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

The following discussion and analysis provides information that management believes is relevant for an assessment and understanding of our results of operations and financial condition. This information should be read in conjunction with our audited financial statements, which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, and our interim unaudited financial statements and notes thereto included with this report in Part I, Item 1.





COVID-19 Pandemic

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

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

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





Forward-Looking Statements

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

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





Overview

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

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











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

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

Results of Operations for the three months ended June 30, 2022 and 2021





                                           Three months ended June 30,
                                              2022               2021

Operating expenses:
General and administrative expenses      $       31,211       $   531,550
Total operating expenses                         31,211           531,550

Operating loss                                  (31,211 )        (531,550 )

Other expense:
Interest expense                                (94,318 )         (84,893 )
Loss on change in derivative liability         (306,552 )         (16,491 )
Total other expense                            (400,870 )        (101,384 )

Net loss                                 $     (432,081 )     $  (632,934 )




Operating expenses

During the three months ended June 30, 2022, our total operating expenses included general and administrative expenses of $31,211 as compared to $531,550 during the three months ended June 30, 2021. The $500,339 decrease is primarily associated with decreases in stock-based compensation and investor relation expenses.





Other expense

During the three months ended June 30, 2022, total other expense was $400,870 as compared to $101,384 during the three months ended June 30, 2021. The $299,486 change was mainly related to the loss on change in derivative liability.











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Results of Operations for the six months ended June 30, 2022 and 2021





                                           Six months ended June 30,
                                             2022              2021

Operating expenses:
General and administrative expenses      $      99,808     $  1,250,987
Total operating expenses                        99,808        1,250,987

Operating loss                                 (99,808 )     (1,250,987 )

Other income (expense):
Interest expense                              (160,007 )       (148,494 )
Loss on change in derivative liability        (277,012 )         (7,392 )
Total other expense                           (437,019 )       (155,886 )

Net loss                                 $    (536,827 )   $ (1,406,873 )




Operating expenses

During the six months ended June 30, 2022, our total operating expenses included general and administrative expenses of $99,808 as compared to $1,250,987 during the six months ended June 30, 2021. The $1,151,179 decrease is primarily associated with decreases in stock-based compensation and investor relation expenses.





Other expense

During the six months ended June 30, 2022, total other expense was $437,019 as compared to $155,886 during the six months ended June 30, 2021. The $281,133 change was mainly related to related to the loss on change in derivative liability.

Liquidity and Capital Resources

Our unaudited consolidated financial statements have been prepared on a going concern basis, which assumes that we will be able to meet our obligations and continue our operations during the next fiscal year. Asset realization values may be significantly different from carrying values as shown in our consolidated financial statements and do not give effect to adjustments that would be necessary to the carrying values of assets and liabilities should we be unable to continue as a going concern. At June 30, 2022, we had not yet generated sufficient revenues or achieved profitable operations and we have accumulated losses of $18,506,640. We expect to incur further losses in the development of our business, all of which raises substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern depends on our ability to generate future profits and/or to obtain the necessary financing to meet our obligations arising from normal business operations when they come due, of which there can be no assurance.

During the six months ended June 30, 2022, the Company entered into two unsecured promissory notes totaling $40,000 and three unsecured promissory notes with related parties totaling $30,000.

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











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Cash Flows



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



                                              Six months ended June 30,
                                                2022               2021

Net cash used in operating activities $ (85,288 ) $ (198,359 )



Net cash used in investing activities                (769 )        (36,727 )

Net cash provided by financing activities 70,000 412,185



Net change in cash                                (16,057 )        177,099
Cash beginning of period                           18,766                -
Cash end of period                          $       2,709       $  177,099

At June 30, 2022, we had $2,709 in cash and a $1,854,729 working capital deficit. This compares to cash of $18,766 and a working capital deficit of $1,459,741 at December 31, 2021.

Net cash used in operating activities during the six months ended June 30, 2022 was $85,288 and was mainly comprised of our $536,827 net loss during the period, adjusted by a non-cash charges of $18,608 of stock compensation, loss on change in derivative liability of $277,012 and accretion of discounts on notes payable of $122,362. In addition, it reflects changes in operating assets and liabilities of $33,557.

Net cash used in operating activities from during the six months ended June 30, 2021 was $198,359 and was mainly comprised of our $1,406,873 net loss during the period, adjusted by a non-cash charges of $1,099,902 of stock compensation, loss on change in derivative liability of $7,392 and accretion of discounts on notes payable of $115,583. In addition, it reflects changes in operating assets and liabilities of $14,363.

Net cash used in investing activities during the six months ended June 30, 2022 was $769 which was comprised of cash payments for development costs.

Net cash used in investing activities during the six months ended June 30, 2021 was $36,727 which was comprised of cash payments for development costs.

During the six months ended June 30, 2022, net cash provided by financing activities was $70,000 comprised of $40,000 proceeds from notes payable and $30,000 proceeds from notes payable from related parties.

During the six months ended June 30, 2021, net cash provided by financing activities from continuing operations was $412,185 comprised of $175,000 proceeds from convertible debt from third parties, $287,000 proceeds from exercise of warrants, $605 proceeds on advances from third parties, offset by $20,000 payments on advances and $30,420 payments on advances from third parties.

Off Balance Sheet Arrangements

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











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Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates, assumptions and judgments that affect the amounts reported in the financial statements, including the notes thereto. We consider critical accounting policies to be those that require more significant judgments and estimates in the preparation of our financial statements, including the following: long lived assets; intangible assets valuations; and income tax valuations. Management relies on historical experience and other assumptions believed to be reasonable in making its judgment and estimates. Actual results could differ materially from those estimates.

Management believes its application of accounting policies, and the estimates inherently required therein, are reasonable. These accounting policies and estimates are periodically reevaluated, and adjustments are made when facts and circumstances dictate a change.

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