News Column

GOLDRICH MINING CO - 10-Q - Management's Discussion and Analysis of Financial Condition or Plan of Operation

August 19, 2014

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 15, 2013. 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 Overview



Our Chandalar, Alaska gold mining property has seen over a hundred years of intermittent mining exploration and extraction history. There has been small production 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 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 and 2013. It appears financial markets may be improving and we have been successful in raising funds for a limited exploration program in 2014.

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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.

As of 2013, total mining preparation expenditures by GNP were approximately $13.7 million and mining preparation expenditures for 2014 are estimated to be $4.5 million. The total mine preparation expenditures to complete the mine are comparable to total costs, adjusted for inflation, as estimated in our 2009 preliminary assessment study for a similar mine plan. All costs up to commercial production (as defined in the joint venture agreement) are required to be funded by NyacAU and will be paid back from cash flow from gold production (as defined in the joint venture agreement).

Goldrich has completed approximately 15,000 feet of drilling to date on the upper half of the Little Squaw Creek placer project and outlined 10.5 million cubic yards of mineralized material, at an average head grade of 0.025 ounces of gold per cubic yard for an estimated total of approximately 250,000 contained ounces. The mineralized material at Chandalar is not a mineral reserve as defined in SEC Industry Guide 7. Based on a targeted production rate of 20,000 ounces of gold per year and the mineralized material drilled out to date, the Little Squaw Creek mine would have a mine life of approximately 12 years. Little Squaw Creek is one of seven potential placer targets on the Chandalar property and is open to expansion. Mining operations at the Chandalar mine utilize conventional gravity technologies for gold recovery. All plants will employ a recirculating closed-loop water system to minimize water usage and protect the environment.

Completion of 2014 Winter Trail

In late March and early April GNP successfully completed the mobilization of equipment and supplies needed for its placer mining operation this summer at Chandalar, Alaska. Equipment and supplies were delivered over the 90-mile winter trail between Coldfoot, Alaska and Chandalar. The primary piece of equipment delivered to the mine site was a feeder for the expanded plant. Plant expansion is scheduled to be completed in stages through 2016, culminating in a nearly 400% increase from the former plant with a 125 loose cubic yard (lcy) per hour capacity to a new plant with a 600 lcy per hour capacity. Once finished, processing facilities will consist of a primary feeder system with multiple gravel screens and gold recovery tables and an expanded settling pond system for additional water conservation and quality control. The full capacity of the feeder will be realized as additional gravel screens and gold recovery tables are added in stages.

2014 Summer Construction Season

All mining permits for an expanded mine were received in August 2013 and GNP was able to produce approximately 680 ounces of gold during the last several weeks late of the 2013 production season operating at partial capacity. The new permit expanded the mine site area, including the area for a new airstrip, from approximately 10 to 350 acres. This provides an increased area for stockpiling topsoil, a larger settling pond system with greater capacity to ensure water quality and availability, and room to allow concurrent mine reclamation as the project advances. After the 2013 production season and on receiving all the mining permits, the existing plant was able to be disassembled and moved from a tight position up the mountain to a lower and more easily accessible broader part of the valley floor. The new site will facilitate maximum and efficient production under the expanded mine plan.

The expanded plant and recirculating pond system are currently under construction and are expected to be near completion in 2014 except for certain equipment with longer lead manufacturer time being constructed outside of Alaska. That equipment will not be available until the later part of the 2014 and will be mobilized to Chandalar during the 2015 winter trail. GNP has concluded it is prudent, more efficient, and in the best interest of the operation to focus on the construction of the plant and process no pay gravel in 2014.

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2014 Petrographic Study and Exploration Activities

As announced in May 2014, we completed advanced petrographic studies of drill core samples from the Chandalar gold property. The new data refines the orogenic model that has historically guided exploration at Chandalar and offers a fresh approach to future exploration.

Our geologists concurred the studies are important for exploration as the pegmatite textures in outcrop and drilling and the radiogenic activity from accessory minerals associated with pegmatite-veins may indicate proximity to intrusive-related mineralization and may provide us a highly useful tool for gold mineralization discovery.

The petrologic study involved detailed microprobe examination of samples taken from veins in the Chandalar gold system that exhibit characteristics of pegmatite, an igneous rock deposited during emplacement of a granitic intrusive body. All of the samples contain numerous accessory minerals that commonly derive from magma or late stage magmatic fluids, including monazite, thorite and xenotime. Some of the accessory minerals co-precipitated with gold, indicating that late intrusive stage hydrothermal fluids migrated upward along shear zones within which the lode gold mineralization is emplaced. Importantly, radiogenic activity is associated with the accessory mineral suite.

We believe rigorous follow-up rock sampling and radiogenic surveys may result in more effective selection of high-priority drill sites, an important factor considering the expansive size of the Chandalar system.

In August 2014, we engaged a contractor and geologists to perform additional airborne magnetic and radiometric studies across the entire Chandalar property. The data obtained from these studies will be compiled with data already derived from sampling, trenching, drilling and geophysical testing to present a comprehensive 3D model of the Chandalar prospects and their geological setting. The results of these studies will assist us in determining methods and targets for exploration in 2015 and beyond.

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 2014 and beyond. We anticipate that we will incur approximately $650,000 for general operating expenses over the next 12 months as of June 30, 2014.

On January 23, 2014, the Company completed the offer and sale of 200 shares of Series B Preferred stock in the Company, resulting in net proceeds of $200,000 to the Company.

On January 24, 2014, the Company closed a three-year unsecured senior note financing for $300,000. Per the note agreement, the $300,000 is the first of six-staged loans for total aggregate proceeds of $2 million. Under the terms of the note, the three-year maturity date is measured from the closing date of each loan in the series. The loans will be issued at a 5% discount and, for each loan of the series, the lender will be issued a pro rata amount of five-year warrants totaling up to 10.5 million shares of common stock of the Company exercisable at a price equal to the greater of $0.15 per common share or the market price per common share on date of issuance of the warrants. The Company has, at its election, the ability to cancel future loans at any time or prepay the loans together with interest thereon without penalty. The Lender reserves the right, at its election, to determine whether to fund Loans 2 through 6 in the series. The Company will pay finder fees consisting of a 3% cash commission and warrants to purchase shares of common stock of the Company equal to 8% of each loan, of which 1% of the cash commission and 3% of the warrants will be paid to a director of the Company. The terms of the warrants will be the same as the warrants issued to the lender.

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On June 6, 2014, the Company completed the first tranche of a private placement of its common stock and warrants to purchase shares of its common stock. This tranche of the private placement consisted of 14,208,637 units to be issued at a price of $0.055 per unit and resulted in net proceeds to the Company of approximately $703,004. Each unit consists of one share of the Company's common stock and one half of a Class N warrant. Each full Class N warrant is exercisable to purchase one additional common share of the Company at $0.11, for a period of five years following the date of issue. Of the units to be issued in this tranche, officers and directors of the Company purchased 481,819 units, contributing $26,500 of the total proceeds of the private placement. Such units were purchased on the same terms and conditions as the purchase of units by other investors in the private placement.

On June 30, 2014, the Company completed the second tranche of a private placement of its common stock and warrants to purchase shares of its common stock. This tranche of the private placement consisted of 8,700,363 units to be issued at a price of $0.055 per unit and resulted in net proceeds to the Company of approximately $432,960. Each unit consists of one share of the Company's common stock and one half of a Class N warrant. Each full Class N warrant is exercisable to purchase one additional common share of the Company at $0.11, for a period of five years following the date of issue. Of the units to be issued in this tranche, officers and directors of the Company purchased 833,545 units, contributing $45,845 of the total proceeds of the private placement.

The terms of the warrants include a call option for the Company. In the event that the Company's common shares trade at a weighted volume average price equal to or greater than $0.22 for a period of 20 out of 30 consecutive trading days at any time following the issuance of the respective warrants, and the average trading volume of the common stock for 20 out of 30 consecutive trading days was at least 120,000 shares, the Company may, in its sole discretion, accelerate the expiration date of the respective warrants by giving written notice to the holders thereof within 14 business days of the occurrence thereof, and in such case, the warrants will expire on the close of business on the date next preceding the Redemption Date. The Company's right to call the warrants is also dependent on (i) a registration statement under the United States Securities Act of 1933, as amended (the "Securities Act"), registering for sale the Warrant Shares, has been filed with the United States Securities and Exchange Commission and is in effect on the date of written notice of the redemption (the "Notice Date") and the redemption date contained therein and (ii) there exists on the Notice Date a public trading market for the Company's common stock and such shares are listed for quotation on the NASDAQ Stock Market, the OTC Electronic Bulletin Board, or a national securities exchange The Company granted piggyback registration rights to such investor

During the six-months ended June 30, 2014, the Company received the first staged loan of $300,000 less a discount of $15,000, for proceeds of $285,000. The Company paid finder fees totaling $9,000, and incurred other placement costs of $35,627, for a total of $44,627 of deferred finance costs. The lender elected to defer at least the second through the fifth tranches of the note advances pending the resolution and additional due diligence related to a lien that was placed on our claims in December by our JV partner, which were subsequently released during the quarter ended March 31, 2014.

At June 30, 2014, the Company had an outstanding note payable of $300,000 less unamortized discounts of $54,734 for a net liability of $245,266.

The Company plans to raise additional necessary financing through debt and/or equity placements. Failure 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, no minimum distribution is due Goldrich from the placer operation until 2016. Although the current capital markets and general economic conditions in the United States may be obstacles to raising the required financing, 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, as the placer mine nears completion, we look forward to internal cash flow and additional options for financing appear to be coming available. 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 FINRA OTCBB in the United States.

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Going Concern

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/or raising additional funds. During the six-months ended June 30, 2014, we raised $1,135,964 net cash from the sale of 22,909,000 common shares to be issued, $200,000 net cash from the sale of 200 shares of Series B Preferred Stock, and $230,489 net cash from the issuance of a note payable. 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 no historical recurring source of revenue and our ability to continue as a going concern is dependent on our ability to raise capital to fund our future exploration and working capital requirements or our ability to profitably execute our business plan. Our plans for the long-term return to and continuation as a going concern 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.

On October 10, 2013, we reported Goldrich NyacAU Placer, LLC ("GNP") had completed preparations for initial production and had produced approximately 680 ounces of gold during the construction of the mine before closing out the 2013 season. There is no production currently planned for the 2014 season. Production is expected to begin in 2015 and plant expansion is scheduled to be completed in stages through 2016. A successful mining operation may provide the long-term financial strength for the Company to remove the going concern condition in future years. See Note 6 Joint Venture.

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 for the Three and Six-Month Periods ended June 30, 2014

On June 30, 2014 we had total liabilities of $2,147,747 and total assets of $1,798,727. This compares to total liabilities of $2,106,734 and total assets of $1,063,240 on December 31, 2013. The increase in liabilities was due to the note payable entered into during the quarter ended March 31, 2014, partially offset by a decrease in trade payables and related party payables resulting from payments made from the cash proceeds of private placements of equity units and note payable. As of June 30, 2014, our liabilities consist of $764,217 for notes payable in gold, net of discounts, $641,566 for environmental remediation and asset retirement obligations, $345,460 of trade payables and accrued liabilities, $245,266 for note payable, net of discounts, $129,155 due to related parties, and $22,083 for dividends payable. Of these liabilities, $1,260,915 is due within 12 months. The increase in total assets was due to the cash received near the beginning of the quarter from the note payable, the sale of 200 shares of Series A Convertible Preferred stock, the sale of 22,909,000 equity units issued from private placements, increases in prepaid expenses for insurance premiums paid, and an increase in deferred financing cost asset during the six-months ended June 30, 2014.

On June 30, 2014 we had negative working capital of $272,546 and stockholders' deficit of $349,020 compared to negative working capital of $1,318,660 and stockholders' deficit of $1,043,494 for the year ended December 31, 2013. Negative working capital decreased due to the cash proceeds from the private placements entered into during June 2014, offset by the cash remaining in the bank from those proceeds after payment of trade payables and related party payables. Stockholders' deficit decreased due to the sale of preferred stock and private placements of equity units in the six months ended June 30, 2014, partially offset by the operating loss for the six-month period.

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During the six-month period ended June 30, 2014, we used cash from operating activities of $781,697 compared to $511,931 for same period of 2013. The increase in cash used is due primarily to pay down of accounts payable and related party payables in the six-month period ended June 30, 2014 compared to a smaller decrease of accounts payable and an increase in related party payables for the same period of 2013. As of June 30, 2014, we had accumulated approximately $23.2 million in federal and state net operating losses, which may enable us to generate approximately $23.2 million in net income prior to incurring any significant income tax obligation.

During the six-month period ended June 30, 2014, no cash was provided by investing activities compared to cash provided by the sale of equipment of $284,629 in 2013. We purchased no additional capital equipment in the June 2014 and 2013 quarters.

During the six-month period ended June 30, 2014, cash of $1,566,453 was provided by financing activities from the proceeds of a note payable, private placement of common stock, and the sale of Preferred Stock, compared to cash provided of $550,352 from proceeds of notes payable in gold and payments made on related party debt during the six-month period ended June 30, 2013.

Sale of Unregistered Securities

Private Placements

On June 6, 2014, the Company completed the first tranche of a private placement of its common stock and warrants to purchase shares of its common stock. This tranche of the private placement consisted of 14,208,637 units to be issued at a price of $0.055 per unit and resulted in net proceeds to the Company of approximately $703,004. Each unit consists of one share of the Company's common stock and one half of a Class N warrant. Each full Class N warrant is exercisable to purchase one additional common share of the Company at $0.11, for a period of five years following the date of issue. Of the units to be issued in this tranche, officers and directors of the Company purchased 481,819 units, contributing $26,500 of the total proceeds of the private placement. Such units were purchased on the same terms and conditions as the purchase of units by other investors in the private placement.

On June 30, 2014, the Company completed the second tranche of a private placement of its common stock and warrants to purchase shares of its common stock. This tranche of the private placement consisted of 8,700,363 units to be issued at a price of $0.055 per unit and resulted in net proceeds to the Company of approximately $432,960. Each unit consists of one share of the Company's common stock and one half of a Class N warrant. Each full Class N warrant is exercisable to purchase one additional common share of the Company at $0.11, for a period of five years following the date of issue. Of the units to be issued in this tranche, officers and directors of the Company purchased 833,545 units, contributing $45,845 of the total proceeds of the private placement.

The terms of the warrants include a call option for the Company. In the event that the Company's common shares trade at a weighted volume average price equal to or greater than $0.22 for a period of 20 out of 30 consecutive trading days at any time following the issuance of the respective warrants, and the average trading volume of the common stock for 20 out of 30 consecutive trading days was at least 120,000 shares, the Company may, in its sole discretion, accelerate the expiration date of the respective warrants by giving written notice to the holders thereof within 14 business days of the occurrence thereof, and in such case, the warrants will expire on the close of business on the date next preceding the Redemption Date. The Company's right to call the warrants is also dependent on (i) a registration statement under the United States Securities Act of 1933, as amended (the "Securities Act"), registering for sale the Warrant Shares, has been filed with the United States Securities and Exchange Commission and is in effect on the date of written notice of the redemption (the "Notice Date") and the redemption date contained therein and (ii) there exists on the Notice Date a public trading market for the Company's common stock and such shares are listed for quotation on the NASDAQ Stock Market, the OTC Electronic Bulletin Board, or a national securities exchange The Company granted piggyback registration rights to such investors.

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The proceeds from the offering will be utilized to further advance development of the Company's 100%-owned Chandalar district-scale gold project in Alaska as well as for general working capital purposes.

The shares were issued to "accredited investors" (as defined in Rule 501(a) of Regulation D) in private placement transactions pursuant to Section 4(2) of the Securities Act of 1933, as amended.

Series B Preferred Stock

On January 23, 2014, the Company completed the offer and sale of 200 shares of Series B Preferred stock in the Company, resulting in net proceeds of $200,000 to the Company. These shares were issued from the designated 9,000,000 share of Preferred Stock, par value as the Board may determine.

In connection with the issuance of the Series B Preferred Stock, the Company issued 2,857,142 five-year Class L warrants with an exercise price of $0.10 per share of the Company's common stock with a fair value of $92,242 as determined using a Black Scholes model and allocation between the preferred shares and the warrants as prescribed by ASC 470. Additionally, after accounting for the fair value of the warrant, a beneficial conversion feature of $50,000 was determined to exist, which represented a deemed dividend to the holder of the preferred shares recognizable immediately upon issue due to the ability to convert the shares concurrent with issuance of the preferred shares. Both the fair value of the warrants and the beneficial conversion feature were charged to Additional paid in capital at the date of issuance.

The fair value of the warrants was estimated on the issue date using the following weighted average assumptions:

Risk-free interest rate 1.62% Expected dividend yield -- Expected term (in years) 5 Expected volatility 157.0%



The Series B Convertible Preferred Shares carry the following rights and preferences:



Liquidation Preference: Upon a liquidation event, each holder of outstanding shares of Series B Stock shall be entitled to be paid out of the assets of the Company available for distribution to stockholders, whether such assets are capital, surplus or earnings and before any amount shall be paid or distributed to the holders of any class of the Company's common stock, par value $0.10 per share (the "Common Stock"), or of any other stock ranking on liquidation junior to the Series B Stock, an amount in cash equal to $1,000 per share (adjusted appropriately for stock splits, stock dividends and the like) (the "Series B Liquidation Amount"), payable pari passu with the preference with any other securities ranking equal in liquidation preference; provided, however, that if upon any liquidation event, the amounts payable with respect to the Series B Stock are not paid in full, the holders of the Series B Stock shall share ratably in any distribution of assets in proportion to the full respective preferential amounts to which they are entitled. Holders of the Company's Series A Preferred Stock shall be paid in advance of holders of Series B Stock on the occurrence of a liquidation event.



Voting: Each holder of Series B Stock shall be entitled to vote on all matters upon which holders of Common Stock would be entitled to vote and shall be entitled to that number of votes equal to the number of whole shares of Common Stock into which such holder's shares of Series B Stock could be converted under Section 4, at the record date for the determination of stockholders entitled to vote on such matter, or, if no such record date is established, at the day before the first notice of the meeting of stockholders at which the vote is to be taken is delivered to stockholders, or the date any written consent of stockholders is solicited if the vote is not to be taken at a meeting. Each such holder shall be entitled to notice of any stockholders' meeting in accordance with the Company's Bylaws. Except as otherwise expressly provided in the Company's Articles of Incorporation, by the Alaska Code or the Certificate of Designation, the holders of shares of Series B Stock shall vote together as a single class with the Common Stock on an as-if-converted basis on all matters.

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Conversion: Any share of Series B Preferred Stock may, at the option of the holder be converted at any time into such number of fully-paid and non-assessable shares of Common Stock as is equal to the product obtained by multiplying the Series B Conversion Rate ($1000.00 divided by the Series B Conversion Price of $0.07 per share) by the number of shares of Series B Stock being converted.



Right to Participate: The Company grants to each holder of Series B Stock the right to participate in any offerings of the Company's Common Shares or securities convertible into or exercisable to obtain Common Shares ("Participation Securities") where the price per Common Share (including on an as converted or exercised basis, as applicable) is less than $0.07 for a three-year period beginning on the Closing Date. Such participation shall be on the same terms as other investors in such future offerings at a dollar value equal to the principal amount of Preferred Shares held by the holder at the time of the Participation Notice (as defined below). Each holder of Series B Stock shall participate in such future offering by surrendering all of the holders then outstanding Preferred Shares and Warrants and receiving securities in the future offering with a dollar value equal to the principal amount of Preferred Shares surrendered. Prior to closing any offering of Participation Securities, the Company shall provide the holder with a written notice detailing the Participation Securities being offered and the material terms of the offering, which shall be the same terms being offered to other investors in the offering ("Participation Notice"). Upon receipt of the Participation Notice, the holder will have 10 Business Days for a private offering or 3 Business Days for a public offering to notify the Company that the holder wishes to participate in the offering.



Notices of Record Date: In the event of any capital reorganization of the Company, any reclassification of the capital stock of the Company, or any Liquidation Event, the Company shall mail or deliver, or cause to be mailed or delivered, to each holder of Series B Stock a notice specifying: (a) if a plan of merger, consolidation or exchange is to be submitted for approval by the Company's shareholders, the place, day and hour of the meeting and purpose for which the meeting is called and including a copy or summary of the plan of merger, consolidation or exchange and copies of Alaska Code Sections 574 and 576; (b) the date on which any such reorganization, reclassification, or Liquidation Event is expected to become effective; and (c) the time, if any, that is to be fixed, as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such reorganization, reclassification, or Liquidation Event. Such notice shall be mailed or delivered no later than ten (10) days prior to the date specified in such notice on which such action is to be taken.



Transfer: The shares of Series B Stock are non-transferrable.



Other Rights: Except as otherwise provided in the Certificate of Designation, each share of Series B Stock and each share of Common Stock shall be identical in all respects, shall have the same powers, preferences and rights, without preference of any such class or share over any other such class or share.

The Series B Preferred Shares were issued to "accredited investors" (as defined in Rule 501(a) of Regulation D) in private placement transactions pursuant to Section 4(2) of the Securities Act of 1933, as amended.

Note Payable

On January 24, 2014, the Company closed a three-year unsecured senior note financing for $300,000 with a private investment firm. Per the note agreement, the $300,000 is the first of six-staged loans for total aggregate proceeds of $2 million. The note bears interest at 15%, payable at the end of each quarter. Interest of $19,110 had been accrued and paid as of June 30, 2014.

Repayment of all amounts owed under the note is guaranteed by Goldrich Placer LLC, the Company's wholly owned subsidiary, which in turn owns a 50% interest in Goldrich NyacAU Placer LLC. See Note 6 Joint Venture.

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The note contains standard default provisions, including failure to pay interest and principal when due. If the lender has fully funded loans 1 through 4 as outlined below, then upon the occurrence of any event of default as defined in the agreement, until such time as the earlier of either (i) the event of default has been cured in the reasonable judgment of the Lender as evidenced in writing or (ii) all amounts due and payable under the note are paid in full pursuant to the terms hereof, any amounts owing hereunder shall bear an applicable rate equal to twenty percent (20%) per annum and shall be immediately due and payable to lender upon lender's written demand to the Company.

Under the terms of the note, the three-year maturity date is measured from the closing date of each loan in the series. The loans will be issued at a 5% discount and, for each loan of the series, the lender will be issued a pro rata amount of five-year Class M warrants totaling up to 10.5 million shares of common stock of the Company exercisable at $0.15 per common share. The Company has, at its election, the ability to cancel future loans at any time or prepay the loans together with interest thereon without penalty. The lender reserves the right, at its election, to determine whether to fund Loans 2 through 6 in the series. The Company will pay finder fees consisting of a 3% cash commission and warrants to purchase shares of common stock of the Company equal to 8% of each loan (160,000 warrants through June 30, 2014), of which 1% of the cash commission and 3% of the warrants will be paid to a director of the Company. The terms of the warrants will be the same as the warrants issued to the lender.

The loans are scheduled to be made as follows:

Loan Number Date of Loan: Amount of Loan: Pro Rata Warrants to Lender 1 January 29, 2014 $300,000 1,575,000 2 February 28, 2014 $200,000 1,050,000 3 March 30, 2014 $300,000 1,575,000 4 April 29, 2014 $200,000 1,050,000 5 June 30, 2014 $500,000 2,625,000 6 September 30, 2014 $500,000 2,625,000 TOTAL $2,000,000 10,500,000



During the six-months ended June 30, 2014, the Company received the first staged loan of $300,000 less a discount of $15,000, for proceeds of $285,000. The Company issued 1,735,000 Class M warrants, paid finder fees totaling $9,000, and incurred other placement costs of $35,627, for a total of $44,627 of deferred finance costs. The lender elected to defer at least the second through the fifth tranches of the note advances pending the resolution and additional due diligence related to a lien that was placed on our claims in December by our JV partner, which were subsequently released during the quarter ended March 31, 2014.

The fair value of warrants issued with the notes payable in gold was estimated at the date of issuance using the Black-Scholes fair value model, which requires the use of highly subjective assumptions, including the expected volatility of the stock price, which may be difficult to estimate for small reporting companies traded on micro-cap stock exchanges. The fair value of the warrants was estimated on the issue date using the following weighted average assumptions:

Risk-free interest rate 1.52% Expected dividend yield 0 Expected term (in years) 5 Expected volatility 157.1%



The risk-free interest rate is based on the U.S. Treasury yield curve at the time of the grant. The expected term of warrants issued is from the date of issuance. The expected volatility is based on historical volatility. The Company has evaluated previous low occurrences of warrant forfeitures and believes that current holders of the warrants will hold them to maturity as has been experienced historically; therefore, no variable for forfeiture was used in the calculation of fair value. The Note payable was discounted by the fair value of the warrants, which is being amortized over the life of the note.

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At June 30, 2014, the Company had outstanding total notes payable of $300,000 less unamortized discounts of $54,734 for a net liability of $245,266. The holder of the note payable contract elected to defer at least the second, third and fourth tranches of the note advances pending the resolution and additional due diligence related to a lien that was placed on our claims in December by our joint venture partner (see Note 6 Joint Venture), which were subsequently released during the quarter ended March 31, 2014.

Notes Payable in Gold

During the three month period ended March 31, 2013, the Company issued notes in principal amounts totaling $820,000, less a discount of $205,000, for cash 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 or a 25% discount to market price as calculated on the contract date and specify delivery of gold in November 2014. The notes payable in gold contracts contain standard terms regarding delivery and receipt of gold and payment of delivery costs. The Company paid a finder fee of $42,000 or 7% of $600,000 of the net proceeds and incurred other placement costs of $2,143, for a total of $44,143 of deferred finance costs.

Additionally, for each dollar of note payable in gold entered into during the three month period ended March 31, 2013, the holder received one half of a common stock purchase warrant. Each whole warrant is exercisable to purchase one share of common stock of the Company at an exercise price of $0.40 for a period of two years following the date of issue. The Company recognized an additional discount of $10,247 for the fair value of the warrants.

In the event that our shares of common stock trade in the United States at a closing price of greater than $1.00 per share for a period of 10 consecutive trading days at any time following the issuance of the warrants, the Company may, in its sole discretion, accelerate the expiration date of the warrants by giving written notice to the holders thereof, and in such case, the warrants will expire on the 20th business day after the date on which such notice is given by the Company.

At June 30, 2014, the Company had outstanding total notes payable in gold of $820,000 less unamortized discounts of $55,783 for a net liability of $764,217, representing 511.193 ounces of fine gold deliverable at November 30, 2014. The Joint Venture does not plan to produce or distribute gold to the Company prior to November 30, 2014; therefore, the Company will secure financing to buy the gold for payment, enter into negotiations with holders to modify the terms of the agreement or begin accruing and paying 8% interest on the total notes payable balance until the gold is delivered.

The notes were issued to "accredited investors" (as defined in Rule 501(a) of Regulation D) in private placement transactions pursuant to Section 4(2) of the Securities Act of 1933, as amended.

Subsequent Events

On July 18, 2014, Goldrich Mining Company completed the third and final tranche of its private placement financing. In total the Company raised gross proceeds of $1,524,000 through the issuance of 27,726,090 units at a price of $0.055 per unit. Officers and directors of the Company took part in the Offering, purchasing a total of 1,424,454 units under the same terms and conditions as units purchased by other investors in the private placement.

The placement agent for the Offering was paid a sales commission of 8% of gross proceeds raised from the Offering, placement agent warrants equal to 10% of the total units sold, and expenses equal to 2% of the gross proceeds of the securities sold in the offering. Each placement agent warrant is exercisable to purchase one share of common stock of the Company at $0.055 and shall be exercisable for five years.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

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Inflation

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

Contractual Obligations

We have no 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:



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 6 Joint Venture 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.

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