Forward-Looking Statements

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





Overview

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

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

Basis of Presentation and Going Concern

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

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

At March 31, 2020, the Company was in default on delinquent payments on accounts payable of approximately $3.05 million, $398 thousand on a note payable and $643 thousand on other accrued liabilities.

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

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

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Revenue

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





Operating Costs and Expenses

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

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





Other Income (Expense)

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

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





Revenue

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





Operating Costs and Expenses

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

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





Other Income (Expense)

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

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

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

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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