2. Liquidity

At June 30, 2019, the Company’s aggregate cash and cash equivalents totaled $1.8 million, compared to the $2.9 million in similar assets held at December 31, 2018. The June 30, 2019 balance is due in part from the following expenditures and cash inflows for the six months ended June 30, 2019. Expenditures totaled $6.2 million from the following:

$2.2 million in exploration expenditures, including work at the Yoquivo, Sand Canyon, Santa Maria and other properties;

$1.0 million in care and maintenance costs at the Velardeña Properties;

$1.0 million in exploration and evaluation activities, care and maintenance and property holding costs at the El Quevar project; and

$2.0 million in general and administrative expenses.

The foregoing expenditures were offset by cash inflows of $5.1 million from the following:

$2.7 million of net operating margin received pursuant to the oxide plant lease (defined as oxide plant lease revenue less oxide plant lease costs);

$1.5 million received as a deposit related to the proposed sale of the Velardeña Properties and other mineral concessions to Autlán (as described in Note 1);

$0.6 million, net of commitment fees and other offering related costs, from the LPC Program (as described in Note 14 below); and

$0.3 million decrease in working capital primarily related to increased accounts payables for general and administrative expenses.

In addition to the $1.8 million cash balance at June 30, 2019, the Company received approximately $2.0 million, net of costs, from the sale of approximately 8.6 million shares of the Company’s common stock to certain institutional investors in July 2019 (see Note 20). The Company also expects to receive an additional approximately $1.3 million in net operating margin from the lease of the oxide plant prior to closing the Agreement with Autlán near the end of the third quarter 2019. In addition, near the end of the third quarter 2019, the Company expects to receive the remaining $20.5 million purchase price from closing the proposed Autlán Transaction (see Note 1). The Company’s currently budgeted expenditures during the next twelve months ending June 30, 2020 are as follows:

Approximately $3.0 million on exploration activities and property holding costs related to the Company’s portfolio of exploration properties located in Mexico, Nevada and Argentina including project assessment and evaluation costs relating to Yoquivo, Sand Canyon and other properties;

Approximately $0.5 million at the Velardeña Properties for care and maintenance prior to the closing of the Autlán Transaction;

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.

If the Autlán Transaction closes, which we anticipate will occur near the end of the third quarter 2019, the Company’s cash resources will greatly exceed its currently budgeted expenditures during the next twelve months ended June 30, 2020. Should the closing of the transaction not occur, the Company may be required to repay the US$1.5 million deposit and may need to take appropriate actions, which could include sales to parties other than Autlán 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 and the LPC Program (as defined in Note 14 below) or otherwise.

The actual amount of cash that the Company receives or the expenditures that the Company incurs during the twelve-month period ending June 30, 2020 may vary significantly from the amounts specified above and will depend on a number of factors, including the successful closing of the Autlán Transaction, variations in anticipated revenues from the oxide plant lease, 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, which would require further actions on the Company’s part in order to maintain sufficient cash balances over the next twelve months.

The condensed 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 closing the Autlán Transaction or securing additional funding in the future on terms acceptable to the Company or at all. Notwithstanding the foregoing, the Company believes the anticipated closing of the Autlán Transaction, continuing cash flow from the lease of the oxide plant (until closing of the Autlán Transaction occurs), 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 June 30, 2019.