Forward-Looking Statements

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





Overview

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

During the three-months ended September 30, 2019, the Company focused primarily on repair and improvement projects at the Jim Crow mine site and initiated our limited exploratory program at the mine site.

Basis of Presentation and Going Concern

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

The Company has recorded a net loss of $735,985 for the three months ended September 30, 2019, and has a total accumulated deficit of $94,214,655 and a working capital deficit at September 30, 2019 of $4,384,295. The Company used in operating activities, approximately $469,000. The Company currently has no source of generating revenue.

To continue as a going concern, the Company is dependent on continued capital financing for project development, repayment of various debt facilities and payment of current operating expenses until the Company has put into production, an acceptable source to generate mineralized ore to generate a revenue stream. Currently we have no commitment from any party to provide additional working capital and there is no assurance that any funding will be available as required, or if available, that its terms will be favorable or acceptable to the Company.

At September 30, 2019, the Company was in default on delinquent payments of approximately: $3.04 million on accounts payable, $398,000 on a note payable and $643,000 on other accrued liabilities.

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

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The results of operations in the past reflected a continued under-capitalization of our projects which required additional funding to be able to achieve full project performance and sustained potential profitability. We currently are dependent on additional financing to resume any mining operations and to continue our exploration efforts in the future as warranted.

Operating Results for the Three Months Ended September 30, 2019 and 2018





Revenue

During the three months ended September 30, 2019 and 2018, the Company had no revenue in the periods of measurement.





Operating Costs and Expenses

Our operating expenses incurred in three months ended September 30, 2019, increased $448,972 from $300,402 in the three months ended September 30, 2018, to $749,374 for the current period of measurement. The increases in operating expenses in the current period of measurement is attributable to increased exploration and mine related costs of $270,228, and increased general and administrative of $172,074 and an increase in depreciation of $6,670.

The increase in exploration and mine related costs were incurred on the Jim Crow mine and consisted of $156,470 in wages and payroll burden costs and other mine related costs of $113,758. The increase in general and administrative of $172,074 was mainly attributable to decreased consulting fees related to working capital raises of $62,803 and offset by an increase accounting and audit fees of $175,666, legal fees of $35,871 and salaries and payroll burden costs of $14,714.





Other Income (Expense)

Other income for the three months ended September 30, 2019, was $13,389 as compared to $446,694 for three months ended September 30, 2018, a decrease in other income of $433,305. The net decrease in other income for the current period of measurement is mainly comprised of the following income components: decrease in financing costs on commodity supply agreements of $234,417 and a decrease in recovery of a misappropriation of funds aggregating $350,521. These income items were offset by a decrease in interest expense of $151,633. The decreased interest expense and financing costs on commodity supply agreements are a result of debt write-off at our fiscal year ended June 30, 2019.

Liquidity and Capital Resources; Plan of Operation

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

The Company has recorded a net loss of $735,985 for the three months ended September 30, 2019, and has a total accumulated deficit of $94,214,655 and a working capital deficit at September 30, 2019 of $4,384,295. The Company used in operating activities, approximately $469,000. The Company currently has no source of generating revenue.

To continue as a going concern, the Company is dependent on continued capital financing for project development, repayment of various debt facilities and payment of current operating expenses until the Company has put into production an acceptable source to generate mineralized ore to generate a revenue stream. Currently we have no commitment from any party to provide additional working capital and there is no assurance that any funding will be available as required, or if available, that its terms will be favorable or acceptable to the Company.

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