UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the transition period from              to           

Commission file number: 001-34055

TIMBERLINE RESOURCES CORPORATION

 (Exact(Exact Name of Registrant as Specified in its Charter)

(208) 664-4859

(Registrant’s Telephone Number, including Area Code)

(Former name, former addressSecurities registered pursuant to Section 12(b) of the Act: None

Securities registered under Section 12(g) of the Exchange Act:  Common Stock, $0.001 par value, (Title of Class)

Trading symbols and former fiscal year, if changed since last report)exchanges:  TLRS, OTCQB  TBR, TSX-V

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   x   Yes  o  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  xYes  o  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  £

o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)o ☐  Yes  x   No

Number of shares of issuer’s common stock outstanding at January 25, 2018: 36,027,819August 16, 2021: 139,558,522

INDEX

Page

PART I — FINANCIAL INFORMATION4

3

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)4

3

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS.15

13

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK23

20

ITEM 4. CONTROLS AND PROCEDURES23

21

PART II — OTHER INFORMATION24

21

ITEM 1. LEGAL PROCEEDINGS.24

21

ITEM 1A. RISK FACTORS24

21

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.24

21

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.24

21

ITEM 4.  MINE SAFETY DISCLOSURES24

21

ITEM 5.  OTHER INFORMATION.INFORMATION24

22

ITEM 6. EXHIBITS.25

22SIGNATURES26

SIGNATURES

23

COVID-19

In March 2020, COVID-19 was declared a pandemic by the World Health Organization and the Centers for Disease Control and Prevention. Its rapid spread around the world and throughout the United States prompted many countries, including the United States, to institute restrictions on travel, public gatherings and certain business operations. These restrictions did not significantly disrupt economic activity in Timberline Resource’s business.

As of June 30, 2021, the pandemic had not materially impacted the Registrants’ financial statements. However, if the severity of the COVID-19 pandemic continues, the negative financial impact due to limitations in conducting geologic field work and exploration activities could be significantly greater in future periods. In addition, the economic disruptions caused by COVID-19 could adversely impact the impairment risks for certain long-lived assets and equity method investments. Timberline Resources evaluated these impairment considerations and determined that no such impairments occurred as of June 30, 2021.

The effects of the continued outbreak of COVID-19 and related government responses could also include extended disruptions to supply chains and capital markets, reduced availability of contractors and a prolonged reduction in economic activity. These effects could have a variety of adverse impacts on the Company, including its ability to conduct exploration activities. As of June 30, 2021, there were no material adverse impacts on the Company’s operations due to COVID-19.

As of June 30, 2021, Timberline Resource’s available cash is $2,559,106. Management believes the Company has adequate liquidity to fund current obligations and commitments. To the extent that future access to the capital markets or the cost of funding is adversely affected by COVID-19, the Company may need to consider additional sources of funding for operations and working capital, which may adversely impact future results of operations, financial condition, and cash flows.

The Company has taken steps to mitigate the potential risks to suppliers and employees posed by the spread of COVID-19, including work from home policies where appropriate. The Company will continue to monitor developments affecting both its workforce and contractors, and will take additional precautions as necessary. The ultimate impact of COVID-19 depends on factors beyond management’s knowledge or control, including its duration and third-party actions to contain its spread and mitigate its public health effects. Therefore, the Company cannot estimate the potential future impact to its financial position, results of operations and cash flows, but the impacts could be material.

PART I — FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

TIMBERLINE RESOURCES CORPORATION AND SUBSIDIARIES

Contents

Page

FINANCIAL STATEMENTS:STATEMENTS (UNAUDITED):

Consolidated balance sheets5

4

Consolidated statements of operations and comprehensive income (loss)6

5

Consolidated statements of changes in stockholders’ equity7

Consolidated statements of cash flows8

6

Notes to consolidated financial statements9 - 14

7 - 12

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements.

TIMBERLINE RESOURCES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6

June 30, 2021 (Unaudited)

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS:

Timberline Resources Corporation (“Timberline” or “the Company”, “we”, “us”, “our”)Company) was incorporated in August of 1968 under the laws of the State of Idaho as Silver Crystal Mines, Inc., for the purpose of exploring for precious metal deposits and advancing them to production. In 2008, wethe Company reincorporated into the State of Delaware, pursuant to a merger agreement approved by ourits shareholders.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

a.

Basis of Presentation and Going Concern – The accompanying unaudited consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, as well as the instructions to Form 10-Q. Accordingly, the financial statementsthey do not include all of the information and footnotes required by accounting principles generally accepted in the United States of AmericaGAAP for complete financial statements. In the opinion of ourthe Company’s management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation of the interim financial statements have been included. Operating results for the three-month periodthree and nine-month periods ended December 31, 2017June 30, 2021 are not necessarily indicative of the results that may be expected for the fullfiscal year ending September 30, 2018.  All amounts presented are in U.S. dollars.  2021. 

For further information refer to the financial statements and footnotes thereto in ourthe Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2017.

2020.

The accompanying consolidated financial statements forhave been prepared under the three-month period ended December 31, 2017 were prepared on the basisassumption that the Company iswill continue as a going concern, which contemplates the realizationconcern. The Company has incurred losses since its inception. The Company has sufficient cash to fund normal operations and meet all of its assetsobligations for the next 12 months without raising additional funds. However, we are an exploration company with exploration programs that require significant cash expenditures. A significant drilling program, such as that we have planned, can result in depletion of cash and the settlementreturn us to a position of its liabilities in theinsufficient cash to support normal courseoperations for 12 months. The Company currently has no historical recurring source of operations. These financial statements do not reflect adjustments that would be necessary if the going concern assumption were not appropriate.  The Company’srevenue, and its ability to continue as a going concern is dependent uponon its ability to receive cash flow fromraise capital to fund future exploration and working capital requirements, or the Company’s ability to profitably execute its business plan. The Company’s plans for the long-term continuation as a going concern include financing its future operations through sales of common stock and/or to successfully obtain additional financing.debt and the eventual profitable exploitation of its mining properties. While the Company has been successful in the past in obtaining financing, there is no assurance that it will be able to obtain adequate financing in the future or that such financing will be on terms acceptable to the Company. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

b.The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. If the going concern basis were not appropriate for these financial statements, adjustments would be necessary in the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used.

b.Net Income (Loss) per ShareNew Accounting Pronouncements - In August 2020, the FASB issued ASU No. 2020-06 Debt - Debt With Conversion And Other Options (Subtopic 470-20) And Derivatives And Hedging - Contracts In Entity’s Own Equity (Subtopic 815-40): Accounting For Convertible Instruments And Contracts In An Entity’s Own Equity.  The update simplifies the accounting for and disclosures related to company debt that is convertible or can be settled in a company’s own equity securities. The update is effective for fiscal years beginning after December 15, 2021. Management is evaluating the impact of this update on the Company’s financial statements. 

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.

c.Principles of Consolidation – BasicThe consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, BH Minerals USA, Inc.; Lookout Mountain LLC; Wolfpack Gold (Nevada) Corp.; Staccato Gold Resources, Ltd.; and Talapoosa Development Corp., after elimination of intercompany accounts and transactions. Due to the change in ownership of Lookout Mountain LLC and the associated transfer to the Company of all management and approval responsibilities, the Company began consolidating all balance sheet and expense transactions relative to the Lookout Mountain Project into its consolidated financial statements as of July 29, 2020. 

d.Exploration Expenditures – All exploration expenditures are expensed as incurred. Significant property acquisition payments for active exploration properties are capitalized. If no mineable ore body is discovered, the Company determines to focus its exploration efforts elsewhere, claims fees and holding fees are not remitted, or for other  

TIMBERLINE RESOURCES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2021 (Unaudited)

reasons, previously capitalized costs are expensed in the period the property is abandoned. When it is determined that a mineral deposit can be economically developed as a result of establishing proven and probable reserves, the costs incurred after such determination will be capitalized and amortized over their useful lives. To date, the Company has not established the commercial feasibility of its exploration prospects; therefore, all exploration costs are being expensed.

e.Property Holding Costs – Holding costs to maintain a property, excluding mineral lease payments, are expensed in the period they are incurred. These costs include security and maintenance expenses, claim fees and payments, and environmental monitoring and reporting costs. 

f.Fair Value Measurements – When required to measure assets or liabilities at fair value, the Company uses a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used. The Company determines the level within the fair value hierarchy in which the fair value measurements in their entirety fall. The categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Level 1 uses quoted prices in active markets for identical assets or liabilities, Level 2 uses significant other observable inputs, and Level 3 uses significant unobservable inputs. The amount of the total gains or losses for the period are included in earnings per share (“EPS”) is computed as net income (loss) dividedthat are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date. 

At June 30, 2021 and September 30, 2020, the Company had no assets or liabilities accounted for at fair value on a recurring basis or nonrecurring basis. The carrying amounts of financial instruments, including a senior unsecured note payable-related party, approximate fair value at June 30, 2021 and September 30, 2020.

g.Cash Equivalents – For the purposes of the statement of cash flows, the Company considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. Balances are insured by the weighted average numberFederal Deposit Insurance Corporation up to $250,000 for accounts at each financial institution. 

h.Reclamation Bonds – Bonds paid to assure reclamation of common shares outstandingproperties covered by exploration permits are capitalized in the period paid, reduced as refunds are received or expensed as they are applied to reclamation obligations. 

i.Estimates and Assumptions – The preparation of financial statements in accordance with GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use of management assumptions and estimates relate to long-lived asset impairments, asset retirement obligations, and stock-based compensation. Actual results could differ from these estimates and assumptions and could have a material effect on the Company’s reported financial position and results of operations. 

j.Property and Equipment – Property and equipment are stated at cost. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the assets, which ranges from two to seven years. Maintenance and repairs are charged to operations as incurred. Significant improvements are capitalized and depreciated over the useful life of the assets. Gains or losses on disposition or retirement of property and equipment are recognized in operating income or expenses. 

k.Asset Impairments - Carrying Value of Property, Mineral Rights and Equipment – The Company reviews the carrying value of property, mineral rights, and equipment for impairment whenever events and circumstances indicate that the period. Diluted EPS reflectscarrying value of an asset may not be recoverable from the potential dilution that could occurestimated future cash flows expected to result from common shares issuable through stock options, warrants,its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of the related assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, the effects of obsolescence, demand, competition, and other convertible securities.economic factors.  

The dilutive effect of convertible and outstanding securities, in periods of future income as of December 31, 2017 and 2016, would be as follows:

At December 31, 2017 and 2016, the effect of the Company’s outstanding options and common stock equivalents would have been anti-dilutive.  

c.

l.Asset retirement obligationRetirement Obligations –We account The Company accounts for asset retirement obligations by following the uniform methodology for accounting for estimated reclamation and abandonment costs as prescribed by authoritative accounting guidance.GAAP. This guidance provides that the fair value of a liability for an asset retirement obligation (“ARO”)will be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. Themade and a contractual obligation exists. An ARO asset is capitalized as part of the carrying value of the assets to which it is associated, and depreciated over the useful life of the asset. Adjustments are made to the liability for changes resulting from passage of time and changes to either the timing or amount of the original present value estimate underlying the obligation. We haveThe Company has an AROasset retirement obligation associated with ourits exploration program at the Lookout Mountain exploration project.Target on its Eureka Project, and its Paiute Project. 

TIMBERLINE RESOURCES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7

June 30, 2021 (Unaudited)

m.NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):

d.

Available-for-sale equity securitiesStock-based Compensation – Available-for-sale equity securities are recorded atThe Company estimates the fair value.  Unrealized gainsvalue of its stock-based option compensation, and losses relating to equity securities classifiedwarrants when issued, using the Black-Scholes model, which requires the input of some subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them (“expected life”), the estimated volatility of the Company’s common stock price over the expected term (“volatility”), employee forfeiture rate, the risk-free interest rate and the dividend yield. Changes in the subjective assumptions can materially affect the estimate of fair value of stock-based compensation.  

The fair value of common stock awards is determined based upon the closing price of the Company’s stock on the grant date of the award. Compensation expense for grants that vest is recognized ratably over the vesting period.

n.Net Income (Loss) per Share – Basic earnings per share (“EPS”) is computed as available-for-sale are recorded as a component of accumulated other comprehensive income (loss) in stockholders’ equity unless an other-than-temporary impairment in value has occurred, in which case such accumulated loss would be charged to current period net income (loss).  Unrealized gain available to common shareholders divided by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options, warrants, and losses originally included in accumulated other comprehensive income are reclassified toconvertible securities.  

The dilutive effect of convertible and outstanding securities as of June 30, 2021 and 2020 is as follows:

At June 30, 2021 and 2020, the current period net income (loss) wheneffect of the sale or determination of other-than-temporary-impairment of securities occurs.  Realized gains and losses on the sale of securities are recognized on a specific identification basis.

e.

Reclassifications - Certain reclassificationsCompany’s common stock equivalents would have been made to prior periods’ balances to conform with the current period’s presentation.  These reclassifications have no effect on previously reported results from operations or net equity as previously disclosed.anti-dilutive. Accordingly, only basic EPS is presented.

NOTE 3 – FAIR VALUE MEASUREMENTS:PROPERTY, MINERAL RIGHTS, AND EQUIPMENT:

The table below sets forth our financial assetsfollowing is a summary of property, mineral rights, and liabilitiesequipment and accumulated depreciation at June 30, 2021 and September 30, 2020, respectively:

For the nine months ended June 30, 2021 and 2020, the Company received mineral lease payments of $78,571 and $84,313, respectively, from a third party on two property blocks the Company leases at the Company’s Eureka property. Monthly payments in the amount of approximately $8,700 terminated subsequent to the end of the period on July 31,2021 due to the termination of the lease by the lessee. These receipts are recorded as a reduction to property, mineral rights, and equipment.

On June 25, 2021, in accordance with the terms of the leases, the lessee notified Timberline that were accountedit had elected to terminate its leases on the two property blocks effective June 30, 2021.  The monthly payments in the amount of approximately $8,700 will cease for at fair value onsubsequent periods due to the termination of the lease.  The claims in question had seen no exploration activity in many years, and they remain the property of BH Minerals USA, Inc., a recurring basis andwholly owned subsidiary of the fair value calculation input hierarchy level that we have determined applies to each asset and liability category.Company. 

NOTE 4 – RESTRICTED CASH:RELATED-PARTY TRANSACTIONS:

TIMBERLINE RESOURCES CORPORATION AND SUBSIDIARIES

Cash thatNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2021 (Unaudited)

A senior unsecured note payable and interest accrued thereon payable to William Matlack, a shareholder and director of the Company, is restricted asdisclosed in Note 5.

One corporate shareholder, which is related to withdrawal or use undera director of the termsCompany, purchased 1,250,000 Units of certain contractual arrangements, generally with regulatory agencies, is recorded inOther Assets asRestricted cash on our balance sheet.  

NOTE 5 – PROPERTY OPTION AGREEMENT:

On March 12, 2015 (the “Effective Date”), we entered into a property option agreement (“Agreement”) with Gunpoint Exploration Ltd. (“Gunpoint”),the of the private placement offering which closed on March 31, 2015 and was amended on October 19, 2016 (“Amended Agreement”).  Pursuant to the Agreement, Gunpoint granted us an exclusive and irrevocable option (“Option”) to purchase a 100% interestJune 25, 2021, which is disclosed in Gunpoint’s Talapoosa project (the “Project”) in western Nevada.  We acquired the right to exercise the Option at any time beginning on March 31, 2015 and ending within thirty (30) months of March 12, 2015, unless sooner terminated (“Option Period”).  Pursuant to the Amended Agreement, we have the right to exercise the Option through March 31, 2019 (“Amended Option Period”), subject to certain interim payments and cumulative project expenditures.    

As consideration for the Option, we issued two million (2,000,000) shares of common stock and paid $300,000 in cash.  The common stock was valued at fair valueNote 6, on the Effective Date and combined with the cash payments of $300,000 for total consideration of $1,500,000.  The common stock was issued on March 31, 2015 into escrow with periodic releases to Gunpoint.  The shares are irrevocable and were released to Gunpointsame terms as follows:  25% on September 12, 2015; 25% on March 12, 2016; 25% on September 12, 2016; and 25% on March 12, 2017.  All of the shares have been released from escrow.  Gunpoint will retain the total of 2,000,000 shares, even if we do not exercise the Option.  

8

NOTE 5 – PROPERTY OPTION AGREEMENT (continued):

Pursuant to the Amended Agreement, during the Amended Option Period, we are required to make the following expenditures and stock issuances in order to retain the Option:

·

Payment of $1 million and issuance of one million common shares of the Company by March 31, 2017 (completed – the shares were valued at $480,000, the quoted value of the shares at issuance);

·

Payment of $2 million and issuance of one million common shares of the Company by March 31, 2018;

·

Cumulative project expenditures of a minimum of $7.5 million by December 31, 2018;

·

Final payment of $8 million and issuance of 1.5 million common shares of the Company by March 31, 2019.

Upon the date that Gunpoint receives all of the required payments and stock issuances (the “Closing Date”), we will have earned a 100% interestother investors in the Project.offering.

For a period of five years following the Closing Date (“Contingent Payment Period”), should the daily price of gold (as determined by the London PM Fix) average greater than or equal to $1,600 per ounce over any 90-day period (“Trigger Event”), we will pay Gunpoint an additional payment of $10 million (the “Contingent Payment”), of which a minimum of $5 million will be payable within six months of the Trigger Event and the remaining $5 million payable within twelve months of the Trigger Event.  The Contingent Payment is payable with 50% in cash and 50% in common shares of the Company, at our sole discretion.

Following our exercise of the Option, effective as of the Closing Date, Gunpoint reserves a one-percent (1%) net smelter returns royalty in all minerals mined and removed from the Project (the “Royalty”).  The Company’s option granted in the Agreement to purchase the Royalty from Gunpoint at any time for a cash payment of $3 million was eliminated in the Amended Agreement.

NOTE 6 – ACCRUED EXPENSES:

As of December 31, 2017 and September 30, 2017, we had accrued $14,201 and $9,923 in expenses, respectively.  

The components of the accrued expenses are:   

NOTE 7 – PAYMENT OBLIGATION:

On September 12, 2017, we entered into an agreement (the “Payment Agreement”) with a creditor (the “Creditor”) to pay by way of a payment plan an existing obligation of $250,000 (the “Debt”) related to a potential corporate transaction in 2015 that was not completed.

Pursuant to the Payment Agreement, we agreed to pay the Debt to the Creditor, including interest, on or before September 12, 2020.  Interest accrues on the unpaid principal amount of the Debt at a rate of prime, as such rate may change from time to time, plus 3% per annum.  We agreed to pay the Creditor 5% of the gross proceeds of any funds raised, whether though equity sales, debt, or sales of assets.  If the gross proceeds of any equity financing are at least $1 million, then we agreed to also commence monthly installment payments of $10,000 until the Debt is paid.

During the three monthsyear ended December 31, 2017, we paid $34,363 to the Creditor from proceeds ofSeptember 30, 2020, two directors participated in a private placement, with $30,043 being applied to principal of the Debt and $4,320 being applied to interest.

9

NOTE 8 – COMMON STOCK, WARRANTS AND PREFERRED STOCK:

Private Placement

On October 12, 2017, we initiated a $1,250,000 private placement offering of Unitsunits of the Company, at a pricepurchasing 909,091 units for total proceeds of $0.30 per Unit, with an over-allotment option to increase the offering by up to 20%, solely to persons who qualify as accredited investors (the "Offering").  

$100,000. Each Unit in the Offeringwas priced at $0.11 and consisted of one share of common stock of the Company and one common share Class L Warrant, with each warrant exercisable to acquire an additional share of common stock of the Company at a price of $0.20 per share until August 15, 2023. The participation of the directors of the Company in this private placement was on the same terms as other investors in the private placement offering. The Board of Directors approved the insiders’ participation in the private placement.

At June 30, 2021, two officers were owed a total of $3,536 for expenses recorded in accounts payable – related party on the consolidated balance sheet that were reimbursed subsequent to the end of the period.

NOTE 5 – SENIOR UNSECURED NOTE PAYABLE – RELATED PARTY:

On July 30, 2018, the Company entered into a loan agreement and promissory note with William Matlack, a significant shareholder and a director as of October 29, 2019, (the “Lender”). Under the loan agreement, the Lender loaned the Company $300,000 in the form of a senior unsecured note payable, with the principal bearing interest at an annual rate of 18%, compounded monthly. The loan is unsecured and has a maturity date of January 20, 2023. At June 30, 2021 and at September 30, 2020, the senior unsecured note payable was $300,000.

The accrued interest on the senior unsecured note payable was $205,776 and $142,492 at June 30, 2021 and September 30, 2020, respectively. Interest expense related to the senior unsecured note payable to this related party was $22,424 and $47,075 for the three months ended June 30, 2021 and June 30, 2020, respectively, and $64,658 and $138,187 for the nine months ended June 30, 2021 and June 30, 2020, respectively.

The $300,000 senior unsecured note payable is senior to any other debt obtained by the Company subsequent to June 30, 2021. The senior unsecured note payable requires that when the Company enters into any other financings, 25% of the proceeds of such financings will be paid toward reduction of the principal and interest accrued on the note. No payments have been made by the Company to the Lender; however, with the common stock private placement financing completed during June and July 2021, the 25% is payable to the holder, and the principal therefore is classified as a current liability at June 30, 2021. Management is working with the holder to pay $250,000 prior to the end of fiscal year 2021 to pay the interest payable on the note and a portion of the note principal and negotiate an amendment to the terms of the note. The Lender provided a waiver of default as of September 30, 2020 on the note that would otherwise have occurred due to such non-payment of the 25% of proceeds at the time of the financing in 2020.

TIMBERLINE RESOURCES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2021 (Unaudited)

NOTE 6 – STOCKHOLDERS’ EQUITY:

Common Shares - Private Placement

On June 25, 2021, the Company closed on total subscriptions for a private placement offering for 23,070,798 Units of the Company at a price of $0.20 per Unit. Each Unit consisted of one share of common stock of the Company and one-half common share purchase Series M Warrant (each whole such warrant (each a “Warrant”), with each Warrant exercisable to acquire an additional share of common stock of the Company at a price of $0.45$0.30 per share until the warrantWarrant expiration date of OctoberMay 31, 2022.2023. A total of 8,941,666 shares and 5,304,166 Warrants were paid for and issued during the quarter ended June 30, 2021, for net proceeds of $1,788,334 to the Company. Another $333,333 was received for shares subscribed but not yet issued as of the end of the quarter. Additionally, 102,000 broker Warrants were issued for finders fees. No cash was paid for finders fees during the quarter ended June 30, 2021. The units subscribed but not yet paid for at June 30, 2021 were accounted for as subscriptions receivable of $2,492,493. Subsequent to the close of the quarter ended June 30, 2021, and prior to the issuance of the financial statements for that period, cash of $2,375,393, net of $117,100 finders fees, was received and 14,129,132 shares and 6,725,481 Warrants were issued to complete the private placement transactions, including 494,248 Warrants issued for finders fees.

Common Shares issued for Exercise of Warrants

During the three months ended December 31, 2017, we closed the saleJune 30, 2021, holders of two tranchesSeries D Warrants exercised 1,775,000 warrants for $0.14 per share to acquire 1,775,000 shares of the Offering.  In the aggregate, we sold aCompany’s common stock for total of 2,880,867 Units at a price of $0.30 per unit for grosscash proceeds of $864,260.

$248,500 to the Company. Also, holders of Series H Warrants

exercised 375,000 warrants for $0.14 per share to acquire 375,000 shares of the Company’s common stock for total cash proceeds of $52,500 to the Company. During the three months ended December 31, 2017, 2,880,867June 30, 2021, 9,000,000 Series D warrants were issued pursuantexpired.

During the nine months ended June 30, 2021, holders of Series D Warrants exercised 3,500,000 warrants for $0.14 per share to acquire 3,500,000 shares of the Company’s common stock for total cash proceeds of $490,000 to the Offering.  NoCompany. Also, holders of Series E Warrants exercised 537,500 warrants expired duringfor $0.14 per share to acquire 537,500 shares of the three months ended December 31, 2017.Company’s common stock for total cash proceeds of $75,250 to the Company. Also, holders of Series H Warrants exercised 375,000 warrants for $0.14 per share to acquire 375,000 shares of the Company’s common stock for total cash proceeds of $52,500 to the Company.  At December 31, 2017, there were 9,960,006June 30, 2021, the Company has a total of 67,628,336 warrants outstandingoutstanding.

NOTE 7 – STOCK-BASED AWARDS:

On October 8, 2020, the Company granted a total of 1,100,000 options to purchase shares of the Company’s common stock that expire in five years with an exercise price of $0.25 per sharein conjunction with the appointment of Patrick Highsmith as CEO (750,000 options), Mr. Steven Osterberg as VP-Exploration (250,000 options), and addition of Mr. Quinton Hennigh to the Board of Directors (100,000 options). Of Mr. Highsmith’s options, 187,500 vested immediately, with 187,500 vesting at each of the following three grant anniversary dates.  

On May 6, 2021, the Company granted a total of 2,785,000 options to employees, consultants, officers and directors to purchase shares of the Company’s common stock that expire on May 31, 2019, 8,000,000 warrants outstandingin five years with an exercise price of $0.40 per share that expire on January 31, 2020, and 2,880,867 warrants outstanding with an exercise price of $0.45.  In aggregate, as of December 31, 2017, there were 20,840,873 warrants outstanding at a weighted average exercise price of $0.335.

Preferred Stock

We are authorized to issue up to 10,000,000 shares of preferred stock, $0.01 par value. Our board of directors is authorized to issue the preferred stock from time to time in series, and is further authorized to establish such series, to fix and determine the variations in the relative rights and preferences as between series, to fix voting rights, if any, for each series, and to allow for the conversion of preferred stock into common stock.  There is no preferred stock issued as of December 31, 2017.

NOTE 9 – STOCK-BASED AWARDS:

During the three months ended December 31, 2017, no options were granted and 62,500 options vested.  In March 2017, 250,000 stock options with an exercise price of $0.33 and a five-year term were granted to a consultant company.  The fair value of all of the options granted was $60,000 ($0.24 per option).  The$0.25. All options vested quarterly over a one-year period, including 25% of which (62,500 options) vested on December 15, 2017.   upon issuance.

The fair value of the 62,500 options thatoption awards granted and vested during the three months ended December 31, 2017June 30, 2021 and 2020 was $15,000$519,400 and was classified as other general and administrative expense.nil. The value of all of the 250,000 options has now been recognized evenly over the past four quarters as the options vested.  Thefair value of the option awards granted and vested during the nine months ended June 30, 2021 and 2020 was $646,422 and $161,100, respectively. The fair value of unvested options was estimatedwill be recognized as compensation in the amount of $44,321 in each of the following three years covered by the vesting period. Fair values of options issued

TIMBERLINE RESOURCES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2021 (Unaudited)

were measured on the date of the grant with a Black-Scholes option-pricing model using the assumptions noted in the following table:

10

NOTE 9 – STOCK-BASED AWARDS (continued):

The following is a summary of our options issued under the Amended 2005 Equity Incentive Plan and the 2015 Stock and Incentive Plan:outstanding at June 30, 2021:

The aggregate of options exercisable as of December 31, 2017June 30, 2021 had an intrinsic value of nil,$517,500, based on the closing price of $0.23 per share of ourthe Company’s common stock on December 31, 2017.June 30, 2021.

NOTE 108 – COMMITMENTS AND CONTINGENCIES:

The Company has the following commitments and contingencies:

Mineral Exploration

A portion of ourthe Company’s mining claims on ourthe Company’s properties are subject to lease and option agreements with various terms, obligations, and royalties payable in certain circumstances.

Pursuant to the Amended Option Agreement at Talapoosa (see Note 5), we had an obligation to make a payment of $1 million by March 31, 2017, which payment was made.  There are also future payment and property expenditure obligations of $17.5 million, including $2 million due by March 31, 2018 and $8 million due by March 31, 2019.  

We payThe Company pays federal and county claim maintenance fees on unpatented claims that are included in ourthe Company’s mineral exploration properties. Should wethe Company continue to explore all of ourthe Company’s mineral properties, we expectit expects annual fees to total approximately $285,000$236,277 per year in the future.

While we recognize that we will not be able to meet these obligations with our current cash balances, we do expect to make these required payments with proceeds from expected capital raises.  We expect to obtain additional capital through refunds of excess restricted cash held for exploration bonds and financing transactions such as equity investments, asset sales, joint ventures, debt facilities, or other types of strategic arrangements.

11

Real Estate Lease Commitments

As of December 31, 2017,At September 30, 2020, the Company has nohad real estate lease commitments.commitments for certain mineral properties totaling $72,000 annually. The Company’s office in Coeur d’Alene, Idaho and its facilities in Sparks, Nevada and Eureka, Nevada are rented on a month-to-month basis.

Total office lease and rental expense from continuing operations is includedNOTE 9 – SUBSEQUENT EVENTS:

With the exception of events described in Note 6, as evaluated through the following line items in the consolidated statements of operations and comprehensive income (loss):

Employment Agreements

The Company has an employment agreement with an executive employeefinancial statement issuance date, there were no material events subsequent to June 30, 2021 that requires certain termination benefits and payments in defined circumstances.require disclosure.

12

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

As used in herein, the terms “Timberline,” the “Company,” “we,” “us,” and “our” refer to Timberline Resources Corporation.

The followingThis discussion and analysis contains forward-looking statements that involve known or unknown risks, uncertainties and other factors that may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Except for historical information, the matters set forth herein, which are forward-looking statements, involve certain risks and uncertainties that could cause actual results to differ. Potential risks and uncertainties include, but are not limited to, unexpected changes in business and economic conditions; significant increases or decreases in gold prices; changes in interest and currency exchange rates; unanticipated grade changes; metallurgy, processing, access, availability of materials, equipment, supplies and water; results of current and future exploration and production activities; local and community impacts and issues; timing of receipt and maintenance of government approvals; accidents and labor disputes; environmental costs and risks; competitive factors, including competition for property acquisitions; and availability of external financing at reasonable rates or at all, and those set forth under the heading “Risk Factors” in our Form 10-K filed with the United States Securities and Exchange Commission (the “SEC”) on January 13, 2021. Forward-looking statements can be identified by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continues” or the negative of these terms or other comparable terminology. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance, or achievements.Forward-looking statements are made based on management’s beliefs, estimates, and opinions on the date the statements are made, and the Company undertakes no obligation to update such forward-looking statements if these beliefs, estimates, and opinions should change, except as required by law.

This discussion and analysis should be read in conjunction with ourthe accompanying unaudited condensed interim consolidated financial statements as at and forrelated notes. The discussion and analysis of the three months ended December 31, 2017financial condition and results of operations are based upon the related notes thereto,unaudited consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted accounting principles in the United States (“U.S. GAAP”). This discussion and analysis contains forward-lookingof America. The preparation of financial statements and forward-looking information that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements and information as a result of many factors, including, but not limited to, those set forth elsewhereconformity with accounting principles generally accepted in this Quarterly Report on Form 10-Q. See section heading “Note Regarding Forward-Looking Statements” below.

Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q and the exhibits attached hereto contain “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the United States Exchange Act of 1934, as amended,America requires the Company to make estimates and “forward-looking information” withinassumptions that affect the meaningreported amounts of applicable Canadian securities legislation, collectively “forward-looking statements.”  Such forward-looking statements concern our anticipated resultsassets and developments in our operations in future periods, planned explorationliabilities, disclosure of any contingent liabilities at the financial statement date and developmentreported amounts of our properties, plans related to our businessrevenue and expenses during the reporting period. On an on-going basis the Company reviews its estimates and assumptions. The estimates were based on historical experience and other mattersassumptions that may occur in the future.  These statements relateCompany believes to analyses and other information thatbe reasonable under the circumstances. Actual results are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management.  These statements include, but are not limited to, comments regarding:

·the establishment and estimates of mineralization and reserves;

·the grade of mineralization and reserves;

·anticipated expenditures and costs in our operations;

·planned exploration activities and the anticipated timing and outcomes of such exploration activities;

·planned production of technical reports, economic assessments, and feasibility studies on our properties;

·plans and anticipated timing for obtaining permits and licenses for our properties;

·expected future financing, strategic and other transactions and the anticipated outcomes;

·plans and anticipated timing regarding production dates;

·anticipated gold and silver prices;

·anticipated liquidity to meet expected operating costs and capital requirements;

·our ability to obtain financing to fund our estimated expenditure and capital requirements; and

·factors expected to impact our results of operations

Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as “expects” or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “estimates” or “intends”, or stating that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements.  Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors which could cause actual events or resultslikely to differ from those expressedestimates under different assumptions or implied byconditions, but the forward-looking statements, including, without limitation:

·risks related toCompany does not believe such differences will materially affect our limited operating history;

·risks related to our ability to continue as a going concern;

·risks related to our historyconsolidated financial position or results of losses and our expectation of continued losses;

·risks related to our properties being inoperations. Critical accounting policies, the exploration or, if warranted, development stage;

·risks related to our bringing our projects into production;

·risks related to our mineral operations being subject to government and environmental regulations;

·risks related to future legislation and administrative changes to mining laws;

·risks related to future legislation regarding climate change

·risks related to our ability to obtain additional capital for exploration or to develop our reserves, if any;

·risks related to land reclamation requirements and costs;

·risks related to mineral exploration and development activities being inherently hazardous;

·risks related to our insurance coverage for operating risks;

·risks related to cost increases for our exploration and development projects;

·risks related to a shortage of skilled personnel, equipment, & supplies adversely affecting our ability to operate;

·risks related to mineral resource and economic estimates;

·risks relatedpolicies the Company believes are most important to the fluctuationpresentation of prices for preciousits consolidated financial statements and base metals, such as gold, silverrequire the most difficult, subjective and copper;complex judgments are outlined below in “Critical Accounting Policies” and have not changed significantly.

·risks related to the competitive industry of mineral exploration;

13

·risks related to our title and rights in our mineral properties;

·risks related to integration issues with acquisitions;

·risks related to our common stock trading on the Over-the-Counter markets

·risks related to joint ventures and partnerships;

·risks related to potential conflicts of interest with our management;

·risks related to our dependence on key management;

·risks related to our Talapoosa Project, Lookout Mountain and other acquired growth projects;

·risks related to our business model;

·risks related to our acquisition of Wolfpack Gold (Nevada) Corp.;

·risks related to our acquisition and amendment of the Talapoosa option;

·risks related to evolving corporate governance standards for public companies;

·risks related to our Canadian regulatory requirements; and

·risks related to our shares of common stock or other securities.

This list is not exhaustive of the factors that may affect our forward-looking statements. Some of the important risks and uncertainties that could affect forward-looking statements are described further under the sections titled “Risk Factors”, “Description of Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for the year ended September 30, 2017, filed with the Securities and Exchange Commission (the “SEC”) on December 20, 2017.  Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected.  We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.  We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events, except as otherwise required by law.

We qualify all the forward-looking statements contained in this Quarterly Report on Form 10-Q by the foregoing cautionary statements.

Corporate Overview

Our business is mineral exploration in Nevada with a focus on district-scale gold projects such as our district-scale Eureka Project, where we are focused on delivering high-grade Carlin-type gold discoveries. The Eureka property includes the advanced Talapoosa project and our Eureka project in Nevada.

In June 2010, we acquired Staccato Gold Resources Ltd. (“Staccato”), a Canadian-based resource company listed on the TSX Venture Exchange that was in the business of acquiring, exploring and developing mineral properties with a focus on gold exploration in the dominant gold producing trends in Nevada.  As a result of this acquisition, we obtained Staccato’s Eureka Property, which included their flagship gold exploration project, thehistoric Lookout Mountain Project (“Lookout Mountain”) and the Windfall project, along with several other projects at various stages of explorationMines in the Battle Mountain/Eureka gold trend in Nevada, along with Staccato’s wholly owned U.S. subsidiary, BH Minerals USA, Inc.  

In August 2014, we acquired Wolfpack Gold (Nevada) Corp. (“Wolfpack”), a U.S. company that was in the business of acquiring, exploring, and developing mineral properties with a focus on gold exploration in the dominant gold producing trends in Nevada.  As a result of this acquisition, we obtained cash and several projects at various stages of exploration in the gold trends of Nevada.  

In March 2015, we acquired an option from Gunpoint Exploration Ltd. (“Gunpoint”) to purchase a 100% interest in Gunpoint’s Talapoosa exploration project in western Nevada.  The option agreement, as amended, grants us the right to exercise the purchase option at any time through March 31, 2019, subject to certain interim payments and cumulative project expenditures.    

Recent Events

In October, 2017, we initiated a private placement offering of Units of the Company at a price of $0.30 per Unit (the “Offering”).   Each Unit in the Offering consisted of one share of common stock of the Company and one common share purchase warrant.  During the three months ended December 31, 2017, we closed the sale of two tranches of the Offering.  In the aggregate, we sold a total property position of 2,880,867 Units for gross proceeds of $864,260.

On September 12, 2017, we entered into an agreement (the “Payment Agreement”)approximately 24 square miles (62 square kilometers). The Eureka mineral resource was reported in compliance with a creditor (the “Creditor”) to pay by way of a payment plan an existing obligation of $250,000 (the “Debt”) related to a potential corporate transaction in 2015 that was not completed.  Pursuant to the Payment Agreement, we agreed to pay the Debt to the Creditor, including interest, on or before September 12, 2020.  Interest accrues on the unpaid principal amount of the Debt at a rate of prime,

14

as such rate may change from time to time, plus 3% per annum.  We agreed to pay the Creditor 5% of the gross proceeds of any funds raised, whether though equity sales, debt, or sales of assets.  If the gross proceeds of any equity financing are at least $1 million, then we agreed to also commence monthly installment payments of $10,000 until the Debt is paid.  During the three months ended December 31, 2017, we paid $34,363 to the Creditor from proceeds of a private placement, with $30,043 being applied to principal of the Debt and $4,320 being applied to interest.

Mineral Exploration

Talapoosa, Nevada

Talapoosa is a 14,870 acre district-scale property comprising U.S. Bureau of Land Management (“BLM”) claims, fee lands, and water rights.  Mineralized material at Talapoosa consists of 42.5 million tons of in-place bulk tonnage with an average grade of 0.03 ounces of gold per ton and 0.37 ounces of silver per ton at a gold cut-off of 0.013 ounces per ton of gold.  The project was fully permitted by Miramar Mining Corporation with the BLM and the State of Nevada in 1996, but remained undeveloped due to low prevailing metals prices.  The deposit is open on strike, and we believe potential exists to expand the quantity of mineralized material with additional exploration.  The Talapoosa project includes the 4 mile-long Appaloosa zone located one mile to the north of, and parallel to, the Talapoosa mineralized area.  The Appaloosa zone outcrops as epithermal-type sinter and breccia with vein fragments and is untested but for six historic, shallow drill holes.  

In March, 2015, we completed a National Instrument 43-101 (“NI 43-101”) compliant Technical Report entitled “Technical Report and Resource Estimate on the Talapoosa Project, Nevada,” dated March 24, 2015 (the “Talapoosa Technical Report”) substantiating the mineralization for the Talapoosa project.  Upon completion of the Talapoosa Technical Report, we initiated anCanadian NI 43-101 Preliminary Economic Assessment (“PEA”) on the property.  Results of the PEA were released on April 27, 2015 and reported positive results on a potential open pit mine with heap-leach processing and Merrill Crowe recovery of gold and silver.  To support the PEA, we completed due diligence reviews on the gold and silver mineralization; historic studies including metallurgy, geotechnical pit wall stability, hydrology, geochemistry, mining methods, facility siting for the previously proposed operation, and mine permitting.  A metallurgical and geotechnical test program is currently in progress and is designed to assess the potential to improve heap permeability and enhance gold and silver leach efficiency for the processing of the mineralized material at the Talapoosa gold and silver deposit. The program has been designed to increase the already-substantial metallurgical test results incorporated into the Company’s PEA issued in May 2015.  

In 2016, we completed surface rock sampling in the Appaloosa Zone which identified 0.16 ounces per ton (“opt”) (5.5 grams per tonne (“g/t”)) of gold and 1.24 opt (42.40 g/t) of silver over a 21.5 feet (6.55 meter (“m”)) channel sample across exposed hydrothermal breccia.  Four grab samples of vein material from existing waste dumps and altered outcrops assayed from 0.005 - 0.51 opt (0.168 - 17.4 g/t) gold and 0.70 - 3.07 opt (2.3 - 105.3 g/t) silver.  A nearby historic (1995) drill hole (CON-45) completed by Miramar intercepted 0.05 opt (1.66 g/t) gold over 80 feet (24.4 m) (“Technical Report of the Talapoosa Project, Lyon County, Nevada, U.S.A.” effective September 17, 2010).   

We also completed a positive review of assay data from historic drill holes in areas northwest and southeast of, and contiguous to, the Talapoosa mineralized area as defined in the PEA.  Results from historic drilling identify these areas as high priority drill targets for resource expansion as first noted in the NI 43-101 “Technical Report of the Talapoosa Project, Lyon County, Nevada, U.S.A.” effective September 17, 2010 and filed on SEDAR on October 12, 2010.  Northwest of the PEA pit area, an expansion target is defined where eight of nine historic drill holes spaced over a strike extent of approximately 2,000 feet (600 m) intercepted gold mineralization.  Historic drilling in this area intercepted mineralization in eight of the nine holes ranging from 75 feet (22.9 m) of 0.022 opt (0.75 g/t) gold and 0.439 opt (14.70 g/t) silver, to 205 feet (62.5 m) of  0.159 opt (5.43 g/t) gold and 0.80 opt (27.57 g/t) silver.

To the southeast of the Talapoosa resource area as defined in the PEA, eight of nine historic drill holes also intercepted mineralization also over approximately 2,000 feet (600 m) of strike extension.  Historic drilling in this area intercepted mineralization in eight of the nine holes ranging from 21 feet (6.4 m) of 0.017 opt (0.57 g/t) gold and nil silver to 191 feet (58.2 m) of 0.032 opt (1.09 g/t) gold and 0.172 opt (5.88 g/t) silver.

In September, 2017, a metallurgical and geotechnical test program designed to assess the potential to improve heap permeability and enhance gold and silver leach efficiency for the processing of the mineralized material at the Talapoosa gold and silver deposit was completed. The program included re-sampling of four metallurgical composite samples originally tested by Gunpoint Exploration in 2013. The program advanced the already-substantial metallurgical test results incorporated into the Company’s PEA issued in May 2015.  

Final results were released on 4 drill core composite test samples that were crushed using high pressure grinding roll (“HPGR”) technology to -1.7mm (-10 mesh), and separated by screening into a fine fraction (-75µm or -200 mesh) and a

15

coarse fraction (+75µm or +200 mesh).  Follow-up saturated permeability was tested on each coarse fraction test sample under simulated leach pad height of up to 200 feet with results indicating that acceptable levels of permeability would be maintained.  Gold and silver column leach testing of the coarse fraction indicates recoveries from 58% to 63% which are comparable to historic estimates for crushed mineralized material as utilized in the PEA.  The fine fraction material was also separately tested for simulated heap leach recovery with sample results indicating recovery of approximately 77% for both gold and silver.  

In addition, the program also studied and compared historic assay results between various analytical methods including Metallic Screen Fire Assays (MSFA).  The MSFA data led us to conclude that the deposit gold grade assays may be up to approximately 20% higher than when completed by traditional historic 30 gram or 50 gram fire assay methods.  

Subject to available capital, follow-up work is planned in 2018, including additional Reverse Circulation (“RC”) drilling to test the mineralization expansion targets and core drilling to provide sufficient mineralized material to advance the metallurgical studies to a sufficient level to support a final feasibility study.  We also intend to initiate studies to update historic permits for the project to current standards.  These activities are expected to be completed as soon as possible, subject to availability of sufficient financing, which we estimate to be $3.5 million to complete the additional RC and core drilling and $0.5 million to undertake the updating of historic permits to current standards.  Pending availability of such financing, we expect to complete these activities and incorporate the results into a NI 43-101 compliant Preliminary Feasibility Study (“PFS”).  Subject to additional capital availability, the PFS could be completed by the end of 2018 at an additional cost of approximately $3 million.    

There are no proven and probable reserves as defined under United States Securities and Exchange Commission’s Industry Guide 7 (“Guide 7”) at Talapoosa, and our activities there remain exploratory in nature.

Cautionary Note to U.S. Investors: The Talapoosa Technical Report and the PEA use the terms “mineral resource,” “measured mineral resource,” “indicated mineral resource” and “inferred mineral resource”. We advise investors that these terms are defined in and required to be disclosed by Canadian regulations (NI 43-101); however, these terms are not defined terms under Guide 7 and are normally not permitted to be used in reports and registration statements filed with the SEC. As a reporting issuer in Canada, we are required to prepare reports on our mineral properties in accordance with NI 43-101. We reference the Talapoosa Technical Report and the PEA in this Quarterly Report on Form 10-Q for informational purposes only, and the Technical Report and PEA are not incorporated herein by reference.  Investors are cautioned not to assume that all or any part of a mineral deposit in the above categories will ever be converted into Guide 7 compliant reserves.  “Inferred mineral resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category.  Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases.  Investors are cautioned not to assume that all or any part of an inferred mineral resource exists or is economically or legally mineable.  

Eureka Project, Nevada

The Eureka Project, which includes Lookout Mountain, comprises an area of approximately 15,000 acres, or more than 23 square miles.  The Eureka Project is located within the southern portion of Nevada’s Battle Mountain-Eureka gold trend and includes three structurally controlled zones of gold mineralization, each approximately 3- 4 miles in strike length, all zones of which are open and will require additional in-fill and step-out drilling. The project has an extensive exploration, drilling, and gold production history by a number of companies since 1975, including Idaho Mining Corp., Norse-Windfall Mining, Amselco, Echo Bay Mines, Newmont and Barrick Gold. A total of 533 holes, totaling 267,000 feet, were drilled on the property prior to its acquisition by Timberline in 2010. Gold mineralization tested to date is typical sediment-hosted “Carlin-type” gold mineralization, most of which may be amenable to low-cost, heap-leach processing.

In 2010-2011, we completed an exploration program that culminated in the release of an NI 43-101 compliant technical report, entitled,Updated Technical Report on the Lookout Mountain Project Eureka County, Nevada, USA, dated May 2, 2011 (the “Lookout Mountain Technical Report”).  The Lookout Mountain Technical Report was prepared by Mine Development Associates, (“MDA”)Effective March 1, 2013, filed on SEDAR April 12, 2013:

We are also operator of Reno,the Paiute Joint Venture Project with Nevada Gold Mines in the Battle Mountain District. Both of these properties lie on the prolific Battle Mountain-Eureka gold trend. We also control the Seven Troughs Project in northern Nevada, which is one of the state's highest-grade former gold producers. In total, we control over 43 square miles (111 square kilometers) of mineral rights in Nevada. Detailed maps and mineral resource estimates for the Eureka Project and NI 43-101 technical reports for its projects may be viewed at http://timberlineresources.co/.

We are listed on the OTCQB, where we trade under the supervisionsymbol “TLRS”, and on the TSX Venture Exchange, where we trade under the symbol "TBR".

Corporate Update

In January 2021, we announced the appointment of Michael M. Gustin, Senior Geologist, who isMr. Patrick Highsmith, our President and CEO, to the board of directors effective January 1, 2021. At the Company’s annual meeting of shareholders on April 14, 2021, our shareholders approved a qualified person under NI 43-101.downsized board of directors, including five members: Leigh Freeman (Chairman), Quinton Hennigh, Patrick Highsmith, William Matlack, and Don McDowell. In another event subsequent to the end of the quarter, on May 6, 2021 we announced the appointment of Ms. Pamela Saxton to the board of directors. On August 6, 2021, Quinton Hennigh resigned from the board of directors as he accepted an executive position at Crescat Capital, a major shareholder of Timberline.

Summary of Exploration Activities for the Three Months ended June 30, 2021:

Exploration activities undertaken during the quarter ending June 30, 2021 continued advance of numerous Carlin-type gold occurrences within the 62 km2 (24 mi2) Eureka Project land position.  In 2020 we demonstrated that there are many high-grade (defined as ≥ 3 g/t) gold intercepts both inside the existing resource and beyond its limits, that can add significant size and value to our flagship project. The Carlin-type gold resource at Lookout Mountain Technical Report detailsincludes oxide mineralization that is exposed at the surface which provides a strong foundation for resource expansion.  Nonetheless, we believe the best growth potential at Eureka will come from discovery of high-grade gold associated with many under-drilled targets at Lookout Mountain.Mountain and elsewhere across the Eureka property. The 2021 program is designed to advance exploration towards discovery of additional high-grade gold through drill testing in step-outs beyond the limits of the current resource area and by advancing new targets through geologic, geochemical, and geophysical evaluations.  

Cautionary Note to U.S. Investors: The Lookout Mountain Technical Report usesHighlights of the terms “mineral resource,” “measured mineral resource,” “indicated mineral resource” and “inferred mineral resource”. We advise investors that these terms are defined2021 exploration program to-date include:

·Completed approximately 23% (1,409m) of the planned reverse circulation (RC) drilling at the Eureka Project – 5 holes completed in and required to be disclosed by Canadian regulations (NI 43-101); however, these terms are not defined terms under Guide 7 and are normally not permitted to be used in reports and registration statements filed with the SEC. As a reporting issuer in Canada, we are required to prepare reports on our mineral properties in accordance with NI 43-101. We reference the Lookout Mountain Technical Report in this Quarterly Report on Form 10-Qarea;  

·Completed a controlled source audio magnetotellurics (CSAMT) geophysics survey, spanning 19 line-kilometers along four survey lines; 

·Commenced an induced polarization/resistivity (IP) survey – planned for informational purposes only, and the Lookout Mountain Technical Report is not incorporated herein by reference.  Investors are

16

cautioned not to assume that all or any part of a mineral deposit29 line-kilometers primarily in the above categories will ever be converted into Guide 7 compliant reserves.  “Inferred mineral resources” have a great amount of uncertainty as to their existence,Windfall area; 

·Geological mapping well underway in the central Oswego Trend and great uncertainty as to their economicnorthern Lookout Trend; and   legal feasibility. It cannot be assumed that all or any part of

·Completed an inferred mineral resource will ever be upgraded to a higher category.  Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases.  Investors are cautioned not to assume that all or any part of an inferred mineral resource exists or is economically or legally mineable.  

The Lookout Mountain Technical Report describes gold mineralization which was modeled and estimated by MDA.  MDA statistically evaluated available drill data utilizing geologic interpretations provided by Timberline to interpret gold mineral domains on cross sections spaced at 50- to 100-foot intervalsorientation soil survey across the extentWindfall Trend and approximately 700 soil geochemical samples in the northern portion of the property.  

Drilling

During late 2020 and early 2021 we announced drill results confirming new areas of high-grade gold inside the existing resource and to the east in the Water Well Zone (WWZ) (see Company news releases December 1, 2020 and January 7, 2021). Much of the Lookout Mountain mineralization.  The cross sections were rectifiedgold resource is associated with mineral-domain interpretations on level plans spaced at 10-foot intervals.  The modeleda significant alteration zone and related collapse brecciation along the east-dipping Footwall Fault (Figure 2). East of that structure, high-angle faults cut the graben zone and some may be related to known gold mineralization was analyzed using geostatistics to aidwe discovered in the establishmentWWZ (see Company news releases dated April 20, 2015 and January 7, 2021).  The Graben Zone also hosts a 2 km-long strong IP (chargeability) anomaly near its central axis (Figure 1).

The Timberline team has applied geophysics in conjunction with geologic mapping and 3D modeling to develop these targets for testing in the 2021 drill program. RC drilling commenced in mid-July and five holes (1,409 meters) have been completed at the time of estimation parameters,this writing (Figure 1). Three of these holes were aimed at expanding the WWZ mineralization to the north, including the northernmost hole, which is more than 200 meters from previous high-grade intercepts. The high-grade WWZ remains open to the northwest, north, south, and interpolating grades into a three-dimensional block model.

In 2012, we released updated exploration data foreast. Several more holes are planned in 2021 to test the zone to the northwest and southeast. The first phase of drilling also included two new target areas to the southwest from the historic Lookout Mountain Pit.

Drilling is on hiatus during August, but drilling will restart in September when drill rigs and filed an updatedcrews rotate back to the Eureka Project. The Company has been successful in securing a drilling contractor during a busy year by agreeing to flexibility in schedule so that drillers can manager other commitments in parallel. Timberline expects this drill program to run at least until November 2021.

Figure 1.  Lookout Mountain Technical Report.   AsGold Resource Area and Graben Zone with Major Faults, IP anomalies, and 2021 Planned Drill Holes in Target Areas  

Geophysics

During the quarter ending June 30, 2021, Zonge Geosciences, Inc. (Zonge) completed a result ofCSAMT survey along four lines totaling 19 line-kilometers (Figure 3).  The four survey lines transect six major target areas on the most recently completed exploration program, we have successfully extendedEureka Project: (1) Water Well Zone; (2) West Lookout; (3) Oswego; (4) Rocky Canyon; (5) the mineralized zone atgap between South Lookout Mountain 600 feet to the south of the mineralized zone boundary defined in the 2011 Lookout Mountain Technical Report, and have expanded mineralization along the west margin of the deposit. Results from Lookout Mountain, and from the South Adit area, significantly increasedZone; and (6) Windfall.  These data are expected to provide enhanced insights into the currently reported mineralization atalteration, structural geology, and stratigraphy of the rocks in three dimensions.  This will be helpful in interpreting how best to drill in some of the newer target areas.  It will also improve understanding how the three major trends on the property are related, the Windfall, the Oswego, and the Lookout Mountain.  In early 2013, we completed our 2012 exploration program at Lookout Mountain, including 26,140 feet totalTrends.  Processing, analysis, and interpretation of infill-drilling.  This program focused on expansion of mineralization, metallurgical, geotechnical,the CSAMT data are on-going and permitting studies.will be integrated with new IP data and recent geologic mapping.

Assay results from drilling were incorporated into an updated Lookout Mountain Technical Report which was completed in early 2013.  Drilling also provided data for on-going metallurgical studies directed at characterization of gold mineralization recovery, and for initial assessment of pit-slope stabilities.  Permitting-related activities were advanced throughSince completion of quarterly monitoring, and installation of three monitoring wells. Conceptual designs for site facilities (heap leach pads, mine rock storage, access roads) have also been prepared.  

In 2013, we continued geochemical waste rock environmental characterization, completed independent metallurgical leach testing, continued water quality monitoring and defined hydrologic work plans.  We also continued the baseline environmental data collection and analysis at Lookout Mountain.  In addition, we reduced costs by consolidating our Elko field office into our Eureka facility.  

During most of 2014, the Company limited exploration related activities to low cost field surveys including soil and rock sampling, drill site reclamation, site archeological surveys, and geologic mapping.  The mapping led to identification of new targets on each of the three structural zones of gold mineralization.  In December 2014, drilling resumed at Eureka with an initial test of one new target completed before year-end.  RC drill hole BHSE-171 identifiedCSAMT survey, in mid-July Zonge has begun a new zone of gold mineralization29 line-kilometer IP survey.  The IP survey builds on the very successful work conducted during late 2020 and intersected 25 feet of 0.144 ounces of gold per ton (“opt”) (7.62 meters (m) of 4.93 grams of gold per tonne (“g/t”)) within a longer 65-foot interval assaying 0.094 opt (19.82 m of 3.22 g/t)will include multiple lines in the Lookout Mountain area.  This hole was offset 140 feet from BHSE-152 (drilled in 2012) which first encountered the new zone in 2012 but was not completed due to drilling difficulties.  

In follow-up to the successful results in RC drill hole BHSE-171, two diamond drill core holes were completed in January, 2015.  BHSE-172 intersected 25.2 feet of 0.15 opt (7.7 m of 5.02 g/t) within an interval of 46.6 feet of 0.10 opt (14.2 m of 5.02 g/t).  BHSE-173 intercepted 57.4 feet of 0.06 opt (17.5 m @ 1.92 g/t).  The two core hole intercepts of the mineralized zone were offset approximately 140 feet from BHSE-171.  The intercepts are well-correlated, as the gold occurs in mineralized collapse breccia within the pyritic Dunderberg Shale-Hamburg Dolomite contact zone.  The intercepts are thought by Timberline geologists to be related to stratigraphic traps associated spatially with a higher-grade feeder system as recognized in many Carlin-type systems.

Two additional RC holes were completed as infill drilling within the existing resource area at Lookout Mountain.  Results were highlighted by hole BHSE-174, which intercepted 75.0 feet of 0.02 opt (22.9 m of 0.57 g/t) which is very consistent with surrounding intercepts.  

We also completed a six-hole RC drill program on the Windfall target within thearea (Figure 3).

Figure 2.  Lookout Mountain Geologic Cross Section and Schematic Gold Targets

Figure 3.  Eureka project.  Project Geologic Trends, and 2021 Geophysical Survey and Soil Sample Locations

Geochemistry

The drilling successfully tested on-strike, offset, and down-dip extensions of gold mineralization that was previously mined at Windfall.  Six drill holes completed over a strike length of approximately 3,000 feet intersected gold mineralization consistent with results from over 600 historic drill holes, highlighted by BHWF-40 which intersected 80 feet at 0.09 opt of gold (6.1 m @ 8.79 g/t).    The data for Windfall will support potential development of a resource estimate of the gold mineralization at the project.  

In order to prioritize our resources toward the development of Talapoosa, no material exploration expenditures were incurredsystems at the Eureka Project often come to the surface where faults and altered rocks can be expressed in 2017.  Unless financial resources become available, minimal expenditures are anticipatedgold and pathfinder elements detectable in soils. Each of the three major trends at Eureka is reflected in gold anomalies in existing soils geochemical data (Figure 3), but the northern portion of the property position was never covered by previous workers.  

17

In the quarter ending June 30th, we initiated a soil geochemical survey across unsurveyed areas of the property.  The survey began with an orientation survey to test sampling and analytical methodology over an area of known mineralization.  Systematic sampling commenced after a period of training and completion of the orientation survey; the sampling team has collected approximately 700 samples at the time of this writing.  The new sampling augments the existing geochemical coverage (Figure 3) across the projected northern extensions of the three gold trends on the property.  Initial samples have been submitted to ALS Global Laboratory for 2018, with workanalysis by new state-of-the-art ultra-trace level technology which is likely to yield much more robust and comprehensive data than seen in previous surveys.  The soil geochemistry survey is expected to focus on reclamation ofprovide high-resolution data that will support future drill sites.  targeting.

There are no proven and probable reserves as defined under Guide 7 at the Eureka Project, and our activities there remain exploratory in nature.

Summary

We believe the global economic environment and monetary climate continue to favor a relatively steady gold price for the foreseeable future with potential for long-term price improvements.  While volatility is to be expected, our expectation is that we can identify and pursue opportunities to advance our projects, despite the current gold price and market volatility.  

As a company, we are considering financing and strategic corporate opportunities with our focus on providing for the advancement of our Talapoosa project.  In May 2015, we finalized a positive PEA at Talapoosa, the results of which were announced on April 27, 2015.  The metallurgical test programs were designed to increase the level of confidence in the metallurgical conclusions that were incorporated into the Talapoosa PEA.

We believe that with appropriate funding, the Talapoosa project can advance toward the preparation of a pre-feasibility study for an anticipated open-pit mining operation.  Subject to available capital, exploration programs at the Lookout Mountain and Windfall areas within our Eureka project and at Seven Troughs may also continue.  We believe that management and our board of directors have the knowledge and experience to evaluate financing and strategic opportunities and to provide for the advancement of our Talapoosa project toward a production decision.     

Results of Operations for the threenine months ended December 31, 2017June 30, 2021 and 20162020

Consolidated Results

Our consolidated net loss for the three months ended December 31, 2017June 30, 2021 was $329,162,$1,263,259, compared to a consolidated net loss of $326,708$1,431,778 for the three months ended December 31, 2016.June 30, 2020. As a result of the consolidation of Lookout Mountain LLC, total exploration expenses of $427,908 were recorded on our statement of operations for the three months ended June 30, 2021, compared with $14,221 for the three months ended June 30, 2020. The year-over-year differenceincrease in net loss is minimal, with decreaseddue to the significant increase in exploration expenses professionalmade possible by the infusion of cash that occurred near the close of fiscal year 2020, share-based compensation resulting from stock options issued to directors, officers and consultants, an increase in salaries and benefits resulting from adding an additional corporate officer, and increases in investor and legal fees and tax provisionsresulting from costs associated with the preparation for the shareholder meeting held in 2017April 2021, offset by increased non-cash stock option expense, and other general and administrative expenses.  Other general and administrative expenditures were higher in 2017 primarily related to higherreduced investor relations consulting fees aimed at increasing our market exposure and supporting our marketing efforts during the quarter ended December 31, 2017.  We anticipate that the net loss will remain relatively flat, subject to changes in non-cash option expenses and general and administrative expenditures which are subject to transaction activity.  Exploration expenditures during the three months ended December 31, 2017 decreased slightlyJune 30, 2021. These cost increases were offset by the reduction of interest expense and accretion of the discount on senior notes payable as a result of paying off significant debt late in fiscal year 2020. Insurance expense was somewhat higher in the comparative period due to the normal increases the industry is experiencing.

Our consolidated net loss for the nine months ended June 30, 2021 was $3,332,531, compared to a consolidated net loss of $2,511,423 for the same periodnine months ended June 30, 2020. As a result of the consolidation of Lookout Mountain LLC, total exploration expenses of $1,827,980 were recorded on our statement of operations for the nine months ended June 30, 2021, compared with $173,452 for the nine months ended June 30, 2020. The year-over-year increase in 2016 with some reclamation activities, but nonet loss is due to the significant increase in exploration activity.  We anticipateexpenses made possible by the infusion of cash that exploration expenditures willoccurred near the close of fiscal year 2020, an increase year-over-yearin share-based compensation resulting from stock options issued to directors, officers and consultants, an increase in salaries and benefits resulting from adding an additional corporate officer, all of which were

offset by the non-recurrence of the loss on modification of debt, the non-recurrence of a charge for impairment of claims, and the reduction of interest expense and accretion of the discount on senior notes payable as a result of paying off significant debt late in fiscal year 2020. Insurance expense was somewhat higher in the next quarter, subjectfirst nine months of 2021 due to available capital, as we advance toward development at Talapoosa.  the normal increases the industry is experiencing.

Subject to adequateAs made possible by the additional funding in 2018,2021, we expect to continue to incur exploration expenses for the advancement of Talapoosa and exploration at Eureka.our Eureka Project.

18

Financial Condition and Liquidity

At December 31, 2017,June 30, 2021, we had assets of $17,938,314,$19,434,111, consisting of cash in the amount of $240,255;$2,559,106, subscriptions receivable of $2,492,493, property, mineral rights and equipment of $13,793,084, net of depreciation, of $17,151,019, restricted cash held for explorationreclamation bonds of $285,128,$538,696, and prepaid expenses, deposits and other assets in the amount of $261,912.  $50,732.

On June 30, 2021, we had total liabilities of $793,474 and total assets of $19,434,111. This compares to total liabilities of $792,085 and total assets of $16,886,921 on September 30, 2020. As of June 30, 2021, our liabilities consist of $167,323 of trade payables and accrued liabilities, $209,312 of interest and expenses payable to related parties, $116,839 for asset retirement obligations, and $300,000 of senior unsecured note payable – related party. Of these liabilities, $416,839 are due within twelve months. The liabilities compared to September 30, 2020 experienced a minor net change as a result of a decrease in accrued trade payables offset by increases in accrued liabilities and accrued interest - related party. The increase in total assets was due to the infusions of cash and subscriptions receivable from private placements of our equity, offset by uses of cash to reduce accounts payable and to pay Company operating expenses.

On June 30, 2021, we had working capital of $4,419,996 and stockholders’ equity of $18,640,637 compared to working capital of $2,155,400 and stockholders’ equity of $16,094,836 for the year ended September 30, 2020. Working capital increased due to the increase in cash and subscriptions receivable associated with the private placement near the close of the quarter ended June 30, 2021, enhanced by reductions of accounts payable, and offset by increases in accrued expenses and accrued interest - related party and the current status of the senior unsecured note payable to a related party.

During the threenine months ended December 31, 2017,June 30, 2021, we closedused cash from operating activities of $2,715,608, compared to cash used of $801,792 for the nine months ended June 30, 2020. The use of cash from operating activities results primarily from the net loss of $3,332,531 for the nine-month period ended June 30, 2021 compared to net loss of $2,511,423 for the nine months ended June 30, 2020. Each of the comparable periods experienced significantly different non-cash effects as a result of changes in stock-based compensation and non-recurrence of loss on extinguishment of debt and loss on abandonment of claims. Changes to the net loss for the comparative periods are described above.

During the nine-month period ended June 30, 2021, cash of $14,571 was provided by investment activities, compared with cash of $302,007 provided for the nine-month period ended June 30, 2020. During the nine months ended June 30, 2021, we received $78,571 for lease payments to us for company-owned mineral properties offset by $64,000 paid for mineral rights, compared to cash received of $12,500 for refunds of reclamation bonds paid previously, $205,194 from LM LLC for an advance on reclamation bond refunds due on claims assigned to LM LLC and $84,313 for lease payments to us for company-owned mineral properties for the nine months ended June 30, 2020.

During the nine-month period ended June 30, 2021, $2,739,417 was provided by financing activities, compared to cash of $571,706 provided during the nine-month period ended June 30, 2020. For the nine-month period ended June 30, 2021, cash of $1,788,334 was provided through the sale of two tranchesstock and warrants, $617,750 provided by the exercise of an equity financing.  Inwarrants and $333,333 from the aggregate, we sold a totalproceeds from stock subscriptions paid for which stock had not yet been issued.  For the nine-month period ended June 30, 2020, cash of 2,880,867 Units at a price$600,000 was provided through the sale of $0.30 per unitstock and warrants, net of offering costs, and $28,294 cash was used for gross proceeds of $864,260 and net proceeds after the costspayment of the financing of $821,767.  payment obligation.

Going Concern:

The audit opinion and notes that accompany our consolidated financial statements for the year ended September 30, 2020 disclose a ‘going concern’ qualification to our ability to continue in business. These consolidated financial statements have been prepared on the basis that the Company is a going concern, which contemplates the realization of our assets and the settlement of our liabilities in the normal course of our operations. Disruptions in the credit and financial markets over the past several years have had a material adverse impact on a number of financial institutions and investors and have limited access to capital and credit for many companies. In recent years,addition, commodity prices and mining equities have seen significant volatility which increases the risk to precious metal investors. Commodity price expectations, global economic uncertainties,Market disruptions and market factors,alternative investment options, among other things, may make it more difficult for us to obtain, or increase our cost of obtaining, capital and financing for our operations. Our access to additional capital may not be available on terms acceptable to us or at all. If we are unable to

obtain financing through equity investments, we will seek multiple solutions including, but not limited to, return of excess restricted cash held for exploration bonds, asset sales, corporate transactions, credit facilities or debenture issuances in order to continue as a going concern.

The consolidated financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern. We believe that the going concern condition cannot be removed with confidence until the Company has entered into a business climate where funding of its activities is more assured. If the going concern basis were not appropriate for these financial statements, adjustments would be necessary in the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used.

At December 31, 2017,June 30, 2021, we had working capital of $119,118.$4,419,996. We have a cash balance of approximately $2,559,106 and approximately $676,635 outstanding in current liabilities. As of the date of this report we have approximately $325,000outstanding in current liabilities and a cash balance of approximately $150,000.  As of the date of this Quarterly Report on Form 10-Q, we do not anticipate that we will be ablehave sufficient cash to continue as a going concern, meet our Talapoosa option and property expenditure obligations and execute our business plannormal operating commitments for the next 12 months without receiving significant additional capital.  We estimate that in order to meet our minimum obligations to maintain the Talapoosa option and continue as a going concern for the next twelve months, we need to raise at least $3 million during the next year, and to conduct our planned exploration program for the Talapoosa project for the next twelve months would require an estimated additional $5 million.months. Therefore, we do not expect to be required to engage in financial transactions to increase our cash balance and/or decrease our cash obligations in the near term, whichterm. However, we are an exploration company with planned exploration programs that require significant cash expenditures. A significant drilling program, such as those we have planned, will result in depletion of cash and may return us to a position of insufficient cash to support normal operations for the following 12 months. Cash-raising efforts may include equity financings, corporate transactions, joint venture agreements, sales of non-core assets, credit facilities or debenture issuances, or other strategic transactions.

We are working to increase and maintain sufficient working capital by prioritizing our expenditures toward added-value activities and advancing transactions aimed at improving our cash position.  We have implemented significant cost-cutting measures, reduced staff, and curtailed discretionary exploration expenditures to preserve cash.  We are also working to increase our working capital by exploring multiple financing alternatives to fund the execution of our business plan.    

We recognize that we will not be able to execute our operating plans with our current cash balances.  However, with our current cash balance, proceeds from sales of non-core assets, our expected ability to acquire additional capital and complete necessary financing transactions, and our ability to curtail discretionary exploration expenditures as needed, we believe that we will have sufficient working capital to meet our ongoing, non-discretionary operating expenses for the next 12 months and maintain our primary mineral properties.  Additional capital may be obtained through financing transactions such as equity investments, asset sales, joint ventures, debt facilities, or other types of strategic arrangements.

We plan as funding allows, to follow-upfollow up on our completed PEApositive drill results on our Eureka and Paiute Projects. Principally, we plan to execute drilling as part of Talapoosa with a pre-feasibility study, which is expected to include trade-off studies, further metallurgical tests, and analysis of various other processing scenarios.the ongoing exploration program at Eureka. Also, subject to available capital, we may continue prudent exploration programs on our material exploration properties and/or fund some exploratory activities on early-stage properties. Based upon identified potential funding opportunities, we are revising our corporate and exploration budgets, with a focus on the advancement of the Talapoosa pre-feasibility study.  We recognize that we will require additional funding in order to execute our operating plans and advance toward development of our properties.

Given current market conditions, we cannot provide assurance that necessary financing will be available to us on acceptable terms and/or at all.  Over the past two years, we have significantly curtailed our corporate,reductions in exploration and otheradministrative expenditures however, we recognize that we will still require additional funding to provide sufficient capital to meet our Talapoosa option obligations, fund our planned, non-discretionary expenditures for the next 12 months, and maintain our primary mineral properties.in future periods. If we cannot obtain sufficient additional financing, we may be unable to make required property payments on a timely basis and be forced to return some or all of our leased or optioned properties to the underlying owners.

19

Financing Activities

In October, 2017,On June 25, 2021, we initiatedclosed on total subscriptions for a private placement offering offor 23,070,798 Units of the Company at a price of $0.30$0.20 per Unit, with an over-allotment option to increase the offering by up to 20%, solely to persons who qualify as accredited investors (the "Offering").Unit. Each Unit in the Offering consisted of one share of our common stock of the Company and oneone-half common share purchase Class M Warrant (each whole such warrant (each a “Warrant”), with each Warrant exercisable to acquire an additional share of our common stock of the Company at a price of $0.45$0.30 per share until the warrantWarrant expiration date of OctoberMay 31, 2022.2023. A total of 8,971,666 shares and 5,304,166 Warrants were paid for and issued during the quarter ended June 30, 2021, for net proceeds of $1,788,334 to the Company. Another $333,333 was received for shares subscribed but not yet issued as of the end of the quarter. Additionally, 102,000 broker Warrants were issued for finders fees. No cash was paid for finders fees during the quarter ended June 30, 2021. The units subscribed but not yet paid for at June 30, 2021 were accounted for as subscriptions receivable of $2,492,493. Subsequent to the close of the quarter ended June 30, 2021, and prior to the issuance of the financial statements for that period, cash of $2,375,393, net of $117,100 finders fees, was received and 14,129,132 shares and 6,725,481 Warrants were issued to complete the private placement transactions, including 494,248 Warrants issued during the subsequent period for finders fees.

One corporate shareholder, which is related to a director of the Company, purchased 1,250,000 Units of the of the private placement offering which closed on June 25, 2021, which is disclosed in Note 6, on the same terms as other investors in the offering. The Offering was completed under Rule 506(b) of Regulation D promulgated by the SEC under the Securities Act of 1933, as amended (the “Securities Act”), solely to persons who qualify as accredited investors.  Subscribers whoinvestors and in accordance with applicable securities laws.

Subsequent Events

With the exception of events described in Financing Activities above, as evaluated through the financial statement issuance date, there were resident in Canada were requiredno material events subsequent to qualify as accredited investors under Canadian National Instrument 45-106Prospectus Exemptions.June 30, 2021 that require disclosure.

During the three months ended December 31, we closed the sale of two tranches of the Offering.  In the aggregate, we sold a total of 2,880,867 Units at a price of $0.30 per unit for gross proceeds of $864,260.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity or capital expenditures.

Critical Accounting Policies and Estimates

See Note 2 to the financial statements contained in this Quarterly Report for a summary of the significant accounting policies used in the presentation of our financial statements. We are required to make estimates and assumptions that

affect the reported amounts and related disclosures of assets, liabilities, revenue and expenses. We believe that our most critical accounting estimates are related to asset impairments and asset retirement obligations.

Our critical accounting policies and estimates are as follows:

Asset Impairments- Carrying Value of Property, Mineral Rights and Equipment

Significant property acquisition payments for active exploration properties are capitalized. The evaluation of our mineral properties for impairment is based on market conditions for minerals, underlying mineralized material associated with the properties, and future costs that may be required for ultimate realization through mining operations or by sale. If no mineable ore body is discovered, or market conditions for minerals deteriorate, there is the potential for a material adjustment to the value assigned to such mineral properties.

We review the carrying value of equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment or abandonment loss is recognized equal to an amount by which the carrying value exceeds the fair value of the asset. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the equipment is used, and the effects of obsolescence, demand, competition, and other economic factors.

Asset Retirement Obligations

We have an obligation to reclaim our properties after the surface has been disturbed by exploration methods at the site. As a result, we have recorded a liability for the fair value of the reclamation costs we expect to incur at ourLookout Mountain Target on our Eureka Project, and our Paiute Project. We estimate applicable inflation and credit-adjusted risk-free rates as well as expected reclamation time frames. To the extent that the estimated reclamation costs change, such changes will impact future reclamation expense recorded.A liability is recognized for the present value of estimated environmental remediation (asset retirement obligation) in the period in which the liability is incurred if a reasonable estimate of fair value can be made. The offsetting balance is charged to the related long-lived asset. Adjustments are made to the liability for changes resulting from passage of time and changes to either the timing or amount of the original present value estimate underlying the obligation.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

20

ITEM 4. CONTROLS AND PROCEDURES

Conclusions of Management Regarding Effectiveness of Disclosure Controls and Procedures

At the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision of and with the participation of our management, including the Principal Executive Officer and the Principal Financial Officer of the effectiveness of the design and operations of our disclosure controls and procedures (as defined in Rule 13a – 15(e) and Rule 15d – 15(e) under the Exchange ActAct) as of the end of the period covered by this report).report. Based on that evaluation, our management, including the Principal Executive Officer and the Principal Financial Officer hashave concluded that as of the end of the period covered by this report, our disclosure controls and procedures were not effective in ensuring that: (i) information required to be disclosed by the Company in reports that we fileit files or submitsubmits to the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in applicable rules and forms and (ii) material information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our Principal Executive OfficerCEO and Principal Financial Officer,CFO, as appropriate, to allow for accurate and timely decisions regarding required disclosure.

Management determined that the Company’s disclosureDisclosure controls and procedures were not effective because ofdue primarily to a material weakness in our internal control over financial reporting due primarily to minimal staffing at the Company and the resulting weakness related to appropriate segregation of duties. While the Company does adhere to a system of internal controls and processes that were designed and implemented by a respected, national accounting firm, it is difficult with a very limited staff to maintain appropriate segregation of duties in the initiating and recordingCompany’s internal control of transactions, thereby creating a segregation of duties weakness.  Subject to available capital, we anticipate improving the effectiveness of our disclosure controls and procedures on a long-term basis by increasing staffing levels and segregating certain duties.

financial reporting.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’sour internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f)), that occurred during the Company’s most recent fiscal quarter ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’sour internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We are not aware of any material pending litigation or of any proceedings known to be contemplated by governmental authorities which are, or would be, likely to have a material adverse effect upon us or our operations, taken as a whole. No director, officer or affiliate of Timberline and no owner of record or beneficial owner of more than 5% of our securities or any associate of any such director, officer or security holder is a party adverse to Timberline or has a material interest adverse to Timberline in reference to any currently pending litigation.

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended September 30, 2017,2020, which was filed with the SEC on December 20, 2017.January 13, 2021.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

All sales of unregistered equity securities during the fiscal quarter covered by this Quarterly Report on Form 10-Q were previously reported on Form 8-K.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.  MINE SAFETY DISCLOSURES

We consider health, safety and environmental stewardship to be a core value for the Company.