MAGELLAN COPPER & GOLD Corp 10-K

ITEM 7. 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 provide 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 years ended December 31, 2023 and 2022. 21 Forward-Looking Statements Some of the information presented in this Form 10-K 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. 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. In conjunction with the Clearwater acquisition, Gregory Schifrin, the sole shareholder of Clearwater, was appointed on July 1, 2020 to serve as a member of the Company’s Board. The Company acquired 100% of the issued and outstanding shares of Clearwater in consideration of 1,000,000 shares of Magellan common stock, a $125,000 convertible note and $25,000 in cash. The contracted share issuance was to be made in increments as progress was achieved on gaining access to the mine. To date 750,000 shares have been issued and 250,000 shares are still pending issuance. With respect to the convertible secured note, $125,000 plus accrued interest is currently due for payment. During the year ended December 31, 2022, the Company evaluated the mineral rights and properties for impairment and recorded an impairment expense of $1,037,500. As of December 31, 2023 and 2022, the Clearwater mineral rights and properties balance totaled $0. As of December 31, 2023 and 2022, the Company had $0 and $194,274 in capitalized development costs for the Center Star Project, respectively. 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 twelve 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. 22 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 15 th 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. Results of Operations for the Years Ended December 31, 2023 and 2022 Years Ended December 31, 2023 2022 Operating expenses: General and administrative expenses $ 230,062 $ 242,883 Impairment expense 1,194,274 1,037,500 Total operating expenses 1,424,336 1,280,383 Operating loss (1,424,336 ) (1,280,383 ) Other income (expense): Interest expense (101,422 ) (282,334 ) Gain on change in derivative liability 61,722 2,788 Total other income (expense) (39,700 ) (279,546 ) Net loss $ (1,464,036 ) $ (1,559,929 ) Operating expenses During the year ended December 31, 2023, our total operating expenses included general and administrative expenses of $1,424,336 as compared to $1,280,383 during the year ended December 31, 2022. The $143,953 increase is primarily associated with the $1,194,274 impairment expense related to the Golden Idaho project and development costs during the year ended December 31, 2023. Other income (expenses) During the year ended December 31, 2023, total other expenses were $39,700 as compared to $279,546 during the year ended December 31, 2022. The $239,846 change was related to a $180,912 decrease in interest expense and a $58,934 increase in derivative liability related to the gain in derivative liability in 2023. Liquidity and Capital Resources: Our audited 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 December 31, 2023, we had not yet generated any revenues or achieved profitable operations and we have accumulated losses of $20,993,778. We expect to incur further losses in the development of our business, all of which casts 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. 23 During the year ended December 31, 2023, the Company entered into unsecured promissory notes totaling $22,000. During the year ended December 31, 2022, the Company entered into unsecured promissory notes totaling $78,000 and unsecured promissory notes with related parties totaling $53,000. 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. Cash Flows A summary of our cash provided by and used in operating, investing, and financing activities is as follows: Years ended December 31, 2023 2022 Net cash used in operating activities $ (70,543 ) $ (148,254 ) Net cash used in investing (100,000 ) (769 ) Net cash provided by financing 169,899 131,000 Net change in cash (644 ) (18,023 ) Cash at beginning of period 743 18,766 Cash at end of period $ 99 $ 743 At December 31, 2023, we had $99 in cash and a $1,784,671 working capital deficit. This compares to $743 in cash and a working capital deficit of $1,692,051 at December 31, 2022. Net cash used in operating activities during the year ended December 31, 2023 was $70,543 and was mainly comprised of our $1,464,036 net loss during the year, adjusted by $1,194,274 of impairment expense, stock compensation of $24,542, accretion of discounts on notes payable of $10,000 and $61,722 gain on change in derivative liability. In addition, it reflects changes in operating assets and liabilities of $226,399. Net cash used in operating activities during the year ended December 31, 2022 was $148,254 and was mainly comprised of our $1,559,929 net loss during the year, adjusted by $1,037,500 of impairment expense, $110,888 of stock compensation and accretion of discounts on notes payable of $201,815. In addition, it reflects changes in operating assets and liabilities of $64,260. Net cash used in investing activities during the year ended December 31, 2023 was $100,000 which was comprised of cash payments for mineral properties. Net cash used in investing activities during the year ended December 31, 2022 was $769 which was comprised of cash payments for development costs. Net cash provided by financing activities during the year ended December 31, 2023 was $169,899 comprised of $22,000 proceeds from notes payable and $252,600 proceeds from sale of common stock which were offset by $100,000 repayment of convertible debt and the repayment of advances from related parties of $4,701. Net cash provided by financing activities during the year ended December 31, 2022 was $131,000 comprised of $78,000 proceeds from notes payable and $53,000 proceeds from notes payable from related parties. 24 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The financial statements required by this item are in Item 15 beginning on page F-1 of this Annual Report on Form 10-K and are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None.