We use the terms "Magellan," "we," "our," and "us" to refer to Magellan Gold Corporation.

The following discussion and analysis provides information that management believes is relevant for an assessment and understanding of our results of operations and financial condition. This information should be read in conjunction with our audited financial statements, which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and our interim unaudited financial statements and notes thereto included with this report in Part I, Item 1.





COVID-19 Pandemic

In December 2019, a novel strain of coronavirus ("COVID-19") emerged in China. On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. The outbreak has now spread to the United States and infections have been reported globally.

The COVID-19 pandemic is rapidly evolving. The information in this Annual Report is based on data currently available to us and will likely change as the pandemic progresses. As COVID-19 continues to spread throughout areas in which we operate, we believe the outbreak has the potential to have a material negative impact on our operating results and financial condition. The extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, impact on our operators, employees and vendors, and the impact on the Company's ability to obtain debt and equity financing to fund ongoing exploration activities, all of which are uncertain and cannot be predicted. Given these uncertainties, we cannot reasonably estimate the related impact to our business, operating results and financial condition.

We expect the trends highlighted above with respect to the impact of the COVID-19 pandemic to continue and, in some cases, accelerate. The extent of the COVID-19 pandemic's continued effect on our operational and financial performance will depend on future developments, including the duration, spread and intensity of the outbreak, the pace at which jurisdictions across the country re-open and restrictions begin to lift, the availability of government financial support to our business, tenants and operators and whether a resurgence of the outbreak occurs. Due to these uncertainties, we are not able at this time to estimate the ultimate impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows but it could be material.





Forward-Looking Statements

Some of the information presented in this Form 10-Q constitutes "forward-looking statements". These forward-looking statements include, but are not limited to, statements that include terms such as "may," "will," "intend," "anticipate," "estimate," "expect," "continue," "believe," "plan," or the like, as well as all statements that are not historical facts. Forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from current expectations. Although we believe our expectations are based on reasonable assumptions within the bounds of our knowledge of our business and operations, there can be no assurance that actual results will not differ materially from expectations.

All forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made.









  18






Overview

We were incorporated on September 28, 2010, in Nevada. Our principal business is the acquisition and exploration of mineral properties in the United States. We have not presently determined whether the properties to which we have mineral rights contain mineral reserves that are economically recoverable.

We have only had exploration and project development operations to date and we rely upon the sale of our securities and borrowings from officers, directors and other significant investors to fund our operations, as we have not generated any revenue.

Magellan entered into a stock purchase agreement to acquire Clearwater Gold Mining Corporation ("Clearwater") which owns certain unpatented mining claims in Idaho County. Idaho that include the historic Center Star Gold Mine near Elk City, Idaho. The Center Star Mine hosts high grade gold mineralization that was discovered in the early 1900's. There was periodic historic production and development work done under different ownership through the 1980s. With the high-grade gold mineralization present, Magellan will be evaluating the historic mine data to assess the potential to develop a gold resource at Center Star. The project area is located 45 miles from Grangeville, Idaho and near the town of Elk City, Idaho.

in consideration for 100% of the issued and outstanding shares of Clearwater, Magellan has agreed to pay its sole shareholder 1,000,000 shares of Magellan common stock and $150,000. The 1,000,000 shares will be issued (i) 250,000 shares at closing (ii) 250,000 shares at the time the Center Mine receives its permit to reopen the main portal of the mine, (iv) 250,000 shares at the point the main portal has been reopened and (iv) 250,000 shares two years from the closing concurrent with the pay-off of the secured promissory note. The cash consideration of $25,000 will be paid within 30 days of closing and the balance of $125,000 to be evidenced by a secured promissory note due in two years. The Note will be secured by the Clearwater shares and assets. Magellan has issued 750,000 of the 1,000,000 shares and has paid $12,500 of the required $25,000 payment.

Effective March 31, 2020, we divested our subsidiary holding all of our international assets and plan to advance our Idaho gold project towards resource definition and eventual development, and possibly to acquire additional mineral rights and conduct additional exploration, development and permitting activities. Our mineral lease payments, permitting applications and exploration and development efforts will require additional capital. We rely upon the sale of our securities as well as advances and loans from executive management and significant shareholders to fund our operations as we have not generated any significant revenue.

Effective March 31, 2020 the Company entered into an Agreement to Accept Collateral in Full Satisfaction of Obligations (the "Agreement") with certain holders of Promissory Notes (the "Lenders") due December 31, 2019 (the "Notes") in the aggregate principal amount of $1.05 million. The Company is indebted under the Notes to the Lenders and the Company's obligations to the Lenders are secured by a Stock Pledge and Security Agreement covering 100 shares of common stock of Magellan Acquisition Corporation and one (1) share of MV2 (the "Collateral") held under a Collateral Agent Agreement. Magellan Acquisition Corp. and MV2 own the SDA Mill and El Dorado prospect in Nayarit, Mexico. The Notes matured on December 31, 2019 and remain unpaid and in default. The Lenders have accelerated the Company's indebtedness. Pursuant to terms set forth in the Agreement, the Lenders have agreed to accept the Collateral in full satisfaction of the Notes and unconditionally and irrevocably waive any entitlement or right to receive payment of (i) the initial 10% Financing Fee included in the principal amount of the Notes, (ii) the 5% Rollover Fee agreed to in an Allonge and Modification Agreement. The effective date of the Agreement was March 31, 2020.

On July 21, 2020, the Company entered into a Stock Purchase agreement with Tri Power Resources, LLC to sell 1,000 shares representing 100% ownership of Gulf+Western Industries, Inc ("Gulf+Western") to Tri Power in consideration for the return and cancellation of 50,000 shares of the Company's Series A Preferred Stock with a stated value of $10 per share. John Gibbs, a majority shareholder in the Company, is the Managing Member and Chief Executive Officer of Tri Power Resources, LLC.

As a result of these agreements, the assets, liabilities and operations of the Gulf+Western, MAC and MV2 have been reflected as discontinued operations in the Company's consolidated balance sheets, consolidated statements of operations, consolidated statements of cash flows and consolidated statements of other comprehensive income (loss) for the periods presented.

Certain prior period amounts have been reclassified to conform to the current period financial statement presentation, including the discontinued operations presentation resulting from the disposition of the Company's Gulf+Western , MAC and MV2 operations in 2020.









  19

Results of Operations for the three months Ended September 30, 2020 and 2019





                                                           Three Months Ended September 30,
                                                            2020                    2019

Operating expenses:
General and administrative expenses                    $       393,468       $          321,067
Total operating expenses                                       393,468                  321,067

Loss from continuing operations                               (393,468 )               (321,067 )

Other income (expense)
Interest expense                                              (156,309 )               (116,981 )
Loss on settlement of liabilities                              (34,800 )             (3,151,314 )
Change in fair value                                                 -                    9,735
Total other income (expense)                                  (191,109 )             (3,258,560 )

Net loss from continuing operations                           (584,577 )             (3,579,627 )

Net loss from discontinued operations, net of tax                 (906 )               (168,316 )

Net loss                                               $      (585,483 )     $       (3,747,943 )




Operating expenses

During the three months ended September 30, 2020, our total operating expenses included general and administrative expenses of $393,468 as compared to $321,067 during the three months ended September 30, 2019. The $72,401 increase is primarily associated with increases in investor relations, stock based compensation and legal fees offset with decreases in travel expenses





Other income (expense)

During the three months ended September 30, 2020, total other expense was $191,109 as compared to $3,258,560 during the three months ended September 30, 2019. The $3,067,451 change is primarily related to the $3,151,314 loss on debt extinguishment of debt for the three months ended September 30, 2019 offset with increases in amortization of debt discount for the three months ended September 30, 2020.









  20






Discontinued operations

The net loss from discontinued operations during the three months ended September 30, 2020 and 2019 totaled $906 and $168,316, respectively. Net loss from discontinued operations represent the Mexico operations and Gulf+Western that were disposed of in March 2020 and July 2020, respectively. The $167,410 change is due to the limited operations of the Mexico and Gulf+Western assets in 2020.

Results of Operations for the nine months Ended September 30, 2020 and 2019





                                                         Nine Months Ended September 30,
                                                             2020                 2019

Operating expenses:
General and administrative expenses                    $        686,589       $     770,291
Total operating expenses                                        686,589             770,291

Loss from continuing operations                                (686,589 )          (770,291 )

Other income (expense)
Interest expense                                               (305,282 )          (287,012 )
Other income                                                     26,980                   -
Loss on settlement of liabilities                            (2,110,047 )        (3,151,314 )
Change in fair value                                                  -              12,457
Total other income (expense)                                 (2,388,349 )        (3,425,869 )

Net loss from continuing operations                          (3,074,938 )        (4,196,160 )

Net loss from discontinued operations, net of tax               (31,599 )          (403,892 )

Net loss                                               $     (3,106,537 )     $  (4,600,052 )




Operating expenses

During the nine months ended September 30, 2020, our total operating expenses included general and administrative expenses of $686,589 as compared to $770,291 during the nine months ended September 30, 2019. The $83,702 decrease is primarily associated with increases in consulting, stock based compensation offset with decreases investor relations, officer compensation travel expense and audit fees.









  21






Other income(expense)

During the nine months ended September 30, 2020, total other expense was $2,388,349 as compared to $3,425,869 during the nine months ended September 30, 2019. The $1,037,520 decrease is primarily related to $1,041,267 decrease in loss on settlement of liabilities offset with an increase in interest expense and other income related to the NVX option and Small Business Administration Economic Injury Disaster Loan Grant.





Discontinued operations

The net loss from discontinued operations during the three months ended September 30, 2020 and 2019 totaled $31,599 and $403,892, respectively. Net loss from discontinued operations represent the Mexico operations and Gulf+Western that were disposed of in March 2020 and July 2020, respectively. The $372,293 change is due to the limited operations of the Mexico and Gulf+Western assets in 2020.

Liquidity and Capital Resources

Our unaudited consolidated financial statements have been prepared on a going concern basis, which assumes that we will be able to meet our obligations and continue our operations during the next fiscal year. Asset realization values may be significantly different from carrying values as shown in our consolidated financial statements and do not give effect to adjustments that would be necessary to the carrying values of assets and liabilities should we be unable to continue as a going concern. At September 30, 2020, we had not yet generated sufficient revenues or achieved profitable operations and we have accumulated losses of $15,176,673. We expect to incur further losses in the development of our business, all of which raises substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern depends on our ability to generate future profits and/or to obtain the necessary financing to meet our obligations arising from normal business operations when they come due.

During the nine months ended September 30, 2020, the Company entered into an Agreement to Accept Collateral in Full Satisfaction of Obligations with the holders of the Series 2017 Notes due December 31, 2019 in the aggregate principal amount of $1.14 million.

Additionally, the Company received $22,500 of proceeds from the sale of common stock and warrants, $295,000 of proceeds from convertible debt from related and third parties and $33,300 of proceeds from advances from related and third parties.

We anticipate that additional funding will be in the form of additional loans from officers, directors or significant shareholders, or equity financing from the sale of our common stock but cannot assure that any future financings will occur.









  22






Cash Flows



A summary of our cash provided by and used in operating, investing and financing
activities is as follows:



                                                           Nine Months Ended September 30,
                                                             2020                   2019

Net cash used in operating activities from
continuing operations                                  $       (143,163 )     $       (587,599 )
Net cash used in operating activities from
discontinued operations                                         (51,491 )              228,134
Net cash used in operating activities                          (194,654 )             (359,465 )

Net cash used in investing activities from
continuing operations                                           (58,776 )                    -
Net cash used in investing activities from
discontinued operations                                               -                (75,000 )
Net cash used in investing activities                           (58,776 )              (75,000 )

Net cash provided by financing activities from
continuing operations                                           197,272                439,579
Net cash provided by financing activities from
discontinued operations                                               -                      -
Net cash provided by financing activities                       197,272                439,579

Effect of foreign currency exchange                              68,636                 (8,153 )

Net change in cash and cash equivalents                          12,478                 (3,039 )
Cash and cash equivalents beginning of period                       167                  4,436

Cash and cash equivalents end of period                $         12,645       $          1,397

At September 30, 2020, we had $12,645 in cash and a $1,090,380 working capital deficit. This compares to cash of $167 and a working capital deficit of $2,494,426 at December 31, 2019.

Net cash used in operating activities from continuing operations during the nine months ended September 30, 2020 was $143,163 and was mainly comprised of our $3,074,938 net loss during the period, adjusted by a non-cash charges of $2,153,183 for loss on settlement of liabilities, $325,255 of stock compensation and accretion of discounts on notes payable of $238,903. In addition, it reflects changes in operating assets and liabilities of $214,434.

Net cash used in operating activities from discontinued operations of $51,491 related to the Mexico and Gulf+Western operations which was disposed of on September 30, 2020.

During the nine months ended September 30, 2020, net cash provided by financing activities from continuing operations was $197,272 comprised of $235,000 proceeds from convertible debt from third parties, $60,000 proceeds from convertible debt from related parties, $23,300 proceeds from advances from related parties, $10,000 proceeds on advances from third parties, offset by $10,000 payments on convertible notes from third parties and $143,528 payments on advances from related parties.









  23

Off Balance Sheet Arrangements

We do not have and have never had any off-balance sheet arrangements.

Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

Our consolidated financial statements include our accounts and the accounts of our 100% owned subsidiary, Clearwater Gold Mining Corporation and M Gold Royalty. All intercompany transactions and balances have been eliminated. Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").





Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of expenses during the period presented.

We make our estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are recognized in accordance with the accounting rules for the estimate, which is typically in the period when new information becomes available. We believe that our significant estimates, assumptions and judgments are reasonable, based upon information available at the time they were made. Actual results could differ from these estimates, making it possible that a change in these estimates could occur in the near term.

Fair Value of Financial Instruments

We value our financial assets and liabilities using fair value measurements. Our financial instruments primarily consist of cash and cash equivalents, accounts payable, accrued liabilities, amounts due to related parties and notes payable to related parties. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The carrying amount of cash and cash equivalents, accounts payable, accrued liabilities, notes payable to related parties and other amounts due to related parties approximates fair value because of the short-term nature of these financial instruments.





Concentrations of Credit Risk

Our financial instruments which potentially subject us to credit risk are our cash. We maintain our cash at reputable financial institutions and currently, we are not exposed to significant credit risk.









  24






Cash and Cash Equivalents

We consider all amounts on deposit with financial institutions and highly liquid investments with an original maturity of three months or less to be cash equivalents at the date of purchase.

Notes Payable - Related Parties

Notes payable to related parties are classified as current liabilities as the note holders either have the ability to control the repayment dates of the notes or the notes are due within twelve months of the balance sheet date.

Net Loss per Common Share

We compute basic net loss per common share by dividing our net loss attributable to common shareholders by our weighted-average number of common shares outstanding during the period. Computation of diluted net loss per common share adds the weighted-average number of potential common shares outstanding to the weighted-average common shares outstanding, as calculated for basic net loss per share, except for instances in which there is a net loss. For the three and nine months ended September 30, 2020 and 2019, potential common shares associated with convertible notes payable and outstanding warrants to purchase common stock have been omitted from the net loss per common share computation as they are anti-dilutive due to the net loss for these periods.





Stock-based Compensation

The Company measures the cost of employee services received in exchange for an award of equity instruments (share-based payments, or SBP) based on the grant-date fair value of the award. That cost is recognized over the period during which an employee is required to provide service in exchange for the SBP award-the requisite service period (vesting period). For SBP awards subject to conditions, compensation is not recognized until the performance condition is probable of occurrence. The grant-date fair value of share options is estimated using the Black-Scholes-Merton option-pricing model. The Company adopted ASU 2018-07 which aligns the accounting for share-based payment awards issued to employees and nonemployees.

Recently Adopted Accounting Standards

The Company does not believe that any recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements.

© Edgar Online, source Glimpses