UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended December 31, 2019

¨		TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number: 001-12974

SANTA FE GOLD CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	84-1094315
(State or Other Jurisdiction	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

3544 Rio Grande Blvd. NW

Albuquerque, NM 87107

(Address of Principal Executive Offices)

(505) 255-4852

(Registrant’s telephone number, including area code)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.002 par value	SFEG	OTC PINK

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 ¨ 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 ¨ 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.

	Large accelerated filer ¨	Accelerated filer ¨
	Non-accelerated filer ¨	Smaller reporting company þ
	(Do not check if smaller reporting company)	Emerging growth company ¨

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

As of October 26, 2020, the registrant had 427,504,214 shares of its common stock, par value $0.002 per share, outstanding.

SANTA FE GOLD CORPORATION
INDEX TO FORM 10-Q

PART I
FINANCIAL INFORMATION
		Page
	Cautionary Statement on Forward-Looking Statements	3
	Cautionary Note Regarding Exploration Stage Status	4
	SEC Industry Guide Definitions	4

Item 1.	Financial Statements	5
	Consolidated Balance Sheets as of December 31, 2019 (Unaudited) and June 30, 2019	5
	Consolidated Statements of Operations for the Three and Six Months Ended December 31, 2019 and 2018 (Unaudited)	6
	Consolidated Statements of Changes in Stockholders’ Deficit for the Three and Six Months Ended December 31, 2019 and 2018 (Unaudited)	7
	Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2019 and 2018 Unaudited)	8
	Notes to the Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	22
Item 4.	Controls and Procedures	22

PART II OTHER INFORMATION
Item 1.	Legal Proceedings	23
Item 1A	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults Upon Senior Securities	25
Item 4.	Mine Safety Disclosures	25
Item 5.	Other Information	25
Item 6.	Exhibits	25
SIGNATURES		26
CERTIFICATIONS

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.

Exploration State		The term “exploration state” (or “exploration stage”) includes all issuers engaged in the search for mineral deposits (reserves) which are not in either the development or production stage.

Development Stage		The term “development stage” includes all issuers engaged in the preparation of an established commercially mineable deposit (reserves) for its extraction which are not in the production stage. This stage occurs after completion of a feasibility study.

Mineralized Material		The term “mineralized material” refers to material that is not included in the reserve as it does not meet all of the criteria for adequate demonstration for economic or legal extraction.

Probable (Indicated) Reserve		The term “probable reserve” or “indicated reserve” refers to reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation.

Production Stage		The term “production stage” includes all issuers engaged in the exploitation of a mineral deposit (reserve).

Proven (Measured) Reserve		The term “proven reserve” or “measured reserve” refers to reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established.

Reserve		The term “reserve” refers to that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. Reserves must be supported by a feasibility study done to bankable standards that demonstrates the economic extraction. (“Bankable standards” implies that the confidence attached to the costs and achievements developed in the study is sufficient for the project to be eligible for external debt financing.) A reserve includes adjustments to the in-situ tons and grade to include diluting materials and allowances for losses that might occur when the material is mined.

PART I
FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SANTA FE GOLD CORPORATION CONSOLIDATED BALANCE SHEETS
		December 31,			June 30,
		2019			2019*
		(Unaudited)			(Audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	6,400		$	264,900
Prepaid expenses and other current assets		30,470			76,921
Total current assets		36,870			341,821

NON-CURRENT ASSETS:
Property and equipment, net		249,938			25,543
Mineral property		3,515,365			3,315,365
Total non-current assets		3,765,303			3,340,908
Total Assets	$	3,802,173		$	3,682,729

LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable	$	3,356,002		$	3,151,035
Accrued liabilities		679,574			645,068
Notes payable		558,543			598,543
Notes payable and accrued interest to related party		91,953			63,499
Total Current Liabilities		4,686,072			4,458,145
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT:
Common stock, $.002 par value, 550,000,000 shares authorized at December 31, 2019 and June 30, 2019; 397,420,809 shares issued and outstanding at December 31, 2019 and 379,775,217 shares issued and outstanding at June 30, 2019		794,842			759,550
Additional paid-in capital		93,150,454			91,943,704
Accumulated deficit		(94,829,195	)		(93,478,670	)
Total Stockholders' Deficit		(883,899	)		(775,416	)
Total Liabilities and Stockholders' Deficit	$	3,802,173		$	3,682,729

*The balance sheet at June 30, 2019 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)

	Three Months Ended December 31,						Six Months Ended December 31,
		2019			2018			2019			2018


REVENUES	$	—		$	—		$	—		$	—


OPERATING EXPENSES:
Exploration and mine related costs		382,142			1,613			665,116			7,689
General and administrative		218,479			224,464			684,879			518,790
Total Operating Expenses		600,621			226,077			1,349,995			526,479

LOSS FROM OPERATIONS		(600,621	)		(226,077	)		(1,349,995	)		(526,479	)

OTHER INCOME (EXPENSE):
Miscellaneous income		1			637			1			637
Gain on debt extinguishment		—			112,625			—			112,625
Recovery (misappropriation) of funds		—			—			27,539			378,060
Financing costs – commodity supply agreement		—			(340,312	)		—			(105,895	)
Interest expense		(13,920	)		(163,811	)		(28,070	)		(329,594	)
Total Other Income (Expense)		(13,919	)		(390,861	)		(530	)		55,833

LOSS BEFORE PROVISION FOR INCOME TAXES		(614,540	)		(616,938	)		(1,350,525	)		(470,646	)

PROVISION FOR INCOME TAXES		—			—			—			—

NET LOSS AND COMPREHENSIVE LOSS	$	(614,540	)	$	(616,938	)	$	(1,350,525	)	$	(470,646	)

Basic and Diluted Per Share Data:
Net (Loss) Per Share – basic and diluted	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)

Weighted Average Common Shares Outstanding:
Basic and diluted		394,039,717			300,000,000			390,574,903			300,000,000

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

SANTA FE GOLD CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2019 AND 2018
(Unaudited)


					Additional
Six Months Ended December 31, 2019:	Common Stock				Paid-In		Accumulated
	Shares		Amount		Capital		Deficit			Total
Balance, June 30, 2019		379,775,217	$	759,550	$	91,943,704	$	(93,478,670	)	$	(775,416	)

Consulting stock-based compensation		181,466		363		14,916		—			15,279
Share subscriptions issued		12,285,714		24,572		835,428		—			860,000
Net (Loss)		—		—		—		(735,985	)		(735,985	)
Balance, September 30, 2019		392,242,397		784,485		92,794,048		(94,214,655	)		(636,122	)

Consulting stock-based compensation		178,512		357		16,406		—			16,763
Share subscriptions issued		5,000,000		10,000		340,000		—			350,000
Net (Loss)		—		—		—		(614,540	)		(614,540	)
Balance, December 31, 2019		397,420,909	$	794,842	$	93,150,454	$	(94,829,196	)	$	(883,899	)

					Additional
Six Months Ended December, 2018:	Common Stock				Paid- In			Accumulated
	Shares		Amount		Capital			Deficit			Total
Balances, June 30, 2018		300,000,000	$	600,000	$	84,113,690		$	(102,013,374	)	$	(17,299,684	)

Valuation change on mandatory share
redemption		—		—		342,000			—			342,000
Net Income		—		—		—			146,292			146,292
Balances, September 30, 2018		300,000,000		600,000		84,455,690			(101,867,082	)		(16,811,392	)

Valuation change on mandatory share
redemption		—		—		(126,000	)		—			(126,000	)
Net (Loss)		—		—		—			(616,938	)		(616,938	)
Balances, December 31, 2018		300,000,000	$	600,000	$	84,329,690		$	(102,484,020	)	$	(17,554,330	)

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

SANTA FE GOLD CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

		Six Months Ended
		December 31,
		2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(1,350,525	)	$	(470,646	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Stock-based compensation		32,042			17,800
Financing costs – commodity supply agreements		—			105,895
Depreciation expense		16,362			—
Non-cash interest expense		8,454			—
Net change in operating assets and liabilities:
Prepaid expenses and other current assets		46,451			(33,620	)
Accounts payable and accrued liabilities		239,474			279,240
Net Cash Used in Operating Activities		(1,007,742	)		(101,331	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Payment on mineral property		(200,000	)		(325,000	)
Refund (investment) in joint venture		—			25,000
Purchase of property and equipment		(240,757	)		—
Net Cash Used in Investing Activities:		(440,757	)		(300,000	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock subscriptions		—			350,000
Proceeds from common stock issuances		1,210,000			—
Proceeds from note payable		—			203,000
Loan proceeds from related party		20,000			30,689
Payments on note payable principle		(40,000	)		(182,522	)
Net Cash Provided by Financing Activities		1,190,000			401,167

NET (DECREASE) IN CASH AND CASH EQUIVALENTS		(258,499	)		(164	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		264,900			18,897
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	6,400		$	18,733

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	—		$	—
Cash paid for income taxes	$	—		$	—

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Valuation change on mandatory share redemption	$	—		$	216,000

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

SANTA FE GOLD CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – ORGANIZATION AND BUSINESS DESCRIPTION

Santa Fe Gold Corporation (the “Company”, “our” or “we”) 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. 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 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, 2019 and June 30, 2019 (Audited), the consolidated results of operations for the three and six months ended December 31, 2019 and 2018, the consolidated statements of shareholders’ deficit for the three and six months ended December 31, 2019 and 2018 and, consolidated cash flows for the six months ended December 31, 2019 and 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 six months ended December 31, 2019, are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 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.

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 net loss of $1,350,525 for the six months ended December 31, 2019, and has a total accumulated deficit of $94,829,195 and a working capital deficit at December 31, 2019 of $4,649,203. The Company used in operating activities approximately $1,000,000. The Company currently has no source of generating revenue.

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 March 31, 2020, the Company was in default on delinquent payments on accounts payable of approximately $3.05 million, $398 thousand on a note payable and $643 thousand 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, Mineral Acquisitions, a New Mexico Limited Liability Company and Bullard’s Peak Corporation, a New Mexico Corporation. All significant inter-company accounts and transactions have been eliminated in consolidation.

Use of 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.

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, 2019, and June 30, 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.

Property and Equipment

Property and equipment are carried at cost. Maintenance and repairs that do not improve or extend the life of the 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 straight-line method. The estimated useful lives of the equipment are shown below. Land is not depreciated.

	Estimated Useful Life
Mine equipment	7 Years
General equipment	5 – 7 Years
Automotive	4.5 - 5 Years
Small tools	1.25 Years

Derivative Financial Instruments

The Financial Accounting Standards Board (“FASB”) provides guidance that requires derivative instruments to be recognized as either assets or liabilities in the balance sheet at fair value. 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 changes in fair value are recorded in the balance sheets as a component of accumulated other comprehensive income (loss). Changes in the fair value of derivative instruments not designated as hedges are recorded in the consolidated statements of operations, generally as a component of other income (expense).

Warrants

In connection with certain financing, the Company has issued warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes option pricing model as of the measurement date. Warrants are recorded at fair value as expense over the requisite service period or at the date of issuance, if there is not a service period.

The Company assessed the classification of its common stock purchase warrants as of the date of each equity offering and determines that such instruments meet the criteria for equity classification, as the settlement terms indicate that the instruments are indexed to the entity’s underlying stock.

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, 2019 and 2018, the impact of outstanding stock equivalents has not been included as they would be anti-dilutive.

Stock-Based Compensation

Share-based compensation is accounted for based on the requirements of ASC 718, “Compensation – Stock Compensation’ (“ASC 718”) which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform 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 measurement date which is the grant date. Until the measurement date is reached, the total amount of compensation expense remains uncertain.

Share based payments to nonemployees are valued at the earlier or a commitment date or completion of services. The Company had stock-based compensation to non-employees of $32,042 and $17,800 in the six months ending December 31, 2019 and 2018, respectively.

Accounting Standards to be Adopted in Future Periods

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 adopted Topic 842 as of July 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 June 2018, the FASB issued ASU 2018-07, “Compensation — Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting”, which expands 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 consumed 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 selling goods or services to customers as part of a contract accounted for under ASC 606. ASU 2018-07 is effective for fiscal years beginning after December 15, 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, beginning after December 15, 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

Mine 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.

Drilling 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 costs applicable to sales.

As of December 31, 2019, the Company has not established proven or probable reserves or established the commercial feasibility of any of our exploration projects and all exploration costs are being expensed.

Mineral Rights

Costs of exploration, 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 the 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.

To date, the Company has not 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 benefits from mineral deposits. Mining assets include mineral rights.

Acquired mineral rights are considered tangible assets under ASC 930-805. As a result, the direct costs to acquire mineral rights are initially capitalized as tangible assets. Mineral rights include costs associated with acquiring patented and unpatented 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 probable reserves following the commencement of production. The Company assesses 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 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 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 reviews, 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 Environmental Obligations”, which establishes the standards for the initial measurement and subsequent accounting for obligations associated with 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 six months ended December 31, 2019.

NOTE 3 – PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31, 2019 and June 30, 2019:

	December 31,			June 30,
	2019			2019
Vehicles	$	20,725		$	20,725
Small tools		4,882			—
Mining equipment		205,693			4,818
Land, non-mineral		35,000			—
		266,300			25,543
Less Accumulated depreciation		(16,362	)		—
	$	249,938		$	25,543

During the six-month periods ended December 31, 2019 and 2018, the Company recognized depreciation expense of $16,362 and $0, respectively.

The Company during the current quarter, began maintenance and repair activities at the Jim Crow mine 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 $200,875. The significant acquisitions were mainly a crusher, generators, wheel loader, conveyors, capitalized repairs 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:

	December 31,		June 30,
	2019		2019
Alhambra - Blackhawk project	$ 3,115,365	$	3,115,365
Billali – Jim Crow Imperial mineral rights project	400,000		200,000
	3,515,365		3,315,365
Less Accumulated amortization	—		—
	$ 3,515,365	$	3,315,365

Exploration Status

We have not established that the Alhambra - Blackhawk project or Billali Mine - 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 not (i) commenced or adopted plans to conduct 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 any exploration work. The Company will need to raise funds to conduct exploration work and it currently lacks a firm financing commitment for any exploration activities.

The Company commenced development of the Jim Crow mine in late 2019. Work to date 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 late 2019. The Company has the right to cancel the Agreement at any time.

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 - Jim Crow Mine Agreement are capitalized by the Company and when a revenue stream is attained the capitalized balance will amortized.

NOTE 5 – ACCRUED LIABILITIES

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

		December 31,		June 30,
		2019		2019
Interest	$	220,242	$	194,318
Vacation		15,771		15,771
Payroll		119,793		124,623
Franchise taxes		8,697		8,697
Other		42,991		29,579
Audit		18,557		18,557
Property taxes		253,523		253,523

	$	679,574	$	645,068

NOTE 6 – NOTES PAYABLE

Installment Note

On June 1, 2012, the Company entered into an installment sales contract for $593,657 to purchase certain equipment. The term of the agreement is for 48 months at an interest rate of 5.75%, with the equipment securing the loan. The balance owed on the note was $398,793 at December 31, 2019 and June 30, 2019. The Company has been unable to make its monthly payments since November 2013, and has been in default since that time. The equipment has been returned to the vendor for sale and remains unsold at December 31, 2019. Interest expense for the six months ended December 31, 2019 and 2018 was $11,465, respectively. Accrued interest on the note at December 31, 2019 and June 30, 2019 was $122,083 and $110,618, respectively.

Note Payable

An individual during the prior fiscal year loaned Company $239,750 of which the Company paid back $40,000 during that current fiscal year and $40,000 was paid back during the fiscal year. The loan is at an annual interest rate of 6%, has no stated due date and is payable on demand by the lender. Accrued interest on the loan at December 31, 2019 and June 30, 2019 was $12,947 and $7,793, respectively. Interest expense on the loan for the six months ended December 31, 2019 and 2018 is $5,154 and $872, respectively.

The following summarizes notes payable:		December 31,		June 30,
		2019		2019
Installment sales contract on equipment, interest at 5.75%, payable in 48 monthly installments of $13,874, including interest through July 2016.	$	398,793	$	398,793
Note payable		159,750		199,750
Notes payable - current	$	558,543	$	598,543

NOTE 7 – FAIR VALUE MEASUREMENTS

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in generally accepted accounting principles (“GAAP”), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

Level 1		Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2		Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3		Pricing inputs that are generally observable inputs and not corroborated by market data.

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. A slight change in unobservable inputs such as volatility can significantly have a significant impact on the fair value measurement of the derivatives liabilities.

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The carrying amounts of the Company’s financial assets and liabilities, such as cash and accounts payable approximate their fair values because of the short maturity of these instruments.

NOTE 8 – CONTINGENCIES AND COMMITMENTS

Billali and Jim Crow/Imperial Mines Project

The Company determined the Agreement on the Billali and Jim Crow/Imperial mines is a lease and is cancellable at any time by the Company. Costs of lease renewals, exploration, 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 the 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. The Company can cancel the Agreement at any time as detailed in the Agreement.

As of December 31, 2019, the Company has not established the commercial feasibility of any of our exploration projects; therefore, all exploration costs are being expensed. For the six months ended December 31, 2019, we have capitalized $200,000 under the Agreement. Acquired mineral rights are considered tangible assets under ASC 930-805. As a result, the direct costs to acquire mineral rights are initially capitalized as tangible assets. Mineral rights include costs associated with acquiring patented and unpatented mining claims

Payments under the Amended Agreement No. 4 dated effective October 7, 2020, on the Billali and Jim Crow/Imperial project are as follows:

The Total Purchase Price of $10,000,000 will be paid as follows:

(i)Six Hundred Thousand Dollars ($600,000) has been paid by Buyer to Seller as of the date of this Amendment.

(ii)Commencing November 1, 2020 and continuing on the first day of each subsequent month thereafter, a monthly payment of $25,000 will be paid until (A) the mill processing plant to create concentrate is in operation and (B) we received our first payment for shipment of such concentrate from the mill (satisfaction of these two items is referred to as “Milestone”). Upon satisfaction of this Milestone and commencing on the first day of the following month and continuing the first day of each subsequent month thereafter, Buyer will pay to Seller the sum of Fifty Thousand Dollars ($50,000) until a total of One Million Six Hundred Thousand Dollars ($1,600,000 is paid.

(iii)Commencing 30 days after the last payment in (ii) above and continuing with 48 subsequent payments every 30 days thereafter, Buyer will pay to Seller the sum of One Hundred Seventy-Five Thousand Dollars ($175,000.00) per period.

(iv)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.

Office and Real Property Leases

On August 1, 2015, the Company moved the office to a single room located in Albuquerque, NM, at the home of the CFO for a monthly rent of $500 until the Company is required to lease increased office space due to additional personnel requirements. Rental expense totaled $3,000 for the six months ended December 31, 2019 and 2018, respectively.

Title to Mineral Properties

Although the Company has taken steps, consistent with industry standards, to verify title to mineral properties in which it has an interest, these procedures do not guarantee the Company’s title. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects.

NOTE 9 - STOCKHOLDERS' DEFICIT

Common Stock Transactions

For the six months ended December 31, 2019:

	(i)	Issued 359,978 shares of restricted common stock for consulting services at a value of $32,042 on the date of issuance;
	(ii)	Issued an aggregate of 17,285,714 shares of restricted common stock to accredited investors for cash proceeds of $1,210,000.

Stock Warrants

During the six months ended December 31, 2019, the Company issued no new warrants and no warrants expired.

Stock Options

During six months ended December 31, 2019, the Company granted no new options and no options expired.

Stock option and warrant activity, for the six months ended December 31, 2019, are as follows:

	Stock Options		Stock Warrants
		Weighted		Weighted
		Average		Exercise
	Shares	Price	Shares	Price
Outstanding at June 30, 2019	30,100,000	$0.05	100,000	$0.15
Granted	—	—	—	—
Canceled	—	—	—	—
Expired	—	—	—	—
Exercised	—	—	—	—
Outstanding at December 31, 2019	30,100,000	$0.05	100,000	$0.15

Stock options and warrants outstanding and exercisable at December 31, 2019 are as follows:

	Outstanding and Exercisable Options						Outstanding and Exercisable
								Warrants
			Weighted							Weighted
			Average							Average
			Contractual		Weighted					Contractual		Weighted
Exercise			Remaining		Average		Exercise			Remaining		Average
Price	Outstanding	Exercisable	Life		Exercise		Price	Outstanding	Exercisable	Life		Exercise
Range	Number	Number	(in Years)		Price		Range	Number	Number	(in Years)		Price
$0.07	100,000	100,000	0.01	$	0.07	$	0.15	100,000	100,000	2.96	$	0.15
$0.05	30,000,000	30,000,000	4.22	$	0.08		—	—	—	—		—
	30,100,000	30,100,000						100,000	100,000

	Outstanding Options		4.21	$	0.05		Outstanding Warrants			2.96	$	0.15

	Exercisable Options		4.21	$	0.05		Exercisable Warrants			2.96	$	0.15

As of December 31, 2019, the aggregate intrinsic value of all stock options and warrants vested was $1,078,590. The intrinsic value of each option share is the difference between the fair market value of the common stock and the exercise price of such option or warrant share to the extent it is "in-the-money". Aggregate intrinsic value represents the value that would have been received by the holders of in-the-money options had they exercised their options on the last trading day of the quarter and sold the underlying shares at the closing stock price on such day. The intrinsic value calculation is based on the $0.0859 closing stock price of the common stock on December 31, 2019.

The total intrinsic value associated with options exercised during the six months ended December 31, 2019, was $0. Intrinsic value of exercised shares is the total value of such shares on the date of exercise less the cash received from the option or warrant holder to exercise the options.

NOTE 10 – RELATED PARTY TRANSACTIONS

On August 1, 2015, the Company leased a home office space from the Company’s CFO for $500 a month for the corporate administrative office in Albuquerque, NM until such time growth requires a larger corporate administrative office. Rental expense totaled $3,000 for the six months ended December 31, 2019 and 2018, respectively.

The board authorized on June 16, 2016, the hiring of Nataliia Mueller, wife of the Company’s CFO, with a current annual wage of $60,000 as an assistant to the CFO.

During the fiscal year ended June 30, 2019, the CFO for the Company loaned the Company $10,000 and net deferred salary aggregating $51,848 into a note at 6% per annum and during the six months ended December 31, 2019, loaned an additional $20,000. Accrued interest on the note at December 31, 2019 and June 30, 2019, was $3,799 and $1,650, respectively. Interest expense on the note for the six months ended December 31, 2019 and 2018 was $2,149 and $184, respectively. The loan has no stated due date and is

payable on demand by the lender. The combined loan and interest balance at December 31, 2019 and June 30, 2019 was $91,953 and $63,499, respectively.

Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

NOTE 11 – LEGAL PROCEEDINGS

All legal proceedings were stayed with the filing of Chapter 11 bankruptcy.

Boart Long year Company v. Lordsburg Mining Company, Case No. D-2-2-CV-2015- 06048, County of Bernalillo, NM; Boart Longyear Company v. Lordsburg Mining Company, Case No. D-721-CV-2015- 00058, County of Sierra, NM; and Boart Longyear Company v. Lordsburg Mining Company, Case No. D-608-CV- 201500165, County of Quintero, NM. There are a series of collection cases by Boart Longyear Company, a company that obtained Utah judgments for equipment delivered to Lordsburg Mining Company in the aggregate amounts of $158,480 and has an interest rate of 5.25% per annum. Accrued interest on the obligation at December 31, 2019 and June 30, 2019 was $32,533 and $28,339 respectively. Interest on the obligation for the six months ended December 31, 2019 and 2018 was $4,194 respectively.

Wagner Equipment Co. v. Lordsburg Mining Company, Case No. D-2014-02372, County of Bernalillo, NM 28 is a collection case by Wagner equipment, who obtained judgment for equipment delivered to Lordsburg Mining Company in the amount of $115,789 and has a rate of interest of 8.75% per annum. During the six months ended December 31, 2019 and 2018. Company interest on the obligation was $5,108, respectively. Accrued interest on the obligation at December 31, 2019 and June 30, 2019 was $52,679 and $47,571, respectively.

The bankruptcy court set up a Trust fund that will be funded by the activities of the Summit mine for five (5) years after reopening of the mine and the trust funds will be distributed by an independent trustee to all credit holders on record. Currently all debts at the time of the bankruptcy are currently due and in default. None of the claims have been reopened since June 2016.

In November 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. The Company owes the sellers Can$140,000 and 10,000,000 shares of Company common stock. To date, the Company has paid Can$260,000. The Company owes the sellers Can$140,000 and 10,000,000 shares of Company common stock. Based upon our subsequent scrutiny and analysis of the transaction, the Company in February 2019 initiated an arbitration proceeding against the seller to void and rescind the purchase of these British Columbia properties, including requesting additional remedies. The Company cannot predict the outcome of this arbitration, and there can be no assurance that the Company will not lose its interest in these claims, or owe seller the remaining outstanding amounts. In connection with this arbitration, the Company’s legal position is to void the transaction and, due to the uncertainty of the outcome, has provided an impairment of the amount at June 30, 2019, in the amount of $210,116.

In November 2018, Santa Fe filed a complaint in Luna County District Court, State of New Mexico, requesting a $930,000 money judgment against Mr. and Mrs. Laws for misappropriation of Company funds, in addition to foreclosing on the mortgage Mr. and Ms. Laws granted to Santa Fe on real property to secure the promissory note located in Luna County, New Mexico.

In November 2018, Santa Fe filed a similar complaint in Grant County District Court, State of New Mexico, as Mr. and Mrs. Laws and XYZ Ranch Estates, LLC granted Santa Fe a deed of trust and a mortgage, respectively, on several pieces of real property in Grant County, New Mexico. Mr. Laws also granted Santa Fe a security agreement on an airplane located in Grant County, New Mexico. The complaint in Grant County requested a money judgment in the amount of $930,000 against Mr. and Mrs. Laws, in addition to a request to foreclose on the assets pledged to us located in Grant County, New Mexico.

Subsequent review of these transactions for the fiscal year ended June 30, 2017, resulted in a restatement of assets and operating costs in the amount of $971,099 and charged to the former chief executive officer. Subsequent professional costs including legal, auditing, forensic accounting and related filing costs related to this event have been added to the amounts owed by Mr. Laws. At the time of filing this report, we have determined costs associated with Mr. Laws action currently aggregates $1,651,263, of which we have collected $485,966 as of the date of filing this report.

As of the filing of this report, Mr. Laws has pleaded guilty to various charges brought against him by the U. S. District Attorney for the District of New Mexico , which include the Company allegations. Mr. Laws is currently awaiting sentencing on the pleaded to charges. The Company attorneys have filed all required documents for future monetary settlements to be determined by the court and the Company does not anticipate receiving a substantial reimbursement of the remaining Laws costs.

The DOJ and the SEC have each initiated investigation into the Company, resulting from the Laws transactions. The SEC has obtained a formal order to investigate the Company. The DOJ investigation found no wrong doings by the Company. These types of investigations are expensive, time-consuming for management, and unpredictable – often resulting in other aspects of the Company’s operations becoming subject to regulatory scrutiny. The SEC investigations are ongoing and no prediction can be made regarding the timing or outcome of such matters including remedial action pursued against the Company and current officers and directors. These types of remedial actions may result in additional costs and expenses to be incurred by the Company.

In accordance with accounting standards regarding loss contingencies, the Company accrues an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated, and the Company discloses the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for its financial statements not to be misleading. The Company does not record liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated, or when the liability is believed to be only reasonably possible or remote.

We are subject from time to time to litigation, claims and suits arising in the ordinary course of business. Other than the above-described litigation, as of December 31, 2019, we were not a party to any material litigation, claim or suit whose outcome could have a material effect on our financial statements.

Because litigation outcomes are inherently unpredictable, the Company’s evaluation of legal proceedings often involves a series of complex assessments by management about future events and can rely heavily on estimates and assumptions. If the assessments indicate that loss contingencies that could be material to any one of its financial statements are not probable, but are reasonably possible, or are probable, but cannot be estimated, then the Company discloses the nature of the loss contingencies, together with an estimate of the range of possible loss or a statement that such loss is not reasonably estimable. While the consequences of certain unresolved proceedings are not presently determinable, and an estimate of the probable and reasonably possible loss or range of loss in excess of amounts accrued for such proceedings cannot be reasonably made, an adverse outcome from such proceedings could have a material adverse effect on its financial statements in any given reporting period. However, in the opinion of Management, after consulting with legal counsel, the ultimate liability related to the current outstanding litigation is not expected to have a material adverse effect on its financial statements.

NOTE 12 – SUBSEQUENT EVENTS

Recent Issuances of Unregistered Securities

In the period from January 1, 2020 through October 14, 2020, the Company sold an aggregate of 21,250,001 restricted shares of common stock to accredited investors for cash proceeds $1,282,500. During this period Company sold an aggregate of 4,500,000 restricted shares of common stock to the chairman of the board for cash proceeds $225,000.

In the period from January 1, 2020 through October 14, 2020, the Company issued warrants to accredited investors aggregating 2,541,667, and 2,250,000 warrants to the chairman of the board that were attached to restricted stock purchases. The warrants were vested at issuance, have a two or three life and an exercise price of $0.05 to $0.07 per share.

During the period from January 1, 2020 through October 14, 2020, the Company issued 619,005 restricted shares of common stock for consulting services at a market value of $45,944 on the date of issuance.

On April 10, 2020 , the Company converted $100,000 of accrued salary for the Company’s CFO into 2,000,000 shares of restricted common stock at a market value of $117,000 on the date of grant and recorded a loss on debt conversion of $17,000. Warrants issued in conjunction with the conversion were 1,000,000 vested three-year warrants and have an exercise price of $0.05 per share .

On June 30, 2020 , the Company converted a note payable with the Company CFO consisting of principal and interest of $42,037 and $6,178, respectively, into 964,299 shares of restricted common stock at $0.05 per share. The market value on the date of conversion was $67,501 and on the date of conversion the Company recorded a loss on debt conversion of $19,286. In conjunction with the conversion, 482,149 vested three-year warrants were granted and have an exercise price of $0.05 per share.

On August 7, 2020, former Chief Financial Officer (“CFO”) of the Company resigned from that position. As the former CFO has significant institutional knowledge and background Company knowledge, the Board offered the individual the position of Managing Director of Mining Operations with a signing bonus of $20,000 and 750,00 shares of restricted common stock and an employment agreement was signed.

Miscellaneous Events

As of the filing of this report, the Company has determined that Mr. Laws owes the Company $1,651,263, net of funds recovered from Mr. Laws of $485,966. This amount represents an increase consisting of legal, forensic accounting services incurred by the Company and the audit restatement of our fiscal year 2017 that was attributable to the misappropriation of funds. The current amount does not include any penalties or interest as provided in the secured promissory note and security agreement signed by Mr. Laws. The Company does not anticipate collecting a material amount due from Mr. Laws and any recovery will be determined by the bankruptcy court.

As of the filing of this report, Mr. Laws has pleaded guilty to various charges brought against him by government officials, which include the Company allegations. Mr. Laws is currently awaiting sentencing on the charges he plead to. The Company attorneys have filed all required documents for future monetary settlements to be determined by the court.

Effective July 7, 2020, the Company retained a new Chief Financial Officer and an employment agreement was signed.

The Company signed employment agreements with the new Chief Financial Officer and Managing Director of Mining Operations. The agreements are a one-year employment agreement with the Company, with automatic successive one-year renewals provided that neither party has provided notice of termination prior to 30 days from the end of such applicable term.

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

Forward-Looking Statements

In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. See “Cautionary Statement on Forward-Looking Statements.” Our results and the timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including the risk factors described in this report and in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019.

Overview

We are an exploration company that owns certain mining and mineral rights at our Alhambra-Blackhawk project and have right-of-use mineral rights comprising the Billali and Jim Crow-Imperial mine project in southwest New Mexico.

During the six-months ended December 31, 2019, the Company focused primarily on repair and improvement projects work at the Jim Crow mine site and continued and expanded our exploratory program at the mine site.

Basis of Presentation and Going Concern

The Company has recorded a net loss of $1,350,526 for the six months ended December 31, 2019, and has a total accumulated deficit of $94,829,196 and a working capital deficit at December 31, 2019 of $4,649,203. The Company used in operating activities approximately, $1,000,000. The Company currently has no source of generating revenue.

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 put into production an acceptable source to generate mineralized ore to generate a 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.

Operating Results for the Three Months Ended December 31, 2019 and 2018

Revenue

During the three months ended December 31, 2019 and 2018, the Company had no revenue in the periods of measurement.

Operating Costs and Expenses

Our operating expenses incurred in three months ended December 31, 2019, increased $374,545 from $226,077 in the three months ended December 31, 2018 to $600,622 for the current period of measurement. The increases in operating expenses in the current period of measurement are attributable increased exploration and mine related costs of $380,529 and is offset by a decrease in general and administrative of $5,984.

The increase in exploration and mine related costs were incurred on the Jim Crow mine and consisted mainly of $237,103 in wages and payroll burden costs, other mine related costs of $133,734 and depreciation of $9,692. The decrease in general and administrative of $5,984 was mainly attributable to decreases in: consulting fees related to working capital raises of $12,238, audit fees and accounting of $46,841 and transfer agent fees of $16,842. These decreases were offset mainly by offset by an increase in salaries and related payroll burden of $33,761, legal fees of $33,542 and liability insurance of $6.536.

Other Income (Expense)

Other income (expense) for three months ended December 31, 2019, was $(13,919) as compared to $(390,861) for three months ended December 31, 2018, a decrease in other expense of $376,942. The net decrease in other expense for the current period measurement is mainly comprised of the following expense components: decrease in financing costs on commodity supply agreements of $340,312, a decrease in interest expense of $149,891and offset by a decrease in gain on debt extinguishment of $112,625. The decreased interest expense and financing costs – commodity supply agreements are a result of debt write-off at our fiscal year ended June 30, 2019.

Operating Results for the Six Months Ended December 31, 2019 and 2018

Revenue

During the six months ended December 31, 2019 and 2018, the Company had no revenue in the periods of measurement.

Operating Costs and Expenses

Our operating expenses incurred in six months ended December 31, 2019, increased $823,517 from $526,479 in the six months ended December 31, 2018 to $1,349,996 for the current period of measurement. The increases in operating expenses in the current period of measurement is attributable to increased exploration and mine related costs of $657,427 increased general and administrative of $166,090.

The increase in exploration and mine related costs were incurred on the Jim Crow mine and consisted mainly of $401,549 in wages and payroll burden costs, other mine related costs of $239,516 and depreciation of $16,362. The increase in general and administrative of $166,090 was mainly attributable to increases in: in salaries and related payroll burden of $46,823, audit fees and accounting of $128,825, legal of $69,413 and liability insurance of $15,154. These increases were offset by decreases in consulting fees related to working capital raises of $75,041, general expenses of $4,966 and transfer agent fees of $18,592.

Other Income (Expense)

Other income (expense) for six months ended December 31, 2019, was $(530) as compared to $55,833 for six months ended December 31, 2018, a decrease in other income of $(56,363). The net decrease in other income for the current period measurement is mainly comprised of decreases in following expense components: financing costs-commodity supply agreements of $105,895, and interest expense of $301,524. These expense decreases were offset by income decreases in gain on debt extinguishment of $112,625 and recovery of misappropriated funds of 378,060.

The decreased interest expense and financing costs on commodity supply agreements are a result of debt write-off at our fiscal year ended June 30, 2019.

Liquidity and Capital Resources; Plan of Operation

The Company has recorded a net loss of $1,350,526 for the six months ended December 31, 2019, and has a total accumulated deficit of $94,829,196 and a working capital deficit at December 31, 2019 of $4,649,203. The Company used cash in operating activities approximately,$1,000,000. The Company currently has no source of generating revenue.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

ITEM 4 – CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

During the three months ended December 31, 2019, our management, with the participation of our Chairman and Chief Financial Officer of the Company at that time, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended. Our Chairman and Interim Chief Financial Officer have concluded that, as of December 31, 2019, our disclosure controls and procedures were not effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the required time periods and are designed to ensure that information required to be disclosed in our reports is accumulated and communicated to our management, including our Chairman and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. This was due to the following material weakness.

Due to the Company’s continuing financial condition, the Company had limited personnel which resulted in a lack of segregation of duties and a lack of formal reviews at multiple levels. A significant weakness existed that our then current Chief Executive Officer, also a CPA, insisted on maintaining various original detail financial records at his office and not the corporate office. The lack of not receiving these original documents and related reviews, resulted in the Company uncovering a misappropriation of Company funds by the then current Chief Executive Officer.

At the beginning of the current fiscal year, new formal policies were initiated for review of material transactions by an outside accounting professional with a CPA and CFO background and all disbursements reviewed and approved by the Chairman of the Board. Any discrepancies will be reported directly to the Board of Directors. These policies are intended for multiple reviews on all material transactions and assist in eliminating a material weakness described above.

Inherent Limitations over Internal Controls

The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”).

While present in our design of internal controls, our internal controls over financial reporting and disclosure are not written; however, the operation of many controls are in place and are applied on a consistent basis. Company personnel perform controls standard to: 1) approve all Company expenditures, 2) approve and sign contractual obligations, 3) reconcile bank accounts and other general ledger accounts, and 4) many other similar rudimentary controls applied as best practice.

However, we have concluded that due to the Company’s small size and limited personnel available to perform control functions, and the weakness described above, the Company was precluded from applying adequate segregation of duties in financial transactions. The Company has taken steps to assure all original financial documents are received and maintained at the corporate office. The material weaknesses described are common to companies of our similar size and staffing in our industry. We expect

these material weakness conditions to continue for the foreseeable future, or until Company growth results in additional personnel to perform segregated financial functions.

Management, including the Company’s Chairman and Chief Financial Officer, does not expect that the Company’s internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, during the three months ended December 31, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

All legal proceedings were stayed with the filing of Chapter 11 bankruptcy.

ITEM 1A. RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described in our annual report for Fiscal 2019, although we may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with on Form 10-K for our year fiscal ended June 30, 2019, in addition to the other information included in this quarterly report. If any of the risks described actually occurs, our business, financial condition or results of operations would likely suffer. In that case, the trading price of our common stock could fall.

Except as set forth herein, Santa Fe Gold and all its subsidiaries, filed for bankruptcy protection under Chapter 11 in the state of Delaware, Case # 15-11761-MFW on August 26, 2015 and on June 15, 2016, the case was dismissed on June 15, 2016. The Company’s most current risk factors are disclosed in our Annual Report filed with the Commission on Form 10-K for the fiscal year ended June 30, 2019 to the SEC on July 15, 2020 and are incorporated herein by reference.

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

Between October 1, 2019, and December 31, 2019, in reliance upon the exemptions from registration provided by Section 4(a)(2) of the Securities Act and/or Regulation S promulgated thereunder, the Company accepted stock subscriptions from two existing accredited investors at $0.07 per share for an aggregate of 5,000,000 shares of the Company’s restricted common stock for a total aggregate consideration of $350,000. There were no subsequent or contemporaneous offerings of the Company’s common stock or other securities. Negotiations for the issuance of the shares took place directly between the investor and the Company.

The Company on October 1, 2019, approved the issuance of 178,512 shares of restricted common stock for consulting fees with a value of $15,279 on the issuance date.

The issuances of the restricted common shares during the three months ended December 31, 2019, were exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a) (2) thereof and/or Regulation S promulgated thereunder and/or because such issuances did not involve a public offering and/or because such sales were to non-US-persons. The cash proceeds were utilized for working capital by the Company. In connection with transactions referenced above, other than issuances to the Company’s officers, directors, employees and consultants for services, the Company obtained representations from each investor that (i) such investor was an “accredited investor” within the meaning of Rule 501 of Regulation D, (ii) such investor was acquiring the securities for its own account for investment and not for the account of any other person and not with a view to or for distribution, assignment or resale in connection with any distribution within the meaning of the Securities Act, (iii) such investor understands that the purchased securities or shares underlying such securities are subject to transfer restrictions under the Securities Act and any applicable state securities laws, (iv) such investor has knowledge and experience in financial and business matters such that such investor is capable of evaluating the merits and risks of an investment in us, and (v) such investor has considered the risk factors contained in SEC filings

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

With the filing of bankruptcy protection on August 26, 2015, all debt securities are in default and all but Waterton remain after the dismissal of the proceedings on June 15, 2016.

ITEM 4. MINE SAFETY DISCLOSURES

Pursuant to Section 1503(a) of the Dodd-Frank Act, issuers that are operators, or that have a subsidiary that is an operator of mine in the United States are required to disclose specified information about mine health and safety in their periodic reports. These reporting requirements are based on the safety and health requirements applicable to mines under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”) which is administered by the U.S. Department of Labor’s Mine Safety and Health Administration (“MSHA”). During the three-month period ended December 31, 2019, we and our properties or operations were not subject to regulation by MSHA under the Mine Act and thus no disclosure is required under Section 1503(a) of the Dodd-Frank Act.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

(a)The following exhibits are filed as part of this report:

Exhibit	Description
31.1	Certification of Chief Financial Officer and Principal Accounting Officer Pursuant to Rule 13a-14a and Rule 15d-14(a).

32.1	Certification of Chief Financial Officer and Principal Accounting Officer pursuant to 18 U.S.C.-. Section 1350.

SIGNATURES:

In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: October 27, 2020

/s/ Stephen J. Antol

Stephen J. Antol

Chief Financial Officer, Principal Accounting Officer

Santa Fe Gold CORP 10-Q