Note 5 – Notes Payable – Related Parties

On May 31, 2017 we entered into three short-term notes with Mr. Gibbs, Dr. Carson and Mr. Power in the principal amounts of $100,000, $25,000 and $25,000, respectively. The notes bear interest at 6% and matured on November 15, 2017. The note balances were subsequently rolled into the Series 2017 Notes. A total of $752 of interest is accrued on these notes as of September 30, 2020 and December 31, 2019, respectively.

On November 30, 2017 we entered into a series of secured promissory notes (“Series 2017 Notes”) with both related and unrelated parties in the aggregate amount of $1,155,000, including financing fees of $105,000 recorded as a discount to the notes. During the year ended December 31, 2019, a total of $57,750 of additional fees were added to the principal amount and recorded as a discount to the notes related of an extension of the maturity date to December 31, 2019. Of the additional fees $52,250 was related to the related party portion of these notes and $5,500 was related to their third party portion. The balance on these notes, net of discount of $0, was $1,069,376 as of December 31, 2019. During the year ended December 31, 2019 $ 57,750 of debt discount related to the above notes was amortized to interest expense. The notes are secured by a stock pledge agreement covering 100% of the outstanding common stock of Magellan Acquisition Corporation, bear interest at 10%.

The total of portion of the Series 2017 Notes from related parties totaled $1,045,000, including financing fees of $95,000 recorded as discount to the notes. Mr. Gibbs, Dr. Carson, and Mr. Power transferred $100,000, $25,000, and $25,000, respectively, from the May 31, 2017 short term related party notes into the Series 2017 Notes.

The Series 2017 Notes were in default as of December 31, 2019. Consequently, on March 31, 2020, the Company entered into an Agreement to Accept Collateral in Full Satisfaction of Obligations (the “Agreement”) with the holders of the Series 2017 Notes (the “Lenders”) due December 31, 2019 in the aggregate principal amount of $1.14 million. The Company is indebted under the Series 2017 Notes to the Lenders and the Company’s obligations to the Lenders are secured by a Stock Pledge and Security Agreement covering 100 shares of common stock of MAC and one (1) share of MV2 (the “Collateral”) held under a Collateral Agent Agreement. MAC and MV2 own the SDA Mill and El Dorado prospect in Nayarit, Mexico. The Series 2017 Notes matured on December 31, 2019 and remain unpaid and in default. The Lenders have accelerated the Company’s indebtedness. Pursuant to terms set forth in the Agreement, the Lenders have agreed to accept the Collateral in full satisfaction of the Series 2017 Notes and unconditionally and irrevocably waive any entitlement or right to receive payment of (i) the initial 10% Financing Fee included in the principal amount of the Notes, (ii) the 5% Rollover Fee agreed to in an Allonge and Modification Agreement. The effective date of the Agreement was March 31, 2020.

Unsecured advances – related party

During the nine months ended September 30, 2020, Mr. Gibbs advanced $20,000 to the Company. During the nine months ended, Mr. Power advanced $3,300 cash and paid expenses using his personal credit card on behalf of the Company of $106,271 and the Company made repayments to Mr. Power and/or his credit card of $143,528. On May 31, 2020, the Company issued 475,000 shares of common stock to Mr. Gibbs with a fair value of $332,500 for the settlement of advances in the amount of $95,000, resulting in a loss on settlement of $237,500. In addition, the Company issued 475,000 warrants exercisable for a period of twelve months at an exercise price of $0.20 per share. The Company recognized an additional $288,046 loss related to the issuance of warrants for the settlement of liabilities. Amounts due to Mr. Gibbs and Powers related to cash advances and expense paid on behalf of the Company was $25,602 and $134,559 as of September 30, 2020 and December 31, 2019, respectively.