NOTE 11 — SUBSEQUENT EVENTS

Northern Panther Merger Agreement

On August 10, 2020, the Company entered into the Merger Agreement with Acquisition Corp., NPRC and the Stockholder Representative named therein, pursuant to which Acquisition Corp. merged with and into NPRC, with NPRC surviving as a wholly-owned subsidiary of the Company (such transaction, the “Merger”).

At the closing of the Merger, which occurred on August 11, 2020, the shares of common stock of NPRC outstanding immediately prior to the Merger (other than shares held as treasury stock) were converted into and represent the right to receive (i) 581,053 shares of the Company’s common stock, par value $0.001 per share, and (ii) 106,894 shares of the Company’s Series H Convertible Preferred Stock, par value $0.001 per share (the “Series H Preferred Stock” and, together with the common stock, the “Merger Consideration”), which Series H Preferred Stock is expected to convert into common stock on a 1 for 10 basis upon receipt of the approval by the requisite vote of the Company’s stockholders at the next annual general meeting, scheduled for October 27, 2020.

The Series H Preferred Stock issued as part of the Merger Consideration is convertible at the option of the holder, subject to an exchange cap, which prohibits the conversion of the Series H Preferred Stock if such conversion would result in a violation of the rules of the Nasdaq Capital Market. Holders of the Series H Preferred Stock have the same voting rights and liquidation preference as holders of common stock, on an as-converted basis.

The common stock issued pursuant to the Merger Agreement as part of the Merger Consideration is being sold as “restricted stock” subject to the six-month minimum hold period under Rule 144 under the Securities Act of 1933, as amended. In addition, pursuant to certain leak-out agreements entered into concurrently with the execution of the Merger Agreement by and between the stockholders of NPRC and the Company, the shares of common stock issued pursuant to the Merger Agreement, including shares issued upon conversion of the Series H Convertible Preferred Stock, are subject to a leak-out provision limiting future share sales of the Company’s common stock held by the holders of such shares to no more than 10% of the daily trading volume.

In connection with the Merger, Luke Norman Consulting Ltd. received a finder’s fee equal to the quotient of (a) 5% of the purchase value for the Merger and (b) the 30-day Volume Weighted Average Price (“VWAP”) of a share of our common stock as reported on the Nasdaq Capital Market prior to the execution Merger Agreement, which was paid in 82,500 shares restricted common stock on the closing date of the Merger.

Total consideration given consist of the common shares and common share equivalents of 1,650,000 shares, valued at the Volume Weighted Average Price for the 30-day period immediately prior to the date of the Merger Agreement of $7.6612 per common share, or $12,640,980. Net assets purchased consist of:

Accounting Treatment

Management analyzed the Merger Agreement to determine if the Company acquired a business or acquired assets. The FASB issued new guidance (ASU 2017-01) that changed the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. The guidance requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities is not a business. The guidance also requires a business to include at least one substantive process and narrows the definition of outputs by more closely aligning it with how outputs are described in ASC 606. Under the new guidance, an entity first determines whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the set is not a business. Under the ASU, a set is not a business when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets.

Pursuant to ASC 805-10-55-5, to be capable of being conducted and managed, as further described in 805-10-55-3A, an integrated set of activities and assets require two essential elements, at a minimum, include inputs and substantive process that together significantly contribute to the ability to create output. Management first considered the guidance in paragraphs 805-10-55-5A through 55-5C.

Per 805-10-55-5A, if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not considered a business. Gross assets acquired should exclude cash and cash equivalents, as well as other identified assets which are not part of this acquisition.

The identifiable assets that could be recognized in the agreements are 1) cash and 2) mineral rights on a gold exploration project in Idaho called the Challis Gold exploration project. Pursuant to 805-10-55-5A, NPRC is a newly formed Nevada corporation, with limited operating history and no established bank or business accounts. The only identifiable assets are the escrowed $2.5 million in cash (excluded from the analysis per ASC 8005-10-55-5A) and the Challis Gold Project. Management has excluded cash in the determination of the gross assets, and thus determined that the Challis Gold project represents substantially all of the fair value of the gross assets.

Pursuant to ASC 805-10-55-5A, the Company concludes that the acquisition of NPRC, and its wholly owned subsidiaries, is an acquisition of assets.

Securities Purchase Agreement

In connection with the Merger, on August 10, 2020, the Company entered into a securities purchase agreement (the “SPA”) with certain investors (the “Purchasers”), pursuant to which the Company sold to the Purchasers in a private placement (i) an aggregate of 921,666 shares of the Company’s Series I Convertible Preferred Stock, par value $0.001 per share (the “Series I Preferred Stock”) and (ii) warrants to purchase an aggregate of 921,666 shares of common stock at an exercise price of $6.00 per share (the “Warrants”) for aggregate consideration of $5,530,004.

The Series I Preferred Stock has substantially the same terms as the Series H Preferred Stock, except that each share of Series I Preferred Stock is convertible into one share of common stock, and is subject to an exchange cap. The Warrants are exercisable in whole or in part at any time, from time to time following the initial exercise date, terminate five years following the issuance, and are subject to an exchange cap. The sale of the Series I Preferred Stock and Warrants under the SPA closed on August 11, 2020.

The Warrants and the shares of the Company’s common stock issuable upon the exercise of the Warrants, the conversion of the Series H Preferred Stock, and the conversion of the Series I Preferred Stock are not being registered under the Securities Act and are being offered pursuant to and in reliance on the exemption provided in Section 4(a)(2) under the Securities Act and Rule 506(b) promulgated thereunder.