EXHIBIT 99.1
XTRA-GOLD RESOURCES CORP.
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022
(expressed in U.S. Dollars, except where noted)
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Xtra Gold Resources Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Xtra Gold Resources Corp. (the "Company") as of December 31, 2022, and the related consolidated statement of operations, stockholders' equity, and cash flows for the year then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
Substantial Doubt about the Company's Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company's uncertainty of gold recovery and the fact that the Company does not have a demonstrably viable business to provide future funds raises substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current year audit of the financial statement that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/S/
BF Borgers CPA PC
Served as auditor since 2022
March 30, 2023
(Expressed in U.S. Dollars)
| AS AT | December 31, 2022 |
December 31, 2021 |
December 31, 2020 |
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| ASSETS | |||||||||
| Current | |||||||||
| Cash and cash equivalents | $ | $ | $ | ||||||
| Investment in trading securities, at cost of $ |
|||||||||
| Receivables and other assets | |||||||||
| Inventory (Note 8) | |||||||||
| Total current assets | |||||||||
| Restricted cash (Note 7) | |||||||||
| Equipment, net (Note 5) | |||||||||
| Mineral properties (Note 6) | |||||||||
| TOTAL ASSETS | $ | $ | $ | ||||||
| LIABILITIES AND EQUITY | |||||||||
| Current | |||||||||
| Accounts payable and accrued liabilities | $ | $ | $ | ||||||
| Asset retirement obligation (Note 7) | |||||||||
| Total current liabilities | |||||||||
| Total liabilities | |||||||||
| Equity | |||||||||
| Capital stock (Note 9) | |||||||||
| Authorized - |
|||||||||
| Issued and outstanding | |||||||||
| Additional paid in capital | |||||||||
| Shares in treasury | ( |
) | ( |
) | ( |
) | |||
| Accumulated deficit | ( |
) | ( |
) | ( |
) | |||
| Total Xtra-Gold Resources Corp. stockholders' equity | |||||||||
| Non-controlling interest | ( |
) | ( |
) | ( |
) | |||
| Total equity | |||||||||
| TOTAL LIABILITIES AND EQUITY | $ | $ | $ |
| History and organization of the Company (Note 1) Continuance of operations (Note 2) Contingency and commitments (Note 13) |
APPROVED ON BEHALF OF THE BOARD | |
| "James Longshore" | "James Schweitzer" | |
| Director | Director | |
The accompanying notes are an integral part of these consolidated financial statements.
1
(Expressed in U.S. Dollars)
| Year Ended December 31, 2022 |
Year Ended December 31, 2021 |
Year Ended December 31, 2020 |
|||||||
| EXPENSES | |||||||||
| Depreciation | $ | $ | $ | ||||||
| Exploration | |||||||||
| General and administrative | |||||||||
| LOSS BEFORE OTHER ITEMS | ( |
) | ( |
) | ( |
) | |||
| OTHER ITEMS | |||||||||
| Recovery of gold, net | |||||||||
| Foreign exchange loss | ( |
) | ( |
) | ( |
) | |||
| Net gain on trading securities | |||||||||
| Other income | |||||||||
| Impairment on marketable securities | ( |
) | |||||||
| Change in fair value warrant derivative liability | |||||||||
| INCOME FROM OTHER ITEMS | |||||||||
| Income before tax | |||||||||
| Income tax expense | ( |
) | ( |
) | ( |
) | |||
| Net income | |||||||||
| Net gain attributable to non-controlling interest | ( |
) | ( |
) | ( |
) | |||
| Net income attributable to Xtra-Gold Resources Corp. | $ | $ | $ | ||||||
| Basic income attributable to common shareholders per common share |
$ | $ | $ |
||||||
| Diluted income attributable to common shareholders per common share |
$ | $ | $ |
||||||
| Basic weighted average number of common shares outstanding | |||||||||
| Diluted weighted average number of common shares outstanding | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
2
(Expressed in U.S. Dollars)
| Common Stock | |||||||||||||||||||||
| Number of Shares |
Amount | Additional Paid in Capital |
Shares in Treasury |
Accumulated Deficit |
Non- Controlling Interest |
Total | |||||||||||||||
| Balance, December 31, 2019 | $ | $ | $ | ( |
) | $( |
) | $ | ( |
) | $ | ||||||||||
| Stock-based compensation | - | - | - | - | - | ||||||||||||||||
| Exercise of warrants | - | - | - | ||||||||||||||||||
| Exercise of stock options | - | - | - | ||||||||||||||||||
| Repurchase of shares | ( |
) | ( |
) | ( |
) | - | - | ( |
) | |||||||||||
| Shares in treasury | - | - | - | ( |
) | - | - | ( |
) | ||||||||||||
| Net income | - | - | - | - | |||||||||||||||||
| Balance, December 31, 2020 | ( |
) | ( |
) | ( |
) | |||||||||||||||
| Stock-based compensation | - | - | - | - | - | ||||||||||||||||
| Exercise of stock options | - | - | - | ||||||||||||||||||
| Repurchase of shares | ( |
) | ( |
) | ( |
) | - | - | ( |
) | |||||||||||
| Shares in treasury | - | - | - | ( |
) | - | - | ( |
) | ||||||||||||
| Net income | - | - | - | - | |||||||||||||||||
| Balance, December 31, 2021 | ( |
) | ( |
) | ( |
) | |||||||||||||||
| Stock-based compensation | - | - | - | - | - | ||||||||||||||||
| Repurchase of shares | ( |
) | ( |
) | ( |
) | - | - | ( |
) | |||||||||||
| Shares in treasury | - | - | - | ( |
) | - | - | ( |
) | ||||||||||||
| Net income | - | - | - | - | |||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | ( |
) | $ ( |
) | $ ( |
) | $ | |||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
3
(Expressed in U.S. Dollars)
| Year Ended December 31, 2022 |
Year Ended December 31, 2021 |
Year Ended December 31, 2020 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||
| Net income | $ | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||
| Depreciation | |||||||||
| Stock-based compensation | |||||||||
| Change in fair value warrant derivative liability | ( |
) | |||||||
| Unrealized foreign exchange loss (gain) | ( |
) | ( |
) | |||||
| Purchase of trading securities | ( |
) | ( |
) | ( |
) | |||
| Proceeds on sale of trading securities | |||||||||
| Net gain on sales of trading securities | ( |
) | ( |
) | ( |
) | |||
| Impairment on trading securities | |||||||||
| Changes in non-cash working capital items: | |||||||||
| (Increase) decrease in receivables and other assets | ( |
) | ( |
) | |||||
| Decrease (increase) in inventory | ( |
) | ( |
) | |||||
| Change in asset retirement obligation | ( |
) | ( |
) | |||||
| Increase (decrease) in accounts payable and accrued liabilities | |||||||||
| Net cash provided by operating activities | |||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||
| Acquisition of equipment | ( |
) | ( |
) | ( |
) | |||
| Net cash used in investing activities | ( |
) | ( |
) | ( |
) | |||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||
| Proceeds from exercise of options and warrants | |||||||||
| Repurchase of capital stock | ( |
) | ( |
) | ( |
) | |||
| Net cash (used in) provided by financing activities | ( |
) | ( |
) | |||||
| Change in cash and cash equivalents and restricted cash during the year | |||||||||
| Cash and cash equivalents and restricted cash, beginning of the year | |||||||||
| Cash and cash equivalents and restricted cash, end of the year | $ | $ | $ | ||||||
| Reconciliation of Cash and Cash Equivalents and Restricted Cash | |||||||||
| Cash and cash equivalents at beginning of year | $ | $ | $ | ||||||
| Restricted cash at beginning of year | |||||||||
| Cash and cash equivalents and restricted cash at beginning of year | $ | $ | $ | ||||||
| Cash and cash equivalents at end of year | $ | $ | $ | ||||||
| Restricted cash at end of year | |||||||||
| Cash and cash equivalents and restricted cash at end of year | $ | $ | $ | ||||||
Supplemental disclosure with respect to cash flows (Note 11)
The accompanying notes are an integral part of these consolidated financial statements.
4
|
XTRA-GOLD RESOURCES CORP.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars) December 31, 2022 |
1. HISTORY AND ORGANIZATION OF THE COMPANY
Xtra-Gold Resources Corp., previously Silverwing Systems Corporation, was incorporated under the laws of the State of Nevada on September 1, 1998, pursuant to the provisions of the Nevada Revised Statutes. In 2003, the Company became a resource exploration company. The Company has also engaged in recovery of gold through alluvial operations on its claims. On November 30, 2012, the Company redomiciled from the USA to the British Virgin Islands.
In 2004, the Company acquired
2. CONTINUANCE OF OPERATIONS - GOING CONCERN
The Company is in development as an exploration company. It may need financing for its exploration and acquisition activities. Although the Company has incurred a gain of $
The Company's operations could be significantly adversely affected by the effects of a widespread global outbreak of a contagious disease, including the recent outbreak of respiratory illness caused by COVID-19. The Company cannot accurately predict the impact COVID-19 will have on its operations and the ability of others to meet their obligations with the Company, including uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and the length of travel and quarantine restrictions imposed by governments of affected countries. In addition, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could further affect the Company's operations and ability to finance its operations.
Currently, Covid-19 has not affected any of the Company's operations in Ghana. The first cases of Covid-19 were detected much later in Ghana than other parts of the world, and Government action has limited the incidence of transmission. The Company continues to monitor the potential effects on its operations and is implementing protocol to hopefully help in minimize its impact. However, investors are cautioned this is an evolving issue, and that there is not guarantee the Company's protocols will be effective.
Management of the Company ("Management") is of the opinion that sufficient financing will be obtained from external sources and further share issuances will be made to meet the Company's obligations. The Company's discretionary exploration activities do have considerable scope for flexibility in terms of the amount and timing of exploration expenditure, and expenditures may be adjusted accordingly if required.
3. SIGNIFICANT ACCOUNTING POLICIES
Generally accepted accounting principles
These consolidated financial statements have been prepared in conformity with generally accepted accounting principles of the United States of America ("US GAAP").
XTRA-GOLD RESOURCES CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) December 31, 2022 |
Principles of consolidation
These consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, XG Exploration (from February 16, 2004) and its
Use of estimates
The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant areas requiring the use of estimates include the carrying value and recoverability of mineral properties, inputs used in the calculation of stock-based compensation and warrants, inputs used in the calculation of the asset retirement obligation, and the valuation allowance applied to deferred income taxes. Actual results could differ from those estimates and would impact future results of operations and cash flows.
Cash and cash equivalents
The Company considers highly liquid investments with original maturities of three months or less to be cash equivalents. At December 31, 2022, 2021 and 2020, cash and cash equivalents consisted of cash held at financial institutions.
The Company has been required by the Ghanaian government to post a bond for environmental reclamation. This cash has been recorded as restricted cash, a non-current asset.
Receivables
Management has evaluated all receivables and has provided allowances for accounts where it deems collection doubtful. As of December 31, 2022, 2021, and 2020, the Company had not recorded any allowance for doubtful accounts.
Inventory
Inventories are initially recognized at cost and subsequently stated at the lower of cost or net realizable value. The Company's inventory consists of raw gold recovered from alluvial operations. Costs are determined using the first-in, first-out ("FIFO") method and includes expenditures incurred in extracting the raw gold, other costs incurred in bringing them to their existing location and condition, and the cost of reclaiming the disturbed land to a natural state.
Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale. Inventories are written down to net realizable value when the cost of inventories is not estimated to be recoverable due to declining selling prices, or other issues related to the sale of gold.
Recovery of gold
Recovery of gold and other income is recognized when title and the risks and rewards of ownership to delivered bullion and commodities pass to the buyer and collection is reasonably assured. Recovery of gold, net of expenses, is not related to exploration and is not the core business of the Company, so proceeds from gold recovery are recognized as other income.
Trading securities
The Company's trading securities are reported at fair value, with realized and unrealized gains and losses included in earnings.
XTRA-GOLD RESOURCES CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) December 31, 2022 |
Non-Controlling Interest
The consolidated financial statements include the accounts of XG Mining (from December 22, 2004). All intercompany accounts and transactions have been eliminated upon consolidation. The Company records a non-controlling interest which reflects the
Equipment
Equipment is recorded at cost and is being amortized over its estimated useful lives using the declining balance method at the following annual rates:
| Furniture and equipment | |
| Computer equipment | |
| Vehicles | |
| Mining and exploration equipment |
Mineral properties and exploration and development costs
The costs of acquiring mineral rights are capitalized at the date of acquisition. After acquisition, various factors can affect the recoverability of the capitalized costs. If, after review, management concludes that the carrying amount of a mineral property is impaired, it will be written down to estimated fair value. Exploration costs incurred on mineral properties are expensed as incurred. Development costs incurred on proven and probable reserves will be capitalized. Upon commencement of production, capitalized costs will be amortized using the unit-of-production method over the estimated life of the ore body based on proven and probable reserves (which exclude non-recoverable reserves and anticipated processing losses). When the Company receives an option payment related to a property, the proceeds of the payment are applied to reduce the carrying value of the exploration asset.
Impairment of non-financial assets
At the end of each reporting period, the Company reviews the carrying amounts of its non-financial assets with finite lives to determine whether there is any indication that those assets are impaired. Where such an indication exists, the recoverable amount of the asset is estimated. For the purpose of measuring recoverable amounts, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units or "CGUs"). The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use (being the present value of the expected future cash flows of the relevant asset or CGU). An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount.
The Company has assessed the assets of all its operating entities and has determined that no impairment was considered necessary for the Company's non-financial assets as at December 31, 2022, 2021 and 2020.
Long-lived assets
Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, the recoverability test is performed using undiscounted net cash flows related to the long-lived assets. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of their carrying amount or fair value less costs to sell.
XTRA-GOLD RESOURCES CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) December 31, 2022 |
Asset retirement obligations
The Company records the estimated rehabilitation value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development, and/or normal use of the long-lived assets. Subsequent to the initial measurement of the asset retirement obligation, the obligation is adjusted at the end of each period to reflect the changes in the estimated future cash flows underlying the obligation (asset retirement cost).
Stock-based compensation
The Company accounts for stock compensation arrangements under ASC 718 "Compensation - Stock Compensation" using the fair value based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments.
We use the fair value method for equity instruments granted to non-employees and use the Black-Scholes model for measuring the fair value of options. The stock based fair value compensation is determined as of the date of the grant (measurement date) and is recognized over the vesting periods.
Warrants
The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value using the appropriate valuation methodology and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. The warrants are presented as a liability because they do not meet the criteria of Accounting Standard Codification ("ASC") topic 480 for equity classification. Subsequent changes in the fair value of the warrants are recorded in the consolidated statement of operations.
Share repurchases
The Company accounts for the repurchase of its common shares as an increase in shares in treasury for the market value of the shares at the time of purchase. When the shares are cancelled, the issued and outstanding shares are reduced by the $
Share-based payment transactions
The fair value is measured at grant date and recognized over the period during which the options vest. The fair value of the options granted is measured using the Black-Scholes option pricing model, taking into account the terms and conditions upon which the options were granted. At each financial position reporting date, the amount recognized as an expense is adjusted to reflect the actual number of share options that are expected to vest.
An individual is classified as an employee when the individual is an employee for legal or tax purposes (direct employee) or provides services similar to those performed by a direct employee, including directors of the Company.
In situations where equity instruments are issued to non-employees and some or all of the goods or services received by the entity as consideration cannot be specifically identified, they are measured at fair value of the share-based payment. Otherwise, share-based payments are measured at the fair value of the goods and services received.
Income taxes
The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under the asset and liability method the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion or all of the deferred tax asset will not be recognized.
XTRA-GOLD RESOURCES CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) December 31, 2022 |
Income (Loss) per share
Basic loss per common share is computed using the weighted average number of common shares outstanding during the period. To calculate diluted loss per share, the Company uses the treasury stock method and if converted method. As of December 31, 2022, there were
Foreign exchange
The Company's functional currency is the U.S. dollar. Any monetary assets and liabilities that are in a currency other than the U.S. dollar are translated at the rate prevailing at year end. Revenue and expenses in a foreign currency are translated at rates that approximate those in effect at the time of translation. Gains and losses from translation of foreign currency transactions into U.S. dollars are included in current results of operations.
Financial instruments
The Company's financial instruments consist of cash and cash equivalents, trading securities, receivables, accounts payable and accrued liabilities. It is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from its financial instruments. The fair values of these financial instruments approximate their carrying values unless otherwise noted. Cash in Canada is primarily held in financial institutions. Balances on hand may exceed insured maximums. Cash in Ghana is held in banks with a strong international presence. Ghana does not insure bank balances.
Fair value of financial assets and liabilities
Our financial assets and liabilities that are measured at fair value on a recurring basis include cash equivalents, marketable securities, derivative contracts, and marketable debt securities. Our financial assets measured at fair value on a nonrecurring basis include non-marketable equity securities, which are adjusted to fair value when observable price changes are identified or when the non-marketable equity securities are impaired (referred to as the measurement alternative). Other financial assets and liabilities are carried at cost with fair value disclosed, if required.
Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. Assets and liabilities recorded at fair value are measured and classified in accordance with a three-tier fair value hierarchy based on the observability of the inputs available in the market used to measure fair value:
Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 - Inputs that are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant inputs are observable in the market or can be derived from observable market data. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, foreign exchange rates, and credit ratings.
Level 3 - Unobservable inputs that are supported by little or no market activities.
The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
XTRA-GOLD RESOURCES CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) December 31, 2022 |
Cash, Cash Equivalents, and Marketable Securities
We invest all excess cash primarily in time deposits, money market funds, corporate debt securities, equities, limited partnerships, and rights and warrants.
We classify all marketable debt securities that have stated maturities of three months or less from the date of purchase as cash equivalents and those with stated maturities of greater than three months as marketable securities on our Consolidated Balance Sheets.
We determine the appropriate classification of our investments in marketable debt securities at the time of purchase and reevaluate such designation at each balance sheet date. We have classified and accounted for our marketable debt securities as trading securities. After consideration of our risk versus reward objectives, as well as our liquidity requirements, we may sell these debt securities prior to their stated maturities. For all of our marketable debt securities we have elected the fair value option, for which changes in fair value are recorded in other income (expense), net. We determine any realized gains or losses on the sale of marketable debt securities on a specific identification method, and we record such gains and losses as a component of other income (expense), net.
The following tables summarize our debt securities, at their fair value, by significant investment categories as of December 31, 2022, 2021 and 2020:
| Level 1 - Cash equivalents | December 31, 2022 | December 31, 2021 | December 31, 2020 | ||||||
| Money market funds | $ | $ | $ | ||||||
| $ | $ | $ |
| December 31, 2022 |
Quoted Prices in Active Markets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
|||||||||
| Cash and cash equivalents | $ | $ | $ | $ | ||||||||
| Restricted cash | ||||||||||||
| Marketable securities | ||||||||||||
| Total | $ | $ | $ | $ |
| December 31, 2021 |
Quoted Prices in Active Markets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
|||||||||
| Cash and cash equivalents | $ | $ | $ | $ | ||||||||
| Restricted cash | ||||||||||||
| Marketable securities | ||||||||||||
| Total | $ | $ | $ | $ |
XTRA-GOLD RESOURCES CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) December 31, 2022 |
| December 31, 2020 |
Quoted Prices in Active Markets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
|||||||||
| Cash and cash equivalents | $ | $ | $ | $ | ||||||||
| Restricted cash | ||||||||||||
| Marketable securities | ||||||||||||
| Total | $ | $ | $ | $ |
The fair values of cash and cash equivalents and marketable securities are determined through market, observable and corroborated sources. The fair value of the warrant liability was determined through the Black Scholes valuation model.
Debt Securities
We classify our marketable debt securities, which are accounted for as trading securities, within Level 1 or 2 in the fair value hierarchy because we use quoted market prices to the extent available or alternative pricing sources and models utilizing market observable inputs to determine fair value.
Investment in trading securities
The following discusses our marketable equity securities, non-marketable equity securities, gains and losses on marketable and non-marketable equity securities, as well as our equity securities accounted for under the equity method.
Our marketable equity securities are publicly traded stocks or funds measured at fair value and classified within Level 1 and 2 in the fair value hierarchy because we use quoted prices for identical assets in active markets or inputs that are based upon quoted prices for similar instruments in active markets.
Our non-marketable equity securities are investments in privately held companies without readily determinable market values. The carrying value of our non-marketable equity securities is adjusted to fair value for observable transactions for identical or similar investments of the same issuer or impairment (referred to as the measurement alternative). Non-marketable equity securities that have been remeasured during the period based on observable transactions are classified within Level 2 or Level 3 in the fair value hierarchy because we estimate the value based on valuation methods which may include a combination of the observable transaction price at the transaction date and other unobservable inputs including volatility, rights, and obligations of the securities we hold. The fair value of non-marketable equity securities that have been remeasured due to impairment are classified within Level 3.
Concentration of credit risk
The financial instrument which potentially subjects the Company to concentration of credit risk is cash. The Company maintains cash in bank accounts that, at times, may exceed federally insured limits. As of December 31, 2022, the Company held $
The Company uses one smelter to process its raw gold. Ownership of the gold is transferred to the smelting company at the mine site. The Company has not experienced any losses from this sole sourced smelter and believes it is not exposed to any significant risks on its gold processing.
XTRA-GOLD RESOURCES CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) December 31, 2022 |
4. INVESTMENTS IN TRADING SECURITIES
At December 31, 2022, the Company held investments classified as trading securities, which consisted of various equity securities. All trading securities are carried at fair value. Private company investments are valued using Level 3 methods. Private company investments are initially valued at the cost of the investment. If a subsequent investment in the same security is made at a different price, the entire investment is valued at the new price and any gain or loss is recognized in other income, net. All other marketable securities are publicly traded and valued using Level 1 methods. As of December 31, 2022, the fair value of trading securities was $
| December 31, 2022 | December 31, 2021 | December 31, 2020 | |||||||
| Investments in trading securities at cost | $ | $ | $ | ||||||
| Unrealized gains (losses) | |||||||||
| Investments in trading securities at fair market value | $ | $ | $ |
The fair value carrying value of investments by category is as follows:
| December 31, 2022 | December 31, 2021 | December 31, 2020 | |||||||
| Marketable Equity Securities - Level 1 | |||||||||
| Publicly traded investments | $ | $ | $ | ||||||
| Marketable Debt Securities - Level 2 | |||||||||
| Corporate bonds | |||||||||
| Non-Marketable Equity Securities - Level 3 | |||||||||
| Private investments | |||||||||
| Total investments | $ | $ | $ |
The gains and losses on investments by category is as follows:
| December 31, 2022 | December 31, 2021 | December 31, 2020 | |||||||
| Marketable Equity Securities - Level 1 | |||||||||
| Publicly traded investments - realized | $ | $ | $ | ||||||
| Publicly traded investments - unrealized | ( |
) | |||||||
| Non-Marketable Debt Securities - Level 2 | |||||||||
| Private bonds | ( |
) | |||||||
| Non-Marketable Equity Securities - Level 3 | |||||||||
| Private investments - realized | ( |
) | |||||||
| Private investments - unrealized | |||||||||
| Total investments | $ | $ | $ |
5. EQUIPMENT
| December 31, 2022 | |||||||||
| Cost | Accumulated Depreciation |
Net Book Value | |||||||
| Exploration equipment | $ | $ | $ | ||||||
| Vehicles | |||||||||
| $ | $ | $ | |||||||
XTRA-GOLD RESOURCES CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) December 31, 2022 |
The company expensed $
| December 31, 2021 | |||||||||
| Cost | Accumulated Depreciation |
Net Book Value | |||||||
| Exploration equipment | $ | $ | $ | ||||||
| Vehicles | |||||||||
| $ | $ | $ | |||||||
The company expensed $
| December 31, 2020 | |||||||||
| Cost | Accumulated Depreciation |
Net Book Value | |||||||
| Exploration equipment | $ | $ | $ | ||||||
| Vehicles |
|
||||||||
| $ | $ | $ | |||||||
The company expensed $
6. MINERAL PROPERTIES
| December 31, 2022 |
December 31, 2021 |
December 31, 2020 |
|||||||
| Acquisition costs | $ | $ | $ | ||||||
| Asset retirement obligation (Note 7) | |||||||||
| Option payments received | ( |
) | ( |
) | ( |
) | |||
| Total | $ | $ | $ | ||||||
The Projects were purchased as a group in 2003, and the purchase price was not allocated between the properties and camp facilities. Option payments related to shares and cash received for the right to purchase projects from the Company. All such options have expired unexercised.
Kibi, Kwabeng and Pameng Projects
The Company holds the mineral rights over the lease area for Kibi , Kwabeng, and Pameng Projects, all of which are located in Ghana. All three mining leases grant the Company the right to produce gold. The Kwabeng and Pameng mining leases expired on July 26, 2019.
All required documentation to extend the lease for our Kibi Project (formerly known as the Apapam Project) for 15 years from December 17, 2015 has been submitted to the Ghana Minerals Commission. No additional information was requested or submitted in the year ended December 31, 2022. As of these extensions generally take years for the regulatory review to be completed, and the Company is not yet in receipt of the renewal extension approval. However, until the Company receives the renewal extension approval, the old lease remains in force under the mineral laws. The renewal extension is in accordance with the terms of application and payment of fees to the Minerals Commission.
The Company has applied to Minerals Commission for a renewal extension for the Kwabeng and Pameng mining leases and has submitted all the required documentation to renew and extend these leases for a further 15 years.
XTRA-GOLD RESOURCES CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) December 31, 2022 |
All gold production will be subject to a production royalty of the net smelter returns ("NSR") payable to the Government of Ghana.
Banso and Muoso Projects
During the year ended December 31, 2010, the Company made an application to Mincom to convert a single prospecting license ("PL") securing its interest in the Banso and Muoso Projects located in Ghana to a mining lease covering the lease area of each of these Projects. This application was approved by Mincom who subsequently made recommendation to the Minister of Lands, Forestry and Mines to grant an individual mining lease for each Project. On January 6, 2011, the Government of Ghana granted two mining leases for these Projects. These mining leases grant the Company mining rights to produce gold in the respective lease areas until January 5, 2025 with respect to the Banso Project and until January 5, 2024 with respect to the Muoso Project. These mining leases supersede the PL previously granted to the Company. Among other things, both mining leases require that the Company:
i) pay the Government of Ghana a fee of $
ii) pay annual ground rent of GH¢
iii) commence commercial production of gold within two years from the date of the mining leases; and
iv) pay a production royalty of
Mining Lease and Prospecting License Commitments
The Company is committed to expend, from time to time fees payable
(a) to the Minerals Commission for:
(i) a grant or renewal of a mining lease (currently an annual fee maximum of $
(ii) annual operating permits;
(b) to the Environmental Protection Agency ("EPA") (of Ghana) for:
i) processing and certificate fees with respect to EPA permits;
ii) the issuance of permits before the commencement of any work at a particular concession; or
iii) the posting of a bond in connection with any mining operations undertaken by the Company;
(c) for a legal obligation associated with our mineral properties for clean up costs when work programs are completed.
7. ASSET RETIREMENT OBLIGATION
| December 31, 2022 |
December 31, 2021 |
December 31, 2020 |
|||||||
| Balance, beginning of year | $ | $ | $ | ||||||
| Change in obligation | ( |
) | ( |
) | |||||
| Accretion expense | |||||||||
| Balance, end of year | $ | $ | $ |
The Company has a legal obligation associated with its mineral properties for clean up costs when work programs are completed. Most of the cash will be spent to return the grade of disturbed land to its original state and to plant vegetation.
The rehabilitation obligation is estimated at $
XTRA-GOLD RESOURCES CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) December 31, 2022 |
8. INVENTORIES
Inventories consisted of the following:
| December 31, 2022 | December 31, 2021 | December 31, 2020 | |||||||
| Raw gold | $ | $ | $ |
Inventory consists of raw gold awaiting transport to the smelter.
9. CAPITAL STOCK
Authorized stock
The Company's authorized shares are
Issuances of shares
The Company did not issue shares during the year ended December 31, 2022.
During the year ended December 31, 2021, the Company issued
During the year ended December 31, 2020, the Company issued
Cancellation of shares
During the year ended December 31, 2022, a total of
During the year ended December 31, 2021, a total of
During the year ended December 31, 2020, a total of
Stock options
At June 30, 2011, the Company adopted a new
The TSX's rules relating to security-based compensation arrangements require that every three years after the institution of a security-based compensation arrangement which does not have a fixed maximum aggregate of securities issuable, all unallocated options must be approved by a majority of the Company's directors and by the Company's shareholders. The Board approved all unallocated options under the Option Plan on March 26, 2020 which was approved by the Company's shareholders at the annual and special meeting held on June 25, 2020.
XTRA-GOLD RESOURCES CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) December 31, 2022 |
At December 31, 2022, the following stock options were outstanding:
| Number of Options |
Exercise Price |
Expiry Date |
| CDN$ |
||
| CDN$ |
||
| CDN$ |
||
| CDN$ |
||
| CDN$ |
||
| CDN$ |
||
| CDN$ |
Stock option transactions and the number of stock options outstanding are summarized as follows:
| December 31, 2022 | December 31, 2021 | December 31, 2020 | ||||||||||||||||
| Number of Options |
Weighted Average Exercise Price |
Number of Options |
Weighted Average Exercise Price |
Number of Options |
Weighted Average Exercise Price |
|||||||||||||
| Outstanding, beginning of year | $ | $ | $ | |||||||||||||||
| Granted | ||||||||||||||||||
| Exercised | ( |
) | ( |
) | ||||||||||||||
| Cancelled/Expired | ( |
) | ( |
) | ||||||||||||||
| Outstanding, end of year | $ | $ | $ | |||||||||||||||
| Exercisable, end of year | $ | $ | $ | |||||||||||||||
The aggregate intrinsic value for options vested and for total options as of December 31, 2022 is approximately $
The fair value of stock options granted, vested, and modified during the year ended December 31, 2022 was $
The following assumptions were used for the Black-Scholes valuation of stock options amended during the years ended December 31, 2022, 2021, and 2020:
| 2022 | 2021 | 2020 | |||||||
| Risk-free interest rate | |||||||||
| Expected life | |||||||||
| Annualized volatility | |||||||||
| Dividend rate |
On December 14, 2022 the Company granted
XTRA-GOLD RESOURCES CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) December 31, 2022 |
The Company did not issue stock options during the years ended December 31, 2021.
During 2020 the Company granted
Warrants
At December 31, 2022, 2021 and 2020, there were no warrants outstanding.
| 2021 | 2021 | 2020 | ||||||||||
| Balance, beginning of period | CAD$ |
|||||||||||
| Issued | ||||||||||||
| Exercised | ( |
) | CAD$ |
|||||||||
| Expired | ( |
) | CAD$ |
|||||||||
| Balance, end of period | ||||||||||||
10. RELATED PARTY TRANSACTIONS
During the years ended December 31, 2022, 2021 and 2020, the Company entered into the following transactions with related parties:
| December 31, 2022 | December 31, 2021 | December 31, 2020 | |||||||
| Consulting fees paid or accrued to officers or their companies | $ |
$ |
$ |
||||||
| Directors' fees | |||||||||
| Stock option grants to officers and directors | |||||||||
| Stock option grant price range | CAD$ |
CAD$ |
Of the total consulting fees noted above, $
During 2022, the Company granted
XTRA-GOLD RESOURCES CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) December 31, 2022 |
11. SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS
| December 31, 2022 |
December 31, 2021 |
December 31, 2020 |
|||||||
| Cash paid during the period for: | |||||||||
| Interest | $ | $ | $ | ||||||
| Income taxes | $ | $ | $ | ||||||
The company paid $
12. DEFERRED INCOME TAXES
On November 30, 2012, the Company changed its residency address from the USA to the British Virgin Islands("BVI"). The Company has no presence/nexus within the United States of America, nor any of its States and therefore is not required to file Income/Franchise, etc. tax returns in the United States of America, nor any of its States. The Company is not subject to any corporate income tax in the BVI. In Ghana, the Company is subject to a
| 2022 | 2021 | 2020 | |||||||
| Pre tax income | $ | $ | $ | ||||||
| Tax at the BVI rate |
|||||||||
| Tax in Ghana at |
|||||||||
| Other | ( |
) | |||||||
| Temporary differences | ( |
) | |||||||
| Income tax | $ | $ | $ |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The major temporary differences that gave rise to the deferred tax assets and liabilities are as follows: net operating loss carryforwards (2020 tax year).
In evaluating the ability to recover the deferred tax assets within the jurisdiction from which they arise, the Company considered all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In projecting future taxable income, the Company began with historical results adjusted for changes in accounting policies and incorporates assumptions including the amount of future pretax operating income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimate the Company are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, the Company consider three years of cumulative operating income. The Company has a small, deferred tax asset of $
13. CONTINGENCY AND COMMITMENTS
a) Bond deposit
The Company has been required by the Ghanaian government to post an environmental bond of US$
XTRA-GOLD RESOURCES CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) December 31, 2022 |
b) Litigation
From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company's business. The Company is not aware of any such legal proceedings other than below disclosed that will have, individually or in the aggregate, a material adverse effect on its business, financial condition or operating results.
The Company is a party to two pending lawsuits. One lawsuit claims that an Xtra contracted worker caused bodily harm on another person. Another lawsuit claims that workers were terminated unlawfully. The Company will defend itself in each of these lawsuits if required, and believes both cases are completely without merit and frivolous.
The Company is subject to additional legal proceedings and claims which arise in the ordinary course of its business. Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters should not have a material adverse effect on its financial position, results of operations or liquidity.
On October 19, 2022, Minerals Commission issued five invoices totaling $
Ghana Revenue Agency ("GRA") sent our Ghanaian subsidiary an updated tax assessment letter on November 11, 2022. The letter alleges a total tax liability of $
(c) Credit risk
Financial instruments that are potentially subject to credit risk consist principally of trade receivables. The Company believes the concentration of credit risk in its trade receivables is substantially mitigated by its ongoing credit evaluation process and relatively short collection terms. The Company does not generally require collateral from customers. The Company evaluates the need for an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.
(d) Exchange rate risk
The functional currency of the Company is US$, to date the majority of the revenues and costs are denominated in Ghana and a significant portion of the assets and liabilities are denominated in both Canada and Ghana. As a result, the Company is exposed to foreign exchange risk as its revenues and results of operations may be affected by fluctuations in the exchange rate between US$and Ghana currency. If Ghana depreciates against US$, the value of Ghana revenues and assets as expressed in US$financial statements will decline. The Company does not hold any derivative or other financial instruments that expose to substantial market risk.
(e) Economic and political risks
The Company's operations are conducted in Ghana. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environment in Ghana, and by the general state of the Ghana economy.
XTRA-GOLD RESOURCES CORP. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Expressed in U.S. Dollars) December 31, 2022 |
The Company's operations in the Ghana are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company's results may be adversely affected by changes in the political and social conditions in Ghana, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation.
f) Commodity price risk
We are exposed to fluctuations in commodity prices for gold. Commodity prices are affected by many factors, including but not limited to, supply and demand.
g) The Kwabeng and Pameng mining leases expired on July 26, 2019.
All required documentation to extend the lease for our Kibi Project (formerly known as the Apapam Project) for
14. SUBSEQUENT EVENTS
Subsequent to December 31, 2022,
Subsequent to December 31, 2022, the Company announced that it would proceed with a share repurchase plan in 2023. Under the terms of the plan, which commences on March 17, 2023, the Company will be able to repurchase up to
20