2. Liquidity

At March 31, 2019, the Company’s aggregate cash and cash equivalents totaled $2.2 million, compared to the $3.3 million in similar assets held at December 31, 2018. The March 31, 2019 balance is due in part from the following expenditures and cash inflows for the three months ended March 31, 2019. Expenditures totaled $2.8 million from the following:

$0.9 million in exploration expenditures, including work at the Yoquivo, Santa Maria and other properties;

$0.5 million in care and maintenance costs at the Velardeña Properties;

$0.3 million in exploration and evaluation activities, care and maintenance and property holding costs at the El Quevar project; and

$1.1 million in general and administrative expenses.

The foregoing expenditures were offset by cash inflows of $1.7 million from the following:

$1.3 million of net operating margin received pursuant to the oxide plant lease (defined as oxide plant lease revenue less oxide plant lease costs); and

$0.4 million, net of commitment fees and other offering related costs, from the LPC Program (as defined in Note 15 below).

In addition to the $2.2 million cash balance at March 31, 2019, the Company expects to receive approximately $4.8 million in net operating margin from the lease of the oxide plant during the next twelve-month period ending March 31, 2020. In addition, subsequent to March 31, 2019 the Company received approximately $0.1 million from the sale of our common stock under the LPC Program. The Company’s currently budgeted expenditures during the twelve months ending March 31, 2020 are as follows:

Approximately $2.0 million on exploration activities and property holding costs related to the Company’s portfolio of exploration properties located primarily in Mexico, including project assessment and evaluation costs relating to Yoquivo and other properties;

Approximately $1.5 million at the Velardeña Properties for care and maintenance;

Approximately $1.0 million at the El Quevar project to fund ongoing exploration and evaluation activities, care and maintenance and property holding costs; and

Approximately $3.0 million on general and administrative costs.

The Company’s currently budgeted expenditures are slightly greater than its resources noted above. Therefore, during 2019 the Company intends to take appropriate actions, which may include sales of certain of the Company’s exploration assets, reductions to the Company’s currently budgeted level of spending, and/or raising additional equity capital through sales under the ATM Program (as defined in Note 15 below), the LPC Program or otherwise.

The actual amount of cash that the Company receives or the expenditures that the Company incurs during the twelve-month period ending March 31, 2020 may vary significantly from the amounts specified above and will depend on a number of factors, including variations from anticipated care and maintenance costs at the Velardeña Properties and costs for continued exploration, project assessment, and development at the Company’s other exploration properties, including El Quevar. Moreover, revenues from the oxide plant lease may be less than anticipated, which would require further actions on the Company’s part in order to maintain sufficient cash balances over the next twelve months.

The consolidated financial statements have been prepared on a going concern basis under which an entity is considered to be able to realize its assets and satisfy its liabilities in the normal course of business. However, the Company’s continuing long-term operations are dependent upon its ability to secure sufficient funding and to generate future profitable operations. The underlying value and recoverability of the amounts shown as property, plant and equipment in the Company’s consolidated financial statements are dependent on its ability to generate positive cash flows from operations and to continue to fund exploration and development activities that would lead to profitable mining activities or to generate proceeds from the disposition of property, plant and equipment.

There can be no assurance that the Company will be successful in generating future profitable operations or securing additional funding in the future on terms acceptable to the Company or at all. The Company believes the continuing cash flow from the lease of the oxide plant, use of the ATM Program and the LPC Program, and the potential for additional asset dispositions make it probable that the Company will have sufficient cash to meet its financial obligations and continue its business strategy beyond one year from the filing of the Company’s consolidated financial statements for the period ended March 31, 2019.