2. Liquidity

At December 31, 2019, the Company’s aggregate cash and cash equivalents totaled $4.6 million, compared to the $3.3 million in similar assets held at December 31, 2018. The December 31, 2019 balance is due in part to the following expenditures and cash inflows for the year ended December 31, 2019. Expenditures totaled $11.4 million from the following:

$4.0 million in exploration expenditures, including work at the Sand Canyon, Yoquivo, Santa Maria and other properties;

$2.0 million in evaluation activities, care and maintenance and property holding costs at the El Quevar project; and

$1.8 million in care and maintenance costs at the Velardeña Properties; and

$3.6 million in general and administrative expenses.

The foregoing expenditures were offset by cash inflows of $12.7 million from the following:

$5.3 million of net operating margin received pursuant to the oxide plant lease (defined as oxide plant lease revenue less oxide plant lease costs);

$3.0 million from the sale of certain nonstrategic mineral claims to Peñoles;

$1.9 million of net proceeds from the sale of the Company’s common stock in a registered direct offering (as described in Note 17);

$1.3 million received as a deposit, net of repayments, related to the proposed sale of the Velardeña Properties and other mineral concessions to Autlán (as described in Notes 1 and 14);

$0.6 million, net of commitment fees and other offering related costs, from the LPC Program (as described in Note 17);

$0.1 million from the sale of miscellaneous assets and $0.1 million from the sale of an investment in a junior mining company (as described in Note 6); and

$0.4 million from a decrease in working capital primarily related to an increase in accrued liabilities for value added taxes collected from the sale of mineral claims to Peñoles (as described in Note 14; these value added taxes were required to be remitted to the Mexican government in January 2020).

In addition to the $4.6 million cash balance at December 31, 2019, in October 2019 the Company entered into an option to purchase agreement for the sale of its interest in the Santa Maria property and expects to receive an initial cash payment of $1.0 million in connection with the transaction by the end of the first quarter 2020. The Company also expects to receive approximately $3.3 million in net operating margin from the lease of the oxide plant during the next twelve-month period ending December 31, 2020. In addition, subsequent to December 31, 2019 the Company received approximately $0.4 million from the sale of our common stock under the LPC Program and the ATM Program during the year to date period ended February 25, 2020. The Company’s forecasted expenditures during the twelve months ending December 31, 2020 are as follows:

Approximately $3.0 million on exploration activities and property holding costs related to our portfolio of exploration properties located primarily in Mexico, including project assessment and evaluation costs relating to Sand Canyon, Yoquivo and other properties;

Approximately $1.3 million related to repayment of the remaining Autlán deposit;

Approximately $1.8 million at the Velardeña Properties for care and maintenance;

Approximately $0.8 million at the El Quevar project to fund ongoing exploration and evaluation activities, care and maintenance and property holding costs;

Approximately $0.3 million related to the payment of income taxes due in Canada;

Approximately $3.2 million on general and administrative costs; and

Approximately $0.5 million related to an increase in working capital related to a decrease in accrued liabilities.

The Company’s forecasted expenditures of $10.9 million are greater than the cash resources of $9.3 million, noted above, that are projected to be available during the period. Therefore, through December 31, 2020, the Company will 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 17 below), the LPC Program or otherwise.

The actual amount of cash expenditures that the Company incurs during the twelve-month period ending December 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 Sand Canyon, Yoquivo and El Quevar. Likewise, although the Company believes it is probable it will receive the sources of cash described above, the actual amount of cash receipts that the Company receives during the period may vary significantly from the amounts specified above due to, among other things, a decrease in the quantity of material processed under the oxide plant lease, an unexpected early termination of the oxide plant lease by the lessee, or the election by the purchaser of the Santa Maria property to terminate the proposed acquisition prior to payment of the initial $1.0 million portion of the purchase price. If cash expenditures are greater than anticipated or if cash receipts are less than anticipated, the Company would need to take more aggressive actions to maintain sufficient cash balances over the next twelve months, 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, the LPC Program or otherwise.

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 continuing operations of the Company 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 Note 10 are dependent on the ability of the Company 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 December 31, 2019.