Financial
Statements
|
Three months ended March 31, 2016
|
(Unaudited -
Expressed in US dollars)
|
3.
|
FINANCIAL INSTRUMENTS AND RISKS
(continued)
|
|
|
|
|
(b)
|
Credit risk:
|
|
|
|
|
|
Credit risk is the risk that a counterparty to a
financial instrument will fail to discharge its contractual
obligations.
|
|
|
|
|
|
The Company mitigates credit risk by maintaining its cash
with high credit quality US, Chilean and Chinese financial
institutions.
|
|
|
|
|
(c)
|
Liquidity risk:
|
|
|
|
|
|
Liquidity risk is the risk that the Company will
encounter difficulty in satisfying financial obligations as they become
due. The Company manages its liquidity risk by forecasting cash flows
required for operations and anticipated investing and financing
activities. The Companys cash at March 31, 2016 and December 31, 2015
totaled $2,016,463 and $396,878, respectively. At March 31, 2016 and
December 31, 2015, the Company had accounts payable and accrued
liabilities of $405,423, and $135,354, respectively, all of which fall due
in the next fiscal quarter. The Company has a Convertible Note for
principal amount of $2,000,000 which is due on March 16, 2018.
|
|
|
|
|
(d)
|
Market risk:
|
|
|
|
|
|
Market risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate due to changes in
market prices. Market risk comprises three types of risk: interest rate
risk, foreign currency risk and other price
risk.
|
|
(a)
|
To the extent that payments made or received on the
Companys monetary assets and liabilities are affected by changes in the
prevailing market interest rates, the Company is exposed to interest rate
cash flow risk. The Companys Convertible Note is not exposed to interest
rate cash flow risk as it bears a fixed interest rate.
|
|
|
|
|
(b)
|
To the extent that changes in prevailing market interest
rates differ from the interest rate in the Companys monetary assets and
liabilities, the Company is exposed to interest rate price
risk.
|
The Companys cash consists of cash
held in bank accounts. Due to the short-term nature of this financial
instrument, fluctuations in market interest rates do not have a significant
impact on estimated fair values and on cash flows associated with the interest
income.
|
(ii)
|
Foreign currency risk
|
|
|
|
|
|
The Company is exposed to foreign currency risk to the
extent expenditures incurred or funds received and balances maintained by
the Company are denominated in currencies other than the US dollar
(primarily Chilean pesos (CLP), Chinese yuan (RMB), and Hong
Kong dollars (HKD)). As at March 31, 2016, the Company has
net monetary liabilities of $43,401 (December 31, 2015 - net monetary
liabilities of $44,693) denominated in CLP, net monetary assets of $4,584
(December 31, 2015 - $7,678) denominated in HKD, and net monetary assets
of $75,765 (December 31, 2015 - $152,095) denominated in RMB.
|
10
WHITE MOUNTAIN TITANIUM CORPORATION
|
Notes to Condensed Consolidated Interim Financial
Statements
|
Three months ended March 31, 2016
|
(Unaudited -
Expressed in US dollars)
|
3.
|
FINANCIAL INSTRUMENTS AND RISKS
(continued)
|
|
|
As at March 31, 2016, the Companys sensitivity analysis
suggests that a change in the absolute rate of exchange in CLP, RMB and
HKD by 10% will not have a material effect on the Companys business,
financial condition and results of operations, and a change in the
absolute rate of exchange in CLP by 6% will also not have a material
impact.
|
|
|
|
|
|
The Company has not entered into any foreign currency
contracts to mitigate this risk.
|
|
|
|
|
(iii)
|
Other price risk
|
|
|
|
|
|
Other price risk is the risk that the fair value or
future cash flows of a financial instrument will fluctuate due to changes
in market prices, other than those arising from interest rate risk or
foreign currency risk. The Company is not exposed to other price
risk.
|
4.
|
PROPERTY AND EQUIPMENT
|
|
|
|
|
|
|
March 31, 2016
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
Cost
|
|
|
Amortization
|
|
|
Net
|
|
|
Land held for future
development
|
$
|
146,636
|
|
$
|
-
|
|
$
|
146,636
|
|
|
Vehicles
|
|
129,439
|
|
|
121,183
|
|
|
8,256
|
|
|
Office furniture and fixtures
|
|
175,048
|
|
|
89,202
|
|
|
85,846
|
|
|
Office equipment
|
|
33,574
|
|
|
23,955
|
|
|
9,619
|
|
|
Computer equipment
|
|
7,553
|
|
|
7,553
|
|
|
-
|
|
|
Computer software
|
|
68,995
|
|
|
68,995
|
|
|
-
|
|
|
Field equipment
|
|
154,150
|
|
|
135,654
|
|
|
18,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
715,395
|
|
$
|
446,542
|
|
$
|
268,853
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
Cost
|
|
|
Amortization
|
|
|
Net
|
|
|
Land held for future
development
|
$
|
146,636
|
|
$
|
-
|
|
$
|
146,636
|
|
|
Vehicles
|
|
129,439
|
|
|
117,590
|
|
|
11,849
|
|
|
Office furniture and fixtures
|
|
175,048
|
|
|
81,779
|
|
|
93,269
|
|
|
Office equipment
|
|
33,574
|
|
|
22,818
|
|
|
10,756
|
|
|
Computer equipment
|
|
7,553
|
|
|
7,553
|
|
|
-
|
|
|
Computer software
|
|
68,995
|
|
|
68,995
|
|
|
-
|
|
|
Field equipment
|
|
154,150
|
|
|
130,244
|
|
|
23,906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
715,395
|
|
$
|
428,979
|
|
$
|
286,416
|
|
11
WHITE MOUNTAIN TITANIUM CORPORATION
|
Notes to Condensed Consolidated Interim Financial
Statements
|
Three months ended March 31, 2016
|
(Unaudited -
Expressed in US dollars)
|
5.
|
MINERAL PROPERTIES
Cerro Blanco
|
|
|
|
On September 5, 2003, the Company, through its
wholly-owned Chilean subsidiary, White Mountain Chile, entered into a
purchase agreement with Compañía Contractual Mineral Ojos del Salado
(Ojos del Salado), a wholly-owned Chilean subsidiary of Phelps Dodge
Corporation, to acquire a 100% interest in nine exploration mining
concessions, collectively known as Cerro Blanco. Cerro Blanco is located
in Region III of northern Chile, approximately 39 kilometers, or 24 miles,
west of the city of Vallenar. Consideration for the purchase, including
legal fees, was $651,950
|
|
|
|
The purchase agreement covering Cerro Blanco was
originally entered into between Ojos del Salado and Dorado Mineral
Resources NL (Dorado) on March 17, 2000. Under that agreement, Dorado
purchased the mining exploitation concessions from Ojos del Salado for
$1,000,000, of which $350,000 was paid. A first mortgage and prohibitions
against entering into other contracts regarding mining concessions without
the prior written consent of Ojos del Salado had also been established in
favor of Ojos del Salado. On September 5, 2003, White Mountain Chile
assumed Dorados obligations under the purchase agreement, including the
mortgage and prohibitions, with payment terms as described
above.
|
|
|
|
La Martina
|
|
|
|
As a result of regional exploration carried out in
January 2013, a new rutile prospect named La Martina has been discovered
and staked in the Atacama, or Region III, geographic region of northern
Chile. La Martina, which is located approximately 45 kilometres southwest
of the city of Vallenar and 17 kilometres southwest of the Cerro Blanco
project, consists of six registered exploration concessions. Concession
fees and other costs incurred in staking the property have been
expensed.
|
|
|
|
Ownership in mineral properties involves certain inherent
risks due to the difficulties of determining the validity of certain
claims as well as the potential for problems arising from the frequently
ambiguous conveyance history characteristic of mineral properties. The
Company has investigated ownership of its mineral properties, and to the
best of its knowledge, ownership of its interests is in good standing. At
present, the Company has determined that it has no material asset
retirement obligations (AROs).
|
12
WHITE MOUNTAIN TITANIUM CORPORATION
|
Notes to Condensed Consolidated Interim Financial
Statements
|
Three months ended March 31, 2016
|
(Unaudited -
Expressed in US dollars)
|
5.
|
MINERAL PROPERTIES
(continued)
|
La Martina
(continued)
Exploration expenditures incurred by
the Company during the three months ended March 31, 2016 and 2015 were as
follows:
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Concession fees
|
$
|
71,913
|
|
|
65,344
|
|
|
Environmental
|
|
-
|
|
|
243,144
|
|
|
Equipment rental
|
|
2,025
|
|
|
3,860
|
|
|
Geological consulting fees
|
|
16,352
|
|
|
5,039
|
|
|
Site costs
|
|
145,499
|
|
|
133,037
|
|
|
Transportation
|
|
1,002
|
|
|
11,246
|
|
|
|
|
|
|
|
|
|
|
Exploration expenditures for period
|
$
|
236,791
|
|
$
|
461,670
|
|
6.
|
NOTES PAYABLE
|
|
|
|
On March 16, 2016, the Company and its wholly-owned
subsidiary Sociedad Contractual Minera White Mountain Titanium Corporation
entered into a loan agreement and issued a 7% Senior Convertible
Promissory Note to the lender for a total of $2,000,000 (the Convertible
Note).
|
|
|
|
The Convertible Note has a maturity date of March 16,
2018 and bears simple interest of 7% per annum on the unpaid principal
amount until the principal amount is repaid in full.
|
|
|
|
The Convertible Note is convertible into shares of the
Companys Series A Preferred Stock (Series A Shares) at the rate of
$0.12 per share, par value of $0.001 per share. The Series A Shares have
the same voting rights as Common Stockholders and are convertible into
Common Stock at conversion price of $0.12 per share. The Convertible Note
will automatically convert into Series A Preferred Stock if the Company
successfully raises an additional $8,000,000, the proceeds of which are
allocated for certain qualified milestones relating to the Cerro Blanco
project, or if the Company secures a water off-take agreement for its
proposed desalination plant with volume and price components that are
mutually satisfactory to both the Company and the lender. In addition, the
Company issued to the lender 100 shares of Series A Preferred Stock with a
$0.001 par value and warrants to purchase 8,333,333 shares of Common Stock
at price of $0.30 per share until March 16, 2019. An amount of $12 was
recognized for the preferred share issuance which has been recognized as a
derivative liability.
|
|
|
|
In the event of default, the interest rate increases to
25% per annum. Subject to certain exceptions, the Convertible Note is
senior to any other indebtedness of the Company.
|
|
|
|
The fair value of the liability component was determined
using present value of expected cash-flows. The conversion component of
the note was classified as a derivative liability. The estimated fair
value of the derivative liability component was valued using the
Black-Scholes option model using the following assumptions: volatility of
145.14%, expected term of 2 years, discount rate of 1.13% and dividend
yield of 0%. The warrants were classified as equity and were recorded as
additional paid in capital at their estimated fair value using the
Black-Scholes option model using the following assumptions: volatility of
131.93%, expected term of 3 years, discount rate of 1.13% and dividend
yield of 0%
|
13
WHITE MOUNTAIN TITANIUM CORPORATION
|
Notes to Condensed Consolidated Interim Financial
Statements
|
Three months ended March 31, 2016
|
(Unaudited -
Expressed in US dollars)
|
6.
|
NOTES PAYABLE
(continued)
|
|
|
|
Based on the valuation of the instruments, the
proportionate allocation of fair values of the Convertible Note on initial
recognition was allocated to the debt component as $748,591, the
derivative liability component as $845,809 and the warrants component as
$405,600.
|
|
|
|
The derivative component was further revalued at March
31, 2016 resulting in a gain on derivative liability of $8,070 and an
ending balance of $837,751. The derivative liability component was
revalued using the following assumptions: volatility of 145.14%, expected
term of 1.96 years, discount rate of 1.13% and dividend yield of
0%.
|
|
|
|
$18,442 of accretion expense was recognized using the
effective interest rate during the three months ended March 31, 2016. The
debt component as at March 31, 2016 is $767,033.
|
|
|
7.
|
CAPITAL STOCK
|
|
|
|
(a) Common stock
|
|
|
|
During the three months ended March 31, 2016, no common
stock was issued.
|
|
|
|
(b) Preferred stock
|
|
|
|
During the period ended March 31, 2016, the Company
designated 19,000,100 shares of Series A preferred stock with a par value
of $0.001 per share. Each share of preferred stock was convertible into
one common share at any time at the holders option, at a conversion of
$0.12 per share subject to the adjustments to the conversion ratio. The
adjustment to the conversion price of these preferred shares is based on
the lowest of the share price of any common shares issued, the exercise
price of any options granted or re-priced, or any preferred shares issued
after the issuance of these preferred shares.
|
|
|
|
The preferred stock was unlisted, non-retractable and
non-redeemable. The preferred stockholders were entitled to the number of
votes equal to the number of whole shares of common stock into which the
preferred stock are convertible. The preferred stockholders were further
entitled to the same dividends and distributions as the common
stockholders.
|
|
|
|
In connection with the issuance of the Convertible Note
(
Note 6
) 100 shares of Series A Preferred Stock, $0.001 par value, were
issued to the note holder.
|
|
|
|
(c) Stock options
|
|
|
|
The Company has a stock option plan, adopted in 2005, and
a stock option/stock issuance plan, adopted in 2010, which has been
replaced by a stock incentive plan adopted in June 2015 (individually, the
2005 Plan, the 2010 Plan, and the 2015 Plan, respectively, and,
collectively, the Plans). Under the Plans, the Company is authorized to
grant options to executive officers and directors, employees and
consultants of the Company. The 2005 Plan was originally authorized to
grant 3,140,000 shares, and the 2015 Plan was originally authorized to
issue 4,641,040 shares, which amount is increased at the end of each year
to represent 10% of the total number of shares of Common Stock outstanding
on the last trading day in December of the immediately preceding calendar
year, less 3,949,500 shares. Effective January 1, 2016, the 2015 Plan
authorized shares automatically increased to 5,661,944 shares. The terms
of any stock options granted under the 2005 Plan may not exceed five years
and the exercise price of any stock option granted may not be discounted
below the maximum discount permitted under the policies of the Toronto
Stock Exchange. The terms of any stock options granted under the 2015 Plan
may not exceed ten years and the exercise price of any stock option plan
is fixed by the plan administrator.
|
14
WHITE MOUNTAIN TITANIUM CORPORATION
|
Notes to Condensed Consolidated Interim Financial
Statements
|
Three months ended March 31, 2016
|
(Unaudited -
Expressed in US dollars)
|
7.
|
CAPITAL STOCK
(continued)
|
|
|
|
(c) Stock options (continued)
|
|
|
|
The Company originally also adopted a management
compensation pool for the benefit of officers, directors and employees of
the Company. The pool consists of 1% of the outstanding shares at the end
of each year. The shares granted under the compensation pool program are
issued under the 2015 Plan.
|
|
|
|
The following table represents service-based stock option
activity during the three months ended March 31, 2016 and the year ended
December 31, 2015:
|
|
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
|
|
|
Number of
|
|
|
Weighted Average
|
|
|
Number of
|
|
|
Weighted Average
|
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding - beginning of
period
|
|
1,375,000
|
|
$
|
0.45
|
|
|
1,225,000
|
|
$
|
0.55
|
|
|
Granted
|
|
-
|
|
$
|
-
|
|
|
300,000
|
|
$
|
0.45
|
|
|
Expired /Cancelled
|
|
-
|
|
$
|
-
|
|
|
(150,000
|
)
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding and exercisable end of period
|
|
1,375,000
|
|
$
|
0.45
|
|
|
1,375,000
|
|
$
|
0.45
|
|
As at March 31, 2016 and December 31,
2015, the following stock options were outstanding:
|
|
|
Exercise
|
|
|
March
31,
|
|
|
December 31,
|
|
|
Expiry Date
|
|
Price
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2, 2017
|
$
|
0.45
|
|
|
375,000
|
|
|
375,000
|
|
|
December 31, 2017
|
$
|
0.45
|
|
|
1,000,000
|
|
|
1,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,375,000
|
|
|
1,375,000
|
|
The shares under option at March 31,
2016 had an intrinsic value of $nil (December 31, 2015 - $nil) and a weighted
average remaining contractual life of 1.75 (December 31, 2015 - 3) years.
(d) Stock-based compensation
During the three months ended March 31,
2016, $8,972 (2015 - $48,919) was recognized as stock-based compensation for
amortization of shares of common stock issuable upon the market performance of
the Companys stock. The remaining unamortized balance of $120,036 (2015 -
$129,008) will be amortized through July 2019.
15
WHITE MOUNTAIN TITANIUM CORPORATION
|
Notes to Condensed Consolidated Interim Financial
Statements
|
Three months ended March 31, 2016
|
(Unaudited -
Expressed in US dollars)
|
7.
|
CAPITAL STOCK
(continued)
|
|
|
|
(e) Warrants
|
|
|
|
On March 16, 2016, the Company issued warrants to
purchase 8,333,333 shares of Common Stock, in connection with the
Convertible Note (
Note 6
). Each whole warrant is exercisable at
$0.30 per share until March 16, 2019.
|
|
|
|
Stock purchase warrant activity for the period ended
March 31, 2016 and the year ended December 31, 2015 is as
follows:
|
|
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
Number
|
|
|
Average
|
|
|
Number
|
|
|
Average
|
|
|
|
|
of
Warrants
|
|
|
Exercise Price
|
|
|
of
Warrants
|
|
|
Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding - beginning of year
|
|
35,362,585
|
|
$
|
0.34
|
|
|
21,487,585
|
|
$
|
0.55
|
|
|
Issued
|
|
8,333,333
|
|
|
0.30
|
|
|
13,875,000
|
|
|
0.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding - end
of year
|
|
43,695,918
|
|
$
|
0.33
|
|
|
35,362,585
|
|
$
|
0.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at March 31, 2016 and December 31,
2015, the following warrants were outstanding:
|
|
|
|
|
|
March 16,
|
|
|
December 31,
|
|
|
Expiry Date
|
|
Exercise Price
|
|
|
2016
|
|
|
2015
|
|
|
April 30, 2016
|
$
|
0.30
|
|
|
1,770,328
|
|
|
1,770,328
|
|
|
April 30, 2016
|
$
|
0.30
|
|
|
910,534
|
|
|
910,534
|
|
|
April 30, 2016
|
$
|
0.30
|
|
|
2,367,437
|
|
|
2,367,437
|
|
|
December 31, 2017
|
$
|
0.30
|
|
|
5,714,286
|
|
|
5,714,286
|
|
|
December 31, 2017
|
$
|
0.65
|
|
|
600,000
|
|
|
600,000
|
|
|
December 31, 2018
|
$
|
0.35
|
|
|
4,500,000
|
|
|
4,500,000
|
|
|
December 31, 2018
|
$
|
0.35
|
|
|
5,625,000
|
|
|
5,625,000
|
|
|
December 31, 2018
|
$
|
0.35
|
|
|
13,875,000
|
|
|
13,875,000
|
|
|
March 16, 2019
|
$
|
0.30
|
|
|
8,333,333
|
|
|
-
|
|
|
|
|
|
|
|
43,695,918
|
|
|
35,362,585
|
|
8.
|
LOSS PER SHARE
|
|
|
|
Potentially dilutive securities not included in diluted
weighted average shares outstanding include shares underlying 1,375,000 in
outstanding options and 43,695,918 in outstanding
warrants.
|
16
WHITE MOUNTAIN TITANIUM CORPORATION
|
Notes to Condensed Consolidated Interim Financial
Statements
|
Three months ended March 31, 2016
|
(Unaudited -
Expressed in US dollars)
|
9.
|
COMMITMENTS
|
|
|
|
The Company entered into a lease agreement for office
premises in China that commenced July 1, 2014 and expires June 30, 2021.
The total lease payment pursuant to the agreement is $584,018, of which
the remaining balance at March 31, 2016 is $396,297. If the Company
terminates the lease prior to the end of the lease term, a deposit of
$14,000 will not be returned.
|
|
|
|
The Companys lease payments for office premises in China
for the next five years are as follows:
|
|
|
|
|
2016
|
$
|
62,573
|
|
2017
|
|
83,431
|
|
2018
|
|
83,431
|
|
2019
|
|
83,431
|
|
2020
|
|
83,431
|
|
|
$
|
396,297
|
|
10.
|
SUBSEQUENT EVENTS
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On April 30, 2016, warrants to purchase up to 5,048,299
shares of common stock of the Company at $0.30 per share
expired.
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17
Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
Managements Discussion and Analysis of Financial Condition
and Results of Operations analyze the major elements of our balance sheets and
statements of operations. This section should be read in conjunction with our
Annual Report on Form 10-K for the year ended December 31, 2015, and our
unaudited interim consolidated condensed financial statements for the three
months ended March 31, 2016 and accompanying notes to these financial statements
(financial statements).
Forward Looking Statements
The statements contained in this report that are not historical
facts are forward-looking statements that represent managements beliefs and
assumptions based on currently available information. Forward-looking statements
include the information concerning our possible or assumed future results of
operations, business strategies, need for financing, competitive position,
potential growth opportunities, potential operating performance improvements,
ability to retain and recruit personnel, the effects of competition and the
effects of future legislation or regulations. Forward-looking statements include
all statements that are not historical facts and can be identified by the use of
forward-looking terminology such as the words believes, intends, may,
should, anticipates, expects, could, plans, or comparable terminology
or by discussions of strategy or trends. Although we believe that the
expectations reflected in such forward-looking statements are reasonable, we
cannot give any assurances that these expectations will prove to be correct.
Such statements by their nature involve risks and uncertainties that could
significantly affect expected results, and actual future results could differ
materially from those described in such forward-looking statements.
Among the factors that could cause actual future results to
differ materially are the risks and uncertainties discussed in this report.
While it is not possible to identify all factors, we continue to face many risks
and uncertainties including, but not limited to, continued access to financing
prior to completion of the EIS, the cyclicality of the titanium dioxide
industry, global economic and political conditions, global productive capacity,
customer inventory levels, changes in product pricing, changes in product
costing, changes in foreign currency exchange rates, competitive technology
positions and operating interruptions (including, but not limited to, labor
disputes, leaks, fires, explosions, unscheduled downtime, transportation
interruptions, war and terrorist activities). Mining operations are subject to a
variety of existing laws and regulations relating to exploration and
development, permitting procedures, safety precautions, property reclamation,
employee health and safety, air and water quality standards, pollution and other
environmental protection controls, all of which are subject to change and are
becoming more stringent and costly to comply with. Should one or more of these
risks materialize (or the consequences of such a development worsen), or should
the underlying assumptions prove incorrect, actual results could differ
materially from those expected. We disclaim any intention or obligation to
update publicly or revise such statements whether as a result of new
information, future events or otherwise.
There may also be other risks and uncertainties that we are
unable to predict at this time or that we do not now expect to have a material
adverse impact on our business.
Overview
We are a mineral exploration company engaged in the search for
mineral deposits or reserves which could be economically and legally extracted
or recovered. We hold mining concessions covering two rutile properties located
in the Atacama region (Region III) of northern Chile, namely Cerro Blanco and
the La Martina.
We were incorporated in the State of Nevada on April 24, 1998.
We have six wholly owned subsidiaries: SCM White Mountain Titanium, a Chilean
stock company which holds our Chilean mining concessions for our Cerro Blanco
project and conducts our principal exploration operations on that property;
White Mountain Metals SpA, a Chilean stock company; White Mountain Minerals SpA,
which holds our Chilean mining concessions for our La Martina project and
conducts our principal exploration operations on that property; White Mountain
Energy Ltda., an inactive Chilean company; White Mountain Titanium (Hong Kong),
a Hong Kong corporation; and Cerro Blanco Titanium Corporation Limited
(Shenzhen), a Chinese corporation.
18
Our principal business is to explore for and develop natural
rutile deposits on our mining concessions. Our principal objectives are to
advance the Cerro Blanco project towards a final engineering feasibility, to
secure off-take agreements for the planned rutile concentrate output, and to
secure funding or other arrangements to place the project into production, if
warranted. It would be the intention to sell the rutile concentrate to titanium
metal and pigment producers. In addition, we continue to research into the
recovery of feldspar, which if successful would provide another potential income
stream from the sale of feldspar to the glass and ceramics industries.
During the current year, we will look to advance our Cerro Blanco Project on several related fronts. Firstly engineering activities will be ramped up to satisfy the requirements of a full feasibility study. Secondly additional drilling will be carried out at Cerro Blanco, not only to increase the overall resource base, but to identify areas of high grade rutile mineralization which would provide quality process plant feed in the early years of production. Thirdly, we, working with Nexo, will seek to obtain off-take agreements for industrial water, which can be made available for sale, from our desalination plant. To that end discussions have already taken place with a number of interested parties whose water requirements could be met by our water project. Whilst the production of industrial water is an integral part of the mining project, sales of surplus water to parties in the Huasco Valley could represent another potential income stream for the project.
Our common stock is currently traded in the over-the-counter
market and is quoted on the OTCQB Markets. Upon meeting listing requirements, it
is our intention to graduate to a more senior exchange in due course.
We have produced no revenues, have experienced losses since
inception, have no revenue producing operations, and currently rely upon the
sale of our securities to fund our exploration activities on our mining
properties.
Cerro Blanco
We are progressing in various stages of development on our
Cerro Blanco project, which is our principal project. We have identified nine
natural rutile prospects designated as the Las Carolinas, La Cantera, Eli,
Chascones, Hororios Creek, Hippo Ear, Quartz Creek, Algodon and Bono prospects.
The last five of these have only recently been located. We presently hold 58
registered mining exploration concessions and three exploration concessions over an
area of approximately 14,791 hectares.
La Martina
La Martina consists of six registered exploration concessions,
covering an area of 1,288 hectares, comparable in size to the area covering the
current nine known prospects at Cerro Blanco. Alteration and mineralization at
La Martina is similar to that observed on the Cerro Blanco property.
Off-Take Agreements
We currently have two definitive off-take agreements in place:
-
During 2011, we entered into our first off-take agreement with a major
international pigment producer where that producer will purchase 25,000 tonnes
per annum of our standard grade, natural rutile concentrate at $1,200 per
tonne FOB port. Although deliveries did not commence by September, 2014, the
contract remains in place. The term of the agreement may be extended by mutual
agreement.
-
On September 27, 2012, we entered into a second off-take agreement with a
major international pigment producer for the supply of natural rutile
concentrate from the Cerro Blanco project. Under the agreement, the pigment
producer has agreed to purchase 10,000 tonnes per annum of our standard grade
rutile concentrate at $1,250 per tonne FOB port. The three-year term, which
commences upon the production of 5,000 tons of product from the Cerro Blanco
project, may be extended by mutual agreement.
These two contracts were still in force at March 31, 2016.
Major Developments
19
Since December 31, 2015, we had the following major
developments:
-
On January 15, 2016, the Board of Directors of the Company approved holding
of the 2016 Annual Shareholders Meeting on April 20, 2016 at the Companys
principle executive offices. The record date for the Annual meeting was set to
March 15, 2016. The Annual Shareholders Meeting date later was postponed to
July 8, 2016 and the new record date is May 31, 2016.
-
Effective March 2, 2016, Mr. Wei Lu resigned as a director of the Board.
Mr. Lu served on the Audit Committee, the Compensation Committee, and the
Nomination Committee.
-
Effective March 3, 2016 Mr. Howard Crosby resigned as a director of the
Board. Mr. Crosby served on the Compensation Committee, and as a Chairman of
the Nominating Committee.
-
Effective March 4, 2016, Mr. Kin Wong resigned as Chief Executive Officer
of the Company, but continued to serve as a non-executive Chairman of the
Board until the Annual Shareholders Meeting. Mr. Mike Kurtanjek would serve
as interim Chief Executive Officer until the Annual Shareholders Meeting.
-
Effective March 4, the Board appointed Mr. Bobby E. Cooper and Mr. Andrew
Sloop to fill in the vacancies created by the resignations of Messrs. Lu and
Crosby.
-
On March 11, 2016, we changed the record date for the Annual meeting from
March 15, 2016 to March 18, 2016.
-
On March 16, 2016, under the terms of the Loan Agreement dated and entered
into on March 16, 2016 (the
Nexo Loan Agreement
) with Nexo WMTM
Holdings, LLC (
Nexo
), we completed a debt funding for a total of
$2,000,000, which was evidenced by a 7% Senior Convertible Promissory Note
(the
Nexo
Note
). The Nexo Note is convertible into shares of
our Series A Preferred Stock at a rate of $0.12 per share. Under the terms of
the Nexo Loan Agreement, we designated 19,000,100 shares of Series A preferred
stock with a par value of $0.001 per share, of which 100 shares were issued
at the date the Nexo Loan Agreement was executed. Each share of preferred
stock is convertible into one common share at a conversion rate of $0.12 per
share, subject to adjustments to the conversion ratio. We also issued
three-year warrants to purchase up to 8,333,333 common shares of the Company
at $0.30 per share (the
Nexo
Warrants
). Finally, under the
terms of the Nexo Loan Agreement, we entered into an Assignment of Development
Rights with Nexo Water Ventures, LLC (
Nexo Water
), an affiliate of
Nexo, relating to the proposed desalination plant to be constructed in
connection with our Cerro Blanco mining project in Chile (the
Development
Assignment Agreement
).
-
On March 16, 2016, in connection with the signing of the Nexo Loan
Agreement, the Board approved amendments to the Company's Bylaws to implement
the voting rights of the Series A Preferred Stock.
-
On April 3, 2016, Mr. Bobby Cooper resigned as a director of the Board. At the meeting of the Board of Directors held on April 4, 2016, Mr. Kevin Stulp was elected as a director of the Board to fill the vacancy created by the resignation of Mr. Cooper and Andrew Sloop was appointed as the nonexecutive Chairman of the Board of Directors of the Company. Also at the meeting of the Board of Directors held on April 4, 2016, the Board completed its reconstitution of the nominating and compensation committees.
Results of Operations
We recorded a net loss of $736,992 for the three months ended
March 31, 2016 ($0.01 per weighted average common share outstanding) compared to
a net loss of $1,182,514 ($0.01 per share) for the comparative interim period in
2015.
Compared to the three months ended March 31, 2015, our
operation expenses for the current quarter decreased from $1.2 million to $0.7
million due to the changes in the following items:
-
Advertising and promotion expense decreased from $92,689 to $11,903.
During the first quarter of 2015, we engaged a marketing and consulting firm
to increase potential investors awareness of the Company. No such activity
for the same period this year.
20
-
Consulting fees directors and officers decreased 29% from $199,500 to
$140,750 due to management pay cut. The fees will be further reduced in future
period as we are going to pay a management fee to one officer.
-
Traveling expense decreased 67% from $66,090 to $22,091 as a result of less
management travelling activities during the current quarter.
-
Bank charge and interest expense increased from $4,208 to $22,268 due to
the interest accreted to the Convertible Note. Excluding the interest
accretion expense, there was no significant changes in bank charge and
interest expense during the period compared to the same period in 2015.
Exploration expense is still the largest single expense item in
our operation. It decreased by half from $461,670 to $236,791 as we reduced
geological works after we received the approval of the EIS. Most of the expense
reduction was related to the EIS.
Due to the cash constrains, there was no spending on research
and development during the three months ended March 31, 2016.
Loss before other items for the current three-month period was
$741,335, as compared to $1,178,188 for the comparative period in 2015.
Gain on derivative liability of $8,070 comprises of a change in
value of the conversion component of the notes payable.
Liquidity and Cash Flows
As of March 31, 2016, we had a working capital of $1,760,578
(December 31, 2015: $460,651), including $2,016,463 of cash (December 31, 2015:
$396,878).
Cash used in operating activities was $380,415 for the three
months ended March 31, 2016, compared to $964,981 for the comparative interim
period in 2015. We had no investing activities for the three months ended March
31, 2016 (2015: $59).
We raised $2,000,000 from financing activities during the
current three-month period by issuing a Convertible Note. During the three
months ended March 31, 2015, we raised $350,000 from issuing Common Stock. The
proceeds received will be used to support our operating activities during the
year.
We anticipate that we will need to raise additional funds of
$1,500,000 to $2,000,000 to fulfill our commitments stipulated in the EIS as
well as finance the necessary corporate general and administrative expenses in
2016. If we are able to raise additional $8,000,000, we will complete work
necessary for the Bankable Feasibility Study (the
BFS
). For 2016, we
prepared a flexible annual operating budget open to adjustment depending on our
ability to raise capital and the overall Titanium Dioxide market conditions.