MAGELLAN COPPER & GOLD Corp 10-Q

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission file number: 333-174287 MAGELLAN GOLD CORPORATION (Exact name of registrant as specified in its charter) Nevada (State or other jurisdiction of incorporation or organization) 27-3566922 (IRS Employer Identification Number) 602 Cedar Street , Suite 205 Wallace , Idaho (Address of principal executive offices) 83873 (Zip Code) Registrant's telephone number, including area code: (208) 556-1600 Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered N/A N/A N/A Securities registered under Section 12(g) of the Exchange Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated Filer ☒ Smaller reporting company ☒ Emerging growth company ☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ On August 15, 2022, there were 11,753,737 shares of the registrant’s common stock, $.001 par value, issued and outstanding. MAGELLAN GOLD CORPORATION Form 10-Q June 30, 2022 Table of Contents Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements 3 Consolidated Balance Sheets (unaudited) 3 Consolidated Statements of Operations (unaudited) 4 Consolidated Statements of Shareholders’ Deficit (unaudited) 5 Consolidated Statements of Cash Flows (unaudited) 6 Notes to Consolidated Financial Statements (unaudited) 7 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 13 Item 3. Quantitative and Qualitative Disclosures About Market Risk 17 Item 4. Controls and Procedures 17 PART II. OTHER INFORMATION Item 1. Legal Proceedings 18 Item 1A. Risk Factors 18 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 18 Item 3. Defaults Upon Senior Securities 18 Item 4. Mine Safety Disclosures 18 Item 5. Other Information 18   Item 6. Exhibits 18 Signatures 19 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements MAGELLAN GOLD CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, 2022 December 31, 2021 ASSETS Current assets Cash $ 2,709 $ 18,766 Prepaid expenses and other current assets 4,439 10,091 Total current assets 7,148 28,857 Mineral rights and properties 1,000,000 1,000,000 Development costs 194,274 193,505 Total assets $ 1,201,422 $ 1,222,362 LIABILITIES AND SHAREHOLDERS' DEFICIT Current liabilities: Accounts payable $ 208,728 $ 207,406 Accounts payable - related party 12,500 12,500 Accrued liabilities 206,468 206,468 Convertible note payable, net - related party 184,880 163,185 Convertible note payable, net 597,645 620,978 Accrued interest - related parties 17,725 13,268 Accrued interest 96,553 75,365 Advances payable - related party 21,190 20,252 Advances payable 18,223 18,223 Notes payable 40,000 – Notes payable - related party 30,000 – Derivative liability 427,965 150,953 Total current liabilities 1,861,877 1,488,598 Total liabilities 1,861,877 1,488,598 Commitments and contingencies – – Shareholders' deficit: Preferred shares, 25,000,000 shares Series A preferred stock - $ 10.00 stated value; 2,500,000 authorized; 0 shares issued and outstanding – – Common shares, $ 0.001 par value; 1,000,000,000 shares authorized; 11,753,737 and 11,340,403 shares issued and outstanding, respectively 11,754 11,341 Additional paid-in capital 17,834,431 17,692,236 Accumulated deficit ( 18,506,640 ) ( 17,969,813 ) Shareholders' deficit: ( 660,455 ) ( 266,236 ) Total liabilities and shareholders' deficit $ 1,201,422 $ 1,222,362 See accompanying notes to the unaudited consolidated financial statements 3 MAGELLAN GOLD CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Operating expenses: General and administrative expenses $ 31,211 $ 531,550 $ 99,808 $ 1,250,987 Total operating expenses 31,211 531,550 99,808 1,250,987 Operating loss 31,211 531,550 99,808 1,250,987 Other expense: Interest expense ( 94,318 ) ( 84,893 ) ( 160,007 ) ( 148,494 ) Loss on change in derivative liability ( 306,552 ) ( 16,491 ) ( 277,012 ) ( 7,392 ) Total other expense ( 400,870 ) ( 101,384 ) ( 437,019 ) ( 155,886 ) Net loss ( 432,081 ) ( 632,934 ) ( 536,827 ) ( 1,406,873 ) Series A preferred stock dividend – ( 32,045 ) – ( 80,112 ) Net loss attributable to common shareholders $ ( 432,081 ) $ ( 664,979 ) $ ( 536,827 ) $ ( 1,486,985 ) Basic net loss per common share $ ( 0.04 ) $ ( 0.09 ) $ ( 0.05 ) $ ( 0.20 ) Diluted net loss per common share $ ( 0.04 ) $ ( 0.09 ) $ ( 0.05 ) $ ( 0.20 ) Basic weighted-average 11,650,033 7,768,932 11,546,218 7,586,011 Diluted weighted-average 11,650,033 7,768,932 11,546,218 7,586,011 See accompanying notes to the unaudited consolidated financial statements 4 MAGELLAN GOLD CORPORATION Consolidated Statements of Shareholders' Deficit For the six months ended June 30, 2022 and 2021 (Unaudited) Additional Preferred Stock Common Stock Paid - in Accumulated Shares Amount Shares Par Value Capital Deficit Total Balance, December 31, 2021 – $ – 11,340,403 $ 11,341 $ 17,692,236 $ ( 17,969,813 ) $ ( 266,236 ) Shares issued as deferred finance costs – – 180,000 180 53,820 – 54,000 Stock based compensation – – – – 12,615 – 12,615 Net loss – – – – – ( 104,746 ) ( 104,746 ) Balance, March 31, 2022 – – 11,520,403 11,521 17,758,671 ( 18,074,559 ) ( 304,367 ) Shares issued as deferred finance costs – – 233,334 233 69,767 – 70,000 Stock based compensation – – – – 5,993 – 5,993 Net loss – – – – – ( 432,081 ) ( 432,081 ) Balance, June 30, 2022 – $ – 11,753,737 $ 11,754 $ 17,834,431 $ ( 18,506,640 ) $ ( 660,455 ) 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 See accompanying notes to the unaudited consolidated financial statements 5 MAGELLAN GOLD CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, 2022 2021 Operating activities: Net loss $ ( 536,827 ) $ ( 1,406,873 ) Adjustments to reconcile net loss to net cash used in operating activities: Accretion of discounts on notes payable 122,362 115,583 Stock based compensation 18,608 1,099,902 Loss on change in derivative liability 277,012 7,392 Changes in operating assets and liabilities: Prepaid expenses and other assets 5,652 ( 20,333 ) Accounts payable and accrued liabilities 2,260 ( 18,552 ) Accrued interest 25,645 24,522 Net cash used in operating activities ( 85,288 ) ( 198,359 ) Investing activities: Cash paid for development costs ( 769 ) ( 36,727 ) Net cash used in investing activities ( 769 ) ( 36,727 ) Financing activities: Proceeds from convertible debt from third parties – 175,000 Payments on advances from related parties – ( 20,000 ) Payments on advances from third parties – ( 30,420 ) Proceeds from notes payable from third parties 40,000 – Proceeds from notes payable from related parties 30,000 – Proceeds from advances from third parties – 605 Proceeds from exercise of warrants – 287,000 Net cash provided by financing activities 70,000 412,185 Net change in cash ( 16,057 ) 177,099 Cash at beginning of period 18,766 – Cash at end of period $ 2,709 $ 177,099 Supplemental disclosure of cash flow information Cash paid for interest $ 17,333 $ 6,022 Cash paid for income taxes $ – $ – Non-cash financing and investing activities: Series A preferred stock dividend $ – $ 80,112 Expenses paid on behalf of the Company $ 938 $ 30,528 Common stock and warrants issued for settlement liabilities $ – $ 136,000 Debt discount created by derivative liability $ – $ 95,715 Conversion of Series A preferred stock and accrued dividend $ 124,000 $ 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. 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 six months ended June 30, 2022 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, 2021. 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”). 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, 2022, 72,000 of stock options, 117,500 of warrants, and 1,916,904 shares issuable from convertible notes were considered for their dilutive effects. 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 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. 7 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, 2022, we had a working capital deficit of $ 1,854,729 , we had not yet generated any significant revenues or achieved profitable operations and we have accumulated losses of $ 18,506,640 . 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, 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 than any future financings will occur. 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, 2022 and December 31, 2021, the mineral rights and properties balance totaled $ 1,000,000 . As of June 30, 2022 and December 31, 2021, the Company had $ 194,274 and $ 193,505 in capitalized development cost to develop gold resources at Center Star, respectively. 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. 8 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 June 30, 2022 and December 31, 2021: Schedule of fair value measurements on a recurring basis Level 1 Level 2 Level 3 Fair value at June 30, 2022 Liabilities: Derivative liability $ – $ – $ 427,965 $ 427,965 Level 1 Level 2 Level 3 Fair value at December 31, 2021 Liabilities: Derivative liability $ – $ – $ 150,953 $ 150,953 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, 2022: Schedule of fair value of the derivative liability Fair value as of December 31, 2021 $ 150,953 Loss on change in fair value of derivatives 277,012 Fair value as of June 30, 2022 $ 427,965 Note 5 – Notes payable, Convertible Note Payable and Derivative Liability Notes payable On March 4, 2022, the Company entered into two unsecured promissory notes totaling $ 40,000 . The promissory notes bear interest at 12 % per annum and are payable on demand. As of June 30, 2022, the notes payable balance was $ 40,000 , with accrued interest of $ 2,304 . 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, 2022 and December 31, 2021, the balance due under these notes $ 75,000 , with accrued interest of $ 21,944 and $ 17,481 , respectively. 9 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, 2022 and December 31, 2021, the balance due under this note is $ 145,978 , with accrued interest of $ 40,074 and $ 32,835 , respectively. 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, 2022 and December 31,2021, the balance due to a third party under these notes is $ 200,000 , with accrued interest of $ 32,231 and $ 24,297 , respectively. 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, 2022. As of June 30, 2022, the balance due to a related party under this note net of unamortized discount of $ 120 , is $ 124,880 , with accrued interest of $ 7,490 . As of December 31, 2021, the balance due to a related party under this note net of unamortized discount of $ 21,815 , is $ 103,185 , with accrued interest of $ 5,630 . 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. In August 2021, the note was extended six months and the interest rate was increase to 15%. 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. On February 9,2022, the Company extended the maturity to May 10, 2022 . In consideration of the extension, the Company issued the debtholder 180,000 shares of common stock valued at $ 54,000 . The incremental value of the debt modification of $54,000 will be recorded over the remaining life of the note ending May 10, 2022. On May 11, 2022, the Company agreed to a second amendment to extend the maturity of the AJB note to August 10, 2022. In consideration for the extension, the Company issued 233,334 shares of common stock at a price of $ 0.30 per share for a total value of $ 70,000 . The incremental value of the debt modification of $ 70,000 will be recorded over the remaining life of the note ending August 10, 2022. During the six months ended June 30, 2022, the Company recognized $ 100,667 of expense related to the debt modification. As of June 30, 2022, the balance on the loan, net of unamortized discount of $ 23,333 is $ 176,667 . As of December 31, 2021, the balance on the loan, net of unamortized discount of $ 0 is $ 200,000 , with accrued interest of $ 0 . 10 As of June 30, 2022, the total derivative liability on the above note was adjusted to a fair value of $ 427,965 . 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 $ 0.13 , volatility of 249.06 % based on a comparable company peer group, expected term of 0.50 years, risk-free rate of 2.51 % and a dividend yield of 0 %. Note 6 – Stockholders’ Deficit Common Stock On February 9,2022, the Company extended the maturity of a convertible note to May 10, 2022 . In consideration of the extension, the Company issued the debtholder 180,000 shares of common stock valued at $ 54,000 . On May 11, 2022, the Company agreed to a second amendment to extend the maturity of the AJB note to August 10, 2022. In consideration for the extension, the Company issued 233,334 shares of common stock at a price of $ 0.30 per share for a total value of $ 70,000 . 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, 2022, the Company had 128,000 shares available for future grant. Stock option activity within the 2017 Equity Incentive Plan and warrant activity outside the plan, for the six months ended June 30, 2022 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, 2021 72,000 $ 2.00 423,635 $ 0.28 Granted – – – – Cancelled – – – – Expired – – ( 306,135 ) 0.20 Exercised – – – – Outstanding at June 30, 2022 72,000 $ 2.00 117,500 $ 0.28 Exercisable at June 30, 2022 72,000 $ 2.00 117,500 $ 0.50 As of June 30, 2022, the outstanding stock options have a weighted average remaining term of 5.38 years and have no intrinsic value, and the outstanding stock warrants have a weighted average remaining term of 2.93 years and have no intrinsic value. Note 7 – 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, 2022, all of these claims are in good standing. 11 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 June 30, 2022, 345,000 restricted stock units may be settled in shares of common stock. During the six months ended June 30, 2022, the Company recognized $ 18,608 of stock-based compensation related to the agreement. Note 9 – Related Party Transactions Advances- Related Parties During the six months ended June 30, 2022, the CEO paid $ 938 of expenses on behalf of the Company. As of June 30, 2022 and December 31, 2021, the advances related party balance totaled $ 21,190 and $ 20,252 , respectively. Accrued Interest - Related Parties Accrued interest due to related parties is included in our consolidated balance sheets as follows: Schedule of related party transactions (accrued interest) June 30, 2022 December 31, 2021 Accrued interest payable – Mr. Gibbs $ 8,653 $ 6,597 Accrued interest payable – Mr. Schifrin 7,490 5,630 Accrued interest payable – Mr. Malhotra 1,438 1,041 Accrued interest payable – Mr. Lavigne 144 – $ 17,725 $ 13,268 Notes Payable - Related Parties In June 2022, the Company entered into three unsecured promissory notes with related parties totaling $ 30,000 . The promissory notes bear interest at 12% per annum and are payable on demand. 12 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, 2021, and our interim unaudited financial statements and notes thereto included with this report in Part I, Item 1. COVID-19 Pandemic In December 2019, a novel strain of coronavirus (“COVID-19”) emerged in China. On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. The outbreak has now spread to the United States and infections have been reported globally. The COVID-19 pandemic is rapidly evolving. The information in this Quarterly Report is based on data currently available to us and will likely change as the pandemic progresses. As COVID-19 continues to spread throughout areas in which we operate, we believe the outbreak has the potential to have a material negative impact on our operating results and financial condition. The extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, impact on our operators, employees and vendors, and the impact on the Company’s ability to obtain debt and equity financing to fund ongoing exploration activities, all of which are uncertain and cannot be predicted. Given these uncertainties, we cannot reasonably estimate the related impact to our business, operating results and financial condition. We expect the trends highlighted above with respect to the impact of the COVID-19 pandemic to continue and, in some cases, accelerate. The extent of the COVID-19 pandemic’s continued effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the outbreak, the pace at which jurisdictions across the country re-open and restrictions begin to lift, the availability of government financial support to our business, tenants and operators and whether a resurgence of the outbreak occurs. Due to these uncertainties, we are not able at this time to estimate the ultimate impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows but it could be material. 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 properties in the United States. 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 exploration and project development operations to date, and we rely upon the sale of our securities and borrowings from officers, directors and other significant investors to fund our operations, as we have not generated any revenue. 13 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 includes 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. The 1,000,000 shares have or will be issued (i) 250,000 shares at closing (ii) 250,000 shares at the time the Center Mine receives its permit to reopen the main portal of the mine, (iv) 250,000 shares at the point the main portal has been reopened and (iv) 250,000 shares two years from the closing concurrent with the pay-off of the secured promissory note. The cash consideration of $25,000 will be paid within 30 days of closing and the balance of $125,000 to be evidenced by a secured promissory note due in two years. The Note will be secured by the Clearwater shares and assets. Magellan has issued 750,000 of the 1,000,000 shares and has paid $12,500 of the required $25,000 payment. Results of Operations for the three months ended June 30, 2022 and 2021 Three months ended June 30, 2022 2021 Operating expenses: General and administrative expenses $ 31,211 $ 531,550 Total operating expenses 31,211 531,550 Operating loss (31,211 ) (531,550 ) Other expense: Interest expense (94,318 ) (84,893 ) Loss on change in derivative liability (306,552 ) (16,491 ) Total other expense (400,870 ) (101,384 ) Net loss $ (432,081 ) $ (632,934 ) Operating expenses During the three months ended June 30, 2022, our total operating expenses included general and administrative expenses of $31,211 as compared to $531,550 during the three months ended June 30, 2021. T he $500,339 decrease is primarily associated with decreases in stock-based compensation and investor relation expenses. Other expense During the three months ended June 30, 2022, total other expense was $400,870 as compared to $101,384 during the three months ended June 30, 2021. The $299,486 change was mainly related to the loss on change in derivative liability. 14 Results of Operations for the six months ended June 30, 2022 and 2021 Six months ended June 30, 2022 2021 Operating expenses: General and administrative expenses $ 99,808 $ 1,250,987 Total operating expenses 99,808 1,250,987 Operating loss (99,808 ) (1,250,987 ) Other income (expense): Interest expense (160,007 ) (148,494 ) Loss on change in derivative liability (277,012 ) (7,392 ) Total other expense (437,019 ) (155,886 ) Net loss $ (536,827 ) $ (1,406,873 ) Operating expenses During the six months ended June 30, 2022, our total operating expenses included general and administrative expenses of $99,808 as compared to $ 1,250,987 during the six months ended June 30, 2021. The $1,151,179 decrease is primarily associated with decreases in stock-based compensation and investor relation expenses. Other expense During the six months ended June 30, 2022, total other expense was $437,019 as compared to $ 155,886 during the six months ended June 30, 2021. The $281,133 change was mainly related to related to the loss on 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 June 30, 2022, we had not yet generated sufficient revenues or achieved profitable operations and we have accumulated losses of $18,506,640. 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. During the six months ended June 30, 2022, the Company entered into two unsecured promissory notes totaling $40,000 and three unsecured promissory notes with related parties totaling $30,000. 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 financings will occur. 15 Cash Flows A summary of our cash provided by and used in operating, investing and financing activities is as follows: Six months ended June 30, 2022 2021 Net cash used in operating activities $ (85,288 ) $ (198,359 ) Net cash used in investing activities (769 ) (36,727 ) Net cash provided by financing activities 70,000 412,185 Net change in cash (16,057 ) 177,099 Cash beginning of period 18,766 – Cash end of period $ 2,709 $ 177,099 At June 30, 2022, we had $2,709 in cash and a $1,854,729 working capital deficit. This compares to cash of $18,766 and a working capital deficit of $1,459,741 at December 31, 2021. Net cash used in operating activities during the six months ended June 30, 2022 was $85,288 and was mainly comprised of our $536,827 net loss during the period, adjusted by a non-cash charges of $18,608 of stock compensation, loss on change in derivative liability of $277,012 and accretion of discounts on notes payable of $122,362. In addition, it reflects changes in operating assets and liabilities of $33,557. Net cash used in operating activities from during the six months ended June 30, 2021 was $198,359 and was mainly comprised of our $1,406,873 net loss during the period, adjusted by a non-cash charges of $1,099,902 of stock compensation, loss on change in derivative liability of $7,392 and accretion of discounts on notes payable of $115,583. In addition, it reflects changes in operating assets and liabilities of $14,363. Net cash used in investing activities during the six months ended June 30, 2022 was $769 which was comprised of cash payments for development costs. Net cash used in investing activities during the six months ended June 30, 2021 was $36,727 which was comprised of cash payments for development costs. During the six months ended June 30, 2022, net cash provided by financing activities was $70,000 comprised of $40,000 proceeds from notes payable and $30,000 proceeds from notes payable from related parties. During the six months ended June 30, 2021, net cash provided by financing activities from continuing operations was $412,185 comprised of $175,000 proceeds from convertible debt from third parties, $287,000 proceeds from exercise of warrants, $605 proceeds on advances from third parties, offset by $20,000 payments on advances and $30,420 payments on advances from third parties. Off Balance Sheet Arrangements We do not have and have never had any off-balance sheet arrangements. 16 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, 2021. 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. 17 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, 2021. 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 None. ITEM 6. EXHIBITS Exhibit Number Exhibit Description 31* Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32* Certification of the President, Chief Executive Officer and 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. 18 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: August 15, 2022 MAGELLAN GOLD CORPORATION By: /s/ Michael Lavigne Michael Lavigne Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Accounting Officer) 19