U.S.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Commission file number:  001-12974

SANTA FE GOLD CORPORATION

(Exact name of registrant as specified in its charter)

3544 Rio Grande Blvd.   NW

Albuquerque, NM   87107

(Address of Principal Executive Offices) (Zip Code)

3544 Rio Grande Blvd.   NW

Albuquerque, NM87107

(Address of Principal Executive Offices)

(505) (505) 255-4852

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(g) of the Act:

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 preceding 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.   Yes þ¨ No ¨þ

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 (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ¨ No ¨þ

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.  ¨

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).  Yes ¨ No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 422,670,880427,504,214 shares of common stock par value $0.002, of the issuer were issued and outstanding as of August 12,October 26, 2020.

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

This Form 10-Q contains certain “forward-looking” statements as such term is defined by the Securities and Exchange Commission in its rules, regulations and releases, which represent the Company’s expectations or beliefs, including but not limited to, statements concerning the Company’s strategy, operations, economic performance, financial condition, resource drilling strategies, investments, and future operational plans. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intent,” “could,” “estimate,” “might,” “plan,” “predict” or “continue” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by any forward-looking statements. This Form 10-Q contains forward-looking statements, many assuming that the Company secures adequate financing and is able to continue as a going concern, including statements regarding, among other things: our ability to continue as a going concern; including but not limited to statements regarding the following:

•exploration for minerals is highly speculative and involves greater risk than many other businesses; as such, most exploration programs fail to result in the discovery of economic mineralization;

•our mineralized material calculations at various projects are only estimates and are based principally on historic data;

•actual capital costs, operating costs, production and economic returns may differ significantly from those that we have anticipated;

•exposure to all of the risks associated with restarting and establishing new mining operations, if the development of one or more of our mineral projects is found to be economically feasible;

•title to some of our mineral properties may be uncertain or defective;

•land reclamation and mine closure may be burdensome and costly;

•significant risk and hazards associated with mining operations;

•we will require additional financing in the future to develop a mine at any other projects;

•the requirements that we obtain, maintain and renew environmental, construction and mining permits, which is often a costly and time-consuming process and may be opposed by local environmental group;

•our anticipated needs for working capital;

•our ability to secure financing;

•claims and legal proceedings against us;

•our lack of necessary financial resources to complete development of our projects and the uncertainty of our future financing plans;

•our exposure to material costs, liabilities and obligations because of environmental laws and regulations (including changes thereto) and permits;

•changes in the price of silver and gold;

•extensive regulation by the U.S. government as well as state and local governments;

•our projected sales and profitability;

•our business growth strategies;

•anticipated trends in our industry;

•the lack of commercial acceptance of our product or by-products;

•problems regarding availability of materials and equipment;

•failure of equipment to process or operate in accordance with specifications, including expected throughput, which could prevent the production of commercially viable output; and

•our ability to seek out and acquire high quality gold, silver and/or copper properties.

Occurrence of such events or circumstances could have a material adverse effect on our business, financial condition, results of operations or cash flows or the market price of our securities. All subsequent written and oral forward-looking statements by or

attributable to us or persons acting on our behalf are expressly qualified in their entirety by these factors. Except as may be required by securities or other law, the Company does not intend to undertake to update the information in this Form 10-Q if any forward-looking statement later turns out to be inaccurate whether as a result of new information, future events, or other circumstances.

CAUTIONARY NOTE REGARDING EXPLORATION STAGE STATUS

We are considered an “exploration stage” company under the U.S. Securities and Exchange Commission (“SEC”) Industry Guide 7, Description of Property by Issuers Engaged or to be Engaged in Significant Mining Operations (“Industry Guide 7”), because we do not have reserves as defined under Industry Guide 7.  Reserves are defined in Industry Guide 7 as that part of a mineral deposit which can be economically and legally extracted or produced at the time of the reserve determination.  The establishment of reserves under Industry Guide 7 requires, among other things, certain spacing of exploratory drill holes to establish the required continuity of mineralization and the completion of a detailed cost or feasibility study.

Because we have no reserves as defined in Industry Guide 7, we have not exited the exploration stage and continue to report our financial information as an exploration stage entity as required under Generally Accepted Accounting Principles (“GAAP”).  Although for purposes of FASB Accounting Standards Codification Topic 915, Development Stage Entities, we have exited the development stage and no longer report inception to date results of operations, cash flows and other financial information, we will remain an exploration stage company under Industry Guide 7 until such time as we demonstrate reserves in accordance with the criteria in Industry Guide 7.

Because we have no reserves, we have and will continue to expense all mine construction costs, even though these expenditures are expected to have a future economic benefit in excess of one year.  We also expense our reclamation and remediation costs at the time the obligation is incurred.  Companies that have reserves and have exited the exploration stage typically capitalize these costs, and subsequently amortize them on a units-of-production basis as reserves are mined, with the resulting depletion charge allocated to inventory, and then to cost of sales as the inventory is sold.  As a result of these and other differences, our financial statements will not be comparable to the financial statements of mining companies that have established reserves and have exited the exploration stage.

SEC INDUSTRY GUIDE 7 DEFINITIONS

The following definitions are taken from the mining industry guide entitled “Description of Property by Issuers Engaged or to be Engaged in Significant Mining Operations” contained in the Securities Act Industry Guides published by the United States Securities and Exchange Commission, as amended.

PART I
FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

*The balance sheet at June 30, 20182019 has been derived from the audited consolidated financial statement at that date.

The accompanying notes are an integral part of the unaudited consolidated financial statements.

SANTA FE GOLD CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

The accompanying notes are an integral part of the unaudited consolidated financial statements.

The accompanying notes are an integral part of the unaudited consolidated financial statements.

SANTA FE GOLD CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(Unaudited)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

The accompanying notes are an integral part of the unaudited consolidated financial statements.

SANTA FE GOLD CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2018September 30, 2019

(Unaudited)

NOTE 1 – COMPANYORGANIZATION AND NATURE OF OPERATIONSBUSINESS DESCRIPTION

Santa Fe Gold Corporation a Delaware corporation (the "Santa Fe”, "Company"“Company”, “our” or “we”) is a U.S. copper, silvermining company incorporated in Delaware in August 1991. Our general business strategy is to acquire, explore, develop and gold explorationmine mineral properties. The Company elected on August 26, 2015, to file for Chapter 11 Bankruptcy protection, Case # 15-11761 (MFW) and that case was dismissed on June 15, 2016. The Summit Silver-Gold Project, the Lordsburg Copper Project, Black Canyon Mica Project, Planet MIO Project, all claims and other assets were lost in the process. After the Company emerged from the bankruptcy with a management team of two with no assets, we developed a business plan to raise equity funds to acquire new mining company.claims, a potential processing plant or arrangements with a processing plant in an acceptable geographic location to potential new mining claims.

In August 2017, the Company acquired all the capital stock of Bullard’s Peak Corporation and the related patented and unpatented claims in the Black Hawk district of New Mexico from Black Hawk Consolidated Mines Company for a purchase price of $3,115,365. The mine property is known as the Alhambra mine site. The transaction was finalized and closed in April 2019. The mining property acquired is an asset of Mineral Acquisitions, LLC, one of the Company’s five wholly owned subsidiaries.

In January 2019 the Company has acquired right of use on two properties in western New Mexico, consisting of eight (8) patented claims and two unpatented claims, all located in the Steeple Rock Mining District, Grant County, New Mexico and a related water rights lease agreement. The two properties are known as the Billali Mine and the Jim Crow Imperial Mine. The Company has begun improvements to the Jim Crow Imperial mine to start mining operations during the third calendar quarter of 2020.

We are considered an “exploration stage” company under the U.S. Securities and Exchange Commission (“SEC”) Industry Guide 7.

Interim Financial Statements

The accompanying unaudited financial statements and related notes present the Company’s consolidated financial position as of December 31, 2018September 30, 2019 and June 30, 20182019 (Audited), the consolidated results of operations for the three and six months ended December 31,September 30, 2019 and 2018, and 2017, the consolidated statements of stockholder’sshareholders’ deficit for the three and six months ended December 31,2018September 30, 2019 and the2018 and, consolidated cash flows for the sixthree months ended December 31, 2018September 30, 2019 and 2017.2018. The unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the sixthree months ended December 31, 2018,September 30, 2019, are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2019.2020. The accounting policies followed by the Company are set forth in Note 2 to the Company’s financial statements included in Form 10-K for the fiscal year ended June 30, 2019. These interim financial statements and notes thereto should be read in conjunction with the consolidated financial statements presented in the Company’s 2019 Annual Report on Form 10-K filed on July 15, 2020.

Nature of Operations

Santa Fe Gold Corporation is a U.S. mining company incorporated in Delaware in August 1991. Our general business strategy is to acquire, explore, develop and mine mineral properties. The Company elected on August 26, 2015, to file for Chapter 11 Bankruptcy protection, Case # 15-11761 (MFW) and that case was dismissed on June 15, 2016.

Upon the Company emerging from the bankruptcy with a management team of two and no assets, we developed a business plan to raise equity funds to acquire new mining claims, a potential processing plant or arrangements with a processing plant in an acceptable geographic location to potential new mining claims.

On August 18, 2017, the Company signed the Bullard’s Peak Agreement and delivered $100,000 towards the purchase price. The Agreement is to purchase Bullard’s Peak Corporation and Black Hawk Consolidated Mines Company and acquire 100% of the issued and outstanding capital stock for a cash purchase price in the aggregate amount of $3,000,000, and paid with installments stated in the Bullard’s Peak Agreement.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Going Concern

The financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. Should the Company be unable to continue as a going concern, it may be unable to realize the carrying value of its assets and to meet its liabilities as they become due.

The Company has recorded anet loss of $470,646$735,985 for the sixthree months ended December 31, 2018,September 30, 2019, and has a total accumulated deficit of $102,484,020$94,214,655 and a working capital deficit at December 31, 2018September 30, 2019 of $19,167,446.$4,384,295. The Company used in operating activities approximately $469,000 during the current period of measurement. The Company currently has no source of generating revenue.

On August 26, 2015, Santa Fe filed for Chapter 11 Bankruptcy protection, Case # 15-11761 (MFW) in Delaware. With the dismissal of our bankruptcy case in June 15, 2016, all assets of the Company were sold. These conditions raise substantial doubt regarding the Company’s ability to continue as a going concern. 

To continue as a going concern, the Company is dependent on continued capital financing for project development, repayment of various debt facilities and payment of current operating expenses until the Company has acquired new mining claims andput into production an acceptable source to process thegenerate mineralized ore to generate revenue. Wea revenue stream. Currently we have no commitment from any party to provide additional

working capital and there is no assurance that any funding will be available as required, or if available, that its terms will be favorable or acceptable to the Company.

At December 31, 2018,September 30, 2019, the Company was in defaultsdefault on delinquent payments of approximately $7.77approximately: $3.04 million under a gold stream agreement (the “Gold Stream Agreement”) with Sandstorm Gold Ltd. (“Sandstorm”), other notes payable principle aggregating approximating $2.35 million, accrued liabilities of approximately $2.83 million andon accounts payable, approximating $3.04 million.$398,000 on a note payable and $643,000 on other accrued liabilities.

The unaudited consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries AZCO Mica, Inc., a Delaware corporation, The Lordsburg Mining Company, a New Mexico corporation, and Santa Fe Gold Barbados Corporation, a Barbados corporation, Santa Fe Acquisitions Company, a New Mexico Limited Liability Company,  and MineralsMineral Acquisitions, LLC, a New Mexico Limited Liability Company.Company and Bullard’s Peak Corporation, a New Mexico Corporation. All significant inter-company accounts and transactions have been eliminated in consolidation.

On July 19, 2016, a new company was formed, Santa Fe Acquisition LLC (“SFA”) with Tom Laws, our CEO, as the signer, for the sole purposeUse of acquiring assets for Santa Fe Gold (“SFG”). On September 25, 2017, with an effective date of July 23, 2016, the CEO assigned ownership of SFA to Santa Fe Gold whereby SFG became to sole member of SFA resulting in SFA becoming a wholly owned subsidiary of SFG.  All major purchases were made through the SFA Company for the benefit of SFG, with the funding provided by SFG.

Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates under different assumptions or conditions.

Significant estimates are used when accounting for the Company's carrying value of mineral properties, fixed assets, depreciation, and amortization, accruals, derivative instrument liabilities, valuation of warrants, taxes and contingencies, and stock-based compensation which are discussed in the respective notes to the consolidated financial statements.compensation.

Fair Value Measurements

The carrying values of cash and cash equivalents, accounts payable and accrued liabilities approximated their related fair values as of December 31, 2018September 30, 2019, and June 30, 2017,2019, due to the relatively short-term nature of these instruments. The carrying value of the Company's convertible notes payable approximates the fair value based on the terms at which the Company could obtain similar financing and the short-term nature of these instruments.

Cash and Cash Equivalents

The Company considers all liquid investments purchased with an initial maturity of three months or less to be cash equivalents. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash balances.

Derivative Financial Instruments  Property and Equipment

The Company doesProperty and equipment are carried at cost. Maintenance and repairs that do not use derivative instruments to hedge exposures to cash flow, market,improve or foreign currency risks. The Company reviews the terms of convertible debt, equity instruments and other financing arrangements to determine whether there are embedded derivative instruments, including embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument. Also, in connection with the issuance of financing instruments, the Company may issue freestanding options or warrants that may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity. The Company may also issue options or warrants to non-employees in connection with consulting or other services.

Derivative financial instruments are initially measured at their fair value. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. To the extent that the initial fair values of the freestanding and/or bifurcated derivative instrument liabilities exceed the total proceeds received, an immediate charge to income is recognized as a one-day derivative loss, in order to initially record the derivative instrument liabilities at their fair value. The discount from the face value of the convertible debt or

equity instruments resulting from allocating some or all of the proceeds to the derivative instruments, together with the stated interest on the instrument, is amortized overextend the life of the instrument through periodic charges to income,respective assets are expensed as incurred.  Expenditures for new property or equipment and expenditures that extend the useful lives of existing property and equipment are capitalized and recorded at cost. Upon retirement, sale or other disposition, the cost and accumulated amortization are eliminated and the gain or loss is included in operations.  Depreciation is taken over the estimated useful lives of the assets using the effective intereststraight-line method. The estimated useful lives of the equipment are shown below. Land is not depreciated.

Derivative Financial Instruments  

The classification ofFinancial Accounting Standards Board (“FASB”) provides guidance that requires derivative instruments including whether such instruments shouldto be recordedrecognized as either assets or liabilities or as equity, is reassessedin the balance sheet at the end of each reporting period. If reclassification is required, the fair value of the derivative instrument, as of the determination date, is reclassified. Any previous charges or credits to incomevalue. The accounting for changes in the fair value of derivative instruments depends on their intended use and resulting hedge designations. For derivative instruments designated as hedges, the derivative instrumentchanges in fair value are not reversed. Derivative instrument liabilities are classifiedrecorded in the balance sheetsheets as current or non-current based on whether or not net-cash settlementa component of accumulated other comprehensive income (loss). Changes in the derivative instrument could be required within twelve monthsfair value of the balance sheet date.The Company has no financial derivative instruments not designated as hedges are recorded in the current reporting periods.consolidated statements of operations, generally as a component of other income (expense).

Net Income (Loss) Per Share

Basic earnings (loss) per share are calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings per share are calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding. During the periods when they are anti-dilutive, common stock equivalents, if any, are not considered in the computation. For the three and six months ended December 31, 2018 and 2017,September 30, 2019, the impact of outstanding stock equivalents has not been included as they would be anti-dilutive.

A reconciliation of the weighted average shares outstanding used in the basic and diluted earnings per share (“EPS”) computation is as follows:  

The number of stock options excluded from the calculation of diluted earnings per share for the three months ended September 30, 2018 was 100,000 and excluded warrants was 4,320,000, because their inclusion would have been anti-dilutive.  

Stock-Based Compensation

In connection with termsShare-based compensation is accounted for based on the requirements of employment withASC 718, “Compensation—Stock Compensation’ (“ASC 718”), which requires recognition in the Company’s executivesfinancial statements of the cost of employee and employees,director services received in exchange for an award of equity instruments over the Company occasionally issues optionsperiod the employee or director is required to acquire its common stock. Awards are madeperform the services in exchange for the award (presumptively, the vesting period). ASC 718 also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award. Pursuant to ASC 505, “Equity—Equity Based Payments to Non-Employees” (“ASC 505-50”), for share-based payments to consultants and other third parties, compensation expense is determined at the discretionmeasurement date, which is the grant date. Until the measurement date is reached, the total amount of the Board of Directors. Such options may be exercisable at varying exercise prices and generally vest over a period of six months to a year.compensation expense remains uncertain.

The Company accounts for share-based compensation on the grant date fair value of the award. The Company estimates the fair value of the award using the Black-Scholes option pricing model for valuation of the share-based payments. The Company believes this model provides the best estimate of fair value due to its ability to incorporate inputs that change over time, such as volatility and interest rates, and to allow for actual exercise behavior of option holders. The compensation cost is recognized over the expected vesting period. Share based payments to nonemployees are valued at the earlier or a commitment date or completion of services. The Company had stock-based compensation of $15,279 and $17,800 forin the sixthree months ending December 31,September 30, 2019 and 2018, and $196,000 for the six months ended December 31, 2017.respectively.

Accounting Standards to be Adopted in Future Periods

In May 2014, the FASB issued ASC updated No. 2014-09, Revenue from Contracts with Customers (Topic 606(ASU 2014-09). Under the amendments in this update, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amendments in this update are effective for fiscal years and interim periods within those years beginning after December 15, 2017. The new standard is required to be applied either retrospectively to each prior reporting period presented, or retrospectively with the cumulative effect of applying the update recognized at the date of initial application. The new standard was adopted by the Company the quarter ended September 30,2018, and will not have an impact on our consolidated financial statements until revenue is achieved.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.  This ASU is effective for annual periods beginning after December 15, 2017 and interim periods within fiscal years. ASU No 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The Company adopted this standard effective July 1, 2018 and it will not have a material impact on the Company’s financial position or results of operations.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with a term of more than one year. Accounting by lessors will remain similar to existing U.S. GAAP. Subsequent accounting standards updates have been issued, which amend and/or clarify the application of ASU 2016-02. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018.  The Company has not adopted Topic 842 as of the filing of this 10-QJuly 1, 2019 and at this time the new standard will not have an impact on our consolidated financial statements until significant a lease agreement is entered.

In November 2016,June 2018, the FASB has issued ASU No. 2016-18, Statement of Cash Flows2018-07, “Compensation — Stock Compensation (Topic 230)718): Improvements to Nonemployee Share-Based Payment Accounting”, which provides guidance on how restricted cashexpands the scope of Topic 718 to include all share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 specifies that Topic 718 applies to all share-based payment transactions in which the grantor acquires goods and services to be used or restricted cash equivalents should be includedconsumed in its own operations by issuing share-based payment awards. ASU 2018-07 also clarifies that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statementselling goods or services to customers as part of cash flows. This amendmenta contract accounted for under ASC 606. ASU 2018-07 is effective for fiscal years

beginning after December 15, 2017,2018, including interim periods within those fiscal years, with early adoption permitted, but no earlier than adoption of ASC 606. The Company adopted ASU 2018-07, effective July 1, 2019, and determined the adoption of this standard did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which removes, modifies and adds various disclosure requirements related to fair value disclosures. Disclosures related to transfers between fair value hierarchy levels will be removed and further detail around changes in unrealized gains and losses for the period and unobservable inputs used in determining level 3 fair value measurements will be added, among other changes. ASU 2018-13 is effective for fiscal years, and interim periods within those fiscal years. The new standard was adopted by the Company in the quarter ended September 30, 2018, and will not have a significant impact on our consolidated financial statements

In May 2017, FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, which amends the scope of modification accounting surrounding share-based payment arrangements as issued in ASU 2016-09 by providing guidance on the various types of changes which would trigger modification accounting for share-based payment awards. ASU 2017-09 is effective for annual periodsyears, beginning after December 15, 2017. The new standard was adopted by the Company in the quarter ended September 30, 2018, and the Company does not expect the adoption of ASU 2017-09 to have a material effect on its business or on its financial position, results of operations or cash flows.

In August 2018, ASU No. 2018-13 was issued to modify and enhance the disclosure requirements for fair value measurements. This update is effective in fiscal years, including interim periods, beginning after December 1, 2020, and early adoption is permitted.2019. The Company is currently evaluating this guidance and the impact on its Consolidated Financial Statements.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not, or are not believed by management to, have a material impact on the Company's present or future financial position, results of operations or cash flows.

Mine Development

NOTE 3 – DEPOSIT ON MINERAL PROPERTYMine development costs include engineering and metallurgical studies, drilling and other related costs to delineate an ore body, and the building of access ways, shafts, lateral access, drifts, ramps and other infrastructure in an underground mine. Costs incurred before mineralization is classified as proven and probable reserves are expensed and classified as exploration expense. Capitalization of mine development project costs, that meet the definition of an asset, begins once mineralization is classified as proven and probable reserves.

AcquisitionDrilling and related costs are capitalized for an ore body where proven and probable reserves exist and the activities are directed at obtaining additional information on the ore body or converting non-reserve mineralization to proven and probable reserves. All other drilling and related costs are expensed as incurred. Drilling costs incurred during the production phase for operational ore control are allocated to inventory costs and then included as a component of Bullard’s Peak Corporation and Black Hawk Consolidated Mines Companycosts applicable to sales.

On August 18, 2017,As of September 30, 2019, the Company signedhas not established proven or probable reserves or established the Bullard’s Peak Agreementcommercial feasibility of any of our exploration projects and delivered $100,000 towards the purchase price.all exploration costs are being expensed. The Agreement is to purchase Bullard’s Peak CorporationCompany may never identify proven and Black Hawk Consolidated Mines Company and acquire 100% of the issued and outstanding capital stock for an initial cash purchase price of $3,000,000, to be paid with installments stated in the Bullard’s Peak Agreement. Title to the claims and capital stock will be transferred upon receipt by seller of the full purchase price. Additional installments were made as follows through the end of the current reporting period towards the purchase price:  probable reserves.

- August 30, 2017, the Company delivered $900,000;

- September 8, 2017, the Company delivered $500,000;

- October 13, 2017, the Company delivered $500,000;

- January 2, 2018, the Company delivered $500,000;

- October 15, 2018, the Company delivered $100,000;

- October 31, 2018, the Company delivered $100,000; and

- November 30, 2018, the Company delivered $100,000.Mineral Rights

PurchaseCosts of four placer claimsexploration, carrying and retaining unproven mineral lease properties are expensed as incurred. The Company expenses all mineral exploration costs as incurred as it is still in British Columbia, Canadathe exploration stage. If the Company identifies proven and probable reserves in its investigation of its properties and upon development of a plan for operating a mine, it would enter the development stage and capitalize future costs until production is established.

On November 30, 2017, the Company entered into substantially identical agreements with Fortune Graphite, Inc. and Worldwide Graphite Producers, Ltd. to acquire a total of four placer claims for aggregate consideration of Can$400,000 and the issuance of 10,000,000 shares of Company common stock.  Title to these claims remained in trust with the sellers until payment in full.  To date, the Company has paidnot established the commercial feasibility of any exploration projects; therefore, all exploration costs are expensed as incurred. Mineral properties are capitalized at their fair value at the acquisition date, either as an individual asset purchase or as part of a business combination. ASC 930-805, “Extractive Activities-Mining: Business Combinations.” ASC 930-805 states that mineral rights consist of the legal right to explore, extract, and retain at least a portion of the sellers’ consideration of US$210,116.  The Company disclosed in a Form 8-K filing on November 20, 2018 that it had been notified that it was in default with respect to these two November 2017 agreements and that the sellers threatened legal action.  The Company has engaged British Columbia counsel to review the two November 2017 agreements and has concluded that there were false representations made by the sellers and that certain conditions precedent of sellers were not satisfied.benefits from mineral deposits. Mining assets include mineral rights.

Acquired mineral rights are considered tangible assets under ASC 930-805. As a result, the Company’s position is that these two November 2017 agreementsdirect costs to acquire mineral rights are notinitially capitalized as tangible assets. Mineral rights include costs associated with acquiring patented and were never bindingunpatented mining claims.

When a property reaches the production stage, the related capitalized costs are amortized on a units-of-production basis over the proven and have requested sellers to refundprobable reserves following the US$210,116.commencement of production. The Company so informed sellersassesses the carrying costs of the capitalized mineral properties for impairment under ASC 360-10, “Impairment of long-lived assets”, and evaluates the carrying value under ASC 930-360, “Extractive Activities - Mining”, annually. An impairment is recognized when the sum of the expected

undiscounted future cash flows is less than the carrying amount of the mineral properties. Impairment losses, if any, are measured as the excess of the carrying amount of the mineral properties over its estimated fair value.

When it is determined that a mineral property can be economically developed as a result of establishing reserves, subsequent mine development is capitalized and are amortized using the units of production method over the estimated life of the ore body based on March 4, 2019.estimated recoverable tonnage in proven and probable reserves. We may never identify proven and probable reserves.

At the time the Company has a revenue stream from a project, the Company will amortize any capitalized balance each quarter. Companies that have reserves under SEC Industry Guide 7 typically capitalize these costs, and subsequently depreciate or amortize them on a units-of-production basis as reserves are mined. Unlike these other companies, our properties have no reserves and we will depreciate or amortize any capitalized costs based on the most appropriate amortization method, which includes straight-line or units-of-production method over the estimated remaining life of the mine, as determined by our geologist. As we have no reliable information to compute  a units of production methodology, we will amortize our capitalized costs on a straight-line basis over the estimated remaining life of the mine as determined by our geologist. Because of these and other differences, our financial statements may not be comparable to the financial statements of mining companies that have proven and probable reserves on their properties.

Reclamation Costs

Reclamation obligations are recognized when incurred and recorded as liabilities at fair value. The liability is accreted over time through periodic charges to accretion expense. The asset retirement cost is capitalized as part of the asset’s carrying value and depreciated over the life of the related asset. Reclamation costs are periodically adjusted to reflect changes in the estimated present value resulting from the passage of time and revisions to the estimates of either the timing or amount of the reclamation costs. The reclamation obligation is based on when spending for an existing disturbance will occur. The Company continues to evaluate its rightsreviews, on an annual basis, unless otherwise deemed necessary, the reclamation obligation at each mine site in accordance with the provisions of ASC 440, “Asset Retirement and remedies in connectionEnvironmental Obligations”, which establishes the standards for the initial measurement and subsequent accounting for obligations associated with this matter.  As a result,the sale, abandonment, or other disposal of long-lived tangible assets arising from the acquisition, construction or development and for normal operations of such assets.  No reclamation costs were required for the three months ended September 30, 2019.

NOTE 3 – PROPERTY AND EQUIPMENT

Property and equipment consist of the following at September 30, 2019 and June 30, 2019:

During the three-month periods ended September 30, 2019 and 2018 the Company does not own any rights torecognized depreciation expense of $6,670 and $0, respectively.

The Company during the four placer claims located in the Vernon mining district of British Columbia, Canada (which property is more fully set forth in the Form 8-K filing dated November 20, 2018).

Billali Minecurrent quarter, began maintenance and repair activities at the Jim Crow Imperialmine site along with geological work on the site and related mine ore material. The Company during this quarter purchased the required materials and equipment to perform the required activities under our mine manager. During the quarter our major mining equipment purchases aggregated $174,053. The significant acquisitions were mainly a crusher, generators, wheel loader, conveyors and freight on related heavy equipment purchases. We also purchased a site for a storage yard for our mine inventory for $35,000 and is accessible to our Billali and Jim Crow mines. The property consist of 1.64 acres, has water and electricity to the property, a night security light and security fencing with a truck access gate.

NOTE 4 –MINERAL PROPERTIES

The Company has capitalized acquisition costs on mineral properties as follows:

We have not established that the Alhambra - Blackhawk project or Billali Mine Mineral Interest

In January 2019- Jim Crow mine rights projects contain proven or probably reserves, as defined under Industry Guide 7.  Minimal exploration activities have commenced to date and minimal exploration costs have been incurred and expensed. To date, the Company has acquired rightsnot (i) commenced or adopted plans to two propertiesconduct any exploration, (ii) prepared drilling plans, proposals, timetables or budgets for exploration work, or (iii) identified engineers and other personnel that will conduct or assist in western New Mexico, consisting of eight (8) patented claimsany exploration work.  The Company will need to raise funds to conduct exploration work and two unpatented claims, all located in the Steeple Rock Mining District, Grant County, New Mexico andit currently lacks a related water rights lease agreement.firm financing commitment for any exploration activities.

The Company entered into a purchase agreement with a mining operatorcommenced development of the Jim Crow mine in January 2019late 2019. Work to purchase two propertiesdate has consisted of beginning the upgrading of the surface facilities, rehabilitating the shaft, expanding the hoisting capability and underground development on three levels. A crushing plant was purchased and installed at Duncan, Arizona, in western New Mexico,late 2019.

Acquired mineral rights are considered tangible assets under ASC 930-805. ASC 930-805 requires that mineral rights be recognized at fair value as of the acquisition date.  Mining assets include mineral rights. The payments made under the Billali Mine and the- Jim Crow Imperial Mine.  The purchase price for all rightsMine Agreement are capitalized by the Company and interests to be conveyedwhen a revenue stream is $2,500,000 forattained the Billali Mine and $7,500,000 for the Jim Crow Imperial Mine, with aggregate consideration for both definitive agreements payable as follows per Amendment Three that is effective as of May 1, 2020:

*$500,000 paid to date as of the filing date; 

*buyer to pay $50,000 monthly commencing July 1, 2020, and continuing for the next subsequent 19 months; 

*commencing 30 days after the last payment above, and continuing for the for an additional 48 subsequent payments, buyer to make each 30 days a payment in the amount of $175,000; 

*after the final payment above and 30 days thereafter, the buyercapitalized balance will make the final payment of $100,000 completing the  purchase. amortized.

*each payment made hereunder will be allocated twenty-five per cent (25%) to the Billali and seventy-five percent (75%) to the Jim Crow, Imperial. 

The Agreement has a 5% net smelter return (NSR) royalty on the nine patented Lode Claims with a royalty limit up to $650,000, and a 3% NSR thereafter.

Title and all rights and interest in the properties will be conveyed under the agreements upon completion of the payments of the purchase prices of the properties.

NOTE 4 5 – ACCRUED LIABILITIES

Accrued liabilities consist of the following at December 31, 2018September 30, 2019 and June 30, 2018:2019:

NOTE 5 – COMPLETION GUARANTEE PAYABLE

At June 30, 2012, the Company calculated the completion guarantee payable provided by Amendment 1 under the Gold Stream Agreement with Sandstorm. See NOTE 9- CONTINGENCIES AND COMMITMENTS, Commodity Supply Agreement. Based upon the provisions of the Agreement and the related completion guarantee test, incremental financing charges totaling $504,049 were recognized in Other Expenses and accrued at June 30, 2012. These accrued charges, combined with the remaining uncredited liability totaled $3,359,873 at December 31, 2018 and June 30, 2018, respectively, and are reported as completion guarantee payable. Accrued interest on the completion guarantee payable at December 31, 2018 and June 30, 2018 was $1,146,554 and $1,058,357, respectively. Interest expense on the obligation for the six months ended December 31, 2018 and 2017 was $88,197, respectively.