Silver Bull Resources, Inc 10-Q for FY2023 Q2
Silver Bull Resources, Inc. (SVBL)
About this 10-Q
Silver Bull Resources, Inc filed this 10-Q on June 14, 2023, covering the quarter ended April 30, 2023 (FY2023 Q2).
Headline figures
Quarter ended April 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $477.8K
- compared with a net loss of $2.55M a year earlier
- Diluted EPS
- -$0.01
- compared with -$0.07 a year earlier
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED |
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO _________. |
Commission File Number:
(Exact name of registrant as specified in its charter)
| State or other jurisdiction of incorporation or organization | (I.R.S. Employer Identification No.) |
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area
code:
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐
No
As of June 13, 2023, there were
SILVER BULL RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
TABLE OF CONTENTS
Page
| PART I – FINANCIAL INFORMATION | 3 |
| ITEM 1. FINANCIAL STATEMENTS. | 3 |
| ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. | 19 |
| ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. | 26 |
| ITEM 4. CONTROLS AND PROCEDURES. | 26 |
| PART II – OTHER INFORMATION | 26 |
| ITEM 1. LEGAL PROCEEDINGS. | 26 |
| ITEM 1A. RISK FACTORS. | 26 |
| ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. | 26 |
| ITEM 3. DEFAULTS UPON SENIOR SECURITIES. | 26 |
| ITEM 4. MINE SAFETY DISCLOSURES. | 26 |
| ITEM 5. OTHER INFORMATION. | 26 |
| ITEM 6. EXHIBITS. | 27 |
| SIGNATURES | 28 |
[The balance of this page has been intentionally left blank.]
| 2 |
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
SILVER BULL RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
April 30, 2023 |
October 31, 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents (Note 13) | $ | $ | ||||||
| Other receivables | ||||||||
| Prepaid expenses and deposits | ||||||||
| Due from related party (Note 5) | ||||||||
| Total Current Assets | ||||||||
| Value-added tax receivable, net of allowance for uncollectible taxes of $ | ||||||||
| Office and mining equipment, net (Note 7) | ||||||||
| Property concessions (Note 8) | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities and expenses | ||||||||
| Income tax payable | ||||||||
| Loan payable (Note 9) | ||||||||
| Total Current Liabilities | ||||||||
| Loan payable (Note 9) | ||||||||
| TOTAL LIABILITIES | $ | $ | ||||||
| COMMITMENTS AND CONTINGENCIES (Note 14) | ||||||||
| STOCKHOLDERS’ EQUITY (Notes 4, 10, 11 and 12) | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Other comprehensive income | ||||||||
| Total Stockholders’ Equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
| 3 |
SILVER BULL RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)
Three Months Ended April 30, | Six Months Ended April 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| REVENUES | $ | $ | $ | $ | ||||||||||||
| EXPLORATION AND PROPERTY HOLDING COSTS | ||||||||||||||||
| Exploration and property holding costs | ||||||||||||||||
| Depreciation (Note 7) | ||||||||||||||||
| Concessions impairment (Note 8) | ||||||||||||||||
| Goodwill impairment | ||||||||||||||||
| TOTAL EXPLORATION AND PROPERTY HOLDING COSTS | ||||||||||||||||
| GENERAL AND ADMINISTRATIVE EXPENSES | ||||||||||||||||
| Personnel | ||||||||||||||||
| Office and administrative | ||||||||||||||||
| Professional services | ||||||||||||||||
| Directors’ fees | ||||||||||||||||
| Provision for uncollectible value-added taxes (Note 6) | ||||||||||||||||
| TOTAL GENERAL AND ADMINISTRATIVE EXPENSES | ||||||||||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER EXPENSES | ||||||||||||||||
| Interest income | ||||||||||||||||
| Foreign currency transaction loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other costs (Note 13) | ( | ) | ( | ) | ||||||||||||
| TOTAL OTHER EXPENSES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| LOSS BEFORE INCOME TAXES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| INCOME TAX RECOVERY (EXPENSE) | ( | ) | ( | ) | ( | ) | ||||||||||
| NET AND COMPREHENSIVE LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
| 4 |
SILVER BULL RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)
| Common Stock | ||||||||||||||||||||||||
| Number of Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Other Comprehensive Income | Total Equity | |||||||||||||||||||
| Six months ended April 30, 2023 | ||||||||||||||||||||||||
| Balance, October 31, 2022 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Issuance of common stock as follows: | ||||||||||||||||||||||||
| - For compensation at $ | — | — | ||||||||||||||||||||||
| Stock option activity as follows: | ||||||||||||||||||||||||
| - Stock-based compensation for options issued to directors, officers, employees, and advisors (Note 11) | — | — | — | — | ||||||||||||||||||||
| Net loss for the six-month period ended April 30, 2023 | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||
| Balance, April 30, 2023 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Common Stock | |||||||||||||||||||||||
| Number of Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Other Comprehensive Income | Total Equity | |||||||||||||||||||
| Three months ended April 30, 2023 | ||||||||||||||||||||||||
| Balance, January 31, 2023 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Issuance of common stock as follows: | ||||||||||||||||||||||||
- For compensation at $ | — | — | ||||||||||||||||||||||
| Stock option activity as follows: | ||||||||||||||||||||||||
| - Stock-based compensation (recovery) for options issued to directors, officers, employees, and advisors (Note 11) | — | — | ( | ) | — | — | ( | ) | ||||||||||||||||
| Net loss for the three-month period ended April 30, 2023 | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance, April 30, 2023 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
| 5 |
SILVER BULL RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONTINUED) (Unaudited)
| Common Stock | ||||||||||||||||||||||||
| Number of Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Other Comprehensive Income | Total Stockholders’ Equity | |||||||||||||||||||
| Six months ended April 30, 2022 | ||||||||||||||||||||||||
| Balance, October 31, 2021 | $ | $ | ( | ) | $ | $ | ||||||||||||||||||
| Issuance of common stock as follows: | ||||||||||||||||||||||||
| - For compensation at $ | — | — | ||||||||||||||||||||||
| Stock option activity as follows: | ||||||||||||||||||||||||
| - Stock-based compensation for options issued to directors, officers, employees, and advisors (Note 11) | — | — | — | — | ||||||||||||||||||||
| Net loss for the six-month period ended April 30, 2022 | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||
| Balance, April 30, 2022 | $ | $ | ( | ) | $ | $ | ||||||||||||||||||
| Common Stock | ||||||||||||||||||||||||
| Number of Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Other Comprehensive Income | Total Stockholders’ Equity | |||||||||||||||||||
| Three months ended April 30, 2022 | ||||||||||||||||||||||||
| Balance, January 31, 2022 | $ | $ | ( | ) | $ | $ | ||||||||||||||||||
| Issuance of common stock as follows: | ||||||||||||||||||||||||
| - For compensation at $ | — | — | ||||||||||||||||||||||
| Stock option activity as follows: | ||||||||||||||||||||||||
| Stock option activity as follows: | ||||||||||||||||||||||||
| - Stock-based compensation for options issued to directors, officers, employees, and advisors (Note 11) | — | — | — | — | ||||||||||||||||||||
| Net loss for the three-month period ended April 30, 2022 | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance, April 30, 2022 | $ | $ | ( | ) | $ | $ | ||||||||||||||||||
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
| 6 |
SILVER BULL RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended April 30, | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used by operating activities: | ||||||||
| Depreciation | ||||||||
| Concessions impairment (Note 8) | ||||||||
| Goodwill impairment | ||||||||
| Provision for uncollectible value-added taxes | ||||||||
| Foreign currency transaction (income) loss | ( | ) | ||||||
| Stock options issued for compensation (Note 11) | ||||||||
| Shares of common stock issued for services (Note 10) | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Value-added tax receivable | ( | ) | ( | ) | ||||
| Other receivables | ( | ) | ( | ) | ||||
| Prepaid expenses and deposits | ||||||||
| Accounts payable | ( | ) | ||||||
| Accrued liabilities and expenses | ( | ) | ||||||
| Due to related party (Note 5) | ||||||||
| Income tax payable | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITY: | ||||||||
| Proceeds from sale of investments | ||||||||
| Net cash provided by investing activity | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITY: | ||||||||
| Net cash provided by financing activity | ||||||||
| Effect of exchange rates on cash and cash equivalents | ( | ) | ||||||
| Net decrease in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents beginning of period | ||||||||
| Cash and cash equivalents end of period | $ | $ | ||||||
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
| 7 |
SILVER BULL RESOURCES, INC.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
Six Months Ended April 30, | ||||||||
| 2023 | 2022 | |||||||
| SUPPLEMENTAL CASH FLOW DISCLOSURES: | ||||||||
| Income taxes paid | $ | $ | ||||||
| Interest paid | $ | |||||||
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
| 8 |
NOTE 1 – ORGANIZATION, DESCRIPTION OF BUSINESS AND GOING CONCERN
Silver Bull Resources, Inc. (the “Company”) was incorporated in the State of Nevada on November 8, 1993 as the Cadgie Company for the purpose of acquiring and developing mineral properties. The Cadgie Company was a spin-off from its predecessor, Precious Metal Mines, Inc. On June 28, 1996, the Company’s name was changed to Metalline Mining Company. On April 21, 2011, the Company’s name was changed to Silver Bull Resources, Inc. The Company’s fiscal year-end is October 31. The Company has not realized any revenues from its planned operations and is considered an exploration stage company. The Company has not established any reserves with respect to its exploration projects and is not expected to enter into the development stage with respect to any of its projects.
The Company has been engaged in the business of mineral exploration. The Company currently owns a number of property concessions located in Coahuila, Mexico (collectively known as the “Sierra Mojada Property”). The Company conducts its operations in Mexico through its wholly-owned subsidiary corporations, Minera Metalin S.A. de C.V. (“Minera Metalin”) and Minas de Coahuila SBR S.A. de C.V. (“Minas”).
On April 16, 2010, Metalline Mining Delaware, Inc., a wholly-owned subsidiary of the Company incorporated in the State of Delaware, was merged with and into Dome Ventures Corporation (“Dome”), a Delaware corporation. As a result, Dome became a wholly-owned subsidiary of the Company. Dome has a wholly-owned subsidiary Dome Asia Inc., which is incorporated in the British Virgin Islands.
On April 23, 2023, Nomad Minerals Ltd. (“Nomad Minerals"), a wholly-owned subsidiary of the Company, was incorporated in British Columbia, Canada. On April 28, 2023, Nomad Metals Limited was incorporated at Astana International Financial Centre in Astana, Republic of Kazakhstan, as a wholly-owned subsidiary of Nomad Minerals.
The Company’s efforts and expenditures have been concentrated on the exploration of properties, principally in the Sierra Mojada Property located in Coahuila, Mexico (the “Sierra Mojada Project”). The Company has not determined whether its exploration properties contain ore reserves that are economically recoverable. The ultimate realization of the Company’s investment in exploration properties is dependent upon the success of future property sales, the existence of economically recoverable reserves, and the ability of the Company to obtain financing or make other arrangements for exploration, development, and future profitable production activities. The ultimate realization of the Company’s investment in exploration properties cannot be determined at this time.
Illegal Blockade of Sierra Mojada Property
The Company’s efforts and expenditures have been concentrated on the exploration of properties, principally with respect to the Sierra Mojada Property located in Coahuila, Mexico.
On June 1, 2018, the Company and its subsidiaries
Minera Metalin and Contratistas de Sierra Mojada S.A. de C.V. entered into an earn-in option agreement (the “South32 Option Agreement”)
with South32 International Investment Holdings Pty Ltd (“South32”), a wholly-owned subsidiary of South32 Limited (ASX/JSE/LSE:
S32), whereby South32 was able to obtain an option to purchase
On October 11, 2019, the Company and its subsidiary Minera Metalin issued a notice of force majeure to South32 pursuant to the South32 Option Agreement. Due to an illegal blockade by a cooperative of local miners called Sociedad Cooperativa de Exploración Minera Mineros Norteños, S.C.L. (“Mineros Norteños”), the Company halted all work on the Sierra Mojada Property. The notice of force majeure was issued because the Company and its subsidiary Minera Metalin was unable to perform their obligations under the South32 Option Agreement due to the blockade. Pursuant to the South32 Option Agreement, any time period provided for in the South32 Option Agreement was to be generally extended by a period equal to the period of delay caused by the event of force majeure.
On August 31, 2022, due to the ongoing blockade of the site, the South32 Option Agreement was mutually terminated by South32 and the Company.
| 9 |
No portion of the equity value of the Company
has been classified as temporary equity as the South32 Option has no intrinsic value. South32 paid $
As of June 13, 2023, the blockade by Mineros Norteños at, on and around the Sierra Mojada Property is ongoing, and the Company remains unable to access the Sierra Mojada Property.
On March 2, 2023, the Company filed a Notice of Intent with Mexico’s Directorate General of Foreign Investment to initiate a legacy NAFTA claim under Annex 14-C of the United States-Mexico-Canada Agreement to recover economic damages resulting from the illegal blockade of the Sierra Mojada Property by Mineros Norteños (“NAFTA Notice of Intent”). The Company has been unable to access the project since the illegal blockade commenced in September 2019. Despite numerous demands and requests for action by the Company, Mexican governmental agencies have allowed this unlawful behaviour to continue and, as such, failed to protect the Company’s investment.
On or before June 30, 2023, the Company intends to file the request for arbitration (the “Request”) in the legacy NAFTA claim at the International Centre for Settlement of Investment Dispute (the “ICSID”).
Arras Minerals Corp. Spin-Off
On August 12, 2020, the Company entered
into an option agreement (the “Beskauga Option Agreement”) with Copperbelt AG, a corporation existing under the laws of Switzerland
(“Copperbelt Parent”), and Dostyk LLP, an entity existing under the laws of Kazakhstan and a wholly-owned subsidiary of Copperbelt
(the “Copperbelt Sub,” and together with Copperbelt Parent, “Copperbelt”), pursuant to which the Company has the
exclusive right and option to acquire Copperbelt’s right, title and
On February 5, 2021, Arras
Minerals Corp. (“Arras”) was incorporated in British Columbia, Canada, as a wholly-owned subsidiary of the Company. On March
19, 2021, pursuant to an asset purchase agreement with Arras, the Company transferred its right, title and interest in and to the Beskauga
Option Agreement, among other things, to Arras in exchange for
In December 2021 and June 2022, the
Company sold
Exploration Stage
The Company has established the existence of mineral resources for the Sierra Mojada Project. The Company has not established proven or probable reserves, as defined by the United States Securities and the U.S. Securities and Exchange Commission (the “SEC”) subpart 1300 of Regulation S-K (“S-K 1300”), through the completion of a “final” or “bankable” feasibility study for Sierra Mojada Project. Furthermore, the Company has no plans to establish proven or probable reserves for Sierra Mojada Project. As a result, and despite the fact that the Company commenced extraction of mineral resources at the Sierra Mojada Property, the Company remains an exploration stage company, as defined by the SEC.
Beginning with the Company’s annual report on Form 10-K for the year ended October 31, 2022, the Company reports its mineral resources in accordance with S-K 1300.
Going Concern
Since its inception in November 1993, the Company has yet to generated revenue and has incurred an accumulated deficit
of $
| 10 |
These interim condensed consolidated financial statements have been prepared on a going concern basis and do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary in the event the Company can no longer continue as a going concern. Such adjustments could be material.
NOTE 2 – BASIS OF PRESENTATION
The Company’s interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and applicable rules of the SEC regarding interim reporting. All intercompany transactions and balances have been eliminated during consolidation. Certain information and note disclosures typically included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The consolidated balance sheet at October 31, 2022 was derived from the audited consolidated financial statements. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended October 31, 2022.
All figures are in United States dollars unless otherwise noted.
The interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements. In the opinion of management, the interim condensed consolidated financial statements furnished herein include all adjustments, all of which are of a routine recurring nature, necessary for a fair statement of the results for the interim periods presented. Uncertainties with respect to estimates and assumptions are inherent in the preparation of the Company’s interim condensed consolidated financial statements. Accordingly, operating results for the six months ended April 30, 2023, are not necessarily indicative of the results that may be expected for the fiscal year ending October 31, 2023, or any future period.
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies are defined in the Company’s Annual Report on Form 10-K for the year ended October 31, 2022 filed with the SEC on January 26, 2023.
Other recent accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) (including its Emerging Issues Task Force) and the SEC did not or are not expected to have a significant impact on the Company’s present or future consolidated financial statements.
NOTE 4 – NET LOSS PER SHARE
The Company had stock options and warrants
outstanding at April 30, 2023 and 2022 that upon exercise were issuable into
NOTE 5 – DUE FROM RELATED PARTY
As of April 30, 2023, due from related party
consists of $
NOTE 6 – VALUE-ADDED TAX RECEIVABLE
Value-added tax (“VAT”)
receivable relates to VAT paid in Mexico. The Company estimates a net VAT of $
A summary of the changes in the allowance for uncollectible VAT for the six months ended April 30, 2023 is as follows:
| Allowance for uncollectible VAT – October 31, 2022 | $ | |||
| Provision for VAT receivable allowance | ||||
| Foreign currency translation adjustment | ||||
| Allowance for uncollectible VAT – April 30, 2023 | $ |
NOTE 7 – OFFICE AND MINING EQUIPMENT
The following is a summary of the Company’s office and mining equipment at April 30, 2023 and October 31, 2022, respectively:
| April 30, | October 31, | |||||||
| 2023 | 2022 | |||||||
| Mining equipment | $ | $ | ||||||
| Vehicles | ||||||||
| Buildings and structures | ||||||||
| Computer equipment and software | ||||||||
| Well equipment | ||||||||
| Office equipment | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Office and mining equipment, net | $ | $ | ||||||
| 11 |
NOTE 8 – PROPERTY CONCESSIONS
The following is a summary of the Company’s property concessions for the Sierra Mojada Property as at April 30, 2023 and October 31, 2022:
| Property concessions – October 31, 2022 | $ | ||||
| Impairment | ( | ) | |||
| Property concessions – April 30, 2023 | $ |
During the
six months ended April 30, 2023, the Company decided to withdraw certain concessions’ applications in Sierra Mojada, Mexico. As
a result, the Company no longer has the right to these property concessions and the value in use is $. Accordingly, the Company has
written off the capitalized property concession balance related to these concessions of $
If the blockade at Sierra Mojada Property continues, further impairment of property concessions is possible.
NOTE 9 – LOAN PAYABLE
In June 2020, the Company received $
In January 2021, the
Company received an additional $
The balance of the CEBA loan is fully repayable on or before the end of the Extended Term, if not repaid on or before the end of the Initial Term. The Company anticipates repaying the CEBA loan prior to the Initial Term date. An income will be recognized in the period when the CEBA loan is forgiven.
| Loan payable – October 31, 2022 | $ | |||
| Foreign currency translation adjustment | ||||
| Loan payable – April 30, 2023 | $ |
NOTE 10 – COMMON STOCK
On March 9, 2023, the Company issued
On February 17, 2022, the Company issued
NOTE 11 – STOCK OPTIONS
The Company has one stock option plan under which
equity securities are authorized for issuance to officers, directors, employees and advisors: the 2019 Stock Option and Stock Bonus Plan
(the “2019 Plan”). The 2019 Plan was amended on April 19, 2022 (the “Amended 2019 Plan”). Under the Amended 2019
Plan,
Options are typically granted with an exercise price
equal to the closing market price of the Company’s stock at the date of grant, have a graded vesting schedule over
During the six months period ended April 30, 2023,
the Company granted options to acquire
A summary of the range of assumptions used to value stock options granted for the six months ended April 30, 2023 and 2022 are as follows:
Six Months Ended April 30, | ||||||||
| Options | 2023 | 2022 | ||||||
| Expected volatility | ||||||||
| Risk-free interest rate | ||||||||
| Dividend yield | ||||||||
| Expected term (in years) | ||||||||
| 12 |
No options were exercised during the six months ended April 30, 2023.
During the six months period ended April 30,
2022, the Company granted options to acquire
No options were exercised during the six months ended April 30, 2022.
The following is a summary of stock option activity for the six months ended April 30, 2023:
| Options | Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding at October 31, 2022 | $ | $ | |||||||||||||||
| Granted | |||||||||||||||||
| Cancelled | ( | ) | |||||||||||||||
| Expired | ( | ) | |||||||||||||||
| Outstanding at April 30, 2023 | |||||||||||||||||
| Exercisable at April 30, 2023 | $ | $ | |||||||||||||||
The Company recognized stock-based compensation costs
for stock options of $
Summarized information about stock options outstanding and exercisable at April 30, 2023 is as follows:
| Options Outstanding | Options Exercisable | |||||||||||||||||||||
| Exercise Price | Number Outstanding | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | |||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
NOTE 12 – WARRANTS
A summary of warrant activity for the six months ended April 30, 2023 is as follows:
| Warrants | Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | Aggregate Intrinsic Value | ||||||||||||
| Outstanding and exercisable at October 31, 2022 | $ | $ | ||||||||||||||
| Outstanding and exercisable at April 30, 2023* | ||||||||||||||||
*
| 13 |
No warrants were issued or exercised during the six months ended April 30, 2023 or 2022.
Summarized information about warrants outstanding and exercisable at April 30, 2023 is as follows:
| Warrants Outstanding and Exercisable | ||||||||||||||
| Exercise Price | Number Outstanding | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | |||||||||||
| $ | $ | |||||||||||||
NOTE 13 – FINANCIAL INSTRUMENTS
Fair Value Measurements
All financial assets and financial liabilities are recorded at fair value on initial recognition. Transaction costs are expensed when incurred, unless they are directly attributable to the acquisition of financial assets or the assumption of liabilities carried at amortized cost, in which case the transaction costs adjust the carrying amount.
The three levels of the fair value hierarchy are as follows:
| Level 1 | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; | |
| Level 2 | Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and | |
| Level 3 | Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). |
Under fair value accounting, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s financial instruments consist of cash and cash equivalents, accounts payable, due from related party and loan payable.
The carrying amounts of cash and cash equivalents, accounts payable and due from related party approximate fair value at April 30, 2023 and October 31, 2022 due to the short maturities of these financial instruments. Loan payable is classified as Level 2 in the fair value hierarchy.
Credit Risk
Credit risk is the risk that the counterparty to a financial instrument will cause a financial loss for the Company by failing to discharge its obligations. To mitigate exposure to credit risk on financial assets, the Company has established policies to ensure the liquidity of funds and ensure that counterparties demonstrate acceptable levels of creditworthiness.
The Company maintains its U.S. dollar and Canadian
dollar cash and cash equivalents in bank and demand deposit accounts with major financial institutions with high credit standings. Cash
deposits held in Canada are insured by the Canada Deposit Insurance Corporation (“CDIC”) for up to $CDN
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In February 2023, a cash balance of $
As at April 30, 2023 and October 31, 2022,
cash and cash equivalents consist of guaranteed investment certificates of $
Liquidity Risk
Liquidity risk is the risk that the Company
will encounter difficulty in satisfying its financial obligations as they become due. The Company manages its liquidity risk by forecasting
cash flows from operations and anticipating investing and financing activities. As at April 30, 2023, the Company had working capital
deficiency of $
Accounts payable and accrued liabilities are non-interest-bearing and are typically settled on 30-day terms.
Interest Rate Risk
The Company holds substantially all of its
cash and cash equivalents in bank and demand deposit accounts with major financial institutions. The interest rates received on these
balances may fluctuate with changes in economic conditions. Based on the average cash and cash equivalent balances during the six months
ended April 30, 2023, a
Foreign Currency Exchange Risk
Certain purchases of labor, operating supplies and capital assets are denominated in $CDN, $MXN or other currencies. As a result, currency exchange fluctuations may impact the costs of the Company’s operations. Specifically, the appreciation of the $MXN or $CDN against the U.S. dollar may result in an increase in operating expenses and capital costs in U.S. dollar terms. The Company currently does not engage in any currency hedging activities.
NOTE 14 – COMMITMENTS AND CONTINGENCIES
Compliance with Environmental Regulations
The Company’s exploration activities are subject to laws and regulations controlling not only the exploration and mining of mineral properties but also the effect of such activities on the environment. Compliance with such laws and regulations may necessitate additional capital outlays or affect the economics of a project, and cause changes or delays in the Company’s activities.
Property Concessions in Mexico
To properly maintain property concessions in Mexico, the Company is required to pay a semi-annual fee to the Mexican government and complete annual assessment work.
Royalty
The Company has agreed to pay a
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Litigation and Claims
Mineros Norteños Case
On
May 20, 2014, Mineros Norteños filed an action in the Local First Civil Court in the District of Morelos, State of Chihuahua,
Mexico, against the Company’s subsidiary, Minera Metalin, claiming that Minera Metalin breached an agreement regarding the development
of the Sierra Mojada Property. Mineros Norteños sought payment of the Royalty, including interest at a rate of
Legacy investment claim under the North American Free Trade Agreement (“NAFTA”)
On March 2, 2023, the Company filed a Notice of Intent with Mexico’s Directorate General of Foreign Investment to initiate a legacy NAFTA claim under Annex 14-C of the United States-Mexico-Canada Agreement to recover economic damages resulting from the illegal blockade of the Sierra Mojada Property by Mineros Norteños (Note 1). On May 30, 2023, the Company attended a meeting with Mexican government officials in Mexico City, no settlement had been reached and the Request in the legacy NAFTA claim will be filed with the ICSID on or before June 30, 2023.
The Company has engaged Boies Schiller Flexner
(UK) LLP as its legal advisers on the legacy NAFTA claim. To support the legacy NAFTA claim, the Company engaged an arbitration consultant,
who, upon a successful arbitration ruling, is to receive an arbitration fee amounting to
Valdez Case
On February 15,
2016, Messrs. Jaime Valdez Farias and Maria Asuncion Perez Alonso (collectively, “Valdez”) filed an action before the
Local First Civil Court of Torreon, State of Coahuila, Mexico, against the Company’s subsidiary, Minera Metalin, claiming that Minera
Metalin had breached an agreement regarding the development of the Sierra Mojada Property. Valdez sought payment in the amount of $
From time to time, the Company is involved in other disputes, claims, proceedings and legal actions arising in the ordinary course of business. The Company intends to vigorously defend all claims against the Company and pursue its full legal rights in cases where the Company has been harmed. Although the ultimate outcome of these proceedings cannot be accurately predicted due to the inherent uncertainty of litigation, in the opinion of management, based upon current information, no other currently pending or overtly threatened proceeding is expected to have a material adverse effect on the Company’s business, financial condition or results of operations.
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NOTE 15 – SEGMENT INFORMATION
The Company operates in a single reportable segment: the exploration of mineral property interests. The Company has mineral property interests in Sierra Mojada, Mexico.
Geographic information is approximately as follows:
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| April 30, | April 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Mexico | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
| Canada | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Loss | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
The following table details the allocation of assets included in the accompanying balance sheet at April 30, 2023:
| Canada | Mexico | Total | ||||||||||
| Cash and cash equivalents | $ | $ | — | $ | ||||||||
| Other receivables | ||||||||||||
| Prepaid expenses and deposits | ||||||||||||
| Due from related party | ||||||||||||
| Value-added tax receivable, net | ||||||||||||
| Office and mining equipment, net | ||||||||||||
| Property concessions | ||||||||||||
| $ | $ | $ | ||||||||||
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The following table details the allocation of assets included in the accompanying balance sheet at October 31, 2022:
| Canada | Mexico | Total | ||||||||||
| Cash and cash equivalents | $ | $ | $ | |||||||||
| Value-added tax receivable, net | ||||||||||||
| Other receivables | ||||||||||||
| Prepaid expenses and deposits | ||||||||||||
| Due from related party | ||||||||||||
| Office and mining equipment, net | ||||||||||||
| Property concessions | ||||||||||||
| $ | $ | $ | ||||||||||
The Company has significant assets in Coahuila, Mexico. Although Mexico is generally considered economically stable, unanticipated events in Mexico, such as the blockade, can, and may in the future, disrupt the Company’s operations. The Mexican government does not require foreign entities to maintain cash reserves in Mexico.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
When using the terms “Silver Bull,” or the “Company,” management is referring to Silver Bull Resources, Inc. and its subsidiaries, unless the context otherwise requires. Management has included technical terms important to an understanding of the Company’s business under “Glossary of Common Terms” in its Annual Report on Form 10-K for the fiscal year ended October 31, 2022.
Cautionary Statement Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes certain statements that may be deemed to be “forward-looking statements” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”), the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the U.S. Private Securities Litigation Reform Act of 1995, and “forward-looking information” within the meaning of applicable Canadian securities legislation. Management uses words such as “anticipate,” “continue,” “likely,” “estimate,” “expect,” “may,” “will,” “projection,” “should,” “believe,” “potential,” “could,” or similar words suggesting future outcomes (including negative and grammatical variations) to identify forward-looking statements. Forward-looking statements include statements the Company makes regarding:
- The sufficiency of the Company’s existing cash resources to enable it to continue operations for the next 12 months as a going concern;
- The prospects of a claim process, or award, under NAFTA;
- Prospects of entering the development or production stage with respect to any of the Company’s projects;
- Plans at the Sierra Mojada Project in 2023 and beyond;
- Whether any part of the Sierra Mojada Project will ever be confirmed or converted into “proven or probable mineral reserves” as defined under Item 1300 of Regulation S-K;
- The requirement of additional power supplies for the Sierra Mojada Project if a mining operation is determined to be feasible;
- The Company’s ability to obtain and hold additional concessions in the Sierra Mojada Project areas;
- Whether the Company will be required to obtain additional surface rights if a mining operation is determined to be feasible;
- The possible impact on the Company’s operations of the blockade by a cooperative of miners on the Sierra Mojada Property;
- The potential acquisition of additional mineral properties or property concessions;
- Testing of the impact of the fine bubble flotation test work on the recovery of minerals and initial rough concentrate grade;
- The impact of recent accounting pronouncements on financial position, results of operations or cash flows and disclosures;
- The impact of changes to current state or federal laws and regulations on estimated capital expenditures, the economics of a particular project and/or activities;
- The ability to raise additional capital and/or pursue additional strategic options, and the potential impact on the business, financial condition and results of operations of doing so or not;
- The impact of changing foreign currency exchange rates on the Company’s financial condition;
- The impairment of concessions and likelihood of further impairment of other long-lived assets;
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- Whether using major financial institutions with high credit ratings mitigates credit risk;
- The impact of changing economic conditions on interest rates;
- Expectations regarding future recovery of value-added taxes (“VAT”) paid in Mexico; and
- The merits of any claims in connection with, and the expected timing of any, ongoing legal proceedings.
These statements are based on certain assumptions and analyses made by us in light of management’s experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, and the actual results could differ from those expressed or implied in these forward-looking statements as a result of the factors described under “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2022, including without limitation, risks associated with the following:
- The ability to obtain additional financial resources on acceptable terms to (i) fund the Company’s legacy NAFTA claim (ii) maintain its property concessions in Mexico and (iii) maintain general and administrative expenditures at acceptable levels;
- The ability to acquire additional mineral properties or property concessions;
- The ability of the Company to maintain its assets in Mexico given the performance of the Mexican government at various levels, including those described in PART II, ITEM 1A RISK FACTORS;
- Worldwide economic and political events affecting (i) the market prices for silver, zinc, lead, copper and other minerals that may be found on the Company’s exploration properties (ii) interest rates and (iii) foreign currency exchange rates;
- The amount and nature of future capital and exploration expenditures;
- Volatility in the Company’s stock price;
- The inability to obtain required permits;
- Competitive factors, including exploration-related competition;
- Timing of receipt and maintenance of government approvals;
- Unanticipated title issues;
- Changes in tax laws;
- Changes in regulatory frameworks or regulations affecting our activities;
- The ability to retain key management, consultants and experts necessary to successfully operate and grow the business; and
- Political and economic instability in Mexico and other countries in which the Company conducts its business, and future potential actions of the governments in such countries with respect to nationalization of natural resources or other changes in mining or taxation policies.
These factors are not intended to represent a complete list of the general or specific factors that could affect the Company.
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All forward-looking statements speak only as of the date made. All subsequent written and oral forward-looking statements attributable to the Company, or persons acting on its behalf, are expressly qualified in their entirety by the cautionary statements. Except as required by law, management undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. Readers should not place undue reliance on these forward-looking statements.
Cautionary Note Regarding Exploration Stage Companies
Silver Bull is an exploration stage company and does not currently have any known reserves and cannot be expected to have reserves unless and until a feasibility study is completed for the Sierra Mojada concessions that shows proven and probable reserves. There can be no assurance that these concessions contain proven and probable reserves, and investors may lose their entire investment. See the sections titled “Risk Factors” in this Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended October 31, 2022.
Business Overview
Silver Bull, incorporated in Nevada, is an exploration stage company, engaged in the business of mineral exploration, and its primary objective is to define sufficient mineral reserves on the Sierra Mojada Property to justify the development of a mechanized mining operation. The Company conducts its operations in Mexico through its wholly-owned Mexican subsidiaries, Minera Metalin S.A. de C.V. (“Minera Metalin”) and Minas de Coahuila SBR S.A. de C.V. On August 26, 2021, the wholly-owned Mexican subsidiary, Contratistas de Sierra Mojada S.A. de C.V. merged with and into Minera Metalin. As noted above, the Company has not established any reserves at the Sierra Mojada Property, and it is in the exploration stage, and may never enter the development or production stage.
On August 12, 2020, the Company entered into an option agreement (the “Beskauga Option Agreement”) with Copperbelt AG, a corporation existing under the laws of Switzerland (“Copperbelt Parent”), and Dostyk LLP, an entity existing under the laws of Kazakhstan and a wholly-owned subsidiary of Copperbelt Parent (the “Copperbelt Sub,” and together with Copperbelt Parent, “Copperbelt”), pursuant to which it had the exclusive right and option (the “Beskauga Option”) to acquire Copperbelt’s right, title and 100% interest in the Beskauga property located in Kazakhstan (the “Beskauga Property”), which consists of the Beskauga Main project (the “Beskauga Main Project”) and the Beskauga South project (the “Beskauga South Project,” and together the Beskauga Main Project, the “Beskauga Project”). The transaction contemplated by the Beskauga Option Agreement closed on January 26, 2021.
On February 5, 2021, Arras Minerals Corp. (“Arras”) was incorporated in British Columbia, Canada, as a wholly-owned subsidiary of Silver Bull. On March 19, 2021, pursuant to an asset purchase agreement with Arras, the Company transferred its right, title and interest in and to the Beskauga Option Agreement, among other things, to Arras in exchange for 36,000,000 common shares of Arras. On September 24, 2021, Silver Bull distributed to its shareholders one Arras common share for each Silver Bull share held by such shareholders, or 34,547,838 Arras common shares in total (the “Distribution”), and Arras became a stand-alone company. Upon completion of the distribution, the Company retained 1,452,162 Arras common shares as a strategic investment, and Arras became a stand-alone company.
In December 2021 and June 2022, the Company sold 600,000 and 852,262 common shares of Arras at a price of $CDN 1.00 and $CDN 1.50 per shares, respectively. The Company has no interest in Arras as of April 30, 2023.
On April 23, 2023, Nomad Minerals Ltd. (“Nomad Minerals"), a wholly-owned subsidiary of the Company was incorporated in British Columbia, Canada. On April 28, 2023, Nomad Metals Limited was incorporated at Astana International Financial Centre in Astana, Republic of Kazakhstan, as a wholly-owned subsidiary of Nomad Minerals.
Silver Bull’s principal office is located at 777 Dunsmuir Street, Suite 1605 Vancouver, BC, Canada V7Y 1K4, and the telephone number is 604-687-5800.
Recent Developments
Commencement of the Legacy NAFTA Claim
On March 2, 2023, the Company filed the NAFTA Notice of Intent. The Company has been unable to access the project since the illegal blockade commenced in September 2019. Despite numerous demands and requests for action by the Company, Mexican governmental agencies have allowed this unlawful behaviour to continue and, as such, failed to protect the Company’s investment. Silver Bull will be seeking to recover no less than US$178 million in damages that it has suffered as a result of Mexico’s breach of its NAFTA obligations.
On May 30, 2023, the Company attended a meeting with Mexican government officials in Mexico City, no settlement had been reached and the Request in the legacy NAFTA claim will be filed with the ICSID on or before June 30, 2023.
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Properties Concessions and Outlook
Sierra Mojada Property
The focus of the Company for the remainder of the 2023 calendar year is to continue the legacy NAFTA claim process in relation to the blockade at the Sierra Mojada Property.
Management and Board Changes
On April 25, 2023, Mr. Darren Klinck ceased serving as a President of the Company. Mr. Tim Barry (the Company’s Chief Executive Officer) was appointed the Company’s President, replacing Mr. Klinck.
On March 2, 2023, Mr. William Matlack was appointed to the Board of Directors as an independent director. Mr. Matlack is a veteran geologist over a 20-year career in the mining industry, working primarily with Santa Fe Pacific Gold Corp. (now Newmont Mining) and Gold Fields. Mr. Matlack was involved in the exploration and development of several world-class gold discoveries in Nevada and California. Later, he was an equity research analyst in metals & mining with Citigroup and BMO Capital Markets, and an investment banker in metals & mining with Scarsdale Equities. From 2012 to 2018, he was interim CEO and a director of Klondex Mines Limited during its transformation from an explorer to gold producer in Nevada. Mr. Matlack has served as a director of Timberline Resources Corp. since October 2019.
Results of Operations
Three Months Ended April 30, 2023 and April 30, 2022
For the three months ended April 30, 2023, the Company had a net loss of $478,000, or approximately $0.01 per share, compared to a net loss of $2,548,000, or approximately $0.07 per share, during the comparable period last year. The $2,070,000 decrease in net loss was primarily due to a $2,075,000 decrease in exploration and property holding costs (which was significantly the result of the $2,058,000 goodwill impairment during the comparable period last year) which was partially offset by a $17,000 decrease in exploration and property costs compared to the comparable period last year as described below.
Exploration and Property Holding Costs
Exploration and property holding costs decreased $2,075,000 to $42,000 for the three months ended April 30, 2023, compared to $2,117,000 for the comparable period last year. This decrease was mainly the result of a $2,058,000 goodwill impairment in the comparable period last year which was partially offset by a $17,000 decrease in exploration and holding costs.
General and Administrative Expenses
The Company recorded general and administrative expenses of $421,000 for the three months ended April 30, 2023 as compared to $417,000 for the comparable period last year. The $4,000 increase was mainly the result of a $81,000 decrease in personnel costs, a $30,000 decrease in office and administrative costs, a $44,000 decrease in directors’ fees, which was offset by a $159,000 increase in professional services as described below.
Stock-based compensation was a factor in the fluctuations in general and administrative expenses. The Company recorded a $4,000 recovery of stock-based compensation as the result of the resignation of the Company’s President (as described in the “Management and Board Changes” section) included in general and administrative expenses for the three months ended April 30, 2023, compared to $191,000 for the comparable period last year as the result of stock options granted to our employees, directors and advisors in the three months ended April 30, 2022.
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Personnel costs decreased $81,000 to $107,000 for the three months ended April 30, 2023 as compared to $188,000 for the comparable period last year. This decrease was mainly due to a decrease in stock-based compensation expenses in the three months ended April 30, 2023 from $151,000 in the comparable period last year as a result of stock options vesting in the three months ended April 30, 2023 having a lower fair value than stock options vesting in the comparable period last year, which was partially offset by a $68,000 increase in employees’ bonus in the three months ended April 30, 2023..
Office and administrative costs decreased $30,000 to $66,000 for the three months ended April 30, 2023 as compared to $96,000 for the comparable period last year. This decrease was primarily due to decreased investor relations activities and insurance.
Professional fees increased $123,000 to $219,000 for the three months ended April 30, 2023 compared to $60,000 for the comparable period last year. This increase is mainly due to arbitration related costs incurred in relation to the legacy NAFTA claim (as described in the “Recent Developments” section).
Directors’ fees decreased $44,000 to $26,000 for the three months ended April 30, 2023 as compared to $70,000 for the comparable period last year. This decrease was primarily due to decrease in the stock-based compensation expense compared to the comparable period last year as a result of stock options vesting in the three months ended April 30, 2023 having a lower fair value than stock options vesting in the comparable period last year.
A provision for uncollectible VAT in the amount of $2,000 was recorded for the three months ended April 30, 2023, which was similar to the $3,000 in such costs for the comparable period last year. The allowance for uncollectible taxes was estimated by management based upon a number of factors, including the length of time the returns have been outstanding, responses received from tax authorities, general economic conditions in Mexico and estimated net recovery after commissions.
Other Expenses
Other expenses of $16,000 were incurred for the three months ended April 30, 2023 as compared to other expenses of $14,000 for the comparable period last year. The significant factor contributing to other expenses was $19,000 other costs related to the certain years’ VAT and corporate taxes disputes with Mexican tax authorities for the three months ended April 30, 2023. The significant factor contributing to other expenses for the comparable period last year was a $14,000 foreign currency transaction loss.
Six Months Ended April 30, 2023 and April 30, 2022
For the six months ended April 30, 2023, the Company had a net loss of $824,000, or approximately $0.02 per share, compared to a net loss of $2,878,000, or approximately $0.08 per share, during the comparable period last year. The $2,054,000 decrease in net loss was primarily due to a $2,058,000 goodwill impairment in exploration and property holding costs in the comparable period last year as described below.
Exploration and Property Holding Costs
Exploration and property holding costs decreased $2,053,000 to $178,000 for the six months ended April 30, 2023, compared to $2,231,000 for the comparable period last year. This decrease was mainly the result of a $2,058,000 goodwill impairment in the comparable period last year.
General and Administrative Expenses
The Company recorded general and administrative expenses of $633,000 for the six months ended April 30, 2023 as compared to $628,000 for the comparable period last year. The $5,000 increase was mainly the result of a $147,000 increase in professional services, which were partially offset by a $34,000 decrease in personnel costs, a $31,000 decrease in office and administrative costs and a $29,000 decrease in directors’ fees as described below.
Stock-based compensation was a factor in the fluctuations in general and administrative expenses. Overall stock-based compensation included in general and administrative expense decreased to $49,000 for the six months ended April 30, 2023 from $191,000 for the comparable period last year. This was mainly due to stock options granted to our employees, directors and advisors in the comparable period last year.
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Personnel costs decreased $84,000 to $196,000 for the six months ended April 30, 2023 as compared to $280,000 for the comparable period last year. This decrease was mainly due to a $110,000 decrease in stock-based compensation expenses in the six months ended April 30, 2023 from $143,000 in the comparable period last year as a result of stock options vesting in the six months ended April 30, 2022 having a higher fair value than stock options vesting in the comparable period last year, which were partially offset by a $25,000 increase in employees’ salaries and bonus.
Office and administrative costs decreased $31,000 to $100,000 for the six months ended April 30, 2023 as compared to $131,000 for the comparable period last year. This decrease was primarily due to decreased investor relations activities and insurance.
Professional fees increased $147,000 to $266,000 for the six months ended April 30, 2023 compared to $119,000 for the comparable period last year. This increase was mainly due to arbitration related costs incurred in relation to the legacy NAFTA claim (as described in the “Recent Developments” section).
Directors’ fees decreased $29,000 to $60,000 for the six months ended April 30, 2023 as compared to $89,000 for the comparable period last year. This decrease was primarily due to a $31,000 decrease the stock-based compensation expense to $17,000 in the six months ended April 30, 2023 from $48,000 in the comparable period last year as a result of stock options vesting in the six months ended April 30, 2023 having a lower fair value than stock options vesting in the comparable period last year.
The Company recorded a $10,000 provision for uncollectible VAT for the six months ended April 30, 2023 as compared to a $9,000 provision for uncollectible VAT in the comparable period last year. The allowance for uncollectible taxes was estimated by management based upon a number of factors, including the length of time the returns have been outstanding, responses received from tax authorities, general economic conditions in Mexico and estimated net recovery after commissions.
Other Expenses
Other expenses of $12,000 were incurred for the six months ended April 30, 2023 as compared to other expenses of $18,000 for the comparable period last year. The significant factor contributing to other expenses was $19,000 other costs related to the certain years’ VAT and corporate taxes disputes with Mexican tax authorities for the six months ended April 30, 2023, which was offset by a $13,000 interest income. The significant factor contributing to other expenses for the comparable period last year was a $18,000 foreign currency transaction loss.
Material Changes in Financial Condition; Liquidity and Capital Resources
Cash Flows
During the six months ended April 30, 2023, cash and cash equivalents were primarily utilized to fund general and administrative expenses and exploration activities at the Sierra Mojada Property. As a result of the exploration activities and general and administrative expenses, cash and cash equivalents decreased from $887,000 at October 31, 2022 to $498,000 at April 30, 2023.
Cash flows used in operating activities for the six months ended April 30, 2023 were $389,000, as compared to $569,000 for the comparable period in 2022. This decrease was mainly due to the timing of certain payments.
Cash flows provided by investing activities for the six months ended April 30, 2023 were $nil. Cash flows provided by investing activities for the six months ended April 30, 2022 were proceeds of $470,000 from the sale of 600,000 Arras common shares at a price of $CDN 1.00 per share.
Cash flows provided by financing activities for the six months ended April 30, 2023 and 2022 were $nil.
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Capital Resources
As of April 30, 2023, the Company had cash and cash equivalents of $498,000, as compared to cash and cash equivalents of $887,000 as of October 31, 2022. The decrease in liquidity and working capital were primarily the result of the exploration activities at the Sierra Mojada Property and general and administrative expenses.
Since the Company’s inception in November 1993, it has not generated revenue and has incurred an accumulated deficit of $138,218,000. Accordingly, Silver Bull has not generated cash flows from operations, and since inception has relied primarily upon proceeds from private placements and registered direct offerings of the Company’s equity securities, warrant exercises, sale of investments, and funding from South32 as the primary sources of financing to fund our operations. Based on the Company’s limited cash and cash equivalents, and history of losses, there is substantial doubt as to whether its existing cash resources are sufficient to enable it to continue operations for the next 12 months as a going concern. Management plans to pursue possible financing and strategic options, including, but not limited to, obtaining additional equity financing and the exercise of warrants by warrantholders. However, there is no assurance that the Company will be successful in pursuing these plans.
Any future additional financing in the near term will likely be in the form of the issuance of equity securities, which will result in dilution to Silver Bull’s existing shareholders. Moreover, the Company may incur significant fees and expenses in the pursuit of a financing or other strategic transaction, which will increase the rate at which its cash and cash equivalents are depleted.
Capital Requirements and Liquidity; Need for Additional Funding
The Company’s management and board of directors monitor overall costs, expenses, and financial resources and, if necessary, will adjust planned operational expenditures in an attempt to ensure that the Company has sufficient operating capital. Management continues to evaluate the Company’s costs and planned expenditures, including for the Sierra Mojada Property, as discussed below.
The aforementioned legacy NAFTA claim process will require the Company to incur significant expense and devote significant resources. Outcomes in legacy NAFTA claim and the process for recovering funds, even if there is a successful outcome in legacy NAFTA claim, can be lengthy and unpredictable. Furthermore, there is a risk that the Company will be unable to secure the necessary funding to advance its claim.
In January 2023, Silver Bull’s board of directors approved a calendar year 2023 budget of $0.3 million for the Sierra Mojada Property and $0.7 million for general and administrative expenses for calendar year 2022. The focus of the Company’s 2023 calendar year program at the Sierra Mojada Property is to maintain its property concessions in Mexico. As of May 31, 2023, the Company had approximately $0.35 million in cash and cash equivalents. To maintain the Sierra Mojada Property and the legacy NAFTA claim ultimately will require the Company to raise additional capital, identify other sources of funding or identify a strategic partner.
Management will continue to evaluate the Company’s ability to obtain additional financial resources, and will attempt to reduce or limit expenditures on the Sierra Mojada Property as well as general and administrative costs if determined that additional financial resources are unavailable or available on terms that management determine are unacceptable. However, it may not be possible to reduce costs, and even if management is successful in reducing costs, the Company still may not be able to continue operations for the next 12 months as a going concern. If the Company is unable to fund future operations by obtaining additional financial resources, including an equity offering or other strategic transaction, management do not expect to have sufficient available cash and cash equivalents to continue the Company’s operations for the next 12 months as a going concern.
Critical Accounting Policies
The critical accounting policies are defined in our Annual Report on Form 10-K for the year ended October 31, 2022 filed with the SEC on January 26, 2023.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force) and the SEC did not or are not expected to have a material impact on the Company’s present or future consolidated financial statements.
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| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
Not applicable.
| ITEM 4. | CONTROLS AND PROCEDURES. |
| (a) | Evaluation of Disclosure Controls and Procedures. |
Under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, management has carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of April 30, 2023. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective as of April 30, 2023.
The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed in its reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in its reports filed or submitted under the Exchange Act is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
| (b) | Changes in Internal Control over Financial Reporting |
During the quarter ended April 30, 2023, there have not been any changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II – OTHER INFORMATION
| ITEM 1. | LEGAL PROCEEDINGS. |
See Note 14 – Commitments and Contingencies to the Company’s financial statements (Part I, Item 1 of this Quarterly Report on Form 10-Q) for information regarding legal proceedings in which it is involved.
| ITEM 1A. | RISK FACTORS. |
The risk factor outlined below should be considered along with the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended October 31, 2022.
The Company has litigation risk with respect to its legacy NAFTA claim under the United States-Mexico-Canada Agreement and other possible proceedings.
The Company is currently, and may in the future become, subject to litigation, arbitration or proceedings with other parties. On March 2, 2023, the Company filed a Notice of Intent with Mexico’s Directorate General of Foreign Investment to initiate a legacy NAFTA claim under Annex 14-C of the United States-Mexico-Canada Agreement to recover economic damages resulting from the illegal blockade of the Sierra Mojada Project by Mineros Norteños. On or before June 30, 2023, the Company will file the Request in the legacy NAFTA claim with the ICSID. If decided adversely to us, these legal proceedings, or others that could be brought against the Company in the future, could have a material adverse effect on our financial position or prospects. While the Company believes its legacy NAFTA claim is valid, litigation matters are inherently uncertain and there is no guarantee that the Company will be successful in its assessment, or that the likely outcome of this matter will be consistent with the ultimate resolution of the matter. The legacy NAFTA claim process will require the Company to incur significant expense, devote significant resources, and may generate adverse publicity, which could materially, and possibly adversely, affect its business. The Company’s inability to enforce its rights and the enforcement of rights on a prejudicial basis by foreign courts or international arbitral tribunals could have an adverse effect on the Company’s outlook. Outcomes in the legacy NAFTA claim and the process for recovering funds even if there is a successful outcome in the legacy NAFTA claim can be lengthy and unpredictable. Furthermore, there is a risk that the Company will be unable to secure the necessary funding to advance its claim.
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. |
Recent Sales of Unregistered Securities
No sales of unregistered equity securities occurred during the period covered by this report.
Purchases of Equity Securities by the Company and Affiliated Purchasers
No purchases of equity securities were made by or on behalf of Silver Bull or any “affiliated purchaser” within the meaning of Rule 10b-18 under the Exchange Act during the period covered by this report.
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES. |
None.
| ITEM 4. | MINE SAFETY DISCLOSURES. |
Not applicable.
| ITEM 5. | OTHER INFORMATION. |
None
| 25 |
| ITEM 6. | EXHIBITS. |
| Incorporated by Reference | ||||||||||||||
| Exhibit Number | Exhibit Description | Form | Date | Exhibit | Filed/ Furnished Herewith | |||||||||
| 31.1 | Certification of CEO Pursuant to Exchange Act Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | ||||||||||||
| 31.2 | Certification of CFO Pursuant to Exchange Act Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | ||||||||||||
| 32.1 | Certification of CEO Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | XX | ||||||||||||
| 32.2 | Certification of CFO Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | XX | ||||||||||||
| 101.INS* | XBRL Instance Document | X | ||||||||||||
| 101.SCH* | XBRL Schema Document |
X
|
||||||||||||
| 101.CAL* | XBRL Calculation Linkbase Document | X | ||||||||||||
|
101.DEF* |
XBRL Definition Linkbase Document |
X |
||||||||||||
| 101.LAB* | XBRL Labels Linkbase Document | X | ||||||||||||
| 104 | The Cover Page Interactive Data File, formatted in Inline XBRL (included in Exhibit 101). | X | ||||||||||||
| X | Filed herewith | |||||||||||||
| XX | Furnished herewith | |||||||||||||
| + | Indicates a management contract or compensatory plan, contract or arrangement. | |||||||||||||
| * | The following financial information from Silver Bull Resources, Inc.’s Quarterly Report on Form 10-Q for the six months ended April 30, 2023, is formatted in XBRL (Extensible Business Reporting Language): Interim Condensed Consolidated Balance Sheets, Interim Condensed Consolidated Statements of Operations and Comprehensive Loss, Interim Condensed Consolidated Statements of Stockholders’ Equity, Interim Condensed Consolidated Statements of Cash Flows. | |||||||||||||
| 26 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| SILVER BULL RESOURCES, INC. | ||
| Dated: June 13, 2023 | By: | /s/ Timothy Barry |
| Timothy Barry | ||
| President and Chief Executive Officer | ||
|
(Principal Executive Officer)
| ||
| Dated: June 13, 2023 | By: | /s/ Christopher Richards |
| Christopher Richards | ||
| Chief Financial Officer | ||
| (Principal Financial Officer and Principal Accounting Officer) | ||
| 27 |
Exhibit 31.1
Certification
of CEO Pursuant to Exchange Act Rules 13a-14 and 15d-14,
as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Timothy Barry, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Silver Bull Resources, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Dated: June 13, 2023 | By: | /s/ Timothy Barry |
|
Timothy Barry, Chief Executive Officer (Principal Executive Officer) | ||
Exhibit 31.2
Certification
of CFO Pursuant to Exchange Act Rules 13a-14 and 15d-14,
as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Christopher Richards, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Silver Bull Resources, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Dated: June 13, 2023 | By: | /s/ Christopher Richards |
|
Christopher Richards, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | ||
Exhibit 32.1
CERTIFICATION OF CEO PURSUANT TO 18 U.S.C.
SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code), the undersigned officer of Silver Bull Resources, Inc. (the “Company”) does hereby certify with respect to the Quarterly Report of the Company on Form 10-Q for the quarterly period ended April 30, 2023 (the “Report”) that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: June 13, 2023 | By: | /s/ Timothy Barry | ||
|
Timothy Barry, Chief Executive Officer (Principal Executive Officer) | ||||
The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code). It shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 (15 U.S.C. Section 78r) or otherwise subject to the liability of that section. It shall also not be deemed incorporated by reference into any filing under the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, except to the extent that the Company specifically incorporates it by reference.
Exhibit 32.2
CERTIFICATION OF CFO PURSUANT TO 18 U.S.C.
SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code), the undersigned officer of Silver Bull Resources, Inc. (the “Company”) does hereby certify with respect to the Quarterly Report of the Company on Form 10-Q for the quarterly period ended April 30, 2023 (the “Report”) that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: June 13, 2023 | By: | /s/ Christopher Richards | ||
|
Christopher Richards, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | ||||
The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code). It shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 (15 U.S.C. Section 78r) or otherwise subject to the liability of that section. It shall also not be deemed incorporated by reference into any filing under the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, except to the extent that the Company specifically incorporates it by reference.