| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 3 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES This summary of significant accounting
policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements
and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These
accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently
applied in the preparation of the financial statements. Accounting Method The Company’s financial statements
are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States
of America. Accounting for Stock Options and Stock
Awards Granted to Employees and Nonemployees All transactions in which goods or services
are received for the issuance of shares of the Company’s common stock or options to purchase shares of common stock are accounted
for based on the fair value of the goods or services received or the fair value of the equity interest issued, whichever is more
reliably measurable. The Company estimates the fair value of stock-based compensation using the Black-Scholes model, which requires
the input of some subjective assumptions. These assumptions include estimating the length of time employees will retain their vested
stock options before exercising them (“expected life”), the estimated volatility of the Company’s common stock
price over the expected term (“volatility”), the risk-free interest rate and the dividend yield. Changes in the subjective
assumptions can materially affect the estimate of the fair value of stock-based compensation. 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 gold ounces in inventories, the recoverability of the cost of mining claims, asset retirement
obligation, stock-based compensation, determination of the fair value of common stock issued, deferred tax assets and related valuation
allowances. Actual results could differ from those estimates. Reclassifications Certain reclassifications have been made
to conform prior periods’ amounts to the current presentation. These reclassifications have no effect on the results of operations,
stockholders’ deficit, and cash flows previously reported. Cash and Cash Equivalents The Company considers all highly liquid
investments and short-term debt instruments with original maturities of three months or less when purchased to be cash equivalents. Reclamation bonds Reclamation bonds primarily represent bonds
and are restricted primarily for reclamation funding which are carried at cost plus earned interest. Reclamation bonds are shown
as a non-current asset and is included in the balance sheet. See Note 5. Inventories The recovery of gold from certain oxide
ores is achieved through the heap leaching process. Under this method, mineralized material is placed on a leach pad where it is
treated with a chemical solution, which dissolves the gold contained in the material. The resulting “pregnant” solution
is further processed in a plant where gold is recovered. The Company records ore on leach pad, solution in carbon columns in process
and gold concentrate, at average production cost per gold ounce, less provisions required to reduce inventory to net realizable
value. Production costs include the cost of mineralized material processed; direct and indirect materials and consumables; direct
labor; repairs and maintenance; utilities; amortization of property, equipment, and mineral properties; and mine administrative
expenses. Revenue from the sale of silver is accounted for as by-product and is deducted from production costs. Costs are removed
from ore on leach pads as ounces are recovered, based on the average cost per recoverable ounce of gold on the leach pad. Estimates of recoverable gold on the leach
pad are calculated from the quantities of material placed on the leach pad (measured tons added to the leach pad), the grade of
material placed on the leach pad (based on assay data) and an estimated recovery percentage (based on ore type). The nature of
the leaching process inherently limits the ability to precisely monitor inventory levels. As a result, actual gold ounces recovered
are regularly monitored and estimates are refined based on actual results over time. As of December 31, 2018, the Company had a
limited operating history and actual results only over a short period of time. Due to this, estimates of recoverable gold are based
primarily on initial tests with only limited refinements. Variations between actual and estimated
quantities resulting from changes in assumptions and estimates that do not result in write-downs to net realizable value are accounted
for on a prospective basis. The ultimate recovery of gold from a leach pad will not be known until the leaching process is concluded.
The quantification of material inventory on the leach pad is based on estimates of the quantities of gold at each balance sheet
date that the Company expects to recover during the next 12 to 18 months. See Notes 2 and 6. Property and Equipment Property and equipment are stated at cost.
Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the assets,
which range from three to seven years. The Company evaluates the recoverability of property and equipment when events and circumstances
indicate that such assets might be impaired. The Company determines impairment by comparing the undiscounted future cash flows
estimated to be generated by these assets to their respective carrying amounts. Maintenance and repairs are expensed as incurred.
Replacements and betterments that extend the useful life of the property and equipment are capitalized. The cost and related reserves
of assets sold or retired are removed from the accounts and any resulting gain or loss is reflected in results of operations. See
Note 7. Mineral Properties and Leases The Company capitalizes costs for acquiring
mineral properties and ongoing mineral lease payments and expenses costs to maintain mineral rights. Upon reaching the production
stage, the capitalized costs are 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. Mine property costs include
the building of infrastructure of the processing facility including the heap leach pad and the carbon in column process plant along
with water wells, roads and fencing. These costs are capitalized until ready for their intended use at which time they are amortized
using the units of production method based on projected units of production which approximates the estimated life of the facility.
Additionally, interest is capitalized to mine development until such assets are ready for their intended use. The Company does
not have proven and probable reserves at this time. See Note 8. Mineral Exploration and Development
Costs Until proven and probable reserves (as
defined by SEC Guide 7) are established, all exploration expenditures are expensed as incurred. Once such reserves are established,
expenditures to develop new mines, to define further mineralization in existing ore bodies, and to expand the capacity of operations,
are capitalized and will be amortized on units of production basis over proven and probable reserves. Previously capitalized costs
are expensed in the period the property is abandoned. Impairment of Long-Lived Assets The Company evaluates the carrying amounts
of its long-lived assets for impairment whenever events and circumstances indicate the carrying value may not be recoverable from
the estimated future cash flows expected to result from its use and eventual disposition. Estimated undiscounted future net cash
flows from each mineral property are calculated using estimated future production, three-year average metals prices, operating
capital and costs, and reclamations costs. An impairment loss is recognized when the estimated discounted future cash flows expected
to result from the use of an asset are less than the carrying amount of the asset. The Company’s estimates of future cash
flows are subject to risks and uncertainties. It is reasonably possible that changes in estimates could occur which may affect
the expected recoverability of the Company’s investments in mineral properties. Provision for Taxes Income taxes are provided based upon the
liability method of accounting. Under this approach, deferred income taxes are recorded to reflect the tax consequences in future
years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end. A
valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the “more
likely than not” standard to allow recognition of such an asset. Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income
tax purposes. When applicable, the Company will recognize
a liability for unrecognized tax benefits. The Company recognizes interest accrued related to unrecognized tax benefits in interest
expense and penalties in operating expenses. No such interest or penalties were recognized during the periods presented. See Note
16. Earnings Per Share Basic earnings per share includes no dilution
and is computed by dividing net income (loss) available to common shareholders by the weighted average common shares outstanding
for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of the
Company.
2018 2017
Net income (loss) $ 21,344,498 $ (4,076,641 )
Deemed capital contribution on extinguishment of preferred stock 4,068,720 -
Net income (loss) available to common shareholders - basic 25,413,218 (4,150,162 )
Interest expense on convertible
notes payable - related parties 74,465 -
Net income (loss) available to common shareholders - diluted $ 25,487,683 $ (4,150,162 )
Weighted average shares outstanding - basic 19,196,808 13,682,082
Dilutive shares – convertible notes payable – related parties 3,457,602 -
Weighted average shares outstanding - diluted 22,654,411 13,682,082
Basic income (loss) per share $ 1.32 $ (0.30 )
Diluted income (loss) per share $ 1.12 $ (0.30 ) At December 31, 2018, the common stock
equivalents of 2,400,000 associated with the Company’s outstanding stock options were excluded from the calculation of diluted
earnings per share because the options’ exercise price was not lower than the average share price during the year. At December 31, 2017, common stock equivalents
included 3,728,886 shares associated with convertible debt – related parties and 47,211,002 shares associated with convertible
preferred stock. These were excluded from the calculation of diluted earnings per share because they were anti-dilutive. Revenue Recognition Sales of gold concentrate sold directly
to customers are recorded as revenues and receivables upon completion of the performance obligations and transfer of control of
the product to the customer. For concentrate sales, the performance obligation is met, the transaction price can be reasonably
estimated, and revenue is recognized generally at the time of shipment at estimated forward prices for the anticipated month of
settlement. Due to the time elapsed from shipment to the customer and the final settlement with the customer, prices at which sales
of our concentrates will be settled are estimated. Previously recorded sales and accounts receivable are adjusted to the estimated
settlement metals prices until final settlement by the customer. Sales and accounts receivable for concentrate
shipments are recorded net of charges by the customer for treatment, refining, smelting losses, and other charges negotiated with
the customers. Charges are estimated upon shipment of concentrates based on contractual terms, and actual charges typically do
not vary materially from estimates. See Note 15. Reclamation and Remediation 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 asset.
After the initial measurement of the asset retirement obligation, the liability is adjusted when there are changes in the estimated
future cash flows due to change in estimated costs or change in time until reclamation will commence. 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. Such assumptions are based on the Company’s current mining plan and the best available
information for making such estimates. See Note 14. 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. Financial Instruments The Company’s financial instruments
include cash and cash equivalents as well as various notes payable. All instruments are accounted for on a historical cost basis,
which, due to the short maturity and interest rates of these financial instruments, approximates fair value at December 31, 2018
and December 31, 2017. Fair Value Measurements The Company discloses the following information
for each class of assets and liabilities that are measured at fair value:
1. the fair value measurement;
2. the level within the fair value hierarchy in which the fair value measurements in their entirety
fall, segregating fair value measurements using quoted prices in active markets for identical assets or liabilities (Level 1),
significant other observable inputs (Level 2), and significant unobservable inputs (Level 3);
3. for fair value measurements using significant unobservable inputs (Level 3), a reconciliation of
the beginning and ending balances, separately presenting changes during the period attributable to the following:
a. total gains or losses for the period (realized and unrealized), segregating those gains or losses
included in earnings, and a description of where those gains or losses included in earnings are reported in the statement
of operations;
b. the amount of these gains or losses attributable to the change in unrealized gains or losses relating
to those assets or liabilities still held at the reporting period date and a description of where those unrealized gains or losses
are reported;
c. purchases, sales, issuances, and settlements (net); and
d. transfers into and/or out of Level 3.
4. the amount of the total gains or losses for the period 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 and a description
of where those unrealized gains or losses are reported in the statement of operations; and
5. in annual periods only, the valuation technique(s) used to measure fair value and a discussion
of changes in valuation techniques, if any, during the period. At December 31, 2018 and December 31, 2017,
the Company has no assets nor liabilities that require measurement at fair value on a recurring basis. Going Concern As shown in the accompanying financial
statements, the Company had an accumulated deficit of $5,674,925 through December 31, 2018 and negative working capital of $2,789,068
which raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not
include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification
of liabilities that might be necessary in the event the Company cannot continue in existence. Although production has restarted in 2019,
it has not yet reached optimum levels. The timing and amount of capital requirements will depend on a number of factors, including
demand for products, metals market pricing, and the availability of opportunities for expansion through affiliations and other
business relationships. Although management has procured funding through a lender (Note 20) they intend to continue to seek new
capital from equity securities issuances to provide funds needed to increase liquidity, fund internal growth, and fully implement
its business plan. If the going concern assumption were not
appropriate for these financial statements, then adjustments would be necessary to the carrying values of the assets and liabilities,
the reported revenues and expenses, and the balance sheet classifications used. New Accounting Pronouncements Accounting Standards Updates Adopted In May 2014, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 Revenue Recognition, replacing guidance
previously codified in Subtopic 605-10 Revenue Recognition-Overall. The new ASU establishes a five step principles-based framework
in an effort to significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions,
and capital markets. In August 2015, the FASB issued ASU No. 2015-14 Revenue from Contracts with Customers (Topic 606): Deferral
of the Effective Date. ASU No. 2015-14 deferred the effective date of ASU No. 2014-09 until annual and interim reporting periods
beginning after December 15, 2017. The Company adopted ASU No. 2014-09 as of January 1, 2018 using the modified-retrospective transition
approach. The Company performed an assessment of
the impact of implementation of ASU No. 2014-09, and concluded it does not change the timing of revenue recognition or amounts
of revenue recognized compared to how it recognized revenue under previous policies. Revenues involve a very small number of types
of contracts and customers. In addition, revenue contracts do not involve multiple types of performance obligations. Concentrate sales involve variable consideration
as they are subject to changes in metals prices between the time of shipment and their final settlement. However, the Company is
able to reasonably estimate the transaction price for the concentrate sales at the time of shipment using forward prices for the
month of settlement, and values are adjusted each period until final settlement. Also, it is unlikely a significant reversal of
revenue for any one concentrate lot will occur. Adoption of ASU No. 2014-09 involves additional
disclosures, where applicable, concerning (i) contracts with customers, (ii) significant judgments and changes in judgments in
determining the timing of satisfaction of performance obligations and the transaction price, and (iii) assets recognized for costs
to obtain or fulfill contracts. See Note 15 for information on our sales of products. In August 2016, the FASB issued ASU No.
2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The update provides guidance
on classification of cash receipts and payments related to eight specific issues. The update is effective for fiscal years beginning
after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. We adopted this update as
of January 1, 2018 and there were no material impacts on our financial statements. In November 2016, the FASB issued ASU No.
2016-18 Statement of Cash Flows (Topic 230): Restricted Cash. The update requires that a statement of cash flows explain the change
during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash
equivalents. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal
years, with early adoption permitted. We adopted this update as of January 1, 2018, and there were no material impacts on our financial
statements. In January 2017, the FASB issued ASU No.
2017-01 Business Combinations (Topic 805): Clarifying the Definition of a Business. The update clarifies the definition of a business
with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions
(or disposals) of assets or businesses. We adopted this update as of January 1, 2018. We will apply the applicable provisions of
the update to any future acquisitions. Accounting Standards Updates to Become Effective in Future
Periods 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. Upon implementation of the new guidance, we will be required to recognize a liability and right-of-use asset for our
operating leases. We have elected the transition option to apply the new guidance at the effective date without adjusting comparative
periods presented. Our operating leases, which will be impacted upon adoption, are not significant and we anticipate no material
impact upon adoption on January 1, 2019. 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 financial
statements upon adoption. |
