MAGELLAN COPPER & GOLD Corp 10-Q

Item 1. Financial Statements MAGELLAN GOLD CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, 2021 December 31, 2020 ASSETS Current assets Cash $ 177,099 $ – Prepaid expenses and other current assets 22,501 2,168 Total current assets 199,600 2,168 Mineral rights and properties 1,000,000 1,000,000 Development costs 149,695 112,968 Total assets $ 1,349,295 $ 1,115,136 LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable $ 159,510 $ 195,951 Accounts payable - related party 12,500 25,139 Accrued liabilities 206,468 618,480 Convertible note payable, net - related party 141,130 119,435 Convertible note payable, net - third party 594,151 420,978 Accrued interest - related parties 8,958 5,470 Accrued interest 56,049 35,015 Advances payable - related party 20,252 47,762 Advances payable - third party 18,223 10,000 Derivative liability 103,107 – Total current liabilities 1,320,348 1,478,230 Total liabilities 1,320,348 1,478,230 Commitments and contingencies – – Shareholders' equity (deficit): Preferred shares, 25,000,000 shares – – Series A preferred stock - $ 10.00 stated value; 2,500,000 authorized; 0 and 192,269 shares issued and outstanding, respectively – 1,922,690 Series B preferred stock - $ 1,250.00 stated value; 5,000 authorized; no shares issued and outstanding – – Common shares, $0.001 par value; 1,000,000,000 shares authorized; 11,340,412 and 7,098,394 shares issued and outstanding, respectively 11,341 7,099 Additional paid-in capital 17,337,560 13,540,086 Accumulated deficit ( 17,319,954 ) ( 15,832,969 ) Shareholders' equity (deficit): 28,947 ( 363,094 ) Total liabilities and shareholders' equity (deficit) $ 1,349,295 $ 1,115,136 See accompanying notes to the unaudited consolidated financial statements 3 MAGELLAN GOLD CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Operating expenses: General and administrative expenses $ 531,550 $ 123,580 $ 1,250,987 $ 293,565 Total operating expenses 531,550 123,580 1,250,987 293,565 Loss from continuing operations 531,550 123,580 1,250,987 293,565 Other income (expense): Interest expense ( 84,893 ) ( 74,241 ) ( 148,494 ) ( 148,973 ) Other income – 26,980 – 26,980 Loss on settlement of liabilities – ( 765,659 ) – ( 765,659 ) Loss on conversion of debt – ( 1,309,588 ) – ( 1,309,588 ) Loss on change in derivative liability ( 16,491 ) – ( 7,392 ) – Total other income (expense) ( 101,384 ) ( 2,122,508 ) ( 155,886 ) ( 2,197,240 ) Net loss from continuing operations ( 632,934 ) ( 2,246,088 ) ( 1,406,873 ) ( 2,490,805 ) Net loss from discontinued operations, net of tax – ( 556 ) – ( 30,249 ) Net loss ( 632,934 ) ( 2,246,644 ) ( 1,406,873 ) ( 2,521,054 ) Series A preferred stock dividend ( 32,045 ) ( 59,738 ) ( 80,112 ) ( 119,476 ) Net loss attributable to common shareholders ( 664,979 ) ( 2,306,382 ) ( 1,486,985 ) ( 2,640,530 ) Other comprehensive income: Foreign currency translation – – – 68,636 Total other comprehensive income – – – 68,636 Net comprehensive loss $ ( 664,979 ) $ ( 2,306,382 ) $ ( 1,486,985 ) $ ( 2,571,894 ) Basic and diluted net loss per common share: Continuing operations $ ( 0.09 ) $ ( 0.54 ) $ ( 0.20 ) $ ( 0.66 ) Discontinued operations $ – $ – $ – $ ( 0.01 ) Net loss attributable to common shareholders $ ( 0.09 ) $ ( 0.54 ) $ ( 0.20 ) $ ( 0.67 ) Basic and diluted weighted-average: Common shares outstanding 7,768,932 4,289,621 7,586,011 3,968,568 See accompanying notes to the unaudited consolidated financial statements 4 MAGELLAN GOLD CORPORATION Consolidated Statements of Shareholders' Deficit For the three and six months ended June 30, 2021 and 2020 (Unaudited) Additional Accumulated Other Series A Preferred Stock Common Stock Paid - in Comprehensive Accumulated Shares Amount Shares Par Value Capital Income (Loss) Deficit Total Balance, December 31, 2020 192,269 $ 1,922,690 7,098,394 $ 7,099 $ 13,540,086 $ – $ ( 15,832,969 ) $ ( 363,094 ) Exercise of warrants – – 50,000 50 9,950 – – 10,000 Common stock issued for settlement liabilities – – 261,538 262 135,738 – – 136,000 Stock based compensation – – 266,667 267 651,083 – – 651,350 Series A preferred stock dividend – – – – – – ( 48,067 ) ( 48,067 ) Net loss – – – – – – ( 773,939 ) ( 773,939 ) Balance, March 31, 2021 192,269 1,922,690 7,676,599 7,678 14,336,857 – ( 16,654,975 ) ( 387,750 ) Exercise of warrants – – 1,385,000 1,385 275,615 – – 277,000 Stock based compensation – – – – 448,552 – – 448,552 Series A preferred stock dividend – – – – – ( 32,045 ) ( 32,045 ) Conversion of Series A preferred stock and accrued dividend ( 192,269 ) ( 1,922,690 ) 2,278,813 2,278 2,276,536 – – 356,124 Net loss – – – – – – ( 632,934 ) ( 632,934 ) Balance, June 30, 2021 – $ – 11,340,412 $ 11,341 $ 17,337,560 $ – $ ( 17,319,954 ) $ 28,947 Balance, December 31, 2019 242,269 $ 2,422,690 3,651,042 $ 3,651 $ 8,383,929 $ ( 68,636 ) $ ( 11,902,725 ) $ ( 1,161,091 ) Common stock issued for services – – – – 5,500 – – 5,500 Stock based compensation – – – – 76,650 – – 76,650 Series A preferred stock dividend – – – – – – ( 59,738 ) ( 59,738 ) Disposition of assets, related party – – – – 206,860 – – 206,860 Net loss – – – – – – ( 274,410 ) ( 274,410 ) Other comprehensive loss – – – – – 68,636 – 68,636 Balance, March 31, 2020 242,269 2,422,690 3,651,042 3,651 8,672,939 – ( 12,236,873 ) ( 1,137,593 ) Debt discount from warrants and beneficial conversion feature – – – – 102,263 – – 102,263 Stock issued for services – – – – 5,500 – – 5,500 Stock and warrants issued for liabilities – – 773,770 774 962,774 – – 963,548 Stock and warrants issued for convertible notes and accrued interest – – 1,183,635 1,184 1,545,132 – – 1,546,316 Series A preferred stock dividend – – – – – – ( 59,738 ) ( 59,738 ) Net loss – – – – – – ( 2,246,644 ) ( 2,246,644 ) Balance, June 30, 2020 242,269 $ 2,422,690 5,608,447 $ 5,609 $ 11,288,608 $ – $ ( 14,543,255 ) $ ( 826,348 ) See accompanying notes to the unaudited consolidated financial statements 5 MAGELLAN GOLD CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six months ended June 30, 2021 2020 Operating activities: Net loss from continuing operations $ ( 1,406,873 ) $ ( 2,490,805 ) Adjustments to reconcile net loss from continuing operations to net cash used in operating activities: Accretion of discounts on notes payable 115,583 95,126 Stock based compensation 1,099,902 87,650 Loss on settlement of liabilities – 2,118,383 Loss on change in derivative liability 7,392 – Changes in operating assets and liabilities: Prepaid expenses and other assets ( 20,333 ) 13,834 Accounts payable and accrued liabilities ( 18,552 ) 91,585 Accrued interest 24,522 22,379 Net cash used in operating activities from continuing operations ( 198,359 ) ( 61,848 ) Net cash used in operating activities from discontinued operations – ( 50,141 ) Net cash used in operating activities ( 198,359 ) ( 111,989 ) Investing activities: Cash paid for development costs ( 36,727 ) – Net cash used in investing activities from continuing operations ( 36,727 ) – Net cash used in investing activities from discontinued operations – – Net cash used in investing activities ( 36,727 ) – Financing activities: Payments on convertible debt from third parties – ( 10,000 ) Proceeds from convertible debt from third parties 175,000 110,000 Proceeds from convertible debt from related parties – 50,000 Proceeds from advances from related parties – 20,000 Payments on advances from related parties ( 20,000 ) ( 83,284 ) Payments on advances from third parties ( 30,420 ) – Proceeds from advances from third parties 605 10,000 Proceeds from exercise of warrants 287,000 – Net cash provided by financing activities from continuing operations 412,185 96,716 Net cash provided by financing activities from discontinued operations – – Net cash provided by financing activities 412,185 96,716 Effect of foreign currency exchange – 68,636 Net change in cash 177,099 53,363 Cash at beginning of period – 167 Cash at end of period $ 177,099 $ 53,530 Supplemental disclosure of cash flow information Cash paid for interest $ 6,022 $ 3,250 Cash paid for income taxes $ – $ – Non-cash financing and investing activities: Series A preferred stock dividend $ 80,112 $ 119,476 Expenses paid on behalf of the Company $ 30,528 $ 69,780 Common stock issued for settlement liabilities $ 136,000 $ 137,500 Disposition of assets, related party $ – $ 206,860 Conversion of debt and accrued interest $ 95,715 $ 236,727 Discounts on convertible notes $ – $ 102,263 Common stock issued for accounts payable $ – $ 17,254 Conversion of Series A preferred stock and accrued dividend $ 2,278,814 $ – 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 of our international assets and plan to advance our recently acquired Idaho Gold project towards resource definition and eventual development, and possibly to acquire additional mineral rights and conduct additional exploration, development and permitting activities. Our mineral lease payments, 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 and six months ended June 30, 2021 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, 2020. On July 1, 2020, the Company entered into a Stock Purchase Agreement to acquire Clearwater Gold Mining Corporation (“Clearwater”) which owns certain unpatented mining claims in Idaho County, Idaho. The Company 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. On August 25, 2020 the Company, formed a new wholly owned subsidiary, M Gold Royalty (“M Gold”), to expand into the royalty business. M Gold Royalty will engage in organically generating royalties derived from a portfolio of mineral property interests in North America. Royalties from this portfolio will be complemented by royalties from selected acquisitions as well as income from other strategic investments. Our consolidated financial statements include our accounts and the accounts of our 100% owned subsidiary, 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”). 7 Net Loss per Common Share 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 six months ended June 30, 2021, 72,000 of stock options, 423,635 of warrants, and 1,283,375 shares issuable from convertible notes were considered for their dilutive effects. For the six months ended June 30, 2020, 72,000 of stock options, 2,281,135 of warrants, 242,269 shares issuable from Series A Preferred Stock and 550,978 shares issuable from convertible notes were considered for their dilutive effects. 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 June 30, 2021, we had a working capital deficit of $ 1,120,747 , we had not yet generated any significant revenues or achieved profitable operations and we have accumulated losses of $ 17,319,954 . We expect to incur further losses in the development of our business, all of which raises substantial doubt as to 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. 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 than any future financings will occur. 8 Note 3 – Mineral Rights and Properties Center Star Gold Mine On July 1, 2020, the Company 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 (“Center Star”) near Elk City, Idaho. As a result of the Clearwater acquisition, Gregory Schifrin, the sole shareholder of Clearwater, was appointed to serve as a member of the Company’s Board on July 1, 2020. In consideration for 100% of the issued and outstanding shares of Clearwater, the Company has agreed to pay Clearwater’s sole shareholder 1,000,000 shares of Magellan common stock, $125,000 convertible note and $25,000 in cash. The 1,000,000 shares are to be issued to the shareholder on and under the terms as follows: 250,000 shares at the time of closing, 250,000 shares at the time the Center Mine receives its permit to reopen the main portal of the mine, 250,000 shares at the point the main portal has been reopened and 250,000 shares two-years from closing concurrent the pay-off of the $125,000 convertible note. As of June 30, 2021, the total purchase price for the Clearwater was determined to be $1,000,000 which consisted of $ 12,500 cash paid, $ 12,500 accrued in accounts payable – related party, a $ 125,000 convertible promissory note, and 1,000,000 shares of common stock with a fair value of $ 850,000 . The Company concluded the transaction qualified as an asset acquisition and all such acquisition costs have been capitalized. As of June 30, 2021 and December 31, 2020, the Company had $ 149,695 and $ 112,968 in capitalized development cost to develop gold resources at Center Star, respectively. Note 4 – Disposition of Business Mexico Operations On March 3, 2017 the Company entered into a Memorandum of Understanding (“MOU”) with Rose Petroleum plc (“Rose”), a multi-asset natural resource business, to purchase an operating floatation plant that also includes a precious metals leach circuit and associated assets, licenses and agreements (together, the “SDA Mill”) located in the State of Nayarit, Mexico. Prior to closing, all of the assets and operations related to the SDA Mill were transferred to a newly incorporated entity, Minerales Vane 2 S.A. de C.V. (“Minerales Vane 2”). Effective November 30, 2017, the Company’s newly incorporated wholly owned subsidiary, Magellan Acquisition Corporation (“MAC”), acquired 100% of the issued and outstanding shares of Minerales Vane 2 (“MV2”). Effective March 31, 2020 the Company entered into an Agreement to Accept Collateral in Full Satisfaction of Obligations (the “Agreement”) with certain holders of Promissory Notes (the “Lenders”) due December 31, 2019 (the “Notes”) in the aggregate principal amount of $1.05 million. The Company is indebted under the Notes to the Lenders and the Company’s obligations to the Lenders are secured by a Stock Pledge and Security Agreement covering 100 shares of common stock of Magellan Acquisition Corporation and one (1) share of MV2 (the “Collateral”) held under a Collateral Agent Agreement. Magellan Acquisition Corp. and MV2 own the SDA Mill and El Dorado prospect in Nayarit, Mexico. The Notes matured on December 31, 2019 and remain unpaid and in default. The Lenders have accelerated the Company’s indebtedness. Pursuant to terms set forth in the Agreement, the Lenders have agreed to accept the Collateral in full satisfaction of the Notes and unconditionally and irrevocably waive any entitlement or right to receive payment of (i) the initial 10% Financing Fee included in the principal amount of the Notes, (ii) the 5% Rollover Fee agreed to in an Allonge and Modification Agreement. The effective date of the Agreement was March 31, 2020. Silver District On July 21, 2020, the Company entered into a Stock Purchase agreement with Tri Power Resources, LLC to sell 1,000 shares representing 100% ownership of Gulf+Western Industries, Inc (“Gulf+Western”) to Tri Power in consideration for the return and cancellation of 50,000 shares of the Company’s Series A Preferred Stock with a stated value of $10 per share. John Gibbs, a majority shareholder in the Company, is the Managing Member and Chief Executive Officer of Tri Power Resources, LLC. 9 Due to the related party nature of the above transactions, the gain of $ 206,860 associated with the disposals were recorded to additional paid in capital. Summary The agreements qualify as a discontinued operation in accordance with U.S. GAAP. As a result, operating results and cash flows related to the Gulf+Western, MAC and MV2 operations have been reflected as discontinued operations in the Company’s consolidated statements of operations and comprehensive loss and consolidated statements of cash flows. Schedule of discontinued operations June 30, 2021 June 30, 2020 Revenue $ – $ – Cost of sales – – Exploration costs – – General and administrative expenses – ( 30,249 ) Operating loss – ( 30,249 ) Other expense – – Net loss from discontinued operations $ – $ ( 30,249 ) Note 5 – 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. 10 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 June 30, 2021 and December 31, 2020: Schedule of Fair Value, Assets and Liabilities Measured on Recurring Level 1 Level 2 Level 3 Fair value at June 30, 2021 Liabilities: Derivative liability $ – $ – $ 103,107 $ 103,107 Level 1 Level 2 Level 3 Fair value at December 31, 2020 Liabilities: Derivative liability $ – $ – $ – $ – 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 six months ended June 30, 2021: Schedule of fair value of the derivative liability Fair value as of December 31, 2020 $ – Fair value on the date of issuance recorded as a debt discount 95,715 Loss on change in fair value of derivatives 7,392 Fair value as of June 30, 2021 $ 103,107 Note 6 – Advances Unsecured advances – related party During the six months ended June 30, 2021, a Director paid expenses on behalf of the Company of $ 30,252 and the Company made payments on advances of $20,000. As of June 30, 2021, the advances from related party balance were $ 20,252 . Unsecured advances –third party During the six months ended June 30, 2021, the Company received $ 605 in cash advances, had expenses paid on its behalf of $ 276 and made repayments on advances of $ 30,420 . As of June 30, 2021, the advances from third party balance were $ 18,223 . Note 7 – Convertible Note Payable and Derivative Liability Series 2019A 10% Unsecured Convertible Notes In 2019, the Company sold $ 135,000 of Series 2019A 10 % Unsecured Convertible Notes. The purchase price of the Note is equal to the principal amount of the Note. The Series 2019A Notes are convertible into shares of Common Stock at a conversion price of $ 1.00 during the life of the Note. The lenders were issued 100,000 common stock warrants with an exercise price of $2.00 per share. 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 August and December 2019. The $ 135,000 debt discount is amortized over the term of the loan. The Notes will accrue interest at the rate of 10% per annum, payable quarterly in arrears. The Notes mature twelve (12) months from the date of issue. The maturity date can be extended at the option of the Company for an additional one (1) year. There are two Series 2019A 10% Unsecured Convertible Notes that were due and payable in August 2020 and are currently past due and in default. The default interest rate on the notes is 12%. As of June 30, 2021, the balance due under these notes net of unamortized discount of $ 0 , is $ 75,000 , with accrued interest of $ 12,945 . 11 On October 1, 2019, the Company sold a 10 % Unsecured Convertible Note for $ 145,978 due on demand to settle accounts payable. The purchase price of the 10% Unsecured Convertible Note is equal to the principal amount of the Note. The 10% Unsecured Convertible Note is convertible into shares of Common Stock at a conversion price of $ 1.00 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 as a debt discount and additional paid in capital in October 2019. The debt discount will be amortized over the term of the loan. The 10% Unsecured Convertible Note will accrue interest at the rate of 10% per annum payable quarterly, accruing from the date of issuance. As of June 30, 2021, the balance due under these notes net of unamortized discount of $ 0 , is $ 145,978 , with accrued interest of $ 25,476 . 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. As of June 30, 2021, the balance due to a related party under these notes net of unamortized discount of $ 0 , is $ 60,000 , with accrued interest of $ 5,218 . As of June 30, 2021, the balance due to a third party under these notes net of unamortized discount of $ 0 , is $ 200,000 , with accrued interest of $ 16,231 . 3% Secured Convertible Note On July 1, 2020, the Company issued a $ 125,000 Secured Convertible Note to a related party for the 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 $ 21,695 was recognized during the six months ended June 30, 2020. As of June 30, 2021, the balance due to a related party under this note net of unamortized discount of $ 43,870 , is $ 81,130 , with accrued interest of $ 3,740 . AJB Convertible Note On February 10, 2021, the Company entered into a debt agreement to borrow $ 200,000 . The secured note has an original issuance discount of $ 16,000 along with $ 9,000 in legal and finder fees recorded as a discount, which will be amortized over the life of the note. The loan is secured by common stock of the Company, bears interest at a rate of 10 % and has a six-month maturity. The unpaid principal is convertible into shares of the Company’s common stock at the conversion price. The conversion price shall be the less of 90% of the lowest trading price during the previous twenty (20) trading day period ending on the issuance date, or during the previous twenty (20) trading day period ending on date of conversion of this note. The Company issued the debtholder 266,667 common shares as a commitment fee. Due to the variable conversion feature the note conversion feature was bifurcated from the note and recorded as a derivative liability. The day one derivative liability was $ 95,715 was recorded as a discount on the convertible notes payable. As of June 30, 2021, the balance on the loan, net of unamortized discount of $ 26,826 , is $ 173,173 , with accrued interest of $ 645 . As of June 30, 2021, the total derivative liability on the above note was adjusted to a fair value of $ 103,107 . During the six months ended June 30, 2021, $ 93,889 of the discount was amortized leaving an unamortized balance of $ 26,825 . The fair value of the conversion option was estimated using the Black-Scholes option pricing model and the following assumptions during the period: fair value of stock $ 0.90 - 1.03 , volatility of 91.27 % - 105.28 % based on a comparable company peer group, expected term of 0.50 years, risk-free rate of 0.05 % - 0.06 % and a dividend yield of 0 %. 12 Note 8 – Stockholders’ Deficit Common Stock On February 10, 2021, the Company issued the 266,667 common shares as a commitment fee. The shares were valued at $ 0.92 , the closing price of the Company’s stock on February 10, 2021. During the six months ended June 30, 2021, the Company recognized $ 245,334 of stock-based compensation related to this issuance. On August 6, 2020, the Company entered into a one-year investor relations consulting agreement. As consideration for its services under the Agreement, the Company agreed to pay to the consultant 261,538 restricted shares of the Company’s common stock. The shares were valued at $ 1.56 , the closing price of the Company’s stock on August 6, 2020. As of December 31, 2020, the Company had not issued the shares and accrued $ 136,000 related to this agreement. During the six months ended June 30, 2021, the Company issued the 261,538 shares related to this agreement, settled the prior year accrual of $ 136,000 for 2020 services and recognized $ 204,000 of stock-based compensation for services provided during the six months ended June 30, 2021. During the six months ended June 30, 2021, the Company received net proceeds of $ 10,000 from the exercise of 50,000 warrants. On July 15, 2020, the Company issued 500,000 shares for services rendered pursuant to two investor relations agreements: 200,000 shares under a Services Agreement and 300,000 shares under a Consulting Agreement. The shares were valued at $1.29, the closing price of the Company’s stock on July 15, 2020. The Services Agreement is $7,500 per month and has a term of twelve months The Consulting Agreement is $7,500 per month and has an initial term of six months. If the Consulting Agreement is not terminated at least thirty days prior to the end of the initial term, the term will continue for an additional six months. During the six months ended June 30, 2021 the Company recognized $ 322,250 of expense related to these shares. Preferred Stock In September 2020, the Company established a Series B Convertible Preferred Stock (“Series B Preferred”) and authorized an aggregate of 5,000 shares with a par value of $0.001 per share and a stated value of $1,250.00 per share. The holders of outstanding Series B Preferred shall be entitled to receive dividends at the annual rate of 10% based on the stated value per share. Dividends on the share of Series B Preferred shall be cumulative. During the six months ended June 30, 2021, the Company accrued $ 80,112 for the Series A preferred stock dividend. Effective May 31, 2021, the Company received notices of Conversion from five of its Series A Convertible Preferred stockholders that they had elected to convert a total of 192,269 shares of Series A Convertible Preferred Stock into an aggregate of 1,922,690 shares of Common Stock and $356,123 in accrued but unpaid dividends on the Series A Shares into an aggregate of 356,123 shares of Common Stock Each share of Series A Convertible Preferred Stock was convertible into ten shares of Common Stock. The Conversion Price of the Dividend Shares was $1.00 per share. On June 30, 2021, the Company issued 2,278,813 shares of common stock for the conversion of preferred stock and accrued dividends. 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 200,000 shares of common stock. The 2017 Plan provides for the grant of (1) both incentive and nonstatutory stock options, (2) stock bonuses, (3) rights to purchase restricted stock and (4) stock appreciation rights. As of June 30, 2021, the Company had 128,000 shares available for future grant. 13 On September 15, 2020, John Gibbs, a related party, transferred 330,000 warrants to purchase common stock back to the Company. The warrants were accounted for as if they were returned and re-granted. Deepak Malhotra, a member of the board, received 300,000 of the transferred warrants as compensation for services to be performed over a one year term. The warrants were valued $386,764 and will recognized over the one year service period. During the six months ended June 30, 2021, the Company recognized $ 193,382 of expense related to the issuance of these warrants. Mr. Malhotra exercised 50,000 warrants in the third quarter of 2020. On May 31, 2021, Mr. Malhotra’s remaining 250,000 warrants were extended until May 31, 2022. The incremental value of the warrant modification of $194,687 will be recorded over the remaining service period ending September 30, 2021. During the six months ended June 30, 2021, the Company recognized $48,671 of expense related to the warrant modification. In May 2021, John Gibbs, a related party, transferred 75,000 warrants and five other warrant holders transferred 1,310,000 warrants to purchase common stock to various other holders. The transferred warrants were all set to expire on May 31, 2021 and had an exercise price of $0.20. In May 2021, 1,185,000 of the warrants were exercised resulting in proceeds to the Company of $237,000. On May 31, 2021 the remaining 200,000 transferred warrants were extended to May 31, 2022. These remaining warrants were exercised in June 2021 and resulted in proceeds to the Company of $40,000. Stock option activity within the 2017 Equity Incentive Plan and warrant activity outside the plan, for the six months ended June 30, 2021 is as follows: Schedule of stock option and warrant activity Stock Options Stock Warrants Shares Weighted Average Exercise Price Shares Weighted Average Exercise Price Outstanding at December 31, 2020 72,000 $ 2.00 1,858,635 $ 0.67 Granted – – – – Cancelled – – – – Expired – – – – Exercised – – ( 1,435,000 ) 0.20 Outstanding at June 30, 2021 72,000 $ 2.00 423,635 $ 0.28 Exercisable at June 30, 2021 72,000 $ 2.00 423,635 $ 0.28 As of June 30, 2021, the outstanding stock options have a weighted average remaining term of 6.33 years and has no intrinsic value, and the outstanding stock warrants have a weighted average remaining term of 1.75 years and an intrinsic value of $ 261,295 . Note 9 – Commitments and Contingencies Mining Claims As part of our acquisition of the Center Star gold mine project, we acquire 15 Bureau of Land Management (“BLM”) unpatented mining claims and subsequently staked another 16 unpatented mining claims. In order to maintain the BLM lode \ claims, annual payments are required before the end of August of each year. As of June 30, 2021, all of these claims are in good standing. Note 10 – 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 June 30, 2021, 165,000 restricted stock units may be settled in shares of common stock. During the six months ended June 30, 2021, the Company recognized $ 86,265 of stock-based compensation related to the agreement. 14 Note 11 – Related Party Transactions 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 are significant investors and managing members of Silver Saddle. Magellan and Silver Saddle 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 position from those that could have resulted had Magellan, Athena and Silver Saddle been autonomous. As of March 31, 2021, Mr. Power and Dr. Carson are no longer considered related parties, and therefore all amounts due to them have been reclassified out of related party accounts. Accrued Interest - Related Parties Accrued interest due to related parties is included in our consolidated balance sheets as follows: Schedule of accrued interest payable June 30, 2021 December 31, 2020 Accrued interest payable – Mr. Gibbs $ 4,581 $ 2,597 Accrued interest payable – Dr. Carson – 752 Accrued interest payable – Mr. Schifrin 3,740 1,880 Accrued interest payable – Mr. Malhotra 637 241 $ 8,958 $ 5,470 15