GOLDRICH MINING CO - Quarter Report: 2019 September (Form 10-Q)

The accompanying notes are an integral part of these consolidated financial statements.

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The accompanying notes are an integral part of these consolidated financial statements.

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Goldrich Mining Company

Notes to the Consolidated Financial Statements (unaudited)

1.BASIS OF PRESENTATION 

The unaudited financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America for interim financial information, as well as the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.  In the opinion of the Company’s management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation of the interim financial statements have been included.  Operating results for the nine-month period ended September 30, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2019.  

For further information refer to the financial statements and footnotes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Going Concern

The accompanying consolidated financial statements have been prepared under the assumption that the Company will continue as a going concern. The Company has incurred losses since its inception and does not have sufficient cash to fund normal operations and meet debt obligations for the next 12 months without deferring payment on certain current liabilities and/or raising additional funds.

The Company currently has no historical recurring source of revenue and an accumulated deficit of $34,328,898 at September 30, 2019. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company may profitably execute a production business plan, and thereby, its ability to continue as a going concern may improve and become less dependent on the Company’s ability to raise capital to fund its future exploration and working capital requirements. The Company’s plans for the long-term return to and continuation as a going concern include the profitable exploitation of its mining properties and financing the Company’s future operations through sales of its common stock and/or debt.

The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. If the going concern basis were not appropriate for these financial statements, adjustments would be necessary in the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used.

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

Reclassifications

Certain prior period amounts have been reclassified to conform to the 2019 financial statement presentation. Reclassifications had no effect on net loss, stockholders' equity, or cash flows as previously reported.

Earnings (Loss) Per Share

We are authorized to issue 250,000,000 shares of common stock, $0.10 par value per share. At September 30, 2019, there were 139,573,798 shares of our common stock issued and outstanding.

For the periods ended September 30, 2019 and 2018, the effect of the Company’s outstanding preferred shares, options and warrants, totaling 94,042,079 and 108,490,017, respectively, would have been anti-dilutive. The total of dilutive instruments decreased during the nine months ended September 30, 2019 due to the expiration of the Class N and Class N-2 warrants.

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Goldrich Mining Company

Notes to the Consolidated Financial Statements (unaudited)

Accounting for Investments in Joint Ventures

ASC 321 Investments – Equity Securities provides guidance for equity interests that meet the definition of an equity security, as well as other equity interests (such as investments in partnerships, unincorporated joint ventures, and limited liability companies) that are required to be accounted for like equity securities under ASC 321. The term “equity interest” refers to all equity instruments within the scope of ASC 321. Under ASC 321, all equity investments are to be accounted for at fair value.  However, there is a measurement alternative for those investments without readily determinable fair values. As required by ASC 321-10-35-2, the appropriate method for investments without a readily determinable fair value is “cost less impairment”. 

The Company has an equity interest in Goldrich NyacAU Placer LLC, a 50%-owned joint venture in which the Company does not have joint control or significant influence. See Note 4 Joint Venture. Additionally, the ownership interests of the joint venture are not traded on any established market, and the fair value of the joint venture cannot be readily determined or estimated. Therefore, the Company measures its investment in the joint venture at cost less impairment, adjusted for any distributions received during the period. The carrying amount of this investment was $nil as of December 31, 2019 and 2018, respectively.

The Company performs a quantitative and qualitative assessment at each reporting date to determine whether the investment is impaired and an impairment loss equal to the difference between the carrying value and fair value is recorded within Other (income) expense on the Company's Consolidated Statement of Operations if an impairment has been determined. Because the carrying value of the joint venture is $nil, there were no impairment losses recorded during the years ended December 31, 2019 and 2018.

Recent Accounting Pronouncements

In August 2018, the FASB issued ASU No. 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The update removes, modifies and makes additions to the disclosure requirements on fair value measurements. The update is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. Management does not expect the ASU to have a material effect on the Company’s financial statements.

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 consolidated financial statements upon adoption.

Cash and Cash Equivalents

For the purposes of the statement of cash flows, we consider all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.

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 the recoverability of the cost of mining claims, joint venture distributions, accrued remediation costs, asset retirement obligations, stock-based compensation, deferred tax assets and related valuation allowances and uncertainties regarding the outcome of arbitration proceedings. Actual results could differ from those estimates.

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Goldrich Mining Company

Notes to the Consolidated Financial Statements (unaudited)

Property, Equipment, and Accumulated Depreciation

Property and equipment are stated at cost, which is determined by cash paid or fair value of the shares of the Company’s common stock issued. The Company’s property and equipment are located on the Company’s unpatented state mining claims located in the Chandalar mining district of Alaska.

All property and equipment purchased prior to 2009 are fully depreciated. The Company’s equipment is located at the Chandalar property in Alaska, with a small amount of office equipment located at Company offices in Spokane, Washington. Assets are depreciated on a straight-line basis. Improvements, which significantly increase an asset’s value or significantly extend its useful life are capitalized and depreciated over the asset’s remaining useful life.

When a fixed asset is sold at a price either higher or lower than its carrying amount, or undepreciated cost at the date of disposal, the difference between the sale proceeds over the carrying amount is recognized as gain, while a loss is recognized when the carrying amount exceeds the sale proceeds. The gain or loss is recognized in the Consolidated Statements of Operations.

Mining Properties, Claims, and Royalty Option

The Company capitalizes costs for acquiring mineral properties, claims and royalty option and expenses, costs to maintain mineral rights and leases as incurred. Should a property reach the production stage, these capitalized costs would be 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.

Income Taxes

Income taxes are recognized in accordance with Accounting Standards Codification (“ASC”) 740 Income Taxes, whereby deferred income tax liabilities or assets at the end of each period are determined using the tax rate expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on deferred tax assets when it is more likely than not that some or all of these deferred tax assets will not be realized.

Uncertain tax positions are evaluated in a two-step process, whereby (i) it is determined whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the related tax authority would be recognized.

Revenue Recognition

The Company does not have joint control or significant influence over the joint venture; therefore, distributions from our joint venture are recognized using the cost method. In accordance with ASU No. 2014-09, the Company has determined that our revenue does not arise from contracts with customers, does not involve satisfaction of any performance obligations on the part of the Company, or require company assets to be recognized or applied to determine costs to obtain or fulfill any contract generating revenue. Other than any distribution the Company was awarded in arbitration (see Note 3 Joint Venture), there was no distribution from the joint venture for 2018. There will not be a distribution for 2019, due to arbitration proceedings and dissolution of the joint venture. (See note 3, Joint Venture.)

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Goldrich Mining Company

Notes to the Consolidated Financial Statements (unaudited)

Stock-Based Compensation

The Company periodically issues common shares or options to purchase shares of the Company’s common shares to its officers, directors or other parties. These issuances are recorded at fair value. The Company uses a Black Scholes valuation model for determining fair value of options to purchase shares, and compensation expense is recognized ratably over the vesting periods on a straight-line basis. Compensation expense for grants that vest immediately are recognized in the period of grant.

Exploration Costs

Exploration costs are expensed in the period in which they occur.

Derivatives

The Company measures derivative contracts as assets or liabilities based on their fair value. Gains or losses resulting from changes in the fair value of derivatives in each period are recorded in current operating results. None of the Company’s derivative contracts qualify for hedge accounting. The Company does not hold or issue derivative financial instruments for speculative trading purposes.

Remediation and Asset Retirement Obligation

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 long-lived asset using a units of production method. After the initial measurement of the asset retirement obligation, the liability will be adjusted at the end of each reporting period to reflect changes in the estimated future cash flows underlying the obligation. 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.

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.

Fair Value Measurements

When required to measure assets or liabilities at fair value, the Company uses a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used. The Company determines the level within the fair value hierarchy in which the fair value measurements in their entirety fall. The categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Level 1 uses quoted prices in active markets for identical assets or liabilities, Level 2 uses significant other observable inputs, and Level 3 uses significant unobservable inputs. The amount of the total gains or losses for the period are 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.

During 2019 and 2018, the Company determined fair value on a recurring basis and non-recurring basis as follows:

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Goldrich Mining Company

Notes to the Consolidated Financial Statements (unaudited)

The carrying amounts of financial instruments, including notes payable, approximate fair value at September 30, 2019 and December 31, 2018. The inputs to the valuation of Level 2 liabilities are described in Note 6 Notes Payable in Gold.

3.JOINT VENTURE 

On April 3, 2012, Goldrich Placer, LLC (“GP”), a subsidiary of Goldrich, entered into a term sheet for a joint venture with NyacAU, LLC (“NyacAU”), an Alaskan private company, to bring Goldrich’s Chandalar placer gold properties into production as defined in the joint venture agreement (the “Operating Agreement”), which was subsequently signed and made effective April 2, 2012. In each case as used herein in reference to the JV, ‘production’ is as defined by the Operating Agreement. As part of the Operating Agreement, GP and NyacAU (together the “Members”) formed a 50:50 joint venture company, Goldrich NyacAU Placer LLC (“GNP”), to operate the Chandalar placer mines, with NyacAU acting as managing partner. Goldrich has no significant control or influence over the JV, and therefore accounts for its investment using the cost less impairment method.

Under the terms of the Operating Agreement, NyacAU provided funding to the JV. The loans are to be repaid from future production. According to the Operating Agreement, on at least an annual basis, the JV shall allocate and distribute all revenue (whether in cash or as gold) generated from the JV’s placer operation in the following order:

1.Operating Expenses. GNP will first pay all Operating Expenses as defined in the Operating Agreement for placer mining operations at the Claims for the current mining year. Until Commercial Production is achieved, GNP will drawdown or use a line of credit from NyacAU (“LOC1”) to fund payment of the Operating Expenses and repay LOC1 to the extent of the current year's Operating Expenses.  

2.Members' Distribution - Ten Percent (10%) Portion. After payment of Operating Expenses, GNP will distribute in kind twenty percent (20%) of the remaining gold produced, equally, ten percent (10%) to NyacAU as a Member of the GNP and ten percent (10%) to Goldrich as a Member of GNP; provided, however, that, for so long as any secondary line of credit from NyacAU to GNP (“LOC2”) or loan from NyacAU to GNP to purchase the Jumbo Basin royalty (“Loan3”) are not paid in full, GNP shall retain one hundred percent (100%) of this distribution to Goldrich and shall apply such funds as payment to reduce the balance of LOC2 and Loan3 until they are paid in full.  

3.LOC1 Payments. After payment of Operating Expenses and the Members' distribution, GNP will apply any remaining revenue to reduce the remaining balance of LOC1, if any, until it is paid in full. 

4.Reserves. After payment of Operating Expenses, the Members' distribution, and payment of LOC1, the Company may fund Reserves in an amount that is consistent with the annual budget. 

5.Member Distributions, LOC2 Payments and Loan3 Recovery. After payment of Operating Expenses, the Members', payment of LOC1, and funding of any Reserves, from any remaining gold production or revenue, the Company will distribute fifty percent (50%) to NyacAU as a Member of GNP and fifty percent (50%) to Goldrich as a Member of GNP; provided, however, that, for so long as LOC2 or Loan3 are not paid in full, GNP shall retain one hundred percent (100%) of the distribution to Goldrich and shall apply such funds as payment to reduce the balance of LOC2 and Loan3 until they are paid in full. LOC2 has never been funded or utilized.  

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Goldrich Mining Company

Notes to the Consolidated Financial Statements (unaudited)

As of December 31, 2018, the JV had not achieved commercial production as required under the Operating Agreement. As a result, GNP was dissolved during 2019 and, as of September 30, 2019, the liquidation of GNP was in process. The Company calculated distributions under item #2 above for the 2018 production season using the same methodology as prior years’ distributions. NyacAU has challenged its responsibility to declare or pay any distributions of this type for 2018. The Company has refuted the challenge as well as certain changes to the financial statements (see Arbitration).

On June 23, 2015, the Company raised net proceeds of $1.1 million through the sale of 12.5% of the cash flows of GP, Goldrich’s subsidiary, receives in the future from its interest in GNP (“Distribution Interest”), paid in cash under items #2, to Chandalar Gold, LLC (“CGL”) and GVC Capital, LLC,(“GVC”), both of which are non-related entities. GP retained its ownership of its 50% interest in GNP but, after the transaction, subject to the terms of the GNP Operating Agreement, GP will effectively receive approximately 44%, CGL will effectively receive 6% (12% of Goldrich’s 50% of GNP = 6%) and GVC will effectively receive 0.25% (0.5% of Goldrich’s 50% of GNP = 0.25%) of any distributions produced by GNP. At December 31, 2018 and 2017, an amount of $35,794 has been accrued for the distribution which is included in accrued liabilities for distributions to the Company that were applied to Loan3. No amount has been accrued for the 2019 and 2018 distribution due to uncertainties relating to realization of distributions from NyacAU, although during arbitration proceedings, Loan3 was determined and agreed to be paid in full (see Arbitration).

In 2012, the joint venture purchased, on Goldrich’s behalf, a 2% royalty interest, payable on all production from certain Goldrich mining claims at the Chandalar, Alaska property for $250,000 from Jumbo Basin Corporation. This transaction gave rise to Loan3, which was carried at an interest rate of the greater of prime plus 2% or 10%, and was to be repaid from distributions to Goldrich as defined in the Operating Agreement, prior to any distributions in cash to Goldrich. Subsequent to September 30, 2019, the arbitration panel (see Arbitration below) awarded distributions from 2016 and 2017 to Goldrich from GNP. In accordance with terms of the Operating Agreement, the Company applied the distributions toward Loan3 and the balance of principal and interest for LOC3 were paid in full at December 31, 2019.

Arbitration

In December 2017, the Company filed an arbitration statement of claim against NyacAU and other parties. The claim challenged certain accounting treatment of capital leases, allocations of tax losses, charges to the JV for funding costs related to the JV manager’s financing, related-party transactions, and other items of dispute in a previous mediation that was unsuccessful in reaching an agreement. As a result, the Company participated in an arbitration before a panel of three independent arbitrators during 2018 to address these items. Through 2019 and the filing of this report in 2020, the Company has continued to respond to panel inquiries, make motions to prosecute or defend positions, answer motions made by the opposing JV partner and aggressively support the Company’s efforts toward success.

The Company records amounts for loss or gain contingencies when it is probable that a liability or an asset is realizable and can be reasonably estimated. To date, the arbitration proceedings are still in progress, with some rulings being issued for and against the Company’s positions. No assurance can be given that the arbitration will result in a successful outcome for the Company. Due to uncertainties relating to the pending outcome, the financial statements contain only adjustments for the final results of the arbitration that are estimable and probable. See Note 7 Commitments and Contingencies and Note 8 Subsequent Events for additional information and rulings subsequent to September 30, 2019. The Company incurred $120,826 and $1,600,687 in arbitration expenses during the periods ended September 30, 2019 and September 30, 2018, respectively.

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Goldrich Mining Company

Notes to the Consolidated Financial Statements (unaudited)

4.RELATED PARTY TRANSACTIONS 

Beginning in January 2016 and through September 30, 2019, the salary of the Company’s Chief Executive Officer (“CEO”) has not been paid in full. Fees due to the Company’s Chief Financial Officer (“CFO”) have been accrued and remain unpaid:

During the year ended December 31, 2018, the Company also awarded 1,850,000 shares of common stock to officers and a director as compensation. The fair value of the shares awarded was $64,565 based upon the quoted value of the stock at the time of the grant.

5.NOTES PAYABLE & NOTES PAYABLE – RELATED PARTY  

At December 31, 2018, the Company had outstanding Notes payable of $952,634 and outstanding Notes payable - related party of $2,378,947, with all discounts being amortized. The Notes payable and Notes payable - related party had matured on October 31, 2018 and are now due on demand.

During the three and nine months ended September 30, 2019, the Company received the third, fourth, and fifth tranches of the notes payable for $318,947 and $603,158, for the respective periods, discounted at 5%, or $15,947 and $30,158, resulting in net proceeds of $303,000 and $573,000 for the three and nine months ended September 30, 2019, respectively, of which $303,000 and $509,000 net, was from a related party, respectively. The notes are due upon demand; therefore, the discounts and related warrants issued with them were immediately expensed to finance costs.

At September 30, 2019, the Company had outstanding Notes payable of $1,020,000 and outstanding Notes payable – related party of $2,914,737, with all discounts fully amortized. The Company is in negotiations with holders of the Notes payable and Notes payable – related party to amend payment terms.

The notes have an interest rate of 15% per annum, calculated on a 360-day year and payable monthly, and were issued net of a 5% original issue discount. A total of 20,657,349 five-year Class T warrants have been issued to the lenders, including 15,302,357 to a related party in connection with the current and prior-period note issuances. The warrants have an exercise price of $0.03 and expire on various dates from November 30, 2022 through September 30, 2024. During the nine months ended September 30, 2019, the Company

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Goldrich Mining Company

Notes to the Consolidated Financial Statements (unaudited)

issued 3,166,573 warrants in connection with the notes payable. The warrants had a fair value of $46,327 and had an allocated relative fair value of $40,553.

A total of 1,652,588 five-year Class T warrants have been issued for finders fees related to this debt financing including 1,224,189 to a related party. The warrants issued for finders fees were fair valued at $1,741 and $28,095 for the three and nine months ended September 30, 2019, using a Black Scholes valuation model (see table below), and are included in interest expense and finance costs.

During the three and nine months ended September 30, 2019, the Company accrued cash finders fees related to this debt financing totaling $9,090 and $54,990 compared to $21,000 for each for the three- and nine-month periods ended September 30, 2018 to related party entities and are included in interest expense and finance costs. Interest of $140,419 and $396,286 were expensed during the three and nine months ended September 30, 2019 compared to $101,331 and $240,141 expensed during the three and nine months ended September 30, 2018. Total interest for the notes of $582,032 is accrued at September 30, 2019 and is included in Interest payable and Interest payable – related parties. Interest due at September 30, 2019 was not timely paid. To date, the notes have not been paid, and the note holders have not demanded payment and have indicated willingness to work with the Company to extend the due date.

Interest payable on the consolidated balance sheet also includes $11,217 interest accrued on a Related parties payable and $8,620 accrued on Notes payable in gold.

The table below summarizes the total notes due, the amount received with discount, warrants issued for finders fees and cash expensed for finders fees for all periods related to the notes payable and notes payable – related party.

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Goldrich Mining Company

Notes to the Consolidated Financial Statements (unaudited)

The total fair value of the Class T warrants was estimated on the issue dates at $46,327 and $151,145 for the nine months ended September 30, 2019 and 2018, respectively, using the following weighted average assumptions: 

Subsequent to the close of the quarter, effective November 1, 2019, the Company entered into an Amended and Restated Loan, Security, and Intercreditor Agreement (the “Amended Agreement”) with Nicholas Gallagher (“Gallagher”), a related party and member of the Company’s Board of Directors, in his capacity as agent for and on behalf of the holders of the Notes payable. No compensation was paid or accrued for Mr. Gallagher, either in cash or warrants, for his services as agent for other holders. Pursuant to the Amended Agreement, in exchange for the secured promissory notes and other consideration:

1.Holders have loaned to borrower prior to November 1, 2019, an aggregate principal amount of $3,987,368;  

2.Gallagher has agreed to make additional loans to borrower from and after November 1, 2019, totaling a maximum principal amount of $394,737 (the net proceeds of which to the Company will be $375,000);  

3.With his consent, any new lender or existing holder may make an additional loan or loans under the Amended Agreement; 

4.Any loans arising after July 1, 2018 by Mr. Gallagher and any loans made after November 1, 2019 by any new or existing Holder other than Gallagher, after Gallagher has consented in writing to such loan or advance, are Senior secured loans. Senior Notes are entitled to be repaid in full before any of the Junior Notes are repaid; and 

5.The Company agreed to other terms, the most significant of which are as follows: 

a.to pay, no later than February 28, 2021, (1) to the order of NGB Capital Limited (a company owned by Mr. Gallagher), a finder’s fee in the amount of $49,273, and (2) to the order of Capital Investments 4165 LLC a finder’s fee in the amount of $7,920. Of these amounts $6,500 and $nil have been remitted as of the date of this report; and  

b.to reimburse Gallagher, no later than February 20, 2020, for up to $35,000 in legal fees and costs incurred by Gallagher in connection with the Amended Agreement. The Company accrued $32,644 at December 31, 2019 and paid the amount to Mr. Gallagher in 2020 under this clause. 

Under the Amended Agreement, for each holder of the Notes payable, whether or not a related party:

1.The borrower and holder entered into a Deed of Trust whereunder the Notes are secured by a security interest in all real property, claims, contracts, agreements, leases, permits and the like.  

2.The borrower and any holder may negotiate a separate agreement enabling the borrower to issue shares to the holder in satisfaction of some or all interest that may be due to that Holder.  

16

Goldrich Mining Company

Notes to the Consolidated Financial Statements (unaudited)

3.The Company entered into a Guaranty whereunder, among other conditions, the Company unconditionally guarantees and promises to pay to the order of each holder:   

a.the principal sum of each Note payable held by such holder when and as the same becomes due, whether at the stated maturity thereof, by acceleration, call for redemption, tender, or otherwise,   

b.all interest payable on each such Note payable when and as the same becomes due, and  

c.any other amounts owing by the Company to such holder under the Amended Agreement or any other loan document when and as the same becomes due.   

In an agreement separate from the Amended Agreement, Goldrich and Mr. Gallagher agreed that Mr. Gallagher, at his option, has the right to convert outstanding but unpaid and future interest on his loan into stock of the Company at $0.015 per share. In another agreement separate from the Amended Agreement, Goldrich and holders, other than Mr. Gallagher, agreed to convert $36,813 of unpaid interest into stock of the Company at $0.015 per share. During 2020, a total of 13,719,248 common shares with a basis of $0.015 per share, were issued to the holders, reducing interest payable by $205,789 (see Note 8 Subsequent Events).

Several events of default were enumerated in the Amended Agreement, including the following:

a.the Company fails to pay (i) any portion of the principal amount of any Note when due or (ii) any accrued and unpaid Interest when due and such failure continues for three (3) Business Days or (iii) any other amount that is due and payable under this Amended Agreement, any Note, or the Deed of Trust and such failure continues for ten (10) Business Days after demand for such payment is made by the Holder; 

b.the Company fails to observe or perform any other obligation, covenant, or agreement applicable to the Company under this Amended Agreement as and when due and fails to cure such failure within 10 Business Days of notice of such failure by the holder to the Company; 

c.the Company fails to observe or perform any covenant or agreement applicable under the Guaranty and fails to cure such failure within 10 Business Days of notice of such failure by the holder to the Company; 

d.an insolvency or liquidation proceeding or assignment is commenced with respect to the Company or its subsidiary; or 

e.any alleged creditor other than the holders seeks to collect any amount allegedly due and owing to said creditor at that time. 

6.NOTES PAYABLE IN GOLD 

During 2013, the Company issued notes payable in gold totaling $820,000, less a discount of $205,000, for net proceeds of $615,000. Under the terms of the notes, the Company agreed to deliver gold to the holders at the lesser of $1,350 per ounce of fine gold or a 25% discount to market price as calculated on the contract date and specify delivery of gold in November 2014.

During the nine months ended September 30, 2019, the Company renegotiated terms with the holders for a sixth time. A default condition arising from the non-delivery of the gold on March 31, 2019, was alleviated by agreements with the three note holders with the following amended terms:

17

Goldrich Mining Company

Notes to the Consolidated Financial Statements (unaudited)

·The fourth delayed delivery required quantity shall be delivered to the purchaser at the delivery point on the date that is sixty (60) days after the date that the purchaser gives notice to the Company that the required quantity must be delivered. 

·Subsequent to February 28, 2019, the Company agreed to pay interest on the value of the fourth delayed delivery required quantity at an annual percentage rate of 10% from February 28, 2019, payable quarterly with any remaining interest due and payable on the delivery date for the required quantity. Interest shall be non-compounding, provided however, that any interest not paid in full by any required interest payment date, shall be added to the principal and shall be subject to interest at the interest rate until such late interest payment is made in full. 

·The Company, at the Company’s sole discretion, has the option to pay or deliver the required quantity prior to receiving notice from the purchaser demanding payment of the required quantity or prior to sixty days after the notice date. If the Company exercises this option, in relation to the required quantity, the delivery date as set forth in the original agreement, was amended to be the date of actual payment or delivery.  

·The value of the required quantity was reset on March 1, 2019 and was equal to the number of ounces of gold in the fourth delayed delivery required quantity multiplied by the original purchase price used to calculate the amount of gold due in the original agreement.  

Through the date of the issuance of these financial statements, the gold notes have not been paid and the note holders have not demanded payment or delivery of gold. At September 30, 2019 and 2018, 266.788 ounces of fine gold was due and deliverable to the holders of the Notes.

For the three and nine months ended September 30, 2019, using the fair value of gold on September 30, 2019 of $1,485 per ounce, the Company recognized an increase in fair value of $20,356 and $54,104, respectively. For the three and nine months ended September 30, 2018, using a forward gold price of $1,230, the Company recognized an increase in fair value of $4,322 and a decrease of $27,933, respectively in accounting for these notes as derivatives.

The fair value was calculated using the market approach with Level 2 inputs of gold future delivery contracts. At September 30, 2019 and December 31, 2018, the Company had outstanding total notes payable in gold of $396,261 and $342,157, respectively, representing 266.788 ounces of fine gold deliverable at March 31, 2019. Interest of $25,405 was expensed during the nine months ended September 30, 2019, of which $8,620 is accrued at September 30, 2019 and is included in Interest payable.

7.COMMITMENTS AND CONTINGENCIES  

We are subject to Alaska state annual claims rental fees in order to maintain our non-patented claims. In addition to the annual claims rental fees of approximately $125,945, as increased in 2020 subsequent to September 30, 2019, due November 30 of each year, we are also required to meet annual labor requirements of approximately $61,100 due November 30 of each year. The Company is able to carry forward costs for annual labor that exceed the required yearly totals for four years. The Company has significant carryovers to 2020 to satisfy its annual labor requirements. This carryover expires in the years 2020 through 2024 if unneeded to satisfy requirements in those years

Arbitration

In 2017, the Company, its subsidiary and the joint venture, as claimants, filed an arbitration statement of claim before a three-member Arbitration Panel (“the Panel”), against our JV partner and its affiliates; NyacAU, LLC (“NyacAU”), BEAR Leasing, LLC, and Dr. J. Michael James, as respondents. In 2018, the respondents filed a counter-claim against the Company, its subsidiaries and certain members of the Company’s current and former management, the counterclaim respondents. The arbitration claim alleged, amongst other things, claims concerning related-party transactions, accounting issues including capital vs.

18

Goldrich Mining Company

Notes to the Consolidated Financial Statements (unaudited)

operating leases, interpretation of the joint venture operating agreement, allocation of tax losses between the joint venture partners, and unpaid amounts due Goldrich relating to the Chandalar Mine.

It is possible that there could be either adverse or favorable developments in the arbitration pending with the Company and its JV partner. The Company records provisions in the consolidated financial statements for pending arbitration results when it determines that an outcome is probable, and the amount of loss can be reasonably estimated. At the present time, except as stated otherwise, while it is reasonably possible that a favorable or unfavorable outcome in the arbitration may occur, after assessing the information available, management is unable to estimate the possible loss, or range of losses, for the pending arbitration; and accordingly, no estimated losses have been accrued in the consolidated financial statements for favorable or unfavorable outcomes. Legal defense costs are expensed as incurred. Favorable rulings would not result in the recognition of gains prior to offsetting against losses, due to the ruling being an estimate which must be constructively received prior to recognition.

The arbitration is ongoing and the various parties to the claims and counterclaims continue to disagree on several matters.

On May 25, 2019, the Panel issued an Interim Award, which requested input from the parties on a small number of discrete issues, all input to be supported by references to the arbitration record.

8.SUBSEQUENT EVENTS 

In April of 2020, the Company applied for and received a loan under the Payroll Protection Program under the provisions of the CARES Act of $50,600. This loan may be converted to a grant and forgiven when the Company uses the funds for qualifying expenses and applies for forgiveness under the program.

During August through October of 2020, the Company received $439,000 cash as a result of exercise of Class Q, Class S, and Class T warrants at an exercise price of $0.03 per common share. Ownership of these warrants had been in the hands of a related party and were sold by him personally to unrelated parties. The unrelated parties then exercised the warrants for cash, resulting in the issuance of 14,633,333 common shares.

Effective September 16, 2020, the Company entered into a contract with Yabucoa Partners Corp, dba Street Smart, to provide market research and analysis services to the Company.  The Company will pay a flat fee of $150,000 USD payable $75,000 USD upon signing and $75,000 in 3 months. In addition, the Company will pay a monthly fee of $1,500 USD (one thousand five hundred), paid 6 (six) months in advance.

Arbitration Rulings Subsequent to September 30, 2019

On November 30, 2019, the Panel ordered the Partial Final Award and concurrently the Second Interim Award RE Dissolution/Liquidation of GNP and Related Issues (“the Second Interim Award”).

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Goldrich Mining Company

Notes to the Consolidated Financial Statements (unaudited)

The Partial Final Award

The Partial Final Award addressed several matters including leases and the impact of their characterization on interim distributions. As a result, the Panel determined that the Company is entitled to an additional $214,797 in distributions for 2016 and an additional $198,644 for 2017, for a total of $413,442 from GNP. In like manner, the Panel determined that NyacAU is entitled to an additional $413,442 in distributions for these years. As the Company is uncertain as to the collectability of these distributions, no recognition of these revenues is included in its Statement of Operations for the year ended December 31, 2019.

The Partial Final Award also addressed the Company’s claim for payment of interest earned by LOC 1. The Panel determined that NyacAU should pay the Company 50% of the interest earned on LOC 1 actually received by NyacAU, or $126,666. The Company has not accrued a receivable or recognized interest income for the interest due to uncertainties surrounding its collectability.

The Panel ruled Goldrich was responsible to pay NyacAU for the 2012 reclamation work and NyacAU is also entitled to 5% interest on the award from the date the first invoice was sent to Goldrich in 2014. Goldrich has accrued a liability for this ruling on its consolidated balance sheet of $421,366 included in accounts payable and interest payable, however Goldrich has contested the party to whom payment should be made and whether additional amounts not invoiced by GNP should be included in the award.

The Partial Final Award found the Company liable for an act of negligent misrepresentation regarding the concealment of certain technical information from NyacAU. The Company has vigorously disputed the concealment and the finding of negligence. Nevertheless, as a result of the Panel’s determination, the Panel awarded Dr. J. Michael James a reimbursement of 17% of his previous $350,000 stock investment in the Company or $59,500 plus prejudgment interest of 5% and legal fees, for a total of $83,388. In addition, the Panel awarded Dr. James $9,858, plus interest at 5% and legal fees, for personal expenses incurred relating to GNP’s operations, for a total of $13,713. These amounts plus additional interest have been included in accounts payable and interest payable on the consolidated balance sheet at December 31, 2019.

The Second Interim Award

The Second Interim Award was necessitated by the fact that the dissolution/liquidation of the joint venture had not yet run its course. In the Second Interim Award the Panel ordered that:

a)No later than January 15, 2020, NyacAU and Goldrich shall attempt to establish, by agreement, a market value for the GNP permit in connection with a transfer of the Permit to Goldrich or a third party, taking into consideration the obligation of GNP, or any transferee of the permit, to complete reclamation in accordance with NyacAU’s government-approved reclamation plan. 

b)Reasonably prior to May 31, 2020, NyacAU shall perform its obligation to “make provision … for reclamation by (1) adding all reclamation expenses actually incurred by NyacAU to LOC 1; (2) from GNP’s assets, to the extent possible after payment of GNP’s debts and liabilities and liquidation expenses”. 

Neither order was successfully executed by the parties on the dates specified by the Panel. The Second Interim Award confirmed the dissolution of GNP and noted that “no provision of the Claims Lease or the Operating Agreement speaks directly to the rights or obligations of GNP to transfer its mining permit, which is held in the name of the manager, NyacAU. Although GNP no longer has the right to mine, GNP and specifically NyacAU have the liability of reclamation.

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Goldrich Mining Company

Notes to the Consolidated Financial Statements (unaudited)

Balance and payment of LOC1 

The arbitration panel calculated a tentative balance of LOC1 at $16,483,271 as of June 2019. This balance will be adjusted for any additional costs incurred by GNP in the liquidation or awards and/or adjustments made by the arbitration panel. Upon liquidation of GNP, 50% of the LOC1 liability may be recorded on Goldrich’s balance sheet.

The arbitration panel ruled in the Final Post Award (see below) that LOC1 cannot be increased for costs incurred after mining operations have ceased, including costs for reclamation. This deprives NyacAU of a security interest in 50% of future placer gold production at the site to repay reclamation expenses which it advances. Further, the panel ruled that the Operating Agreement does not impose an obligation on the Company to pay 50% of the reclamation fee, but that the reclamation obligation resides with the permit holder.

Right to Offset Damages or Distributions 

The arbitration panel granted the request that any damages awarded to one party can be an offset to distributions (or damages) due to the other party.

Final Post Award Orders

On September 4, 2020, the arbitration panel issued Final Post Award Orders, wherein the panel issued rulings on multiple issues, including but not limited to, those discussed below:  

·Reclamation:  

The Company had previously filed a motion to compel NyacAU to correct accruals for certain expenses including reclamation, demobilization, equipment rental and utilities. Most notably, the Company contended that an accrual for reclamation liability was short of a much larger estimate prepared by independent professionals as engaged by Goldrich. The panel denied the Company’s motion and ruled that Goldrich does not have the authority to compel the establishment of any reserves on the GNP financial records.

The Company had previously filed a motion to compel NyacAU to reclaim the disturbed acres as required under the Operating Agreement and the mining permit issued to NyacAU in 2013, and to require NyacAU to fund the reclamation reserve from cash that had been distributed to NyacAU. The panel denied the Company’s motion and ruled that while there was express provision in the Operating Agreement to establish reserves necessary for contingent or unforeseen liabilities or obligations, which could conceivably include reclamation reserves, the agreement does not impose an express obligation to reclaim the project site.

·Mining Claims 

a)All of the Company’s mining claims remain the property of the Company; however, NyacAU staked several claims contiguous to the claims owned by the Company. The Company had previously filed a motion to compel the transfer NyacAU’s claims from NyacAU to the Company. The motion was granted in part in that the claims held in NyacAU’s name were ruled to be owned by the Company, but would not be transferred immediately. They would remain in the possession of NyacAU as manager of the liquidation until the property covered by the claims was not being used for liquidation activities and could be transferred without disruption to the liquidation activity. 

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Goldrich Mining Company

Notes to the Consolidated Financial Statements (unaudited)

Judgements issued by Superior Court

On April 29, 2020, the Superior Court of the State of Alaska issued a in favor of Dr. James, in the total amount of $13,713 (for the 2012 reclamation costs personally incurred, including interest) and $83,588 (for the adjustment to Dr. James’ stock purchase, including interest). The Court ordered both Goldrich and NyacAU to submit a status report to the Court in September 2020 regarding the Panel’s clarification of the amounts payable for the 2012 reclamation, including interest, it determined to be payable to NyacAU at that time. The status report has been filed by both parties, and these judgements remain unpaid and in force before the Superior Court. The amounts related to these judgements were accrued for at December 31, 2019.

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As used in herein, the terms “Goldrich,” the “Company,” “we,” “us,” and “our” refer to Goldrich Mining Company.

This discussion and analysis contains forward-looking statements that involve known or unknown risks, uncertainties and other factors that may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Except for historical information, the matters set forth herein, which are forward-looking statements, involve certain risks and uncertainties that could cause actual results to differ. Potential risks and uncertainties include, but are not limited to, unexpected changes in business and economic conditions; significant increases or decreases in gold prices; changes in interest and currency exchange rates; unanticipated grade changes; metallurgy, processing, access, availability of materials, equipment, supplies and water; results of current and future exploration and production activities; local and community impacts and issues; timing of receipt and maintenance of government approvals; accidents and labor disputes; environmental costs and risks; competitive factors, including competition for property acquisitions; and availability of external financing at reasonable rates or at all, and those set forth under the heading “Risk Factors” in our Form 10-K filed with the United States Securities and Exchange Commission (the “SEC”) on April 3, 2019. Forward- looking statements can be identified by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continues” or the negative of these terms or other comparable terminology. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievements. Forward-looking statements are made based on management’s beliefs, estimates, and opinions on the date the statements are made, and the Company undertakes no obligation to update such forward-looking statements if these beliefs, estimates, and opinions should change, except as required by law.

This discussion and analysis should be read in conjunction with the accompanying unaudited consolidated financial statements and related notes. The discussion and analysis of the financial condition and results of operations are based upon the unaudited consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an on-going basis the Company reviews its estimates and assumptions. The estimates were based on historical experience and other assumptions that the Company believes to be reasonable under the circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions, but the Company does not believe such differences will materially affect our consolidated financial position or results of operations. Critical accounting policies, the policies the Company believes are most important to the presentation of its consolidated financial statements and require the most difficult, subjective and complex judgments are outlined below in “Critical Accounting Policies” and have not changed significantly.

General

Our Chandalar, Alaska gold mining property has seen over a hundred years of intermittent mining exploration and extraction history. There has been small extraction of gold from several alluvial, or placer gold streams, and from an array of small quartz veins that dot the property. However, only in very recent times is the primary source of the gold becoming evident. As a result of our exploration, considering structural geology, petrographic, geochemical and geophysical evidence, we have realized that all of the gold is sourced within a system of magmatic hydrothermal alteration features such as small pegmatitic dikes and chloritized schist. We believe these features are common to and link all of the hard-rock (lode) prospects, the weathering of which generated the gold placer deposits, and furthermore are an outlying expression of an underlying gold bearing pluton.

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We have two main focuses. First, we are currently defining drilling targets for a hard-rock (lode) gold deposit in an area of interest approximately 1,800 feet wide and over five miles long, possibly underlain by a series of mineralized magmatic intrusions (plutons). Exploration therefore has taken on two directions; one toward defining a low-grade, large tonnage body of mineralization running beneath the headwaters of Little Squaw Creek where dense swarms of gold mineralized pegmatitic dikelets are seen, the other a deeper, larger mineralized plutonic body(ies) from which the district’s mineralizing fluids have emanated and migrated through Chandalar country rock. Our main focus continues to be the exploration of these hard-rock targets; however, weak financial markets prevented us from obtaining funds for any significant exploration in 2012, 2013, and 2016 through 2019. We were successful in raising funds for a limited exploration program in 2014 and reclamation work in 2015.

Our second focus is to continue gold extraction from the Chandalar placer gold deposit discovered on the property. In 2012, Goldrich and NyacAU LLC (“NyacAU”) formed Goldrich NyacAU Placer LLC (“GNP”), a 50/50 joint-venture company, managed by NyacAU, to mine Goldrich’s various placer properties at Chandalar. The placer gold production by GNP increased each year from 2015 through 2018, trending toward production figures that were anticipated by the Preliminary Economic Assessment authored by qualified geologists for us. However, in spite of the yearly increase in production, the total production fell short of the Minimum Production Requirements required in the Operating Agreement, and as a result, the JV was dissolved and is in the process of liquidation (see Joint Venture and Subsequent Events above and Arbitration Rulings, Results and Continuing Matters below). Goldrich has hired an independent mining engineering firm to formulate a mine plan and complete an Initial Assessment to determine if Goldrich should resume production.  Any plan to continue future mining is contingent upon our success in raising sufficient capital to fund these activities or any portion of them.

Chandalar Mine

During 2018, the plant ran from approximately May 31, 2018 through September 21, 2018. A total of approximately 20,900 ounces of alluvial gold, equivalent to 17,100 ounces of fine gold, were extracted. Total revenue was approximately $21 million and total production represents an increase of 39% over the 2017 mining season. This compares to production in previous years as follows:

The 2018 production season ran from approximately May 31, 2018 through September 21, 2018. The normal production season is approximately from June through mid-September, subject to weather.  No production occurred during the 2019 production season due to the dissolution of the JV.

Dissolution of the GNP Joint Venture:

As previously anticipated and disclosed, we announced the dissolution of GNP in August of 2019. The certificate of dissolution was received in July with an effective date of June 3, 2019. On June 1, 2020, the Arbitration Panel ruled that, due to uncompleted tasks in process, NyacAU would remain as manager of the liquidation until a future time when identified critical tasks are complete.

The joint venture was dissolved because GNP failed to meet the Minimum Production Requirements. According to the terms of the joint venture operating agreement, GNP was required to pay a contractual Minimum Production Requirement of 1,100 ounces for 2016, 1,200 ounces for 2017, and 1,300 ounces for 2018 to Goldrich by October 31, 2018. The Minimum Production Requirement for each year was determined based on the spot price of gold on December 1 of the preceding year.

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GNP’s lease to mine the placer properties terminated upon dissolution of GNP and GNP has no further rights to mine the placer properties located on Goldrich’s mining claims.

Planned 2019 Exploration and Mining Activities

Concerning our placer operations, GNP was dissolved in June 2019 and is in the process of liquidation.  Except for equipment needed for reclamation, most the heavy equipment and the wash plant were removed on a winter trail in March through mid-April 2019.  There was no gold production in 2019. Although all rights to mine the placer properties revert to Goldrich upon dissolution of GNP, NyacAU is the holder of the mine permits. NyacAU began reclamation of the mine in 2019 and is responsible for future reclamation costs.  Goldrich hired an independent mining engineering firm in 2019 to formulate a mine plan and complete an Initial Assessment to determine if Goldrich should resume production.  Any plan to continue future mining is contingent upon our success in raising sufficient capital to fund these activities or any portion of them (see Joint Venture and Subsequent Events above and Arbitration Rulings, Results and Continuing Matters below for details of the GNP joint venture, arbitration activities and the joint venture’s pending liquidation).

Concerning hard-rock exploration, we do not anticipate conducting hard-rock exploration drilling activities and other hard-rock exploration activities at the Chandalar property in 2020. However, our main focus in the future will continue to be the exploration of the hard-rock targets of our Chandalar property. Weak financial markets during the last several years have been an important factor affecting the level of our exploration activities. We will once again undertake such activities when our financial situation permits. If the placer mine continues commercial production (by Goldrich or a third-party operator), we look forward to internal cash flow and additional opportunities for financing that will give us a unique advantage for growth over other junior mining exploration companies; however, finances must be obtained before we can continue mining. We also intend to list our shares on a recognized stock exchange in Canada in addition to maintaining our listing on the OTCBB in the United States. We believe these factors will increase our access to financial markets and positively affect our ability to raise the funds necessary to add value to our property and increase shareholder value.

Arbitration Rulings, Results and Continuing Matters

On December 23, 2019, the Company provided an update regarding the liquidation of GNP and the arbitration between Goldrich and NyacAU.

On May 25, 2019, the Panel issued an Interim Award, which requested input from the parties on a small number of discrete issues, all input to be supported by references to the arbitration record. On November 30, 2019, the Panel issued the Partial Final Award and concurrently the Second Interim Award RE Dissolution/Liquidation of GNP and Related Issues (“the Second Interim Award”). On September 4, 2020, the Arbitration Panel (the “Panel”) issued the Final Post Award Orders, wherein the Panel issued rulings on multiple material issues. A summary of each award is provided below. Matters of minor significance on which the Panel ruled or waived actions on matters over which the Panel had no jurisdiction are not included in the summary.

Arbitration Rulings Subsequent to September 30, 2019

On November 30, 2019, the Panel ordered the Partial Final Award and concurrently the Second Interim Award RE Dissolution/Liquidation of GNP and Related Issues (“the Second Interim Award”).

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The Partial Final Award

A summary of the various matters addressed in the Partial Final Award is as follows:

Capital vs. Operating Leases

In response to a claim made by Goldrich, the Panel ruled that certain leases were capital leases, rather than operating leases, which increased the basis upon which distributions are made to the JV partners.  In addition, the Panel modified the interest rates applicable to the leases, which decreased the profitability of the JV for the change in interest on all leases but only decreased the basis upon which distributions are made to Goldrich for leases that were deemed to be operating leases.  The net change had no effect on the Company’s 2019 financial statements, and the net change on Goldrich’s 2018 financial statements is yet to be determined by the Panel. The ruling did, however, affect the amount of interim distributions made from GNP to Goldrich for 2016 and 2017 as noted below.

Ownership by GNP of Leased Equipment

The Panel ruled that certain continuing lease payments made by GNP for equipment treated as operating leases, which were subsequently ruled capital leases, represented buy-out payments at the conclusion of the capital lease.  Therefore, ownership of the subject equipment was transferred to GNP. As a result of the ruling, certain leased equipment became capital leases and property of GNP, but the assets and equity built up in those capital leases was subsequently transferred to Bear Leasing to partially satisfy default of other lease agreements when GNP was dissolved.

Lease Charges and Ownership of Arctic Camp Purchased by NyacAU related party from Third-Party 

The Panel ruled that lease payments made by GNP to Bear Leasing toward rented Arctic camp facilities that had been purchased from an unrelated third-party from 2012 through 2014 represented purchase consideration. As a result, GNP was deemed the beneficial owner of the camp in connection with the dissolution/liquidation process. Further, LOC1 was reduced by $531,164, which represents the lease payments GNP was charged beyond the purchase price for the Arctic camp.

Interim Distributions to Goldrich for 2016 and 2017

As a result of the awards noted above, the Panel determined that the Company is entitled to an additional $214,797 in distributions for 2016 and an additional $198,644 for 2017, for a total of $413,442. In like manner, the Panel determined that NyacAU is entitled to an additional $413,442 in distributions for these years. Goldrich’s distributions were first applied against Loan3, in accordance with the terms of the Operating Agreement, and were sufficient to pay all of Loan3 principal and interest in full. As we are uncertain as to the collectability of these remaining distributions, no recognition of these revenues is included in our Statement of Operations for the year ended December 31, 2019.

Payment of Interest Earned by LOC1

The Partial Final Award also addressed our claim for payment of interest earned by LOC 1. The Panel determined that NyacAU should pay the Company 50% of the interest earned on LOC 1 actually received by NyacAU, or $126,666. We have not accrued a receivable or recognized interest income for the interest due to uncertainties surrounding its collectability.  NyacAU is contesting the amount of LOC1 interest paid by GNP to NyacAU. The matter is further discussed below in the summary for the Final Post Award Order.

2012 Reclamation Work

The Panel ruled Goldrich is responsible to pay NyacAU for the 2012 reclamation work and NyacAU is also entitled to 5% interest on the award from the date the first invoice was sent to Goldrich in 2014. Goldrich has accrued a liability for this ruling, however Goldrich has contested the party to whom payment should be made and whether additional amounts not invoiced by GNP should be included in the award.  

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Allocation of Tax Losses 

From 2012 through 2018, NyacAU, as managers of GNP, had allocated net tax losses from GNP totaling $19,888,374 to NyacAU and $839,537 to Goldrich. Goldrich claimed it had a right to 50% of all tax losses under the GNP Operating Agreement and filed Form 8082 for each year with the Internal Revenue Service (“IRS”) to correct the GNP K-1’s filed by NyacAU. Goldrich claimed a total of $9,946,369, 50% of the total GNP losses for the years 2012 through 2018. The Panel generally agreed with that allocation but only during the periods where actual mining operations were being performed, since those rationally are the only periods in which both parties bore a material economic risk, in terms of the impact of mining operations on processed and unprocessed gold. Based on the evidence before the Panel, mining operations were performed in August-September 2013, and 2015-2018.

Prior to Goldrich receiving the award, the IRS had processed and accepted the Forms 8082, corrected GNP K-1’s, and amended tax returns filed by Goldrich for 2012 through 2017. The IRS also notified Goldrich that Goldrich’s 2012 through 2014 tax returns were closed for further changes due to the expiration of the statute of limitations for those years. The IRS also conducted an audit of Goldrich’s 2014 through 2017 tax returns with a ‘no change’ determination. Therefore, although Goldrich was not awarded 50% of all GNP 2012 to 2014 tax losses in the arbitration, Goldrich has been allowed to take the full total of its share of GNP tax losses of $9,946,369, which can be used to offset taxable profits Goldrich generates in future years.

Subsequent to the end of the year, in August 2020, the IRS issued an unfavorable ruling to GNP as it affects the Company in regard to the audit of the joint venture which, when the individual partners’ effects are communicated to us by the IRS, is probable to decrease our net federal and state net operating loss carryforwards by $2.0 million and $1.8 million, respectively, for the years under audit. The recourse available to us in regard to the audit ruling is a challenge of the IRS ruling before the tax court, should we determine this to be in our best interests.

Other

·The arbitration awarded NyacAU’s request that an entry be made on GNP’s books for unpaid and unbilled interest expense of $66,180 under the appropriate Lease, incurred during the period of construction of the wash plant. In the liquidation process, NyacAU (through Bear Leasing) shall be treated as a third-party creditor with respect to the recovery of this amount from GNP. 

·The Panel awarded Dr. James $9,858, plus interest at 5% and legal fees, for personal expenses incurred relating to 2012 Goldrich reclamation costs. These amounts totaling $27,943 have been included in accounts payable and interest payable of the Company at December 31, 2019. 

·The Partial Final Award found the Company liable for an act of negligent misrepresentation regarding the concealment of certain technical information from NyacAU. We have vigorously disputed the concealment and the finding of negligence. Nevertheless, as a result of the Panel’s determination, the Panel awarded Dr. J. Michael James a reimbursement of 17% of his previous $350,000 stock investment in the Company or $59,500 plus interest of 5% and legal fees. The award plus interest, totaling $70,244, has been included in accounts payable and interest payable of the Company at December 31, 2019.  

·As requested by Goldrich and NyacAU, the Panel will retain jurisdiction and oversight over the dissolution/liquidation process to its completion.  The Panel stated, “there is likely more information the parties will have to provide on certain issues--including, among others, changes in the balance of LOC 1 and the issue of transfer of the permit to Goldrich--before a Final Award on dissolution/liquidation can be made.” As of the date of this report, the balance of LOC1 continues to change as a result of on-going rulings by the Panel. Additionally, the Panel has stated it lacks jurisdiction on the transfer of the mining permit, which the Panel has ruled is a matter to be negotiated between the parties. 

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·The Panel ruled that “there has been no prevailing party in the arbitration to this point, although it reserves judgment as to whether a prevailing party will emerge from the Final Award with regard to issues which are now part of the Revised [Second] Interim Award. Accordingly, as to all issues covered by this Partial Final Award, the parties shall bear their own costs, expenses, and attorneys’ fees.” 

The Second Interim Award

The Second Interim Award was necessitated by the fact that the dissolution/liquidation of the joint venture had not yet run its course. A summary of the various matters addressed in the Second Interim Award is as follows:

Transfer of Mining Permits

The Panel ordered that:

c)No later than January 15, 2020, NyacAU and Goldrich shall attempt to establish, by agreement, a market value for the GNP permit in connection with a transfer of the Permit to Goldrich or a third party, taking into consideration the obligation of GNP, or any transferee of the permit, to complete reclamation in accordance with NyacAU’s government-approved reclamation plan. 

d)Reasonably prior to May 31, 2020, NyacAU shall perform its obligation to “make provision … for reclamation by (1) adding all reclamation expenses actually incurred by NyacAU to LOC 1; (2) from GNP’s assets, to the extent possible after payment of GNP’s debts and liabilities and liquidation expenses”. 

Neither order was successfully executed by the parties on the dates specified by the Panel. The Second Interim Award confirmed the dissolution of GNP and noted that “no provision of the Claims Lease or the Operating Agreement speaks directly to the rights or obligations of GNP to transfer its mining permit, which is held in the name of the manager, NyacAU. Although GNP no longer has the right to mine, GNP and specifically NyacAU have the liability of reclamation. Absent a transfer of the Permit, GNP (through NyacAU) would be obligated to complete reclamation, and obtain final approval from appropriate government authorities, as required by the Claims Lease—a process estimated to take several years.”

If NyacAU does not transfer the mining permit to Goldrich as part of the dissolution, they will retain the requirement to reclaim the mine, and Goldrich will be prevented from mining the property, since two mining permits cannot be issued for the same claims. The actual cost of the reclamation will be subject to many variables, not the least of which will be whether the remedial activity is undertaken while the mine is inactive or conversely, when the mine is actively producing gold. If the mining permit were to be transferred to Goldrich or another entity with the reclamation obligation intact, the reclamation activity could be undertaken as a key piece of a mining plan in order to mitigate reclamation costs. If an agreement cannot be reached to transfer the mining permit and the associated reclamation of prior mining activities, Goldrich will be prevented from mining its claims, and will be limited to exploration activities on the hard rock deposits of the Chandalar property

NyacAU has indicated they will not transfer the permit without also transferring the reclamation obligation, of which they believe to be approximately $3 million. Goldrich has indicated they will not accept transfer of the permit together with the reclamation obligation, which they believe to be substantially greater. Both parties are in discussion to attempt to reach an agreement for the transfer of both the permit and the reclamation obligation, no transfer of either, or some other arrangement.

Balance and payment of LOC1

The Panel calculated a tentative balance of LOC1 at $16,483,271 as of June 2019. This balance will be adjusted for any additional awards and/or adjustments made by the Panel.

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Upon liquidation of GNP, 50% of the LOC1 liability may be recorded on Goldrich’s balance sheet. Per the Operating Agreement and a separate Security Agreement between GNP and NyacAU, NyacAU was entitled to record a security interest in all placer gold production from the placer claims as collateral for repayment of fifty percent (50%) of LOC1. The agreements between GNP and NyacAU are silent concerning what happens if GNP is dissolved and is no longer producing gold, the basis of calculation, timing of remittance and other key factors related to repayment if mining activities were to be undertaken again.

The Panel ruled in the Final Post Award, discussed below, that LOC1 cannot be increased for costs incurred after mining operations have ceased, including costs for reclamation. Mining operations ceased on September 28, 2018. This deprives NyacAU of a security interest in 50% of future placer gold production at the site to repay NyacAU for expenses incurred subsequent to the cessation of mining operations.

If an agreement cannot be reached for the transfer of the mining permit and reclamation liability to Goldrich or an operating company that will harvest the placer gold in the deposit, mining will likely not continue at the mine and LOC1 likely will not be paid. Further, in order to operate the mine, Goldrich will be required to raise money to fund replacement equipment, wash plant, infrastructure and initial operating costs to restart the mine, due to the mining assets which have been removed as part of the liquidation of GNP. Goldrich is actively preparing a new mine plan and an initial assessment to show the mine’s potential, as announced in Goldrich’s news release dated July 29, 2020. However, at the date of this report, there is no candidate for operating the mine without a settling concession as part of the transfer of the permit and the associated reclamation and LOC1 obligations.

Goldrich may not have a reasonable avenue to pursue in restarting the mine and may be limited to raising investment funds for the sole purpose of exploration of the hard rock deposits.

Right to Offset Damages or Distributions 

The Panel granted the request that any damages awarded to one party can be an offset to distributions (or damages) due to the other party.

Final Post Award Orders

On September 4, 2020, the Panel issued Final Post Award Orders, wherein the Panel issued rulings on multiple issues, including but not limited to the following:

Reclamation:

a)We had previously filed a motion to compel NyacAU to correct accruals for certain expenses including reclamation, demobilization, equipment rental and utilities. Most notably, we contended that an accrual for reclamation liability of approximately $2.1 million was woefully short of an $18.4 million estimate prepared by independent professionals as engaged by Goldrich. The Panel denied our motion and ruled that Goldrich does not have the authority to compel the establishment of any reserves on the GNP financial records; NyacAU having sole authority to establish reserves as manager of the joint venture. There was no direct financial consequence to us as a result of this ruling. The effect on the future balance of LOC1 and our liability for 50% of that balance is not determined yet. 

b)We had previously filed a motion to compel NyacAU to reclaim the disturbed acres as required under the Operating Agreement and the mining permit issued to NyacAU in 2013, and to require NyacAU to fund the reclamation reserve from cash that had been distributed to NyacAU. The Panel denied our motion and ruled that while there was express provision in the Operating Agreement to establish reserves necessary for contingent or unforeseen liabilities or obligations, which could conceivably include reclamation reserves, the agreement does not impose an express obligation to reclaim the project site. The obligation to perform reclamation is imposed by the claims lease and the mining permit issued to NyacAU, which requires the permit holder to reclaim the site in accordance with government regulations. The ruling also states that the determination of the scope  

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of potential obligations to reclaim under the permit is beyond the jurisdiction of the Panel. Further, the Panel ruled that the Operating Agreement does not impose an obligation on the Company to pay 50% of the reclamation fee, confirming again the obligation resides with the permit holder. Still further, the Panel ruled that the reclamation fees were not operating expenses to bring the mine to commercial production and therefore by definition of the Operating Agreement, precludes reclamation expenses from being added to LOC1, for which we may be obligated to remit 50% to NyacAU upon liquidation of GNP. This ruling deprives NyacAU of a security interest in 50% of future placer gold production at the site to repay reclamation expenses which it advances. Subject to the Panel’s future rulings, there was no direct financial consequence to us as a result of this ruling; however, the effect on the future balance of LOC1 and our potential liability for 50% of that balance would be significant now that NyacAU is not allowed to pass through reclamation costs to GNP but is required to retain responsibility for those costs as holder of the mining permit.

c)NyacAU had previously filed a motion to compel the Company to recognize and remit a reclamation liability that had been invoiced by GNP to Goldrich in 2014 for reclamation work it performed on Goldrich’s behalf for violations resulting from our 2012 mining activities. We had previously challenged the validity of the invoice, citing back charges to GNP that had not been recognized or remitted to it. The Panel denied Goldrich’s claim and ruled in favor of NyacAU. While we continue to work with the Panel to clarify the party to whom the reclamation is payable, the specific amount of the payable and the calculation of interest associated with the liability, it has recorded an accrued liability totaling $ 421,366 for the year ended December 31, 2019, related to this reclamation liability and associated interest thereon, due to the liability now being estimable and probable under ASC 450. The total consists of $329,157 for reclamation expense and $92,209 for pre- and post-judgement interest expense, calculated at 5%. 

Mining Claims:

All of our mining claims remain the property of the Company; however, NyacAU staked several claims contiguous to the claims owned by the Company. We had previously filed a motion to compel the transfer NyacAU’s claims from NyacAU to us. The motion was granted in part in that the claims held in NyacAU’s name were ruled to be owned by the Company, but would not be transferred immediately. They would remain in the possession of NyacAU as manager of the liquidation until the property covered by the claims was not being used for liquidation activities and could be transferred without disruption to the liquidation activity. There was no direct financial consequence to us as a result of this ruling. The claims are assured to be transferred to us at a reasonable future time.

Repayment of misappropriation of JV funds

We had previously filed a motion to compel NyacAU to repay funds Goldrich considered to be misappropriated as payments on LOC1 in contravention of the payment priority requirements as outlined in the Operating Agreement (See Note 4 Joint Venture). A successful challenge of these cash disbursements would return to GNP funds that we considered to be necessary to pay for 2018 partner distributions that have precedence over repayment of LOC1. The ruling was deferred pending additional information to be determined in the future, such as the profitability of operations in 2018, which has not yet been determined when taking the Panel’s ruling into account. There was no immediate direct financial consequence to us as a result of this ruling; however, the inappropriate redirection of cash funds from GNP could affect the JV’s ability to remit funds due to Goldrich or to cover reclamation costs yet to be incurred with no funding in place.

Clarification concerning GNP’s 2018 Profitability and 2018 Interim Distributions.

We had made a challenge to the Panel’s understanding of facts related to GNP’s profitability for 2018 as presented in the arbitration proceedings, with a motion to distribute interim distribution after applying the rulings made to date. The Panel deferred ruling on the matter, retaining jurisdiction to decide the issue of interim distributions for 2018 and requested the parties to present evidence and argument (disregarding any jurisdictional issue) as to (i) whether Goldrich has a right to interim distributions for 2018, and (ii) the amount, if any, of distributions to be paid.  Goldrich has submitted a claim for approximately $680,000 plus prejudgment interest thereon at 5%; NyacAU claims that Goldrich is not entitled to any distributions for 2018.

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The direct financial consequence to us is that our claims to distribution for the 2018 profitability are uncertain, undetermined and delayed until some future date as a result of this ruling.

Clarification of LOC1 Interest Paid and Amounts Owed to Goldrich.

We had challenged the amount of payment of LOC1 interest by GNP to NyacAU and claimed reimbursement of 50% of the amount remitted as specified by the Operating Agreement. The Panel deferred a ruling and requires more information from each party. The direct financial consequence to us is that our claims to our share of interest paid on LOC1, amounting to approximately $120,000, may be denied by the Panel. The reimbursement of interest to us is uncertain, undetermined and delayed until some future date as a result of this ruling.

Subordination of Mr. Gallagher’s Security to NyacAU’s Security.

A challenge to the validity of priority of security interest was ruled in the Company’s favor. NyacAU’s security interest for LOC1 was reaffirmed to be gold production from the mining claims, while Mr. Gallagher’s security is perfected in the mining claims themselves. The Panel determined there was no conflict between the two security interests. There was no direct financial consequence to us as a result of this ruling.

Judgements issued by Superior Court

On April 29, 2020, the Superior Court of the State of Alaska issued a judgement in favor of Dr. James, in the total amount of $13,713 (for the 2012 reclamation costs personally incurred, including interest) and $83,588 (for the adjustment to Dr. James’ stock purchase, including interest). The Court ordered both Goldrich and NyacAU to submit a status report to the Court in September 2020 regarding the Panel’s clarification of the amounts payable for the 2012 reclamation, including interest, it determined to be payable to NyacAU at that time. The status report has been filed by both parties, and these judgements remain unpaid and in force before the Superior Court.

Liquidity and Capital Resources

We are an exploration stage company and have incurred losses since our inception. We currently do not have sufficient cash to support the Company through 2019 and beyond. We anticipate that we will incur approximately $650,000 for general operating expenses and property maintenance, $636,798 for interest, $396,261 for payment upon demand by holders of the gold notes, $4,176,842 for payment of notes payable and notes payable – related party. Additional funds will be needed for any exploration expenditures, should any be undertaken. We also anticipate additional unknown and undeterminable costs for arbitration. Of necessity, we have had to rely on a friendly related party and note holders to provide the limited funding we have been able to secure, pending the resolution of the arbitration and the removal of its associated uncertainties that are preventing us from moving forward with operating and mining plans and the associated financing to implement those plans. We plan to raise the required financing through a combination of debt and/or equity placements, sale of mining property interests, and revenue from placer operations.

We have filed an arbitration claim against our joint venture operating partner to challenge certain accounting treatment of capital leases, allocations of tax losses, charges to the JV for funding costs related to the JV manager’s financing, related-party transactions, and other items of dispute. In 2018, our joint venture partners filed a counter-claim against us. Favorable rulings at arbitration could provide significant cash flows to us and unfavorable rulings could have a significant negative impact on our cash flows.  Arbitration testimony was completed in August 2018, with many motions and responses submitted to the panel since that time. For recent developments in the arbitration proceedings, see the sections entitled Arbitration Rulings, Results and Continuing Matters and also Subsequent Events above. Additional awards may be issued over the coming months.

The audit opinion and notes that accompany our consolidated financial statements for the year ended December 31, 2018, disclose a ‘going concern’ qualification to our ability to continue in business. The accompanying consolidated financial statements have been prepared under the assumption that we will

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continue as a going concern. We are an exploration stage company and we have incurred losses since our inception. We do not have sufficient cash to fund normal operations and meet debt obligations for the next 12 months without deferring payment on certain current liabilities and raising additional funds. We believe that the going concern condition cannot be removed with confidence until the Company has entered into a business climate where funding of its activities is more assured.

We currently have only a brief recent history of a recurring source of revenue. If we profitably execute a production business plan, our ability to continue as a going concern may improve and become less dependent on our ability to raise capital to fund our future exploration and working capital requirements. Our plans for the long-term include the profitable exploitation of our mining properties and financing our future operations through sales of our common stock and/or debt. Additionally, the current capital markets and general economic conditions in the United States are significant obstacles to raising the required funds. These factors raise substantial doubt about our ability to continue as a going concern.

During the nine months ended September 30, 2019, we completed financings of $573,000, compared to $1,045,587 net cash for note financings and placements of our securities during the nine months ended September 30, 2018. At September 30, 2019, we owe a total of $3,934,737 for notes payable, of which $3,052,632 came due October 31, 2018. Notes payable to third parties totaling $967,371 were subsequently amended to extend the due date to February 28, 2019. To date, the notes payable have not been paid, the note holders have not demanded payment and have indicated willingness to work with the Company to extend the due date.

If we are unable to timely satisfy our obligations under the notes payable and the notes payable in gold, and we are not able to re-negotiate the terms of those agreements, the holders will have rights against us, including potentially seizing or selling our assets. The notes payable in gold are secured against our right to future distributions of gold extracted by gold production at Chandalar. At September 30, 2019, we had outstanding total notes payable in gold of $396,261, representing 266.789 ounces of fine gold deliverable within 60 days of demand by the note holders. To date, the gold notes have not been paid and the note holders have not demanded payment.

We believe we will be able to secure sufficient financing for further operations and exploration activities of our Company but we cannot give assurance we will be successful in attracting financing on terms acceptable to us, if at all. Additionally, anticipating continued placer production after dissolution of GNP, we look forward to internal cash flow and additional options for financing. A successful mining operation may provide the long-term financial strength for the Company to remove the going concern condition in future years. To increase its access to financial markets, Goldrich intends to also seek a listing of its shares on a recognized stock exchange in Canada in addition to its listing on the OTCBB in the United States.

The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. If the going concern basis were not appropriate for these financial statements, adjustments would be necessary in the carrying value of assets and liabilities, the reported expenses and the balance sheet classifications used.

Results of Operations

On September 30, 2019, we had total liabilities of $7,294,480 and total assets of $1,095,763. This compares to total liabilities of $5,912,698 and total assets of $1,083,521 on December 31, 2018. As of September 30, 2019, our liabilities consist of $458,211 for remediation and asset retirement obligations, $396,261 of notes payable in gold, $1,020,000 of notes payable, $2,914,737 of notes payable – related parties, $1,306,045 of trade payables and accrued liabilities, $210,657 of accrued interest payable, $391,288 of accrued interest payable – related parties, $566,663 due to related parties, and $30,618 for dividends payable. Of these liabilities, $6,630,480 is due within 12 months. The increase in liabilities compared to December 31, 2018 is due to an increase in trade and related party payables, additional borrowings under notes payable and notes payable - related parties, largely resulting from costs associated with arbitration, and amortization of the discount and

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warrants of the notes payable. Total assets and its components did not experience significant changes, with the exception of a decrease in cash due to financing activities insufficient to cover the level of operating expenses, offset by an increase in prepaid expenses during the nine months ended September 30, 2019.

On September 30, 2019, we had negative working capital of $6,404,277 and a stockholders’ deficit of $6,198,717 compared to negative working capital of $5,251,940 and stockholders’ deficit of $4,829,177 for the year ended December 31, 2018. Working capital decreased during the quarter ended September 30, 2019 due to the accruals of accounts and trade payables that exceeded cash proceeds from Notes payable and Notes payable – related parties. Stockholders’ equity decreased due to an operating loss for the nine-month period ended September 30, 2019.

During the nine months ended September 30, 2019, we used cash from operating activities of $645,337 compared to $1,528,962 for the period ended September 30, 2018. Net losses were slightly lower year over year due largely to a decrease in arbitration costs, an insurance refund of professional service costs in relation to the arbitration and decreases in management fees and general and administration fees as a result of reduced costs as a result of our inability to execute on strategic plans in the absence of a definitive award by the arbitration panel, compared to the same period of 2018. Net operating losses were $645,770 and $1,438,188 for the three and nine months ended September 30, 2019, respectively, compared with $1,489,796 and $3,018,888 for the three and nine months ended September 30, 2018, respectively. Net losses included depreciation of $982 and $4,464 for the respective nine-month periods.

During the nine months ended September 30, 2019 and 2018 respectively, we used no cash in investing activities.

During the nine months ended September 30, 2019, cash of $573,000 was provided by financing activities, compared to $1,045,587 provided during the same period of 2018.

Private Placement Offerings

No private placement offerings occurred during the nine months ended September 30, 2019 or 2018.

Notes Payable in Gold, Notes Payable & Notes Payable – Related Party

At September 30, 2019, we owed $396,261 for Notes payable in Gold, $1,020,000 for Notes payable and $2,914,737 for Notes payable – related party. Interest payable on these borrowings totaled $582,032. These borrowings have matured beyond their original due dates and have been amended to be due upon demand.

During September of 2020, the holders of the Notes payable and Notes payable – related party, received shares in lieu of cash for interest. A total of 13,719,248 common shares with a basis of $0.015 per share, were issued to the lenders, reducing interest payable by $205,789, of which $168,976 was to a related party.

Effective November 1, 2019, we entered into an Amended and Restated Loan, Security, and Intercreditor Agreement (the “Amended Agreement”) with Nicholas Gallagher, a related party and member of our Board of Directors, in his capacity as agent for and on behalf of the holders of the Notes payable.

As a result of the borrowings under the Notes payable in gold, Notes payable and Notes payable – related party (collectively, the “Notes”), we are faced with a significant hurdle in financing the Company going forward, whether to conduct exploration programs or initiate a mining program at the Chandalar mine. Our near-term cash requirements are greater than the assets we have available to satisfy them, and the holders of the Notes could choose to exercise their rights to demand payment, which would result in a default situation relative to the Notes. Mr. Gallagher is secured in his lending to the Company by means of the Amended Agreement, and if he were to demand payment, the Company would not be able to pay him the amounts due and he would be entitled to take ownership of our claims and other assets. We believe these holders to be

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friendly to the Company and that they will refrain from demanding payment, but the Company cannot control the potential demands nor the consequences that would be extracted as a result of default on the Notes.  

.

Mining Permit and Future Mining Activities

The recent upward movements in the price of gold to a range of $1,800 to $2,000 per ounce or higher over the most recent three months of 2020 have created renewed interest in gold mining, gold exploration and investments in companies engaging in those activities, including the junior mining/exploration sector in which we participate. Additionally, the fact that we own a mine that has produced over 40,000 ounces in recent years along an annual increasing trend has caught the interest of placer mining companies and investors who support placer mining operations. We believe we have the fundamentals to raise capital and continue our primary strategy of exploration and secondarily placer mining.

If we can attract the type of investor who is comfortable with reinstating the placer mining operation, we may have a viable and productive path forward toward obtaining financing in the short-term to achieve long-term profitability. To effectively pursue this strategy, (1) the mining permit for the Chandalar mine must be transferred to us from NyacAU, our former JV partner and the current holder of the permit, (2) financial concessions must be made relative to LOC1, which is currently to be satisfied from gold produced from the claims at the Chandalar mine, and (3) reclamation costs for the Chandalar mine that currently are the responsibility of NyacAU must be mitigated by a mining plan that accomplishes much of the reclamation costs as part of the ongoing mining activity. We do not believe an investor or group of investors will be willing to step forward to fund the placer mining activity without these three factors aligning themselves as described.

Additionally, without a profitable mining operation, the ability to pay back the Notes may not be available to us. If that is the case, the payback would require us to raise money from placements of equity instruments to raise the cash to satisfy the obligations. Such a use of funds may present a funding effort that receives tepid or little response in the equity markets.

However, we do believe there are investors motivated to provide funding for exploration programs to locate and exploit the hard rock deposits from which the placer mineralization is coming from. This strategy can be pursued independent of any mining activities.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Inflation

We do not believe that inflation has had a significant impact on our consolidated results of operations or financial condition.

Contractual Obligations

There are no current contractual obligations.

Critical Accounting Policies

We have identified our critical accounting policies, the application of which may materially affect the financial statements, either because of the significance of the financials statement item to which they relate, or because they require management’s judgment in making estimates and assumptions in measuring, at a specific point in time, events which will be settled in the future. The critical accounting policies, judgments and estimates which management believes have the most significant effect on the financial statements are set forth below:

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·Estimates of the recoverability of the carrying value of our mining and mineral property assets. We use publicly available pricing or valuation estimates of comparable property and equipment to assess the carrying value of our mining and mineral property assets. However, if future results vary materially from the assumptions and estimates used by us, we may be required to recognize an impairment in the assets’ carrying value. 

·Expenses and disclosures associated with accounting for stock-based compensation. We used the Black-Scholes option pricing model to estimate the fair market value of stock options issued under our stock-based compensation plan, which determines the recognition of associated compensation expense. This valuation model requires the use of judgment in applying assumptions of risk-free interest rate, stock price volatility and the expected life of the options. While we believe we have applied appropriate judgment in the assumptions and estimates, variations in judgment in applying assumptions and estimates used in this valuation could have a material effect upon the reported operating results. 

·Estimates of our environmental liabilities. Our potential obligations in environmental remediation, asset retirement obligations or reclamation activities are considered critical due to the assumptions and estimates inherent in accruals of such liabilities, including uncertainties relating to specific reclamation and remediation methods and costs, the application and changing of environmental laws, regulations and interpretations by regulatory authorities. 

·Accounting for Investments in Joint Ventures. For joint ventures in which we do not have joint control or significant influence, the cost method is used. Under the cost method, these investments are carried at the lower of cost or fair value. For those joint ventures in which there is joint control between the parties and in which we have significant influence, the equity method is utilized whereby our share of the ventures’ earnings and losses is included in the statement of operations as earnings in joint ventures and our investments therein are adjusted by a similar amount. We have no significant influence over our joint venture described in Note 3 Joint Ventures to the financial statements, and therefore account for our investment using the cost method. For joint ventures where we hold more than 50% of the voting interest and has significant influence, the joint venture is consolidated with the presentation of a non-controlling interest. In determining whether significant influence exists, we consider our participation in policy-making decisions and our representation on the venture’s management committee. We currently have no joint venture of this nature. 

Not applicable.

Evaluation of Disclosure Controls and Procedures

At the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision of, and with the participation of, our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a – 15(e) and Rule 15d – 15(e) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were not effective, and that information required to be disclosed by the Company in its reports that it files or submits to the SEC under the Exchange Act, is recorded, processed, summarized and reported within the time period specified in applicable rules and forms.

Our Chief Executive Officer and Chief Financial Officer have also determined that the disclosure controls and procedures are not effective, and that material information required to be disclosed in our reports filed under

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the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow for accurate required disclosure to be made on a timely basis.

Changes in internal controls over financial reporting

During the quarter ended September 30, 2019, there have been no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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We are subject to legal proceedings and claims, which arise from time to time. These can include, but are not limited to, legal proceedings and/or claims pertaining to environmental or safety matters. With the exception of the arbitration actions detailed below, there are no pending material legal proceedings in which the Company is a party or any of their respective properties is subject. Also, with the exception of the arbitration actions detailed below, there are no pending legal proceedings to which any director, officer or affiliate of the Company, any owner of record or beneficiary of more than 5% of the common stock of the Company, or any security holder of the Company is a party adverse to the Company or has a material interest adverse to the Company.

In 2017, the Company, its subsidiary and the joint venture, as claimants, filed an arbitration statement of claim against NyacAU, LLC (“NyacAU”), BEAR Leasing, LLC, and Dr. J. Michael James, as respondents. In 2018, the respondents filed a counter-claim against us, the claimants. The arbitration claim alleges, amongst other things, claims concerning related-party transactions, accounting issues, interpretation of the joint venture operating agreement, allocation of tax losses between the joint venture partners, and unpaid amounts due Goldrich relating to the Chandalar Mine. The arbitration occurred during July and August 2018 in Anchorage, Alaska before a three-member panel. Under the terms of the Operating Agreement, both partners are required to abide by the rulings proceeding from the Panel. We have received an Interim Award, a Partial Final Award, a Second Interim Award, and a Final Post Award and are awaiting the outcome of the arbitration that would come in the form of a Final Award from the panel.

There have been no changes to our risk factors as reported in our annual report on Form 10-K for the year ended December 31, 2018.

See full disclosure in section entitled “Sale of Unregistered Securities” above, which is incorporated by reference to this Item 2.

None.

Our exploration properties are subject to regulation by the Federal Mine Safety and Health Administration ("MSHA") under the Federal Mine Safety and Health Act of 1977 (the "Mine Act"). Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (The "Dodd-Frank Act"), issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities.

During the quarter ended September 30, 2019, at our joint venture, GNP, we had no such specified health and safety violations, orders or citations, related assessments or legal actions, mining-related fatalities, or similar events in relation to our United States operations requiring disclosure pursuant to Section 1503(a) of the Dodd-Frank Act.

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None.

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SIGNATURES

In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant has caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

Date:  November 4, 2020

GOLDRICH MINING COMPANY 

By   /s/  William Schara                                                      

William Schara, Chief Executive Officer and President  

In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant has caused Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

Date:  November  4, 2020

GOLDRICH MINING COMPANY 

By    /s/ Ted R. Sharp                                                         

Ted R. Sharp, Chief Financial Officer  

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