NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 – Organization, Basis of Presentation, and Nature of
Operations
Organization and Nature of Operations
Magellan Gold Corporation (“we” “our”,
“us”, the “Company” or “Magellan”) was incorporated on September 28, 2010, under the laws
of the State of Nevada. Our principal business is the acquisition and exploration of mineral resources. We have not presently determined
whether the properties to which we have mining rights contain mineral reserves that are economically recoverable.
Our primary focus is to explore and develop mineral
properties in the United States. Effective March 31, 2020, we divested our subsidiary holding all of our international assets and plan
to advance our recently acquired Idaho Gold project towards resource definition and eventual development, and possibly to acquire additional
mineral rights and conduct additional exploration, development and permitting activities. Our mineral lease payments, permitting applications
and exploration and development efforts will require additional capital. We rely upon the sale of our securities as well as advances and
loans from executive management and significant shareholders to fund our operations as we have not generated any significant revenue.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
We prepare our financial statements in accordance
with accounting principles generally accepted in the United States (“GAAP”). The accompanying unaudited interim consolidated
financial statements have been prepared in accordance with GAAP for interim financial information in accordance with Article 8 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In our
opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating
results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results for the full year. While
we believe that the disclosures presented herein are adequate and not misleading, these interim financial statements should be read in
conjunction with the audited financial statements and the footnotes thereto contained in our annual report on Form 10-K for the year ended
December 31, 2020.
On July 1, 2020, the Company entered into a Stock
Purchase Agreement to acquire Clearwater Gold Mining Corporation (“Clearwater”) which owns certain unpatented mining claims
in Idaho County, Idaho. The Company will be evaluating the historic mine data to assess the potential to develop a gold resource at Center
Star. The project area is located 45 miles from Grangeville, Idaho and near the town of Elk City, Idaho.
On August 25, 2020 the Company, formed a new wholly
owned subsidiary, M Gold Royalty (“M Gold”), to expand into the royalty business. M Gold Royalty will engage in organically
generating royalties derived from a portfolio of mineral property interests in North America. Royalties from this portfolio will be complemented
by royalties from selected acquisitions as well as income from other strategic investments.
Our consolidated financial statements include
our accounts and the accounts of our 100% owned subsidiary, Clearwater and M Gold. All intercompany transactions and balances have been
eliminated. Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America (“U.S. GAAP”).
Net Loss per Common Share
We compute basic net loss per common share by
dividing our net loss attributable to common shareholders by our weighted-average number of common shares outstanding during the period.
Computation of diluted net loss per common share adds the weighted-average number of potential common shares outstanding to the weighted-average
common shares outstanding, as calculated for basic net loss per share, except for instances in which there is a net loss. For the nine
months ended September 30, 2021, 72,000 of stock options, 423,635 of warrants, and 1,260,338 shares issuable from convertible notes were
considered for their dilutive effects. For the nine months ended September 30, 2020, 72,000 of stock options, 2,038,635 of warrants, 242,269
shares issuable from Series A Preferred Stock and 990,978 shares issuable from convertible notes were considered for their dilutive effects.
Derivative Financial Instruments
Fair value accounting requires bifurcation of
embedded derivative instruments such as conversion features in convertible debt or equity instruments and measurement of their fair value
for accounting purposes. In assessing the convertible debt instruments, management determines if the convertible debt host instrument
is conventional convertible debt and further if there is a beneficial conversion feature requiring measurement. If the instrument is not
considered conventional convertible debt under ASC 470, the Company will continue its evaluation process of these instruments as derivative
financial instruments under ASC 815. The Company applies the guidance in ASC 815-40-35-12 to determine the order in which each convertible
instrument would be evaluated for derivative classification. The Company’s sequencing policy is to evaluate for reclassification
contracts with the earliest maturity date first.
Once determined, derivative liabilities are adjusted
to reflect fair value at each reporting period end, with any increase or decrease in the fair value being recorded in results of operations
as an adjustment to fair value of derivatives.
Recent Accounting Pronouncements
The Company does not believe that any recently
issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying
financial statements.
Liquidity and Going Concern
Our consolidated financial statements have been
prepared on a going concern basis, which assumes that we will be able to meet our obligations and continue our operations during the next
fiscal year. Asset realization values may be significantly different from carrying values as shown in our consolidated financial statements
and do not give effect to adjustments that would be necessary to the carrying values of assets and liabilities should we be unable to
continue as a going concern. At September 30, 2021, we had a working capital deficit of $1,299,535, we had not yet generated any significant
revenues or achieved profitable operations and we have accumulated losses of $17,781,107. We expect to incur further losses in the development
of our business, all of which raises substantial doubt as to our ability to continue as a going concern. Our ability to continue as a
going concern depends on our ability to generate future profits and/or to obtain the necessary financing to meet our obligations arising
from normal business operations when they come due.
We anticipate that additional funding will be
in the form of additional loans from officers, directors or significant shareholders, or equity financing from the sale of our common
stock but cannot assure than any future financings will occur.
Note 3 – Mineral Rights and Properties
Center Star Gold Mine
On July 1, 2020, the Company entered into a Stock
Purchase Agreement to acquire Clearwater Gold Mining Corporation (“Clearwater”) which owns certain unpatented mining claims
in Idaho County, Idaho that include the historic Center Star Gold Mine (“Center Star”) near Elk City, Idaho. As a result of
the Clearwater acquisition, Gregory Schifrin, the sole shareholder of Clearwater, was appointed to serve as a member of the Company’s
Board on July 1, 2020. In consideration for 100% of the issued and outstanding shares of Clearwater, the Company has agreed to pay Clearwater’s
sole shareholder 1,000,000 shares of Magellan common stock, $125,000 convertible note and $25,000 in cash. The 1,000,000 shares are to
be issued to the shareholder on and under the terms as follows: 250,000 shares at the time of closing, 250,000 shares at the time the
Center Mine receives its permit to reopen the main portal of the mine, 250,000 shares at the point the main portal has been reopened and
250,000 shares two-years from closing concurrent the pay-off of the $125,000 convertible note. As of September 30, 2021, the total purchase
price for the Clearwater was determined to be $1,000,000 which consisted of $12,500 cash paid, $12,500 accrued in accounts payable –
related party, a $125,000 convertible promissory note, and 1,000,000 shares of common stock with a fair value of $850,000. The Company
concluded the transaction qualified as an asset acquisition and all such acquisition costs have been capitalized.
As of September 30, 2021 and December 31, 2020,
the Company had $193,505 and $112,968 in capitalized development cost to develop gold resources at Center Star, respectively.
Note 4 – Disposition of Business
Mexico Operations
On March 3, 2017 the Company entered into a Memorandum
of Understanding (“MOU”) with Rose Petroleum plc (“Rose”), a multi-asset natural resource business, to purchase
an operating floatation plant that also includes a precious metals leach circuit and associated assets, licenses and agreements (together,
the “SDA Mill”) located in the State of Nayarit, Mexico.
Prior to closing, all of the assets and operations
related to the SDA Mill were transferred to a newly incorporated entity, Minerales Vane 2 S.A. de C.V. (“Minerales Vane 2”).
Effective November 30, 2017, the Company’s newly incorporated wholly owned subsidiary, Magellan Acquisition Corporation (“MAC”),
acquired 100% of the issued and outstanding shares of Minerales Vane 2 (“MV2”).
Effective March 31, 2020 the Company entered into
an Agreement to Accept Collateral in Full Satisfaction of Obligations (the “Agreement”) with certain holders of Promissory
Notes (the “Lenders”) due December 31, 2019 (the “Notes”) in the aggregate principal amount of $1.05 million.
The Company is indebted under the Notes to the Lenders and the Company’s obligations to the Lenders are secured by a Stock Pledge
and Security Agreement covering 100 shares of common stock of Magellan Acquisition Corporation and one (1) share of MV2 (the “Collateral”)
held under a Collateral Agent Agreement. Magellan Acquisition Corp. and MV2 own the SDA Mill and El Dorado prospect in Nayarit, Mexico.
The Notes matured on December 31, 2019 and remain unpaid and in default. The Lenders have accelerated the Company’s
indebtedness. Pursuant to terms set forth in the Agreement, the Lenders have agreed to accept the Collateral in full satisfaction of the
Notes and unconditionally and irrevocably waive any entitlement or right to receive payment of (i) the initial 10% Financing Fee included
in the principal amount of the Notes, (ii) the 5% Rollover Fee agreed to in an Allonge and Modification Agreement. The effective date
of the Agreement was March 31, 2020.
Silver District
On July 21, 2020, the Company entered into a Stock
Purchase agreement with Tri Power Resources, LLC to sell 1,000 shares representing 100% ownership of Gulf+Western Industries, Inc (“Gulf+Western”)
to Tri Power in consideration for the return and cancellation of 50,000 shares of the Company’s Series A Preferred Stock with a
stated value of $10 per share. John Gibbs, a majority shareholder in the Company, is the Managing Member and Chief Executive Officer of
Tri Power Resources, LLC.
Due to the related party nature of the above transactions,
the gain of $206,860 associated with the disposals were recorded to additional paid in capital.
Summary
The agreements qualify as a discontinued operation
in accordance with U.S. GAAP. As a result, operating results and cash flows related to the Gulf+Western, MAC and MV2 operations have
been reflected as discontinued operations in the Company’s consolidated statements of operations and comprehensive loss and consolidated
statements of cash flows.
Schedule
of discontinued operations
|
|
|
|
|
|
|
|
|
September
30, 2021
|
|
|
September
30, 2020
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
–
|
|
|
$
|
–
|
|
Cost of sales
|
|
|
–
|
|
|
|
–
|
|
Exploration
costs
|
|
|
–
|
|
|
|
–
|
|
General
and administrative expenses
|
|
|
–
|
|
|
|
(31,599
|
)
|
Operating
loss
|
|
|
–
|
|
|
|
(31,599
|
)
|
Other
expense
|
|
|
–
|
|
|
|
–
|
|
Net
loss from discontinued operations
|
|
$
|
–
|
|
|
$
|
(31,599
|
)
|
Note 5 – Fair Value of Financial Instruments
Financial assets and liabilities recorded at fair
value in our consolidated balance sheets are categorized based upon a fair value hierarchy established by GAAP, which prioritizes the
inputs used to measure fair value into the following levels:
Level 1 – Quoted market prices in active
markets for identical assets or liabilities at the measurement date.
Level 2 – Quoted prices for similar
assets or liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active;
or other inputs that are observable and can be corroborated by observable market data.
Level 3 – Inputs reflecting management’s
best estimates and assumptions of what market participants would use in pricing assets or liabilities at the measurement date. The inputs
are unobservable in the market and significant to the valuation of the instruments.
A financial instrument's categorization within
the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The carrying values for cash and cash equivalents,
prepaid assets, accounts payable and accrued liabilities, related party line of credit and notes payable approximate their fair value
due to their short-term maturities.
Fair Value Measurements
The Company’s assets and liabilities recorded
at fair value have been categorized based upon a fair value hierarchy.
The following table presents information about
the Company’s liabilities measured at fair value on a recurring basis and the Company’s estimated level within the fair value
hierarchy of those assets and liabilities as of September 30, 2021 and December 31, 2020:
Schedule
of fair value measurements on a recurring basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Fair
value at September 30, 2021
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
liability
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
118,084
|
|
|
$
|
118,084
|
|
|
|
|
Level
1
|
|
|
|
Level
2
|
|
|
|
Level
3
|
|
|
|
Fair
value at December 31, 2020
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
liability
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
There were no transfers
between Level 1, 2 or 3 during the period.
The table below
presents the change in the fair value of the derivative liability during the nine months ended September 30, 2021:
Schedule of fair value of the derivative liability
|
|
|
|
|
Fair value as of December 31, 2020
|
|
$
|
–
|
|
Fair value on the date of issuance
recorded as a debt discount
|
|
|
95,715
|
|
Loss on change in fair value of derivatives
|
|
|
22,369
|
|
Fair value as of September 30, 2021
|
|
$
|
118,084
|
|
Note
6 – Advances
Unsecured advances
– related party
During the nine
months ended September 30, 2021, a Director paid expenses on behalf of the Company of $30,252
and the Company made payments on advances of $20,000. As of September 30, 2021, the advances
from related party balance were $20,252.
Unsecured advances
–third party
During the nine
months ended September 30, 2021, the Company received $605
in cash advances, had expenses paid on its behalf of $276
and made repayments on advances of $30,420.
As of September 30, 2021, the advances from third party balance were $18,223.
Note
7 – Convertible Note Payable and Derivative Liability
Series 2019A
10% Unsecured Convertible Notes
In 2019, the Company
sold $135,000
of Series 2019A 10%
Unsecured Convertible Notes. The purchase price of the Note is equal to the principal amount of the Note. The Series 2019A Notes are
convertible into shares of Common Stock at a conversion price of $1.00
during the life of the Note. The lenders were issued 100,000 common stock warrants with an
exercise price of $2.00 per share. The Company evaluated the conversion option and concluded a beneficial conversion feature was present
at issuance. The Company recognized the beneficial conversion feature and relative fair value of the warrants as a debt discount and
additional paid in capital in August and December 2019. The $135,000
debt discount is amortized over the term of the loan. The Notes will accrue interest at the
rate of 10% per annum, payable quarterly in arrears. The Notes mature twelve (12) months from the date of issue. The maturity date can
be extended at the option of the Company for an additional one (1) year. There are two Series 2019A 10% Unsecured Convertible Notes that
were due and payable in August 2020 and are currently past due and in default. The default interest rate on the notes is 12%. As of September
30, 2021, the balance due under these notes net of unamortized discount of $0,
is $75,000,
with accrued interest of $15,213.
On October 1, 2019,
the Company sold a 10%
Unsecured Convertible Note for $145,978
due on demand to settle accounts payable. The purchase price of the 10% Unsecured Convertible
Note is equal to the principal amount of the Note. The 10% Unsecured Convertible Note is convertible into shares of Common Stock at a
conversion price of $1.00
during the life of the Note. The Company evaluated the conversion option and concluded a
beneficial conversion feature was present at issuance. The Company recognized the beneficial conversion feature as a debt discount and
additional paid in capital in October 2019. The debt discount will be amortized over the term of the loan. The 10% Unsecured Convertible
Note will accrue interest at the rate of 10% per annum payable quarterly, accruing from the date of issuance. As of September 30, 2021,
the balance due under these notes net of unamortized discount of $0,
is $145,978,
with accrued interest of $29,156.
Series 2020A
8% Unsecured Convertible Notes
In 2020, the Company
sold $285,000
of Series 2020A 8%
Unsecured Convertible Notes with a maturity date of November 30, 2020. The purchase price of the Note is equal to the principal amount
of the Note. The Series 2020A Notes are convertible into shares of Common Stock at a conversion price of $0.50
during the life of the Note. The lenders were issued 142,500
common stock warrants with an exercise price of $0.50
per share for a term of 5
years. Two related parties purchased $60,000 of the 2020A notes. The Company evaluated the
conversion option and concluded a beneficial conversion feature was present at issuance. The Company recognized the beneficial conversion
feature as a debt discount and additional paid in capital as of December 31, 2020. The $237,263
debt discount will be amortized over the term of the loan. The Notes will accrue interest
at the rate of 8% per annum, payable quarterly in arrears. In July 2020, $25,000 of Series 2020A 8% Unsecured Convertible Notes were
converted into 50,000 shares of common stock at a conversion price of $0.50 per share. As of September 30, 2021, the balance due to a
related party under these notes net of unamortized discount of $0,
is $60,000,
with accrued interest of $6,428.
As of September 30, 2021, the balance due to a third party under these notes net of unamortized discount of $0,
is $200,000,
with accrued interest of $20,264.
3% Secured Convertible
Note
On July 1, 2020,
the Company issued a $125,000
Secured Convertible Note to a related party for the as part of the purchase of Clearwater
Mining Corporation. The convertible note is secured by common stock of the Company, matures on July 1, 2022 and will accrue interest
at the rate of 3%
per annum, payable yearly in arrears beginning July 1, 2021. The Note is convertible into shares of Common Stock at a conversion price
of $0.50
during the life of the Note. The Company evaluated the conversion option and concluded a
beneficial conversion feature was present at issuance. The Company recognized the beneficial conversion feature and relative fair value
of the warrants as a debt discount and additional paid in capital in July 2019. The $87,500
debt discount will be amortized over the term of the loan. Amortization expense of $32,723
was recognized during the nine months ended September 30, 2020. As of September 30, 2021,
the balance due to a related party under this note net of unamortized discount of $32,842,
is $92,158,
with accrued interest of $4,685.
AJB Convertible
Note
On February 10,
2021, the Company entered into a debt agreement to borrow $200,000.
The secured note has an original issuance discount of $16,000
along with $9,000
in legal and finder fees recorded as a discount, which will be amortized over the life of
the note. The loan is secured by common stock of the Company, bears interest at a rate of 10%
and has a six-month maturity. In August 2021, the note was extended six months and the interest rate was increased to 15%. The unpaid
principal is convertible into shares of the Company’s common stock at the conversion price. The conversion price shall be the less
of 90% of the lowest trading price during the previous twenty (20) trading day period ending on the issuance date, or during the previous
twenty (20) trading day period ending on date of conversion of this note. The Company issued the debtholder 266,667
common shares as a commitment fee. Due to the variable conversion feature the note conversion
feature was bifurcated from the note and recorded as a derivative liability. The day one derivative liability was $95,715
was recorded as a discount on the convertible notes payable. As of September 30, 2021, the
balance on the loan, net of unamortized discount of $0
is $200,000,
with accrued interest of $333.
As of September
30, 2021, the total derivative liability on the above note was adjusted to a fair value of $118,084.
During the nine months ended September 30, 2021, $120,714
of the discount was amortized leaving an unamortized balance of $0.
The fair value of the conversion option was estimated using the Black-Scholes option pricing model and the following assumptions during
the period: fair value of stock $0.90
- 1.03,
volatility of 91.27%
- 115.83%
based on a comparable company peer group, expected term of 0.50
years, risk-free rate of 0.05%
- 0.06%
and a dividend yield of 0%.
Note
8 – Stockholders’ Deficit
Common Stock
On February 10,
2021, the Company issued the 266,667
common shares as a commitment fee. The shares were valued at $0.92,
the closing price of the Company’s stock on February 10, 2021. During the nine months ended September 30, 2021, the Company recognized
$245,334
of stock-based compensation related to this issuance.
On August 6, 2020,
the Company entered into a one-year investor relations consulting agreement. As consideration for its services under the Agreement, the
Company agreed to pay to the consultant 261,538
restricted shares of the Company’s common stock. The shares were valued at $1.56,
the closing price of the Company’s stock on August 6, 2020. As of December 31, 2020, the Company had not issued the shares and
accrued $136,000
related to this agreement. During the nine months ended September 30, 2021, the Company issued
the 261,538
shares related to this agreement, settled the prior year accrual of $136,000
for 2020 services and recognized $272,000
of stock-based compensation for services provided during the nine months ended September
30, 2021.
During the nine
months ended September 30, 2021, the Company received net proceeds of $287,000
from the exercise of 1,435,000
warrants. On July 15, 2020, the Company issued 500,000 shares for services rendered pursuant
to two investor relations agreements: 200,0000
shares under a Services Agreement and 300,000
shares under a Consulting Agreement. The shares were valued at $1.29, the closing price of
the Company’s stock on July 15, 2020. The Services Agreement is $7,500 per month and has a term of twelve months The Consulting
Agreement is $7,500 per month and has an initial term of six months. If the Consulting Agreement is not terminated at least thirty days
prior to the end of the initial term, the term will continue for an additional six months. During the nine months ended September 30,
2021 the Company recognized $322,250
of expense related to these shares.
Preferred Stock
In September 2020,
the Company established a Series B Convertible Preferred Stock (“Series B Preferred”) and authorized an aggregate of 5,000
shares with a par value of $0.001 per share and a stated value of $1,250.00 per share. The holders of outstanding Series B Preferred
shall be entitled to receive dividends at the annual rate of 10% based on the stated value per share. Dividends on the share of Series
B Preferred shall be cumulative.
During the nine
months ended September 30, 2021, the Company accrued $80,112
for the Series A preferred stock dividend.
Effective May 31,
2021, the Company received notices of Conversion from five of its Series A Convertible Preferred stockholders that they had elected to
convert a total of 192,269 shares of Series A Convertible Preferred Stock into an aggregate of 1,922,690 shares of Common Stock and $356,123
in accrued but unpaid dividends on the Series A Shares into an aggregate of 356,123 shares of Common Stock Each share of Series A Convertible
Preferred Stock was convertible into ten shares of Common Stock. The Conversion Price of the Dividend Shares was $1.00 per share. On
June 30, 2021, the Company issued 2,278,813 shares of common stock for the conversion of preferred stock and accrued dividends.
Stock Warrants,
Stock Options and the 2017 Equity Incentive Plan:
Under the 2017
Equity Incentive Plan, the Company is authorized to grant rights to acquire up to a maximum of 200,000 shares of common stock. The 2017
Plan provides for the grant of (1) both incentive and nonstatutory stock options, (2) stock bonuses, (3) rights to purchase restricted
stock and (4) stock appreciation rights. As of September 30, 2021, the Company had 128,000 shares available for future grant.
On September 15,
2020, John Gibbs, a related party, transferred 330,000 warrants to purchase common stock back to the Company. The warrants were accounted
for as if they were returned and re-granted. Deepak Malhotra, a member of the board, received 300,000 of the transferred warrants as
compensation for services to be performed over a one year term. The warrants were valued $386,764 and will recognized over the one year
service period. During the nine months ended September 30, 2021, the Company recognized $257,842
of expense related to the issuance of these warrants. Mr. Malhotra exercised 50,000 warrants
in the third quarter of 2020. On May 31, 2021, Mr. Malhotra’s remaining 250,000 warrants were extended until May 31, 2022. The
incremental value of the warrant modification of $194,687 will be recorded over the remaining service period ending September 30, 2021.
During the nine months ended September 30, 2021, the Company recognized $194,687
of expense related to the warrant modification.
In May 2021, John
Gibbs, a related party, transferred 75,000 warrants and five other warrant holders transferred 1,310,000 warrants to purchase common
stock to various other holders. The transferred warrants were all set to expire on May 31, 2021 and had an exercise price of $0.20. In
May 2021, 1,185,000 of the warrants were exercised resulting in proceeds to the Company of $237,000. On May 31, 2021 the remaining 200,000
transferred warrants were extended to May 31, 2022. These remaining warrants were exercised in June 2021 and resulted in proceeds to
the Company of $40,000.
Stock option activity
within the 2017 Equity Incentive Plan and warrant activity outside the plan, for the nine months ended September 30, 2021 is as follows:
Schedule of stock option and warrant activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
Stock Warrants
|
|
|
|
Shares
|
|
|
Weighted Average
Exercise Price
|
|
|
Shares
|
|
|
Weighted Average
Exercise Price
|
|
Outstanding at December 31, 2020
|
|
|
72,000
|
|
|
$
|
2.00
|
|
|
|
1,858,635
|
|
|
$
|
0.67
|
|
Granted
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Cancelled
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Expired
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Exercised
|
|
|
–
|
|
|
|
–
|
|
|
|
(1,435,000
|
)
|
|
|
0.20
|
|
Outstanding at September 30, 2021
|
|
|
72,000
|
|
|
$
|
2.00
|
|
|
|
423,635
|
|
|
$
|
0.28
|
|
Exercisable at September 30, 2021
|
|
|
72,000
|
|
|
$
|
2.00
|
|
|
|
423,635
|
|
|
$
|
0.28
|
|
As of September
30, 2021, the outstanding stock options have a weighted average remaining term of 6.07
years and has no intrinsic value, and the outstanding stock warrants have a weighted average
remaining term of 1.37
years and an intrinsic value of $312,131.
Note
9 – Commitments and Contingencies
Mining Claims
As part of our
acquisition of the Center Star gold mine project, we acquire 15 Bureau of Land Management (“BLM”) unpatented mining claims
and subsequently staked another 16 unpatented mining claims. In order to maintain the BLM lode claims, annual payments are required
before the end of August of each year. As of September 30, 2021, all of these claims are in good standing.
Note
10 – Executive Employment Agreement
Effective August
1, 2020, the Company and Michael Lavigne, executed a Restricted Stock Unit Agreement pursuant to which the Company agreed to grant to
Mr. Lavigne, in consideration of services to be rendered as President, CEO and Director, restricted stock units consisting of 15,000
units for each month of service. The vested stock units will be settled in shares of common stock upon or as soon as practicable (a)
upon written request any time after December 31, 2020 or (b) following the termination date, whichever occurs first. As of September
30, 2021, 210,000
restricted stock units may be settled in shares of common stock. During the nine months ended
September 30, 2021, the Company recognized $133,965
of stock-based compensation related to the agreement.
Note
11 – Related Party Transactions
Conflicts
of Interests
Athena Silver Corporation
(“Athena”) is a company under common control. Mr. Gibbs is a significant investor in both Magellan and Athena. Magellan and
Athena are both exploration stage companies involved in the business of acquisition and exploration of mineral resources.
Silver
Saddle Resources, LLC is also a company under common control. Mr. Gibbs are significant investors and managing members of Silver Saddle.
Magellan and Silver Saddle are both exploration stage companies involved in the business of acquisition and exploration of mineral resources.
The
existence of common ownership and common management could result in significantly different operating results or financial position from
those that could have resulted had Magellan, Athena and Silver Saddle been autonomous.
As of March 31,
2021, Mr. Power and Dr. Carson are no longer considered related parties, and therefore all amounts due to them have been reclassified
out of related party accounts.
Accrued Interest
- Related Parties
Accrued interest
due to related parties is included in our consolidated balance sheets as follows:
Schedule of related party transactions (accrued interest)
|
|
|
|
|
|
|
|
|
September
30,
2021
|
|
|
December
31,
2020
|
|
Accrued interest payable –
Mr. Gibbs
|
|
$
|
5,589
|
|
|
$
|
2,597
|
|
Accrued interest payable – Dr. Carson
|
|
|
–
|
|
|
|
752
|
|
Accrued interest payable – Mr. Schifrin
|
|
|
4,685
|
|
|
|
1,880
|
|
Accrued interest payable – Mr. Malhotra
|
|
|
839
|
|
|
|
241
|
|
|
|
$
|
11,113
|
|
|
$
|
5,470
|
|