UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2020

q TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-53848

RISE GOLD CORP.

(Exact name of registrant as specified in its charter)

Securities registered pursuant to Section 12(b) of the Act:

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 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.  [X] Yes   [ ] No

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes q No

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.

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. q

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). q Yes x No

As of June 15, 2020, the registrant had 22,045,965 shares of common stock issued and outstanding.

PART I - FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS.

The condensed consolidated interim financial statements of Rise Gold Corp. (“we”, “us”, “our”, the “Company”, or the “registrant”), a Nevada corporation, included herein were prepared, without audit, pursuant to rules and regulations of the Securities and Exchange Commission. Because certain information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America were condensed or omitted pursuant to such rules and regulations, the condensed consolidated interim financial statements should be read in conjunction with the financial statements and notes thereto included in the audited financial statements of the Company in the Company's Form 10-K for the fiscal year ended July 31, 2019.

1

RISE GOLD CORP.

(AN EXPLORATION STAGE COMPANY)

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

PERIOD ENDED APRIL 30, 2020

2

RISE GOLD CORP.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS

(Expressed in United States Dollars)

(Unaudited)

Nature and continuance of operations (Note 1)

Contingency (Note 7)

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

F-1

RISE GOLD CORP.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

(Expressed in United States Dollars)

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

F-2

RISE GOLD CORP.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(Expressed in United States Dollars)

(Unaudited)

Supplemental disclosure with respect to cash flows (Note 12)

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

F-3

RISE GOLD CORP.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF STOCKHOLDERS’ EQUITY

(Expressed in United States Dollars)

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

F-4

RISE GOLD CORP.

(An Exploration Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED APRIL 30, 2020

(Expressed in United States Dollars)

(Unaudited)

1.

NATURE AND CONTINUANCE OF OPERATIONS

Rise Gold Corp. (the “Company”) was originally incorporated as Atlantic Resources Inc. in the State of Nevada on February 9, 2007 and is in the exploration stage. On April 11, 2012, the Company merged its wholly-owned subsidiary, Patriot Minefinders Inc., a Nevada corporation, in and to the Company to effect a name change to Patriot Minefinders Inc. On January 14, 2015, the Company completed a name change to Rise Resources Inc. in the same manner. On April 7, 2017, the Company changed its name to Rise Gold Corp. These mergers were carried out solely for the purpose of effecting these changes of names.

On December 16, 2019, the Company completed a share consolidation of the authorized and outstanding capital stock on the basis of 10 pre-consolidation shares of common stock for one new post-consolidated share of common stock. All current and comparative references to the number of shares of common stock, stock options, warrants and loss per share reflect this share consolidation.

On February 16, 2015, the Company increased its authorized capital from 2,100,000 shares to 40,000,000 shares.  

On January 29, 2016, the Company completed an initial public offering in Canada and began trading on the Canadian Securities Exchange (“CSE”) on February 1, 2016. On November 28, 2017, the Company ceased trading on the OTC Pink Market and began trading on the OTCQB Venture Market.  On May 11, 2020, the Company qualified to trade on OTCQX Best Market.

The Company is in the early stages of exploration and, as is common with any exploration company, it raises financing for its acquisition activities. The accompanying condensed consolidated interim financial statements have been prepared on the going concern basis, which presumes that the Company will continue operations for the foreseeable future and will be able to realize assets and discharge liabilities in the normal course of business. The Company has incurred a loss of $3,613,391 for the nine-month period ended April 30, 2020 and has accumulated a deficit of $16,437,984. The ability of the Company to continue as a going concern is dependent on the Company’s ability to maintain continued support from its shareholders and creditors and to raise additional capital and implement its business plan. There is no assurance that the Company will be able to obtain adequate financing in the future or that such financing will be on terms advantageous to the Company. However, management believes that the Company has sufficient working capital to meet its projected minimum financial obligations for the next fiscal year. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

During the period ended April 30, 2020, the novel coronavirus outbreak (“COVID-19”) was declared a pandemic by the World Health Organization. The situation is dynamic and the ultimate duration and magnitude of the impact on the economy and the Company’s business are not known at this time. These impacts could include an impact on the Company’s ability to obtain debt and equity financing to fund ongoing exploration activities as well as its ability to explore and conduct business. These consolidated financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern.

At April 30, 2020, the Company had working capital of $927,001.

F-5

RISE GOLD CORP.

(An Exploration Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED APRIL 30, 2020

(Expressed in United States Dollars)

(Unaudited)

2.

BASIS OF PREPARATION

Generally Accepted Accounting Principles

The accompanying unaudited condensed consolidated interim financial statements have been prepared in conformity with generally accepted accounting principles of the United States of America (“US GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) for financial information with the instructions to Form 10-Q and Regulation S-K. Results are not necessarily indicative of results which may be achieved in the future.  The unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K, which contains the audited financial statements and notes thereto, together with Management’s Discussion and Analysis, for the year ended July 31, 2019. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such SEC rules and regulations. The operating results for the nine months ended April 30, 2020 are not necessarily indicative of the results that may be expected for the year ended July 31, 2020.

Basis of Consolidation

These condensed consolidated interim financial statements include the accounts of the Company and its wholly-owned subsidiary, Rise Grass Valley Inc. All significant intercompany accounts and transactions have been eliminated on consolidation.

Subsidiaries

Subsidiaries are all entities over which the Company has exposure to variable returns from its involvement and has the ability to use power over the investee to affect its returns. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company until the date on which control ceases.

The accounts of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Intercompany transactions, balances and unrealized gains or losses on transactions are eliminated upon consolidation.

Foreign Currency Translation

The Company changed its functional currency from Canadian Dollars to United States Dollars as at August 1, 2019. The change in functional currency from Canadian dollars to United States dollars is accounted for prospectively from August 1, 2019. Management determined that the Company’s functional currency had changed based on the assessment related to significant changes of the Company’s economic facts and circumstances. These significant changes included the fact that the Company’s equity and debt financings as well as the majority of the Company’s expenses are now primarily denominated in US dollars. Moreover, the Company’s place of business and management are now located in the United States.

Foreign denominated monetary assets and liabilities are translated to their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date. Expenses and other income are translated at average rates of exchange during the period. Related translation adjustments are reported as a separate component of stockholders’ equity (deficiency), whereas gains or losses resulting from foreign currency transactions are included in the results of operations.

F-6

RISE GOLD CORP.

(An Exploration Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED APRIL 30, 2020

(Expressed in United States Dollars)

(Unaudited)

2.

BASIS OF PREPARATION (continued)

Presentation Currency Change

The Company changed its presentation currency from Canadian Dollars to United States Dollars from October 31, 2019, with retrospective application on comparative figures. The change was made to reflect the change in functional currency to United States Dollars for the same period.

Comparative figures in the consolidated statement of financial position have been translated into the presentation currency at the rate of exchange prevailing at the reporting date. Comparative balances of loss and comprehensive loss and cash flows have been translated into US dollars using average exchange rates for the comparative reporting period. Components of equity have been translated at the exchange rates prevailing at the dates of the relevant transactions. The exchange rate differences arising on translation are taken to accumulated other comprehensive income. The cumulative impact of the change in reporting currency was a gain of $210,221 in accumulated other comprehensive income as at August 1, 2019.

Derivatives

Derivatives are initially recognized at the fair value on the date the derivative contract is entered into and transaction costs are expensed. The Company’s derivatives are subsequently re-measured at their fair value at each balance sheet date with changes in fair value recognized in profit or loss. As the exercise price of the Company’s warrants are in Canadian Dollars, and the functional currency of the Company is the United States Dollar, these warrants are considered a derivative as a variable amount of cash in the Company’s functional currency will be received upon exercise.

Recently Adopted and Recently Issued Accounting Standards

On February 25, 2016, the FASB issued ASU No. 2016-02, “Leases”. This ASU applies to public companies beginning January 1, 2019 and affects the requirement that lessees account for all leases – both operating and finance – on the balance sheet while recognizing both an asset for the right to use the leased asset and an obligation to make lease payments over the lease term. The Company assessed its leases and determined that it did not have any leases extending over the period of 12 months which resulted in the standard not having any significant impact on its consolidated financial statements.

Other than the above, the Company has determined that other significant newly issued accounting pronouncements are either not applicable to the Company’s business or that no material effect is expected on the financial statements as a result of future adoption.

F-7

RISE GOLD CORP.

(An Exploration Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED APRIL 30, 2020

(Expressed in United States Dollars)

(Unaudited)

2.

BASIS OF PREPARATION (continued)

Use of Estimates

The preparation of these 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 revenue and expenses during the reporting period. Significant areas requiring the use of estimates include the carrying value and recoverability of mineral properties and the recognition of deferred tax assets based on the change in unrecognized deductible temporary tax differences. Actual results could differ from those estimates and would impact future results of operations and cash flows.

3.

SIGNIFICANT ACCOUNTING POLICIES

Fair value of financial assets and liabilities

The Company measures the fair value of financial assets and liabilities based on US GAAP guidance which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

The Company classifies financial assets and liabilities as held-for-trading, available-for-sale, held-to-maturity, loans and receivables or other financial liabilities depending on their nature.  Financial assets and financial liabilities are recognized at fair value on their initial recognition, except for those arising from certain related party transactions which are accounted for at the transferor’s carrying amount or exchange amount.

Financial assets and liabilities classified as held-for-trading are measured at fair value, with gains and losses recognized in net income.  Financial assets classified as held-to-maturity, loans and receivables, and financial liabilities other than those classified as held-for-trading are measured at amortized cost, using the effective interest rate method of amortization.  Financial assets classified as available-for-sale are measured at fair value, with unrealized gains and losses being recognized as other comprehensive income until realized, or if an unrealized loss is considered other than temporary, the unrealized loss is recorded in income.

The following indicates the fair value hierarchy of the valuation techniques the Company utilizes to determine the fair value of financial assets that are measured at fair value on a recurring basis.

Level 1 – Unadjusted quoted prices in active markets for identical assets and liabilities;

Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and

Level 3 – Inputs that are not based on observable market data.

Based on the above hierarchy, cash is considered level 1 and the warrant derivative liability is considered level 2 as the fair value of the warrant derivative liability is calculated using the Black-Sholes pricing model.

F-8

RISE GOLD CORP.

(An Exploration Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED APRIL 30, 2020

(Expressed in United States Dollars)

(Unaudited)

4.

PREPAID EXPENSES

5.

MINERAL PROPERTY INTERESTS

The Company’s mineral properties balance consists of:

Title to mineral properties

Title to mineral properties involves certain inherent risks due to the difficulties of determining the validity of certain mineral titles as well as the potential for problems arising from the frequently ambiguous conveying history characteristic of many mineral properties. As at April 30, 2020, the Company holds title to the Idaho-Maryland Gold Mine Property.

As of April 30, 2020, based on management’s review of the carrying value of mineral rights, management determined that there is no evidence that the cost of these acquired mineral rights will not be fully recovered and accordingly, the Company determined that no adjustment to the carrying value of mineral rights was required. As of the date of these consolidated financial statements, the Company has not established any proven or probable reserves on its mineral properties and has incurred only acquisition and exploration costs.

Idaho-Maryland Gold Mine Property, California

On August 30, 2016, the Company entered into an option agreement with three parties to purchase a 100% interest in and to the Idaho-Maryland Gold Mine property located near Grass Valley, California, United States. Pursuant to the option agreement, in order to exercise the option, the Company was required to pay $2,000,000 by November 30, 2016.  Upon execution of the option agreement, the Company paid the vendors a non-refundable cash deposit in the amount of $25,000, which would be credited against the purchase price of $2,000,000 upon exercise of the option. On November 30, 2016, the Company negotiated an extension on the closing date of the option agreement to December 26, 2016, in return for a cash payment of $25,000, which would be credited against the purchase price of $2,000,000 upon exercise of the option. On December 28, 2016, the Company negotiated a further no-cost extension of the closing date of the option agreement to April 30, 2017. On January 25, 2017, the Company exercised the option by paying $1,950,000 and acquired a 100% interest in the Idaho-Maryland Gold Mine property.

F-9

RISE GOLD CORP.

(An Exploration Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED APRIL 30, 2020

(Expressed in United States Dollars)

(Unaudited)

5.

MINERAL PROPERTY INTERESTS (continued)

Idaho-Maryland Gold Mine Property, California (continued)

In connection with the option agreement, the Company agreed to pay a cash commission of $140,000 equal to 7% of the purchase price of $2,000,000. The commission was settled on January 25, 2017 through the issuance of 92,000 units valued at C$2.00 per unit. Each unit consisted of one share of common stock and one transferable share purchase warrant exercisable into one share of common stock at a price of C$4.00 for a period of two years from the date of issuance. The Company also incurred additional transaction costs of $109,053, which have been included in the carrying value of the Idaho-Maryland Gold Mine.

On January 6, 2017, the Company entered into an option agreement with Sierra Pacific Industries Inc. (“Sierra”) to purchase a 100% interest in and to certain surface rights totalling approximately 82 acres located near Grass Valley, California, United States, contiguous to the Idaho-Maryland Gold Mine property acquired by the Company on January 25, 2017. Pursuant to the option agreement, in order to exercise the option, the Company was required to pay $1,900,000 by March 31, 2017. Upon execution of the option agreement, the Company paid the vendors a non-refundable cash deposit in the amount of $100,000, which was credited against the purchase price of $1,900,000 upon exercise of the option. On April 3, 2017, the Company negotiated an extension of the closing date of the option agreement to June 30, 2017, in return for a cash payment of $200,000, at which time a payment of $1,600,000 was due in order to exercise the option. On June 7, 2017, the Company negotiated an extension of the closing date of the option agreement to September 30, 2017, in return for a cash payment of $300,000, at which time a payment of $1,300,000 was due in order to exercise the option.

On May 14, 2018, the Company completed the purchase of the surface rights totalling approximately 82 acres by making final payments totalling $1,300,000.

On June 13, 2019, the Company received $150,000 from a third party as a prepayment to use the Company’s property for a period of six months. On December 13, 2019, the third party paid an additional $75,000 to continue using the Company’s property for another three months. As at April 30, 2020, $225,000 has been recognized as other income ($175,000 during the nine months ended April 30, 2020 and $50,000 during the year ended July 31, 2019) with the balance of $Nil (July 31, 2019 - $101,339) remaining as an advance.

As at April 30, 2020, the Company has incurred cumulative exploration expenditures of $5,760,181 on the Idaho-Maryland Gold Mine property as follows:

F-10

RISE GOLD CORP.

(An Exploration Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED APRIL 30, 2020

(Expressed in United States Dollars)

(Unaudited)

6.

EQUIPMENT AND EQUIPMENT LOAN

During the year ended July 31, 2018, the Company recorded an equipment loan of $495,481 in connection with two diamond core drilling rigs purchased. As at July 31, 2019, the outstanding balance on this loan was $223,574.

Pursuant to an agreement with the lender, the Company completed the purchase of the drilling equipment by making a lump sum payment which was due on or before December 1, 2019. Early settlement of the equipment loan resulted in a gain on settlement of equipment loan of $19,924.

F-11

RISE GOLD CORP.

(An Exploration Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED APRIL 30, 2020

(Expressed in United States Dollars)

(Unaudited)

7.

CONTINGENCY

During the year ended July 31, 2014, the Company entered into a binding letter of intent (“LOI”) with Wundr Software Inc. (“Wundr”). Under the terms of the LOI, the Company would acquire 100% of the issued and outstanding common shares of Wundr. Due to unforeseen circumstances, the Company did not complete the transactions contemplated in the LOI, which the Company announced had expired on January 10, 2014.

On September 17, 2014, the Company learned that it was the subject, along with a number of additional defendants, of a notice of civil claim (the “Claim”) filed in the Supreme Court of British Columbia by Wundr, under which Wundr is seeking general damages from the Company as well as damages for conspiracy to cause economic harm. None of the allegations contained in the Claim have been proven in court.  Management has determined that the probability of the Claim resulting in an unfavourable outcome and financial loss to the Company is unlikely.

8.

RELATED PARTY TRANSACTIONS

Key management personnel consist of the Chief Executive Officer, Chief Financial Officer, and the directors of the Company.  The remuneration of the key management personnel is as follows:

a)

Salaries of $101,250 (2019 - $101,250) to the CEO of the Company.

b)

Directors fees of $64,167 (2019 - $45,000) to directors of the Company. As at April 30, 2020, $35,000 of these director fees is included in payables to related parties. As at July 31, 2019, the Company owed $129,638 to related parties.

c)

During the period ended April 30, 2020, the Company paid $100,799 (2019 - $20,830) in professional and consulting fees to a company controlled by a director of the Company.  

d)

Share-based compensation of $326,393 (2019 - $133,557) for options granted during the period ended April 30, 2020.

e)

Consulting fees of $Nil (2019 - $15,391) to the former CFO of the Company.

F-12

RISE GOLD CORP.

(An Exploration Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED APRIL 30, 2020

(Expressed in United States Dollars)

(Unaudited)

9.

LOAN PAYABLE

On September 3, 2019, the Company completed a debt financing for $1,000,000. This loan has a term of 4 years and an interest rate of 10% compounded monthly for the first two years increasing to 20% in year 3 and to 25% in year 4. Interest will accrue and be paid along with the principal upon the maturity date. The lender received 1,150,000 bonus share purchase warrants as additional consideration for advancing the loan. The fair value of these warrants was determined to be $444,942 which was netted against the loan payable balance along with $15,000 paid to the lender for a total of $459,942 in other issuance costs. Each warrant entitles the holder to acquire one share of common stock at an exercise price of $0.80 (C$1.00) for a period of three years from the date of issuance. This loan may be repaid prior to the maturity date, in whole or in part, provided that all accrued interest is paid. In addition, if total interest payments are less than $200,000, the difference will be paid to the Lender as prepayment compensation. The Loan is secured against the assets of the Company and its subsidiary. As at April 30, 2020, the balance of this loan including accrued interest of $69,357 is $684,970.

F-13

RISE GOLD CORP.

(An Exploration Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED APRIL 30, 2020

(Expressed in United States Dollars)

(Unaudited)

10.

WARRANT DERIVATIVE

The exercise price of the Company’s share purchase warrants is fixed in Canadian dollars and the functional currency of the Company is the US dollar. These warrants are considered to be a derivative as a variable amount of cash in the Company’s functional currency will be received on exercise of the warrants. Accordingly, the share purchase warrants issued as part of past financings, are classified and accounted for as warrant derivative.

Share purchase warrants with a compensatory nature are not included in this calculation.

The following table shows a continuity of the Company’s fair value of warrant derivative:

As the initial recognition as well as the revaluation of these warrants both took place within the nine-month period ended April 30, 2020, the Company recorded a loss on fair value adjustment on warrant derivative of $1,314,564 during the period (April 30, 2019 - $Nil).  

The following weighted average assumptions were used for the Black-Scholes pricing model valuation of warrants as at April 30, 2020 and August 1, 2019:

F-14

RISE GOLD CORP.

(An Exploration Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED APRIL 30, 2020

(Expressed in United States Dollars)

(Unaudited)

11.

CAPITAL STOCK AND ADDITIONAL PAID-IN-CAPITAL

Private Placements

On August 30, 2018, the Company completed a first tranche of a non-brokered private placement, issuing an aggregate of 288,125 units at a price of $0.60 (C$0.80) per unit for gross proceeds of $177,580 (C$230,500). Each unit consists of one share of common stock and one share purchase warrant exercisable into one share of common stock at a price of $0.90 (C$1.20) for a period of three years from the date of issuance until August 30, 2021.

On September 17, 2018, the Company completed a second tranche of a non-brokered private placement, issuing an aggregate of 200,313 units at a price of $0.60 (C$0.80) per unit for gross proceeds of $123,089 (C$160,250). Each unit consists of one share of common stock and one share purchase warrant exercisable into one share of common stock at a price of $0.90 (C$1.20) for a period of three years from the date of issuance until September 17, 2021.

On October 16, 2018, the Company completed a strategic initial investment in a financing of $1,352,606 (C$1,750,000) by issuing 1,750,000 units to Meridian Jerritt Canyon Corp. (“Meridian”), a wholly owned subsidiary of Yamana Gold Inc. (“Yamana”). Each unit issued at a price of $0.80 (C$1.00) consists of one share of common stock and one-half of one share purchase warrant where each whole warrant is exercisable into one share of common stock at a price of $1.00 (C$1.30) until October 16, 2020. As a result of the investment, the investor owned approximately 12.6% of the Company’s issued and outstanding shares on a non-diluted basis. In conjunction with the investment, the Company issued 87,500 share purchase warrants valued at $37,630 (discount rate – 1.65%, volatility – 139.09%, expected life – 2 years, dividend yield – 0%) as a finder’s fee to Southern Arc Minerals Inc. (“Southern Arc”), which will be exercisable into one share of common stock at a price of $1.00 (C$1.30) until October 16, 2020.

On November 5, 2018, the Company raised $572,694 (C$750,000) through the sale of 750,000 units at $0.80 (C$1.00) per unit where each unit consists of one share of common stock and one half of one share purchase warrant where each whole warrant is exercisable into one share of common stock at a price of $1.00 (C$1.30) until November 5, 2020. All 750,000 units issued in the final tranche were acquired by Southern Arc. 

On March 1, 2019, the Company completed a non-brokered private placement for a total of $1,378,184 (C$1,827,472) through the sale of 1,827,472 units at a price of $0.80 (C$1.00) per unit where each unit consists of one share of common stock and one-half of one share purchase warrant. Each whole warrant is exercisable into one share of common stock at a price of $1.00 (C$1.30) until March 1, 2021. Out of the 1,827,472 units issued as part of this private placement, 1,004,972 units were issued to Meridian to settle a convertible debt balance of $757,897 (C$1,004,972). In connection with the private placement, the Company incurred finders’ fees and share issuance costs of $80,919 (C$107,299), and issued a total of 19,950 finders’ warrants valued at $8,371 (C$11,100) (discount rate – 1.65%, volatility – 139.09%, expected life – 2 years, dividend yield – 0%), exercisable into one share of common stock at a price of $1.00 (C$1.30) for a period of two years from the date of issuance.

On July 3, 2019, the Company completed the first tranche of a non-brokered private placement. The Company raised a total of $552,000 (C$725,769) through the sale of 1,036,813 units at a price of $0.50 (C$0.70) per unit where each unit consists of one share of common stock and one-half of one share purchase warrant. Each whole warrant entitles the holder to acquire one additional share at an exercise price of $0.80 (C$1.00) until July 3, 2022.

F-15

RISE GOLD CORP.

(An Exploration Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED APRIL 30, 2020

(Expressed in United States Dollars)

(Unaudited)

11.

CAPITAL STOCK AND ADDITIONAL PAID-IN-CAPITAL (continued)

Private Placements (continued)

On August 19, 2019, the Company completed the second tranche of a non-brokered private placement for a total of $2,412,281 (C$3,207,850) through the sale of 4,582,644 units at a price of $0.53 (C$0.70) per unit where each unit consists of one share of common stock and one-half of one share purchase warrant. Each whole warrant is exercisable into one share of common stock at a price of $0.80 (C$1.00) until August 19, 2022. The Company has paid finders’ fees and associated legal fees of $8,710 and issued a total of 11,196 finder’s warrants with a value of $4,990 entitling the holder to acquire one share at a price of $0.80 (C$1.00) until August 19, 2022. The following weighted average assumptions were used for the Black-Scholes pricing model valuation of these warrants: Risk-free interest rate – 1.52%; expected volatility – 123.27%; share price of C$0.85 and strike price - C$1.00; expected life of warrants – 3 years.

Stock Options

On November 30, 2018, the Company granted 290,000 stock options with a fair value of $133,557 to employees and directors of the Company. The options are exercisable at $0.80 (C$1.00) per share for a period of five years and expire on November 29, 2023.

On August 21, 2019, the Company granted 751,284 stock options with a fair value of $331,966 to employees and directors of the Company pursuant to the terms of the Company’s Stock Option Plan. The options are exercisable at $0.50 (C$0.70) per share for a period of five years and expire on August 21, 2024.

On March 17, 2020, the Company granted 75,000 stock options with a fair value of $25,305 to a consultant of the Company pursuant to the terms of the Company’s Stock Option Plan. The options are exercisable at $0.35 (C$0.50) per share for a period of three years and expire on March 17, 2023.

During the period ended April 30, 2020, the Company recorded $357,271 in share-based compensation (April 30, 2019- $133,557).

The following incentive stock options were outstanding and exercisable at April 30, 2020:

F-16

RISE GOLD CORP.

(An Exploration Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED APRIL 30, 2020

(Expressed in United States Dollars)

(Unaudited)

11.

CAPITAL STOCK AND ADDITIONAL PAID-IN-CAPITAL (continued)

Stock Options (continued)

Stock option transactions are summarized as follows:

The following weighted average assumptions were used for the Black-Scholes pricing model valuation of stock options issued during the period ended April 30, 2020 and year ended July 31, 2019:

Warrants

The following warrants were outstanding at April 30, 2020:

During the period ended April 30, 2020, a total of 1,402,393 warrants with a weighted average exercise price of C$2.50 expired unexercised.

F-17

RISE GOLD CORP.

(An Exploration Stage Company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED APRIL 30, 2020

(Expressed in United States Dollars)

(Unaudited)

11.

CAPITAL STOCK AND ADDITIONAL PAID-IN-CAPITAL (continued)

Warrants (continued)

Warrant transactions are summarized as follows:

Share-Based Payments

The Company has a stock option plan under which it is authorized to grant options to executive officers and directors, employees and consultants enabling them to acquire up to 10% of the issued and outstanding common stock of the Company. Under the plan, the exercise price of each option equals the market price of the Company’s stock, less any applicable discount, as calculated on the date of grant. The options can be granted for a maximum term of 5 years with vesting determined by the board of directors.

12.

SUPPLEMENTAL DISCLOSURE WITH RESPECT TO CASH FLOWS

During the nine-month periods ended April 30, 2020 and 2019, the Company had the following non-cash financing and investing activities:

For the nine-month period ended April 30, 2020:

a)

The Company issued a total of 11,196 finder’s warrants entitling the holder to acquire one share at a price of $1.00 until August 19, 2022 with a fair value of $4,990. The following weighted average assumptions were used for the Black-Scholes pricing model valuation of these warrants: Risk-free interest rate – 1.52%; expected volatility – 123.27%; share price of C$0.85 and strike price - C$1.00; expected life of warrants – 3 years.

For the nine-month period ended April 30, 2019:

b)

The Company issued 107,450 share purchase warrants valued at $37,630 (discount rate – 1.65%, volatility – 139.09%, expected life – 2 years, dividend yield – 0%) as a finder’s fee to Southern Arc which will be exercisable into one share of common stock at a price of $1.00 (C$1.30) until October 16, 2020.

13.

SEGMENTED INFORMATION

A reporting segment is defined as a component of the Company that:

-

Engages in business activities from which it may earn revenues and incur expenses;

-

Operating results are reviewed regularly by the entity’s chief operating decision maker; and

-

Discrete financial information is available

The Company has determined that it operates its business in one geographical segment located in California, United States, where all of its equipment and mineral property interests are located.

F-18

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

SPECIAL NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS

CERTAIN STATEMENTS IN THIS REPORT, INCLUDING STATEMENTS IN THE FOLLOWING DISCUSSION, ARE WHAT ARE KNOWN AS "FORWARD LOOKING STATEMENTS", WHICH ARE BASICALLY STATEMENTS ABOUT THE FUTURE. FOR THAT REASON, THESE STATEMENTS INVOLVE RISK AND UNCERTAINTY SINCE NO ONE CAN ACCURATELY PREDICT THE FUTURE. WORDS SUCH AS "PLANS", "INTENDS", "WILL", "HOPES", "SEEKS", "ANTICIPATES", "EXPECTS" AND THE LIKE OFTEN IDENTIFY SUCH FORWARD LOOKING STATEMENTS, BUT ARE NOT THE ONLY INDICATION THAT A STATEMENT IS A FORWARD LOOKING STATEMENT. SUCH FORWARD LOOKING STATEMENTS INCLUDE STATEMENTS CONCERNING OUR PLANS AND OBJECTIVES WITH RESPECT TO PRESENT AND FUTURE OPERATIONS, AND STATEMENTS WHICH EXPRESS OR IMPLY THAT SUCH PRESENT AND FUTURE OPERATIONS WILL OR MAY PRODUCE REVENUES, INCOME OR PROFITS. NUMEROUS FACTORS AND FUTURE EVENTS COULD CAUSE US TO CHANGE SUCH PLANS AND OBJECTIVES OR FAIL TO SUCCESSFULLY IMPLEMENT SUCH PLANS OR ACHIEVE SUCH OBJECTIVES, OR CAUSE SUCH PRESENT AND FUTURE OPERATIONS TO FAIL TO PRODUCE REVENUES, INCOME OR PROFITS. THEREFORE, THE FOLLOWING DISCUSSION SHOULD BE CONSIDERED IN LIGHT OF THE DISCUSSION OF RISKS AND OTHER FACTORS CONTAINED IN THIS QUARTERLY REPORT ON FORM 10-Q AND IN OUR OTHER FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. NO STATEMENTS CONTAINED IN THE FOLLOWING DISCUSSION SHOULD BE CONSTRUED AS A GUARANTEE OR ASSURANCE OF FUTURE PERFORMANCE OR FUTURE RESULTS.

Description of Business

Our Company was incorporated on February 9, 2007 as Atlantic Resources Inc. in the state of Nevada pursuant to the Nevada Revised Statutes. On April 11, 2012, we changed our name to Patriot Minefinders Inc.  On January 14, 2015, we changed our name to Rise Resources Inc. On April 7, 2017, we changed our name to Rise Gold Corp.

On December 16, 2019, the Company completed a share consolidation of the authorized and outstanding capital stock on the basis of 10 pre-consolidation shares of common stock for one new post-consolidated share of common stock. All current and comparative references to the number of shares of common stock, stock options, warrants and loss per share reflect this share consolidation.

On January 14, 2015, we completed a merger with our wholly owned subsidiary, Rise Resources Inc., and formally assumed the subsidiary’s name by filing Articles of Merger with the Nevada Secretary of State. The subsidiary was incorporated entirely for the purpose of effecting the name change and the merger did not affect our Articles of Incorporation or corporate structure in any other way.

On January 22, 2015, we completed a 1 for 80 reverse split of our common stock and effected a corresponding decrease in our authorized capital by filing a Certificate of Change with the Nevada Secretary of State (the “Reverse Split”). As a result of the Reverse Split, our authorized capital decreased from 168,000,000 shares to 2,100,000 and our issued and outstanding common stock decreased from 6,340,000 shares to 79,252, with each fractional share being rounded up to the nearest whole share.

Both the name change and Reverse Split became effective in the market at the open of business on February 9, 2015.

On April 9, 2015, we increased our authorized capital from 2,100,000 to 40,000,000 shares of common stock.

On March 29, 2017, we completed another merger with our wholly owned subsidiary, Rise Gold Corp., and formally assumed the subsidiary’s name by filing Articles of Merger with the Nevada Secretary of State. The subsidiary was incorporated entirely for the purpose of effecting the name change and the merger did not affect our Articles of Incorporation or corporate structure in any other way.

F-19

We currently have one wholly owned subsidiary, Rise Grass Valley, Inc., which holds certain of our interests and assets located in the United States, and in particular, our interest in the I-M Mine Property. Rise Grass Valley, Inc. was incorporated in the state of Nevada pursuant to the Nevada Revised Statutes.

Our common stock is currently listed in Canada on the Canadian Securities Exchange (the “CSE”) under the symbol “RISE”. We are a reporting issuer in British Columbia, Alberta, and Ontario in Canada. Our common stock is also currently traded in the United States on the OTCQB Venture Market under the symbol “RYES”. We are an SEC reporting company by virtue of our class of common stock being registered under Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Business Development

Developments in our Company’s business during the July 31, 2019 fiscal year and the nine-month period ended April 30, 2020 include the following:

On August 30, 2018, the Company completed a first tranche of a non-brokered private placement, issuing an aggregate of 288,125 units at a price of $0.60 (C$0.80) per unit for gross proceeds of $177,580 (C$230,500). Each unit consists of one share of common stock and one share purchase warrant exercisable into one share of common stock at a price of $0.90 (C$1.20) for a period of three years from the date of issuance until August 30, 2021.

On September 17, 2018, the Company completed a second tranche of a non-brokered private placement, issuing an aggregate of 200,313 units at a price of $0.60 (C$0.80) per unit for gross proceeds of $123,089 (C$160,250). Each unit consists of one share of common stock and one share purchase warrant exercisable into one share of common stock at a price of $0.90 (C$1.20) for a period of three years from the date of issuance until September 17, 2021.

On October 16, 2018, the Company completed a strategic initial investment in a financing of $1,352,606 (C$1,750,000) by issuing 1,750,000 units to Meridian Jerritt Canyon Corp. (“Meridian”), a wholly owned subsidiary of Yamana Gold Inc. (“Yamana”). Each unit issued at a price of $0.80 (C$1.00) consists of one share of common stock and one-half of one share purchase warrant where each whole warrant is exercisable into one share of common stock at a price of $1.00 (C$1.30) until October 16, 2020. As a result of the investment, the investor owned approximately 12.6% of the Company’s issued and outstanding shares on a non-diluted basis. In conjunction with the investment, the Company issued 87,500 share purchase warrants valued at $37,630 (discount rate – 1.65%, volatility – 139.09%, expected life – 2 years, dividend yield – 0%) as a finder’s fee to Southern Arc Minerals Inc. (“Southern Arc”), which will be exercisable into one share of common stock at a price of $1.00 (C$1.30) until October 16, 2020.

On November 5, 2018, the Company raised $572,694 (C$750,000) through the sale of 750,000 units at $0.80 (C$1.00) per unit where each unit consists of one share of common stock and one half of one share purchase warrant where each whole warrant is exercisable into one share of common stock at a price of $1.00 (C$1.30) until November 5, 2020. All 750,000 units issued in the final tranche were acquired by Southern Arc. 

On March 1, 2019, the Company completed a non-brokered private placement for a total of $1,378,184 (C$1,827,472) through the sale of 1,827,472 units at a price of $0.80 (C$1.00) per unit where each unit consists of one share of common stock and one-half of one share purchase warrant. Each whole warrant is exercisable into one share of common stock at a price of $1.00 (C$1.30) until March 1, 2021. Out of the 1,827,472 units issued as part of this private placement, 1,004,972 units were issued to Meridian to settle a convertible debt balance of $757,897 (C$1,004,972). In connection with the private placement, the Company incurred finders’ fees and share issuance costs of $80,919 (C$107,299), and issued a total of 19,950 finders’ warrants valued at $8,371 (C$11,100) (discount rate – 1.65%, volatility – 139.09%, expected life – 2 years, dividend yield – 0%), exercisable into one share of common stock at a price of $1.00 (C$1.30) for a period of two years from the date of issuance.

On July 3, 2019, the Company completed the first tranche of a non-brokered private placement. The Company raised a total of $552,000 (C$725,769) through the sale of 1,036,813 units at a price of $0.50 (C$0.70) per unit where each unit consists of one share of common stock and one-half of one share purchase warrant. Each whole warrant entitles the holder to acquire one additional share at an exercise price of $0.80 (C$1.00) until July 3, 2022.

F-20

On August 19, 2019, the Company completed the second tranche of a non-brokered private placement for a total of $2,412,281 (C$3,207,850) through the sale of 4,582,644 units at a price of $0.53 (C$0.70) per unit where each unit consists of one share of common stock and one-half of one share purchase warrant. Each whole warrant is exercisable into one share of common stock at a price of $0.80 (C$1.00) until August 19, 2022. The Company has paid finders’ fees and associated legal fees of $8,710 and issued a total of 11,196 finder’s warrants with a value of $4,990 entitling the holder to acquire one share at a price of $0.80 (C$1.00) until August 19, 2022. The following weighted average assumptions were used for the Black-Scholes pricing model valuation of these warrants: Risk-free interest rate – 1.52%; expected volatility – 123.27%; share price of C$0.85 and strike price - C$1.00; expected life of warrants – 3 years.

Plan of Operations

As at April 30, 2020, the Company had a cash balance of $1,025,806, compared to a cash balance of $214,158 as of July 31, 2019.

Our plan of operations for the next 12 months is to continue the Use Permit process in Nevada County California, to re-open the Idaho-Maryland gold mine at the I-M Mine Property.

The Company submitted the application for a Use Permit to Nevada County on November 21st 2019. On April 28th, 2020, with a vote of 5-0, the Nevada County (“County”) Board of Supervisors approved the contract for Raney Planning & Management Inc. (“Raney”) to prepare the Environmental Impact Report (“EIR”) and conduct contract planning services on behalf of the County for the proposed Idaho-Maryland Mine Project. Raney will begin work immediately to review the technical studies submitted by Rise with the Use Permit application and initiate preparation of the Draft Environmental Impact Report (“Draft EIR”). A general outline of remaining milestones in the process to approval of the permit is outlined as follows:

1) County planning staff and Raney prepare a Draft EIR which includes holding a public scoping meeting and public comments on which issues should be covered by the EIR;

2) Draft EIR is published for public comment;

3) Raney publishes a Final EIR which includes responses to public comments on the Draft EIR; and

4) County decisionmakers review the Final EIR, certify the environmental document and consider approval of the Use Permit and Reclamation Plan at a public hearing.

The Company’s original estimate of the remaining timeline to approval ranges from December 2020 to May 2021. Ancillary construction and operational permits would follow as needed.  

Project Design

The Use Permit application proposes underground mining to recommence at an average throughput of 1,000 tons per day. The existing Brunswick Shaft, which extends to ~3,400 feet depth below surface, would be used as the primary rock conveyance from the IM Mine. A second service shaft would be constructed by raising from underground to provide for the conveyance of personnel, materials, and equipment. Gold processing would be done by gravity and flotation to produce gravity and flotation gold concentrates. Processing equipment and operations would be fully enclosed in attractive modern buildings and numerous mature trees located on the perimeter of the Brunswick site would be retained to provide visual shielding of aboveground project facilities and operations.

The Company would produce barren rock from underground tunneling and sand tailings as part of the project which would be used for creation of approximately 58 acres of level and useable industrial zoned land for future economic development in Nevada County.

A water treatment plant and pond, using conventional processes, would ensure that groundwater pumped from the mine is treated to regulatory standards before being discharged to the local waterways.

Detailed studies by professionals in the fields of civil and electrical engineering, biology, hydrology, cultural resources, traffic, air quality, human health, vibration, and sound have guided the design of the project.

Approximately 300 employees would be required if the mine reaches full production.

F-21

Nevada County Use Permit

The application and permitting process are being managed by Benchmark Resources, a California based planning and environmental consulting firm with substantial experience in the permitting of mining projects. Benchmark’s track record of success has resulted in the development of numerous environmentally sensitive and socially accepted mining projects across the state.

The IM Mine Property is 100% owned by the Company and located on private land in Nevada County, California. As a result, the Project is subject to the Nevada County Land Use and Development Code. Subsurface mining and aboveground processing are allowed uses subject to County approval of a Use Permit. The Company will also be required to obtain approval of a Reclamation Plan, variance, and rezone from the County for any surface component of the underground mining operation before mining operations can commence.

In order to approve the requested entitlements, the County must satisfy the requirements of the California Environmental Quality Act (“CEQA”).  CEQA requires that the County study the environmental impacts of any discretionary action, disclose the impacts to the public, and mitigate unavoidable impacts to the extent feasible.  CEQA is triggered whenever a California governmental agency is asked to approve a discretionary project. The project application will require an Environmental Impact Report (“EIR”).

The Company believes its drilling program has been successful but cautions investors no current mineral resources or mineral reserves have been defined. The Company’s submission of an application for a Use Permit from Nevada County requires information regarding planned throughput and material quantities. The Company cautions investors that no technical report has been filed to support that this rate of production can be achieved. The Company has not completed a feasibility study to establish mineral reserves and therefore has not demonstrated economic viability of the IM Mine. The Company has not made a production decision for the IM Mine.

F-22

Results of Operations

For the Periods Ended April 30, 2020 and 2019

The Company’s operating results for the periods ended April 30, 2020 and 2019 are summarized as follows:

Liquidity and Capital Resources

Working Capital

F-23

Cash Flows

As of April 30, 2020, the Company had $1,025,806 in cash, $1,160,745 in current assets, $5,916,854 in total assets, $233,744 in current liabilities and $1,999,534 in non-current liabilities, a working capital of $927,001 and an accumulated deficit of $16,437,984.

During the nine-month period ended April 30, 2020, the Company used $2,202,248 (2019 - $3,103,660) in net cash on operating activities. The difference in net cash used in operating activities during the two periods was largely due to the lower level of drilling and exploration activities during the period ended April 30, 2020.

The Company had no investing activities during the nine-month period ended April 30, 2020 (2019 - $94,795 used to purchase equipment).

The Company received net cash of $3,013,896 (2019 – $3,347,132) from financing activities during the nine-month period ended April 30, 2020.

The Company expects to operate at a loss for at least the next 12 months. It has no agreements for additional financing and cannot provide any assurance that additional funding will be available to finance its operations on acceptable terms in order to enable it to carry out its business plan. There are no assurances that the Company will be able to complete further sales of its common stock or any other form of additional financing. If the Company is unable to achieve the financing necessary to continue its plan of operations, then it will not be able to carry out any exploration work on the Idaho-Maryland Property or the other properties in which it owns an interest and its business may fail.

During the period ended April 30, 2020, the novel coronavirus outbreak (“COVID-19”) was declared a pandemic by the World Health Organization. The situation is dynamic and the ultimate duration and magnitude of the impact on the economy and the Company’s business are not known at this time. These impacts could include an impact on the Company’s ability to obtain debt and equity financing to fund ongoing exploration activities as well as its ability to explore and conduct business. These consolidated financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern.

Off Balance Sheet Arrangements

The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

F-24

ITEM 4.

CONTROLS AND PROCEDURES.

The Securities and Exchange Commission (the “SEC”) defines the term “disclosure controls and procedures” to mean controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (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 by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.  

As of the end of the period covered by this Report, management of the Company carried out an evaluation, with the participation of its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures.  Based on this evaluation, management concluded that the Company’s disclosure controls and procedures were not effective as of April 30, 2020 because a material weakness in internal control over financial reporting existed as of that date as a result of a lack of segregation of incompatible duties due to insufficient personnel.

A material weakness is a deficiency or a combination of control deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.

Until the Company is able to have the proper staff in place, it likely will not be able to remediate this material weakness.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the period ended April 30, 2020 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS.

On September 17, 2014, the Company learned that it was the subject, along with a number of additional defendants, of a notice of civil claim (the “Claim”) filed in the Supreme Court of British Columbia by Wundr Software Inc. (“Wundr”), an eBook software developer. Wundr and the Company were formerly parties to a binding letter of intent that was announced on November 12, 2013 (the “Wundr LOI”), pursuant to which the Company proposed to acquire 100% of the outstanding shares of Wundr. On January 10, 2014, the Company reported that the Wundr LOI had expired.

Among other things, the Claim alleges that the Company committed the tort of intentional interference with economic or contractual relations by virtue of its role in an alleged scheme to establish a competing business to Wundr, and that the Company, through its agents, breached the terms of the Wundr LOI by appropriating certain confidential information and intellectual property of Wundr for the purpose of establishing a competing business.  The Claim also alleges that the Company is vicariously liable for the actions of its agents.

Wundr is seeking general damages from the Company as well as damages for conspiracy to cause economic harm.  None of the allegations contained in the Claim have been proven in court, the Company believes that they are without merit, and it therefore intends to vigorously defend its position against Wundr.

Other than as described above, the Company is not aware of any material pending legal proceedings to which it is a party or of which its property is the subject. The Company also knows of no proceedings to which any of its directors, officers or affiliates, or any registered or beneficial holders of more than 5% of any class of the

F-25

Company’s securities, or any associate of any such director, officer, affiliate or security holder are an adverse party or have a material interest adverse to the Company.

ITEM 1A.

RISK FACTORS.

Not required.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.

OTHER INFORMATION.

None.

ITEM 6.

EXHIBITS.

The following exhibits are filed herewith:

3.1

Articles of Incorporation, as amended to date ⁽¹⁾

3.2

Bylaws ⁽²⁾

31.1

Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

XBRL Instance File

101.SCH

XBRL Taxonomy Schema Linkbase Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

F-26

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

(1)

Included as an exhibit to our registration statement on Form S-1 filed on September 5, 2017 and incorporated herein by reference.

(2)

Included as an exhibit to our registration statement on Form S-1 filed on February 19, 2008 and incorporated herein by reference.

F-27

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.

F-28