Company Quick10K Filing
Goldrich Mining
Price0.02 EPS-0
Shares140 P/E-4
MCap3 P/FCF-3
Net Debt-0 EBIT-0
TEV3 TEV/EBIT-9
TTM 2019-06-30, in MM, except price, ratios
10-Q 2019-06-30 Filed 2019-08-27
10-Q 2019-03-31 Filed 2019-05-20
10-K 2018-12-31 Filed 2019-04-03
10-Q 2018-09-30 Filed 2018-11-19
10-Q 2018-06-30 Filed 2018-09-17
10-Q 2018-03-31 Filed 2018-05-21
10-K 2017-12-31 Filed 2018-04-16
10-Q 2017-09-30 Filed 2017-11-17
10-Q 2017-06-30 Filed 2017-08-18
10-Q 2017-03-31 Filed 2017-06-22
10-K 2016-12-31 Filed 2017-06-09
10-Q 2016-09-30 Filed 2016-11-14
10-Q 2016-06-30 Filed 2016-08-22
10-Q 2016-03-31 Filed 2016-05-16
10-K 2015-12-31 Filed 2016-04-14
10-Q 2015-09-30 Filed 2015-11-13
10-Q 2015-03-31 Filed 2015-05-20
10-K 2014-12-31 Filed 2015-04-15
10-Q 2014-06-30 Filed 2014-08-19
10-Q 2013-09-30 Filed 2013-11-14
10-Q 2013-06-30 Filed 2013-08-19
10-Q 2013-03-31 Filed 2013-05-20
10-K 2012-12-31 Filed 2013-04-15
10-Q 2012-09-30 Filed 2012-11-19
10-Q 2012-06-30 Filed 2012-08-20
10-Q 2012-03-31 Filed 2012-05-16
10-Q 2011-09-30 Filed 2011-11-14
10-Q 2011-06-30 Filed 2011-08-15
10-Q 2011-03-31 Filed 2011-05-16
10-K 2010-12-31 Filed 2011-03-21
10-Q 2010-09-30 Filed 2010-11-22
10-Q 2010-06-30 Filed 2010-08-23
10-Q 2010-03-31 Filed 2010-05-24
10-K 2009-12-31 Filed 2010-04-06
8-K 2020-07-29 Regulation FD, Exhibits
8-K 2019-12-23
8-K 2019-12-23
8-K 2018-10-09
8-K 2018-08-20
8-K 2018-08-10
8-K 2018-06-25
8-K 2018-06-22
8-K 2018-02-13
8-K 2017-01-09

GRMC 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition or Plan of Operation
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosure
Item 5. Other Information
Item 6. Exhibits
EX-31 ex31-1.htm
EX-31 ex31-2.htm
EX-32 ex32-1.htm
EX-32 ex32-2.htm

Goldrich Mining Earnings 2019-06-30

Balance SheetIncome StatementCash Flow

10-Q 1 grmc10qaug26-19.htm GOLDRICH MINING CORP FORM 10-Q Goldrich Mining Company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

x

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

OR

o

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from              to             

 

Commission file number: 001-06412

 

 

 

Picture 1 

 

GOLDRICH MINING COMPANY

(Exact Name of Registrant as Specified in its Charter)

ALASKA

 

91-0742812

(State of other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

2607 Southeast Blvd, Ste. B211

 

 

Spokane, Washington

 

99223-4942

(Address of Principal Executive Offices)

 

(Zip Code)

 

(509) 535-7367

(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, $0.10 par value

GRMC

OTCQB

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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).    x   Yes  o  No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.

 

Large accelerated filer     o

 

Accelerated filer

o

Non-accelerated filer       x

(Do not check if a smaller reporting company)

Smaller reporting company

x

 

 

Emerging Growth Company  

o

 

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

 

Number of shares of issuer’s common stock outstanding at August 26, 2019:    139,573,798


1



PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements

 

Goldrich Mining Company

(Unaudited)

 

Consolidated Balance Sheets (Unaudited)

June 30,

December 31,

 

2019

2018

ASSETS

 

 

Current assets:

 

 

  Cash and cash equivalents

$                       22,217

$           77,178

  Prepaid expenses

145,639

122,131

  Other current assets

13,671

13,671

     Total current assets

181,527

212,980

 

 

 

Property, equipment, and mining claims:

 

 

  Equipment, net of accumulated depreciation

1,371

2,025

  Mining properties, claims, and royalty option

868,516

868,516

     Total property, equipment and mining claims

869,887

870,541

        Total assets

$                  1,051,414

$           1,083,521

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

Current liabilities:

 

 

  Accounts payable and accrued liabilities

$                   1,153,079

$         1,052,520

  Interest payable

73,306

44,747

  Interest payable – related party

391,288

205,570

  Related parties payables

536,335

457,727

  Notes payable

1,020,000

952,634

  Notes payable – related party

2,595,790

2,378,947

  Notes payable in gold

375,905

342,157

  Dividends payable on preferred stock

30,618

30,618

     Total current liabilities

6,176,321

5,464,920

 

 

 

Long-term liabilities:

 

 

  Remediation and asset retirement obligation

454,734

447,778

     Total long-term liabilities

454,734

447,778

        Total liabilities

6,631,055

5,912,698

 

 

 

Commitments and contingencies (Notes 3, 4, 5, 7)

 

 

Stockholders' deficit:

 

 

  Preferred stock; no par value, 8,998,700

 

 

     shares authorized; no shares issued or outstanding

-

-

  Convertible preferred stock series A; 5% cumulative dividends,

 

 

     no par value, 1,000,000 shares authorized; 150,000 shares issued

     and outstanding, respectively, $300,000 liquidation preferences

 

150,000

 

150,000

  Convertible preferred stock series B; no par value, 300 shares authorized,

     200 shares issued and outstanding, $200,000 liquidation preference

 

57,758

 

57,758

  Convertible preferred stock series C; no par value, 250 shares

     authorized, issued and outstanding, $250,000 liquidation preference

 

52,588

 

52,588

  Convertible preferred stock series D; no par value, 150 shares

 

 

    authorized, issued and outstanding, $150,000 liquidation preference

-

-

  Convertible preferred stock series E; no par value, 300 shares

     authorized, issued and outstanding, $300,000 liquidation preference

10,829

 

10,829

  Convertible preferred stock series F; no par value, 300 shares authorized,

     153 and 153 shares issued and outstanding, $50,000 liquidation preference

-

 

-

  Common stock; $0.10 par value, 250,000,000 shares authorized;

    139,573,798 issued and outstanding, respectively

 

13,957,380

 

13,957,380

  Additional paid-in capital

13,874,932

13,832,978

  Accumulated deficit

(33,683,128)

(32,890,710)

     Total stockholders’ deficit

(5,579,641)

(4,829,177)

        Total liabilities and stockholders' deficit

$                   1,051,414

$           1,083,521

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


3



Goldrich Mining Company

Consolidated Statements of Operations (Unaudited)

 

 

 

 

 

 

Three Months Ended

Six Months Ended

 

June 30,

June 30,

 

2019

2018

2019

2018

Operating expenses:

 

 

 

 

  Exploration

$                           -

$                  25,811

$                           -

$                  39,654

  Mine preparation costs

37,699

-

65,475

-

  Depreciation and amortization

324

1,675

654

4,034

  Management fees and salaries

54,813

133,440

116,750

192,252

  Professional services

5,638

-

40,963

52,177

  General and administration

63,179

72,473

112,211

135,333

  Office supplies and other

2,264

3,102

3,743

3,711

  Directors' fees

1,200

9,400

9,200

12,900

  Mineral property maintenance

22,667

22,643

45,335

45,285

  Arbitration (Note 3)

27,420

699,275

(19,303)

728,451

     Total operating expenses

215,204

967,819

375,028

1,213,797

 

 

 

 

 

Other expense:

 

 

 

 

  Change in fair value of notes payable in gold

23,971

(34,083)

33,748

(32,255)

  Interest expense and finance costs

169,681

194,166

383,622

347,550

  Loss on foreign exchange

20

-

20

-

     Total other expense

193,672

160,083

417,390

315,295

 

 

 

 

 

Net loss

408,876

1,127,902

792,418

1,529,092

 

 

 

 

 

Preferred dividends

1,896

1,896

3,771

3,771

Net loss available to common stockholders

$                410,772

$             1,129,798

$                796,189

$             1,532,863

 

 

 

 

 

Net loss per common share – basic and diluted

$                     (Nil)

$                   (0.01)

$                   (0.01)

$                   (0.01)

 

 

 

 

 

Weighted average common

 

 

 

 

 shares outstanding – basic and diluted

139,573,798

134,825,720

139,573,798

134,468,748

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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


4



Goldrich Mining Company

Consolidated Statements of Changes in Stockholders’ (Deficit) (Unaudited)

 

 

Common Stock

Preferred Stock

Additional

 

 

 

Shares

Par Value

Shares

No Par Value

Paid-in

Capital

Accumulated

Deficit

Total

Balance, December 31, 2017

134,107,809

$13,410,781

151,053

$271,175

$14,016,932

$(29,110,761)

$(1,411,873)

  Net loss

 

 

 

 

 

(401,190)

(401,190)

Balance, March 31, 2018

134,107,809

$13,410,781

151,053

$271,175

$14,016,932

$(29,511,951)

(1,813,063)

  Warrants issued with notes payable

 

 

 

 

57,421

 

57,421

  Shares issued for accounts and related party                                payables

3,615,989

361,599

 

 

(220,301)

 

141,298

  Shares granted to directors and officers

1,850,000

185,000

 

 

(120,435)

 

64,565

  Other

 

 

 

 

(25,520)

 

(25,520)

  Net loss

 

 

 

 

 

(1,127,902)

(1,127,902)

Balance, June 30, 2018

139,573,798

$13,957,380

151,053

$271,175

$13,708,097

$(30,639,853)

$(2,703,201)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

Preferred Stock

Additional

 

 

 

Shares

Par Value

Shares

No Par Value

Paid-in

Capital

Accumulated Deficit

Total

Balance, December 31, 2018

139,573,798

$13,957,380

151,053

$271,175

$13,832,978

$(32,890,710)

$(4,829,177)

  Warrants issued with notes payable

 

 

 

 

7,754

 

7,754

  Warrants issued for finders fees

 

 

 

 

25,864

 

25,864

  Net loss

 

 

 

 

 

(383,542)

(383,542)

Balance, March 31, 2019

139,573,798

$13,957,380

151,053

$271,175

$13,866,596

$(33,274,252)

(5,179,101)

  Warrants issued with notes payable

 

 

 

 

7,845

 

7,845

  Warrants issued for finders fees

 

 

 

 

491

 

491

  Net loss

 

 

 

 

 

(408,876)

(408,876)

Balance, June 30, 2019

139,573,798

$13,957,380

151,053

$271,175

$13,874,932

$(33,683,128)

$(5,579,641)

 

 

 

 

 

 

 

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


5



Goldrich Mining Company

Consolidated Statements of Cash Flows (Unaudited)

 

 

 

 

Six Months Ended

 

June 30,

 

2019

2018

Cash flows from operating activities:

 

 

  Net loss

$             (792,418)

$           (1,529,092)

  Adjustments to reconcile net loss to net cash

 

 

     used in operating activities:

 

 

     Depreciation and amortization

654

4,034

     Change in fair value of notes payable in gold

33,748

(32,255)

     Warrants issued for finders fees

26,354

-

     Share-based compensation

-

64,566

     Discount on note payable

29,809

197,087

     Accretion of asset retirement obligation

6,956

6,688

 

 

 

  Change in:

 

 

     Prepaid expenses

(23,509)

(67,933)

     Accounts payable and accrued liabilities

100,559

405,660

     Interest payable

28,559

31,338

     Interest payable – related parties

185,719

57,061

     Related parties payable

78,608

(24,643)

           Net cash used - operating activities

(324,961)

(887,489)

 

Cash flows from financing activities:

 

 

  Proceeds from notes payable and warrants, net

64,000

189,367

  Proceeds from notes payable and warrants – related party, net

206,000

265,113

           Net cash provided - financing activities

270,000

454,480

 

 

 

Net (decrease) in cash and cash equivalents

(54,961)

(433,009)

 

 

 

Cash and cash equivalents, beginning of period

77,178

486,211

Cash and cash equivalents, end of period

$              22,217

$              53,202

 

 

 

 

 

 

 

 

 

Non-cash financing and investing activities:

 

 

  Warrants issued for debt financing

$             15,600       

$             57,421   

  Accounts payable satisfied with common stock

$                       -       

$             50,000   

  Related party payables satisfied with common stock

$                       -       

$             91,298   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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


6


Goldrich Mining Company

Notes to the Consolidated Financial Statements (unaudited)


1.BASIS OF PRESENTATION 

 

The unaudited financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America for interim financial information, as well as the instructions to Form 10-Q. 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 the Company’s management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation of the interim financial statements have been included.  Operating results for the six-month period ended June 30, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2019.  

 

For further information refer to the financial statements and footnotes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

 

Going Concern

 

The accompanying consolidated financial statements have been prepared under the assumption that the Company will continue as a going concern. The Company has incurred losses since its inception and does not have sufficient cash to fund normal operations and meet debt obligations for the next 12 months without deferring payment on certain current liabilities and/or raising additional funds.

 

The Company currently has no historical recurring source of revenue and in 2016 received its first cash distribution from the joint venture (Note 3). With the dissolution of the joint venture, the process of which began June 3, 2019, these distributions will cease, other than any distribution the Company may be awarded in arbitration (see Note 3 Joint Venture). The Company may profitably execute a production business plan, and thereby, its ability to continue as a going concern may improve and become less dependent on the Company’s ability to raise capital to fund its future exploration and working capital requirements. The Company’s plans for the long-term return to and continuation as a going concern include the profitable exploitation of its mining properties and financing the Company’s future operations through sales of its common stock and/or debt.

 

Additionally, the current capital markets and general economic conditions in the United States are significant obstacles to raising the required funds. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

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

 

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

 

Reclassifications

 

Certain reclassifications have been made to conform prior year’s data to the current presentation. During the six months ended June 30, 2018, management reclassified Arbitration expenses of $699,275 and $728,451 for the three- and six-month periods ended June 30, 2018, respectively, from Professional services, General and administrative and other line items on previously reported Consolidated Statements of Operations captions to a separate line item because of its significance to the Company’s operations during the year. These reclassifications have no impact of the total net loss for the three and six months ended June 30, 2019 and 2018.


7


Goldrich Mining Company

Notes to the Consolidated Financial Statements (unaudited)


Earnings (Loss) Per Share

 

We are authorized to issue 250,000,000 shares of common stock, $0.10 par value per share. At June 30, 2019, there were 139,573,798 shares of our common stock issued and outstanding.

 

For the periods ended June 30, 2019 and 2018, the effect of the Company’s outstanding preferred shares, options and warrants, totaling 97,261,792 and 106,038,703, respectively, would have been anti-dilutive.

 

Accounting for Investments in Joint Ventures

 

For joint ventures in which the Company does not have joint control or significant influence, the cost method is used. Under the cost method, these investments are carried at the lower of cost or fair value. For those joint ventures in which there is joint control between the parties and in which the Company has significant influence, the equity method is utilized whereby the Company’s share of the venture’s earnings and losses is included in the statement of operations as earnings in joint ventures and its investments therein are adjusted by a similar amount.

 

Goldrich has no significant influence over its joint venture described in Note 3 Joint Venture, and therefore accounts for its investment using the cost method. The Company recognizes as income, funds received that are distributed from net accumulated earnings of the joint venture.

 

For joint ventures where the Company holds more than 50% of the voting interest and has significant influence, the joint venture is consolidated with the presentation of a non-controlling interest. In determining whether significant influence exists, the Company considers its participation in policy-making decisions and its representation on the venture’s management committee. Goldrich currently has no joint venture of this nature.

 

The Company periodically assesses its investments in joint ventures for impairment. If management determines that a decline in fair value is other than temporary it will write-down the investment and charge the impairment against operations.

 

Recent Accounting Pronouncements

 

In February 2016, the FASB issued ASU No. 2016-02 Leases (Topic 842). The update modifies the classification criteria and requires lessees to recognize the assets and liabilities on the balance sheet for most leases. The update is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company adopted the standard on January 1, 2019. The Company performed an assessment of the impact of implementation of ASU No. 2016-02, and concluded it does not have an effect on the consolidated financial statements. The Company currently has two operating leases for the corporate office rent and a small storage unit in Fairbanks, Alaska; both are less than a year and do not require recognition under the standard update.

 

In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation, Improvements to Nonemployee Share-Based Payment Accounting. ASU No. 2018-07 expands the scope of Accounting Standards Codification (ASC) 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The update is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company adopted the new standard on January 1, 2019, with no effect on the consolidated financial statements.

 

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


8


Goldrich Mining Company

Notes to the Consolidated Financial Statements (unaudited)


Cash and Cash Equivalents

 

For the purposes of the statement of cash flows, we consider all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Significant estimates used in preparing these financial statements include those assumed in estimating the recoverability of the cost of mining claims, accrued remediation costs, asset retirement obligations, stock-based compensation, and deferred tax assets and related valuation allowances. Actual results could differ from those estimates.

 

Property, Equipment, and Accumulated Depreciation

 

Property and equipment are stated at cost, which is determined by cash paid or fair value of the shares of the Company’s common stock issued. The Company’s property and equipment are located on the Company’s unpatented state mining claims located in the Chandalar mining district of Alaska.

 

All property and equipment purchased prior to 2009 are fully depreciated. The Company’s equipment is located at the Chandalar property in Alaska, with a small amount of office equipment located at Company offices in Spokane, Washington. Assets are depreciated on a straight-line basis. Improvements, which significantly increase an asset’s value or significantly extend its useful life are capitalized and depreciated over the asset’s remaining useful life.

 

When a fixed asset is sold at a price either higher or lower than its carrying amount, or undepreciated cost at the date of disposal, the difference between the sale proceeds over the carrying amount is recognized as gain, while a loss is recognized when the carrying amount exceeds the sale proceeds. The gain or loss is recognized in the Consolidated Statements of Operations.

 

Mining Properties, Claims, and Royalty Option

 

The Company capitalizes costs for acquiring mineral properties, claims and royalty option and expenses, costs to maintain mineral rights and leases as incurred. Should a property reach the production stage, these capitalized costs would be amortized using the units-of-production method on the basis of periodic estimates of ore reserves. Mineral properties are periodically assessed for impairment of value, and any subsequent losses are charged to operations at the time of impairment. If a property is abandoned or sold, its capitalized costs are charged to operations.

 

Income Taxes

 

Income taxes are recognized in accordance with Accounting Standards Codification (“ASC”) 740 Income Taxes, whereby deferred income tax liabilities or assets at the end of each period are determined using the tax rate expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on deferred tax assets when it is more likely than not that some or all of these deferred tax assets will not be realized. ASC 740 prescribes a recognition threshold and measurement attribute for the recognition and measurement of a tax position taken or expected to be taken in a tax return.


9


Goldrich Mining Company

Notes to the Consolidated Financial Statements (unaudited)


Revenue Recognition

 

The Company does not have joint control or significant influence over the joint venture; therefore, distributions from our joint venture are recognized using the cost method. In accordance with ASU No. 2014-09, the Company has determined that our revenue does not arise from contracts with customers, does not involve satisfaction of any performance obligations on the part of the Company, or require company assets to be recognized or applied to determine costs to obtain or fulfill any contract generating revenue. Other than any distribution the Company may be awarded in arbitration (see Note 3 Joint Venture), there was no distribution from the joint venture for 2018, and there will be no distribution for 2019, due to arbitration proceedings and dissolution of the joint venture. See note 3, Joint Venture.

 

Stock-Based Compensation

 

The Company periodically issues common shares or options to purchase shares of the Company’s common shares to its officers, directors or other parties. These issuances are recorded at fair value. The Company uses a Black Scholes valuation model for determining fair value of options to purchase shares, and compensation expense is recognized ratably over the vesting periods on a straight line basis. Compensation expense for grants that vest immediately are recognized in the period of grant.

 

Exploration Costs

 

Exploration costs are expensed in the period in which they occur.

 

Derivatives

 

The Company measures derivative contracts as assets or liabilities based on their fair value. Gains or losses resulting from changes in the fair value of derivatives in each period are recorded in current operating results. None of the Company’s derivative contracts qualify for hedge accounting. The Company does not hold or issue derivative financial instruments for speculative trading purposes.

 

Remediation and Asset Retirement Obligation

 

The Company’s operations have been, and are subject to, standards for mine reclamation that have been established by various governmental agencies. The Company records the fair value of an asset retirement obligation as a liability in the period in which the Company incurs a legal obligation for the retirement of tangible long-lived assets. A corresponding asset is also recorded and depreciated over the life of the long-lived asset using a units of production method. After the initial measurement of the asset retirement obligation, the liability will be adjusted at the end of each reporting period to reflect changes in the estimated future cash flows underlying the obligation. Determination of any amounts recognized is based upon numerous estimates and assumptions, including future retirement costs, future inflation rates and the credit-adjusted risk-free interest rates.

 

For non-operating properties, the Company accrues costs associated with environmental remediation obligations when it is probable that such costs will be incurred and they are reasonably estimable. Such costs are based on management’s estimate of amounts expected to be incurred when the remediation work is performed.


10


Goldrich Mining Company

Notes to the Consolidated Financial Statements (unaudited)


Fair Value Measurements

 

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

 

During 2019 and 2018, the Company determined fair value on a recurring basis and non-recurring basis as follows:

 

Balance

June 30, 2019

Balance

December 31, 2018

Fair Value

Hierarchy level

Liabilities

 

 

 

  Recurring: Notes payable in gold (Note 6)

 

$   375,905

 

$  342,157

 

2

 

The carrying amounts of financial instruments, including notes payable, approximate fair value at June 30, 2019 and December 31, 2018.

 

3.JOINT VENTURE 

 

On May 7, 2012, the Company entered into a joint venture with NyacAU, LLC (“NyacAU”), an Alaskan private company, to bring Goldrich’s Chandalar placer gold properties into production as defined in the joint venture agreement. In each case as used herein in reference to the JV, ‘production’ is as defined by the JV agreement. As part of the agreement, Goldrich Placer, LLC (“GP”), a subsidiary of Goldrich and NyacAU (together the “Members”) formed a 50:50 joint venture company, Goldrich NyacAU Placer LLC (“GNP”), to operate the Chandalar placer mines, with NyacAU acting as managing partner. Goldrich has no significant control or influence over the JV, and therefore accounts for its investment using the cost method.

 

Under the terms of the joint venture agreement (the “Agreement”), NyacAU provided funding to the JV. The loans are to be repaid from future production. According to the Agreement, on at least an annual basis, the JV shall allocate and distribute all revenue (whether in cash or as gold) generated from the JV’s placer operation in the following order:

 

1.Operating Expenses. GNP will first pay all Operating Expenses as defined in the Operating Agreement for placer mining operations at the Claims for the current mining year. Until Commercial Production is achieved, GNP will drawdown or use a line of credit from NyacAU (“LOC1”) to fund payment of the Operating Expenses and repay LOC1 to the extent of the current year's Operating Expenses.  

2.Members' Distribution - Ten Percent (10%) Portion. After payment of Operating Expenses, GNP will distribute in kind twenty percent (20%) of the remaining gold produced, equally, ten percent (10%) to NyacAU as a Member of the GNP and ten percent (10%) to Goldrich as a Member of GNP; provided, however, that, for so long as any secondary line of credit from NyacAU to GNP (“LOC2”) or loan from NyacAU to GNP to purchase the Jumbo Basin royalty (“Loan3”) are not paid in full, GNP shall retain one hundred percent (100%) of this distribution to Goldrich and shall apply such funds as payment to reduce the balance of LOC2 and Loan3 until they are paid in full.  

3.LOC1 Payments. After payment of Operating Expenses and the Members' distribution, GNP will apply any remaining revenue to reduce the remaining balance of LOC1, if any, until it is paid in full. 

4.Reserves. After payment of Operating Expenses, the Members' distribution, and payment of LOC1, the Company may fund Reserves in an amount that is consistent with the annual budget. 


11


Goldrich Mining Company

Notes to the Consolidated Financial Statements (unaudited)


5.Member Distributions, LOC2 Payments and Loan3 Recovery. After payment of Operating Expenses, the Members', payment of LOC1, and funding of any Reserves, from any remaining gold production or revenue, the Company will distribute fifty percent (50%) to NyacAU as a Member of GNP and fifty percent (50%) to Goldrich as a Member of GNP; provided, however, that, for so long as LOC2 or Loan3 are not paid in full, GNP shall retain one hundred percent (100%) of the distribution to Goldrich and shall apply such funds as payment to reduce the balance of LOC2 and Loan3 until they are paid in full. LOC2 has never been funded or utilized.  

Substantially all required allocations and distributions are required to be made no later than October 31st of each year, with any remaining allocations or distributions being completed no later than December 31st of each year, unless otherwise agreed in writing by the Members. As of June 30, 2019, dissolution of the JV is likely, and distributions under item 2 above for the production season have been calculated using the same methodology as prior years’ distributions, although NyacAU has challenged its responsibility to declare or pay any distributions of this type due to the pending dissolution of the JV. The Company has refuted the challenge (see Arbitration).

 

On June 23, 2015, the Company raised net proceeds of $1.1 million through the sale of 12.5% of the cash flows Goldrich receives in the future from its interest in GNP (“Distribution Interest”), paid in cash under items #2 and #5, to Chandalar Gold, LLC (“CGL”) and GVC Capital, LLC,(“GVC”), both of which are non-related entities. Goldrich retained its ownership of its 50% interest in GNP but, after the transaction, subject to the terms of the GNP operating agreement, Goldrich will effectively receive approximately 44%, CGL will effectively receive 6% (12% of Goldrich’s 50% of GNP = 6%) and GVC will effectively receive 0.25% (0.5% of Goldrich’s 50% of GNP = 0.25%) of any distributions produced by GNP. At December 31, 2018 and 2017, an amount of $35,794 has been accrued for the distribution which is included in accrued liabilities. No amount has been accrued for the 2018 distribution due to uncertainties relating to realization of distributions from NyacAU (see Arbitration).

 

At the conclusion of 2017, Goldrich was allocated a distribution of $218,770, under #2 above. In accordance with terms of the Operating Agreement, the Company had the distribution applied toward Loan3. In 2012, the joint venture purchased, on Goldrich’s behalf, a 2% royalty interest, payable on all production from certain Goldrich mining claims at the Chandalar, Alaska property for $250,000 from Jumbo Basin Corporation. This transaction gave rise to Loan3, is carried on GNP’s financial records at an interest rate of the greater of prime plus 2% or 10%, and is to be repaid from distributions to Goldrich as defined in the Operating Agreement, prior to any distributions in cash to Goldrich. At each of June 30, 2019 and December 31, 2018, the principal balance due on Loan3 was $91,488, as adjusted by the joint venture during arbitration, with additional interest of approximately $13,660 and $9,150, respectively. These amounts may be further adjusted by Arbitration awards.

 

In addition, GNP was required to meet the Minimum Production Requirements as defined by the operating agreement. The Minimum Production Requirement for each year was determined by the price of gold on December 1 in the preceding year. The Minimum Production Requirements for 2016, 2017, and 2018 were 1,100, 1,200, and 1,300 ounces of fine gold, respectively, distributable to each of Goldrich and NyacAU. The Minimum Production Requirements for 2016, 2017, and 2018 were to be substantially paid by October 31, 2018. The value of the combined 2016, 2017 and 2018 Minimum Production Requirements has been calculated at $4,428,000 using the price of gold at $1,230 per ounce at September 30, 2018. GNP did not meet the Minimum Production Requirements.


12


Goldrich Mining Company

Notes to the Consolidated Financial Statements (unaudited)


Arbitration

 

In December 2017, the Company filed an arbitration statement of claim against NyacAU and other parties. The claim challenged certain accounting treatment of capital leases, allocations of tax losses, charges to the JV for funding costs related to the JV manager’s financing, related-party transactions, and other items of dispute in a previous mediation that was unsuccessful in reaching an agreement. As a result, the Company participated in an arbitration before a panel of three independent arbitrators during 2018 to address these items.

 

In accordance with ASC 450, Contingencies (“ASC 450”), the Company accounts for loss or gain contingencies when it is probable that a liability or an asset is realizable and can be reasonably estimated. To date, the arbitration proceedings are in progress and no assurance can be given that the arbitration will result in a successful outcome for the Company. A successful arbitration may result in increases to the 2017 and 2016 distributions and revise the computation of these distributions in 2018. Other than any distribution the Company may be awarded in arbitration, there will be no distribution for 2019 due to the dissolution of the joint venture. An unsuccessful arbitration could have an indeterminate negative effect. Due to uncertainties relating to the pending outcome, the financial statements contain no adjustments for the final results of the arbitration. The arbitration is proceeding on the basis that GNP will be dissolved.

 

During the six months ended June 30, 2019 and 2018, management made certain reclassifications from professional services expense, general and administrative expense and other line items on previously reported Consolidated Statements of Operations captions into Arbitration costs. The Company incurred $(19,303) and $728,451 in arbitration expenses during the six months ended June 30, 2019 and 2018, respectively. The $(19,303) is a result of a $220,147 reimbursement for costs by the Company’s Directors and Officers insurance, netted against expenses of $200,844 for the six months ended June 30, 2019.

 

Due to the JV’s failure to meet the Minimum Production Requirements defined in the Operating Agreement, the JV is being dissolved. No financial statement adjustment has been recorded for the failure of the JV to meet the Minimum Production Requirements. The certificate of dissolution was received in July with an effective date of June 3, 2019. NyacAU, as the manager of GNP, shall act as liquidator to wind up the Company within one (1) year, or such longer period as may be agreed to in writing by the joint venture members. If NyacAU cannot or does not accomplish the liquidation within one (1) year or any agreed upon extension, Goldrich shall complete the liquidation.

 

4.RELATED PARTY TRANSACTIONS 

 

Beginning in January 2016 and through June 30, 2019, the salary of the Company’s Chief Executive Officer (“CEO”) has not been paid in full. Fees due to the Company’s Chief Financial Officer (“CFO”) have been accrued and remain unpaid:

 

CEO

Six Months ended

6/30/19

Year ended

12/31/18

Beginning Balance

$295,000

$192,500

Deferred During Period

90,000

180,000

Cash Paid During Period

(10,000)

(77,500)

  Ending Balance

$375,000

$295,000


13


Goldrich Mining Company

Notes to the Consolidated Financial Statements (unaudited)


CFO

Three Months ended

6/30/19

Year ended

12/31/18

Beginning Balance

$64,909

$35,202

Deferred During Period

28,158

64,222

Cash Paid During Period

(12,734)

(34,515)

  Ending Balance

$80,333

$64,909

 

During the year ended December 31, 2018, the Company also awarded 1,850,000 shares of common stock to officers and a director as compensation. The fair value of the shares awarded was $64,565 based upon the quoted value of the stock at the time of the grant.

 

5.NOTES PAYABLE & NOTES PAYABLE – RELATED PARTY  

 

At December 31, 2018, the Company had outstanding Notes payable of $952,634 and outstanding Notes payable - related party of $2,378,947, with all discounts being amortized. The Notes payable and Notes payable - related party had matured on October 31, 2018 and are now due on demand.

 

During the three and six months ended June 30, 2019, the Company received the third and fourth tranche of the notes payable for $89,474 and $194,737, for the respective tranches, discounted at 5%, or $4,474 and $9,737, resulting in net proceeds of $85,000 and $270,000 for the three and six months ended June 30, 2019, respectively, of which $71,000 and $206,000 was from a related party, respectively. The notes are due upon demand; therefore, the discounts and related warrants issued with them were immediately expensed to finance costs.

 

At June 30, 2019, the Company had outstanding Notes payable of $1,020,000 and outstanding Notes payable – related party of $2,595,790, with all discounts being amortized. The Company is in negotiations with holders of the Notes payable and Notes payable – related party to amend payment terms.

 

The notes have an interest rate of 15% per annum, calculated on a 360-day year and payable monthly, and were issued net of a 5% original issue discount. A total of 18,982,878 five-year Class T warrants have been issued to the lenders, including 13,627,886 to a related party in connection with the current and prior-period note issuances. The warrants have an exercise price of $0.03 and expire on various dates from November 30, 2022 through June 21, 2024. During the six months ended June 30, 2019, the Company issued 1,492,102 warrants in connection with the notes payable. The warrants had a fair value of $17,668 and had an allocated relative fair value of $15,600.

 

A total of 1,518,630 five-year Class T warrants have been issued for finders fees related to this debt financing including 1,090,231 to a related party. The warrants issued for finders fees were fair valued at $25,864 and $26,354 for the three and six months ended June 30, 2019, using a Black Scholes valuation model (see table below), and are included in interest expense and finance costs.

 

During the three and six months ended June 30, 2019, the Company accrued cash finders fees related to this debt financing totaling $40,350 and $45,900 compared to $21,000 for each for the three- and six-month periods ended June 30, 2018 to related party entities and are included in interest expense and finance costs. Interest of $132,135 and $259,183 were expensed during the three and six months ended June 30, 2019 compared to $73,759 and $138,753 expensed during the three and six months ended June 30, 2018. Total interest for the notes of $441,613 is accrued at June 30, 2019 and is included in Interest payable and Interest payable – related parties. Interest due at June 30, 2019 was not timely paid. To date, the notes have not been paid, and the note holders have not demanded payment and have indicated willingness to work with the Company to extend the due date.


14


Goldrich Mining Company

Notes to the Consolidated Financial Statements (unaudited)


Interest payable on the consolidated balance sheet also includes $11,217 interest accrued on a Related parties payable and $11,764 accrued on Notes payable in gold.

 

The table below summarizes the total notes due, the amount received with discount, warrants issued for finders fees and cash expensed for finders fees for all periods related to the notes payable and notes payable – related party.

 

 

Tranche Date

Net amount after 5% Discount

Note Prior to Discount

Warrants issued to lenders

Finders fees in Warrants

Finders fees in Cash

Notes Payable

Dec. 22, 2017

$      705,000

$      742,105

3,896,047

311,684

$                  -

Notes Payable

Dec. 24, 2018

200,000

210,526

1,105,262

88,421

6,000

Notes Payable

March 31, 2019

14,000

14,737

77,368

6,189

420

Notes Payable

June 30, 2019

50,000

52,632

276,315

22,105

1,500

   Total Notes Payable

$      969,000

$   1,020,000

5,354,992

428,399

$          7,920

 

 

 

 

 

 

 

Related Party

Dec. 22, 2017

1,000,000

1,052,632

5,526,312

442,105

30,000

Related Party

Dec. 24, 2018

1,260,000

1,326,316

6,963,155

557,052

37,800

Related Party

March 31, 2019

71,000

74,737

392,368

31,390

2,130

Related Party

June 30, 2019

135,000

142,105

746,051

59,684

4,050

  Total Related Party

2,466,000

2,595,790

13,627,886

1,090,231

73,980

     Total

 

$   3,435,000

$   3,615,790

18,982,878

1,518,630

$        81,900

 

The total fair value of the Class T warrants was estimated on the issue dates at $25,863 and $68,747 for the six months ended June 30, 2019 and June 30, 2018, respectively, using the following weighted average assumptions: 

 

 

June 30, 2019

June 30, 2018

Market price of common stock on date of issuance

$0.007 - $0.0275

$0.02

Risk-free interest rate

1.8% - 2.51%

2.58%

Expected dividend yield

0

0

Expected term (in years)

5

5

Expected volatility

154.7% - 162.5%

155.5%

 

The notes are secured by distributions from the GNP joint venture. The notes are senior to general non-trade creditors and all equity holders in the event of dissolution of the Company with a distribution of assets. The notes rank junior to:

(i) Any GNP Distributions that are only deemed to be made by GNP to Goldrich Placer pursuant to the Operating Agreement but are then withheld pursuant to Section 10.1 of the Operating Agreement; and  

(ii) Any GNP Distributions that are made by GNP to Goldrich Placer pursuant to the GNP Operating Agreement but are then withheld to pay Loan 3 and 2012 reclamation expenses; and   

(iii) Any GNP Distributions that are made by GNP to Goldrich Placer pursuant to the Operating Agreement but are then used to pay legal fees relating to mediation/arbitration concerning distributions due to Goldrich Placer from GNP; and  

(iv) Any GNP Distributions that are part of the Chandalar Sale, described below; 

(v) Any GNP Distributions that are part of the GVC Sale, described below; and  

(vi) Any GNP Distributions which are secured by the Company’s outstanding Senior Gold Forward Sales Contracts.  


15


Goldrich Mining Company

Notes to the Consolidated Financial Statements (unaudited)


The Chandalar Sale relates to a purchase agreement, dated as of June 19, 2015, whereby the Company, through its subsidiary Goldrich Placer, sold and assigned to CGL 12% of any and all GNP Distributions to Goldrich Placer, subject to the limitations set forth in the purchase agreement and the related assignment. See Note 3 Joint Venture.

 

The GVC Sale relates to a purchase agreement, dated as of May 22, 2015, whereby the Company, through its subsidiary Goldrich Placer, sold and assigned to GVC 0.50% of any and all GNP Distributions to Goldrich Placer, subject to the limitations set forth in the purchase agreement and the related assignment. See Note 3 Joint Venture.

 

Repayment of all amounts owed under the notes is guaranteed by Goldrich Placer, which in turn owns a 50% interest in Goldrich NyacAU Placer LLC. See Note 3 Joint Venture. The notes contain standard default provisions, including failure to pay interest and principal when due. Under the terms of the notes, any additional loans will be issued at a 5% discount and, for each loan, the Company will issue 5.25 Class T warrants, not to exceed warrants representing the Company’s maximum authorized shares available, for each dollar loaned under this agreement.

 

6.NOTES PAYABLE IN GOLD 

 

During 2013, the Company issued notes payable in gold totaling $820,000, less a discount of $205,000, for net proceeds of $615,000. Under the terms of the notes, the Company agreed to deliver gold to the holders at the lesser of $1,350 per ounce of fine gold or a 25% discount to market price as calculated on the contract date and specify delivery of gold in November 2014.

 

On November 30, 2017, the Company renegotiated terms with the holders. A default condition arising from the non-delivery of the gold in 2017 was alleviated by agreements with the three note holders to extend the delivery date of gold to November 30, 2018, with the following terms:

 

Fifteen percent (15%), or 76 ounces, of the required quantity of gold under the contract, prior to amendment one in 2014, amendment two in 2015, and amendment three in 2016, which was originally due on the Delivery Date of November 30, 2014, was delivered on November 30, 2017. In lieu of gold, the Company could elect to satisfy the delivery of the deliverable required quantity by paying, an amount equal to the deliverable required quantity times the greater of the original purchase price or the index price for the day preceding the date of payment. The Company paid a total of $97,295 in cash to satisfy this renegotiated term.  

The Company agreed to pay interest on the value of the delayed delivery required quantity of $341,543, at an annual non-compounding percentage rate of 10% payable quarterly with any remaining interest due and payable on the delivery date.  

If the delivery date index price on November 30, 2018 is less than the original purchase price, an additional adjusted required amount shall be delivered by December 31, 2018. 

 

On November 30, 2018, the Company renegotiated terms with the holders. A default condition arising from the non-delivery of the gold in 2018 was alleviated by agreements with the three note holders to extend the delivery date of gold to February 28, 2019, with the following significant terms:

 

In relation to the remaining 55% of the original Required Quantity of Gold under the Contract, prior to Amendment One, Amendment Two, Amendment Three, and Amendment Four (the “Fourth Delayed Delivery Required Quantity”), such Fourth Delayed Delivery Required Quantity shall be delivered to the Purchaser at the Delivery Point on February 28, 2019. In relation to the Fourth Delayed Delivery Required Quantity, “Delivery Date” as set forth on the Confirmation Letter, was amended to be no later than February 28, 2019. 


16


Goldrich Mining Company

Notes to the Consolidated Financial Statements (unaudited)


Subsequent to November 30, 2018, the Company agreed to pay interest on the value of the Fourth Delayed Delivery Required Quantity at an annual percentage rate of 10% (the “Interest Rate”) payable quarterly on December 31, 2018 with any remaining interest due and payable on the Delivery Date for the Fourth Delayed Delivery Required Quantity.  

Subsequent to November 30, 2018, the value of the Fourth Delayed Delivery Required Quantity was reset on December 1, 2018 and was equal to the number of ounces of Gold in the Fourth Delayed Delivery Required Quantity multiplied by a price as defined in the amendment. 

If the Delivery Date Index Price is less than the Original Purchase Price, an Additional Adjusted Required Amount, as defined in the amendment, shall be delivered to the Purchaser at the Delivery Point by March 31, 2019. 

 

Due to the Joint Venture’s failure to meet Minimum Production Requirements or make a sufficient distribution to the Joint Venture partners, the Company was unable to make payment to the holders of the notes payable in gold.

 

Subsequent to June 30, 2019, the Company renegotiated terms with the holders. A default condition arising from the non-delivery of the gold on March 31, 2019, was alleviated by agreements with the three note holders with the following amended terms:

 

The Fourth Delayed Delivery Required Quantity shall be delivered to the Purchaser at the Delivery Point on the date that is sixty (60) days after the date that the purchaser gives notice to the Company that the Fourth Delayed Delivery Required Quantity must be delivered. 

Subsequent to February 28, 2019, the Company agreed to pay interest on the value of the Fourth Delayed Delivery Required Quantity at an annual percentage rate of 10% from February 28, 2019, payable quarterly with any remaining interest due and payable on the Delivery Date for the Fourth Delayed Delivery Required Quantity.   

The Company, at the Company’s sole discretion, has the option to pay or deliver the Fourth Delayed Delivery Required Quantity prior to receiving notice from the Purchaser demanding payment of the Fourth Delayed Delivery Required Quantity or prior to sixty days after the Fourth Delayed Delivery Required Quantity Notice Date. If the Company exercises this option, in relation to the Fourth Delayed Delivery Required Quantity, “Delivery Date” as set forth on the Confirmation Letter, was amended to be the date of actual payment or delivery.  

The value of the Fourth Delayed Delivery Required Quantity was reset on March 1, 2019 and was equal to the number of ounces of Gold in the Fourth Delayed Delivery Required Quantity multiplied by the Original Purchase Price used to calculate the amount of gold due in the Confirmation Letter.  

 

To date, the gold notes have not been paid and the note holders have not demanded payment or delivery of gold.

 

For the six months ended June 30, 2019, using the fair value of gold on June 30, 2019 of $1,409 per ounce, the Company recognized an increase in fair value of $33,748. For the six months ended June 30, 2018, using a forward gold price of $1,213, the Company recognized a decrease in fair value of $32,255 in accounting for these notes as derivatives.

 

The fair value was calculated using the market approach with Level 2 inputs of gold future delivery contracts. At June 30, 2019 and December 31, 2018, the Company had outstanding total notes payable in gold of $375,905 and $342,157, respectively, representing 266.788 ounces of fine gold deliverable at March 31, 2019. Interest of $16,785 was expensed during the six months ended June 30, 2019, of which $11,764 is accrued at June 30, 2019 and is included in Interest payable.


17


Goldrich Mining Company

Notes to the Consolidated Financial Statements (unaudited)


7.COMMITMENTS AND CONTINGENCIES  

 

The Company has 426.5 acres of patented claims and 22,432 acres of non-patented claims. We are subject to annual claims rental fees in order to maintain our non-patented claims. In addition to the annual claims rental fees due November 30 of each year, we are also required to meet annual labor requirements due November 30 of each year. The Company is able to carry forward costs for annual labor that exceed the required yearly totals for four years. Following are the annual claims and labor requirements for 2019.

 

 

November 30, 2019

Claims Rental

$                   90,670

Annual Labor

61,100

Yearly Totals

$                 151,770

 

 

The Company has a labor requirement carryover to 2019 of approximately $28.6 million to satisfy its annual labor requirements. This carryover expires in the years 2019 through 2024 if unneeded to satisfy requirements in those years.

 

8.SUBSEQUENT EVENTS 

 

Subsequent to the six months ended June 30, 2019, the Company entered into additional notes payable totaling $205,000 from a related party, with cash proceeds of $205,000 to the Company. The Company also entered into amendments to the Notes payable in gold as described in Note 6 above.


18



Item 2. Management’s Discussion and Analysis of Financial Condition or Plan of Operation

 

As used in herein, the terms “Goldrich,” the “Company,” “we,” “us,” and “our” refer to Goldrich Mining Company.

 

This discussion and analysis contains forward-looking statements that involve known or unknown risks, uncertainties and other factors that may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Except for historical information, the matters set forth herein, which are forward-looking statements, involve certain risks and uncertainties that could cause actual results to differ. Potential risks and uncertainties include, but are not limited to, unexpected changes in business and economic conditions; significant increases or decreases in gold prices; changes in interest and currency exchange rates; unanticipated grade changes; metallurgy, processing, access, availability of materials, equipment, supplies and water; results of current and future exploration and production activities; local and community impacts and issues; timing of receipt and maintenance of government approvals; accidents and labor disputes; environmental costs and risks; competitive factors, including competition for property acquisitions; and availability of external financing at reasonable rates or at all, and those set forth under the heading “Risk Factors” in our Form 10-K filed with the United States Securities and Exchange Commission (the “SEC”) on April 3, 2019. Forward- looking statements can be identified by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continues” or the negative of these terms or other comparable terminology. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievements. Forward-looking statements are made based on management’s beliefs, estimates, and opinions on the date the statements are made, and the Company undertakes no obligation to update such forward-looking statements if these beliefs, estimates, and opinions should change, except as required by law.

 

This discussion and analysis should be read in conjunction with the accompanying unaudited consolidated financial statements and related notes. The discussion and analysis of the financial condition and results of operations are based upon the unaudited consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis the Company reviews its estimates and assumptions. The estimates were based on historical experience and other assumptions that the Company believes to be reasonable under the circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions, but the Company does not believe such differences will materially affect our consolidated financial position or results of operations. Critical accounting policies, the policies the Company believes are most important to the presentation of its consolidated financial statements and require the most difficult, subjective and complex judgments are outlined below in “Critical Accounting Policies” and have not changed significantly.

 

General

Our Chandalar, Alaska gold mining property has seen over a hundred years of intermittent mining exploration and extraction history. There has been small extraction of gold from several alluvial, or placer gold streams, and from an array of small quartz veins that dot the property. However, only in very recent times is the primary source of the gold becoming evident. As a result of our exploration we have discovered gold in prolific micro-fractures within schist in many places and have petrographic and geochemical evidence linking these and larger vein-hosted gold occurrences to an intrusive source. We are currently defining drilling targets for a hard-rock (lode) gold deposit in an area of interest approximately 1,800 feet wide and over five miles long, possibly underlain by a granitic, mineralized intrusion. Exploration therefore has taken on two directions; one toward defining a low-grade, large tonnage body of mineralization running beneath the


19



headwaters of Little Squaw Creek, the other a deeper, larger mineralized body from which mineralizing fluids have migrated through Chandalar country rock. Our main focus continues to be the exploration of these hard-rock targets; however, weak financial markets prevented us from obtaining funds for any significant exploration in 2012, 2013, and 2016 through 2019. We were successful in raising funds for a limited exploration program in 2014 and reclamation work in 2015.

Because of the weak financial markets suffered by the mining industry in recent years, we endeavored to develop our placer properties as a source of internal cash to protect us from future market fluctuations and to provide funds for future exploration. In 2012, Goldrich and NyacAU LLC (“NyacAU”) formed Goldrich NyacAU Placer LLC (“GNP”), a 50/50 joint-venture company, managed by NyacAU, to mine Goldrich’s various placer properties at Chandalar.

The placer gold production by GNP increased each year from 2015 through 2018, trending toward production figures that were anticipated by the Preliminary Economic Assessment authored by qualified geologists for us. Ultimately the production numbers attained over those years fell short of the Minimum Production Requirements required in the Operating Agreement, and as a result, the JV is being dissolved.

 

Chandalar Mine

During 2018, the plant ran from approximately May 31, 2018 through September 21, 2018. A total of approximately 20,900 ounces of alluvial gold, equivalent to 17,100 ounces of fine gold, were extracted. Total revenue was approximately $21 million and total production represents an increase of 39% over the 2017 mining season. This compares to production in previous years as follows:

 

Year

Ounces of Placer Gold

Ounces of Fine Gold

2015

 4,400

 3,900

2016

 10,200

 8,200

2017

 15,000

 12,300

2018

 20,900

 17,100

 

The 2018 production season ran from approximately May 31, 2018 through September 21, 2018. The normal production season is approximately from June through mid-September, subject to weather.

 

Dissolution of the GNP Joint Venture:

 

As previously anticipated and disclosed, we announced the dissolution of GNP in August of 2019. The certificate of dissolution was received in July with an effective date of June 3, 2019. NyacAU is the manager of the GNP joint venture.

 

The joint venture was dissolved because GNP failed to meet the Minimum Production Requirements. According to the terms of the joint venture operating agreement, GNP was required to pay a contractual Minimum Production Requirement of 1,100 ounces for 2016, 1,200 ounces for 2017, and 1,300 ounces for 2018 to Goldrich by October 31, 2018. The Minimum Production Requirement for each year was determined based on the spot price of gold on December 1 of the preceding year.

 

GNP’s lease to mine the placer properties terminates upon dissolution of GNP and GNP has no further rights to mine the placer properties located on Goldrich’s mining claims.

 

NyacAU, as the manager of GNP, shall act as liquidator to wind up the Company within one (1) year, or such longer period as may be agreed to in writing by the joint venture members. If NyacAU cannot or does not accomplish the liquidation within one (1) year or any agreed upon extension, Goldrich shall complete the liquidation. Most of the equipment used by the joint venture has already been moved off the mine site.


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Goldrich and NyacAU are currently in arbitration and are awaiting the rulings of the arbitration panel. Under the terms of the GNP Operating Agreement, rulings from the three-person arbitration panel are final. The outcome of the arbitration is not yet determined and cannot be estimated or assured.

 

Planned 2019 Exploration and Mining Activities

 

In 2019, we do not anticipate conducting hard-rock exploration drilling activities and other hard-rock exploration activities at the Chandalar property. We will once again undertake such activities if and when our financial situation permits.

 

Although all rights to mine the placer properties revert to Goldrich upon dissolution of GNP, at the date of the report, the arbitration panel had not yet determined such matters as ownership of the mining permit, the ownership of all mining equipment used by GNP, treatment of certain accounting practices employed by the manager of the JV, which may significantly affect the distributions due to us, and several other matters. Due to the timing of the issuance of the Award, management has been precluded from making meaningful progress in obtaining financing, equipment, personnel, permit authority or other infrastructure requirements to conduct production activities Chandalar in 2019.

 

We are in the process of developing a mine plan for the Chandalar gold project. The timing of the issuance of the Award and lack of sufficient financings precluded us from scheduling a winter trail to transport additional equipment and supplies to the Chandalar property, which had to be completed prior to mid-April 2019. We believe we will be able to obtain financing for purchase of equipment, whether the equipment previously used by GNP or purchased from third parties, in order to bring the mine back into production in 2020 and beyond.  The 2019 year will be used to formulate a mine plan, obtain the necessary mining permits, rehabilitate the mine, remove overburden, and prepare according to the plan to resume production in 2020. These plans are contingent upon our success in raising sufficient capital to fund these activities or any portion of them.

 

Liquidity and Capital Resources

We are an exploration stage company and have incurred losses since our inception. We currently do not have sufficient cash to support the Company through 2019 and beyond. We anticipate that we will incur approximately $650,000 for general operating expenses and property maintenance, $464,594 for interest, $375,905 for payment upon demand by holders of the gold notes, $2,595,790 for payment of notes payable to related party, and $1,020,000 for the payment of senior secured loans over the next 12 months as of June 30, 2019. Additional funds will be needed for any exploration expenditures, should any be undertaken. We also anticipate additional unknown and undeterminable costs for arbitration, but a significant portion of this may be recouped if we are successful in the arbitration. Of necessity, we have had to rely on a friendly related party and note holders to provide the limited funding we have been able to secure, pending the resolution of the arbitration and the removal of its associated uncertainties that are preventing us from moving forward with operating and mining plans and the associated financing to implement those plans. We plan to raise the required financing through a combination of debt and/or equity placements, sale of mining property interests, and revenue from placer operations.

 

We have filed an arbitration claim against our joint venture operating partner to challenge certain accounting treatment of capital leases, allocations of tax losses, charges to the JV for funding costs related to the JV manager’s financing, related-party transactions, and other items of dispute. In 2018, our joint venture partners filed a counter-claim against us. Favorable rulings at arbitration could provide significant cash flows to us and unfavorable rulings could have a significant negative impact on our cash flows. We have filed for arbitration before a panel of three independent arbitrators to address each of the disputed claims. A successful arbitration may result in significant increases to the 2018, 2017 and 2016 distributions. Arbitration testimony was completed in August 2018, with many motions and responses submitted to the panel since that time. The panel issued an Interim Award on May 25, 2019 but has yet to rule if the Interim Award may be changed.  Also, the Interim Award requested additional data and calculations relating to various matters that could affect the final outcome of the arbitration. No assurance can be given that the arbitration will be successful.


21



Failure in receiving distributions under our damage claims at arbitration or in our efforts to raise needed financing could result in us having to scale back or discontinue exploration activities or some or all of our business operations. Under the joint venture operating agreement, revenue was to be allocated in accordance with the 5-point schedule outlined in the section Joint Venture Agreement in the Notes to our financial statements included as part of our annual report as filed on Form 10-K for 2019. GNP is being dissolved as previously disclosed. Subsequent to the dissolution, NyacAU is entitled to a secured interest in all placer gold production from certain claims owned by Goldrich as collateral for repayment of fifty percent (50%) of LOC1. Arbitration proceedings may significantly affect the balance of LOC1, the magnitude of which cannot be estimated at the date of this report.

The audit opinion and notes that accompany our consolidated financial statements for the year ended December 31, 2018, disclose a ‘going concern’ qualification to our ability to continue in business. The accompanying consolidated financial statements have been prepared under the assumption that we will continue as a going concern. We are an exploration stage company and we have incurred losses since our inception. We do not have sufficient cash to fund normal operations and meet debt obligations for the next 12 months without deferring payment on certain current liabilities and raising additional funds. We believe that the going concern condition cannot be removed with confidence until the Company has entered into a business climate where funding of its activities is more assured.

 

We currently have only a brief recent history of a recurring source of revenue. If we profitably execute a production business plan, our ability to continue as a going concern may improve and become less dependent on our ability to raise capital to fund our future exploration and working capital requirements. Our plans for the long-term include the profitable exploitation of our mining properties and financing our future operations through sales of our common stock and/or debt. Additionally, the current capital markets and general economic conditions in the United States are significant obstacles to raising the required funds. These factors raise substantial doubt about our ability to continue as a going concern.

 

During the six months ended June 30, 2019, we completed financings of $270,000, compared to $454,480 net cash for note financings and placements of our securities during the six months ended June 30, 2018. At June 30, 2019, we owe a total of $3,615,790 for notes payable, of which $3,052,632 came due October 31, 2018. Notes payable to third parties totaling $967,371 were subsequently amended to extend the due date to February 28, 2019. To date, the notes payable have not been paid, the note holders have not demanded payment and have indicated willingness to work with the Company to extend the due date.

 

If we are unable to timely satisfy our obligations under the notes payable and the notes payable in gold, , and we are not able to re-negotiate the terms of those agreements, the holders will have rights against us, including potentially seizing or selling our assets. The notes payable in gold are secured against our right to future distributions of gold extracted by gold production at Chandalar. At June 30, 2019, we had outstanding total notes payable in gold of $375,905, representing 266.789 ounces of fine gold deliverable within 60 days of demand by the note holders. To date, the gold notes have not been paid and the note holders have not demanded payment.

 

We believe we will be able to secure sufficient financing for further operations and exploration activities of our Company but we cannot give assurance we will be successful in attracting financing on terms acceptable to us, if at all. Additionally, anticipating continued placer production after dissolution of GNP, we look forward to internal cash flow and additional options for financing. A successful mining operation may provide the long-term financial strength for the Company to remove the going concern condition in future years. To increase its access to financial markets, Goldrich intends to also seek a listing of its shares on a recognized stock exchange in Canada in addition to its listing on the OTCBB in the United States.

 

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


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Results of Operations

 

On June 30, 2019, we had total liabilities of $6,631,055 and total assets of $1,051,414. This compares to total liabilities of $5,912,698 and total assets of $1,083,521 on December 31, 2018. As of June 30, 2019, our liabilities consist of $454,734 for remediation and asset retirement obligations, $375,905 of notes payable in gold, $1,020,000 of notes payable, $2,595,790 of notes payable – related parties, $1,153,079 of trade payables and accrued liabilities, $73,306 of accrued interest payable, $391,288 of accrued interest payable – related parties, $536,335 due to related parties, and $30,618 for dividends payable. Of these liabilities, $6,176,321 is due within 12 months. The increase in liabilities compared to December 31, 2018 is due to an increase in trade and related party payables, additional borrowings under notes payable and notes payable - related parties, largely resulting from costs associated with arbitration, and amortization of the discount and warrants of the notes payable. Total assets and its components did not experience significant changes, with the exception of a decrease in cash due to financing activities insufficient to cover the level of operating expenses, offset by an increase in prepaid expenses during the six months ended June 30, 2019.

On June 30, 2019, we had negative working capital of $5,994,794 and a stockholders’ deficit of $5,579,641 compared to negative working capital of $5,521,940 and stockholders’ deficit of $4,829,177 for the year ended December 31, 2018. Working capital decreased during the quarter ended June 30, 2019 due to the accruals of accounts and trade payables that exceeded cash proceeds from Notes payable and Notes payable – related parties. Stockholders’ equity decreased due to an operating loss for the six-month period ended June 30, 2019.

During the six months ended June 30, 2019, we used cash from operating activities of $324,961 compared to $887,489 for the period ended June 30, 2018. Net losses were slightly lower year over year due largely to a decrease in arbitration costs, an insurance refund of professional service costs in relation to the arbitration and decreases in management fees and general and administration fees as a result of reduced costs as a result of our inability to execute on strategic plans in the absence of a definitive award by the arbitration panel, compared to the same period of 2018. Net operating losses were $408,876 and $792,418 for the three and six months ended June 30, 2019, respectively, compared with $1,127,902 and 1,529,092 for the three and six months ended June 30, 2018, respectively. Net losses included depreciation of $1,675 and $4,034 for the respective six-month periods.

During the six months ended June 30, 2019 and 2018 respectively, we used no cash in investing activities.

During the six months ended June 30, 2019, cash of $270,000 was provided by financing activities, compared to $454,480 provided during the same period of 2018.

Private Placement Offerings

 

Notes Payable & Notes Payable – Related Party

 

At December 31, 2018, we had outstanding Notes payable of $952,634 and outstanding Notes payable - related party of $2,378,947, with all discounts being amortized. The Notes payable and Notes payable - related party had matured on October 31, 2018 and are now due on demand.

During the three and six months ended June 30, 2019, we received the third and fourth tranche of the notes payable for $89,474 and $194,737, for the respective tranches, discounted at 5%, or $4,474 and $9,737, resulting in net proceeds of $85,000 and $270,000 for the three and six months ended June 30, 2019, respectively, of which $71,000 and $206,000 was from a related party, respectively. The notes are due upon demand; therefore, the discounts and related warrants issued with them were immediately expensed to finance costs.


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At June 30, 2019, we had outstanding Notes payable of $1,020,000 and outstanding Notes payable – related party of $2,595,790, with all discounts being amortized. We are in negotiations with holders of the Notes payable and Notes payable – related party to amend payment terms.

The notes have an interest rate of 15% per annum, calculated on a 360-day year and payable monthly, and were issued net of a 5% original issue discount. A total of 18,982,878 five-year Class T warrants have been issued to the lenders, including 13,627,886 to a related party in connection with the current and prior-period note issuances. The warrants have an exercise price of $0.03 and expire on various dates from November 30, 2022 through June 21, 2024. During the six months ended June 30, 2019, we issued 1,492,102 warrants in connection with the notes payable. The warrants were valued at $17,668 and had an allocated relative fair value of $15,600.

A total of 1,518,630 five-year Class T warrants have been issued for finders fees related to this debt financing, including 1,090,231 to a related party.  The warrants issued for finders fees were fair valued at $25,863 and $26,354 for the three and six months ended June 30, 2019, using a Black Scholes valuation model (see table below), and are included in interest expense and finance costs.

During the three and six months ended June 30, 2019, we accrued cash finders fees related to this debt financing totaling $40,350 and $45,900 compared to $21,000 for each for the three- and six-month periods ended June 30, 2018 to related party entities and are included in interest expense and finance costs. Interest of $132,135 and $259,183 were expensed during the three and six months ended June 30, 2019 compared to $73,759 and $138,753 expensed during the three and six months ended June 30, 2018. Total interest for the notes of $441,613 accrued at June 30, 2019 and is included in Interest payable and Interest payable – related parties. Interest due at June 30, 2019 was not timely paid. To date, the notes have not been paid, and the note holders have not demanded payment and have indicated willingness to work with us to extend the due date.

The table below summarizes the total notes due, the amount received with discount, warrants issued for finders fees and cash expensed for finders fees for all periods related to the notes payable and notes payable – related party.

 

Tranche Date

Net amount after 5% Discount

Note Prior to Discount

Warrants issued to lenders

Finders fees in Warrants

Finders fees in Cash

Notes Payable

Dec. 22, 2017

$      705,000

$      742,105

3,896,047

311,684

$                  -

Notes Payable

Dec. 24, 2018

$      200,000

$      210,526

1,105,262

88,421

$          6,000

Notes Payable

March 31, 2019

$        14,000

$        14,737

77,368

6,189

$             420

Notes Payable

June 30, 2019

$        50,000

$        52,632

276,315

22,105

$          1,500

   Total Notes Payable

$      969,000

$   1,020,000

5,354,992

428,399

$          7,920

 

 

 

 

 

 

 

Related Party

Dec. 22, 2017

$   1,000,000

$   1,052,632

5,526,312

442,105

$        30,000

Related Party

Dec. 24, 2018

$   1,260,000

$   1,326,316

6,963,155

557,052

$        37,800

Related Party

March 31, 2019

$        71,000

$        74,737

392,368

31,390

$          2,130

Related Party

June 30, 2019

$      135,000

$      142,105

746,051

59,684

$          4,050

  Total Related Party

$   2,466,000

$   2,595,790

13,627,886

1,090,231

$        73,980

     Total

 

$   3,435,000

$   3,615,790

18,982,878

1,518,630

$        81,900

 

The total fair value of the Class T warrants was estimated on the issue dates at $25,863 and $68,747 for the six months ended June 30, 2019 and June 30, 2018, respectively, using the following weighted average assumptions: 


24



 

June 30, 2019

June 30, 2018

Market price of common stock on date of issuance

$0.007 - $0.0275

$0.02

Risk-free interest rate

1.8% - 2.51%

2.58%

Expected dividend yield

0

0

Expected term (in years)

5

5

Expected volatility

154.7% - 162.5%

155.5%

 

The notes are secured by distributions from the GNP joint venture. The notes are senior to general non-trade creditors and all equity holders in the event of dissolution of the Company with a distribution of assets. The notes rank junior to:

(i) Any GNP Distributions that are only deemed to be made by GNP to Goldrich Placer pursuant to the Operating Agreement but are then withheld pursuant to Section 10.1 of the Operating Agreement; and  

(ii) Any GNP Distributions that are made by GNP to Goldrich Placer pursuant to the GNP Operating Agreement but are then withheld to pay Loan 3 and 2012 reclamation expenses; and   

(iii) Any GNP Distributions that are made by GNP to Goldrich Placer pursuant to the Operating Agreement but are then used to pay legal fees relating to mediation/arbitration concerning distributions due to Goldrich Placer from GNP; and  

(iv) Any GNP Distributions that are part of the Chandalar Sale, described below; 

(v) Any GNP Distributions that are part of the GVC Sale, described below; and  

(vi) Any GNP Distributions which are secured by our outstanding Senior Gold Forward Sales Contracts.  

 

The Chandalar Sale relates to a purchase agreement, dated as of June 19, 2015, whereby we, through our subsidiary Goldrich Placer, sold and assigned to CGL 12% of any and all GNP Distributions to Goldrich Placer, subject to the limitations set forth in the purchase agreement and the related assignment. The GVC Sale relates to a purchase agreement, dated as of May 22, 2015, whereby we, through our subsidiary Goldrich Placer, sold and assigned to GVC 0.50% of any and all GNP Distributions to Goldrich Placer, subject to the limitations set forth in the purchase agreement and the related assignment.

 

Repayment of all amounts owed under the notes is guaranteed by Goldrich Placer, which in turn owns a 50% interest in Goldrich NyacAU Placer LLC. The notes contain standard default provisions, including failure to pay interest and principal when due. Under the terms of the notes, any additional loans will be issued at a 5% discount and, for each loan, we will issue 5.25 Class T warrants, not to exceed warrants representing our maximum authorized shares available, for each dollar loaned under this agreement.

 

Notes payable in gold

 

During 2013, we issued notes payable in gold totaling $820,000, less a discount of $205,000, for net proceeds of $615,000. Under the terms of the notes, we agreed to deliver gold to the holders at the lesser of $1,350 per ounce of fine gold or a 25% discount to market price as calculated on the contract date and specify delivery of gold in November 2014.

 

On November 30, 2017, we renegotiated terms with the holders. A default condition arising from the non-delivery of the gold in 2017 was alleviated by agreements with the three note holders to extend the delivery date of gold to November 30, 2018, with the following terms:

 

Fifteen percent (15%), or 76 ounces, of the required quantity of gold under the contract, prior to amendment one in 2014, amendment two in 2015, and amendment three in 2016, which was originally due on the Delivery Date of November 30, 2014, was delivered on November 30, 2017. In lieu of gold, we could elect to satisfy the delivery of the deliverable required quantity by paying, an amount equal to the deliverable required quantity times the greater of the original purchase price or the index price for the day preceding the date of payment. We paid a total of $97,295 in cash to satisfy this renegotiated term.  


25



We agreed to pay interest on the value of the delayed delivery required quantity of $341,543, at an annual non-compounding percentage rate of 10% payable quarterly with any remaining interest due and payable on the delivery date.  

If the delivery date index price on November 30, 2018 is less than the original purchase price, an additional adjusted required amount shall be delivered by December 31, 2018. 

 

On November 30, 2018, we renegotiated terms with the holders. A default condition arising from the non-delivery of the gold in 2018 was alleviated by agreements with the three note holders to extend the delivery date of gold to February 28, 2019, with the following significant terms:

 

In relation to the remaining 55% of the original Required Quantity of Gold under the Contract, prior to Amendment One, Amendment Two, Amendment Three, and Amendment Four (the “Fourth Delayed Delivery Required Quantity”), such Fourth Delayed Delivery Required Quantity shall be delivered to the Purchaser at the Delivery Point on February 28, 2019. In relation to the Fourth Delayed Delivery Required Quantity, “Delivery Date” as set forth on the Confirmation Letter, was amended to be no later than February 28, 2019. 

Subsequent to November 30, 2018, we agreed to pay interest on the value of the Fourth Delayed Delivery Required Quantity at an annual percentage rate of 10% (the “Interest Rate”) payable quarterly on December 31, 2018 with any remaining interest due and payable on the Delivery Date for the Fourth Delayed Delivery Required Quantity.  

Subsequent to November 30, 2018, the value of the Fourth Delayed Delivery Required Quantity was reset on December 1, 2018 and was equal to the number of ounces of Gold in the Fourth Delayed Delivery Required Quantity multiplied by a price as defined in the amendment. 

If the Delivery Date Index Price is less than the Original Purchase Price, an Additional Adjusted Required Amount, as defined in the amendment, shall be delivered to the Purchaser at the Delivery Point by March 31, 2019. 

 

Due to the Joint Venture’s failure to meet Minimum Production Requirements or make a sufficient distribution to the Joint Venture partners, we were unable to make payment to the holders of the notes payable in gold.

 

Subsequent to June 30, 2019, we renegotiated terms with the holders. A default condition arising from the non-delivery of the gold on March 31, 2019, was alleviated by agreements with the three note holders with the following amended terms:

 

The Fourth Delayed Delivery Required Quantity shall be delivered to the Purchaser at the Delivery Point on the date that is sixty (60) days after the date that the purchaser gives notice to the Company that the Fourth Delayed Delivery Required Quantity must be delivered. 

Subsequent to February 28, 2019, we agreed to pay interest on the value of the Fourth Delayed Delivery Required Quantity at an annual percentage rate of 10% from February 28, 2019, payable quarterly with any remaining interest due and payable on the Delivery Date for the Fourth Delayed Delivery Required Quantity.   

We, at our sole discretion, have the option to pay or deliver the Fourth Delayed Delivery Required Quantity prior to receiving notice from the Purchaser demanding payment of the Fourth Delayed Delivery Required Quantity or prior to sixty days after the Fourth Delayed Delivery Required Quantity Notice Date. If we exercise this option, in relation to the Fourth Delayed Delivery Required Quantity, “Delivery Date” as set forth on the Confirmation Letter, was amended to be the date of actual payment or delivery.  

The value of the Fourth Delayed Delivery Required Quantity was reset on March 1, 2019 and was equal to the number of ounces of Gold in the Fourth Delayed Delivery Required Quantity multiplied by the Original Purchase Price used to calculate the amount of gold due in the Confirmation Letter.  

 

To date, the gold notes have not been paid and the note holders have not demanded payment or delivery of gold.


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For the six months ended June 30, 2019, using the value of gold on June 30, 2019 of $1,409, we recognized an increase in fair value of $33,748. For the six months ended June 30, 2018, using a forward gold price of $1,213, we recognized a decrease in fair value of $32,255 in accounting for these notes as derivatives.

 

The fair value was calculated using the market approach with Level 2 inputs of gold future delivery contracts. At June 30, 2019 and December 31, 2018, we had outstanding total notes payable in gold of $375,905 and $342,157, respectively, representing 266.788 ounces of fine gold deliverable at March 31, 2019. Interest of $16,785 was expensed during the six months ended June 30, 2019, of which $11,764 is accrued at June 30, 2019 and is included in Interest payable.

 

Subsequent Events

Subsequent to the six months ended June 30, 2019, we entered into additional notes payable totaling $205,000 from a related party, with cash proceeds of $205,000 to us. We also entered into amendments to the Notes payable in gold as described in Notes Payable in Gold above.

 

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Inflation

We do not believe that inflation has had a significant impact on our consolidated results of operations or financial condition.

Contractual Obligations

See Subsequent Events above.

Critical Accounting Policies

We have identified our critical accounting policies, the application of which may materially affect the financial statements, either because of the significance of the financials statement item to which they relate, or because they require management’s judgment in making estimates and assumptions in measuring, at a specific point in time, events which will be settled in the future. The critical accounting policies, judgments and estimates which management believes have the most significant effect on the financial statements are set forth below:

Estimates of the recoverability of the carrying value of our mining and mineral property assets. We use publicly available pricing or valuation estimates of comparable property and equipment to assess the carrying value of our mining and mineral property assets. However, if future results vary materially from the assumptions and estimates used by us, we may be required to recognize an impairment in the assets’ carrying value. 

Expenses and disclosures associated with accounting for stock-based compensation. We used the Black-Scholes option pricing model to estimate the fair market value of stock options issued under our stock-based compensation plan, which determines the recognition of associated compensation expense. This valuation model requires the use of judgment in applying assumptions of risk-free interest rate, stock price volatility and the expected life of the options. While we believe we have applied appropriate judgment in the assumptions and estimates, variations in judgment in applying assumptions and estimates used in this valuation could have a material effect upon the reported operating results. 


27



Estimates of our environmental liabilities. Our potential obligations in environmental remediation, asset retirement obligations or reclamation activities are considered critical due to the assumptions and estimates inherent in accruals of such liabilities, including uncertainties relating to specific reclamation and remediation methods and costs, the application and changing of environmental laws, regulations and interpretations by regulatory authorities. 

Accounting for Investments in Joint Ventures. For joint ventures in which we do not have joint control or significant influence, the cost method is used. Under the cost method, these investments are carried at the lower of cost or fair value. For those joint ventures in which there is joint control between the parties and in which we have significant influence, the equity method is utilized whereby our share of the ventures’ earnings and losses is included in the statement of operations as earnings in joint ventures and our investments therein are adjusted by a similar amount. We have no significant influence over our joint venture described in Note 5 Joint Ventures to the financial statements, and therefore account for our investment using the cost method. For joint ventures where we hold more than 50% of the voting interest and has significant influence, the joint venture is consolidated with the presentation of a non-controlling interest. In determining whether significant influence exists, we consider our participation in policy-making decisions and our representation on the venture’s management committee. We currently have no joint venture of this nature. 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not applicable.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

At the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision of, and with the participation of, our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a – 15(e) and Rule 15d – 15(e) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective, and that information required to be disclosed by the Company in its reports that it files or submits to the SEC under the Exchange Act, is recorded, processed, summarized and reported within the time period specified in applicable rules and forms.

 

Our Chief Executive Officer and Chief Financial Officer have also determined that the disclosure controls and procedures are effective, and that material information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow for accurate required disclosure to be made on a timely basis.

 

Changes in internal controls over financial reporting

 

During the quarter ended June 30, 2019, there have been no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.


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PART II – OTHER INFORMATION

 

Item 1.  Legal Proceedings

 

In 2017, the Company, its subsidiary and the joint venture, as claimants, filed an arbitration statement of claim against NyacAU, LLC (“NyacAU”), BEAR Leasing, LLC, and Dr. J. Michael James, as respondents. In 2018, the respondents filed a counter-claim against us, the claimants. The arbitration claim alleges, among other things, claims concerning related-party transactions, accounting issues, interpretation of the joint venture operating agreement, allocation of tax losses between the joint venture partners, and unpaid amounts due Goldrich relating to the Chandalar Mine. The arbitration occurred during July and August 2018 in Anchorage, Alaska before a three-member panel. Under the terms of the Operating Agreement, both partners are required to abide by the rulings proceeding from the arbitration panel. Arbitration testimony was completed in August 2018, with many motions and responses submitted to the panel since that time. The panel issued an Interim Award on May 25, 2019 but has yet to rule if the Interim Award may be changed.  Also, the Interim Award requested additional data and calculations relating to various matters that could affect the final outcome of the arbitration.

Item 1A.  Risk Factors

 

There have been no changes to our risk factors as reported in our annual report on Form 10-K for the year ended December 31, 2018.

 

Item 2.  Unregistered Sales of Equity Securities and Use Of Proceeds

 

See full disclosure in section entitled “Sale of Unregistered Securities” above, which is incorporated by reference to this Item 2.

Item 3.  Defaults upon Senior Securities

 

None.

 

Item 4.  Mine Safety Disclosure

 

Our exploration properties are subject to regulation by the Federal Mine Safety and Health Administration ("MSHA") under the Federal Mine Safety and Health Act of 1977 (the "Mine Act"). Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (The "Dodd-Frank Act"), issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities.

 

During the quarter ended June 30, 2019, at our joint venture, GNP, we had no such specified health and safety violations, orders or citations, related assessments or legal actions, mining-related fatalities, or similar events in relation to our United States operations requiring disclosure pursuant to Section 1503(a) of the Dodd-Frank Act.

 

Item 5.  Other Information

 

None.


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Item 6.  Exhibits

 

Exhibit No.

 

Document

31.1

 

Certification of the Chief Executive Officer pursuant to Rule 13a-14 of the Exchange Act

31.2

 

Certification of the Chief Financial Officer pursuant to Rule 13a-14 of the Exchange Act

32.1

 

Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

 

Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

 

XBRL Instance Document

101.SCH

 

XBRL Taxonomy Extension Schema Document

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document


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SIGNATURES

 

In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant has caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date:  August 26, 2019

 

 

GOLDRICH MINING COMPANY

 

By   /s/  William Schara                                                        

William Schara, Chief Executive Officer and President

 

 

In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant has caused Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

Date:  August 26, 2019

 

GOLDRICH MINING COMPANY

 

By    /s/ Ted R. Sharp                                                     

Ted R. Sharp, Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 


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