Quarterly report pursuant to Section 13 or 15(d)

WARRANT LIABILITY

WARRANT LIABILITY

6 Months Ended

Oct. 31, 2022

NOTE 9 — WARRANT LIABILITY

As of October 31, 2022 and April 30, 2022, the Company’s warrants liability was valued at $1,286,000 and $2,440,000, respectively. Under the guidance in ASC 815-40, certain warrants do not meet the criteria for equity treatment. As such, these warrants are recorded at fair value as of each reporting date with the change in fair value reported within other income in the accompanying unaudited condensed consolidated statements of operations as “Change in fair value of warrant liability” until the warrants are exercised, expired or other facts and circumstances lead the warrant liability to be reclassified to stockholders’ equity. The Company utilized a Monte Carlo Simulation model to estimate the fair value of the March 2022 warrants, which incorporates significant inputs that are not observable in the market, and thus represents a Level 3 measurement as defined in ASC 820. The unobservable inputs utilized for measuring the fair value of the contingent consideration reflect management’s own assumptions about the assumptions that market participants would use in valuing the contingent consideration. The Company determined the fair value by using the following key inputs to the Monte Carlo Simulation Model:

Initial Measurement

The Company accounted for the 625,000 warrants issued on March 18, 2022 in accordance with the guidance contained in ASC 815 “Derivatives and Hedging” whereby under that provision these warrants did not meet the criteria for equity treatment and was recorded as a liability. The initial valuation of these warrants were valued at $3,652,000 on March 18, 2022.

The key inputs for the warrant liability were as follows as of October 31, 2022:

Key Valuation Inputs
Expected term (years)		4.88
Annualized volatility		81.2	%
Volatility if fundamental transaction occurs		100.00	%
Risk-free interest rate		4.29	%
Stock price	$	3.69
Dividend yield		0.00	%
Exercise price	$	8.60
Probability of fundamental transaction		85	%
Date of fundamental transaction		1.4 years to 4.9 years

U.S. GOLD CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

OCTOBER 31, 2022

The key inputs for the warrant liability were as follows as of April 30, 2022:

Key Valuation Inputs
Expected term (years)		5.39
Annualized volatility		84.2	%
Volatility if fundamental transaction occurs		100.00	%
Risk-free interest rate		2.92	%
Stock price	$	5.65
Dividend yield		0.00	%
Exercise price	$	8.60
Probability of fundamental transaction		85	%
Date of fundamental transaction		1.90 years to 5.4 years

The following table sets forth a summary of the changes in the fair value of the Level 3 warrant liability for the six months ended October 31, 2022:

	Warrant Liability
Fair value as of April 30, 2022	$	2,440,000
Change in fair value		(1,154,000	)
Fair value as of October 31, 2022	$	1,286,000