MAGELLAN COPPER & GOLD Corp 10-Q

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 Copper & Gold Inc. (formerly Magellan Gold Corporation). The following discussion and analysis provides information that management believes is relevant for an assessment and understanding of our results of operations and financial condition. This information should be read in conjunction with our audited financial statements, which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and our interim unaudited financial statements and notes thereto included with this report in Part I, Item 1. Forward-Looking Statements Some of the information presented in this Form 10-Q constitutes “forward-looking statements”. These forward-looking statements include, but are not limited to, statements that include terms such as “may,” “will,” “intend,” “anticipate,” “estimate,” “expect,” “continue,” “believe,” “plan,” or the like, as well as all statements that are not historical facts. Forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from current expectations. Although we believe our expectations are based on reasonable assumptions within the bounds of our knowledge of our business and operations, there can be no assurance that actual results will not differ materially from expectations. All forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made. Overview We were incorporated on September 28, 2010, in Nevada. Our principal business is the acquisition and exploration of mineral resources. We have not presently determined whether the properties to which we have mineral rights contain mineral reserves that are economically recoverable. We have only had limited operations to date, and we rely upon the sale of our securities and borrowings from significant investors to fund our operations, as we have not generated any revenue. Effective July 1, 2020, Magellan entered into a stock purchase agreement to acquire Clearwater Gold Mining Corporation (“Clearwater”) which owns certain unpatented mining claims in Idaho County, Idaho that include the historic Center Star Gold Mine near Elk City, Idaho. The Center Star Mine hosts high grade gold mineralization that was discovered in the early 1900’s. There was periodic historic production and development work done under different ownership through the 1980s. With the high-grade gold mineralization present, Magellan will be evaluating the historic mine data to assess the potential to develop a gold resource at Center Star. The project area is located 45 miles from Grangeville, Idaho and near the town of Elk City, Idaho. In consideration for 100% of the issued and outstanding shares of Clearwater, Magellan has agreed to pay its sole shareholder 1,000,000 shares of Magellan common stock and $150,000 in cash. The cash consideration of $25,000 was paid and the balance of $125,000 is evidenced by a secured promissory note due in two years. The Note is secured by the Clearwater shares and assets. 16 On January 3, 2023, the Company entered into an asset purchase agreement with Gold Express Mines, Inc (“Gold Express”). Pursuant to the agreement, the Seller sold the following 1) Golden, Idaho Project located in Idaho County, Idaho and consisting of seventy-two unpatented mining claims 2) Seafoam District - located in Custer County, Idaho and consisting of five unpatented mining claims 3) Blacktail District - located in Lemhi County, Idaho and consisting of eight unpatented mining claims 4) Big-it Project- located in Shoshone County, Idaho consisting of twenty-five unpatented mining claims and a mineral lease over three unpatented mining claims and 94.86 acres of real property and 5) Terror Gulch (Capparelli Group) located in Shoshone County, Idaho consisting of twenty-six unpatented mining claims. As of March 31, 2023, the total purchase price for the acquisition was determined to be $1,000,000 which consisted of 5,000,000 shares of common stock with a fair value of $1,000,000. The Company concluded the transaction qualified as an asset acquisition and all such acquisition costs have been capitalized. The Company concluded the purchase of a single set of assets qualified as an asset acquisition and all such acquisition costs have been capitalized as mineral rights and properties on the balance sheet. During the year ended December 31, 2023, the Company evaluated the mineral rights and properties for impairment and recorded an impairment expense of $1,000,000. As of December 31, 2023, the Gold Express mineral rights and properties balance totaled $0. 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. On January 4, 2024 the Company entered into an asset purchase agreement with Gold Express. Pursuant to the agreement, the Seller sold the following 1) Copper Butte Project located in Pinal County, Arizona and consisting of 66 unpatented mining claims 2) Blue Jacket Project located in Idaho County, Idaho and consisting of 79 unpatented mining claims and 3) Copper Cliff Project located in Adams County, Idaho and consisting of 71 unpatented mining claims and a mineral lease with option to purchase consisting of patented mining claims known as the Copper Cliff Patented Claims located in Adams County, Idaho upon landowner approval. As of June 30, 2024, the total purchase price for the acquisition for the three projects was determined to be $422,565, to be paid upon landowner approval, consisting of 5,500,000 shares of common stock for the three projects with a fair market value of $422,565. As of the date of this filing, the Company and GEM have not completed the assignment of leases and the 500,000 shares related to assignment have not been issued. The Company concluded the transaction qualified as an asset acquisition and all costs have been capitalized. The Company concluded the purchase of a single set of assets qualified as an asset acquisition and all such acquisition costs have been capitalized as mineral rights and properties on the balance sheet. Our primary focus is to advance our Center Star gold project, our Kris gold project and our copper projects, Blue Jacket, Copper Cliff and Copper Butte towards resource definition and eventual development, and possibly to acquire additional mineral rights and conduct additional exploration, development and permitting activities. Our permitting applications and exploration and development efforts will require additional capital. We rely upon the sale of our securities as well as advances and loans from executive management and significant shareholders to fund our operations as we have not generated any significant revenue. 17 Results of Operations for the three months ended June 30, 2024 and 2023 Three months ended June 30, 2024 2023 Operating expenses: General and administrative expenses $ 71,817 $ 67,620 Total operating expenses 71,817 67,620 Operating loss (71,817 ) (67,620 ) Other income (expense): Interest expense (20,914 ) (28,792 ) Gain on change in derivative liability 18,594 48,845 Total other income (expense) (2,320 ) 20,053 Net loss $ (74,137 ) $ (47,567 ) Operating expenses During the three months ended June 30, 2024, our total operating expenses included general and administrative expenses of $71,817 as compared to $67,620 during the three months ended June 30, 2023. T he $4,197 increase is primarily associated with increases in professional fees and stock-based compensation. Other income (expense) During the three months ended June 30, 2024, total other expense was $2,320 as compared to other income of $20,053 during the three months ended June 30, 2023. The $22,373 change was mainly related to change in derivative liability. Results of Operations for the six months ended June 30, 2024 and 2023 Six months ended June 30, 2024 2023 Operating expenses: General and administrative expenses $ 172,181 $ 101,565 Total operating expenses 172,181 101,565 Operating loss (172,181 ) (101,565 ) Other income (expense): Interest expense (41,596 ) (47,540 ) Gain on change in derivative liability 9,375 70,617 Total other income (expense) (32,221 ) 23,077 Net loss $ (204,402 ) $ (78,488 ) 18 Operating expenses During the six months ended June 30, 2024, our total operating expenses included general and administrative expenses of $172,181 as compared to $101,565 during the six months ended June 30, 2023. T he $70,616 increase is primarily associated with increases in professional fees and stock-based compensation. Other income (expense) During the six months ended June 30, 2024, total other expense was $32,221 as compared to other income of $23,077 during the six months ended June 30, 2023. The $55,298 change was mainly related to change in derivative liability. Liquidity and Capital Resources Our unaudited consolidated financial statements have been prepared on a going concern basis, which assumes that we will be able to meet our obligations and continue our operations during the next fiscal year. Asset realization values may be significantly different from carrying values as shown in our consolidated financial statements and do not give effect to adjustments that would be necessary to the carrying values of assets and liabilities should we be unable to continue as a going concern. At June 30, 2024, we had not yet generated sufficient revenues or achieved profitable operations and we have accumulated losses of $21,198,180. We expect to incur further losses in the development of our business, all of which raises substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern depends on our ability to generate future profits and/or to obtain the necessary financing to meet our obligations arising from normal business operations when they come due, of which there can be no assurance. We anticipate that additional funding will be in the form of additional loans from officers, directors or significant shareholders, or equity financing from the sale of our common stock but cannot assure that any future financing will occur. Cash Flows A summary of our cash provided by and used in operating, investing and financing activities is as follows: Six months ended June 30, 2024 2023 Net cash used in operating activities $ (110,186 ) $ (54,247 ) Net cash used in investing activities – (100,000 ) Net cash provided by financing activities 114,000 156,299 Net change in cash 3,814 2,052 Cash beginning of period 99 743 Cash end of period $ 3,913 $ 2,795 At June 30, 2024, we had $3,913 in cash and a $1,937,578 working capital deficit. This compares to cash of $99 and a working capital deficit of $1,784,671 at December 31, 2023. 19 Net cash used in operating activities during the six months ended June 30, 2024 was $110,186 and was mainly comprised of our $204,402 net loss during the period, adjusted by a non-cash charges of $51,495 of stock compensation and a gain on change in derivative liability of $9,375. In addition, it reflects changes in operating assets and liabilities of $52,096. Net cash used in operating activities during the six months ended June 30, 2023 was $54,247 and was mainly comprised of our $78,488 net loss during the period, adjusted by a non-cash charges of $12,989 of stock compensation, accretion of discounts on notes payable of $8,019 and a gain on change in derivative liability of $70,617. In addition, it reflects changes in operating assets and liabilities of $73,850. Net cash used in investing activities during the six months ended June 30, 2023 was $100,000 which was comprised of cash payment for acquisition of mineral properties. During the six months ended June 30, 2024, net cash provided by financing activities was $114,000 comprised of proceeds from notes payable related parties which were offset by repayment of notes payable. During the six months ended June 30, 2023, net cash provided by financing activities was $156,299 which was comprised of $240,000 proceeds from sale of common stock, $21,000 proceeds from notes payable, third parties , which were offset with the repayment of convertible debt of $100,000 and repayment of advances from third parties of $4,701. Off Balance Sheet Arrangements We do not have and have never had any off-balance sheet arrangements. Critical Accounting Policies and Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates, assumptions and judgments that affect the amounts reported in the financial statements, including the notes thereto. We consider critical accounting policies to be those that require more significant judgments and estimates in the preparation of our financial statements, including the following: long lived assets; intangible assets valuations; and income tax valuations. Management relies on historical experience and other assumptions believed to be reasonable in making its judgment and estimates. Actual results could differ materially from those estimates. Management believes its application of accounting policies, and the estimates inherently required therein, are reasonable. These accounting policies and estimates are periodically reevaluated, and adjustments are made when facts and circumstances dictate a change.