UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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MAGELLAN GOLD CORPORATION
Form 10-Q
March 31, 2024
Table of Contents
| 2 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Magellan Gold Corporation
Consolidated Balance Sheets
(Unaudited)
| March 31, 2024 | December 31, 2023 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Total current assets | ||||||||
| Mineral rights and properties | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accounts payable - related party | ||||||||
| Accrued liabilities | ||||||||
| Convertible note payable, net - related party | ||||||||
| Convertible note payable, net | ||||||||
| Accrued interest - related parties | ||||||||
| Accrued interest | ||||||||
| Advances payable - related party | ||||||||
| Advances payable | ||||||||
| Notes payable | ||||||||
| Notes payable - related party | ||||||||
| Derivative liability | ||||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Shareholders’ deficit: | ||||||||
| Preferred shares, shares Series A preferred stock - $ stated value; authorized; shares issued and outstanding | ||||||||
| Common shares, $ par value; shares authorized; and shares issued and outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Shareholders’ deficit: | ( | ) | ( | ) | ||||
| Total liabilities and shareholders’ deficit | $ | $ | ||||||
See accompanying notes to the unaudited consolidated financial statements
| 3 |
Magellan Gold Corporation
Consolidated Statements of Operations
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Operating expenses: | ||||||||
| General and administrative expenses | $ | $ | ||||||
| Total operating expenses | ||||||||
| Operating loss | ||||||||
| Other expense: | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Gain (loss) on change in derivative liability | ( | ) | ||||||
| Total other expense | ( | ) | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Basic net loss per common share | $ | ( | ) | $ | ( | ) | ||
| Diluted net loss per common share | $ | ( | ) | $ | ( | ) | ||
| Basic weighted average | ||||||||
| Diluted weighted average | ||||||||
See accompanying notes to the unaudited consolidated financial statements
| 4 |
Magellan Gold Corporation
Consolidated Statements of Shareholders’ Deficit
For the three months ended March 31, 2024 and 2023
(Unaudited)
| Additional | ||||||||||||||||||||
| Common Stock | Paid-in | Accumulated | ||||||||||||||||||
| Shares | Par Value | Capital | Deficit | Total | ||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Shares issued for the acquisition of mineral properties | ||||||||||||||||||||
| Stock based compensation | ||||||||||||||||||||
| Net loss | – | ( | ) | ( | ) | |||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Shares issued for cash | ||||||||||||||||||||
| Shares issued for the acquisition of mineral properties | ||||||||||||||||||||
| Stock based compensation | – | |||||||||||||||||||
| Net loss | – | ( | ) | ( | ) | |||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
See accompanying notes to the unaudited consolidated financial statements
| 5 |
Magellan Gold Corporation
Consolidated Statements of Cash Flows
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock based compensation | ||||||||
| (Gain) loss on change in derivative liability | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other assets | ( | ) | ||||||
| Accounts payable and accrued liabilities | ( | ) | ||||||
| Accounts payable - related party | ||||||||
| Accrued interest | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Financing activities: | ||||||||
| Proceeds from notes payable from related parties | ||||||||
| Repayment of convertible debt | ( | ) | ||||||
| Proceeds from sale of common stock | ||||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash | ||||||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Non-cash financing and investing activities: | ||||||||
| Expenses paid on behalf of the Company | $ | $ | ||||||
| Shares issued for the acquisition of mineral properties | $ | $ | ||||||
See accompanying notes to the unaudited consolidated financial statements
| 6 |
MAGELLAN GOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 – Organization, Basis of Presentation, and Nature of Operations
Organization and Nature of Operations
Magellan Gold Corporation (“we” “our”, “us”, the “Company” or “Magellan”) was incorporated on September 28, 2010, under the laws of the State of Nevada. Our principal business is the acquisition and exploration of mineral resources. We have not presently determined whether the properties to which we have mining rights contain mineral reserves that are economically recoverable.
Our primary focus is to explore and develop mineral properties in the United States. Effective March 31, 2020, we divested our subsidiary holding all our international assets and plan to advance our Center Star Gold Project and our Kris Project towards resource definition and eventual development, to advance the exploration efforts on one or more of the Company’s copper project, Blue Jacket, Copper Cliff or Copper Butte and possibly to acquire additional mineral rights and conduct additional exploration, development and permitting activities. Our mineral lease payments, mineral claim annual holding costs, permitting applications and exploration and development efforts will require additional capital. We rely upon the sale of our securities as well as advances and loans from executive management and significant shareholders to fund our operations as we have not generated any significant revenue.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
We prepare our financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”). The accompanying unaudited interim consolidated financial statements have been prepared in accordance with GAAP for interim financial information in accordance with Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In our opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results for the full year. While we believe that the disclosures presented herein are adequate and not misleading, these interim financial statements should be read in conjunction with the audited financial statements and the footnotes thereto contained in our annual report on Form 10-K for the year ended December 31, 2023.
Our consolidated financial statements include our accounts and the accounts of our 100% owned subsidiaries, Clearwater and M Gold. All intercompany transactions and balances have been eliminated. Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
We compute basic net loss per common share by dividing our net loss attributable to common shareholders by our weighted-average number of common shares outstanding during the period. Computation of diluted net loss per common share adds the weighted-average number of potential common shares outstanding to the weighted-average common shares outstanding, as calculated for basic net loss per share, except for instances in which there is a net loss. For the three months ended March 31, 2024, stock options, warrants, and shares issuable from convertible notes were considered for their dilutive effects. For the three months ended March 31, 2023, stock options, warrants, and shares issuable from convertible notes were considered for their dilutive effects.
| 7 |
Derivative Financial Instruments
Fair value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments and measurement of their fair value for accounting purposes. In assessing the convertible debt instruments, management determines if the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not considered conventional convertible debt under ASC 470, the Company will continue its evaluation process of these instruments as derivative financial instruments under ASC 815. The Company applies the guidance in ASC 815-40-35-12 to determine the order in which each convertible instrument would be evaluated for derivative classification. The Company’s sequencing policy is to evaluate for reclassification contracts with the earliest maturity date first.
Once determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations as an adjustment to fair value of derivatives.
Recent Accounting Pronouncements
The Company does not believe that any recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements.
Liquidity and Going Concern
Our consolidated financial statements have been
prepared on a going concern basis, which assumes that we will be able to meet our obligations and continue our operations during the next
fiscal year. Asset realization values may be significantly different from carrying values as shown in our consolidated financial statements
and do not give effect to adjustments that would be necessary to the carrying values of assets and liabilities should we be unable to
continue as a going concern. At March 31, 2024, we had a working capital deficit of $
We anticipate that additional funding will be in the form of additional loans from officers, directors or significant shareholders, or equity financing from the sale of our common stock but cannot assure that any future financing will occur.
Note 3 – Mineral Rights and Properties
Kris Project
On June 6, 2023, the Company entered a
memorandum of understanding for earn-in agreement (“MOU”) with Gold Express Mines, Inc. (“GEM”). Per the
MOU, the Company agreed to earn-in for up to 50% working interest in the Kris Project, which is comprised of 74 unpatented mining
claims located in Plumas County, CA. In March 2023, the Company paid Gold Express Mines, Inc. $
| 8 |
Blue Jacket and Cuprum Project
On January 4, 2024, the Company entered into
a purchase agreement with GEM, pursuant to which, among other things (i) the Company agreed to purchase certain mineral assets owned
and controlled by GEM for a purchase price equal to 5,500,000 shares of the Company’s common stock, par value $0.001 per
share; and (ii) GEM agreed to assign to the Company a certain lease for mineral properties for a purchase price of
shares of common stock. As of March 31, 2024, the total purchase price for the acquisition was determined to be $
Note 4 – Fair Value of Financial Instruments
Financial assets and liabilities recorded at fair value in our consolidated balance sheets are categorized based upon a fair value hierarchy established by GAAP, which prioritizes the inputs used to measure fair value into the following levels:
Level 1 – Quoted market prices in active markets for identical assets or liabilities at the measurement date.
Level 2 – Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable and can be corroborated by observable market data.
Level 3 – Inputs reflecting management’s best estimates and assumptions of what market participants would use in pricing assets or liabilities at the measurement date. The inputs are unobservable in the market and significant to the valuation of the instruments.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The carrying values for cash and cash equivalents, prepaid assets, accounts payable and accrued liabilities, related party line of credit and notes payable approximate their fair value due to their short-term maturities.
Fair Value Measurements
The Company’s assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy.
The following table presents information about the Company’s liabilities measured at fair value on a recurring basis and the Company’s estimated level within the fair value hierarchy of those assets and liabilities as of March 31, 2024 and December 31, 2023:
| Level 1 | Level 2 | Level 3 | Fair value at March 31, 2024 | |||||||||||||
| Liabilities: | ||||||||||||||||
| Derivative liability | $ | $ | $ | $ | ||||||||||||
| Level 1 | Level 2 | Level 3 | Fair value at December 31, 2023 | |||||||||||||
| Liabilities: | ||||||||||||||||
| Derivative liability | $ | $ | $ | $ | ||||||||||||
| 9 |
There were no transfers between Level 1, 2 or 3 during the period.
The table below presents the change in the fair value of the derivative liability during the three months ended March 31, 2024:
| Fair value as of December 31, 2023 | $ | |||
| Loss on change in fair value of derivatives | ||||
| Fair value as of March 31, 2024 | $ | |||
Note 5 – Notes payable, Convertible Note Payable and Derivative Liability
Unsecured advances
As of March 31, 2024 and December 31, 2023, the
advances balance totaled $
Notes payable
As of March 31, 2024 and December 31, 2023, the
notes payable balance was $
Series 2019A 10% Unsecured Convertible Notes
In 2019, the Company sold $
On October 1, 2019, the Company sold a
| 10 |
Series 2020A 8% Unsecured Convertible Notes
In 2020, the Company sold $
Convertible Note
On February 10, 2021, the Company entered
into a debt agreement to borrow $
Note 6 – Stockholders’ Deficit
Common stock
During the three months ended March 31, 2024,
the Company issued shares of common stock with a fair value of $
Stock Warrants, Stock Options, and the 2017 Equity Incentive Plan:
Under the 2017 Equity Incentive Plan, the Company is authorized to grant rights to acquire up to a maximum of shares of common stock. The 2017 Plan provides for the grant of (1) both incentive and non-statutory stock options, (2) stock bonuses, (3) rights to purchase restricted stock and (4) stock appreciation rights. As of March 31, 2024, the Company had shares available for future grant.
| 11 |
Stock option activity within the 2017 Equity Incentive Plan and warrant activity outside the plan, for the three months ended March 31, 2024 is as follows:
| Stock Options | Stock Warrants | |||||||||||||||
| Shares | Weighted Average Exercise Price | Shares | Weighted Average Exercise Price | |||||||||||||
| Outstanding at December 31, 2023 | $ | $ | ||||||||||||||
| Granted | – | – | – | |||||||||||||
| Cancelled | – | – | – | |||||||||||||
| Expired | – | – | – | |||||||||||||
| Exercised | – | – | – | |||||||||||||
| Outstanding at March 31, 2024 | $ | $ | ||||||||||||||
| Exercisable at March 31, 2024 | $ | $ | ||||||||||||||
As of March 31, 2024, the outstanding stock options have a weighted average remaining term of years and have intrinsic value, and the outstanding stock warrants have a weighted average remaining term of years and have intrinsic value.
Note 7 – Commitments and Contingencies
Mining Claims
We currently own directly or hold indirectly through mineral leases or other contracts a total of 192 unpatented mining claims. To maintain these claims, annual payments are required to be made to the United States Bureau of Land Management by the 1st of September of each year. Additionally, state laws impose additional filings and fees which are required to be made with the Recorder’s Office in the local county in which the claims are located. Additionally, some counties impose property taxes on unpatented mining claims which are due at various dates. As of March 31, 2024, all the unpatented mineral claims are believed by the Company Management to be in good standing.
Note 8 – Executive Employment Agreement
Effective August 1, 2020, the Company and Michael Lavigne, executed a Restricted Stock Unit Agreement pursuant to which the Company agreed to grant to Mr. Lavigne, in consideration of services to be rendered as President, CEO and Director, restricted stock units consisting of 15,000 units for each month of service. The vested stock units will be settled in shares of common stock upon or as soon as practicable (a) upon written request any time after December 31, 2020 or (b) following the termination date, whichever occurs first. As of March 31, 2024 and December 31, 2023, and restricted stock units may be settled in shares of common stock, respectively. During the three months ended March 31, 2024, the Company recognized $ of stock-based compensation related to the agreement, respectively.
Note 9 – Related Party Transactions
Notes Payable – Related Parties
As of December 31, 2023, the notes payable
– related parties balance was $
| 12 |
Unsecured advances – related party
As of March 31, 2024 and December 31, 2023, the
advances related party balance totaled $
Series 2020A 8% Unsecured Convertible Notes
In 2020, the Company sold $285,000 of Series
2020A 8% Unsecured Convertible Notes with a maturity date of November 30, 2020. The purchase price of the Note is equal to the
principal amount of the Note. The Series 2020A Notes are convertible into shares of Common Stock at a conversion price of $0.50
during the life of the Note. The lenders were issued 142,500 common stock warrants with an exercise price of $0.50 per share for a
term of 5 years. Two related parties purchased $60,000 of the 2020A notes. The Company evaluated the conversion option and concluded
a beneficial conversion feature was present at issuance. The Company recognized the beneficial conversion feature as a debt discount
and additional paid in capital as of December 31, 2020. The $237,263 debt discount will be amortized over the term of the loan. The
Notes will accrue interest at the rate of 8% per annum, payable quarterly in arrears. In July 2020, $25,000 of Series 2020A 8%
Unsecured Convertible Notes were converted into 50,000 shares of common stock at a conversion price of $0.50 per share. The Series
2020A 8% Unsecured Convertible Notes that were due and payable in November 2020 and are currently past due. If a default notice is
received the interest rate will be 12%. During the three months ended March 31, 2024, $
3% Secured Convertible Note
On July 1, 2020, the Company issued a $125,000
Secured Convertible Note to a related party as part of the purchase of Clearwater Mining Corporation. The convertible note is secured
by common stock of the Company, matures on July 1, 2022 and will accrue interest at the rate of 3% per annum, payable yearly in arrears
beginning July 1, 2021. The Note is convertible into shares of Common Stock at a conversion price of $0.50 during the life of the Note.
The Company evaluated the conversion option and concluded a beneficial conversion feature was present at issuance. The Company recognized
the beneficial conversion feature and relative fair value of the warrants as a debt discount and additional paid in capital in July 2019.
The $87,500 debt discount will be amortized over the term of the loan. Amortization expense of $21,815 was recognized during the year
ended December 31, 2022. As of March 31, 2024 and December 31, 2023, the balance due to a related party under this note was $
Convertible Note
On February 10, 2021, the Company entered
into a debt agreement to borrow $
| 13 |
As of March 31, 2024, the total derivative liability
on the above note was adjusted to a fair value of $
As of March 31, 2024, the balance on the loan
was $
Consulting Agreement
On December 29, 2022, the Company entered into
a two-year consulting agreement with Rock Creek Mining Company commencing on December 1, 2022, to provide consulting and advisory services.
Michael Lavigne, the Company’s CEO, is an officer and a Director of Rock Creek Mining Company. The consulting agreement provides
for compensation of $6,000 per month, payable on demand. During the three months ended March 31, 2024, the Company incurred consulting
fees of $
Conflicts of Interests
Athena Silver Corporation (“Athena”) is a company under common control. Mr. Gibbs is a significant investor in both Magellan and Athena. Magellan and Athena are both exploration stage companies involved in the business of acquisition and exploration of mineral resources.
Silver Saddle Resources, LLC is also a company under common control. Mr. Gibbs is a significant investor and managing member of Silver Saddle. Magellan and Silver Saddle are both exploration stage companies involved in the business of acquisition and exploration of mineral resources.
Gold Express Mines, Inc. (“GEM”) is a company under common control. Mr. Crosby and Mr. Ryan are both on the board and/or hold management roles in both Magellan and GEM. Magellan and GEM are both exploration stage companies involved in the business of acquisition and exploration of mineral resources.
The existence of common ownership and common management could result in significantly different operating results or financial positions from those that could have resulted had Magellan, Athena, Silver Saddle and Gold Express been autonomous.
Accrued Interest - Related Parties
As of March 31, 2024, Mr. Malhotra is no longer considered a related party, and therefore all amounts due to him have been reclassified out of related party accounts.
Accrued interest due to related parties is included in our consolidated balance sheets as follows:
| March 31, 2024 | December 31, 2023 | |||||||
| Accrued interest payable – Mr. Gibbs | $ | $ | ||||||
| Accrued interest payable – Mr. Joseph Lavigne | ||||||||
| Accrued interest payable – Mr. Schifrin | ||||||||
| Accrued interest payable – Gold Express Mines, Inc. | ||||||||
| Accrued interest payable – Mr. Malhotra | ||||||||
| $ | $ | |||||||
| 14 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We use the terms “Magellan,” “we,” “our,” and “us” to refer to Magellan Gold Corporation.
The following discussion and analysis provides information that management believes is relevant for an assessment and understanding of our results of operations and financial condition. This information should be read in conjunction with our audited financial statements, which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and our interim unaudited financial statements and notes thereto included with this report in Part I, Item 1.
Forward-Looking Statements
Some of the information presented in this Form 10-Q constitutes “forward-looking statements”. These forward-looking statements include, but are not limited to, statements that include terms such as “may,” “will,” “intend,” “anticipate,” “estimate,” “expect,” “continue,” “believe,” “plan,” or the like, as well as all statements that are not historical facts. Forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from current expectations. Although we believe our expectations are based on reasonable assumptions within the bounds of our knowledge of our business and operations, there can be no assurance that actual results will not differ materially from expectations.
All forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made.
Overview
We were incorporated on September 28, 2010, in Nevada. Our principal business is the acquisition and exploration of mineral resources. We have not presently determined whether the properties to which we have mineral rights contain mineral reserves that are economically recoverable.
We have only had limited operations to date, and we rely upon the sale of our securities and borrowings from significant investors to fund our operations, as we have not generated any revenue.
Effective July 1, 2020, Magellan entered into a stock purchase agreement to acquire Clearwater Gold Mining Corporation (“Clearwater”) which owns certain unpatented mining claims in Idaho County, Idaho that include the historic Center Star Gold Mine near Elk City, Idaho. The Center Star Mine hosts high grade gold mineralization that was discovered in the early 1900’s. There was periodic historic production and development work done under different ownership through the 1980s. With the high-grade gold mineralization present, Magellan will be evaluating the historic mine data to assess the potential to develop a gold resource at Center Star. The project area is located 45 miles from Grangeville, Idaho and near the town of Elk City, Idaho.
In consideration for 100% of the issued and outstanding shares of Clearwater, Magellan has agreed to pay its sole shareholder 1,000,000 shares of Magellan common stock and $150,000 in cash. The cash consideration of $25,000 was paid and the balance of $125,000 is evidenced by a secured promissory note due in two years. The Note is secured by the Clearwater shares and assets.
On January 3, 2023, the Company entered into an asset purchase agreement with Gold Express Mines, Inc (“Gold Express”). Pursuant to the agreement, the Seller sold the following 1) Golden, Idaho Project located in Idaho County, Idaho and consisting of seventy-two unpatented mining claims 2) Seafoam District - located in Custer County, Idaho and consisting of five unpatented mining claims 3) Blacktail District - located in Lemhi County, Idaho and consisting of eight unpatented mining claims 4) Big-it Project- located in Shoshone County, Idaho consisting of twenty-five unpatented mining claims and a mineral lease over three unpatented mining claims and 94.86 acres of real property and 5) Terror Gulch (Capparelli Group) located in Shoshone County, Idaho consisting of twenty-six unpatented mining claims. As of March 31, 2023, the total purchase price for the acquisition was determined to be $1,000,000 which consisted of 5,000,000 shares of common stock with a fair value of $1,000,000. The Company concluded the transaction qualified as an asset acquisition and all such acquisition costs have been capitalized. The Company concluded the purchase of a single set of assets qualified as an asset acquisition and all such acquisition costs have been capitalized as mineral rights and properties on the balance sheet. During the year ended December 31, 2023, the Company evaluated the mineral rights and properties for impairment and recorded an impairment expense of $1,000,000. As of December 31, 2023, the Gold Express mineral rights and properties balance totaled $0.
| 15 |
On June 6, 2023, the Company entered a memorandum of understanding for earn-in agreement(“MOU”) with Gold Express Mines, Inc. Per the MOU, the Company agreed to earn-in for up to 50% working interest in Kris Project, which has 74 unpatented mining claims located in Plumas County, CA. In March 2023, the Company paid Gold Express Mines, Inc. $100,000, which was recorded as a deposit, and shall spend $400,000 on the Kris Project in allowable expenditures over the next thirty-six months, assuming permitting for the work is obtained. If permitting delays the exploration and other work programs, the earn-in period shall be extended accordingly. Allowable expenditures are sampling, drilling, assaying, geologic mapping, and mine site improvements made or performed directly on the existing mine site or expanded mine site. Consulting fees for work directly benefiting the Project are also allowed including management of work, preparation of reports, and planning for Future work. Claim maintenance fees on the existing claims are also allowable expenditures, as are the costs of future land acquisitions which are deemed to benefit the Kris Project, and which are approved by both parties beforehand. As part of the agreement, the Company shall make the Bureau of Land Management claim maintenance fees on the existing claims no later than August 15, 2023, and by August 15th in ensuing years during the earn-in period. The Company shall pay for the annual Plumas County “notice of intent to hold” recording costs and any other Plumas County fees or taxes which accrue during the earn-in period. These shall all be allowable expenses under the earn-in agreement. As of December 31, 2023, the $100,000 deposit paid to Golden Express for the MOU was reclassed to mineral rights and properties on the balance sheet.
On January 4, 2024 the Company entered into an asset purchase agreement with Gold Express. Pursuant to the agreement, the Seller sold the following 1) Copper Butte Project located in Pinal County, Arizona and consisting of 66 unpatented mining claims 2) Blue Jacket Project located in Idaho County, Idaho and consisting of 79 unpatented mining claims and 3) Copper Cliff Project located in Adams County, Idaho and consisting of 71 unpatented mining claims and a mineral lease with option to purchase consisting of patented mining claims known as the Copper Cliff Patented Claims located in Adams County, Idaho upon landowner approval. As of March 31, 2024, the total purchase price for the acquisition for the three projects was determined to be $422,565, to be paid upon landowner approval, consisting of 5,500,000 shares of common stock for the three projects with a fair market value of $422,565. As of the date of this filing, the Company and GEM have not completed the assignment of leases and the 500,000 shares related to assignment have not been issued. The Company concluded the transaction qualified as an asset acquisition and all costs have been capitalized. The Company concluded the purchase of a single set of assets qualified as an asset acquisition and all such acquisition costs have been capitalized as mineral rights and properties on the balance sheet.
Our primary focus is to advance our Center Star gold project, our Kris gold project and our copper projects, Blue Jacket, Copper Cliff and Copper Butte towards resource definition and eventual development, and possibly to acquire additional mineral rights and conduct additional exploration, development and permitting activities. Our permitting applications and exploration and development efforts will require additional capital. We rely upon the sale of our securities as well as advances and loans from executive management and significant shareholders to fund our operations as we have not generated any significant revenue.
Results of Operations for the three months ended March 31, 2024 and 2023
| Three months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Operating expenses: | ||||||||
| General and administrative expenses | $ | 100,364 | $ | 33,945 | ||||
| Total operating expenses | 100,364 | 33,945 | ||||||
| Operating loss | (100,364 | ) | (33,945 | ) | ||||
| Other income (expense): | ||||||||
| Interest expense | (20,682 | ) | (18,748 | ) | ||||
| Gain (loss) on change in derivative liability | (9,219 | ) | 21,772 | |||||
| Total other income (expense) | (29,901 | ) | 3,024 | |||||
| Net loss | $ | (130,265 | ) | $ | (30,921 | ) | ||
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Operating expenses
During the three months ended March 31, 2024, our total operating expenses included general and administrative expenses of $100,364 as compared to $33,945 during the three months ended March 31, 2023. The $66,419 increase is primarily associated with increases in professional fees and stock-based compensation.
Other income (expense)
During the three months ended March 31, 2024, total other expense was $29,901 as compared to other income of $3,024 during the three months ended March 31, 2023. The $32,925 change was mainly related to change in derivative liability.
Liquidity and Capital Resources
Our unaudited consolidated financial statements have been prepared on a going concern basis, which assumes that we will be able to meet our obligations and continue our operations during the next fiscal year. Asset realization values may be significantly different from carrying values as shown in our consolidated financial statements and do not give effect to adjustments that would be necessary to the carrying values of assets and liabilities should we be unable to continue as a going concern. At March 31, 2024, we had not yet generated sufficient revenues or achieved profitable operations and we have accumulated losses of $21,124,043. We expect to incur further losses in the development of our business, all of which raises substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern depends on our ability to generate future profits and/or to obtain the necessary financing to meet our obligations arising from normal business operations when they come due, of which there can be no assurance.
We anticipate that additional funding will be in the form of additional loans from officers, directors or significant shareholders, or equity financing from the sale of our common stock but cannot assure that any future financing will occur.
Cash Flows
A summary of our cash provided by and used in operating, investing and financing activities is as follows:
| Three months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Net cash used in operating activities | $ | (73,917 | ) | $ | (113,482 | ) | ||
| Net cash provided by financing activities | 75,000 | 140,000 | ||||||
| Net change in cash | 1,083 | 26,518 | ||||||
| Cash beginning of period | 99 | 743 | ||||||
| Cash end of period | $ | 1,182 | $ | 27,261 | ||||
At March 31, 2024, we had $1,182 in cash and a $1,870,028 working capital deficit. This compares to cash of $99 and a working capital deficit of $1,784,671 at December 31, 2023.
Net cash used in operating activities during the three months ended March 31, 2024 was $73,917 and was mainly comprised of our $130,265 net loss during the period, adjusted by a non-cash charges of $44,908 of stock compensation and a loss on change in derivative liability of $9,219. In addition, it reflects changes in operating assets and liabilities of $2,221.
Net cash used in operating activities during the three months ended March 31, 2023 was $113,482 and was mainly comprised of our $30,921 net loss during the period, adjusted by a non-cash charges of $6,315 of stock compensation and a gain on change in derivative liability of $21,772. In addition, it reflects changes in operating assets and liabilities of $67,104.
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During the three months ended March 31, 2024, net cash provided by financing activities was $75,000 comprised of proceeds from notes payable
related parties.
During the three months ended March 31, 2023, net cash provided by financing activities was $140,000 comprised of $240,000 proceeds from sale of common stock and the repayment of convertible debt of $100,000.
Off Balance Sheet Arrangements
We do not have and have never had any off-balance sheet arrangements.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates, assumptions and judgments that affect the amounts reported in the financial statements, including the notes thereto. We consider critical accounting policies to be those that require more significant judgments and estimates in the preparation of our financial statements, including the following: long lived assets; intangible assets valuations; and income tax valuations. Management relies on historical experience and other assumptions believed to be reasonable in making its judgment and estimates. Actual results could differ materially from those estimates.
Management believes its application of accounting policies, and the estimates inherently required therein, are reasonable. These accounting policies and estimates are periodically reevaluated, and adjustments are made when facts and circumstances dictate a change.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures:
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s (“SEC”) rules and forms, and that such information is accumulated and communicated to management, including Michael Lavigne, our Principal Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management’s control objectives.
Our management, with the participation of our CEO and CFO, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were not effective as of such date as a result of material weaknesses in our internal control over financial reporting due to lack of segregation of duties, a limited corporate governance structure, and lack of a formal review process that includes multiple levels of review as discussed in Item 9A of our Form 10-K for the fiscal year ended December 31, 2023.
While we strive to segregate duties as much as practicable, there is an insufficient volume of transactions at this point in time to justify additional full time staff. We believe that this is typical in many exploration stage companies. We may not be able to fully remediate the material weakness until we commence mining operations, at which time we would expect to hire more staff. We will continue to monitor and assess the costs and benefits of additional staffing.
Changes in Internal Control Over Financial Reporting:
There were no changes in our internal control over financial reporting that occurred during the last fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
There have been no material changes from the risk factors disclosed in Item 1A. to Part I. of our Annual Report on Form 10-K for the year ended December 31, 2023.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None, except as previously reported.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
During the quarter ended March 31, 2024, no director
or officer
ITEM 6. EXHIBITS
|
Exhibit Number |
Exhibit Description | |
| 31.1* | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2* | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1* | Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.1* | Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS* | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104* | Cover Page Interactive Data File (formatted in IXBRL, and included in exhibit 101). |
_____________
* Filed or furnished herewith.
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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.
Dated: June 4, 2024
|
MAGELLAN GOLD CORPORATION
By: /s/ Michael Lavigne Michael Lavigne Chief Executive Officer and Chief Financial Officer (Principal Executive, Financial and Accounting Officer) |
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