| NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES Restatement Effect on Financial Statements The following table illustrates the
impact of the restatement of funds advanced to a related party and the restated audited consolidated balance sheet, the audited
statement of operations and audited statement of cash flows for the fiscal year ended June 30, 2017. Additional information is
disclosed in NOTE 13, RELATED PARTY TRANSACTIONS, Entry into a Material Definitive Agreement Effects on the previously issued financial
statements are as follows:
(A) Reclassification of expenditures for mine equipment, net of depreciation to misappropriated funds
expense.
(B) Increased net loss for the period due to reclassification of misappropriated funds to expense.
(C) Reclassification of expenditures for operating expenses and depreciation expense to misappropriated
funds expense.
(D) Accrued interest and penalties on judgements, accrued interest added to note principle and interest
rate change on note payable.
(E) Restatement of cash funds regarding related party transactions and misappropriated funds.
(F) Share issuance correction for consulting.
(G) Rounding correction
As Previously Adjustment Restated
Consolidated Balance Sheet at June 30, 2017:
Cash E $ 441,806 $ (49,431) $ 392,375
Escrow deposit E $ 500,000 $ (500,000) $ —
Total Current Assets $ 981,644 $ (549,431) $ 432,213
Mine Equipment, net of depreciation of $21,799 A $ 245,933 $ (245,933) $ —
Total Assets $ 1,227,577 $ (795,364) $ 432,213
Accounts payable D $ 3,244,368 $ 32,331 $ 3,276,699
Accrued liabilities D $ 6,216,348 $ 72,685 $ 6,289,033
Payable to related party E $ 49,420 $ (49,420) $ —
Notes payable, current portion G $ 2,376,406 $ 1 $ 2,376,407
Total Current Liabilities $ 15,246,415 $ 55,597 $ 15,302,012
Common stock F $ 579,873 $ 11,331 $ 591,204
Additional paid in capital F $ 83,414,595 $ 541,042 $ 83,955,637
Accumulated deficit B $ (98,013,306) $ (1,403,334) $ (99,416,640)
Stockholders’ Deficit $ (14,018,838) $ (850,961) $ (14,869,799)
Total Liabilities and Stockholders’ Deficit $ 1,227,577 $ (795,364) $ 432,213
Consolidated Statement of Operations for the fiscal year
Exploration and other mine related costs E $ 255,917 $ (166,543) $ 89,374
General and administration E,F $ 1,450,797 $ 569,665 $ 2,020,462
Depreciation and amortization C $ 21,799 $ (21,799) $ —
Total Operating Expenses $ 1,728,513 $ 381,323 $ 2,109.836
Misappropriated funds E $ — $ (971,099) $ (971,099)
Interest expense D $ (961,386) $ (50,912) $ (1,012,298)
Total Other Income and (Expense) $ 4,113,056 $ (1,022,011) $ 3,091,045
Net Income $ 2,384,543 $ (1,403,334) $ 981,209
Consolidated Statement of Cash Flows for fiscal year
Net income $ 2,384,543 $ (1,403,334) $ 981,209
Depreciation and amortization C $ 21,799 $ (21,799) $ —
Stock issued for services F $ 475,007 $ 552,373 $ 1,027,380
Accounts payable and accrued liabilities D $ 1,002,960 $ (97,671) $ 905,289
Net Cash Used in Operating Activities $ (1,063,394) $ (970,431) $ (2,033,825)
Purchase of equipment A $ (267,732) $ 267,732 $ —
Escrow deposit on mineral property E $ (500,000) $ 500,000 $ —
Net Cash Used in Investing Activities $ (767,732) $ 767,732 $ —
Repayments to related party for expenses paid on behalf of Company E $ (153,268) $ 153,268 $ —
Net Cash Provided by Financing Activities $ 2,270,117 $ 153,268 $ 2,423,385
Increase in cash and cash equivalents E $ 438,991 $ (49,431) $ 389,560 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. Below presents summary financial information at the three
fiscal years presented in this 10-K filing.
June 30,
2019 2018 2017
Cash on hand $ 264,900 $ 18,897 $ 392,375
Working capital deficit $ 4,116,324 $ 18,396,800 $ 14,869,799
Stockholder deficit $ 775,416 $ 17,299,684 $ 14,869,799
Current year net income (loss) $ 8,534,704 $ (2,596,734) $ 981,209 On August 26, 2015, Santa Fe filed for
Chapter 11 Bankruptcy protection, Case # 15-11761 (MFW) in Delaware. With the dismissal of our bankruptcy case in June 15, 2016,
all assets of the Company were sold. These conditions raise substantial doubt regarding the Company’s ability to continue
as a going concern. 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 implemented production at one of our recently acquired mine sites and generating
substantial cash flow from operations and an acceptable source to process the mineralized ore to generate revenue. 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. As of the fiscal years ending June 30,
2019, 2018 and 2017, the Company was in default on debt facility payments as follows:
June 30,
2019 2018 2017
Amount due under the Gold Stream Agreement $ — $ 7,572,653 $ 7,365,848
Other notes payable $ 398,793 $ 2,326,407 $ 2,376,407
Accrued other note payable interest $ 110,618 $ 3,031,677 $ 2,318,524
Notes payable and accrued interest to related party $ — $ — $ — Principles of Consolidation The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries AZCO Mica, Inc., a Delaware corporation, The Lordsburg Mining
Company, a New Mexico corporation, Santa Fe Gold Barbados Corporation, a Barbados corporation, Santa Fe Acquisitions Company, a
New Mexico Limited Liability Company, Minerals Acquisitions, LLC, a New Mexico Limited Liability Company and Bullard’s Peak
Corporation, a New Mexico corporation. All significant inter-company accounts and transactions have been eliminated in consolidation. On July 19, 2016, a new company was
formed, Santa Fe Acquisition LLC (“SFA”) with Tom Laws, our CEO at the time, as the signer, for the sole purpose of
acquiring assets for Santa Fe Gold (“SFG”). On September 25, 2017, with an effective date of July 23, 2016, the CEO
assigned ownership of SFA to Santa Fe Gold whereby SFG became to sole member of SFA resulting in SFA becoming a wholly owned subsidiary
of SFG. Any major purchases were made through the SFA Company for the benefit of SFG, with the funding provided by SFG. Estimates The preparation of consolidated financial
statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during
the reporting year. Actual results could differ from those estimates under different assumptions or conditions. Significant estimates are used when
accounting for the Company’s carrying value of mineral properties, useful life of fixed assets, depreciation and amortization,
accruals, derivative instrument liabilities, taxes and contingencies, asset retirement obligations, revenue recognition, and stock-based
compensation which are discussed in the respective notes to the consolidated financial statements. Fair Value of Financial Instruments
The carrying values of cash, miscellaneous
receivables, accounts and notes payable and accrued liabilities approximated their related fair values as of June 30, 2019, 2018
and 2017 (As Restated), due to the relatively short-term nature of these instruments. Cash and Cash Equivalents The Company considers all liquid investments
purchased with an initial maturity of three months or less to be cash equivalents. The Company maintains its cash in bank deposit
accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The
Company believes it is not exposed to any significant credit risk on cash balances. Mine Development Mine development costs include engineering
and metallurgical studies, drilling, and other related costs to delineate an ore body, and the building of access ways, shafts,
lateral access, drifts, ramps and other infrastructure in an underground mine. Costs incurred before mineralization is classified
as proven and probable reserves are expensed and classified as exploration expense. Capitalization of mine development project
costs, that meet the definition of an asset, begins once mineralization is classified as proven and probable reserves. Drilling and related costs are capitalized
for an ore body where proven and probable reserves exist and the activities are directed at obtaining additional information on
the ore body or converting non-reserve mineralization to proven and probable reserves. All other drilling and related costs are
expensed as incurred. Drilling costs incurred during the production phase for operational ore control are allocated to inventory
costs and then included as a component of costs applicable to sales. Mine development is amortized using
the units-of-production method based upon estimated recoverable ounces in proven and probable reserves. To the extent that these
costs benefit an entire ore body, they are amortized over the estimated life of the ore body. Costs incurred to access specific
ore blocks or areas that only provide benefit over the life of that area are amortized over the estimated life of that specific
ore body. Currently, with no claims or mines in our possession, no development costs are incurred. As of June 30, 2019, the Company has
not established proven or probable reserves or established the commercial feasibility of any of our exploration projects and all
exploration costs are being expensed. Mineral Rights Mineral properties are capitalized at
their fair value at the acquisition date, either as an individual asset purchase or as part of a business combination. When it
is determined that a mineral property can be economically developed as a result of establishing reserves, subsequent mine development
is capitalized and are amortized using the units of production method over the estimated life of the ore body based on estimated
recoverable tonnage in proven and probable reserves. The Company’s mineral rights generally
are enforceable regardless of whether proven and probable reserves have been established. The Company has the ability and intent
to renew mineral interests where the existing term is not sufficient to recover all identified and valued proven and probable reserves
and/or undeveloped mineralized material. Costs of exploration, carrying and retaining
unproven mineral lease properties are expensed as incurred. The Company expenses all mineral exploration costs as incurred as it
is still in the exploration stage. If the Company identifies proven and probable reserves in its investigation of its properties
and upon development of a plan for operating a mine, it would enter the development stage and capitalize future costs until production
is established. When a property reaches the production
stage, the related capitalized costs are amortized on a units-of-production basis over the proven and probable reserves following
the commencement of production. The Company assesses the carrying costs of the capitalized mineral properties for impairment under
ASC 360-10, “Impairment of long-lived assets”, and evaluates the carrying value under ASC 930-360, “Extractive
Activities - Mining”, annually. An impairment is recognized when the sum of the expected undiscounted future cash flows is
less than the carrying amount of the mineral properties. Impairment losses, if any, are measured as the excess of the carrying
amount of the mineral properties over its estimated fair value. To date, the Company has not established the
commercial feasibility of any exploration prospects; therefore, all exploration costs are expensed as incurred. Derivative Financial Instruments
The Company does not use derivative
instruments to hedge exposures to cash flow, market, or foreign currency risks. As described in NOTE 4, the Company reviews the
terms of convertible debt, equity instruments and other financing arrangements to determine whether there are embedded derivative
instruments, including embedded conversion options that are required to be bifurcated and accounted for separately as a derivative
financial instrument. Also, in connection with the issuance of financing instruments, the Company may issue freestanding options
or warrants that may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity. The
Company may also issue options or warrants to non-employees in connection with consulting or other services. Derivative financial instruments are
initially measured at their fair value. For derivative financial instruments that are accounted for as liabilities, the derivative
instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value
reported as charges or credits to income. To the extent that the initial fair values of the freestanding and/or bifurcated derivative
instrument liabilities exceed the total proceeds received, an immediate charge to income is recognized as a one-day derivative
loss, in order to initially record the derivative instrument liabilities at their fair value. The discount from the face value of
the convertible debt or equity instruments resulting from allocating some or all of the proceeds to the derivative instruments,
together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to income,
using the effective interest method. When required to arrive at the fair
value of derivatives associated with the convertible notes and warrants, a Black Scholes and a Monte Carlo models are utilized
that values the Convertible Note and Warrant based on average discounted cash flow factoring in the various potential outcomes
by a Chartered Financial Analyst (‘CFA”). In determining the fair value of the financial derivatives, the CFA assumed
that the Company’s business would be conducted as a going concern. The classification of derivative instruments,
including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period.
If reclassification is required, the fair value of the derivative instrument, as of the determination date, is reclassified. Any
previous charges or credits to income for changes in the fair value of the derivative instrument are not reversed. Derivative instrument
liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative
instrument could be required within twelve months of the balance sheet date. Reclamation and Asset Retirement
Costs Reclamation obligations are recognized
when incurred and recorded as liabilities at fair value. The liability is accreted over time through periodic charges to accretion
expense. The asset retirement cost is capitalized as part of the asset’s carrying value and depreciated over the life of
the related asset. Reclamation costs are periodically adjusted to reflect changes in the estimated present value resulting from
the passage of time and revisions to the estimates of either the timing or amount of the reclamation costs. The reclamation obligation
is based on when spending for an existing disturbance will occur. The Company reviews, on an annual basis, unless otherwise deemed
necessary, the reclamation obligation at each mine site in accordance with ASC guidance for reclamation obligations. No reclamation
costs were required for the end of our fiscal 2019, 2018 or 2017. Income Taxes The Company accounts for income taxes
using the asset and liability approach, which requires recognition of deferred tax liabilities and assets for the expected future
tax consequences of temporary differences between the carrying amounts and the tax basis of such assets and liabilities. This method
utilizes enacted statutory tax rates in effect for the year in which the temporary differences are expected to reverse and gives
immediate effect to changes in income tax rates upon enactment. A valuation allowance is recorded when it is more likely than not
that deferred tax assets will be unrealizable in future periods. As of June 30, 2019, 2018 and 2017, the Company has recorded a
valuation allowance against the full amount of its net deferred tax assets. The inability to foresee taxable income in future years
makes it more likely than not that the Company will not realize its recorded deferred tax assets in future periods. Net Earnings (Loss) Per Share Basic earnings (loss) per share are
calculated by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted earnings per
share are calculated by dividing net income by the weighted average number of common shares and dilutive common stock equivalents
outstanding. During the periods when they are anti-dilutive, common stock equivalents, if any, are not considered in the computation.
For the fiscal year ended June 30, 2018, the impact of outstanding stock equivalents has not been included as they would be anti-dilutive. A reconciliation of the weighted average
shares outstanding used in the basic and diluted earnings per share computation (“EPS”) for the fiscal years ended
June 30, 2019 and 2017 is as follows: June 30, 2019:
Net Income (Numerator)
Weighted Average Common Shares (Denominator)
Per Share Amount
Basic EPS
Income available to common stockholders $ 8,534,704 329,903,520 $ 0.03
Diluted EPS
Dilutive effect of options — 3,784,779
Income available to common stockholders plus assumed exercise
of options and warrants $ 8,534,704 333,688,299 $ 0.03 The number of warrants excluded from the calculation
of diluted earnings per share for the year ended June 30, 2019, was 100,000, because their inclusion would have been anti-dilutive. June 30, 2017:
Net Income (Numerator)
Weighted Average Common Shares (Denominator)
Per Share Amount
Basic EPS
Income available to common stockholders $ 981,209 263,709,360 $ 0.00
Diluted EPS
Gain on derivatives on convertible notes (153,538) —
Interest expense on convertible notes 269,776 —
Loss on foreign currency translation 71,181 —
Gain on debt extinguishment (4,068,901) —
Dilutive effect of options — 40,085
Dilutive effect of convertible notes — 41,550,870
Income available to common stockholders plus assumed exercise
of options $ (2,900,273) 305,300,315 $ (0.01) The number of warrants excluded from
the calculation of diluted earnings per share for the year ended June 30, 2017, was 9,348,434, because their inclusion would have
been anti-dilutive. Stock-Based Compensation In connection with terms of employment
with the Company’s executives and employees, the Company occasionally issues options to acquire its common stock. Awards
are made at the discretion of the Board of Directors. Such options may be exercisable at varying exercise prices and generally
vest over a period of six months to a year. The Company accounts for share-based
compensation on the grant date fair value of the award. The Company estimates the fair value of the award using the Black-Scholes
option pricing model for valuation of the share-based payments. The Company believes this model provides the best estimate of fair
value due to its ability to incorporate inputs that change over time, such as volatility and interest rates, and to allow for actual
exercise behavior of option holders. The compensation cost is recognized over the expected vesting period. Share based payments
to nonemployees are valued at the earlier or a commitment date or completion of services. Stock based compensation for the years
ended June 30, 2019, 2018 and 2017 was $291,608, $389,181, and $1,027,380, respectively. Recent Accounting Pronouncements
In May 2014, the FASB issued ASC updated
No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09) In August 2014, the FASB issued ASU
2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40) Disclosure of Uncertainties about
an Entity’s Ability to Continue as a Going Concern In
February 2016, the FASB issued ASU “Leases (Topic 842),” which
requires lessees to recognize assets and liabilities on the balance sheet for the rights obligations
created by all leases with a term of more than one year. Accounting by lessors will remain similar to existing U.S. GAAP. Subsequent
accounting standards updates have been issued, which amend and/or clarify the application of ASU The
guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018 and early
adoption is permitted. In August 2016, the FASB issued ASU
No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. In May 2017, FASB issued ASU 2017-09,
Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting In August 2018, ASU No. 2018-13 was
issued to modify and enhance the disclosure requirements for fair value measurements. This update is effective in fiscal years,
including interim periods, beginning after December 1, 2020, and early adoption is permitted. The Company is currently evaluating
this guidance and the impact on its Consolidated Financial Statements, if any. Other recent accounting pronouncements
issued by the FASB (including its Emerging Issues Task Force, and the SEC did not, or are not believed by management to, have a
material impact on the Company's present or future financial position, results of operations or cash flows. |
