GOLDRICH MINING CO - Quarter Report: 2019 June (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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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 we have discovered gold in prolific micro-fractures within schist in many places and have petrographic and geochemical evidence linking these and larger vein-hosted gold occurrences to an intrusive source. 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 granitic, mineralized intrusion. Exploration therefore has taken on two directions; one toward defining a low-grade, large tonnage body of mineralization running beneath the

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headwaters of Little Squaw Creek, the other a deeper, larger mineralized body from which mineralizing fluids have 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.

Because of the weak financial markets suffered by the mining industry in recent years, we endeavored to develop our placer properties as a source of internal cash to protect us from future market fluctuations and to provide funds for future exploration. 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. Ultimately the production numbers attained over those years fell short of the Minimum Production Requirements required in the Operating Agreement, and as a result, the JV is being dissolved.

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.

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. NyacAU is the manager of the GNP joint venture.

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.

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

NyacAU, as the manager of GNP, shall act as liquidator to wind up the Company within one (1) year, or such longer period as may be agreed to in writing by the joint venture members. If NyacAU cannot or does not accomplish the liquidation within one (1) year or any agreed upon extension, Goldrich shall complete the liquidation. Most of the equipment used by the joint venture has already been moved off the mine site.

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Goldrich and NyacAU are currently in arbitration and are awaiting the rulings of the arbitration panel. Under the terms of the GNP Operating Agreement, rulings from the three-person arbitration panel are final. The outcome of the arbitration is not yet determined and cannot be estimated or assured.

Planned 2019 Exploration and Mining Activities

In 2019, we do not anticipate conducting hard-rock exploration drilling activities and other hard-rock exploration activities at the Chandalar property. We will once again undertake such activities if and when our financial situation permits.

Although all rights to mine the placer properties revert to Goldrich upon dissolution of GNP, at the date of the report, the arbitration panel had not yet determined such matters as ownership of the mining permit, the ownership of all mining equipment used by GNP, treatment of certain accounting practices employed by the manager of the JV, which may significantly affect the distributions due to us, and several other matters. Due to the timing of the issuance of the Award, management has been precluded from making meaningful progress in obtaining financing, equipment, personnel, permit authority or other infrastructure requirements to conduct production activities Chandalar in 2019.

We are in the process of developing a mine plan for the Chandalar gold project. The timing of the issuance of the Award and lack of sufficient financings precluded us from scheduling a winter trail to transport additional equipment and supplies to the Chandalar property, which had to be completed prior to mid-April 2019. We believe we will be able to obtain financing for purchase of equipment, whether the equipment previously used by GNP or purchased from third parties, in order to bring the mine back into production in 2020 and beyond.  The 2019 year will be used to formulate a mine plan, obtain the necessary mining permits, rehabilitate the mine, remove overburden, and prepare according to the plan to resume production in 2020. These plans are contingent upon our success in raising sufficient capital to fund these activities or any portion of them.

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, $464,594 for interest, $375,905 for payment upon demand by holders of the gold notes, $2,595,790 for payment of notes payable to related party, and $1,020,000 for the payment of senior secured loans over the next 12 months as of June 30, 2019. Additional funds will be needed for any exploration expenditures, should any be undertaken. We also anticipate additional unknown and undeterminable costs for arbitration, but a significant portion of this may be recouped if we are successful in the 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. We have filed for arbitration before a panel of three independent arbitrators to address each of the disputed claims. A successful arbitration may result in significant increases to the 2018, 2017 and 2016 distributions. Arbitration testimony was completed in August 2018, with many motions and responses submitted to the panel since that time. The panel issued an Interim Award on May 25, 2019 but has yet to rule if the Interim Award may be changed.  Also, the Interim Award requested additional data and calculations relating to various matters that could affect the final outcome of the arbitration. No assurance can be given that the arbitration will be successful.

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Failure in receiving distributions under our damage claims at arbitration or in our efforts to raise needed financing could result in us having to scale back or discontinue exploration activities or some or all of our business operations. Under the joint venture operating agreement, revenue was to be allocated in accordance with the 5-point schedule outlined in the section Joint Venture Agreement in the Notes to our financial statements included as part of our annual report as filed on Form 10-K for 2019. GNP is being dissolved as previously disclosed. Subsequent to the dissolution, NyacAU is entitled to a secured interest in all placer gold production from certain claims owned by Goldrich as collateral for repayment of fifty percent (50%) of LOC1. Arbitration proceedings may significantly affect the balance of LOC1, the magnitude of which cannot be estimated at the date of this report.

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 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 six months ended June 30, 2019, we completed financings of $270,000, compared to $454,480 net cash for note financings and placements of our securities during the six months ended June 30, 2018. At June 30, 2019, we owe a total of $3,615,790 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 June 30, 2019, we had outstanding total notes payable in gold of $375,905, 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.

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Results of Operations

On June 30, 2019, we had total liabilities of $6,631,055 and total assets of $1,051,414. This compares to total liabilities of $5,912,698 and total assets of $1,083,521 on December 31, 2018. As of June 30, 2019, our liabilities consist of $454,734 for remediation and asset retirement obligations, $375,905 of notes payable in gold, $1,020,000 of notes payable, $2,595,790 of notes payable – related parties, $1,153,079 of trade payables and accrued liabilities, $73,306 of accrued interest payable, $391,288 of accrued interest payable – related parties, $536,335 due to related parties, and $30,618 for dividends payable. Of these liabilities, $6,176,321 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 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 six months ended June 30, 2019.

On June 30, 2019, we had negative working capital of $5,994,794 and a stockholders’ deficit of $5,579,641 compared to negative working capital of $5,521,940 and stockholders’ deficit of $4,829,177 for the year ended December 31, 2018. Working capital decreased during the quarter ended June 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 six-month period ended June 30, 2019.

During the six months ended June 30, 2019, we used cash from operating activities of $324,961 compared to $887,489 for the period ended June 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 $408,876 and $792,418 for the three and six months ended June 30, 2019, respectively, compared with $1,127,902 and 1,529,092 for the three and six months ended June 30, 2018, respectively. Net losses included depreciation of $1,675 and $4,034 for the respective six-month periods.

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

During the six months ended June 30, 2019, cash of $270,000 was provided by financing activities, compared to $454,480 provided during the same period of 2018.

Private Placement Offerings

Notes Payable & Notes Payable – Related Party

At December 31, 2018, we 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 six months ended June 30, 2019, we received the third and fourth tranche of the notes payable for $89,474 and $194,737, for the respective tranches, discounted at 5%, or $4,474 and $9,737, resulting in net proceeds of $85,000 and $270,000 for the three and six months ended June 30, 2019, respectively, of which $71,000 and $206,000 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.

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At June 30, 2019, we had outstanding Notes payable of $1,020,000 and outstanding Notes payable – related party of $2,595,790, with all discounts being amortized. We are 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 18,982,878 five-year Class T warrants have been issued to the lenders, including 13,627,886 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 June 21, 2024. During the six months ended June 30, 2019, we issued 1,492,102 warrants in connection with the notes payable. The warrants were valued at $17,668 and had an allocated relative fair value of $15,600.

A total of 1,518,630 five-year Class T warrants have been issued for finders fees related to this debt financing, including 1,090,231 to a related party.  The warrants issued for finders fees were fair valued at $25,863 and $26,354 for the three and six months ended June 30, 2019, using a Black Scholes valuation model (see table below), and are included in interest expense and finance costs.

During the three and six months ended June 30, 2019, we accrued cash finders fees related to this debt financing totaling $40,350 and $45,900 compared to $21,000 for each for the three- and six-month periods ended June 30, 2018 to related party entities and are included in interest expense and finance costs. Interest of $132,135 and $259,183 were expensed during the three and six months ended June 30, 2019 compared to $73,759 and $138,753 expensed during the three and six months ended June 30, 2018. Total interest for the notes of $441,613 accrued at June 30, 2019 and is included in Interest payable and Interest payable – related parties. Interest due at June 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 us to extend the due date.

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.

The total fair value of the Class T warrants was estimated on the issue dates at $25,863 and $68,747 for the six months ended June 30, 2019 and June 30, 2018, respectively, using the following weighted average assumptions: 

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The notes are secured by distributions from the GNP joint venture. The notes are senior to general non-trade creditors and all equity holders in the event of dissolution of the Company with a distribution of assets. The notes rank junior to:

(i) Any GNP Distributions that are only deemed to be made by GNP to Goldrich Placer pursuant to the Operating Agreement but are then withheld pursuant to Section 10.1 of the Operating Agreement; and  

(ii) Any GNP Distributions that are made by GNP to Goldrich Placer pursuant to the GNP Operating Agreement but are then withheld to pay Loan 3 and 2012 reclamation expenses; and   

(iii) Any GNP Distributions that are made by GNP to Goldrich Placer pursuant to the Operating Agreement but are then used to pay legal fees relating to mediation/arbitration concerning distributions due to Goldrich Placer from GNP; and  

(iv) Any GNP Distributions that are part of the Chandalar Sale, described below; 

(v) Any GNP Distributions that are part of the GVC Sale, described below; and  

(vi) Any GNP Distributions which are secured by our outstanding Senior Gold Forward Sales Contracts.  

The Chandalar Sale relates to a purchase agreement, dated as of June 19, 2015, whereby we, through our subsidiary Goldrich Placer, sold and assigned to CGL 12% of any and all GNP Distributions to Goldrich Placer, subject to the limitations set forth in the purchase agreement and the related assignment. The GVC Sale relates to a purchase agreement, dated as of May 22, 2015, whereby we, through our subsidiary Goldrich Placer, sold and assigned to GVC 0.50% of any and all GNP Distributions to Goldrich Placer, subject to the limitations set forth in the purchase agreement and the related assignment.

Repayment of all amounts owed under the notes is guaranteed by Goldrich Placer, which in turn owns a 50% interest in Goldrich NyacAU Placer LLC. The notes contain standard default provisions, including failure to pay interest and principal when due. Under the terms of the notes, any additional loans will be issued at a 5% discount and, for each loan, we will issue 5.25 Class T warrants, not to exceed warrants representing our maximum authorized shares available, for each dollar loaned under this agreement.

Notes payable in gold

During 2013, we 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, we 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.

On November 30, 2017, we renegotiated terms with the holders. A default condition arising from the non-delivery of the gold in 2017 was alleviated by agreements with the three note holders to extend the delivery date of gold to November 30, 2018, with the following terms:

Fifteen percent (15%), or 76 ounces, of the required quantity of gold under the contract, prior to amendment one in 2014, amendment two in 2015, and amendment three in 2016, which was originally due on the Delivery Date of November 30, 2014, was delivered on November 30, 2017. In lieu of gold, we could elect to satisfy the delivery of the deliverable required quantity by paying, an amount equal to the deliverable required quantity times the greater of the original purchase price or the index price for the day preceding the date of payment. We paid a total of $97,295 in cash to satisfy this renegotiated term.  

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We agreed to pay interest on the value of the delayed delivery required quantity of $341,543, at an annual non-compounding percentage rate of 10% payable quarterly with any remaining interest due and payable on the delivery date.  

If the delivery date index price on November 30, 2018 is less than the original purchase price, an additional adjusted required amount shall be delivered by December 31, 2018. 

On November 30, 2018, we renegotiated terms with the holders. A default condition arising from the non-delivery of the gold in 2018 was alleviated by agreements with the three note holders to extend the delivery date of gold to February 28, 2019, with the following significant terms:

In relation to the remaining 55% of the original Required Quantity of Gold under the Contract, prior to Amendment One, Amendment Two, Amendment Three, and Amendment Four (the “Fourth Delayed Delivery Required Quantity”), such Fourth Delayed Delivery Required Quantity shall be delivered to the Purchaser at the Delivery Point on February 28, 2019. In relation to the Fourth Delayed Delivery Required Quantity, “Delivery Date” as set forth on the Confirmation Letter, was amended to be no later than February 28, 2019. 

Subsequent to November 30, 2018, we agreed to pay interest on the value of the Fourth Delayed Delivery Required Quantity at an annual percentage rate of 10% (the “Interest Rate”) payable quarterly on December 31, 2018 with any remaining interest due and payable on the Delivery Date for the Fourth Delayed Delivery Required Quantity.  

Subsequent to November 30, 2018, the value of the Fourth Delayed Delivery Required Quantity was reset on December 1, 2018 and was equal to the number of ounces of Gold in the Fourth Delayed Delivery Required Quantity multiplied by a price as defined in the amendment. 

If the Delivery Date Index Price is less than the Original Purchase Price, an Additional Adjusted Required Amount, as defined in the amendment, shall be delivered to the Purchaser at the Delivery Point by March 31, 2019. 

Due to the Joint Venture’s failure to meet Minimum Production Requirements or make a sufficient distribution to the Joint Venture partners, we were unable to make payment to the holders of the notes payable in gold.

Subsequent to June 30, 2019, we renegotiated terms with the holders. 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:

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 Fourth Delayed Delivery Required Quantity must be delivered. 

Subsequent to February 28, 2019, we 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 Fourth Delayed Delivery Required Quantity.   

We, at our sole discretion, have the option to pay or deliver the Fourth Delayed Delivery Required Quantity prior to receiving notice from the Purchaser demanding payment of the Fourth Delayed Delivery Required Quantity or prior to sixty days after the Fourth Delayed Delivery Required Quantity Notice Date. If we exercise this option, in relation to the Fourth Delayed Delivery Required Quantity, “Delivery Date” as set forth on the Confirmation Letter, was amended to be the date of actual payment or delivery.  

The value of the Fourth Delayed Delivery 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 Confirmation Letter.  

To date, the gold notes have not been paid and the note holders have not demanded payment or delivery of gold.

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For the six months ended June 30, 2019, using the value of gold on June 30, 2019 of $1,409, we recognized an increase in fair value of $33,748. For the six months ended June 30, 2018, using a forward gold price of $1,213, we recognized a decrease in fair value of $32,255 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 June 30, 2019 and December 31, 2018, we had outstanding total notes payable in gold of $375,905 and $342,157, respectively, representing 266.788 ounces of fine gold deliverable at March 31, 2019. Interest of $16,785 was expensed during the six months ended June 30, 2019, of which $11,764 is accrued at June 30, 2019 and is included in Interest payable.

Subsequent Events

Subsequent to the six months ended June 30, 2019, we entered into additional notes payable totaling $205,000 from a related party, with cash proceeds of $205,000 to us. We also entered into amendments to the Notes payable in gold as described in Notes Payable in Gold above.

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

See Subsequent Events above.

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:

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. 

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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 5 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 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 effective, and that material information required to be disclosed in our reports filed under 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 June 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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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, among 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 arbitration panel. Arbitration testimony was completed in August 2018, with many motions and responses submitted to the panel since that time. The panel issued an Interim Award on May 25, 2019 but has yet to rule if the Interim Award may be changed.  Also, the Interim Award requested additional data and calculations relating to various matters that could affect the final outcome of the arbitration.

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 June 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.

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:  August 26, 2019

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:  August 26, 2019

GOLDRICH MINING COMPANY

By    /s/ Ted R. Sharp                                                     

Ted R. Sharp, Chief Financial Officer

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