Notes
to Consolidated Financial Statements
As
of December 31, 2022 and 2021
1. Nature of Business
Inception
Mining, Inc. (formerly known as Gold American Mining Corp.) was incorporated under the name of Golf Alliance Corporation and under the
laws of the State of Nevada on July 2, 2007. Inception Mining, Inc. is a precious metal mineral acquisition, exploration and development
company. Inception Development, Inc., its wholly owned subsidiary, was incorporated under the laws of the State of Idaho on January 28,
2013.
Golf
Alliance Corporation pursued its original business plan to provide opportunities for golfers to play on private golf courses normally
closed to them due to the membership requirements of the private clubs. During the year ended July 31, 2010, the Company decided to redirect
its business focus toward precious metal mineral acquisition and exploration.
On
March 5, 2010, the Company amended its articles of incorporation to (1) to change its name to Silver America, Inc. and (2) increased
its authorized common stock from 100,000,000 to 500,000,000.
On
June 23, 2010 the Company amended its articles of incorporation to change its name to Gold American Mining Corp.
On
November 21, 2012, the Company implemented a 200 to 1 reverse stock split. Upon effectiveness of the stock split, each shareholder cancelled
200 shares of common stock for every share of common stock owned as of November 21, 2012. This reverse stock split was effective on February
13, 2013. All share and per share references have been retroactively adjusted to reflect this 200 to 1 reverse stock split in the financial
statements and in the notes to financial statements for all periods presented, to reflect the stock split as if it occurred on the first
day of the first period presented.
On
February 25, 2013, Gold American Mining Corp. and its majority shareholder (the “Majority Shareholder”), and its wholly-owned
subsidiary, Inception Development Inc. (the “Subsidiary”), entered into an Asset Purchase Agreement (the “Asset Purchase
Agreement”) with Inception Resources, LLC, a Utah corporation (“Inception Resources”), pursuant to which Inception
purchased the U.P. and Burlington Gold Mine in consideration of 16,000,000 shares of common stock of Inception, the assumption of promissory
notes in the amount of $950,000 and the assignment of a 3% net royalty. Inception Resources was an entity owned by and under the control
of the majority shareholder. This transaction is deemed an asset purchase by entities under common control. The Asset Purchase Agreement
closed on February 25, 2013 (the “Closing”). Inception was a “shell company” (as such term is defined in Rule
12b-2 under the Securities Exchange Act of 1934, as amended) immediately prior to our acquisition of the gold mine pursuant to the terms
of the Asset Purchase Agreement.
On
May 17, 2013, the Company amended its articles of incorporation to change its name to Inception Mining, Inc. (“Inception”
or the “Company”).
On
October 2, 2015, the Company consummated a merger with Clavo Rico Ltd. (“Clavo Rico”). Clavo Rico is a privately held Turks
and Caicos company with principal operations in Honduras, Central America. Clavo Rico operates the Clavo Rico mining concession through
its subsidiaries Compañía Minera Cerros del Sur, S.A de C.V. and Compañía Minera Clavo Rico, S.A. de C.V.
and holds other mining concessions. Pursuant to the agreement, the Company issued of 240,225,901 shares of common stock of Inception
and assumed promissory notes in the amount of $5,488,980 and accrued interest of $3,434,426. Under this merger agreement, there was a
change in control and it has been treated for accounting purposes as a reverse recapitalization with Clavo Rico, Ltd. being the surviving
entity. Its workings include several historical underground operations dating back to the early Mayan and Spanish occupation.
On
January 11, 2016, the Company implemented a 5.5 to 1 reverse stock split. This reverse stock split was effective on May 26, 2016. All
share and per share references have been retroactively adjusted to reflect this 5.5 to 1 reverse stock split in the financial statements
and in the notes to financial statements for all periods presented, to reflect the stock split as if it occurred on the first day of
the first period presented. Immediately before the Reverse Split, the Company had 266,669,980 shares of common stock outstanding. Immediately
after the Reverse Split, the Company had 48,485,451 shares of common stock outstanding, pending fractional-share rounding-up calculations
to adjust for the Reverse Split.
On January 12, 2023,
Inception Mining, Inc. (the “Company”) entered into a non-binding Letter of Intent (the “LOI”) with Mother
Lode Mining, Inc. (“MLM”). The LOI became binding on January 24, 2023 .
Pursuant to the terms of the LOI, the Company agreed
to sell all of the shares of its wholly-owned subsidiary, Compañía Minera Cerros Del Sur, S.A. de C.V. (“CMCS”),
to MLM. CMCS is the Honduran-based company that owns the Clavo Rico mine.
Since the Divestiture of the Clavo Rico Mine, the
Company has been operating as a consultant and advisor to the mining industry, including to Mother Lode Mining, the new owner of the Clavo
Rico mine. It also has an ongoing financial interest in the Clavo Rico Mine under the LOI.
COVID-19
– The Company has been impacted significantly by the COVID-19 global pandemic. In response to COVID-19, national and local
governments around the world have instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns
of certain businesses, curfews, shelter-in-place orders, and recommendations to practice social distancing. Based on management’s
assessment as of December 31, 2022, the ultimate impact of COVID-19 on the Company’s business, results of operations, financial
condition and cash flows is dependent on future developments, including the duration of the pandemic and the related length of its impact
on the global economy, which are uncertain and cannot be predicted at this time.
2.
Summary of Significant Accounting Policies
Going
Concern – The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates
the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying consolidated
financial statements during year ended December 31, 2022, the Company has an accumulated deficit of $41,655,570, a working capital deficit
of $28,765,349 and used $902,422 in cash for operating activities. These factors among others raise substantial doubt about the Company’s
ability to continue as a going concern for twelve months from the date these financial statements are issued.
The
Company’s existence is dependent upon management’s ability to develop profitable operations and to obtain additional funding
sources. There can be no assurance that the Company’s financing efforts will result in profitable operations or the resolution
of the Company’s liquidity problems. The accompanying statements do not include any adjustments that might result should the Company
be unable to continue as a going concern.
Management
is currently working to make changes that will result in profitable operations and to obtain additional funding sources to meet the Company’s
need for cash during the next twelve months and beyond.
Use
of Estimates – In preparing financial statements in conformity with generally accepted accounting principles, we are required
to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets
and liabilities at the date of the financial statements and revenues and expenditures during the reported periods. Actual results could
differ materially from those estimates. Estimates may include those pertaining to valuation of inventories and mineralized material on
leach pads, the estimated useful lives and valuation of properties, plant and equipment, mineral rights and properties, deferred tax
assets, convertible preferred stock, derivative assets and liabilities, reclamation liabilities, stock-based compensation and payments,
and contingent liabilities.
Principles
of Consolidation – The accompanying consolidated financial statements include the accounts of Inception Mining, Inc. and its
wholly owned subsidiaries, Inception Development, Corp., Clavo Rico Development Corp., Clavo Rico, Ltd. and Compañía Minera
Cerros del Río, S.A. de C.V., and its controlling interest subsidiaries, Compañía Minera Cerros del Sur, S.A. de
C.V. and Compañía Minera Clavo Rico, S.A. de C.V. (collectively, the “Company”). All intercompany accounts
have been eliminated upon consolidation.
Basis
of Presentation – The Company prepares its consolidated financial statements in accordance with accounting principles generally
accepted in the United States of America.
Reclassifications - Certain
reclassifications have been made to the prior period consolidated financial statements to conform to the current period presentation.
Cash
and Cash Equivalents – The
Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents.
At December 31, 2022 and December 31, 2021, the Company had no cash equivalents. The aggregate cash balance on deposit in these accounts
are insured by the Federal Deposit Insurance Corporation up to $250,000.
The Company has never experienced any losses in such accounts.
Exploration
and Development Costs – Costs of acquiring mining properties and any exploration and development costs are expensed as incurred
unless proven and probable reserves exist and the property is a commercially mineable property in accordance with FASB ASC 930, Extractive
Activities- Mining. Mine development costs incurred either to develop new gold and silver deposits, expand the capacity of operating
mines, or to develop mine areas substantially in advance of current production are capitalized. Costs incurred to maintain current production
or to maintain assets on a standby basis are charged to operations. Costs of abandoned projects are charged to operations upon abandonment.
The Company evaluates, at least quarterly, the carrying value of capitalized mining costs and related property, plant and equipment costs,
if any, to determine if these costs are in excess of their net realizable value and if a permanent impairment needs to be recorded. The
periodic evaluation of carrying value of capitalized costs and any related property, plant and equipment costs are based upon expected
future cash flows and/or estimated salvage value.
The
Company capitalizes costs for mining properties by individual property and defers such costs for later amortization only if the prospects
for economic productions are reasonably certain.
Capitalized
costs are expensed in the period when the determination has been made that economic production does not appear reasonably certain.
Mineral
Rights and Properties – We defer acquisition costs until we determine the viability of the property. Since we do not have proven
and probable reserves as defined by Securities and Exchange Commission (“SEC”) Industry Guide 7, exploration expenditures
are expensed as incurred. We expense care and maintenance costs as incurred.
We
review the carrying value of our mineral rights and properties for impairment whenever there are negative indicators of impairment. Our
estimate of the gold price, mineralized materials, operating capital, and reclamation costs are subject to risks and uncertainties affecting
the recoverability of our investment in the mineral claims and properties. Although we have made our best, most current estimate of these
factors, it is possible that near term changes could adversely affect estimated net cash flows from our mineral claims and properties
and possibly require future asset impairment write-downs.
Where
estimates of future net operating cash flows are not available and where other conditions suggest impairment, we assess recoverability
of carrying value from other means, including net cash flows generated by the sale of the asset. We use the units-of-production method
to deplete the mineral rights and properties.
Fair
Value Measurements – The fair value of a financial instrument is the amount that could be received upon the sale of an asset
or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked
to bid prices and financial liabilities are marked to offer prices. The fair value should be calculated based on assumptions that market
participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities
should include consideration of non-performance risk, including the party’s own credit risk.
Fair
value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of the
information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that
is significant to the fair value measurement. The fair value hierarchy is defined into the following three categories:
Level
1: Quoted market prices in active markets for identical assets or liabilities.
Level
2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with
insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are
observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets
or liabilities.
Level
3: Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
To
the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair
value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value
hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed
and is determined based on the lowest level input that is significant to the fair value measurement.
The
carrying value of the Company’s cash, accounts payable, short-term borrowings (including convertible notes payable), and other
current assets and liabilities approximate fair value because of their short-term maturity.
The
fair value of financial instruments on December 31, 2022 are summarized below:
Schedule of Fair Value of Financial Instruments
| | |
Level
1 | | |
Level
2 | | |
Level
3 | | |
Total | |
| Marketable securities | |
$ |
- | | |
$ |
- | | |
$ |
- | | |
$ |
- | |
| Total Assets | |
$ |
- | | |
$ |
- | | |
$ |
- | | |
$ |
- | |
| | |
|
| | |
|
| | |
| | |
| |
| Warrant liabilities | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
| Debt
derivative liabilities | |
| - | | |
| - | | |
| 3,262,612 | | |
| 3,262,612 | |
| Total
Liabilities | |
$ | - | | |
$ | - | | |
$ | 3,262,612 | | |
$ | 3,262,612 | |
The
fair value of financial instruments on December 31, 2021 are summarized below:
| | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| Marketable securities | |
$ |
- | | |
$ |
- | | |
$ |
- | | |
$ |
- | |
| Total Assets | |
$ |
- | | |
$ |
- | | |
$ |
- | | |
$ |
- | |
| | |
| | |
| | |
| | |
| |
| Warrant liabilities | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
| Debt derivative liabilities | |
| - | | |
| - | | |
| 4,048,650 | | |
| 4,048,650 | |
| Total Liabilities | |
$ | - | | |
$ | - | | |
$ | 4,048,650 | | |
$ | 4,048,650 | |
The
Company recognizes its marketable securities as level 1 and values its marketable securities using the methods discussed below. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes
that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a
different estimate of fair value at the reporting date.
The
Company recognizes its derivative liabilities as level 3 and values its derivatives using the methods discussed below in Note 4. While
the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the
use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different
estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods
discussed below in Note 4 are that of volatility and market price of the underlying common stock of the Company.
Marketable
Securities – We measure the fair value of marketable securities in accordance with ASC 820-10 – Fair Value Measurements. Any change in the fair value is recognized in net income in the period being reported.
Long-Lived
Assets – We review the carrying amount of our long-lived assets for impairment whenever there are negative indicators of impairment.
An asset is considered impaired when estimated future cash flows are less than the carrying amount of the asset. In the event the carrying
amount of such asset is not considered recoverable, the asset is adjusted to its fair value. Fair value is generally determined based
on discounted future cash flows.
Properties,
Plant and Equipment – We record properties, plant and equipment at historical cost. We provide depreciation and amortization
in amounts sufficient to match the cost of depreciable assets to operations over their estimated service lives or productive value. We
capitalize expenditures for improvements that significantly extend the useful life of an asset. We charge expenditures for maintenance
and repairs to operations when incurred. Depreciation is computed using the straight-line method over estimated useful lives as follows:
Schedule of Property and Equipment Useful Lives
| Building |
7
to 15 years |
| Vehicles
and equipment |
3
to 7 years |
| Processing
and laboratory |
5
to 15 years |
| Furniture
and fixtures |
2
to 3 years |
Revenue
Recognition – In accordance with ASC 606-10, revenue is measured based on a consideration specified in a contract with a customer
and recognized when we satisfy the performance obligation specified in each contract.
The
Company generates revenue by selling gold and silver produced from its mining operations. The majority of the Company’s sales come
from the sale of refined gold; however, the end product at the Company’s gold operations is generally doré bars. Doré
is an alloy consisting primarily of gold but also containing silver and other metals. Doré is sent to refiners to produce bullion
that meets the required market standard of 99.95% gold. Under the terms of the Company’s refining agreements, the doré bars
are refined for a fee, and the Company’s share of the refined gold and silver is credited to its bullion account.
The
Company recognizes revenue for gold and silver from doré production when it satisfies the performance obligation of transferring
gold and silver inventory to the customer, which generally occurs upon transfer of gold and silver bullion credits as this is the point
at which the customer obtains the ability to direct the use and obtain substantially all of the remaining benefits of ownership of the
asset.
The
Company generally recognizes the sale of gold bullion credits at the prevailing market price when gold bullion credits are delivered
to the customer. The transaction price is determined based on the agreed upon market price and the number of ounces delivered. Payment
is due upon delivery of gold bullion credits to the customer’s account.
All
accounts receivable amounts are due from a single customer. Substantially all mining revenues recorded in the current period also related
to the same customer. As gold can be sold through numerous gold market traders worldwide, the Company is not economically dependent on
a limited number of customers for the sale of its product. However, the Company has chosen to sell to only two customers at this time.
Stock
Issued for Goods and Services – Common and preferred shares issued for goods and services are valued based upon the fair market
value of our common stock or the goods and services received.
Stock-Based
Compensation – For stock-based transactions, compensation expense is recognized over the requisite service period, which is
generally the vesting period, based on the estimated fair value on the grant date of the award.
Income
(Loss) per Common Share – Basic net income (loss) per common share is computed by dividing net income (loss), less the preferred
stock dividends, by the weighted average number of common shares outstanding. Dilutive income (loss) per share includes any additional
dilution from common stock equivalents, such as stock options and warrants, and convertible instruments, if the impact is not antidilutive.
430,519,296,789 common share equivalents have been excluded from the diluted loss per share calculation for the year ended December 31,
2022 because it would be anti-dilutive.
Comprehensive
Loss – Comprehensive loss is made up of the exchange differences arising on translating foreign operations and the net loss
for the years ended December 31, 2022 and 2021.
Derivative
Liabilities – Derivatives liabilities are recorded at fair value when issued and the subsequent change in fair value each period
is recorded in other income (expense) in the consolidated statements of operations. We do not hold or issue any derivative financial
instruments for speculative trading purposes.
Income
Taxes – The Company’s income tax expense and deferred tax assets and liabilities reflect management’s best assessment
of estimated future taxes to be paid. Significant judgments and estimates are required in determining the consolidated income tax expense.
Deferred
income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expense. In evaluating
the Company’s ability to recover its deferred tax assets, management considers all available positive and negative evidence, including
scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations.
In projecting future taxable income, the Company develops assumptions including the amount of future state and federal pretax operating
income, the reversal of temporary differences, and the implementation of feasible and prudent tax planning strategies. These assumptions
require significant judgment about the forecasts of future taxable income, and are consistent with the plans and estimates that the Company
is using to manage the underlying businesses. The Company provides a valuation allowance for deferred tax assets for which the Company
does not consider realization of such deferred tax assets to be more likely than not.
Changes
in tax laws and rates could also affect recorded deferred tax assets and liabilities in the future. Management is not aware of any such
changes that would have a material effect on the Company’s results of operations, cash flows or financial position.
Business
Segments – The Company operates in one segment and therefore segment information is not presented.
Operating
Lease – The Company leases its corporate headquarters and administrative offices in Salt Lake City, Utah on a month-to-month
basis.
The
Company incurred rent expense of $15,252 and $14,945 for the year ended December 31, 2022 and 2021.
Non-Controlling
Interest Policy – Non-controlling interest (NCI) is the portion of equity ownership in a subsidiary not attributable to the
parent company, who has a controlling interest and consolidates the subsidiary’s financial results with its own. The amount of
equity relating to the non-controlling interest is separately identified in the equity section of the balance sheet and the amount of
the net income (loss) relating to the non-controlling interest is separately identified on the statement of operations.
Recently
Issued Accounting Pronouncements – From time to time, new accounting pronouncements are issued by FASB that are adopted by
the Company as of the specified effective date. If not discussed, management believes that the impact of recently issued standards, which
are not yet effective, will not have a material impact on the Company’s financial statements upon adoption.
3.
Inventories, Stockpiles and Mineralized Materials on Leach Pads
Inventories,
stockpiles and mineralized materials on leach pads at December 31, 2022 and 2021 consisted of the following:
Schedule
of Inventories
| | |
December 31, 2022 | | |
December 31, 2021 | |
| Supplies | |
$ | - | | |
$ | - | |
| Mineralized Material on Leach Pads | |
| - | | |
| - | |
| ADR Plant | |
| - | | |
| - | |
| Finished Ore | |
| - | | |
| - | |
| Total Inventories | |
$ | - | | |
$ | - | |
There
were no
stockpiles at December 31, 2022 and 2021. All inventories are included in Note 17 – Discontinued Operations.
4.
Derivative Financial Instruments
The
Company adopted the provisions of ASC subtopic 825-10, Financial Instruments (“ASC 825-10”) on January 1, 2008. ASC
825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required
or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact
and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions,
and risk of non-performance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value.
The
following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities as of December 31, 2022:
Summary
of Changes in Fair Value of Level 3 Financial Liabilities
| |
| Debt
Derivative
Liabilities | |
| Balance, December 31, 2021 | |
$ | 4,048,650 | |
| Transfers in upon initial fair value of derivative liabilities | |
| 47,420 | |
| Change in fair value of derivative liabilities and warrant liability | |
| (833,278 | ) |
| Balance, December 31, 2022 | |
$ | 3,262,612 | |
Derivative
Liabilities – The Company issued convertible promissory notes which are convertible into common stock, at holders’ option,
at a discount to the market price of the Company’s common stock. The Company has identified the embedded derivatives related to
these notes relating to certain anti-dilutive (reset) provisions. These embedded derivatives included certain conversion features. The
accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception
date of debenture and to fair value as of each subsequent reporting date.
At
December 31, 2022, the Company marked to market the fair value of the debt derivatives and determined a fair value of $3,262,612.
The Company recorded a gain from change in fair value of debt derivatives of $833,278
for the year ended December 31, 2022. The fair
value of the embedded derivatives was determined using the Binomial Option Pricing Model, the Monte Carlo Valuation Model and the Company’s
Enterprise Valuation Model. The Binomial Option Pricing Model was based on the following assumptions: (1) dividend yield of 0%,
(2) expected volatility of 199.09%,
(3) weighted average risk-free interest rate of 4.12%
(4) expected life of 0.09
years, and (5) the quoted market price of the
Company’s common stock at each valuation date. The Monte Carlo Valuation Model was based on the following assumptions: (1) expected
volatility of 199.10%,
(2) weighted average risk-free interest rate of 4.63%
and (3) expected life of 0.80
years. The Company’s Enterprise Valuation
Model was based on the following assumptions: (1) outstanding note balance at December 31, 2022 of $3,073,532,
(2) outstanding shares of common stock at December 31, 2022 of 244,634,016
shares and (3) closing stock price on December
31, 2022 of $0.0006
per share.
Based
upon ASC 840-15-25, the Company has adopted a sequencing approach regarding the application of ASC 815-40
to its outstanding convertible notes. Pursuant to the sequencing approach, the Company evaluates its contracts based upon earliest issuance
date.
Warrant
Liabilities – Prior to the periods being reported, the Company issued warrants in conjunction with the issuance of three Crown
Bridge Convertible Notes and a Convertible Note with an investor. These warrants contained certain reset provisions. The accounting treatment
of derivative financial instruments required that the Company record fair value of the derivatives as of the inception date (issuance
date) and to fair value as of each subsequent reporting date.
At
December 31, 2022, the Company had a warrant liability of $0. The Company recorded a loss from change in fair value of warrant liability
of $0 for the period ended December 31, 2022. The fair value of the embedded derivatives was determined using the Binomial Option Pricing
Model. The Binomial Option Pricing Model was based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of
191.21% to 196.98%, (3) weighted average risk-free interest rate of 4.73% to 4.76% (4) expected life of 0.36 to 0.82 years, and (5) the
quoted market price of the Company’s common stock at each valuation date.
5.
Properties, Plant and Equipment, Net
Properties,
plant and equipment of continuing operations at December 31, 2022 and 2021 consisted of the following:
Schedule
of Properties, Plant and Equipment
| | |
December 31, 2022 | | |
December 31, 2021 | |
| Machinery and Equipment | |
$ | 25,368 | | |
$ | 25,368 | |
| Office Equipment and Furniture | |
| 1,627 | | |
| 1,627 | |
| Property, Plant and Equipment Gross | |
| 26,995 | | |
| 26,995 | |
| Less Accumulated Depreciation | |
| (23,012 | ) | |
| (22,287 | ) |
| Total Property, Plant and Equipment | |
$ | 3,983 | | |
$ | 4,708 | |
During
the years ended December 31, 2022 and 2021, the Company recognized depreciation expense of $725 and 2,789, respectively.
On
February 21, 2021, the Company sold the Up & Burlington property and mineral rights to Ounces High Exploration, Inc. in exchange
for $250,000 in cash consideration and 66,974,252 shares of common stock of Hawkstone Mining Limited, a publicly-traded Australian company.
The value of this property had previously been reduced to zero in previous years, so the Company recorded a gain on sale on mining property
of $471,083.
6.
Accounts Payable and Accrued Liabilities
Accounts
Payable and accrued liabilities of continuing operations at December 31, 2022 and 2021 consisted of the following:
Schedule
of Accounts Payable and Accrued Liabilities
| | |
December 31, 2022 | | |
December 31, 2021 | |
| Accounts Payable | |
$ | 127,612 | | |
$ | 48,339 | |
| Accrued Liabilities | |
| 4,221,586 | | |
| 2,774,126 | |
| Accrued Salaries and Benefits | |
| 732,346 | | |
| 557,098 | |
| Advances Payable | |
| - | | |
| 106,222 | |
| Total Accrued Liabilities | |
$ | 5,081,544 | | |
$ | 3,485,785 | |
7.
Secured Borrowings
On
June 25, 2020, the Company entered into two new financing arrangements with third parties for a combined principal amount of $172,663.
The terms of the arrangements require the Company to pay the combined principal balance plus a guaranteed return of no less than 10 percent,
or $17,266,
for a total expected remittance of $189,929.
The maturity date of the notes was December
26, 2020. On December 26, 2020, the Company entered
into two new financing arrangements with third parties for a combined principal amount of $118,757.
The terms of the arrangements require the Company to pay the combined principal balance plus a guaranteed return of no less than 10 percent,
or $11,876,
for a total expected remittance of $130,633.
Also on that day, one of the lenders chose to liquidate a portion of his balance amounting to $83,006.
This amount was paid to the lender in January 2021. The maturity date of the notes was June
26, 2021. In May 2021, the remaining agreements
were liquidated for an amount totaling $134,508.
The terms of repayment allow the Company to remit to the lender a certain quantity of gold to satisfy the liability though the Company
expects to liquidate gold held and satisfy the liability in cash.
8.
Notes Payable
Notes
payable of continuing operations were comprised of the following as of December 31, 2022 and December 31, 2021:
Schedule
of Notes Payable
| Notes Payable | |
December 31, 2022 | | |
December 31, 2021 | |
| Phil Zobrist | |
$ | 60,000 | | |
$ | 60,000 | |
| Small Business Administration | |
| - | | |
| 69,558 | |
| Total Notes Payable | |
| 60,000 | | |
| 129,558 | |
| Less Short-Term Notes Payable | |
| - | | |
| (37,891 | ) |
| Total Long-Term Notes Payable | |
$ | 60,000 | | |
$ | 91,667 | |
Phil
Zobrist – On January 11, 2013, the Company issued an unsecured Promissory Note to Phil Zobrist in the principal amount of $60,000
(the “Note”) due on demand and bearing 0% per annum interest. The total net proceeds the Company received was $60,000. On
October 2, 2015, the Company entered into a new convertible note with Phil Zobrist that matures on December 31, 2016 and bears 18% per
annum interest. The Company agreed to accrue interest from inception of these Notes in the amount of $29,412 and charged this amount
to interest expense during the year ended December 31, 2015. The Note is convertible into common stock, at holder’s option, at
a price of $0.99 (0.18 pre-split) or a 50% discount to the average of the three lowest VWAP of the common stock during the 20-trading
day period prior to conversion. On October 2, 2016, the Company renegotiated the note payable. The convertible feature was removed, and
the note was extended until December 31, 2024. The Company recognized a gain on the extinguishment of debt of $121,337 for the remaining
derivative liability and of $11,842 for the remaining debt discount. As of December 31, 2022, the gross balance of the note was $60,000
and accrued interest was $107,734.
Small
Business Administration – On April 17, 2020, the Company issued an unsecured Promissory Note to the Small Business Administration
in the principal amount of $100,000 (the “Note”) that matures on April 16, 2022 and bearing 1.00% per annum interest as part
of the Covid-19 Cares Act. The total net proceeds the Company received was $100,000. On April 30, 2021, the Company issued an additional
unsecured Promissory Note to the Small Business Administration in the principal amount of $31,667 that matures on April 30, 2023 and
bears 3.75% per annum interest under additional funding of the Covid-19 Cares Act. The total net proceeds the Company received was $31,667.
During the year ended December 31, 2021, the Company received forgiveness on the first loan in the amount of $31,667 under the Covid-19
Cares Act. During the nine months ended September 30, 2022, the Company received forgiveness on the second loan in the amount of $31,667
under the Covid-19 Cares Act. Since September 2021, the Company made monthly payments on the first loan that amount to $68,333. As of
December 31, 2022, the gross balance of the note was $0 and accrued interest was $0.
9.
Notes Payable – Related Parties
Notes
payable – related parties of continuing operations were comprised of the following as of December 31, 2022 and December 31,
2021:
Schedule
of Related Parties Notes Payable
| Notes Payable - Related Parties | |
Relationship | |
December 31, 2022 | | |
December 31, 2021 | |
| Clavo Rico, Inc. | |
Affiliate - Controlled by Director | |
$ | 3,377,980 | | |
$ | 3,377,980 | |
| Claymore Management | |
Affiliate - Controlled by Director | |
| 185,000 | | |
| 185,000 | |
| Cluff-Rich PC 401K | |
Affiliate - Controlled by Director | |
| 60,000 | | |
| - | |
| Debra D’ambrosio | |
Immediate Family Member | |
| 446,210 | | |
| 178,900 | |
| Francis E. Rich IRA | |
Immediate Family Member | |
| 100,000 | | |
| 100,000 | |
| Legends Capital | |
Affiliate - Controlled by Director | |
| 715,000 | | |
| 715,000 | |
| LWB Irrev Trust | |
Affiliate - Controlled by Director | |
| 1,101,000 | | |
| 1,101,000 | |
| MDL Ventures | |
Affiliate - Controlled by Director | |
| 1,794,754 | | |
| 1,698,911 | |
| Pine Valley Investments | |
Affiliate - Controlled by Director | |
| 295,000 | | |
| 100,000 | |
| WOC Energy LLC | |
Affiliate - Controlled by Director | |
| - | | |
| - | |
| Total Notes Payable - Related Parties | |
| |
| 8,074,944 | | |
| 7,456,791 | |
| Less Short-Term Notes Payable - Related Parties | |
| (2,695,964 | ) | |
| (2,077,811 | ) |
| Total Long-Term Notes Payable - Related Parties | |
$ | 5,378,980 | | |
$ | 5,378,980 | |
Clavo
Rico, Incorporated – On April 5, 2019, GAIA Ltd and Silverbrook Corporation assigned 100% of the outstanding principal balance
of their notes and all accrued interest to Clavo Rico, Incorporated. The GAIA Ltd and Silverbrook Corporation notes had been extended
until December 31, 2024 and bear 18% per annum interest. As of December 31, 2022, the gross balance of the notes was $3,377,980 and accrued
interest was $6,343,582.
Claymore
Management – On October 2, 2016, the note was extended until December 31, 2024. As of December 31, 2022, the gross balance
of the note was $185,000 and accrued interest was $392,849.
Cluff-Rich
PC 401K – On June 29, 2022, the Company issued an unsecured Short-Term Promissory Note to Cluff-Rich PC 401K in the principal
amount of 60,000 (the “Note”) due on December 31, 2022 and bears a 5.0% interest rate. As of December 31, 2022, the outstanding
balance of the Note was $60,000 and accrued interest was $18,000.
D.
D’Ambrosio – On January 1, 2022, there was three unsecured Short-Term Promissory Notes to D. D’Ambrosio in the
principal amount of $178,900 outstanding from 2021. During 2022, the Company has issued fourteen unsecured Short-Term Promissory Notes
to D. D’Ambrosio in principal amounts totaling $731,210 (the “Notes”) that all bear a 3.00% interest rate. During 2022,
the Company has made payments totaling $488,790 towards the principal balances of $463,900 and accrued interest of $24,890. As of December
31, 2022, there were three Notes outstanding with outstanding balance of the Notes of $446,210 and accrued interest of $81,204.
Francis
E. Rich – On May 24, 2021, the Company issued an unsecured Short-Term Promissory Note to Francis E. Rich in the principal amount
of 50,000 (the “Note”) due on December 25, 2022 and bears a 5.0% interest rate. As of December 31, 2022, the outstanding
balance of the Note was $50,000 and accrued interest was $22,500.
Francis
E. Rich – On November 25, 2021, the Company issued an unsecured Short-Term Promissory Note to Francis E. Rich in the principal
amount of $50,000 (the “Note”) due on December 25, 2022 and bears a 5.0% interest rate. As of December 31, 2022, the outstanding
balance of the Note was $50,000 and accrued interest was $25,000.
Legends
Capital Group – On October 2, 2016, the notes were extended until December 31, 2024. As of December 31, 2022, the gross balance
of the note was $715,000 and accrued interest was $1,478,412.
LW
Briggs Irrevocable Trust – On October 2, 2016, the notes were extended until December 31, 2024. As of December 31, 2022, the
gross balance of the note was $1,101,000 and accrued interest was $2,251,996.
MDL
Ventures – The Company entered into an unsecured convertible note payable agreement with MDL Ventures, LLC, which is 100% owned
by a Company officer, effective October 1, 2014, due on December 31, 2016 and bears 18% per annum interest, due at maturity. Principal
on the convertible note is convertible into common stock at the holder’s option at a price of the lower of $0.99 (0.18 pre-split)
or 50% of the lowest three daily volume weighted average prices of the Company’s common stock during the 20 consecutive days prior
to the date of conversion. On October 2, 2016, the Company renegotiated the note payable. The convertible feature was removed, and the
note was extended until December 31, 2020. The Company recognized a gain on the extinguishment of debt of $1,487,158 for the remaining
derivative liability. As of December 31, 2022, the gross balance of the note was $1,794,754 and accrued interest was $178,849.
Pine
Valley Investments, LLC – On December 6, 2021, the Company issued an unsecured Short-Term Promissory Note to Pine Valley Investments,
LLC in the principal amount of $100,000 (the “Note”) due on January 6, 2022 and bears a 5.0% interest rate. This note has
been extended until October 29, 2022. As of December 31, 2022, the outstanding balance of the Note was $90,000 and accrued interest was
$40,000.
Pine
Valley Investments, LLC – On April 29, 2022, the Company issued an unsecured Short-Term Promissory Note to Pine Valley Investments,
LLC in the principal amount of $160,000 (the “Note”) due on December 24, 2022 and bears a 5.0% interest rate. As of December
31, 2022, the outstanding balance of the Note was $160,000 and accrued interest was $64,000.
Pine
Valley Investments, LLC – On August 15, 2022, the Company issued an unsecured Short-Term Promissory Note to Pine Valley Investments,
LLC in the principal amount of $45,000 (the “Note”) due on February 15, 2023 and bears a 5.0% interest rate. As of December
31, 2022, the outstanding balance of the Note was $45,000 and accrued interest was $11,250.
10.
Convertible Notes Payable
Convertible
notes payable were comprised of the following as of December 31, 2022 and December 31, 2021:
Schedule
of Convertible Notes Payable
| Convertible Notes Payable | |
December 31, 2022 | | |
December 31, 2021 | |
| 1800 Diagonal Lending | |
$ | 104,580 | | |
$ | - | |
| Antczak Polich Law LLC | |
| 279,123 | | |
| 279,123 | |
| Antilles Family Office LLC | |
| 3,073,532 | | |
| 3,074,119 | |
| Scotia International | |
| 395,041 | | |
| 395,041 | |
| Total Convertible Notes Payable | |
| 3,852,276 | | |
| 3,748,283 | |
| Less Unamortized Discount | |
| (50,578 | ) | |
| (826 | ) |
| Total Convertible Notes Payable, Net of Unamortized Debt Discount | |
| 3,801,698 | | |
| 3,747,457 | |
| Less Short-Term Convertible Notes Payable | |
| (3,801,698 | ) | |
| (3,747,457 | ) |
| Total Long-Term Convertible Notes Payable, Net of Unamortized Debt Discount | |
$ | - | | |
$ | - | |
1800
Diagonal Lending LLC – On October 18, 2022, the Company issued an unsecured Convertible Promissory Note (“Note”)
to 1800 Diagonal Lending, LLC (“1800”), in the principal amount of $116,200 (the “Note”) due on October 18, 2023
and bears 12% per annum interest, due at maturity. The total net proceeds the Company received was $100,000 (less an original issue discount
(“OID”) of $16,200). The Note is convertible into common stock, at holder’s option, at a 25% discount of the average
of the three lowest trading price of the common stock during the 10 trading day period prior to conversion. On November 30, 2022, the
Company paid $13,014 towards the principal balance of $11,620 and $1,394 in accrued interest and prepayment penalty. For the year ended
December 31, 2022, the Company amortized $23,558 of debt discount to current period operations as interest expense. As of December 31,
2022, the gross balance of the note was $104,580 and accrued interest was $12,550.
Antczak
Polich Law, LLC – On August 1, 2018, the Company issued an unsecured Convertible Promissory Note (“Note”) to Antczak
Polich Law, LLC (“Antczak”), in the principal amount of $300,000 (the “Note”) due on August 1, 2019 and bears
8% per annum interest, due at maturity. This Note was issued for $300,000 in legal fees due to Antczak for its services related to several
legal issues handled for the Company. The Note is convertible into common stock, at holder’s option, at a fixed conversion price
of $0.75 per share. As of December 31, 2022, the gross balance of the note was $279,123 and accrued interest was $105,675.
Antczak
Polich Law, LLC – On December 1, 2018, the Company issued an unsecured Convertible Promissory Note (“Note”) to
Antczak Polich Law, LLC (“Antczak”), in the principal amount of $130,000 (the “Note”) due on December 1, 2019
and bears 8% per annum interest, due at maturity. This Note was issued for $130,000 in legal fees due to Antczak for its services related
to several legal issues handled for the Company. The Note is convertible into common stock, at holder’s option, at a fixed conversion
price of $0.75 per share. As of December 31, 2022, the gross balance of the note was $0 and accrued interest was $14,142.
Antilles
Family Office LLC – On May 20, 2019, the Company issued a secured Convertible Promissory Note (“Note”) to an Investor,
in the principal amount of $4,250,000 (the “Note”) due on May 20, 2022 and bears 20% (24% default) per annum interest, due
at maturity. The total net proceeds the Company received was $3,000,000. On November 24, 2021, the Note was assigned by the Investor
to Antilles Family Office, LLC (“Antilles”). The Note is convertible into common stock, at holder’s option, at 100%
of market price less $0.01 per share. Market price means the mathematical average of the five lowest individually daily volume weighted
average prices of the common stock from the period beginning on the issuance date and ending on the maturity date. The conversion price
has a floor price of $0.01 per share of common stock. The Company issued 9,250,000 warrants to purchase shares of common stock in connection
with this note. The warrants have a three-year life and an exercise price as follows: 3,750,000 at an exercise price of $0.40 per share,
3,000,000 at an exercise price of $0.50 per share and 2,500,000 at an exercise price of $0.60 per share. The proceeds were allocated
between the note for $1,788,038 and the warrants for $1,211,962. The note has an early payoff penalty of 140% of the then outstanding
face value. On July 29, 2019, the investor converted $265,000 of the principal balance into 2,986,597 shares of common stock valued at
$0.11 per share. The Company recognized a loss on the extinguishment of debt of $40,350. During 2020, the investor converted $36,300
of the principal balance into 17,833,942 shares of common stock. The Company recognized a loss on the extinguishment of debt of $531,194.
The Company also made cash payments of $500,000 towards the principal balance of the note. The Company has required payments as follows:
$2,400,000 in 2021 and the remaining balance due in 2022. During 2020, the Company experienced a triggering event. As a result, the interest
rate increased to 20% for the life of the note. On April 14, 2020, the Company entered into a Forbearance Agreement with Investor in
which Investor agreed to rescind its prior declaration of an Event of Default under the May 20, 2019 Note Purchase Agreement and the
Company agreed to pay certain monthly and quarterly redemptions of the May 20, 2019 Note through 2022. Specifically, the Company agreed
to pay $900,000 during 2020, $2,400,000 during 2021 and $500,000 delivered during each quarter of 2022 until the Note is converted or
redeemed in full. During the year ended December 31, 2021, the investor converted $231,724 of the principal balance into 83,753,430 shares
of common stock. The Company recognized a loss on the extinguishment of debt of $1,783,593. The Company also made cash payments of $142,857
towards the principal balance of the note. The Investor assigned the Note to Antilles in November 2021. The Company is not current with
all payments due under the Forebearance Agreement. On December 30, 2021, the Company was served with a complaint filed by Antilles claiming
an amount of $5,324,206 due from the Company. In the complaint, filed in the United States District Court for the District of Delaware,
Antilles alleges breach of contract and unjust enrichment against the Company and seeks a judgment in the collection action, an aware
of attorneys’ fees and other expenses, and injunctive relief to preserve the assets of the Company. The Company has responded to
the complaint with a motion to dismiss several counts of the complaint as impermissibly duplicative of the breach of contract claim,
and intends to defend the lawsuit aggressively. During the nine months ended September 30, 2022, the investor converted $587 of the principal
balance into 82,712,166 shares of common stock. The Company recognized a loss on the extinguishment of debt of $271,511. As of December
31, 2022, the gross balance of the note was $3,073,532 and accrued interest was $3,635,012.
Scotia
International of Nevada, Inc. – On January 10, 2019, the Company issued an unsecured Convertible Promissory Note (“Note”)
to Scotia International of Nevada, Inc. (“Scotia”), in the principal amount of $400,000 (the “Note”) due on January
10, 2022 and bears 6% per annum interest, due at maturity. The Note was issued as part of a buyout agreement on the net smelter royalty
due Scotia on the precious metals mined from the Company’s mining operation in Honduras. The Note is convertible into common stock,
at holder’s option, at $0.50 per share as long as the Company’s common stock’s bid price is less than $0.75 per share.
If the bid price is more than $0.75 per share, then Scotia may elect to convert at the average bid price of the common stock during the
10-trading day period prior to conversion. For the nine months ended September 30, 2022, the Company amortized $826 of debt discount
to current period operations as interest expense. As of December 31, 2022, the gross balance of the note was $395,042 and accrued interest
was $95,012.
11.
Stockholders’ Deficit
Common
Stock
On
January 5, 2021, the Company issued to an Investor 2,493,479 shares of its common stock under a conversion notice. The conversion was
for $9,500 in principal. The shares were valued at $0.022 per share for a total value of $54,857. The Company recognized a loss of extinguishment
of debt of $46,971 on this conversion.
On
January 15, 2021, the Company issued to an Investor 2,598,468 shares of its common stock under a conversion notice. The conversion was
for $9,900 in principal. The shares were valued at $0.0224 per share for a total value of $58,206. The Company recognized a loss of extinguishment
of debt of $49,847 on this conversion.
On
January 26, 2021, the Company issued to an Investor 2,624,715 shares of its common stock under a conversion notice. The conversion was
for $10,000 in principal. The shares were valued at $0.024 per share for a total value of $62,993. The Company recognized a loss of extinguishment
of debt of $54,409 on this conversion.
On
February 5, 2021, the Company issued to an Investor 2,598,468 shares of its common stock under a conversion notice. The conversion was
for $9,900 in principal. The shares were valued at $0.029 per share for a total value of $75,356. The Company recognized a loss of extinguishment
of debt of $66,730 on this conversion.
On
February 9, 2021, the Company issued to an Investor 2,755,951 shares of its common stock under a conversion notice. The conversion was
for $10,500 in principal. The shares were valued at $0.035 per share for a total value of $96,458. The Company recognized a loss of extinguishment
of debt of $87,254 on this conversion.
On
February 17, 2021, the Company issued to an Investor 2,677,209 shares of its common stock under a conversion notice. The conversion was
for $10,200 in principal. The shares were valued at $0.046 per share for a total value of $123,152. The Company recognized a loss of
extinguishment of debt of $114,106 on this conversion.
On
February 22, 2021, the Company issued to an Investor 2,703,456 shares of its common stock under a conversion notice. The conversion was
for $10,300 in principal. The shares were valued at $0.0535 per share for a total value of $144,635. The Company recognized a loss of
extinguishment of debt of $135,434 on this conversion.
On
March 2, 2021, the Company issued to an Investor 2,677,209 shares of its common stock under a conversion notice. The conversion was for
$10,200 in principal. The shares were valued at $0.04 per share for a total value of $107,088. The Company recognized a loss of extinguishment
of debt of $97,873 on this conversion.
On
March 8, 2021, the Company issued to an Investor 2,834,692 shares of its common stock under a conversion notice. The conversion was for
$10,800 in principal. The shares were valued at $0.0399 per share for a total value of $113,104. The Company recognized a loss of extinguishment
of debt of $103,264 on this conversion.
On
March 11, 2021, the Company issued to an Investor 2,913,434 shares of its common stock under a conversion notice. The conversion was
for $11,100 in principal. The shares were valued at $0.0522 per share for a total value of $152,081. The Company recognized a loss of
extinguishment of debt of $141,925 on this conversion.
On
March 15, 2021, the Company issued to an Investor 3,018,422 shares of its common stock under a conversion notice. The conversion was
for $11,500 in principal. The shares were valued at $0.039 per share for a total value of $117,718. The Company recognized a loss of
extinguishment of debt of $107,137 on this conversion.
On
March 25, 2021, the Company issued to an Investor 3,149,658 shares of its common stock under a conversion notice. The conversion was
for $12,000 in principal. The shares were valued at $0.0327 per share for a total value of $102,994. The Company recognized a loss of
extinguishment of debt of $91,802 on this conversion.
On
April 5, 2021, the Company issued to an Investor 3,307,141 shares of its common stock under a conversion notice. The conversion was for
$12,600 in principal. The shares were valued at $0.0315 per share for a total value of $104,175. The Company recognized a loss of extinguishment
of debt of $92,252 on this conversion.
On
April 20, 2021, the Company issued to an Investor 3,412,130 shares of its common stock under a conversion notice. The conversion was
for $13,000 in principal. The shares were valued at $0.0205 per share for a total value of $69,949. The Company recognized a loss of
extinguishment of debt of $57,413 on this conversion.
On
April 28, 2021, the Company issued to an Investor 3,569,612 shares of its common stock under a conversion notice. The conversion was
for $13,600 in principal. The shares were valued at $0.021 per share for a total value of $74,962. The Company recognized a loss of extinguishment
of debt of $61,717 on this conversion.
On
May 11, 2021, the Company issued to an Investor 3,648,354 shares of its common stock under a conversion notice. The conversion was for
$13,900 in principal. The shares were valued at $0.019 per share for a total value of $69,319. The Company recognized a loss of extinguishment
of debt of $55,567 on this conversion.
On
May 21, 2021, the Company issued to an Investor 4,986,959 shares of its common stock under a conversion notice. The conversion was for
$19,000 in principal. The shares were valued at $0.0183 per share for a total value of $91,261. The Company recognized a loss of extinguishment
of debt of $72,261 on this conversion.
On
June 18, 2021, the Company issued to an Investor 4,960,711 shares of its common stock under a conversion notice. The conversion was for
$18,900 in principal. The shares were valued at $0.015 per share for a total value of $74,411. The Company recognized a loss of extinguishment
of debt of $55,511 on this conversion.
On
July 2, 2021, the Company issued to an Investor 4,665,219 shares of its common stock under a conversion notice. The conversion was for
$9,500 in principal. The shares were valued at $0.015 per share for a total value of $69,978. The Company recognized a loss of extinguishment
of debt of $60,478 on this conversion.
On
July 18, 2021, the Company issued to an Investor 4,791,348 shares of its common stock under a conversion notice. The conversion was for
$5,200 in principal. The shares were valued at $0.0121 per share for a total value of $57,975. The Company recognized a loss of extinguishment
of debt of $52,775 on this conversion.
On
October 7, 2021, the Company issued to an Investor 5,602,192 shares of its common stock under a conversion notice. The conversion was
for $40 in principal. The shares were valued at $0.0135 per share for a total value of $75,630. The Company recognized a loss of extinguishment
of debt of $75,590 on this conversion.
On
October 28, 2021, the Company issued to an Investor 5,602,192 shares of its common stock under a conversion notice. The conversion was
for $40 in principal. The shares were valued at $0.0116 per share for a total value of $64,985. The Company recognized a loss of extinguishment
of debt of $64,945 on this conversion.
On
November 23, 2021, the Company issued to an Investor 560,219 shares of its common stock under a conversion notice. The conversion was
for $4 in principal. The shares were valued at $0.0085 per share for a total value of $4,762. The Company recognized a loss of extinguishment
of debt of $4,758 on this conversion.
On
December 31, 2021, the Company issued to an Investor 5,602,192 shares of its common stock under a conversion notice. The conversion was
for $40 in principal. The shares were valued at $0.006 per share for a total value of $33,613. The Company recognized a loss of extinguishment
of debt of $33,573 on this conversion.
On
January 25, 2022, the Company issued to Antilles Family Office, LLC 5,602,192 shares of its common stock under a conversion notice. The
conversion was for $40 in principal. The shares were valued at $0.007 per share for a total value of $39,215. The Company recognized
a loss of extinguishment of debt of $39,175 on this conversion.
On
February 17, 2022, the Company issued to Antilles Family Office, LLC 4,201,644 shares of its common stock under a conversion notice.
The conversion was for $30 in principal. The shares were valued at $0.0075 per share for a total value of $31,512. The Company recognized
a loss of extinguishment of debt of $31,482 on this conversion.
On
March 2, 2022, the Company issued to Antilles Family Office, LLC 4,901,918 shares of its common stock under a conversion notice. The
conversion was for $35 in principal. The shares were valued at $0.0063 per share for a total value of $30,882. The Company recognized
a loss of extinguishment of debt of $30,847 on this conversion.
On
March 18, 2022, the Company issued to Antilles Family Office, LLC 5,041,973 shares of its common stock under a conversion notice. The
conversion was for $36 in principal. The shares were valued at $0.0045 per share for a total value of $22,689. The Company recognized
a loss of extinguishment of debt of $22,653 on this conversion.
On
April 5, 2022, the Company issued to Antilles Family Office, LLC 4,341,699 shares of its common stock under a conversion notice. The
conversion was for $31 in principal. The shares were valued at $0.0046 per share for a total value of $19,972. The Company recognized
a loss of extinguishment of debt of $19,941 on this conversion.
On
April 18, 2022, the Company issued to Antilles Family Office, LLC 4,481,753 shares of its common stock under a conversion notice. The
conversion was for $32 in principal. The shares were valued at $0.0035 per share for a total value of $15,686. The Company recognized
a loss of extinguishment of debt of $15,654 on this conversion.
On
April 25, 2022, the Company issued to Antilles Family Office, LLC 4,761,863 shares of its common stock under a conversion notice. The
conversion was for $34 in principal. The shares were valued at $0.0037 per share for a total value of $17,619. The Company recognized
a loss of extinguishment of debt of $17,585 on this conversion.
On
May 20, 2022, the Company issued to Antilles Family Office, LLC 5,041,973 shares of its common stock under a conversion notice. The conversion
was for $36 in principal. The shares were valued at $0.0029 per share for a total value of $14,622. The Company recognized a loss of
extinguishment of debt of $14,586 on this conversion.
On
June 2, 2022, the Company issued to Antilles Family Office, LLC 5,322,082 shares of its common stock under a conversion notice. The conversion
was for $38 in principal. The shares were valued at $0.0026 per share for a total value of $13,837. The Company recognized a loss of
extinguishment of debt of $13,799 on this conversion.
On
June 13, 2022, the Company issued to Antilles Family Office, LLC 5,602,192 shares of its common stock under a conversion notice. The
conversion was for $40 in principal. The shares were valued at $0.0025 per share for a total value of $14,005. The Company recognized
a loss of extinguishment of debt of $13,965 on this conversion.
On
June 17, 2022, the Company issued to Antilles Family Office, LLC 6,302,466 shares of its common stock under a conversion notice. The
conversion was for $45 in principal. The shares were valued at $0.0014 per share for a total value of $8,823. The Company recognized
a loss of extinguishment of debt of $8,778 on this conversion.
On
June 23, 2022, the Company issued to Antilles Family Office, LLC 8,403,288 shares of its common stock under a conversion notice. The
conversion was for $60 in principal. The shares were valued at $0.002 per share for a total value of $16,807. The Company recognized
a loss of extinguishment of debt of $16,747 on this conversion.
On
June 28, 2022, the Company issued to Antilles Family Office, LLC 8,823,452 shares of its common stock under a conversion notice. The
conversion was for $63 in principal. The shares were valued at $0.0014 per share for a total value of $12,353. The Company recognized
a loss of extinguishment of debt of $12,290 on this conversion.
On
July 8, 2022, the Company issued to Antilles Family Office, LLC 9,383,671 shares of its common stock under a conversion notice. The conversion
was for $67 in principal. The shares were valued at $0.0015 per share for a total value of $14,076. The Company recognized a loss of
extinguishment of debt of $14,009 on this conversion.
Warrants
On
January 1, 2018, the Company issued 100,000 warrants associated with the issuance of a convertible note payable to Crown Bridge Partners,
LLC. The warrants have a five-year life and are exercisable at $0.75 per share. These warrants’ relative fair value, based on cash
proceeds allocation, was $30,532, which has been recorded warrant derivative liabilities.
On
May 11, 2018, the Company issued 100,000 warrants associated with the issuance of a convertible note payable to Crown Bridge Partners,
LLC. The warrants have a five-year life and are exercisable at $0.75 per share. These warrants’ relative fair value, based on cash
proceeds allocation, was $16,682, which has been recorded warrant derivative liabilities.
On
October 25, 2018, the Company issued 100,000 warrants associated with the issuance of a convertible note payable to Crown Bridge Partners,
LLC. The warrants have a five-year life and are exercisable at $0.75 per share. These warrants’ relative fair value, based on cash
proceeds allocation, was $17,881, which has been recorded warrant derivative liabilities.
On
May 20, 2019, the Company entered into a Note Purchase Agreement (the “Agreement”) with an investor (the “Investor”)
through which the Investor purchased (i) a Senior Secured Redeemable Convertible Note (“Note”) with a face value of $4,250,000
that is convertible into shares of common stock of the Company and (ii) a warrant (“Warrant”) to purchase 9,250,000 shares
of common stock of the Company. The warrant has a life of three years. The warrant is exercisable at the following prices – 3,750,000
shares of common stock at $0.40 per share, 3,000,000 shares of common stock at $0.50 per share and 2,500,000 shares of common stock at
$0.60 per share. These warrants’ relative fair value, based on cash proceeds allocation, was $1,711,394, which has been recorded
warrant derivative liabilities.
The
Company re-valued the warrants at December 31, 2022 for $0 and recorded a gain on the change in derivative liabilities of $0.
The
following tables summarize the warrant activity during the years ended December 31, 2022 and 2021:
Schedule of Warrants Activity
| Stock Warrants | |
Number of Warrants | | |
Weighted Average Exercise Price | |
| Balance at December 31, 2020 | |
| 9,550,000 | | |
$ | 0.50 | |
| Granted | |
| - | | |
| - | |
| Exercised | |
| - | | |
| - | |
| Forfeited | |
| - | | |
| - | |
| Balance at December 31, 2021 | |
| 9,550,000 | | |
| 0.49 | |
| Granted | |
| - | | |
| - | |
| Exercised | |
| - | | |
| - | |
| Forfeited | |
| (9,350,000 | ) | |
| 0.49 | |
| Balance at December 31, 2022 | |
| 200,000 | | |
$ | 0.75 | |
Schedule of Warrants Outstanding and Exercisable
| 2022 Outstanding Warrants | | |
Warrants Exercisable | |
Range of
Exercise Price | | |
Number
Outstanding at
December 31,
2022 | | |
Weighted
Average
Remaining
Contractual
Life | |
Weighted
Average
Exercise Price | | |
Number
Exercisable at
December 31,
2022 | | |
Weighted
Average
Exercise Price | |
| | 0.75 | | |
| 200,000 | | |
0.59 | |
$ | 0.75 | | |
| 200,000 | | |
$ | 0.75 | |
12.
Net Loss Per Common Share
Basic
earnings per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of shares
of common stock outstanding during the period. Diluted income (loss) per share reflects the potential dilution that could occur if stock
options, warrants, and convertible securities to issue common stock were exercised or converted into common stock, if not anti-dilutive.
The following is a reconciliation of the numerator and denominator used in the basic and diluted computation of net income per share:
Schedule
of Reconciliation of Basic and Diluted Computation of Loss per Share
| | |
| | | |
| | |
| | |
For the Years Ended | |
| Numerator | |
December 31, 2022 | | |
December 31, 2021 | |
| Net Loss - Controlling Interest | |
$ | (4,147,141 | ) | |
$ | (2,839,645 | ) |
| Adjusted Net Loss - Controlling Interest | |
$ | (4,147,141 | ) | |
$ | (2,839,645 | ) |
| Denominator | |
Shares | | |
Shares | |
| Basic Weighted Average Number of Shares Outstanding during Period | |
| 215,083,605 | | |
| 129,346,480 | |
| Dilutive Shares | |
| - | | |
| - | |
| Diluted Weighted Average Number of Shares Outstanding during Period | |
| 215,083,605 | | |
| 129,346,480 | |
| | |
| | | |
| | |
| Diluted Net Loss per Share | |
$ | (0.02 | ) | |
$ | (0.02 | ) |
13.
Income Taxes
The
Company’s subsidiaries, Compania Minera Cerros del Sur and Compania Minera Clavo Rico, which are located in Honduras, are required
to pay income tax and solidarity tax on their income and/or assets annually. The Honduran annual report for 2020 was completed during
the year ended December 31, 2021 and the company recognized a tax liability of $158,321 during the period and paid $79,907 of this tax
liability. The Company also accrued for an additional tax liability of $137,756 along with penalties and interest of $246,945 for an
ongoing tax audit for the fiscal year 2017. Also during the year ended December 31, 2021, the Company paid estimated tax payments for
the current fiscal year totaling $77,940 and accrued for another $31,964 in estimated income tax for the fiscal year 2021. During 2022,
the Company paid $109,904 for the 2021 tax liability and accrued for and estimated $13,973 for the 2022 fiscal year.
The
Company accounts for U.S. income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25, deferred
tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered
or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date.
The
provision for income tax expense (recovery) is comprised the following amounts:
Schedule
of Provision for Income Tax Expense (Recovery)
| Tax Reconciliations | |
December 31, 2022 | | |
December 31, 2021 | |
| Tax at Statutory Rate | |
$ | (1,041,630 | ) | |
$ | (415,838 | ) |
| Meals and Entertainment | |
| (280 | ) | |
| (645 | ) |
| Depreciation | |
| - | | |
| 51,239 | |
| Change in Derivative Liability | |
| (216,652 | ) | |
| 914,071 | |
| Amortization of Debt Discount | |
| (3,559 | ) | |
| (197,067 | ) |
| Accrued Interest | |
| 723,448 | | |
| (579,406 | ) |
| Change in Valuation of Allowance | |
| 681,255 | | |
| 757,283 | |
| Tax Provision | |
$ | 142,582 | | |
$ | 529,638 | |
The
components of deferred income tax in the accompanying balance sheets are as follows:
Schedule
of Components of Deferred Income Tax
| Deferred Tax Assets | |
December 31, 2022 | | |
December 31, 2021 | |
| (21% Federal, 5% Average Corporate Rate) | |
| | | |
| | |
| Net Operating Loss Carry-forwards | |
$ | 851,302 | | |
$ | 2,403,846 | |
| Depreciation | |
| 217,362 | | |
| 166,123 | |
| Accrued Interest | |
| 723,448 | | |
| 579,406 | |
| Valuation Allowance | |
| (1,792,111 | ) | |
| (3,149,375 | ) |
| Deferred Tax Assets | |
$ | - | | |
$ | - | |
As
of December 31, 2022 and December 31, 2021, the Company had net operating loss carry-forwards for U.S. federal income tax purposes of
approximately $11,318,460 and $9,245,600, respectively. A portion of the federal amount, $1,710,000, is subject to an annual limitation
of approximately $17,000 as a result of a change in the Company’s ownership through February 2013, as defined by Federal Internal
Revenue Code Section 382 and the related income tax regulations. As a result of the 20-year federal carry-forward period and the limitation,
approximately, $1,400,000 of the net operating loss will expire unutilized. These net operating loss carry-forwards will expire through
the year ending 2042.
The
valuation allowance was established to reduce the deferred tax asset to the amount that will more likely than not be realized. This is
necessary due to the Company’s continued operating losses and the uncertainty of the Company’s ability to utilize all of
the net operating loss carry-forwards before they will expire through the year 2042.
The
Company is subject to income tax in the U.S. federal jurisdiction. The Company has not been audited by the U.S. Internal Revenue Service
in connection with income taxes. The Company’s tax years beginning with the year ended June 30, 2012 through December 31, 2021
generally remain open to examination by the Internal Revenue Service until its net operating loss carry-forwards are utilized and the
applicable statutes of limitation have expired.
14.
Related Party Transactions
Consulting
Agreement – In February 2014, the Company entered into a consulting agreement with a stockholder/director. The Company agreed
to pay $18,000 per month for twelve months. This agreement was renegotiated in October 2017 and the Company agreed to pay the stockholder/director
$25,000 per month starting in October 2017. This agreement was superseded by an Employment Agreement as of July 1, 2018 (see Employment
Agreements below). As of December 31, 2022, the Company owed $1,035,000 to the stockholder/director in accrued consulting fees.
Employment
Agreements – Mr. Cluff currently serves as a director of the Company and has a separate agreement as a consultant of the Company
effective as of October 2, 2015.
The
Company has an employment agreement with its chief executive officer, Trent D’Ambrosio. The employment agreement was effective
as of April 1, 2019 and provides for compensation of $300,000 annually. This agreement is effective for 60 months. Additionally, the
employment agreement provides for benefits and an optional annual bonus to be determined by the Board of Directors.
Notes
Payable – The Company took several short-term notes payable from related parties during 2022. The Company received $936,210
in cash from related parties and paid out $473,900 in cash to related parties on notes payable (see Note 9).
15.
Commitments and Contingencies
Litigation
The
Company at times is subject to other legal proceedings that arise in the ordinary course of business. The following is a summary of pending
or threatened lawsuits that could reasonably be expected to have a material effect on the results of operations of the Company.
On
December 30, 2021, the Company was served with a complaint filed by Antilles Family Office, LLC (“Antilles”) alleging an
amount of $5,324,206 (plus interest, additional costs and attorneys’ fees) due from the Company. Antilles was assigned a Secured
Redeemable Convertible Promissory Note from Discover Growth Fund, LLC in November 2021. In the complaint, filed in the United States
District Court for the District of Delaware, Antilles asserts claims related to alleged breach of contract and unjust enrichment against
the Company, and seeks a monetary judgment, an award of attorneys’ fees and other expenses, and injunctive relief to preserve the
assets of the Company. The Company has responded to the complaint with a motion to dismiss several counts of the complaint as procedurally
improper or impermissibly duplicative of the breach of contract claim, and intends to defend the lawsuit aggressively.
On
June 28, 2021, one of the Company’s subsidiaries, Compañía Minera Clavo Rico, S.A. de C.V., settled a labor dispute
brought in Honduras by one of the Company’s former employees for an amount of $19,408. The settlement included the Company and
all its related entities.
On
March 4, 2020, one of the Company’s subsidiaries, Compañía Minera Clavo Rico, S.A. de C.V., was served with notice
of a civil litigation brought in Honduras by Empresa Agregados y Concretos S.A. (“Agrecon”) for an amount of approximately
$1,350,000, which has been accrued by the Company as of December 31, 2022. The complaint alleges a dispute regarding the amounts owed
by the Company to Agrecon under a certain Material Crushing Agreement. The Company has responded disputing the amount owed and placed
$125,000 in a dedicated account while the case is being litigated and until the court makes its determination on any amounts owed.
The
Servicio de administración de Rentas (“SAR,” the tax authority in Honduras) has completed an audit of the Company’s
tax returns for 2017 and 2018. The Company’s subsidiary, Compañía Minera Clavo Rico, S.A. de C.V., has been served
with a lawsuit filed by SAR in Honduras alleging additional tax liability due. The Complaint alleges that HNL7,186,151,96 lempires are
due in a demand for execution of a forced extrajudicial title. The Company has accrued $256,674 in this matter.
In
the opinion of management, as of December 31, 2022, the amount of ultimate liability with respect to such matters, if any, may be likely
to have a material impact on the Company’s business, financial position, results of operations or liquidity. However, as the outcome
of litigation and other claims is difficult to predict significant changes in the estimated exposures could exist.
16.
Concentrations
We
generally sell a significant portion of our mineral production to a relatively small number of customers. For the year ended December
31, 2022, most of our consolidated product revenues were attributable to A-Mark Precious Metals and to Asahi Refining, Inc., our current
and only two customers as of December 31, 2022. We are not dependent upon any one purchaser and have alternative purchasers readily available
at competitive market prices if there is a disruption in services or other events that cause us to search for other ways to sell our
production.
The
Company currently is producing all of its precious metals from one mine located in Honduras. This location has most of the Company’s
fixed assets and inventories. It would cause considerable disruption to the Company’s operations and revenue if this mine was disrupted
or closed.
17.
Discontinued Operations
During
the year ended December 31, 2022, the Company decided to discontinue all of its operating activities. Based on that decision, the Company’s board of directors committed to a plan to sell the CMCS entity operating
the mine in Honduras.
In
accordance with the provisions of ASC 205-20, the Company has separately reported the assets and liabilities of the discontinued
operations (held for sale) in the consolidated balance sheets.
Schedule of Discontinued operations
| | |
December 31, 2022 | | |
December 31, 2021 | |
| CURRENT ASSETS OF DISCONTINUED OPERATIONS (HELD FOR SALE): | |
| | | |
| | |
| Cash and cash equivalents | |
$ | 2,576 | | |
$ | 23,991 | |
| Accounts receivable | |
| 10,752 | | |
| 12,026 | |
| Inventories | |
| 277,106 | | |
| 455,438 | |
| Prepaid expenses and other current assets | |
| 9,698 | | |
| 9,921 | |
| TOTAL CURRENT ASSETS OF DISCONTINUED OPERATIONS (HELD FOR SALE) | |
$ | 300,132 | | |
$ | 501,376 | |
| | |
| | | |
| | |
| NON-CURRENT ASSETS OF DISCONTINUED OPERATIONS (HELD FOR SALE): | |
| | | |
| | |
| Property, plant and equipment, net | |
$ | 680,643 | | |
$ | 426,564 | |
| Other assets | |
| 142,291 | | |
| 161,044 | |
| TOTAL NON-CURRENT ASSETS OF DISCONTINUED OPERATIONS (HELD FOR SALE) | |
$ | 822,934 | | |
$ | 587,608 | |
| | |
| | | |
| | |
| CURRENT LIABILITIES OF DISCONTINUED OPERATIONS (HELD FOR SALE): | |
| | | |
| | |
| Accounts payable and accrued liabilities | |
$ | 2,504,835 | | |
$ | 1,981,979 | |
| Finance lease liabilities - current portion | |
| 139,029 | | |
| - | |
| Note payable | |
| 272,418 | | |
| - | |
| Taxes payable | |
| 389,045 | | |
| 367,052 | |
| TOTAL CURRENT LIABILITIES OF DISCONTINUED OPERATIONS (HELD FOR SALE) | |
$ | 3,305,227 | | |
$ | 2,349,031 | |
| | |
| | | |
| | |
| NON-CURRENT LIABILITIES OF DISCONTINUED OPERATIONS (HELD FOR SALE): | |
| | | |
| | |
| Finance lease liabilities, net of current portion | |
$ | 23,851 | | |
$ | - | |
| Mine reclamation obligation | |
| 743,822 | | |
| 674,074 | |
| TOTAL NON-CURRENT LIABILITIES OF DISCONTINUED OPERATIONS (HELD FOR SALE) | |
$ | 767,673 | | |
$ | 674,074 | |
In
accordance with the provisions of ASC 205-20, the Company has not included in the results of continuing operations the results of operations
of the discontinued operations in the consolidated statements of operations and comprehensive loss. The results of operations
from discontinued operations for the years ended December 31, 2022 and 2021 have been reflected as discontinued operations in the consolidated
statements of operations and comprehensive loss for the years ended December 31, 2022 and 2021, and consist of the following.
| | |
December 31, 2022 | | |
December 31, 2021 | |
| | |
Years Ended | |
| | |
December 31, 2022 | | |
December 31, 2021 | |
| Precious Metals Income | |
$ | 1,365,387 | | |
$ | 4,725,778 | |
| Cost of goods sold | |
| 1,815,319 | | |
| 3,286,010 | |
| Gross profit | |
| (449,932 | ) | |
| 1,439,768 | |
| | |
| | | |
| | |
| OPERATING EXPENSES OF DISCONTINUED OPERATIONS: | |
| | | |
| | |
| General and administrative | |
| 394,434 | | |
| 477,984 | |
| Depreciation and amortization | |
| 4,044 | | |
| 5,459 | |
| OPERATING EXPENSES OF DISCONTINUED OPERATIONS | |
| 398,478 | | |
| 483,443 | |
| OPERATING INCOME (LOSS) OF DISCONTINUED OPERATIONS | |
| (848,410 | ) | |
| 956,325 | |
| | |
| | | |
| | |
| OTHER (INCOME) EXPENSE OF DISCONTINUED OPERATIONS | |
| | | |
| | |
| Other (income) expense | |
| (26,508 | ) | |
| 1,214,455 | |
| Interest expense | |
| 151,401 | | |
| - | |
| OTHER (INCOME) EXPENSE OF DISCONTINUED OPERATIONS | |
| 124,893 | | |
| 1,214,455 | |
| | |
| | | |
| | |
| LOSS BEFORE INCOME TAXES OF DISCONTINUED OPERATIONS | |
| (973,303 | ) | |
| (258,130 | ) |
| Provision for income taxes of discontinued operations | |
| (142,582 | ) | |
| (529,638 | ) |
| NET LOSS OF DISCONTINUED OPERATIONS | |
$ | (1,115,885 | ) | |
$ | (787,768 | ) |
In
accordance with the provisions of ASC 205-20, the Company has separately reported the cash flow activity of the discontinued operations
in the consolidated statements of cash flows. The cash flow activity from discontinued operations for the years ended December 31, 2022
and 2021 have been reflected as discontinued operations in the consolidated statements of cash flows for the years ended December 31,
2022 and 2021, and consist of the following.
| | |
December 31, 2022 | | |
December 31, 2021 | |
| | |
Years Ended | |
| | |
December 31, 2022 | | |
December 31, 2021 | |
| DISCONTINUED OPERATING ACTIVITIES | |
| | | |
| | |
| Net loss | |
$ | (1,115,885 | ) | |
$ | (787,768 | ) |
| Depreciation expense | |
| 64,662 | | |
| 48,450 | |
| Changes in operating assets and liabilities: | |
| | | |
| | |
| Trade receivables | |
| 1,277 | | |
| (735 | ) |
| Inventories | |
| 19,522 | | |
| 398,217 | |
| Prepaid expenses and other current assets | |
| (183,903 | ) | |
| 2,969 | |
| Accounts payable and accrued liabilities | |
| 826,208 | | |
| 1,588,214 | |
| Accounts payable and accrued liabilities - related parties | |
| 794,604 | | |
| (84,085 | ) |
| Net cash provided by (used in) operating activities of discontinued operations | |
$ | 406,485 | | |
$ | 1,165,262 | |
| | |
| | | |
| | |
| INVESTING ACTIVITIES OF DISCONTINUED OPERATIONS | |
| | | |
| | |
| Purchase of property, plant and equipment | |
$ | (49,666 | ) | |
$ | (72,891 | ) |
| Net cash used in investing activities of discontinued operations | |
$ | (49,666 | ) | |
$ | (72,891 | ) |
| | |
| | | |
| | |
| FINANCING ACTIVITIES OF DISCONTINUED OPERATIONS | |
| | | |
| | |
| Payments on finance leases | |
$ | (76,943 | ) | |
$ | - | |
| Proceeds from notes payable | |
| 403,687 | | |
| - | |
| Net cash provided by financing activities of discontinued operations | |
$ | 326,744 | | |
$ | - | |
18.
Subsequent Events
Management
has evaluated subsequent events, in accordance with FASB ASC Topic 855, “Subsequent Events,” through the date which the consolidated
financial statements were available to be issued and there are no material subsequent events, except as noted below.
On January 12, 2023, Inception Mining, Inc. (the “Company”)
entered into a non-binding Letter of Intent (the “LOI”) with Mother Lode Mining, Inc. (“MLM”). The LOI became
binding on January 24, 2023 when the final installment of initial payment set forth under the LOI was received by the Company.
Pursuant to the terms of the LOI, the Company agreed
to sell all of the shares of its wholly-owned subsidiary, Compañía Minera Cerros Del Sur, S.A. de C.V. (“CMCS”),
to MLM. CMCS is the Honduran-based company that owns the Clavo Rico mine.
The purchase price for the sale of CMCS by the Company
to MLM consisted of the following cash consideration (a) $280,000 was delivered by MLM to the Company on January 3, 2023 to pay outstanding
debts owed by the Corporation; (b) $300,000 was delivered by MLM to the Company on January 5, 2023 to satisfy existing debts of the Company;
(c) $100,000 was delivered by MLM to the Company on January 16, 2023; (d) $200,000 was delivered by MLM to the Company on January 17,
2023; (e) $1,200,000 was delivered by MLM to the Company on January 18, 2023, to pay a settlement amount for existing debt of the Company;
(f) $500,000 was delivered by MLM to the Company on January 23, 2023, to satisfy existing debts of the Company; (g) $420,000 was delivered
by MLM to the Corporation on January 24, 2023 to satisfy existing debts of the Corporation.
In addition to the amounts already delivered under
the LOI, an additional amount of $2,700,0000 shall be paid by MLM to the Company over a period of twenty-four (24) months (the “Monthly
Payments”). The Monthly Payments shall be paid as follows: (i) $25,000 due March 1, 2023, (ii) $50,000 due on the first day of each
of April, May and June 2023, and (iii) $100,000 due on the first day of each month for the following twenty months, until February 1,
2025 at which point all amounts due and payable hereunder shall be delivered in a final balloon payment. Outstanding balances and missed
Monthly Payments will be secured by a 10% NSR on the Clavo Rico mine production until the Monthly Payments are delivered and the purchase
price is paid in full. In addition to the Monthly Payments, the Company will receive a carried forward net profits interest royalty (“NPI”)
of 5% on the Clavo Rico mine production until the total NPI paid to the Company is $1,000,000, subject to limited conditions.
Following the Closing of the LOI on January 24, 2023, the Company divested
its ownership interest in CMCS and its interests in the Clavo Rico mine, resulting in the transfer of operations to Mother Lode Mining
and full control of the Clavo Rico mine asset.
On December 30, 2021, the Company was served with a complaint filed by
Antilles Family Office, LLC (“Antilles”) asserting claims related to alleged breach of contract and unjust enrichment against
the Company. This matter was settled on January 18, 2023 in exchange for the payment of $1,200,000 by the Company to Antilles.
On
February 1, 2023, the Company issued 5,142,857 restricted shares of Common Stock to Cluff-Rich 401(k) upon the conversion of $18,000
in existing debt owed to the shareholder that has been accrued by the Company.
On
February 1, 2023, the Company issued 16,428,571 restricted shares of Common Stock to Fran Rich upon the conversion of $57,500 in existing
debt owed to the shareholder that has been accrued by the Company.
On
February 1, 2023, the Company issued 23,200,857 restricted shares of Common Stock to Debra D’Ambrosio upon the conversion of $81,203
in existing debt owed to the shareholder that has been accrued by the Company.
On
February 1, 2023, the Company issued 485,402,857 restricted shares of Common Stock to Trent D’Ambrosio upon the conversion of
$1,698,910 in existing debt owed to the shareholder that has been accrued by the Company.
On
February 1, 2023, the Company issued 17,142,857 restricted shares of Common Stock to Kay Briggs upon the conversion of $60,000 in existing
debt owed to the shareholder that has been accrued by the Company.
On
February 1, 2023, the Company issued 204,285,714 restricted shares of Common Stock to Legends Capital Group upon the conversion of $715,000
in existing debt owed to the shareholder that has been accrued by the Company.
On
February 1, 2023, the Company issued 314,571,429 restricted shares of Common Stock to L W Briggs Irrevocable Trust upon the conversion
of $1,101,000 in existing debt owed to the shareholder that has been accrued by the Company.
On
February 1, 2023, the Company issued 52,857,143 restricted shares of Common Stock to Claymore Management upon the conversion of $185,000
in existing debt owed to the shareholder that has been accrued by the Company.
On
February 1, 2023, the Company issued 965,137,143 restricted shares of Common Stock to Clavo Rico Inc. upon the conversion of $3,377,980
in existing debt owed to the shareholder that has been accrued by the Company.
On
February 1, 2023, the Company issued 32,928,571 restricted shares of Common Stock to Pine Valley Investments upon the conversion of
$115,200 in existing debt owed to the shareholder that has been accrued by the Company.
On
February 1, 2023, the Company issued 42,857,143 restricted shares of Common Stock to Whit Cluff for services rendered to the Company.
On
February 1, 2023, the Company issued 2,857,143 restricted shares of Common Stock to Rod Sperry for services rendered to the Company.
On
February 1, 2023, the Company issued 2,857,143 restricted shares of Common Stock to Brunson Chandler & Jones, PLLC for services
rendered to the Company.
On
February 1, 2023, the Company issued 14,285,714 restricted shares of Common Stock to Kyle Pickard for services rendered to the Company.
On
February 1, 2023, the Company issued 28,571,429 restricted shares of Common Stock to Justin Wilson for services rendered to the Company.
On February 1, 2023,
the Company issued 28,571,429 restricted shares of Common Stock to Sean Wilson for services rendered to the Company.