UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

x
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended
September 30, 20202021

¨
¨
Transition report under section 13 or 15(d) of the Exchange Act

For the transition period from
to

Commission File Number
000-31380

APPLIED MINERALS, INC.INC.
(Exact name of registrant as specified in its charter)

Delaware
82-0096527
(State or other jurisdiction of incorporation or
organization)
(I. R. S. Employer Identification No.)
55 Washington Street - Suite 301, Brooklyn, NY
1200 Silver City Road, PO Box 432, Eureka, UT
11201
84628
(Address of principal executive offices)
(Zip Code)

(212) 226-4265
(435) 433-2059
(Issuer’s Telephone Number, Including
Area Code)

Former name, former address, and former fiscal year, if changed since last report

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES  
¨
NO 
x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
 YES  
¨
NO 
x
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES  xNO  ¨

YES  
x
NO  
¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes 
YES
xNo 
NO
¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller-reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer
¨
Accelerated Filer
¨
Non-accelerated Filer
¨
Smaller Reporting Company
x
Emerging growth company
¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to 
x
Section 13(a) of the Exchange Act.

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES  ¨NO  x

YES  
¨
NO 
x
The number of shares of the registrant’s common stock, $0.001 par value per share, outstanding as of November 16, 2020
22
, 2021 was 175,638,549.

204,736,762.

DOCUMENTS INCORPORATED BY REFERENCE: None.

 

APPLIED MINERALS, INC.

(An Exploration Stage Company)

QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2020

2021

TABLE OF CONTENTS

Page(s)
PART I. FINANCIAL INFORMATION
Item 1.
Consolidated Financial Statements
3
   
Item 1.Consolidated Financial Statements
Consolidated Balance Sheets as of September 30, 20202021 (unaudited) and December 31, 20192020
3
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020 and 2019 (unaudited)
4
Consolidated Statements of Changes in Stockholders’ Deficit for the Three and Nine Months Ended September 30, 2021 and 2020 and 2019 (unaudited)
5
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020 and 2019 (unaudited)
67
Notes to the Consolidated Financial Statements (unaudited)
78
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
2219
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
2824
Item 4.
Controls and Procedures
2924
PART II. OTHER INFORMATIONItem 1.
Legal Proceedings
25
Item 1.1A
Legal ProceedingsRisk Factors
3025
Item 1A
Risk Factors30
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
3025
Item 3.
Defaults Upon Senior Securities
3025
Item 4.
Mine Safety Disclosures
3025
Item 5.
Other Information
3025
Item 6.
Exhibits
3026
Signatures
3127

2

PPARTART I. FINANCIAL INFORMATION

AAPPLIEDPPLIED MINERALS, INC.

(An Exploration Stage Mining Company)

CONSOLIDATED BALANCE SHEETS

  September 30, 2020  December 31, 2019 
  (unaudited)    
ASSETS        
Current Assets        
Cash $73,917  $52,793 
Accounts receivable  121,783   78,308 
Deposits and prepaid expenses  23,435   284,208 
Total Current Assets  219,135   415,309 
         
Operating lease right-of-use assets  162,344   238,151 
Land  500,000   500,000 
         
Other Assets        
     Deposits  336,122   335,720 
Total Other Assets  336,122   335,720 
         
TOTAL ASSETS $1,217,601  $1,489,180 
         
LIABILITIES AND STOCKHOLDERS’ DEFICIT        
Current Liabilities        
Accounts payable and accrued liabilities $2,681,280  $1,693,589 
Paycheck Protection Program Loan  223,075   - 
PIK Note interest accrual  452,572   176,903 
Current portion of notes payable ($0 and $250,000 to related party, respectively)  59,370   458,728 
Current portion of operating lease liabilities  108,738   101,487 
Total Current Liabilities  3,525,035   2,430,707 
         
Long-Term Liabilities        
PIK Notes payable, net of $1,180,204 and $1,464,311 debt discount, respectively  44,718,396   43,702,301 
Operating lease liabilities  57,737   140,321 
Total Long-Term Liabilities  44,776,133   43,842,622 
         
TOTAL LIABILITIES  48,301,168   46,273,329 
         
Stockholders’ Deficit        
Preferred stock, $0.001 par value, 10,000,000 shares authorized, and 128,000 and 0 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively  128   - 
Common stock, $0.001 par value, 700,000,000 shares authorized, and 175,638,549 and 175,513,549 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively (290,390,539 reserved in Treasury)  175,639   175,514 
Additional paid-in capital  73,915,175   73,774,766 
Accumulated deficit prior to the exploration stage  (20,009,496)  (20,009,496)
Accumulated deficit during the exploration stage  (101,165,013)  (98,724,933)
Total Stockholders’ Deficit  (47,083,567)  (44,784,149)
         
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT $1,217,601  $1,489,180 

 
 
September 30, 2021
 
 
December 31, 2020
 
 
 
(unaudited)
 
 
 
 
ASSETS
 
 
 
 
 
 
Current Assets
 
 
 
 
 
 
Cash
 
$
206,090
 
 
$
669,560
 
Accounts receivable
 
 
24,255
 
 
 
67,557
 
Deposits and prepaid expenses
 
 
32,093
 
 
 
190,698
 
Total Current Assets
 
 
262,438
 
 
 
927,815
 
 
 
 
 
 
 
 
 
 
Land
 
 
500,000
 
 
 
500,000
 
Operating lease right-of-use asset
 
 
55,790
 
 
 
136,308
 
Finance lease right-of-use asset
 
 
45,704
 
 
 
0
 
 
 
 
 
 
 
 
 
 
Other Assets
 
 
 
 
 
 
 
 
Deposits
 
 
336,296
 
 
 
336,184
 
Total Other Assets
 
 
336,296
 
 
 
336,184
 
 
 
 
 
 
 
 
 
 
TOTAL ASSETS
 
$
1,200,228
 
 
$
1,900,307
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
 
 
 
 
 
 
 
 
Current Liabilities
 
 
 
 
 
 
 
 
Accounts payable and accrued liabilities
 
$
2,828,971
 
 
$
2,632,156
 
Paycheck Protection Program Loan
 
 
264,472
 
 
 
223,075
 
PIK Note interest accrual
 
 
457,822
 
 
 
365,121
 
Current portion of notes payable
 
 
0
 
 
 
133,081
 
Current portion of finance lease liabilities
 
 
11,811
 
 
 
0
 
Current portion of operating lease liabilities
 
 
57,737
 
 
 
111,236
 
Total Current Liabilities
 
 
3,620,813
 
 
 
3,464,669
 
 
 
 
 
 
 
 
 
 
Long-Term Liabilities
 
 
 
 
 
 
 
 
PIK Notes payable, net of $783,561 and $1,082,988 debt discount, respectively
 
 
46,468,582
 
 
 
45,235,990
 
Deferred revenue
 
 
1,000,000
 
 
 
1,000,000
 
Finance lease liabilities
 
 
33,893
 
 
 
0
 
Operating lease liabilities
 
 
0
 
 
 
29,085
 
Total Long-Term Liabilities
 
 
47,502,475
 
 
 
46,265,075
 
 
 
 
 
 
 
 
 
 
TOTAL LIABILITIES
 
 
51,123,288
 
 
 
49,729,744
 
 
 
 
 
 
 
 
 
 
Stockholders’ Deficit
 
 
 
 
 
 
 
 
Preferred stock, $0.001 par value, 10,000,000 shares authorized, and 257,136 and 128,000 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively
 
 
257
 
 
 
128
 
Common stock, $0.001 par value, 700,000,000 shares authorized, and 204,736,762 and 183,938,549 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively (134,336,317 reserved in Treasury)
 
 
204,743
 
 
 
183,939
 
Additional paid-in capital
 
 
74,594,281
 
 
 
74,008,636
 
Accumulated deficit prior to the exploration stage
 
 
(20,009,496
)
 
 
(20,009,496
)
Accumulated deficit during the exploration stage
 
 
(104,712,845
)
 
 
(102,012,644
)
Total Stockholders’ Deficit
 
 
(49,923,060
)
 
 
(47,829,437
)
 
 
 
 
 
 
 
 
 
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
 
$
1,200,228
 
 
$
1,900,307
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.

3

AAPPLIEDPPLIED MINERALS, INC.

(An Exploration Stage Mining Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

  For the Three Months Ended September 30  For the Nine Months Ended September 30 
  2020  2019  2020  2019 
             
REVENUES $222,204  $45,102  $518,272  $384,565 
                 
OPERATING EXPENSES:                
Production costs  396,301   216,081   846,338   661,239 
Exploration costs  56,909   49,062   144,588   126,658 
General and administrative  501,178   705,847   1,936,301   2,636,528 
                 
Total Operating Expenses  954,388   970,990   2,927,227   3,424,425 
                 
Operating Loss  (732,184)  (925,888)  (2,408,955)  (3,039,860)
                 
OTHER INCOME (EXPENSES):                
Interest expense, net (including amortization of deferred financing cost and debt discount)  (463,462)  (420,799)  (1,363,330)  (1,344,650)
Change in fair value  

(23,000

)  

-

   

(23,000

)  - 
Other income, net  54,855   596   1,355,205   2,963 
Total Other Income (Expenses)  (431,607)  (420,203)  (31,125)  (1,341,687)
                 
NET LOSS (1,163,791) (1,346,091) (2,440,080) (4,381,547)
                 
Deemed dividend on Series B Convertible preferred stock  

(23,187

)  -   

(23,187

)  - 
                 
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS $

(1,186,978

) $

(1,346,091

) $

(2,463,267

) $

(4,381,547

)
                 
Net Loss Per Common Share (Basic and Diluted) $(0.01) $(0.01) $(0.01) $(0.02)
                 
Weighted Average Common Shares Outstanding (Basic and Diluted)  175,638,549   175,513,549   175,616,195   175,513,549 

 
 
For the Three Months Ended September 30
 
 
For the Nine Months Ended September 30
 
 
 
2021
 
 
2020
 
 
2021
 
 
2020
 
 
 
 
 
 
 
 
 
 
 
 
 
 
REVENUES
 
$
360,815
 
 
$
222,204
 
 
$
1,099,980
 
 
$
518,272
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OPERATING EXPENSES:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Production costs
 
 
434,225
 
 
 
396,301
 
 
 
1,315,350
 
 
 
846,338
 
Exploration costs
 
 
47,866
 
 
 
56,909
 
 
 
175,715
 
 
 
144,588
 
General and administrative
 
 
443,503
 
 
 
501,178
 
 
 
1,244,975
 
 
 
1,936,301
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Operating Expenses
 
 
925,594
 
 
 
954,388
 
 
 
2,736,040
 
 
 
2,927,227
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Loss
 
 
(564,779
)
 
 
(732,184
)
 
 
(1,636,060
)
 
 
(2,408,955
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OTHER INCOME (EXPENSES):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net (including amortization of deferred financing cost and debt discount)
 
 
(474,579
)
 
 
(463,462
)
 
 
(1,401,878
)
 
 
(1,363,330
)
Change in fair value
 
 
-
 
 
 
(23,000
)
 
 
-
 
 
 
(23,000
)
Gain on forgiveness of PPP loan
 
 
-
 
 
 
-
 
 
 
223,075
 
 
 
-
 
Other income, net
 
 
20,308
 
 
 
54,855
 
 
 
114,662
 
 
 
1,355,205
 
Total Other (Expenses)
 
 
(454,271
)
 
 
(431,607
)
 
 
(1,064,141
)
 
 
(31,125
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NET LOSS
 
$
(1,019,050
)
 
$
(1,163,791
)
 
$
(2,700,201
)
 
$
(2,440,080
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deemed dividend on Series B Convertible preferred stock
 
 
(112,525
)
 
 
 
 
 
 
(23,187
)
 
 
(225,137
)
 
 
 
 
(23,187
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Loss Attributable to Common Shareholders
 
$
(1,131,575
)
 
$
(1,186,978
)
 
$
(2,925,338
)
 
$
(2,463,267
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Loss Per Common Share (Basic and Diluted)
 
$
(0.01
)
 
$
(0.01
)
 
$
(0.02
)
 
$
(0.01
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Average Common Shares Outstanding (Basic and Diluted)
 
 
199,138,961
 
 
 
175,638,549
 
 
 
194,202,348
 
 
 
175,616,195
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.

4

AAPPLIEDPPLIED MINERALS, INC.

(An Exploration Stage Mining Company)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’STOCKHOLDERS' DEFICIT

(Unaudited)

  Three Months Ended 
  Common
Stock
Shares		  Common
Stock
Amount		  Preferred
Stock
Shares		  

Preferred

Stock

Amount

  Additional
Paid-in
Capital		  Accumulated
Deficit Prior to
Exploration
Stage		  Accumulated
Deficit During
Exploration
Stage		  Total
Stockholders’
Deficit		 
                         
Balance, June 30, 2020  175,638,549   $175,639   -   -  $73,786,404  $(20,009,496) $(100,001,222) $(46,048,675)
                                 
Shares issued in private placement  -    -    128,000  $128   124,872   -    -    125,000 
                                 
Beneficial conversion feature on Convertible Series B Preferred Stock  -   -   -   -   23,187   -   -   23,187 
                                 
Deemed dividend from beneficial conversion feature on Convertible Series B Preferred Stock  -   -   -   -   (23,187)  -   -   (23,187)
                                 
Stock option compensation expense  -   -   -   -   3,899   -   -   3,899 
                                 
Net Loss  -   -   -   -   -   -   (1,163,791)  (1,163,791)
                                 
Balance, September 30, 2020  175,638,549   $175,639   128,000  $128  $73,915,175  $(20,009,496) $(101,165,013) $(47,083,567)
                                 
Balance, June 30, 2019  175,513,549   $175,514   -  $-  $73,730,188  $(20,009,496) $(95,787,257) $(41,891,051)
                                 
Stock option compensation expense  -   -   -   -   6,570   -   -   6,570 
                                 
Net Loss  -   -   -   -   -   -   (1,346,091)  (1,346,091)
                                 
Balance, September 30, 2019  175,513,549   $175,514   -  $-  $73,736,758  $(20,009,496) $(97,133,348) $(43,230,572)
    
  Nine Months Ended 
  Common
Stock
Shares		  Common
Stock
Amount		  Preferred
Stock
Shares		  

Preferred

Stock

Amount

  Additional
Paid-in
Capital		  Accumulated
Deficit Prior to
Exploration
Stage		  Accumulated
Deficit During
Exploration
Stage		  Total
Stockholders’
Deficit		 
                         
Balance, December 31, 2019  175,513,549   $175,514   -   -  $73,774,766  $(20,009,496) $(98,724,933) $(44,784,149)
                                 
Shares issued to note holder  125,000   125   -    -    1,125   -    -    1,250 
                                 
Shares issued in private placement  -    -    128,000  $128   

124,872

   -    -    

125,000

 
                                 
Beneficial conversion feature on Convertible Series B Preferred Stock  -   -   -   -   23,187   -   -   23,187 
                                 
Deemed dividend from beneficial conversion feature on Convertible Series B Preferred Stock  -   -   -   -   (23,187)  -   -   (23,187)
                   ��             
Stock option compensation expense  -   -   -   -   14,412   -   -   14,412 
                                 
Net Loss  -   -   -   -   -   -   (2,440,080)  (2,440,080)
                                 
Balance, September 30, 2020  175,638,549   $175,639   128,000  $128  $73,915,175  $(20,009,496) $(101,165,013) $(47,083,567)
                                 
Balance, December 31, 2018  175,513,549   $175,514   -  $-  $73,525,650  $(20,009,496) $(87,810,354) $(34,118,686)
                                 
Adoption of new accounting standard  -    -    -    -    -    -    (4,941,447)  (4,941,447)
                                 
Stock option compensation expense  -   -   -   -   211,108   -   -   211,108 
                                 
Net Loss  -   -   -   -   -   -   (4,381,547)  (4,381,547)
                                 
Balance, September 30, 2019  175,513,549   $175,514   -  $-  $73,736,758  $(20,009,496) $(97,133,348) $(43,230,572)

 
 
Three Months Ended
 
 
 
Common
Stock
Shares
 
 
Common
Stock
Amount
 
 
Preferred
Stock
Shares
 
 
Preferred
Stock
Amount
 
 
Additional
Paid-in
Capital
 
 
Accumulated
Deficit Prior to
Exploration
Stage
 
 
Accumulated
Deficit
During
Exploration
Stage
 
 
Total
Stockholders’
Deficit
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, June 30, 2021
 
 
195,105,088
 
 
$
195,105
 
 
 
176,136
 
 
$
176
 
 
$
74,256,128
 
 
$
(20,009,496
)
 
$
(103,693,795
)
 
$
(49,251,882
)
 
 
 
                              
Shares issued in private placement
 
 
0
 
 
 
0
 
 
 
176,000
 
 
 
176
 
 
 
199,824
 
 
 
0
 
 
 
0
 
 
 
200,000
 
                                 
Beneficial conversion feature on Convertible Series B Preferred Stock
  
-
   
0
   
-
   
0
   112,525   
0
   
0
   
112,525
 
                                 
Deemed dividend from beneficial conversion feature on Convertible Series B Preferred Stock
  
-
   
0
   
-
   
0
   
(112,525
)
   
0
   
0
   
(112,525)
 
 
 
 
                              
Shares issued for conversion of preferred stock
 
 
9,638,661
 
 
 
9,638
 
 
 
(95,000
)
 
 
(95
)
 
 
(8,843
)
 
 
-
 
 
 
-
 
 
 
700
 
 
 
 
                              
Stock option compensation expense
 
 
-
 
 
 
0
 
 
 
-
 
 
 
0
 
 
 
147,172
 
 
 
0
 
 
 
0
 
 
 
147,172
 
 
 
 
                              
Net Loss
 
 
-
 
 
 
0
 
 
 
-
 
 
 
0
 
 
 
0
 
 
 
0
 
 
 
(1,019,050
)
 
 
(1,019,050
)
 
 
 
                              
Balance, September 30, 2021
 
 
204,743,749
 
 
$
204,743
 
 
 
257,136
 
 
$
257
 
 
$
74,594,281
 
 
$
(20,009,496
)
 
$
(104,712,845
)
 
$
(49,923,060
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, June 30, 2020
 
 
175,638,549
 
 
$
175,639
 
 
 
0
 
 
 
0
 
 
$
73,786,404
 
 
$
(20,009,496
)
 
$
(100,001,222
)
 
$
(46,048,675
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares issued in private placement
 
 
-
 
 
 
-
 
 
 
128,000
 
 
$
128
 
 
 
124,872
 
 
 
-
 
 
 
-
 
 
 
125,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beneficial conversion feature on Convertible Series B Preferred Stock
 
 
-
 
 
 
0
 
 
 
-
 
 
 
0
 
 
 
23,187
 
 
 
0
 
 
 
0
 
 
 
23,187
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deemed dividend from beneficial conversion feature on Convertible Series B Preferred Stock
 
 
-
 
 
 
0
 
 
 
-
 
 
 
0
 
 
 
(23,187
)
 
 
0
 
 
 
0
 
 
 
(23,187
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock option compensation expense
 
 
-
 
 
 
0
 
 
 
-
 
 
 
0
 
 
 
3,899
 
 
 
0
 
 
 
0
 
 
 
3,899
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Loss
 
 
-
 
 
 
0
 
 
 
-
 
 
 
0
 
 
 
0
 
 
 
0
 
 
 
(1,163,791
)
 
 
(1,163,791
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, September 30, 2020
 
 
175,638,549
 
 
$
175,639
 
 
 
128,000
 
 
$
128
 
 
$
73,915,175
 
 
$
(20,009,496
)
 
$
(101,165,013
)
 
$
(47,083,567
)
5
 
 
Nine Months Ended
 
 
 
Common
 
Stock
 
Shares
 
 
 
 
 
 
 
 
 
 
Common
 
Stock
 
Amount
 
 
 
 
 
 
 
 
 
 
Preferred
 
Stock
 
Shares
 
 
 
 
 
 
 
 
 
 
Preferred
 
Stock
 
Amount
 
 
 
 
 
 
 
 
 
 
Additional
 
Paid-in
 
Capital
 
 
 
 
 
 
 
 
 
 
Accumulated
 
Deficit Prior to
 
Exploration
 
Stage
 
 
 
 
 
 
 
 
 
Accumulated
 
Deficit
During
 
Exploration
 
Stage
 
 
 
 
 
 
 
Total
 
Stockholders’
 
Deficit
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2020
 
 
183,938,939
 
 
$
183,939
 
 
 
128,000
 
 
$
128
 
 
$
74,008,636
 
 
$
(20,009,496
)
 
$
(102,012,644
)
 
$
(47,829,437
)
 
 
 
                              
Shares issued for conversion of preferred stock
 
 
15,805,934
 
 
 
15,805
 
 
 
(223,000
)
 
 
(223
)
 
 
(7,202
)
 
 
-
 
 
 
-
 
 
 
8,380
 
 
 
 
                              
Shares issued in private placement
 
 
0
 
 
 
0
 
 
 
352,136
 
 
$
352
 
 
 
384,648
 
 
 
0
 
 
 
0
 
 
 
385,000
 
 
 
 
                              
Beneficial conversion feature on Convertible Series B Preferred Stock
 
 
-
 
 
 
0
 
 
 
-
 
 
 
0
 
 
 
225,137
 
 
 
0
 
 
 
0
 
 
 
225,137
 
 
 
 
                              
Deemed dividend from beneficial conversion feature on Convertible Series B Preferred Stock
 
 
-
 
 
 
0
 
 
 
-
 
 
 
0
 
 
 
(225,137
)
 
 
0
 
 
 
0
 
 
 
(225,137
)
 
 
 
                              
Shares issued for cashless options exercise
 
 
3,836,475
 
 
 
3,836
 
 
 
-
 
 
 
-
 
 
 
(3,836
)
 
 
-
 
 
 
-
 
 
 
0
 
 
 
 
                              
Shares issued in lieu of bonus
 
 
1,162,791
 
 
 
1,163
 
 
 
-
 
 
 
-
 
 
 
56,977
 
 
 
-
 
 
 
-
 
 
 
58,140
 
 
 
 
                              
Stock option compensation expense
 
 
-
 
 
 
0
 
 
 
-
 
 
 
0
 
 
 
155,058
 
 
 
0
 
 
 
0
 
 
 
155,058
 
 
 
 
                              
Net Loss
 
 
-
 
 
 
0
 
 
 
-
 
 
 
0
 
 
 
0
 
 
 
0
 
 
 
(2,700,201
)
 
 
(2,700,201
)
 
 
 
                              
Balance, September 30, 2021
 
 
204,743,749
 
 
$
204,743
 
 
 
257,136
 
 
$
257
 
 
$
74,594,281
 
 
$
(20,009,496
)
 
$
(104,712,845
)
 
$
(49,923,060
)
                                 
Balance, December 31, 2019
 
 
175,513,549
 
 
$
175,514
 
 
 
0
 
 
 
0
 
 
$
73,774,766
 
 
$
(20,009,496
)
 
$
(98,724,933
)
 
$
(44,784,149
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares issued to note holder
 
 
125,000
 
 
 
125
 
 
 
0
 
 
 
0
 
 
 
1,125
 
 
 
0
 
 
 
0
 
 
 
1,250
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares issued in private placement
 
 
-
 
 
 
-
 
 
 
128,000
 
 
$
128
 
 
 
124,872
 
 
 
-
 
 
 
-
 
 
 
125,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beneficial conversion feature on Convertible Series B Preferred Stock
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
23,187
 
 
 
-
 
 
 
-
 
 
 
23,187
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deemed dividend from beneficial conversion feature on Convertible Series B Preferred Stock
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
(23,187
)
 
 
-
 
 
 
-
 
 
 
(23,187
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock option compensation expense
 
 
-
 
 
 
0
 
 
 
-
 
 
 
0
 
 
 
14,412
 
 
 
0
 
 
 
0
 
 
 
14,412
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Loss
 
 
-
 
 
 
0
 
 
 
-
 
 
 
0
 
 
 
0
 
 
 
0
 
 
 
(2,440,080
)
 
 
(2,440,080
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, September 30, 2020
 
 
175,638,549
 
 
$
175,639
 
 
 
128,000
 
 
$
128
 
 
$
73,915,175
 
 
$
(20,009,496
)
 
$
(101,165,013
)
 
$
(47,083,567
)
The accompanying notes are an integral part of these unaudited consolidated financial statements.

56

AAPPLIEDPPLIED MINERALS, INC.

(An Exploration Stage Mining Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

  For the Nine Months Ended 
  September 30, 
  2020  2019 
       
Cash Flows from Operating Activities:        
Net loss $(2,440,080) $(4,381,547)
Adjustments to reconcile net loss to net cash used in operations:        
Amortization of discount – notes payable  3,568   - 
Amortization of discount - PIK Notes  284,107   269,570 
Amortization of deferred financing costs  41,930   68,255 
Accrued interest on PIK Notes  1,026,249   1,002,273 
Stock based compensation expense  14,412   211,108 
Non-cash lease expense  474   2,944 
Change in fair value  23,000   - 
Change in operating assets and liabilities:        
Accounts receivable  (43,475)  17,243 
Deposits and prepaids  260,371   338,898 
Accounts payable and accrued liabilities  969,099   389,460 
Net cash provided by (used in) operating activities  139,655   (2,081,796)
         
Cash Flows from Financing Activities:        
Proceeds from notes payable  113,750   - 
Proceeds from Paycheck Protection Program Loan  223,075   - 
Proceeds from Private Placement  125,000   - 
Payments on notes payable  (371,625)  (246,496)
Payments on PIK notes  -   (356,568)
Payments on insurance financing  (208,731)  - 
Net cash (used in) financing activities  (118,531)  (603,064)
         
Net change in cash  21,124   (2,684,860)
         
Cash at beginning of period  52,793   2,892,340 
         
Cash at end of period $73,917  $207,480 
         
Supplemental disclosure of cash flow information:        
Cash paid for interest $3,739  $11,057 
Cash paid for income taxes $-  $- 
         
Supplemental disclosure of non-cash financing activity:        
Capitalization of right to use assets and liabilities $-  $265,632 
Accrued PIK interest paid through issuance of PIK Notes $750,580  $1,170,495 
Effect of ASU 2017-11, Financial Instruments with Characteristics of Liabilities and Equity and ASU 2016-02, Leases $-  $4,941,447 
Deemed dividend on Convertible Series B Preferred Stock $23,187     
Common stock issued to note holders for financing cost $1,250  $- 

 
 
For the Nine Months Ended
 
 
 
September 30,
 
 
 
2021
 
 
2020
 
 
 
 
 
 
 
 
Cash Flows from Operating Activities:
 
 
 
 
 
 
 
 
Net loss
 
$
(2,700,201
)
 
$
(2,440,080
)
Adjustments to reconcile net loss to net cash used in operations:
 
 
 
 
 
 
 
 
Depreciation 
 
 
4,869
 
 
 
0
 
Amortization of discount – notes payable
 
 
0
 
 
 
3,568
 
Amortization of discount - PIK Notes
 
 
299,426
 
 
 
284,107
 
Amortization of deferred financing costs
 
 
0
 
 
 
41,930
 
Accrued interest on PIK Notes
 
 
1,036,691
 
 
 
1,026,249
 
Stock based compensation expense
 
 
213,199
 
 
 
14,412
 
Non-cash lease expense
 
 
80,518
 
 
 
474
 
Change in fair value
 
 
0
 
 
 
23,000
 
Stock issued for interest
 
 
8,379
 
 
 
0
 
Gain on
f
orgiveness of PPP
loan
 
 
(223,075
)
 
 
0
 
Change in operating assets and liabilities:
 
 
 
 
 
 
 
 
Operating lease liabilities
 
 
(82,584
)
 
 
0
 
Accounts receivable
 
 
43,302
 
 
 
(43,475
)
Deposits and prepaids
 
 
158,493
 
 
 
260,371
 
Accounts payable and accrued liabilities
 
 
187,151
 
 
 
969,099
 
Net cash (used in) provided by operating activities
 
 
(973,832
)
 
 
139,655
 
 
 
 
 
 
 
 
 
 
Cash Flows from Financing Activities:
 
 
 
 
 
 
 
 
Payments on finance lease liability
 
 
(6,029
)
 
 
0
 
Proceeds from notes payable
 
 
0
 
 
 
113,750
 
Proceeds from Paycheck Protection Program Loan
 
 
264,472
 
 
 
223,075
 
Payments on notes payable
 
 
0
 
 
 
(371,625
)
Proceeds from private placement
 
 
385,000
 
 
 
0-
 
Payments on insurance financing
 
 
(133,081
)
 
 
(208,731
)
Net cash provided by (used in) financing activities
 
 
510,362
 
 
 
(118,531
)
 
 
 
 
 
 
 
 
 
Net change in cash
 
 
(463,470
)
 
 
21,124
 
 
 
 
 
 
 
 
 
 
Cash at beginning of period
 
 
669,560
 
 
 
52,793
 
 
 
 
 
 
 
 
 
 
Cash at end of period
 
$
206,090
 
 
$
73,917
 
 
 
 
 
 
 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
 
 
 
 
 
Cash paid for interest
 
$
6,037
 
 
$
3,739
 
Cash paid for income taxes
 
$
0
 
 
$
0
 
 
 
 
 
 
 
 
 
 
Supplemental disclosure of non-cash financing activity:
 
 
 
 
 
 
 
 
Capitalization of ROU asset and finance lease liability
 
$
51,733
 
 
$
0
 
Deemed dividend on convertible Preferred Stock Series B due to BCF
 
$
225,137
 
 
$
23,187
 
Accrued PIK interest paid through issuance of PIK Notes
 
$
943,990
 
 
$
750,580
 
Stock issued for cashless options exercised
 
$
3,836
 
 
$
0
 
Common stock issued to note holders for financing cost
 
$
0
 
 
$
1,250
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.

67

A APPLIEDPPLIED MINERALS, INC.

(An Exploration Stage Mining Company)

Notes to the Consolidated Financial Statements

(Unaudited)

NOTE 1– ORGANIZATION AND DESCRIPTION OF BUSINESS

Applied Minerals, Inc. (the “Company” or “Applied Minerals” or “we” or “us”) (OTCQB: AMNL) is the owner of the Dragon Mine located in the Tintic Mining District of the State of Utah from where it produces halloysite clay and iron oxide. The Company is currently selling its DRAGONITE halloysite clay product regularly to four customers. Several prospective customers are conducting either commercial-scale trials or field trials for an array of products that are expected to use DRAGONITE as a functional additive. In October 2019, the Company entered into an agreement to supply a manufacturer of cement with up to 30,000 tons AMIRON iron oxide per year over a two-year period.

Applied Minerals is a publicly traded company incorporated in the state of Delaware. The common stock trades on the OTCQB under the symbol AMNL.  

Status of the Company for SEC Reporting Purposes

The Company is classified as an “exploration stage” company for purposes of Industry Guide 7 of the U.S. Securities and Exchange Commission (“SEC”).

Under Industry Guide 7, companies engaged in significant mining operations are classified into three categories, referred to as “stages” - exploration, development, and production.

Exploration stage includes all companies that do not have established reserves in accordance with Industry Guide 7. Such companies are deemed to be “in the search for mineral deposits.” Notwithstanding the nature and extent of development-type or production-type activities that have been undertaken or completed, a company cannot be classified as a development or production stage company unless it has established reserves in accordance with Industry Guide 7.

Exploration Agreement

On December 22, 2017, the Company and Continental Mineral Claims, Inc. (“CMC”) entered into an Exploration Agreement with Option to Purchase (“Agreement”). The Company granted to CMC the exclusive right and option to enter upon and conduct mineral exploration activities (the “Exploration License”) for Metallic Minerals on the Company’s Dragon Mine minesite in Utah (the “Mining Claims”).  Metallic Minerals are defined to include minerals with a high specific gravity and metallic luster, such as gold, silver, lead, copper, zinc, molybdenum, titanium, tungsten, uranium, tin, iron, etc., but shall exclude any such Metallic Minerals that are intermingled within any economically-recoverable, non-metallic mineral deposits located at or above an elevation of 5,590 feet above sea level. Non-metallic minerals include clay and iron oxide, the minerals mined by the Company.  The Company believes that all economic recoverable non-metallic mineral deposits are well above 5,590 feet above sea level. The Exploration License is for a period of ten years.

In consideration of the Exploration License CMC paid the Company $350,000 upon the execution of the agreement and paid it $150,000 on the first anniversary of the Exploration License in December 2018. CMC will pay the Company $250,000 on or before each subsequent anniversary during the Exploration License term following the first anniversary of the Effective Date of this Agreement unless the Exploration License is terminated earlier by CMC by exercising the option or failing to make the required payment for the Exploration License.

On March 25, 2020, the Company and Tintic Copper and Gold, Inc. (CMC’s successor) (“Tintic”) agreed to lower the exercise price of the Option to $1,050,000 and Tintic immediately exercised the Option. The Company also provided Tintic with a Right of First Offer, which expiredexpires on December 21, 2027 and can be extended to December 21, 2032 for $250,000.

8
Upon the exercise of the option, the Company retained the all rights and title to (1) the surface interest (with exception of those rights associated with the Metallic Rights), and (2) all non-metallic minerals (expressly including all industrial minerals including clays and iron oxides).

Upon the exercise of the option the Company retained protections against unreasonable interference of its current and future mining operations by CMC. CMC may not do anything that may, at the Company’s determination, adversely impact the Company’s Mining Operations.  “Mining Operations” shall mean the activities incident to mineral extraction, permitting, and any operations by CMC or the Company relating to the removal of minerals, respectively, that are or may reasonably be conducted on the Mining Claims, including the exploration for, and development, active mining, removing, producing and selling of any minerals, including the Metallic Minerals.  The Agreement states that the parties understand that the Company is willing to enter into the Agreement only if it is assured that CMC will not have any right to unreasonably interfere with the Company’s current mining operations and possible future Mining Operations on the Mining Claims.

7

Impact of COVID–19 Pandemic on Financial Statements

In December 2019, a novel strain of COVID-19 was reported in China. Since then, COVID-19 has spread globally, to include Canada, the United States and several European countries. The spread of COVID-19 from China to other countries has resulted in the World Health Organization (WHO) declaring the outbreak of COVID-19 as a “pandemic,” or a worldwide spread of a new disease, on March 11, 2020. Many countries around the world have imposed quarantines and restrictions on travel and mass gatherings to slow the spread of the virus and have closed non-essential businesses.

As local jurisdictions continue to put restrictions in place, our ability to continue to operate our business may also be limited. Such events may result in a period of business, supply and product manufacturing disruption, and in reduced operations, any of which could materially affect our business, financial condition and results of operations. In response to COVID-19, the Company implemented remote working and thus far, has not experienced a significant disruption or delay in our operations

operations.

To date, COVID-19 has not had a significant financial impact on the Company. However,In particular certain customers have delayed purchases of DRAGONITE due to the impact of COVID-19 on their business. COVID-19 has, caused severe disruptions in transportation and limitedto some extent, impacted the Company’s access to the Company’s facility, resulting in limited support fromcertain of its staff and professional advisors. The small size of the Company’s accounting staff andas well as the additional responsibilities emanating fromassumed by management due to COVID-19 may present difficultiescontinue to adversely affect the Company’s ability to complete subsequent reports in a timely manner.

NOTE 2 – GOING CONCERN AND BASIS OF PRESENTATION

The Company has a history ofsuffered recurring losses from operations and the use of cash in operating activities. For the nine months ended September 30, 2020,currently a working capital deficit. These conditions raise substantial doubt about the Company’s net loss was $2,440,080 and cash provided by operating activities was $139,655. As of September 30, 2020, the Company had current assets of $219,135 and current liabilities of $3,525,035 of which $452,572 was accrued PIK Note interest expectedability to be paid in additional PIK Notes. The Company’s current liabilities also include (i) $608,678 of accrued salaries deferred by certain members of management until the Company’s liquidity improves, (ii) $1,050,811 of accrued directors feecontinue as determined by the Company’s Board, (iii) $119,269 of payables to a compounder for which it has agreed to satisfy in halloysite product, (iv) $132,635 of disputed or erroneously accrued expenses and (v) $223,075 of PPP Funding payable which the Company expects to be forgiven by the U.S. Treasury.

going concern.

Management believes that in order for the Company to meet its obligations arising from normal business operations through November 16, 2021
22
, 2022 that the Company may be required (i) to raise additional capital either in the form of a private placement of common stock or debt and/or (ii) generate additional sales of its products that will generate sufficient operating profit and cash flows to fund operations.  Without additional capital or additional sales of its products, the Company’s ability to continue to operate may be limited.

Based on the Company’s current cash usage expectations, management believes it may not have sufficient liquidity to fund its operations through November 16, 2021.
22
, 2022. Further, management cannot provide any assurance that it is probable that the Company will be successful in accomplishing any of its plans to raise debt or equity financing or generate additional product sales. Collectively these factors raise substantial doubt regarding the Company’s ability to continue as going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded assets amounts and classification of liabilities that might be necessary should the Company not be able to continue as a going concern.

89

NOTE 3 – BASIS OF REPORTING AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated financial statements of Applied Minerals, Inc. have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements.

In the opinion of management, these interim unaudited consolidated financial statements contain all of the adjustments of a normal and recurring nature, which are considered necessary for a fair presentation of the financial position of the Company and the results of its operations and cash flows for the periods presented. The results of operations for the nine months ended September 30, 20202021 are not necessarily indicative of the operating results for the entire year. These financial statements should be read in conjunction with the financial statements and related disclosures for the year ended December 31, 2019,2020, included in the Annual Report of Applied Minerals, Inc. on Form 10-K filed with the SEC on May 29, 2020.

April 15, 2021.

The accompanying interim unaudited consolidated financial statements reflect the application of certain significant accounting policies as described below and elsewhere in these notes. As of November 16, 2020,
22
, 2021
, the Company’s significant accounting policies and estimates remain unchanged from those detailed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. 

9
2020. 

Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s Consolidated Condensed Financial Statements and accompanying notes. Actual results may differ materially from those estimates. As of September 30, 2020,2021, the extent to which the COVID-19 pandemic will impact our business going forward depends on numerous dynamic factors which we cannot reliably predict. As a result, many of our estimates and assumptions required increased judgment and carry a higher degree of variability and volatility. As the events continue to evolve with respect to the pandemic, our estimates may materially change in future periods.

Concentration of Credit Risk

Cash balances, accounts receivable and derivative financial instruments are financial instruments potentially subject to credit risk. Cash and cash equivalents are maintained in bank deposit accounts, which, at times, may exceed the federally insured limits. Management periodically reviews and assesses the financial condition of the banks to mitigate the risk of loss.

For the nine months ended September 30, 20202021 and 2019,2020, revenues from the Company’s largest customer accounted for 45%66% and 14%45% of total revenues, respectively. As of September 30, 20202021 and 2019,2020, amounts owed from these customers comprised 29%98% and 35%29% of accounts receivable, respectively.

Receivables

Trade receivables are reported at outstanding principal amounts, net of an allowance for doubtful accounts.

Management evaluates the collectability of receivable account balances to determine the allowance, if any. Management considers the other party’s credit risk and financial condition, as well as current and projected economic and market conditions, in determining the amount of the allowance. Receivable balances are written off when management determines that the balance is uncollectable. No allowance was required at September 30, 20202021 and December 31, 2019.

2020.

10
Property and Equipment

Property and equipment are carried at cost net of accumulated depreciation and amortization. Depreciation and amortization is computed on the straight-line method over the estimated useful lives of the assets, or the life of the lease, whichever is shorter, as follows:

Estimated
Useful Life
(years)
Building and Building Improvements
5 – 40
5
–
40
Mining equipment
2 – 7
2
–
7
Office and shop furniture and equipment
3 – 7
3
–
7
Vehicles
5
5

Impairment of Long-lived Assets

The Company periodically reviews the carrying amounts of long-lived assets to determine whether current events or circumstances warrant adjustment to such carrying amounts. Long-lived assets are tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. When such events occur, the Company compares the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset to its carrying amount. If this comparison indicates that there is an impairment, the amount of the impairment is typically calculated using discounted expected future cash flows where observable fair values are not readily determinable. Considerable management judgment is necessary to estimate the fair value of assets. Assets to be disposed of are carried at the lower of their financial statement carrying amount or fair value, less cost to sell. The Company has determined that there was no impairment of its long-lived assets as of September 30, 20202021 and 2019.

10
2020.

Stock Options and Warrants

The Company follows ASC 718 (Stock Compensation) and ASU 2018-07 (Compensation – Stock Compensation), which provide guidance in accounting for share-based awards exchanged for services rendered and requires companies to expense the estimated fair value of these awards over the requisite service period. The Company instituted a formal long-term and short-term incentive plan on November
20
, 2012, which was approved by its shareholders. Prior to that date, we did not have a formal equity plan, but all equity grants, including stock options and warrants, were approved by our Board of Directors. We determine the fair value of the stock-based compensation awards granted to non-employees as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. If the fair value of the equity instruments issued is used, it is measured using the stock price and other measurement assumptions as of the earlier of either of (1) the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty’s performance is complete. Beginning in the quarter ended June 30, 2013 the Company began using the simplified method to determine the expected term for any options granted because the Company did not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. The Company previously utilized the contractual term as the expected term.

Environmental Matters

Expenditures for ongoing compliance with environmental regulations that relate to current operations are expensed or capitalized as appropriate. Expenditures resulting from the remediation of existing conditions caused by past operations that do not contribute to future revenue generations are expensed. Liabilities are recognized when environmental assessments indicate that remediation efforts are probable, and the costs can be reasonably estimated.

11
Estimates of such liabilities are based upon currently available facts, existing technology and presently enacted laws and regulations taking into consideration the likely effects of inflation and other societal and economic factors and include estimates of associated legal costs. These amounts also reflect prior experience in remediating contaminated sites, other companies’ clean-up experience and data released by The Environmental Protection Agency or other organizations. Such estimates are by their nature imprecise and can be expected to be revised over time because of changes in government regulations, operations, technology, and inflation. Recoveries are evaluated separately from the liability and, when recovery is assured, the Company records and reports an asset separately from the associated liability.

The Company has posted a cash bond in the amount of 297,000 required by the Utah Department of Oil, Gas and Minerals to cover estimated reclamation costs related the Company large mining permit for its Dragon Mine property. 

Note payable- convertible

Payable - Convertible

The Company follows ASC 480-10, 
Distinguishing Liabilities from Equity
 (“ASC 480-10”) in its evaluation of the accounting for a hybrid instrument. A financial instrument that embodies an unconditional obligation, or a financial instrument other than an outstanding share that embodies a conditional obligation, that the issuer must or may settle by issuing a variable number of its equity shares shall be classified as a liability (or an asset in some circumstances) if, at inception, the monetary value of the obligation is based solely or predominantly on any one of the following: (a) a fixed monetary amount known at inception; (b) variations in something other than the fair value of the issuer’s equity shares; or (c) variations inversely related to changes in the fair value of the issuer’s equity shares. Hybrid instruments meeting these criteria are not further evaluated for any embedded derivatives, and are carried as a liability at fair value at each balance sheet date with remeasurements reported in interest expense in the accompanying Consolidated Statements of Operations.

11

Recently Adopted Accounting Standards

ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework

Effective January 1, 2020 the Company adopted ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. This ASU eliminates, modifies, and adds disclosure requirements for fair value measurements. The adoption of ASU 2018-13 had no material impact on the Company’s results.

ASU 2018-18. Collaborative Arrangements

Effective January 1, 2020 the Company adopted ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606, which, among other things, provides guidance on how to assess whether certain collaborative arrangement transactions should be accounted for under Topic 606. The adoption of ASU 2018-18 had no material impact on the Company’s results.

Recently Issued Accounting Pronouncements

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in accounting standards. The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendments within ASU No. 2019-12 are effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, and early adoption is permitted. The Company is currently assessingadoption of ASU 2019-12 had no material impact on the impact of this update on its consolidatedCompany’s financial statements.  

12
results.  

NOTE 4 – LEASES

Operating Leases
On March 16, 2017, the Company entered into a 5-year operating lease agreement for permanent office space, base rent payment is approximately $9,000 per month, subject to annual adjustments.

Supplemental cash flow information related to leases: Three months ended
September 30, 2020		  Nine months ended
September 30, 2020		 
       
Operating cash flows paid for operating leases $28,521  $84,732 
Non-cash lease expense $(119) $474 
       
Supplemental balance sheet information related to leases: As of
September 30, 2020		    
       
Operating lease Right-of-use assets $162,344     
         
Current portion of operating lease liabilities $108,738     
Long-term operating lease liabilities  57,737     
Total operating lease liabilities $166,475     
         
Weighted average remaining operating lease term  1.50 years     
Weighted average discount rate  6%    

Supplemental cash flow information related to leases:
 
Three months
 
ended
September 30,
 
2021
 
 
 
 
 
 
Nine months ended
September 30, 2021
 
 
 
 
 
 
 
 
 
Operating leases liabilities
 
$
(28,227
)
 
$
(82,584
)
Non-cash lease expense
 
$
27,253
 
 
$
80,518
 
Supplemental balance sheet information related to leases:
 
As of September 30,
2021
 
 
 
 
 
Operating lease Right-of-use assets
 
$
55,790
 
 
 
 
 
Current portion of operating lease liabilities
 
$
57,737
 
Long-term operating lease liabilities
 
 
0
 
Total operating lease liabilities
 
$
57,737
 
 
 
 
 
 
Weighted average remaining operating lease term
 
 
0.50 years
 
Weighted average discount rate
 
 
6
%
The following table summarizes the maturity of lease liabilities under operating leases as of September 30, 2020:

2020 (remaining three months) $28,521 
2021  116,649 
2022  29,376 
Total lease payments  174,546 
Less: imputed interest  (8,071)
Total lease liabilities $166,475 

2021:

2021 (remaining three months)
 
$
29,376
 
2022
 
 
29,376
 
Total lease payments
 
 
58,752
 
Less: imputed interest
 
 
(1,015
)
Total lease liabilities
 
$
57,737
 
In July 2020, the Company entered into a sublease agreement with respect to its N.Y. office. The sublease agreement expires in April 2022. The base rent of the sublease agreement is $7,049 per month and increases by 2.5% in July 2021.
The Company entered into an agreement to sublet a portion of its office space. The sublease is considered to be an operating lease and the Company has not been released from its obligations under the March 16, 2017, 5-year lease agreement. The Company recognizes income from sublease on a straight-line basis over the term of the sublease, as a reduction to lease expense. The sublease is not measured under ASC 842 since the Company remains the primary obligor under the original lease and the sublease is considered to be an operating lease
.
Finance Lease
On May 14, 2021, the Company entered into a 4-year financing lease agreement for an equipment, base rent payment is approximately $1,107 per month.
Supplemental cash flow information related to leases:
 
Three months
ended September 30,
2021
 
 
 
 
 
 
Nine months ended
September 30, 2021
 
 
 
 
 
 
 
 
 
Finance cash flows from finance lease
 
$
(4,001
)
 
$
(6,029
)
Operating cash flows from finance lease
 
$
2,995
 
 
$
4,869
 
Supplemental balance sheet information related to leases:
 
As of September 30,
2021
 
 
 
 
Finance lease Right-of-use assets
 
$
45,704
 
 
 
 
 
 
Current portion of finance lease liability
 
$
11,811
 
Long-term finance lease liability
 
 
33,893
 
Total finance lease liability
 
$
45,704
 
 
 
 
 
 
Weighted average remaining
financing
 lease term
 
 
3.54 years
 
Weighted average discount rate
 
 
6
%
The following table summarizes the maturity of lease liability under finance lease as of September 30, 2021:
2021 (remaining three months)
 
$
3,525
 
2022
 
 
14,099
 
2023
 
 
14,099
 
2024
 
 
14,099
 
2025
 
 
4,700
 
Total lease payments
 
 
50,522
 
Less: imputed interest
 
 
(4,818
)
Total lease liabilities
 
$
45,704
 
NOTE 5 – DEPOSIT

The following is a summary of deposit:

  September 30, 2020  December 31, 2019 
Cash Bond (Mine Permit deposit) $296,954  $296,552 
Office Lease Security Deposit  39,168   39,168 
Total $336,122  $335,720 

13

 
 
September 30, 2021
 
 
December 31, 2020
 
Cash Bond (Mine Permit deposit)
 
$
297,128
 
 
$
297,016
 
Office Lease Security Deposit
 
 
39,168
 
 
 
39,168
 
Total
 
$
336,296
 
 
$
336,184
 
NOTE 6 - NOTES PAYABLE

Notes payable at September 30, 20202021 and December 31, 20192020 consist of the following:

  September 30, 2020  December 31, 2019 
       
Note payable against exploration rights agreement, including interest (a) $-  $250,000 
Note payable, net of $2,682 debt discount and $29,948 deferred financing costs (b)  59,370   - 
Note payable to insurance companies, payable $1,732 – $24,808 monthly, (c) and (d)  -   208,728 
   59,370   458,728 
Less: Current Portion  (59,370)  (458,728)
         
Notes Payable, Long-Term Portion $-  $- 

 
 
September 30, 2021
 
 
December 31, 2020
 
 
 
 
 
 
 
 
Note payable to insurance companies, payable $1,839 - $15,124 monthly, (a)
 
$
0
 
 
$
133,081
 
 
 
 
0
 
 
 
133,081
 
Less: Current Portion
 
 
0
 
 
 
(133,081
)
 
 
 
 
 
 
 
 
 
Notes Payable, Long-Term Portion
 
$
0
 
 
$
0
 
(a)
On November 13, 2019, the Company entered into an agreement with a related party. Per the terms of the agreement, the Company has borrowed $250,000 against an expected annual renewal payment for an exploration license it granted as part of an Exploration Agreement with Option to Purchase entered into with Continental Minerals Claims, Inc. in December 2017, in exchange for $200,000 in cash. The loan was unsecured and paid off in February 2020.  There was no interest rate specified.

(b)

On February 13,October 2020, the Company entered into a secured convertible loan agreement and issued a note in the principal amount of $125,000 (including a 5% OID of $6,250). The note also bears a 5% per annum interest. The maturity date of the note is 12 months from funding date. The note is convertible at any time into the Company’s Common Stock. The initial conversion price is $.02 per share. After one hundred eighty days after the date of the note, the conversion price will be the lower of (i) $.02 or (ii) 75% multiplied by the lowest traded price of the common stock during the 20 consecutive trading day period immediately preceding the date of the respective conversion. The convertible note had a net change in fair value of $23,000.

(c)On October 2019, the Company signed a notetwo notes payable with interest rate of 4.89%4.04% and 6.89% with an insurance company for liability insurance, payable in 10 monthly installment payments
,
which started on
in
November 17, 2019.
2020
.

(d)12On October 2019, the Company signed a note payable with interest rate of 7.04% with an insurance company for liability insurance, payable in 10 monthly installment which started on November 17, 2019.

During the three months ended September 30, 20202021 and 2019,2020, the Company's interest payments totaled $304$657 and $377,$304, respectively. During the nine months ended September 30, 20202021 and 2019,2020, the Company’s interest payments totaled $2,626 and $3,739, and $11,057, respectively.

14

NOTE 7 – PAYCHECK PROTECTION PROGRAM LOAN

On May 5, 2020 the Company entered into a promissory note (“PPP Loan”) in the amount of $223,075 from Bank of America, N.A. under the Paycheck Protection Program (“PPP”), which was established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the U.S. Small Business Administration. The term of the promissory note is two years and the annual interest rate is 1.0%, which shall be deferred for the first six months of the term of the loan. Pursuant to the terms of the CARES Act, the proceeds of each PPP Loan may be used for payroll costs, mortgage interest, rent or utility costs.

The promissory note evidencing each PPP Loan contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the promissory note. The occurrence of an event of default may result in a claim for the immediate repayment of all amounts outstanding under such PPP Loan, collection of all amounts owing from the respective Borrower, filing suit and obtaining judgment against the respective Borrower.

Under the terms of the CARES Act, each Borrower can apply for and be granted forgiveness for all or a portion of the PPP Loan. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds in accordance with the terms of the CARES Act, as described above, during the 8-week period after loan origination and the maintenance or achievement of certain employee levels. No assurance is provided that any Borrower will obtain forgiveness under any relevant PPP Loan in whole or in part.

On February 25, 2021, the Company entered into a second promissory note (“Second PPP Loan”) in the amount of $264,472 from Bank of America, N.A. under the Paycheck Protection Program. The terms of the Second PPP Loan are similar to the PPP Loan the Company entered into on May 5, 2020.
On March 1, 2021, the Company applied for and was granted full forgiveness of the outstanding principal and accrued interest of the PPP Loan it entered into on May 5, 2020 in the amount of $223,075.
On September 17, 2021, the Company applied for full forgiveness of the outstanding principal and accrued interest of the Second PPP Loan.  The Second PPP Loan is currently under review for forgiveness by the SBA.
NOTE 8 – CONVERTIBLE DEBT (PIK NOTES)

PIK Notes
The Company raised $23 million of financing through the issuance of two series of Paid-In-Kind (“PIK”)-Election Convertible Notes in 2013 (“Series 2023 Notes”) and 2014 (“Series A Notes”). The original terms of the Series A Notes included among other things: (i) a maturity of November 1, 2018 with an option to extend to November 1, 2019, (ii) a stated interest rate of 10% paid semi-annually and (iii) a conversion price of $0.90, adjusted downward based on an anti-dilution provision. The original terms of the Series 2023 Notes included among other things: (i) a maturity of August 1, 2023, (ii) a stated interest rate of 10% paid semi-annually and (iii) a conversion price of $1.40, adjusted downward based on an anti-dilution provision. On December 14, 2017, and April 4, 2019,an amendment agreementsagreement, entered into between the Company and the holders of the Series A Notes and Series 2023 Notes, went into effect. The agreementsagreement resulted in changes to certain terms of the Series A and Series 2023 Notes.
13
The key terms of the Series A and Series 2023 Notes, as amended, are highlighted in the table below:

Key Terms Series 2023 Notes Series A Notes 
Inception Date 08/01/2013 11/03/2014 
Cash Received $10,500,000 $12,500,000 
Principal (Initial Liability) $10,500,000 $19,848,486 
Maturity (Term) Matures on August 1, 2023, but convertible into shares of the Company’s common stock at the discretion of the holder or by the Company based on the market price of the Company’s stock; Matures on May 1, 2023 but extends to August 1, 2023 if the Series 2023 Notes are still outstanding. Convertible into shares of the Company’s common stock at the discretion of the holder or by the Company based on the market price of the Company’s stock; 
Exercise Price $0.59, adjusted downward based on anti-dilution provisions/down-round protection $0.40, adjusted downward based on anti-dilution provisions/down-round protection; 
Stated Interest 10% per annum through December 14, 2017, 3% per annum thereafter, due semiannually; 10% per annum through December 14, 2017, 3% per annum thereafter, due semiannually; 
Derivative Liability $2,055,000 established at inception due to the existence of down-round protection; the derivative liability was revalued every quarter using Monte Carlo model through the year ended December 31, 2018. The Company is no longer required to value the derivative liability. $9,212,285 established at inception due to existence of down-round protection; revalued every quarter using a Monte Carlo model through the year ended December 31, 2018. The Company is no longer required to value the derivative liability. 
Payments Per the terms of the amendment agreement entered into on April 4, the holders of the Series A and Series 2023 Notes were to receive a pro-rata distribution of an Immediate Payment of $350,000 as well as (i) receive a pro-rata distribution of 5% of the net proceeds of any capital raise and (ii) on the 15th day after the filing of its quarterly report on Form 10-Q or annual report on Form 10-K, receive a pro-rata payment of (a) 3% of gross revenue if cash or cash equivalents on the Company’s balance sheet or otherwise is less than $3 million on the last day of the fiscal quarter or (b) 5% of gross revenue if cash or cash equivalents on the Company’s balance sheet or otherwise is greater than $3 million but less than $5 million on the last day of the fiscal quarter or (c) 12% of gross revenue if cash or cash equivalents on the Company’s balance sheet or otherwise is greater than $5 million on the last day of the fiscal quarter. If the amount payable under (ii)(a), (ii)(b) or (ii)(c) is in excess of the amount of cash at the end of the fiscal quarter, the payment of the excess amount will be deferred and will be payable in connection with the payment for a following fiscal quarter(s) when cash is available. All payment will be applied to the reduction of the principal amount outstanding of the Series A and Series 2023 Notes. Per the terms of the amendment agreement entered into on April 4, 2019, the holders of the Series A and Series 2023 Notes were to receive a pro-rata distribution of an Immediate Payment of $350,000 as well as (i) receive a pro-rata distribution of 5% of the net proceeds of any capital raise and (ii) on the 15th day after the filing of its quarterly report on Form 10-Q or annual report on Form 10-K, receive a pro-rata payment of (a) 3% of gross revenue if cash or cash equivalents on the Company’s balance sheet or otherwise is less than $3 million on the last day of the fiscal quarter or (b) 5% of gross revenue if cash or cash equivalents on the Company’s balance sheet or otherwise is greater than $3 million but less than $5 million on the last day of the fiscal quarter or (c) 12% of gross revenue if cash or cash equivalents on the Company’s balance sheet or otherwise is greater than $5 million on the last day of the fiscal quarter. If the amount payable under (ii)(a), (ii)(b) or (ii)(c) is in excess of the amount of cash at the end of the fiscal quarter, the payment of the excess amount will be deferred and will be payable in connection with the payment for a following fiscal quarter(s) when cash is available. All payment will be applied to the reduction of the principal amount outstanding of the Series A and Series 2023 Notes. 

15

Key Terms
 
Series 2023 Notes
 
Series A Notes
 
Inception Date
 
08/01/2013
 
11/03/2014
 
Cash Received
 
$10,500,000
 
$12,500,000
 
Principal (Initial Liability)
 
$10,500,000
 
$19,848,486
 
Maturity (Term)
 
Matures on August 1, 2023, but convertible into shares of the Company’s common stock at the discretion of the holder or by the Company based on the market price of the Company’s stock;
 
Matures on May 1, 2023 but extends to August 1, 2023 if the Series 2023 Notes are still outstanding. Convertible into shares of the Company’s common stock at the discretion of the holder or by the Company based on the market price of the Company’s stock;
 
Exercise Price
 
$0.56, adjusted downward based on anti-dilution provisions/downround protection
 
$0.34, adjusted downward based on anti-dilution provisions/down-round protection;
 
Stated Interest
 
10% per annum through December 14, 2017, 3% per annum thereafter, due semiannually;
 
10% per annum through December 14, 2017, 3% per annum thereafter, due semiannually;
 
Derivative Liability
 
$2,055,000 established at inception due to the existence of down-round protection; revalued every quarter using Monte Carlo model.
 
$9,212,285 established at inception due to existence of down-round protection; revalued every quarter using a Monte Carlo model.
 
In April 2019 the Company entered into a settlement agreement with the holders of the Series A Notes and Series 2023 Notes (the “PIK Notes”). Per the terms of the agreement the Company will pay to holders of PIK Notes on a pro rata basis the following percentages of revenue booked during a fiscal quarter: (a) three percent (3%) of gross revenues if cash or cash equivalents on the Company’s balance sheet or otherwise is less than $3 million on the last day of the fiscal quarter; or (b) five percent (5%) of gross revenues if cash or cash equivalents on the Company’s balance sheet or otherwise is greater than $3 million but less than $5 million the last day of the fiscal quarter; or (c) twelve percent (12%) of gross revenues if cash or cash equivalents on the Company’s balance sheet or otherwise is greater than $5 million.
As of September 30, 2021, the liability components of the PIK Notes on the Company’s balance sheet are listed in the following table:
 
 
Series 2023 Notes
 
 
Series A
Notes
 
 
 
 
Total
 
PIK Note Payable, Gross
 
$
17,763,275
 
 
$
29,488,868
 
 
$
47,252,143
 
Less: Discount
 
 
0
 
 
 
(783,561
)
 
 
(783,561
)
PIK Note Payable, Net
 
$
17,763,275
 
 
$
28,705,307
 
 
$
46,468,582
 
As of December 31, 2020, the liability components of the PIK Notes on the Company’s balance sheet are listed in the following table:

  Series 2023 Notes  Series A Notes  Total 
PIK Note Payable, Gross $17,253,483  $28,645,116  $45,898,599 
Less: Discount  -   (1,180,203)  (1,180,203)
PIK Note Payable, Net $17,253,483  $27,464,913  $44,718,396 

As of December 31, 2019, the liability components of the PIK Notes on the Company’s balance sheet are listed in the following table:

  Series 2023 Notes  Series A Notes  Total 
PIK Note Payable, Gross $16,901,447  $28,265,165  $45,166,612 
Less: Discount  -   (1,464,311)  (1,464,311)
PIK Note Payable, Net $16,901,447  $26,800,854  $43,702,301 

 
 
Series 2023 Notes
 
 
Series A
Notes
 
 
Total
 
PIK Note Payable, Gross
 
$
17,249,430
 
 
$
29,069,548
 
 
$
46,318,978
 
Less: Discount
 
 
0
 
 
 
(1,082,988
)
 
 
(1,082,988
)
PIK Note Payable, Net
 
$
17,249,430
 
 
$
27,986,560
 
 
$
45,235,990
 
Series A Notes (Amended)

On November 3, 2014 (“Issue Date”), the Company issued, in a private placement pursuant to investment agreements, $19,848,486 principal amount of 10% PIK-Election Convertible Notes due 2018 ("Series A Notes") in exchange for $12,500,000 in cash and the cancellation of previously-issuedpreviously issued warrants held by one investor.

The original terms of the Series A Notes included among other things: (i) a maturity of November 1, 2018 with an option to extend to November 1, 2019, (ii) a stated interest rate of 10% paid semi-annually and (iii) a conversion price of $0.90, adjusted downward based on an anti-dilution provision. The original terms of both the Series A notes and Series 2023 Notes can be as exhibits to Forms 8-K filed on November 5, 2014.

During the nine months ended September 30, 2020,2021, the Company amortized $284,107$299,427 of debt discount relating to the Series A Notes Payable and issued additional PIK Notes of $387,675$426,097 in lieu of cash interest payments. The carrying value of the Series A Notes Payable as of September 30, 20202021 was $27,464,913.

$29,488,868.

As of September 30, 2020,2021, the Company was in compliance with the covenants of the Series A Notes.

As of September 30, 2020, Samlyn Offshore Master Fund, Ltd. and Samlyn Onshore Fund, LP owned $9,410,688 and $5,022,881, respectively, of principal of the Series A Notes. Samlyn Offshore Master Fund, Ltd. and Samlyn Onshore Fund, LP are managed by Samlyn Capital, LLC. As of September 30, 2020, Michael Barry, a director of the Company, was the General Counsel and Chief Compliance Officer of Samlyn Capital, LLC.

As of September 30, 2020,2021, The IBS Turnaround Fund, LP, The IBS Turnaround (QP) (A Limited Partnership) and The IBS Opportunity Fund, Ltd. owned $1,365,440, $2,741,951$1,424,275, $2,860,098 and $263,087,$277,896, respectively, of principal of the Series A Notes. The IBS Turnaround Fund, LP, The IBS Turnaround (QP) (A Limited Partnership) and The IBS Opportunity Fund, Ltd. are managed by IBS Capital, LLC. At September 30, 2020,2021, IBS Capital, LLC owned 13.6%11.6% of the shares of the common stock of the Company.

As of September 30, 2020, M. Kingdon Offshore Master Fund, LP, a fund managed by Kingdon Capital Management, LLC, owned $4,373,810 of principal of the Series A Notes.

The Company analyzed the notes for derivative accounting consideration and determined that since the note has a fix conversion price at issuance, it does not require to be accounted as a derivative instrument. The Company will evaluate every reporting period and identify if any default provisions and other requirements triggered a variable conversion price and if the note needs to be classified as a derivative instrument. On August 10, 2020, due to the variable conversion feature on convertible note payable, see note 6(b), the Company adopted a sequencing policy and determined that the notes with fixed conversion price were excluded from derivative consideration. There is a possible reset of the conversion price due to the convertible note the Company entered on February 13, 2020.  

Series 2023 Notes (Amended)

In August 2013, the Company received $10,500,000 of financing through the private placement of 10% mandatory convertible Notes due 2023 ("Series 2023 Notes"). The principal amount of the Notes is due on maturity. The Company can elect to pay semi-annual interest on the Series 2023 Notes with additional PIK Notes containing the same terms as the Series 2023 Notes, except interest will accrue from issuance of such notes. The Company can also elect to pay interest in cash. In February 2020, the Company issued $107,042 in additional Series 2023 Notes to the holders to pay the semi-annual interest.

During the nine months ended September 30, 2020,2021, the Company issued additional PIK Notes of $362,904$517,893 in lieu of cash interest payments. The carrying value of the Series 2023 Notes Payable was $17,253,483$17,763,275 as of September 30, 2020.

2021.

As of September 30, 2020,2021, the Company was in compliance with the covenants of the Series 2023 Notes.

As of September 30, 2020, M. Kingdon Offshore Master Fund, LP, a fund managed​​​​​​​ by Kingdon Capital Management, LLC, owned $4,107,970 of principal of the Series 2023 Notes.

The Company analyzed the notes for derivative accounting consideration and determined that since the note has a fix conversion price at issuance, it does not require to be accounted as a derivative instrument. The Company will evaluate every reporting period and identify if any default provisions and other requirements triggered a variable conversion price and if the note needs to be classified as a derivative instrument. On August 10, 2020, due to the variable conversion feature on convertible note payable, see note 6(b), the Company adopted a sequencing policy and determined that the notes with fixed conversion price were excluded from derivative consideration. There is a possible reset of the conversion price due to the convertible note the Company entered on February 13, 2020.

16

NOTE 9 – STOCKHOLDERS’ EQUITY

Preferred Stock

The Company is authorized to issue 10,000,000 shares of noncumulative, non-voting, nonconvertible preferred stock, $0.001 par value per share.

At September 30, 20202021 and December 31, 2019,2020, 257,136 and 128,000 and 0 shares of preferred stock were issued and outstanding.

2020

During the nine months ended September 30, 2020, 128,000outstanding, respectively.

2021
On February 17, 2021, 95,000 shares of Series B Preferred Stock were issued at a stated price of $1.00$1.084 per share for cash proceedproceeds of $100,000, net of $3,000 legal fees.
14
At the time of issuance, the Company evaluated the nature of Series B Preferred Stock and concluded it more akin to equity and recorded it as permanent equity. The Company also recorded $60,738 beneficial conversion feature to additional paid in capital and amortized at the time of issuance. For the nine months ended September 30, 2021, the Company recorded Deemed dividend on Convertible Series B Preferred Stock of $60,738.
On May 24, 2021, 81,136 shares of Series B Preferred Stock were issued at a stated price of $1.084 per share for cash proceeds of $85,000, net of $3,000 legal fees.
At the time of issuance, the Company evaluated the nature of Series B Preferred Stock and concluded it more akin to equity and recorded it as permanent equity. The Company also recorded $51,874 beneficial conversion feature to additional paid in capital and amortized at the time of issuance. For the nine months ended September 30, 2021, the Company recorded Deemed dividend on Convertible Series B Preferred Stock of $51,874.
On August 24, 2021, 110,000 shares of Series B Preferred Stock were issued at a stated price of $1.1636 per share for cash proceeds of $125,000, net of $3,000 legal fees.

At the time of issuance, the Company evaluated the nature of Series B Preferred Stock and concluded it more akin to equity and recorded it as permanent equity. The Company also recorded $70,328 beneficial conversion feature to additional paid in capital and amortized at the time of issuance. On September 30, 2021, the Company recorded Deemed dividend on Convertible Series B Preferred Stock of $70,328.
On September 17, 2021, 66,000 shares of Series B Preferred Stock were issued at a stated price of $1.1818 per share for cash proceeds of $75,000, net of $3,000 legal fees.
At the time of issuance, the Company evaluated the nature of Series B Preferred Stock and concluded it more akin to equity and recorded it as permanent equity. The Company also recorded $42,197 beneficial conversion feature to additional paid in capital and amortized at the time of issuance. On September 30, 2021, the Company recorded Deemed dividend on Convertible Series B Preferred Stock of $42,197.
Each share of Series B Preferred Shares will carry an annual dividend in the amount of twelve percent (12%) of the Stated Value (the “Divided Rate”), which shall be cumulative and compounded daily, payable solely upon redemption, liquidation or conversion. The Company have the right to redeem all or any portion of the shares within 180 days following the issuance day.

The Holder shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the Issuance Date, to convert all or any part of the outstanding Series B Preferred Stock into fully paid and non-assessable shares of Common Stock. The conversion price (the “Conversion Price”) shall equal the 61% multiplied by the Market Price (representing a discount rate of 39%). “Market Price” means the lowest Trading Price for the Common Stock during the twenty (20) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.

2020
During the year ended December 31, 2020, 128,000 shares of Series B Preferred Stock were issued at a stated price of $1.00 per share for cash proceeds of $125,000, net of $3,000 legal fees.
Each share of Series B Preferred Shares will carry an annual dividend in the amount of twelve percent (12%) of the Stated Value (the “Divided Rate”), which shall be cumulative and compounded daily, payable solely upon redemption, liquidation or conversion. The Company have the right to redeem all or any portion of the shares within 180 days following the issuance day.
15
The Holder shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the Issuance Date, to convert all or any part of the outstanding Series B Preferred Stock into fully paid and non-assessable shares of Common Stock. The conversion price (the “Conversion Price”) shall equal the 61% multiplied by the Market Price (representing a discount rate of 39%). “Market Price” means the lowest Trading Price for the Common Stock during the twenty (20) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date.
At the time of issuance, the Company evaluated the nature of Series B Preferred and concluded it more akin to equity and recorded it as permanent equity. The Company also recorded $81,836 beneficial conversion feature to additional paid in capital and amortized overat the period between inception and date convertible. On September 30,time of issuance. For the year ended December 31, 2020, the Company recorded Deemeddeemed dividend on Convertible Series B Preferred Stock of $23,187.

2019

During the nine months ended September 30, 2019, there were no activities.

17
$81,836. 

Common Stock

The Company is authorized to issue 700,000,000 shares of common stock with a $0.001 par value per share.
At September 30, 20202021 and December 31, 2019, 175,638,5492020, 204,743,749 and 175,513,549183,938,549 shares were issued and outstanding, respectively.

2020

2021
During the nine months ended September 30, 2021, (i) 15,805,934 shares were issued upon the conversion of 223,000 shares of Preferred Stock, (ii) 3,836,475 shares were issued upon cashless exercised of 9,528,689 options, and (iii) 1,162,791 shares were issued in lieu of a bonus payment of $58,140.
2020
During the year ended December 31, 2020, (i) 125,000 shares were issued at a price of $0.01 per share to note holders as a financing cost.

2019

Duringcost and (ii) 8,300,000 shares were issued upon the nine months ended September 30, 2019, there were no activities.

conversion of $40,504 of principal and accrued interest related to the FirstFire Convertible Note.

NOTE 10 – OPTIONS AND WARRANTS TO PURCHASE COMMON STOCK

Outstanding Stock Warrants

A summary of the status and changes of the warrants issued for the nine months ended September 30, 2020:

  Shares Issuable    
  upon Exercise of  Weighted Average 
  Outstanding Warrants  Exercise Price 
       
Outstanding at January 1, 2020  26,688,373  $0.15 
Issued  -   - 
Exercised  -     
Forfeited  -   - 
Outstanding at September 30, 2020  26,688,373  $0.15 

2021:

 
 
Shares Issuable
 
 
 
 
 
 
upon Exercise of
 
 
Weighted Average
 
 
 
Outstanding Warrants
 
 
Exercise Price
 
 
 
 
 
 
 
 
Outstanding at January 1, 2021
 
 
24,619,623
 
 
$
0.16
 
Issued
 
 
0
 
 
 
0
 
Exercised
 
 
0
 
 
0
  
Forfeited
 
 
(13,619,623
)
 
 
0.22
 
Outstanding at September 30, 2021
 
 
11,000,000
 
 
$
0.10
 
At September 30, 2020,2021, the intrinsic value of the outstanding warrants was $0.

16
A summary of the status of the warrants outstanding and exercisable at September 30, 20202021 is presented below:

   Warrants Outstanding and Exercisable 
   Shares Issuable  Weighted Average    
   upon Exercise of  Remaining  Weighted Average 
Exercise Price  Outstanding Warrants  Contractual Life (years)  Exercise Price 
$1.15   461,340   0.58  $1.15 
$0.25   3,283,283   0.74  $0.25 
$0.04   2,068,750   1.93  $0.04 
$0.10   11,000,000   2.20  $0.10 
$0.15   9,875,000   0.73  $0.15 
     26,688,373   1.43  $0.15 

On August 10, 2020, due to the variable conversion feature on convertible note payable, see note 6(b), the Company adopted a sequencing policy and determined that the warrants with fixed exercise price were excluded from derivative consideration.

 
 
Warrants Outstanding and Exercisable
 
 
 
Shares Issuable
 
 
Weighted Average
 
 
 
 
 
 
upon Exercise of
 
 
Remaining
 
 
Weighted Average
 
Exercise Price
 
Outstanding Warrants
 
 
Contractual Life (years)
 
 
Exercise Price
 
$ 
 
 
0.10
 
 
11,000,000
 
 
 
1.20
 
 
$
0.10
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11,000,000
 
 
 
1.20
 
 
$
0.10
 
Outstanding Stock Options

On November
20
, 2012, the shareholders of the Company approved the adoption of the Applied Minerals, Inc. 2012 Long-Term Incentive Plan (“LTIP”) and the Short-Term Incentive Plan (“STIP”) and the performance criteria used in setting performance goals for awards intended to be performance-based. Under the LTIP, 8,900,000 shares are authorized for issuance. The STIP does not refer to a particular number of shares under the LTIP, but would use the shares authorized in the LTIP for issuance under the STIP. The CEO, the CFO, and named executive officers, and directors, among others are eligible to participate in the LTIP and STIP. Prior to the adoption of the LTIP and STIP, stock options were granted under individual arrangements between the Company and the grantees, and approved by the Board of Directors.

In May 2016, the Company adopted the 2016 Long-Term Incentive Plan (“2016 LTIP”). The number of shares of common stock for issuance or for reference purposes subject to the 2016 LTIP was 2,000,000. 

18

On December 7, 2016, the stockholders of the Company approved the 2016 Incentive Plan. The purpose of the 2016 Incentive Plan is to enhance the profitability and value of the Company for the benefit of its stockholders by enabling the Company to offer eligible employees, consultants, and non-employee directors incentive awards in order to attract, retain and reward such individuals and strengthen the mutuality of interests between such individuals and the Company’s stockholders. The aggregate number of shares of Common Stock that may be issued or used for reference purposes under the 2016 Incentive Plan or with respect to which awards may be granted may not exceed 15,000,000 shares, which may be either (i) authorized and unissued Common Stock or (ii) Common Stock held in or acquired for the treasury of the Company. 

The Compensation Committee of the Company Board of Directors has full authority to administer and interpret the 2016 Incentive Plan, to grant awards under the 2016 Incentive Plan, to determine the persons to whom awards will be granted, to determine the types of awards to be granted, to determine the terms and conditions of each award, to determine the number of shares of Common Stock to be covered by each award and to make all other determinations in connection with the 2016 Incentive Plan and the awards thereunder as the Committee, in its sole discretion, deems necessary or desirable.

On December 14, 2017, the Board of Directors approved the 2017 Incentive Plan (“2017 IP”). Forty million (40,000,000) shares of Common Stock are subject to the 2017 IP.

The fair value of each of the Company's stock option awards is estimated on the date of grant using the Black-Scholes option-pricing model. Expected volatility is based on an average of historical volatility of the Company's common stock. The risk-free interest rate for periods within the contractual life of the stock option award is based on the yield curve of a zero-coupon U.S. Treasury Bond on the date the award is granted with a maturity equal to the expected term of the award. The Company did not grant any stock option awards during the
nine
months ended
September
30, 2020.

2021.

17
A summary of the status and changes of the options granted under stock option plans and other agreements during the nine months ended September 30, 2020:

  Shares Issued  Weighted 
  Upon Exercise of  Average 
  Options  Exercise Price 
       
Outstanding at December 31, 2019  60,676,568  $0.26 
Granted  -   - 
Exercised  -   - 
Forfeited  (100,000)   0.22 
Outstanding at September 30, 2020  60,576,568  $0.26 

19
2021:

 
 
Shares Issued
 
 
Weighted
 
 
 
Upon Exercise of
 
 
Average
 
 
 
Options
 
 
Exercise Price
 
 
 
 
 
 
 
 
Outstanding at December 31, 2020
 
 
56,661,515
 
 
$
0.28
 
Granted
 
 
9,450,000
 
 
 
0.03
 
Exercised
 
 
(9,528,689
)
 
 
0.06
 
Forfeited
 
 
(3,791,981
)
 
 
0.63
 
Outstanding at September 30, 2021
 
 
52,790,845
 
 
$
0.24
 
A summary of the status of the options outstanding at September 30, 2020 is presented below:

  Options Outstanding  Options Exercisable 

 Range of
per share
exercise
price

 Shares  Weighted
average
remaining
contractual
life		  Per share
weighted
average
exercise
price		  Shares  Weighted
average
remaining
contractual
life		  Per share
weighted
average
exercise
price		 
$0.04 - $0.08  42,403,623   6.93  $0.06   34,861,956   6.91  $0.06 
$0.10 - $0.84  13,230,885   2.19   0.42   13,230,885   2.19   0.42 
$1.10 - $1.90  4,942,060   1.97   1.63   4,942,060   1.97   1.63 
                         
   60,576,568   5.49  $0.26   53,034,901   5.27  $0.29 

 
 
Options Outstanding
 
 
Options Exercisable
 
Range of per
share
exercise
price
 
Shares
 
 
Weighted
average
remaining
contractual
life
 
 
Per share
weighted
average
exercise
price
 
 
Shares
 
 
Weighted
average
remaining
contractual
life
 
 
Per share
weighted
average
exercise price
 
$0.02 - $0.03
 
 
9,450,000
 
 
 
4.75
 
 
$
0.03
 
 
 
4,750,000
 
 
 
4.75
 
 
$
0.03
 
$0.04 - $0.08
 
 
28,959,881
 
 
 
6.19
 
 
$
0.06
 
 
 
28,959,881
 
 
 
6.19
 
 
$
0.06
 
$0.10 - $0.84
 
 
10,338,904
 
 
 
1.80
 
 
$
0.46
 
 
 
10,338,904
 
 
 
1.80
 
 
$
0.46
 
$1.10 - $1.90
 
 
4,042,060
 
 
 
1.45
 
 
$
1.63
 
 
 
4,042,060
 
 
 
1.45
 
 
$
1.63
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
52,790,845
 
 
 
4.58
 
 
$
0.24
 
 
 
48,090,845
 
 
 
4.53
 
 
$
0.34
 
Compensation expense of $3,899$147,172 and $14,412$155,058 was recognized for vested options for the three and nine months ended September 30, 2020.2021. The aggregate intrinsic value of the outstanding options at September 30, 20202021 was $0. At September 30, 2020, (i) $19,625 of unamortized compensation expense for time-based unvested options will be recognized over the next 1.26 years on a weighted average basis; (ii) $223,105 of unamortized compensation expense for performance-based unvested options will be recognized if the performance targets are achieved.

On August 18, 2017, the Company’s management was granted performance-based options to purchase 27.5 million shares of the Company’s common stock at $0.06 per share. The options expire on August 18, 2027. On November 1, 2017, the first fifty percent (50%) of the performance-based options vested as management was able to (i) close the sale of an aggregate of $600,000 of units (consisting of a share of common stock of the Company and a warrant to buy 0.25 of a share of common stock of the Company) at $0.04 per unit and (ii) establish toll processing arrangements with two toll processors of halloysite that, in management’s good faith belief, can process halloysite to the Company’s specifications. An additional twenty-five percent (25%) of the performance-based options vested on January 18, 2018 when management generated $900,000 of additional cash proceeds through (i) the sale of common stock and (ii) the licensing of a right to explore the Dragon Mine property for certain precious metals. The vesting of the remaining 8.3%, 8.3% and 8.4% of the performance-based options occurs when (i) EBITDA is positive over a twelve-month period, (ii) EBITDA is at or greater than $2 million over a twelve-month period and (iii) EBITDA is at or greater than $4 million over a twelve-month period, respectively. Of the 27.5 million performance options granted to management in August 2017, approximately 14.3
million were outstanding at September 30, 2021. The reduction was due to the forfeiture of options to purchase
0.4
million shares of common stock and the exercise of options to purchase approximately
9.5
million shares of common stock during the three months ended March 31, 2021. At September 30, 2020, management, based on its financial expectations for 2020, did not consider2021, the board accelerated the vesting of 1,195,138 options granted to Christopher Carney in August 2017
a
nd accelerated the remaining 25%vesting of 333,333 options granted in March 2019 to Shar
a
d Mathur
,
 CTO
.
In July 2021 the board approved a grant to management of options to purchase 5.7 million shares of common stock at $0.03 per share. The options have a term of five years. Fifty percent (
50
%) of the optiongrant vested in July 2021 and the remainder vests in equal monthly amounts through June 2022. In July 2021 the board approved a grant to be probable.  

the directors and a consultant of options to purchase 3.75 million shares of common stock at $0.03 per share. The options have a term of five years. Fifty percent (50%) of the grant vested in July 2021 and the remainder vests in equal monthly amounts through June 2022.
The f
air value of the options granted in
J
uly on the grant date using the Black Scholes model was $169,690. As of
September 30, 2021 $69,054 of the fair value was recognized as un
amortized compensation.
2018

NOTE 11 - PER SHARE DATA

The computation of basic earnings (loss) per share of common stock is based on the weighted average number of shares outstanding during the year. The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the year plus the common stock equivalents that would arise from the exercise of stock options and warrants outstanding under the treasury method and the average market price per share during the year as well as the conversion of notes.

At September 30, 2020,2021, the weighted average shares outstanding excluded options to purchase 60,576,56852,790,845 shares of common stock of the Company, warrants to purchase 26,688,37311,000,000 shares of common stock of the Company and 110,055,982119,694,849, shares of common stock of the Company issuable upon the conversion of notes because their effect would be anti-dilutive.There is a possible reset of the conversion price on the PIK Series A and 2023 convertible notes due to the convertible note the Company entered on February 13, 2020.

At September 30, 2019,December 31, 2020, the weighted average shares outstanding excluded options to purchase 59,926,56856,661,515 shares of common stock of the Company, warrants to purchase 26,688,37324,619,623 shares of common stock of the Company and 98,958,681,107,025,597 shares of common stock of the Company issuable upon the conversion of notes payable because their effect would be anti-dilutive.

21

IITEMTEM 2     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-looking Statements

This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are based on our current expectations, assumptions, estimates and projections about our business and our industry. Words such as "believe," "anticipate," "expect," "intend," "plan," "will," "may," and other similar expressions identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements.

Overview

Applied Minerals, Inc. is focused primarily on (i) the development, marketing and sale of our halloysite clay-based DRAGONITE™ line of products for use in advanced applications such as, but not limited to, reinforcement additives for polymer composites, flame retardant additives for polymers, catalysts, controlled release carriers for paints and coatings, strength reinforcement additives for cement, concrete, mortars and grouts, advanced ceramics, rheology additives for drilling fluids, environmental remediation media, and carriers of agricultural agents and (ii) the development, marketing and sale of our AMIRON™ line of iron oxide products for pigmentary and technical applications. Halloysite is an aluminosilicate with a tubular structure that provides functionality for a number of applications. Iron oxides are inorganic compounds that are widely used as pigments in paints, coatings and colored concrete.

The Company owns the Dragon Mine, which has significant deposits of high-quality halloysite clay and iron oxide. The 267-acre property is located in southwestern Utah and its resource was mined for halloysite on a large-scale, commercial basis between 1949 and 1976 for use as a petroleum cracking catalyst. The mine was idle until 2001 when the Company leased it to initially develop its halloysite resource for advanced, high-value applications. We purchased 100% of the property in 2005. After further geological characterization of the mine, the Company identified a high-purity, natural iron oxide resource that it has commercialized to supply certain pigmentary and technical markets.

19
The Company has a mineral processing plant with a capacity of up to 45,000 tons per annum for certain applications. The Company has a smaller processing facility with a capacity of 5,000 – 10,000 tons per annum that is currently dedicated to its halloysite resource. The Company believes it can increase its halloysite production capacity to meet an increase in demand through (i) an expansion of our on-site production capacity through a relatively modest capital investment and (ii) the use of a manufacturing tolling agreement.

The Company currently sells its DRAGONITE product as functional additive for advanced molecular sieves, as a nucleating agent for injection molding applications and as a binder for ceramic applications. For a number of markets mentioned above, the Company is currently working with a number of customers, which are in the latter stages of commercializing new and existing products that will utilize DRAGONITE as a functional additive.

Applied Minerals is a publicly traded company incorporated in the state of Delaware. The common stock trades on the OTCQBOTC market under the symbol AMNL.

Critical Accounting Policies and Estimates

A complete discussion of our critical accounting policies and estimates is included in our Form 10-K for the year ended December 31, 2019.2020. There have been no material changes in our critical accounting policies and estimates during the nine-month
nine
-month period ended
September
30, 20202021 compared to the disclosures on Form 10-K for the year ended December 31, 2019.  

22
2020. 

Three Months Ended September 30, 20202021 Compared to Three Months Ended September 30, 2019

2020

Results of Operations

The following sets forth, for the periods indicated, certain components of our operating earnings, including such data stated as percentage of revenues:

  Three Months Ended September 30,  Variance 
  2020  2019  $  % 
             
REVENUES $222,204  $45,102  $177,102   393%
                 
OPERATING EXPENSES:                
Production costs  396,301   216,081   180,220   83%
Exploration costs  56,909   49,062   7,847   16%
General and administrative  501,178   705,847   (204,669)   (29)%
                 
Total Operating Expenses  954,388   970,990   (16,602)  (2)%
Operating Loss  (732,184)  (925,888)  (193,704)   (21)%
OTHER INCOME (EXPENSE):                
Interest expense, net, including amortization of deferred financing cost and debt discount  (463,462)  (420,799)  42,663   10%
Change in fair value  (23,000)  -   23,000   100%
Other income, net  54,855   596   54,259   9,104%
                 
Total Other (Expense)  (431,607)  (420,203)  11,404   3%
                 
NET LOSS (1,163,791) (1,346,091) (182,300)  14%
                 
Deemed dividend on Series B Convertible preferred stock  

(23,187

)  -   

23,187

   100%
                 
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS $

(1,186,978

) $

(1,346,091

) $

(159,113

)  

(12

)%

 
 
Three Months Ended September 30,
 
 
Variance
 
 
 
2021
 
 
2020
 
 
$
 
 
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
REVENUES
 
$
360,815
 
 
$
222,204
 
 
$
138,611
 
 
 
62
%
 
 
 
 
OPERATING EXPENSES:
 
 
 
Production costs
 
 
434,225
 
 
 
396,301
 
 
 
37,924
 
 
 
10
%
Exploration costs
 
 
47,866
 
 
 
56,909
 
 
 
(9,043
)
 
 
(16
)%
General and administrative
 
 
443,503
 
 
 
501,178
 
 
 
(57,675
)
 
 
(12
)%
 
 
 
 
Total Operating Expenses
 
 
925,594
 
 
 
954,388
 
 
 
(28,
974
)
 
 
(3
)%
Operating Loss
 
 
(564,779
)
 
 
(732,184
)
 
 
(167,405
)
 
 
(23
)%
OTHER (EXPENSE) INCOME:
 
 
 
Interest expense, net (including amortization of deferred financing cost and debt discount)
 
 
(474,579
)
 
 
(463,462
)
 
 
11,117
 
 
 
2
%
Change in fair value
 
 
-
 
 
 
(23,000
)
 
 
(23,000
)
 
 
(100
)%
Gain on forgiveness of PPP loan
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
%
Other income, net
 
 
20,308
 
 
 
54,855
 
 
 
(34,547
)
 
 
(63
)%
 
 
 
 
Total Other (Expense)
 
 
(454,271
)
 
 
(431,607
)
 
 
22,664
 
 
 
5
%
 
 
 
 
NET LOSS
 
$
(1,019,050
)
 
$
(1,
163
,
791
)
 
$
(1
44
,
741
)
 
 
(1
2
)%
Revenue for the three months ended September 30, 20202021 totaled $222,204,$360,815, an increase of $177,102$138,611 or 393%62%, compared to the same period in 2019.2020. The increase was driven primarily by a $149,498$153,534 increase in the sale of AMIRON iron oxide, andpartially offset by a $28,923 increase$14,923 decrease in the sale of DRAGONITE halloysite clay.

20

Sales of AMIRON during the period totaled $149,498,$153,534, an increase of $16,443%103% when compared to the same period in 2019.2020. The increase was due to an increase in sales of AMIRON to a producer of cement and a producer of an oilfield application that did not occur during the same period in 2019.cement. Sales of DRAGONITE halloysite clay during the period totaled $72,706, an increase$57,783, a decline of 61%21% when compared to the same period in 2019.2020. The increasedecrease in sales of DRAGONITE halloysite clay was driven primarily by $17,210a decrease in sales of salesDRAGONITE to a leading manufacture of adhesives and related products and $14,250 of sales to a manufacturer of specialty molecular sieves that did not occur during the same period in 2019.

two customers.

Total operating expenses for the three months ended September 30, 20202021 totaled $954,388,$925,594, a decreasereduction of $16,602,$28,795, or 2%3%, compared to the same period in 2019.2020. The declinereduction was driven primarily by a $204,669,$57,675, or 29%12%, decline in general and administrative costs, partially offset by a $180,220,$37,924, or 83%10%, increase in production costs.

Production costs include those operating expenses which management believes are directly related to the mining and processing of the Company’s iron oxide and halloysite minerals, which result in the production of its AMIRON and DRAGONITE products for commercial sale. Production costs include, but are not limited to, wages and benefits of employees who mine material and who work in the Company’s milling operations, energy costs associated with the operation of the Company’s two mills, the cost of mining and milling supplies and the cost of the maintenance and repair of the Company’s mining and milling equipment. Wages and energy are the two largest components of the Company’s production costs.  

23

Production costs incurred during the three months ended September 30, 20202021 were $396,301,$434,225, an increase of $180,220,$37,924, or 83%10%, compared to the same period in 2019.2020. The increase was driven primarily by an increase in the mining and sale of $72,933 in contract labor expense, $30,567 in payroll expense, $17,701 in clay processing expense, $27,299 in utilities, $16,406 in explosive expense, $14,943 in fuel expense and an increase of $11,742 in equipment rental & repair, partially offset by a decrease of $5,263 in freight and hauling expense.

AMIRON during the period.

Exploration costs include operating expenses incurred at the Dragon Mine that are not directly related to production activities. Exploration costs incurred during the three months ended September 30, 20202021 were $56,909, an $7,847,$47,866, a decrease of $9,043, or 16%, increase compared to the same period in 2019. The increase was driven primarily by an increase of $16,645 in ground support and underground material expense and $2,100 in utility offset by a decrease of $5,150 in consultant expense and $5,538 in non-production-related wage and tax expenses at the Dragon Mine.

2020.

General and administrative expenses incurred during the three months ended September 30, 20202021 totaled $501,178, an $204,669,$443,503, a $57,675, or 29%12%, decline when compared to the same period in 2019.2020. The decrease was driven primarily by a $125,517 decrease in wages and related employee expense due primarilyto a reduction in the number of employees, a $46,755 reduction in D&O and workers’ compensation expense due to a reduction in coverage and a $25,000 decline in director expense due to a decline in the number of $149,837 in payroll expense, $2,671directors, partially offset by a $143,274 increase in equity-based compensation expense related primarily to an annualthe grant and acceleration of options to directors, $35,000 in director expense, $23,619 in rent expense due to subleasing office spaceemployees and $16,414 in dues & subscriptions offset by an increase of $18,161 in professional fees.

directors.

Operating loss incurred during the three months ended September 30, 20202021 was $732,184,$564,779, a $193,704,$167,405, or 21%23%, decrease when compared to the same period in 2019.2020. The decline was driven primarily by a $177,102$138,611 increase in revenue and a $204,669$57,675 decrease in general and administrative expense, offset by a $180,220$37,924 increase in production costs when compared to the same period in 2019.

24
2020.

Total Other Expense was $431,607$454,271 for the three months ended September 30, 20202021 compared to Total Other Expense of $420,203$431,607 in same period in 2019.2020. The $11,404$22,664 increase in Total Other Expense was due primarily to a $65,850 increase in PIK Note interest expense, offset by a $54,259 increase$34,547 reduction in other income when compareand a 11,117 increase in interest expense, partially offset by the elimination of $23,000 expense related to the same periodchange in 2019.

the fair value of a liability.

Net Loss for the three-month period ending September 30, 20202021 was $1,163,791,$1,019,050, a decline of $182,300,$144,741, or 14%12%, when compared to the same period in 2019.2020. The decrease was primarily driven by a $193,704$167,405 decline in operating loss offset by a $11,404 increase in Total Other Expense.

loss.

21
Nine Months Ended September 30, 20202021 Compared to Nine Months Ended September 30, 2019

2020

Results of Operations

The following sets forth, for the periods indicated, certain components of our operating earnings, including such data stated as percentage of revenues:

  Nine Months Ended September 30,  Variance 
  2020  2019  $  % 
             
REVENUES $518,272  $384,565  $133,707   35%
                 
OPERATING EXPENSES:                
Production costs  846,338   661,239   185,099   28 %
Exploration costs  144,588   126,658   17,930   14 %
General and administrative  1,936,301   2,636,528   (700,227)  (27)%
                 
Total Operating Expenses  2,927,227   3,424,425   (497,198)  (15)%
Operating Loss  (2,408,955)  (3,039,860)  (630,905)   (21)%
                 
OTHER INCOME (EXPENSE):                
Interest expense, net, including amortization of deferred financing cost and debt discount  (1,363,330)  (1,344,650)  18,680   1%
Change in fair value  

(23,000

)  -   

23,000

   100%
Other income, net  1,355,205   2,963   1,352,242   45,638 %
                 
Total Other (Expense)  (31,125)  (1,341,687)  (1,310,562)  (98)%
                 
NET LOSS ATTRIBUTABLE TO SHAREHOLDERS (2,440,080) (4,381,547) (1,941,467)   (44)%
                 
Deemed dividend on Series B Convertible Preferred Stock  

(23,187

)  -   

(23,187

)  100%
                 
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS $

(2,463,267

) $

(4,381,547

) $

(1,918,280

)  (44)%

 
 
Nine Months Ended September 30,
 
 
Variance
 
 
 
2021
 
 
2020
 
 
$
 
 
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
REVENUES
 
$
1,099,980
 
 
$
518,272
 
 
$
581,708
 
 
 
112
%
 
 
 
         
 
OPERATING EXPENSES:
 
 
         
 
Production costs
 
 
1,315,350
 
 
 
846,338
 
 
 
469,012
 
 
 
55
%
Exploration costs
 
 
175,715
 
 
 
144,588
 
 
 
31,127
 
 
 
22
%
General and administrative
 
 
1,244,975
 
 
 
1,936,301
 
 
 
(691,326
)
 
 
(36
)%
 
 
 
         
 
Total Operating Expenses
 
 
2,736,040
 
 
 
2,927,227
 
 
 
(191,187
)
 
 
(7
)%
Operating Loss
 
 
(1,636,060
)
 
 
(2,408,955
)
 
 
(772,895
)
 
 
(32
)%
 
 
 
         
 
OTHER INCOME (EXPENSE):
 
 
         
 
Interest expense, net (including amortization of deferred financing cost and debt discount)
 
 
(1,401,878
)
 
 
(1,363,330
)
 
 
38,548
 
 
 
3
%
Change in fair value
 
 
-
 
 
 
(23,000
)
 
 
(23,000
)
 
 
(100
)%
Gain on forgiveness of PPP loan
 
 
223,075
 
 
 
-
 
 
 
223,075
 
 
 
-
%
Other income, net
 
 
114,662
 
 
 
1,355,205
 
 
 
(1,017,468
)
 
 
(75
)%
 
 
 
         
 
Total Other Income (Expense)
 
 
(1,064,141
)
 
 
(31,125
)
 
 
(1,033,016
)
 
 
3,189
%
 
 
 
         
 
NET LOSS
 
$
(2,700,201
)
 
$
(2,440,080
)
 
$
(260,121
)
 
 
11
%

Revenue for the nine months ended September 30, 20202021 totaled $518,272,$1,099,980, an increase of $133,707,$581,708, or 35%112%, compared to the same period in 2019.2020. The increase was driven primarily by a $294,321$438,667 increase in salesthe sale of AMIRON iron oxide partially offset byand a $160,614 decrease$143,041 increase in salesthe sale of DRAGONITE halloysite clay.

Sale

Sales of AMIRON during the period totaled $294,321, a 32,550%$733,892, an increase of 149% when compared to the same period in 2019.2020. The increase was due solely to an increase in the production and sale of ironAMIRON to a manufacturerproducer of cement and a manufacturer of an oilfield application that did not happen during the same period in 2019.

cement. Sales of DRAGONITE halloysite clay during the period totaled $223,058, a decrease$366,126, an increase of 42%64% when compared to the same period in 2019.2020. The declineincrease in sales of DRAGONITE halloysite clay was driven primarily by a $288,000 decline in sales to a manufacturer of specialty zeolites, partially offset by $52,000 in sales to a manufacturer of polymer-based proppants, $39,900 in sales to a manufacturer of plastic lawn & garden equipment, angeneral increase of $19,030 in sales to a manufacturer of adhesives and $14,250 in sales of DRAGONITE to a manufacturernumber of molecular sieves.

customers for use as a flame retardant additive, a binder for a catalyst and ceramic bodies and as a nucleating agent for polymers.

Total operating expenses for the nine months ended September 30, 20202021 totaled $2,927,227,$2,736,040, a decrease of $497,198,$191,187, or 15%7%, compared to the same period in 2019.2020. The decline was driven primarily by a $700,227,$691,326, or 27%36%, decline in general and administrative costs, partially offset by an increase of $185,099$469,012 or 28%55% in production costs.

25

Production costs include those operating expenses which management believes are directly related to the mining and processing of the Company’s iron oxide and halloysite minerals, which result in the production of its AMIRON and DRAGONITE products for commercial sale. Production costs include, but are not limited to, wages and benefits of employees who mine material and who work in the Company’s milling operations, energy costs associated with the operation of the Company’s two mills, the cost of mining and milling supplies and the cost of the maintenance and repair of the Company’s mining and milling equipment. Wages and energy are the two largest components of the Company’s production costs.

22
Production costs incurred during the nine months ended September 30, 20202021 were $846,338,$1,315,350, an increase of $185,099,$469,012, or 28%55%, compared to the same period in 2019.2020. The increase was drivendue primarily by anto $354,259 of contract labor expense related to the increase of $58,088in the Company’s iron production, a $75,956 increase in clay toll processing $72,703costs related to sales of certain grades of DRAGONITE, and a $79,103 increase in contract labor, $27,550wages related primarily to the increase in explosive expenses, $42,772 in utilities and $16,066 in equipment rental partially offset by a decrease of $13,630 in freight and shipping expense and $22,600 in hauling expense.

iron production

Exploration costs include operating expenses incurred at the Dragon Mine that are not directly related to production activities. Exploration costs incurred during the nine months ended September 30, 20202021 were $144,588,$175,715, a $17,930,$31,127, or 14%22%, increase compared to the same period in 2019.2020. The increase was due to an increase in ground support and underground materials atdriven primarily by $19,684 of workers’ compensation reclassified during the Dragon Mine.

26
period as exploration expense.

General and administrative expenses incurred during the nine months ended September 30, 20202021 totaled $1,936,301,$1,244,975, a decline of $700,227,$691,326, or 27%36%, when compared to the same period in 2019.2020. The declinedecrease was driven primarily by a $511,889 decrease in wages, related payroll expenses totaling $318,412,taxes and benefits due to a reduction in the number of corporate executives, a reduction of $245,811 in director expense due to a decline in optionthe number of directors, a $110,123 reduction in D&O and workers’ compensation expense totaling $196,696,due to a declinereduction in travel and related expense of $62,334, a decline in dues and subscription fees totaling $28,068, a decline in consulting fees totaling $16,455coverage and a declinedecrease of $40,714 in director fees totaling $59,189.

office rent expense, partially offset by a $198,787 in equity-based expense related to the grant and acceleration of options to employees and directors.

Operating loss incurred during the nine months ended September 30, 20202021 was $2,408,955,$1,636,060, a $630,905,$772,895, or 21%32%, decrease when compared to the same period in 2019.2020. The decline was driven primarily by a $700,227 decline$581,708 increase in revenue and a $691,326 decrease in general and administrative expense, offset by a $133,707$469,012 increase in revenue, a $185,099 increase in production costs and a $17,930 increase in exploration costs when compared to the same period in 2019.

2020.

Total Other Expense for the nine months ended September 30, 20202021 was $31,125, a decline$1,064,141, an increase of $1,310,562,$1,033,016, or 98%3,189%, when compared to the same period in 2019.2020. The decline$1,033,016 increase in Total Other Expense was drivendue primarily by the $1,300,000 income from an exploration agreement, $48,291 income from disposal of old truck and a $26,903 decrease in interest expense when compareddue to the sameabsence of a $1,300,000 payment received during the prior period in 2019.

related to the exercise of an option for certain metallic mineral rights of located on the Dragon Mine, partially offset by forgiveness of the Company’s PPP Loan.

Net Loss for the nine-month periodnine months ending September 30, 20202021 was $2,440,080, a decline$2,700,201, an increase of $1,941,467,$260,121, or 44%11%, when compared to the same period in 2019.2020. The declineincrease was driven by an $1,310,375 declinea $1,033,016 increase in total other expenseTotal Other Expense and a $630,905$772,895 decline in operating loss.

LIQUIDITY AND CAPITAL RESOURCES 

The Company has a history ofsuffered recurring losses from operations and the use of cash in operating activities. For the nine months ended September 30, 2020,currently a working capital deficit. These conditions raise substantial doubt about the Company’s net loss was $2,440,080 and cash provided by operating activities was $139,655. As of September 30, 2020, the Company had current assets of $219,135 and current liabilities of $3,526,035 of which $452,572 was accrued PIK Note interest expectedability to be paid in additional PIK Notes. The Company’s current liabilities also include (i) $608,678 of accrued salaries deferred by certain members of management until the Company’s liquidity improves, (ii) $1,050,811 of accrued directors feecontinue as determined by the Company’s Board, (iii) $119,269 of payables to a compounder for which it has agreed to satisfy in halloysite product, (iv) $132,635 of disputed or erroneously accrued expenses and (v) $223,075 of PPP Funding payable which the Company expects to be forgiven by the U.S. Treasury.

going concern.

Management believes that in order for the Company to meet its obligations arising from normal business operations through November 16, 202120, 2022 that the Company may be required (i) to raise additional capital either in the form of a private placement of common stock or debt and/or (ii) generate additional sales of its products that will generate sufficient operating profit and cash flows to fund operations.  Without additional capital or additional sales of its products, the Company’s ability to continue to operate may be limited.

Based on the Company’s current cash usage expectations, management believes it may not have sufficient liquidity to fund its operations through November 16, 2021.22, 2022. Further, management cannot provide any assurance that it is probable that the Company will be successful in accomplishing any of its plans to raise debt or equity financing or generate additional product sales. Collectively these factors raise substantial doubt regarding the Company’s ability to continue as going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded assets amounts and classification of liabilities that might be necessary should the Company not be able to continue as a going concern.

23
Cash provided byused in operating activities during the nine months ended September 30, 20202021 was $139,655$973,832 compared to $2,081,796$139,655 of cash provided during the same period in 2020. The $1,113,487 increase in cash used by operations during the period was driven primarily by a $260,121 increase in net loss during the period as well as a reduction in payables of $781,948 and a reduction of $101,878 in deposits and prepaids, partially offset by an increase in accounts receivable of $86,777.
Cash provided by financing activities during the nine months ended September 30, 2021 was $510,362 compared to $118,531 used during the same period in 2019.2020. The $2,221,451$628,893 increase in cash provided during the period was due primarily to $385,000 of proceeds from a $1,300,000 increase in exploration agreement revenue and a $987,691 increase in accounts payable resulting from cash management. Cash used in operating activities during 2020 before adjusting for changes in operating assets and liabilities was $1,046,340, $1,781,057 less than the comparable period in 2019.

Cash used in financing activitiesprivate placement of Series B Preferred Stock during the nine months ended September 30, 2020 was $118,531 comparedcurrent period and the (i) absence of $113,750 of proceeds from the issuance of notes and (ii) absence of $371,625 of payments to $603,064reduce notes payable both of which occurred during the same period in 2019. The $484,533 decrease in cash used during the period was due primarily to $113,750 of proceeds from notes issued, $125,000 of proceeds from private placement and $223,075 of proceeds from the Paycheck Protection Program Loan.

27
2020.

Total assets at September 30, 20202021 were $1,217,601$1,200,228 compared to $1,489,180$1,900,307 at December 31, 2019,2020, a decrease of $271,579$700,079 due primarily to decrease in the Company cash, prepaid expenses and operating lease right-of-use assets. Total liabilities were $48,301,168$51,123,288 compared to $46,273,329$49,729,744 at December 31, 2019.2020. The increase of $2,027,839$1,393,544 in total liabilities was due primarily to the increase in Paycheck Protection Program Loan, increase in accounts payable resulting from cash management, amortization of PIK Notes debt discount which increased the carrying value of PIK Notes payable, proceeds from issuance of notes payable and offset by repayment of notes payable to related party.

ISSUANCE OF CONVERTIBLE DEBT

For information with respect to issuance of convertible debt, see Note 8 of Notes to Unaudited Consolidated Financial Statements included elsewhere in this Quarterly Report.

OFF-BALANCE SHEET ARRANGEMENTS

There are no off-balance sheet arrangements between the Company and any other entity that have, or are reasonable likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.

IITEMTEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have no exposure to fluctuations in interest rates, foreign currencies, or other factors. 

28


IITEMTEM 4.     
CONTROLS AND PROCEDURES

As required by Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter covered by this quarterly report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were, as of the end of the fiscal quarter covered by this quarterly report, ineffective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

During the nine months ended September 30, 2020,2021, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Notwithstanding the existence of these material weaknesses in our internal control over financial reporting, the management believes that the consolidated financial statements included in this Form 10-Q fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.

2924


PPARTART II.     OTHER INFORMATION

IITEMTEM 1.
     LEGAL PROCEEDINGS

As of the date of this report, there is no pending or threatened litigation. We may become involved in or subject to, routine litigation, claims, disputes, proceedings and investigations in the ordinary course of business, could have a material adverse effect on our financial condition, cash flows or results of operations.

IITEMTEM 1A.
  RISK FACTORS.

Except for the below, there were no additions or material changes to the Company’s risk factors disclosed in Item 1A of Part I in the Company’s 20192020 Annual Report on Form 10-K.

IITEMTEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

IITEMTEM 3.     DEFAULTS UPON SENIOR SECURITIES

None

IITEMTEM 4.     MINE SAFETY DISCLOSURES

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and this Item is included in Exhibit 95 to this Form 10-Q.

IITEMTEM 5.     OTHER INFORMATION

None.

25
IITEMTEM 6.     EXHIBITS

(a) Exhibits.

The following exhibits are included in this report:


Exhibit

Number

Description of Exhibit
31.1
Certification pursuant to Rule 13a-14 of the Securities Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, of the Principal Executive Officer
31.2
Certification pursuant to Rule 13a-14 of the Securities Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, of the Principal Financial Officer
32.1
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Principal Executive Officer
32.2
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Principal Financial Officer
95
Mine Safety Disclosure
101.INS
XBRL Instance
101.SCH
XBRL Taxonomy Extension Schema
101.CAL
XBRL Taxonomy Extension Calculation
101.DEF
XBRL Taxonomy Extension Definition
101.LAB
XBRL Taxonomy Extension Labels
101.PRE
XBRL Taxonomy Extension Presentation
XBRL
Information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

3026

SSIGNATURES

IGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

APPLIED MINERALS, INC.
Dated: November 16, 202022, 2021
/s/ CHRISTOHER T. CARNEY
By: Christopher T. Carney
Chief Executive Officer
Dated: November 16, 2020
/s/ CHRISTOPHER T. CARNEY
By: Christopher T. Carney
Chief Executive Officer
Dated: November 22, 2021
/s/ CHRISTOPHER T. CARNEY
By: Christopher T. Carney
Chief Financial Officer

3127