UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 10-Q
 
(Mark One)
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the quarterly period ended
March 31,June 30, 2022
 
 
¨
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.
(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.)
 
 
 
1200 Silver City Road, PO Box 432, Eureka, UT
 
84628
(Address of principal executive offices)
 
(Zip Code)
 
 
(212) 226-4256(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  
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  
x
No  N
o
  
¨
 
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
 
The number of shares of the registrant’s common stock, $0.001 par value per share, outstanding as of MayAugust
25
,22, 2022 was 261,831,760.366,967,696
.
 
DOCUMENTS INCORPORATED BY REFERENCE: None.

 
 

 
APPLIED MINERALS, INC.
(An Exploration Stage Company)
 
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31,JUNE 30, 2022
TABLE OF CONTENTS
 
 
 
Page(s)
 
 
 
PART I. FINANCIAL INFORMATION
 
 
 
Item 1.
Consolidated Financial Statements

 
 
 

Consolidated Balance Sheets as of March 31,June 30, 2022 (unaudited) and December 31, 2021
3
 
 
 

Consolidated Statements of Operations for the Three and Six Months Ended March 31,June 30, 2022 and 2021 (unaudited)
4
 
 
 

Consolidated Statements of Changes in Stockholders’ Deficit for the Three and Six Months Ended March 31,June 30, 2022 and 2021 (unaudited)
5
 
 
 

Consolidated Statements of Cash Flows for the ThreeSix Months Ended March 31,June 30, 2022 and 2021 (unaudited)
67
 
 
 

Notes to the Consolidated Financial Statements (unaudited)
78
 
 
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
2623
 
 
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
3128
 
 
 
Item 4.
Controls and Procedures
3229
 
 
 
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings
3329
 
 
 
Item 1A
Risk Factors
3329
 
 
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
3329
 
 
 
Item 3.
Defaults Upon Senior Securities
3329
 
 
 
Item 4.
Mine Safety Disclosures
3329
 
 
 
Item 5.
Other Information
3329
 
 
 
Item 6.
Exhibits
3329
 
 
 
Signatures
3431
 

2
 
PART I. FINANCIAL INFORMATION
 
APPLIED MINERALS, INC.
(An Exploration Stage Mining Company)
CONSOLIDATED BALANCE SHEETS
 
 
March 31, 2022
 
December 31, 2021
 
 
June 30, 2022
 
December 31, 2021
 
 
(unaudited)
 
 
 
 
(unaudited)
 
 
 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash
 
$
50,096
 
 
$
74,253
 
 
$
19,706
 
 
$
74,253
 
Accounts receivable
 
 
19,909
 
 
 
34,309
 
 
 
24,425
 
 
 
34,309
 
Deposits and prepaid expenses
 
 
114,817
 
 
 
161,999
 
 
 
67,634
 
 
 
161,999
 
Total Current Assets
 
 
184,822
 
 
 
270,561
 
 
 
111,765
 
 
 
270,561
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Land
 
 
500,000
 
 
 
500,000
 
 
 
500,000
 
 
 
500,000
 
Operating lease right-of-use assets
 
 
-
 
 
 
28,111
 
Finance lease right-of-use
 
 
39,882
 
 
 
42,821
 
Operating lease right-of-use asset
 
 
-
 
 
 
28,111
 
Finance lease right-of-use asset
 
 
36,906
 
 
 
42,821
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deposits
 
 
336,359
 
 
 
336,328
 
 
 
297,219
 
 
 
336,328
 
Total Other Assets
 
 
336,359
 
 
 
336,328
 
 
 
297,219
 
 
 
336,328
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL ASSETS
 
$
1,061,063
 
 
$
1,177,821
 
 
$
945,890
 
 
$
1,177,821
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable and accrued liabilities
 
$
3,289,919
 
 
$
3,017,454
 
 
$
3,464,615
 
 
$
3,017,454
 
PIK Note interest accrual
 
 
464,690
 
 
 
372,028
 
 
 
377,609
 
 
 
372,028
 
Current portion of notes payable
 
 
263,745
 
 
 
112,835
 
 
 
189,491
 
 
 
112,835
 
Current portion of finance lease liabilities
 
 
12,159
 
 
 
11,986
 
 
 
12,337
 
 
 
11,986
 
Current portion of operating lease liabilities
 
 
-
 
 
 
29,085
 
 
 
-
 
 
 
29,085
 
Total Current Liabilities
 
 
4,030,513
 
 
 
3,543,388
 
 
 
4,044,052
 
 
 
3,543,388
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-Term Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PIK Notes payable, net of $577,289 and $681,102 debt discount, respectively
 
 
47,372,645
 
 
 
47,004,480
 
PIK Notes payable, net of $472,104 and $681,102 debt discount, respectively
 
 
47,924,672
 
 
 
47,004,480
 
Deferred revenue
 
 
1,000,000
 
 
 
1,000,000
 
 
 
1,000,000
 
 
 
1,000,000
 
Finance lease liability
 
 
27,723
 
 
 
30,835
 
Finance lease liabilities
 
 
24,569
 
 
 
30,835
 
Total Long-Term Liabilities
 
 
48,400,368
 
 
 
48,035,315
 
 
 
48,949,241
 
 
 
48,035,315
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL LIABILITIES
 
 
52,430,881
 
 
 
51,578,703
 
 
 
52,993,293
 
 
 
51,578,703
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stockholders’ Deficit
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock, $0.001 par value, 10,000,000 shares authorized, and 187,000 and 262,000 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively
 
 
187
 
 
 
262
 
Common stock, $0.001 par value, 700,000,000 shares authorized, and 252,563,747 and 217,655,150 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively (211,913,925 reserved in Treasury)
 
 
252,562
 
 
 
217,654
 
Preferred stock, $0.001 par value, 10,000,000 shares authorized, and 164,000 and 262,000 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively
 
 
164
 
 
 
262
 
Common stock, $0.001 par value, 700,000,000 shares authorized, and 285,787,382 and 217,655,150 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively (247,569,392 reserved in Treasury)
 
 
285,786
 
 
 
217,654
 
Additional paid-in capital
 
 
74,798,477
 
 
 
74,686,581
 
 
 
74,861,487
 
 
 
74,686,581
 
Accumulated deficit prior to the exploration stage
 
 
(20,009,496
)
 
 
(20,009,496
)
 
 
(20,009,496
)
 
 
(20,009,496
)
Accumulated deficit during the exploration stage
 
 
(106,411,548
)
 
 
(105,295,883
)
 
 
(107,185,344
)
 
 
(105,295,883
)
Total Stockholders’ Deficit
 
 
(51,369,818
)
 
 
(50,400,882
)
 
 
(52,047,403
)
 
 
(50,400,882
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
 
$
1,061,063
 
 
$
1,177,821
 
 
$
945,890
 
 
 
1,177,821
 
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 
3
 
APPLIED MINERALS, INC.
(An Exploration Stage Mining Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
For the Three Months Ended March 31,
 
 
For the Three Months Ended June 30
 
For the Six Months Ended June 30
 
 
2022
 
2021
 
 
2022
 
2021
 
2022
 
2021
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
REVENUES
 
$
78,045
 
 
$
273,672
 
 
$
106,105
 
 
$
465,493
 
 
$
184,150
 
 
$
739,165
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OPERATING EXPENSES:
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Production costs
 
 
133,336
 
 
 
462,166
 
 
 
177,959
 
 
 
418,959
 
 
 
311,295
 
 
 
881,125
 
Exploration costs
 
 
243,470
 
 
 
51,590
 
 
 
6,543
 
 
 
76,259
 
 
 
250,013
 
 
 
127,849
 
General and administrative
 
 
405,378
 
 
 
389,523
 
 
 
335,728
 
 
 
411,949
 
 
 
741,106
 
 
 
801,472
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Operating Expenses
 
 
782,184
 
 
 
903,279
 
 
 
520,230
 
 
 
907,167
 
 
 
1,302,414
 
 
 
1,810,446
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Loss
 
 
(704,139
)
 
 
(629,607
)
 
 
(414,125
)
 
 
(441,674
)
 
 
(1,118,264
)
 
 
(1,071,281
)
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OTHER INCOME (EXPENSE):
 
 
 
 
 
 
  
OTHER INCOME (EXPENSES):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net (including amortization of deferred financing cost and debt discount)
 
 
(471,898
)
 
 
(463,897
)
 
 
(480,717
)
 
 
(463,402
)
 
 
(952,615
)
 
 
(927,299
)
Other income, net
 
 
60,372
 
 
 
247,546
 
 
 
121,046
 
 
 
69,883
 
 
 
181,418
 
 
 
317,429
 
Total Other (Expense) Income
 
 
(411,526
)
 
 
(216,351
)
Total Other (Expenses)
 
 
(359,671
)
 
 
(393,519
)
 
 
(771,197
)
 
 
(609,870
)
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Loss
 
$
(1,115,665
)
 
$
(845,958
)
NET LOSS
 
$
(773,796
)
 
$
(835,193
)
 
$
(1,889,461
)
 
$
(1,681,151
)
 
 
 
 
 
 
  
 
 
              
Deemed dividend on Series B Convertible Preferred Stock
 
 
-


 
 
(60,738
)
Net Loss Per Common Share (Basic and Diluted)
 
$
(0.00
)
 
$
(0.00
)
 
$
(0.01
)
 
$
(0.01
)
 
 
 
 
 
 
  
 
 
              
NET LOSS ATTIBUTABLE TO COMMON SHAREHOLDERS
 
$
(1,115,665
)
 
$
(906,696
)
 
 
 
 
 
 
  
Net Loss Per Common Share – Basic and Diluted
 
$
(0.01
)
 
$
(0.00
)
 
 
 
 
 
 
  
Weighted Average Common Shares Outstanding – Basic and Diluted
 
 
222,601,842
 
 
 
188,243,263
 
Weighted Average Common Shares Outstanding (Basic and Diluted)
 
 
229,964,647
 
 
 
195,105,088
 
 
 
243,688,779
 
 
 
191,693,131
 
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 
4
 
APPLIED MINERALS, INC.
(An Exploration Stage Mining Company)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’STOCKHOLDERS' DEFICIT
(Unaudited)
 
 
 
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, 2021
 
 
217,655,150
 
 
$
217,654
 
 
 
262,000
 
 
$
262
 
 
$
74,686,581
 
 
$
(20,009,496
)
 
$
(105,295,883
)
 
$
(50,400,882
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares issued upon conversion of Series B Preferred Stock
 
 
20,164,153
 
 
 
20,164
 
 
 
(75,000
)
 
 
(75
)
 
 
(20,089
)
 
 
-
 
 
 
-
 
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares issued as part of settlement of liability
 
 
4,444,444
 
 
 
4,444
 
 
 
-
 
 
 
-
 
 
 
49,334
 
 
 
-
 
 
 
-
 
 
 
53,778
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issuance of shares of common stock for debt issuance cost
 
 
300,000
 
 
 
300
 
 
 
-
 
 
 
-
 
 
 
1,440
 
 
 
-
 
 
 
-
 
 
 
1,740
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issuance of shares of common stock for consulting services
 
 
10,000,000
 
 
 
10,000
 
 
 
-
 
 
 
-
 
 
 
60,000
 
 
 
-
 
 
 
-
 
 
 
70,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock based compensation expense
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
21,211
 
 
 
-
 
 
 
-
 
 
 
21,211
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Loss
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
(1,115,665
)
 
 
(1,115,665
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, March 31, 2022
 
 
252,563,747
 
 
$
252,562
 
 
 
187,000
 
 
$
187
 
 
$
74,798,477
 
 
$
(20,009,496
)
 
$
(106,411,548
)
 
$
(51,369,818
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2020
 
 
183,938,549
 
 
$
183,939
 
 
 
128,000
 
 
$
128
 
 
$
74,008,636
 
 
 
(20,009,496
)
 
 
(102,012,644
)
 
 
(47,829,437
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares issued on conversion of preferred stock
 
 
6,167,273
 
 
 
6,167
 
 
 
(128,000
)
 
 
(128
)
 
 
1,641
 
 
 
-
 
 
 
-
 
 
 
7,680
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares issued in private placement
 
 
-
 
 
 
-
 
 
 
95,000
 
 
 
95
 
 
 
99,905
 
 
 
-
 
 
 
-
 
 
 
100,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beneficial conversion feature on Convertible Series B Preferred Stock
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
60,738
 
 
 
-
 
 
 
-
 
 
 
60,738
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deemed dividend from beneficial conversion feature on Convertible Series B Preferred Stock
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
(60,738
)
 
 
-
 
 
 
-
 
 
 
(60,738
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares issued for cashless exercise of options
 
 
3,836,475
 
 
 
3,836
 
 
 
-
 
 
 
 
-
 
 
 
 
(3,836
)
 
 
-
 
 
 
-
 
 
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares issued to employee in lieu of bonus
 
 
1,162,791
 
 
 
1,163
 
 
 
-
 
 
 
-
 
 
 
56,977
 
 
 
-
 
 
 
-
 
 
 
58,140
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock option compensation expense
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
3,943
 
 
 
-
 
 
 
-
 
 
 
3,943
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Loss
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
(845,948
)
 
 
(845,948
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2021
 
 
195,105,088
 
 
$
195,105
 
 
 
95,000
 
 
$
95
 
 
$
74,167,266
 
 
$
(20,009,496
)
 
$
(102,858,602
)
 
$
(48,505,632
)
 
 
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, March 31, 2022
 
 
252,563,747
 
 
$
252,562
 
 
 
187,000
 
 
$
187
 
 
$
74,798,477
 
 
$
(20,009,496
)
 
$
(106,411,548
)
 
$
(51,369,818
)
 
 
 
                              
Shares issued upon conversion of Series B Preferred Stock
 
 
33,223,635
 
 
 
33,224
 
 
 
(101,000
)
 
$
(101
)
 
 
(33,123
)
 
 
-
 
 
 
-
 
 
 
-
 
 
 
 
                              
Beneficial conversion feature on Series B Preferred Stock
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
25,947
 
 
 
-
 
 
 
-
 
 
 
25,947
 
 
 
 
                              
Deemed dividend from beneficial conversion feature on Series B Preferred Stock
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
(25,947
)
 
 
-
 
 
 
-
 
 
 
(25,947
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares of Series B Preferred Stock issued to Geneva Roth
 
 
-
 
 
 
-
 
 
 
78,000
 
 
 
78
 
 
 
74,922
 
 
 
-
 
 
 
-
 
 
 
75,000
 
 
 
 
                              
Stock option compensation expense
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
21,211
 
 
 
-
 
 
 
-
 
 
 
21,211
 
 
 
 
                              
Net Loss
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
(773,796
)
 
 
(773,796
)
 
                                
Balance, June 30, 2022
 
 
285,787,382
 
 
$
285,786
 
 
 
164,000
 
 
$
164
 
 
$
74,861,487
 
 
$
(20,009,496
)
 
$
(107,185,344
)
 
$
(52,047,403
)
 
 
 
                              
Balance, March 31, 2021
 
 
195,105,088
 
 
$
195,105
 
 
 
95,000
 
 
$
95
 
 
$
74,167,266
 
 
$
(20,009,496
)
 
$
(102,858,602
)
 
$
(48,505,632
)
 
 
 
                              
Shares issued in private placement
 
 
-
 
 
 
-
 
 
 
81,136
 
 
 
81
 
 
 
84,919
 
 
 
-
 
 
 
-
 
 
 
85,000
 
 
 
 
                              
Beneficial conversion feature on Series B Preferred Stock
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
51,874
 
 
 
-
 
 
 
-
 
 
 
51,874
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deemed dividend from beneficial conversion feature on Series B Preferred Stock
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
(51,874
)
 
 
-
 
 
 
-
 
 
 
(51,874
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock compensation expense
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
3,943
 
 
 
-
 
 
 
-
 
 
 
3,943
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Loss
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
(835,193
)
 
 
(835,193
)
 
 
 
                             
 
Balance, June 30, 2021
 
 
195,105,088
 
 
$
195,105
 
 
 
176,136
 
 
$
176
 
 
$
74,256,128
 
 
$
(20,009,496
)
 
$
(103,693,795
)
 
$
(49,251,882
)

5
 
 
Six 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, 2021
 
 
217,655,150
 
 
$
217,654
 
 
 
262,000
 
 
$
262
 
 
$
74,686,581
 
 
$
(20,009,496
)
 
$
(105,295,883
)
 
$
(50,400,882
)
 
 
 
                              
Shares issued for conversion of Series B Preferred Stock
 
 
53,387,788
 
 
 
53,388
 
 
 
(176,000
)
 
 
(176
)
 
 
(53,212
)
 
 
-
 
 
 
-
 
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares issued as part of liability settlement
 
 
4,444,444
 
 
 
4,444
 
 
 
-
 
 
 
-
 
 
 
49,334
 
 
 
-
 
 
 
-
 
 
 
53,778
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issuance of shares for debt issuance cost
 
 
300,000
 
 
 
300
 
 
 
-
 
 
 
-
 
 
 
1,440
 
 
 
-
 
 
 
-
 
 
 
1,740
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Issuance of shares of common stock for consulting services
 
 
10,000,000
 
 
 
10,000
 
 
 
-
 
 
 
-
 
 
 
60,000
 
 
 
-
 
 
 
-
 
 
 
70,000
 
 
 
 
                              
Beneficial conversion feature on Series B Preferred Stock
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
25,947
 
 
 
-
 
 
 
-
 
 
 
25,947
 
 
 
 
                              
Deemed dividend from beneficial conversion feature on Series B Preferred Stock
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
(25,947
)
 
 
-
 
 
 
-
 
 
 
(25,947
)
 
 
 
                              
Shares of Series B Preferred Stock issued to Geneva
Roth
 
 
 
 
-
 
 
 
-
 
 
 
78,000
 
 
 
78
 
 
 
74,922
 
 
 
-
 
 
 
-
 
 
 
75,000
 
 
 
 
                              
Stock option compensation expense
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
42,422
 
 
 
-
 
 
 
-
 
 
 
42,422
 
 
 
 
                              
Net Loss
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
(1,889,461
)
 
 
(1,889,461
)
 
 
 
                             
 
Balance, June 30, 2022
 
 
285,787,382
 
 
$
285,786
 
 
 
164,000
 
 
$
164
 
 
$
74,861,487
 
 
$
(20,009,496
)
 
$
(107,185,344
)
 
$
(52,047,403
)
 
 
 
                              
Balance, December 31, 2020
 
 
183,938,549
 
 
$
183,939
 
 
 
128,000
 
 
$
128
 
 
$
74,008,636
 
 
$
(20,009,496
)
 
$
(102,012,644
)
 
$
(47,829,437
)
 
 
 
                              
Shares issued for conversion of Series B Preferred Stock
 
 
6,167,273
 
 
 
6,167
 
 
 
(128,000
)
 
 
(128
)
 
 
1,641
 
 
 
-
 
 
 
-
 
 
 
7,680
 
 
 
 
                              
Shares issued in private placement
 
 
-
 
 
 
-
 
 
 
176,136
 
 
 
176
 
 
 
184,824
 
 
 
-
 
 
 
-
 
 
 
185,000
 
 
 
 
                              
Beneficial conversion of Series B Preferred Stock
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
112,612
 
 
 
-
 
 
 
-
 
 
 
112,612
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deemed dividend from beneficial conversion feature on Series B Preferred Stock
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
(112,612
)
 
 
-
 
 
 
-
 
 
 
(112,612
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares issued upon cashless exercise of options
 
 
3,836,475
 
 
 
3,836
 
 
 
-
 
 
 
-
 
 
 
(3,836
)
 
 
-
 
 
 
-
 
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares issued for employee bonus
 
 
1,162,791
 
 
 
1,163
 
 
 
-
 
 
 
-
 
 
 
56,977
 
 
 
-
 
 
 
-
 
 
 
58,140
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock option compensation expense
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
7,886
 
 
 
-
 
 
 
-
 
 
 
7,886
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Loss
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
 
(1,681,151
)
 
 
(1,681,151
)
 
 
 
                             
 
Balance, June 30, 2021
 
 
195,105,088
 
 
$
195,105
 
 
 
176,136
 
 
$
176
 
 
$
74,256,128
 
 
$
(20,009,496
)
 
$
(103,693,795
)
 
$
(49,251,882
)
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 
56
 
APPLIED MINERALS, INC.
(An Exploration Stage Mining Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
For the Three Months Ended
 
 
For the Six Months Ended
 
 
March 31,
 
 
June 30,
 
 
2022
 
2021
 
 
2022
 
2021
 
 
 
 
 
 
 
 
 
 
 
Cash Flows from Operating Activities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
Net loss
 
$
(1,115,665
)
 
$
(845,958
)
 
$
(1,889,461
)
 
$
(1,681,151
)
Adjustments to reconcile net loss to net cash used in operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation
 
 
8,782
 
 
 
-
 
Depreciation of finance lease
 
 
5,915
 
 
 
1,874
 
Amortization of debt discount
  
2,143
   
-
 
 
Amortization of discount - PIK Notes
 
 
103,813
 
 
 
98,501
 
 
 
208,998
 
 
 
198,304
 
Accrued interest on PIK Notes
 
 
314,907
 
 
 
350,433
 
 
 
721,659
 
 
 
702,434
 
Stock issued for settlement of liability
 
 
53,778
 
 
 
-
 
Stock-based compensation expense
 
 
91,211
 
 
 
62,083
 
Stock issued for settlement liability
 
 
53,778
 
 
 
-
 
Stock based compensation expense
 
 
112,422
 
 
 
66,026
 
Non-cash lease expense
 
 
28,111
 
 
 
26,430
 
 
 
28,111
 
 
 
53,264
 
Dividend
 
 
-
 
 
 
7,680
 
Stock issued for interest
 
 
-
 
 
 
7,680
 
Forgiveness of PPP Fund
 
 
-
 
 
 
(223,075
)
 
 
-
 
 
 
(223,075
)
Change in operating assets and liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accounts receivable
 
 
14,400
 
 
 
32,687
 
 
 
9,884
 
 
 
(68,117
)
Deposits and prepaids
 
 
47,151
 
 
 
57,143
 
 
 
133,474
 
 
 
111,118
 
Operating lease liabilities
 
 
(29,085
)
 
 
(26,548
)
 
 
(29,085
)
 
 
(54,356
)
Financing lease liabilities
 
 
(2,754
)
 
 
-
 
 
 
(5,915
)
 
 
-
 
Accounts payable and accrued liabilities
 
 
314,573
 
 
 
20,370
 
 
 
442,277
 
 
 
37,736
 
Net cash (used in) operating activities
 
 
(170,778
)
 
 
(440,254
)
Net cash (used in) provided by operating activities
 
 
(205,800
)
 
 
(848,263
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash Flows from Financing Activities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Payment on finance lease liability
 
 
(6,029
)
 
 
(2,028
)
Proceeds from notes payable
 
 
200,000
 
 
 
-
 
 
 
200,000
 
 
 
-
 
Proceeds from Paycheck Protection Program Loan
 
 
-
 
 
 
264,472
 
Proceeds from Private Placement
 
 
-
 
 
 
100,000
 
Payments on financing lease liability
 
 
(6,029
)
 
 
-
 
Proceeds from Paycheck Protection Program loan
 
 
-
 
 
 
264,472
 
Payments on notes payable
 
 
(4,379
)
 
 
-
 
 
 
(31,777
)
 
 
 
-
 
 
Proceeds from private placement
 
 
75,000
 
 
 
185,000
 
Payments on insurance financing
 
 
(42,971
)
 
 
(49,906
)
 
 
(85,941
)
 
 
(99,812
)
Net cash provided by financing activities
 
 
146,621
 
 
 
314,566
 
Net cash provided by (used in) financing activities
 
 
151,253
 
 
 
347,632
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net change in cash
 
 
(24,157
)
 
 
(125,688
)
 
 
(54,547
)
 
 
(500,631
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash at beginning of period
 
 
74,253
 
 
 
669,560
 
 
 
74,253
 
 
 
669,560
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash at end of period
 
$
50,096
 
 
$
543,872
 
 
$
19,706
 
 
$
168,929
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash paid for interest
 
$
2,312
 
 
$
4,395
 
 
$
4,624
 
 
$
5,380
 
Cash paid for income taxes
 
$
-
 
 
$
-
 
 
$
-
 
 
$
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Supplemental disclosure of non-cash financing activity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capitalization of ROU asset and finance lease liability
 
$
-
 
 
$
50,573
 
Boral settlement payable
 
$
 
4,844
 
  
$
 
 
-
 
Deemed dividend on Series B Preferred Stock due to BCF
 
$
25,947
 
 
$
112,612
 
Accrued PIK interest paid through issuance of PIK Notes
 
$
265,813
 
 
$
408,807
 
 
$
716,078
 
 
$
703,260
 
Deemed dividend on convertible Preferred Stock Series B due to BCF
 
$
-
 
 
$
60,738
 
Common
s
tock issued for cashless options exercised
 
$
-
 
 
$
3,836
 
Stock issued for cashless options exercised
 
$
1,740
 
 
$
3,836
 
Common stock issued upon conversion of Series B Preferred Stock
 
$
20,164
  
$
-
 
 
$
53,388
 
 
$
-
 
Common stock issued to note holders for financing cost
 
$
1,740
 
 
$
-
 
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 
67
 
APPLIED 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 sellingmarkets its halloysite clay under the DRAGONITE trade name. The Company markets its DRAGONITE halloysite clay productproducts into the as an additive into the ceramic, molecular sieve, catalyst, polymer, flame retardant, and coatings markets. The Company regularly sells its halloysite clay products to foursix customers. Several prospective customers are conducting either commercial-scale trials or field trials for an array of products that are expecteduse DRAGONITE. The Company believes its DRAGONITE halloysite clay has potential use in lithium-ion battery formulations. In particular, halloysite has been shown to be an effective precursor of porous silicon for use DRAGONITE as anode material, a functional additive.coating to improve the conductivity of separators and an additive to improve the conductivity of solid polymer electrolytes. In October 2019June 2021, the Company received a $200,000 U.S. DOE STTR Phase I award to develop a process that produces halloysite-derived porous silicon for use as anode material. In April 2022, the Company applied for $1.15 million U.S. DOE STTR Phase II award to scale up the process developed under the Phase I award. On July 11, 2022, the Company announced that it entered into an agreement to supply a manufacturer of cement with upsell the assets related to 30,000 tons AMIRONits iron oxide per year over a two-year period.resource. 
On August 9, 2022 the sale of the assets related to the Company’s iron oxide resource closed.  
 
Applied Minerals Inc. is a publicly traded company incorporated in the state of Delaware. The common stock trades on the OTC Bulletin Board under the symbol “AMNL.”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. Per the agreement CMC was obligated to 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 the Agreement unless the Exploration License was terminated earlier by CMC by exercising the option or failing to make the required payment for the Exploration License.
 
7
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 proceeds from the exercise of the Option are presented as Other Income. The Company also provided Tintic with a Right of First Offer, which will expire on December 21, 2027 and can be extended to December 21, 2032 for a payment of $250,000 by Tintic to the Company. 
 
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 was willing to enter into the Agreement only if it was assured that CMC would not have any right to unreasonably interfere with the Company’s current mining operations and possible future Mining Operations on the Mining Claims.
 
8
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. Since then, many countries around the world imposed quarantines and restrictions on travel and mass gatherings to slow the spread of the virus and have closed non-essential businesses.
 
The effects of the COVID-19 restrictions adversely affected our business in 2020 and 2021 as certain customers delayed purchases of our DRAGONITE halloysite clay products. As countries, including the U.S., begin to ease restrictions certain
,
 some of our customers mayhave begun to resume their previously planned purchases of our DRAGONITE halloysite clay products during 2022.products.
 
NOTE 2 – GOING CONCERN AND BASIS OF PRESENTATION
 
The Company has suffered recurring losses from operations and currently a working capital deficit. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
 
Management believes that in order for the Company to meet its obligations arising from normal business operations through May 21,August 22, 2023 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 May 21,August 22, 2023. 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.

 
8
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 threesix months ended March 31,June 30, 2022 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, 2021, included in the Annual Report of Applied Minerals, Inc. on Form 10-K filed with the SEC on April 18, 2022.
 
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 May 21,August 20, 2022, 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, 2021. 
 
 
9
 
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 March 31, 2022,June 30, 202
2
, the extent to which the effects of the COVID-19 pandemic willmay impact our business going forward depends on numerous dynamic factors which we cannot reliably predict. As a result, many of our estimates and assumptions requiredstill require 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 threesix months ended March 31,June 30, 2022 and 2021, revenues from the Company’s largest customer accounted for 36%21% and 56%58% of total revenues, respectively. As of March 31,June 30, 2022 and 2021, amounts owed from these customers comprised 0% and 42%18% 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 March 31,June 30, 2022 and December 31, 2021.
 
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
 
Mining equipment
 
 
2 – 7
 
Office and shop furniture and equipment
 
 
3 – 7
 
Vehicles
 
 
5
 

 
10
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 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 March 31,June 30, 2022 and 2021.
10
 
Revenue Recognition
Revenue includes sales of halloysite clay and iron oxide and is recognized when title passes to the buyer and when collectability is reasonably assured. Title passes to the buyer based on terms of the sales contract. Product pricing is determined based on contractual arrangements with the Company’s customers. The Company’s revenue recognition policies are established in accordance with the Revenue Recognition topics of ASC 606, and accordingly, revenue is recognized when control of the promised goods or services is transferred to our clients, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
 
To determine revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five steps: (1) identify the contracts with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when or as the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods it transfers to the customer. The Company recognizes revenue at a point in time based on management’s evaluation of when performance obligations under the terms of a contract with the customer are satisfied and control of the product has been transferred to the customer. In most situations, transfer of control is considered complete when the products have been shipped to the customer.
 
11
Mining Exploration and Development Costs
Land and mining property are carried at cost. The Company expenses prospecting and mining exploration costs. At the point when a property is determined to have proven and probable reserves, subsequent development costs will be capitalized and will be charged to operations using the units-of-production method over proven and probable reserves. Upon abandonment or sale of a mineral property, all capitalized costs relating to the specific property are written off in the period abandoned or sold and a gain or loss is recognized.
 
Income taxes
The Company uses an asset and liability approach which results in the recognition of deferred tax liabilities and assets for the expected future tax consequences or benefits of temporary differences between the financial reporting basis and the tax basis of assets and liabilities, as well as operating loss and tax credit carry forwards, using enacted tax rates in effect in the years in which the differences are expected to reverse.
 
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of its deferred tax assets will not be realized. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. A full valuation allowance has been provided for the Company’s net deferred tax assets as it is more likely than not that they will not be realized.
 
Authoritative guidance provides that the tax effects from an uncertain tax position taken or expected to be taken in a tax return can be recognized in our financial statements only if the position is more likely than not of being sustained on audit based on the technical merits of the position. As of March 31,June 30, 2022, no benefit from uncertain tax positions was recognized in our financial statements. The Company has elected to classify interest and/or penalties related to income tax matters in income tax expense.
 
 
1211

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.
 
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
$
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
 
The Company follows ASC 480-10, 
Distinguishing Liabilities from Equity
 (“(“ASC 480-10”) in its evaluation of the accounting for a certain 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.
 
13

Recent Issued Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, which simplifies the guidance on the issuer’s accounting for convertible debt instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity an embedded conversion feature in such debt and will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. The elimination of these models will reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that is within the scope of ASU 2020-06. Also, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and treasury stock method will be no longer available. ASU 2020-06 is applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company adopted ASU 2020-06 for its fiscal year ending December 31, 2021.

1412


NOTE 4 – 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
March 31, 2022
 
 
 
 
 
Operating cash flows paid for operating leases
 
$
29,085
 
Non-cash lease expense
 
$
28,111
 
In July 2020, the Company entered into a sublease agreement with respect to its N.Y. office. The sublease agreement
expired
in April 2022. The base rent of the sublease agreement is $7,048.50 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 a piece oflaboratory equipment. BaseThe base rent payment is approximately $1,107 per month.
 
Supplemental cash flow information related to leases:
 
Three months ended
March 31, 2022
 
 
 
Three months
ended June 30,
2022
 
 
 
Six months ended
June 30, 2022
 
 
 
 
 
 
 
 
 
 
Finance cash flows used in finance lease
 
$
(2,754
)
Finance cash flows from finance lease
 
$
(3,161
)
 
$
(5,915
)
Operating cash flows from finance lease
 
$
2,754
 
 
$
3,161
 
 
$
5,915
 

Supplemental balance sheet information related to leases:
 
As of June 30,
2022
 
 
 
 
 
 
Finance lease Right-of-use assets
 
$
36,906
 
 
 
 
 
 
Current portion of finance lease liability
 
$
12,337
 
Long-term finance lease liability
 
 
24,569
 
Total finance lease liability
 
$
36,906
 
 
 
 
 
 
Weighted average remaining operating lease term
 
 
2.75 years
 
 
 
Weighted average discount rate
 
 
6
%
Supplemental balance sheet information related to leases:
 
As of March 31,
2022
 
 
 
 
 
 
Finance lease Right-of-use assets
 
$
39,882
 
 
 
 
 
 
Current portion of finance lease liability
 
$
12,159
 
Long-term finance lease liability
 
 
27,723
 
Total finance lease liability
 
$
39,882
 
 
 
 
 
 
Weighted average remaining operating lease term
 
 
3.08 years
 
 
Weighted average discount rate
 
 
6
%
 
15


The following table summarizes the maturity of lease liability under finance lease as
of March 31,June 30, 2022:
2022 (remaining six months)
 
$
7,049
 
2023
 
 
14,099
 
2024
 
 
14,099
 
2025
 
 
4,700
 
Total lease payments
 
 
39,947
 
Less: imputed interest
 
 
(3,041
)
Total lease liabilities
 
$
36,906
 
 
2022
 
$
10,574
 
2023
 
 
14,099
 
2024
 
 
14,099
 
2025
 
 
4,700
 
Total lease payments
 
 
43,472
 
Less: imputed interest
 
 
(3,590
)
Total lease liabilities
 
$
39,882
 
Less: current portion
  
(12,159
)
Noncurrent lease liabilities
 
$
27,723
 

NOTE 5 – DEPOSIT
 
The following is a summary of deposit:
 
 
 
March 31,
2022
 
 
December 31,
2021
 
Cash Bond (Mine Permit deposit)
 
$
297,191
 
 
$
297,160
 
Office Lease Security Deposit
 
 
39,168
 
 
 
39,168
 
Total
 
$
336,359
 
 
$
336,328
 
 
 
June 30, 2022
 
 
December 31, 2021
 
Cash Bond (Mine Permit deposit)
 
$
297,219
 
 
$
297,160
 
Office Lease Security Deposit
 
 
-
 
 
 
39,168
 
Total
 
$
297,219
 
 
$
336,328
 
 
13
 
NOTE 6 - NOTES PAYABLE
 
Notes payable at March 31,June 30, 2022 and December 31, 2021 consist of the following:
 
 
March 31, 2022
 
December 31, 2021
 
 
June 30, 2022
 
December 31, 2021
 
 
 
 
 
 
 
 
 
 
 
Note payable to insurance companies, payable $1,780 and $12,804 monthly, (a)
 
$
69,865
 
 
$
112,835
 
 
$
26,894
 
 
$
112,835
 
Promissory note (b)
 
$
73,260
 
 
$
-
 
 
$
62,546
 
 
$
-
 
Loan payable (c)
 
$
120,620
 
 
$
 
 
 
$
100,051
 
 
$
 
 
 
$
263,745
 
 
$
112,835
 
 
$
189,491
 
 
$
112,835
 
Less: Current Portion
 
$
(263,745
)
 
$
(112,835
)
 
$
(189,491
)
 
$
(112,835
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes Payable, Long-Term Portion
 
$
-
 
 
$
-
 
 
$
-
 
 
$
-
 

(a)
In October 2021, the Company entered into two notes payable with interest rates of 4.04% and 6.29% with an insurance company for liability insurance, payable in 10 monthly installment payments, which started in November 2021.
(b)
In January
January
2022, the Company entered into a promissory note agreement for $90,000, including an original issue discount of 16.7% resulting in net proceeds of $75,000. The annual interest rate is 10%. Principal and interest is due to the lender in seven equal monthly payments of $14,142.50 commencing on June 24, 2022 until the promissory note is paid in full no later than January 24, 2023. In the event of default, the lender will have the right to convert the outstanding principal and interest into stock at a price equal to ninety (90) percent of the lowest trading price over a ten (10) day trading period immediately prior to the date of conversion. As part of entering into the promissory note agreement, the Company issued 300,000 restricted shares of common stock under the lender.
(c)
In March 2022, the Company entered into a loan payable with a lender for $125,000. Payment of the loan includes one installment of $1,215.19 followed by seventy-nine (79) weekly installments of $2,025.32 totalingtota
l
ling $165,000.
The lender has been provided a security interest in certain inventory and equipment. Excluded is the Company’s Alpine mill and related equipment.equipment
.

During the threesix months ended March 31,June 30, 2022 and 2021, the Company's interest payments totaled $2,312$4,624 and $985, respectively.$5,380, respectively
.

 
 
1614


 
NOTE
7
NOTE 7 – CONVERTIBLE DEBT

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, an amendment agreement, entered into between the Company and the holders of the Series A Notes and Series 2023 Notes, went into effect. The agreement resulted in changes to certain terms of the Series A and Series 2023 Notes. 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
 
Series 2023 Notes
 
Series A Notes
Inception Date
 
08/01/2013
 
11/03/2014
 
08/01/2013
 
11/03/2014
Cash Received
 
$10,500,000
 
$12,500,000
 
$10,500,000
 
$12,500,000
Principal (Initial Liability)
 
$10,500,000
 
$19,848,486
 
$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;
 
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
 
$0.51, as adjusted downward based on anti-dilution provisions/down
-
round protection
 
$0.30, as adjusted downward based on anti-dilution provisions/down-round protection;
 
$0.47, as adjusted downward based on anti-dilution provisions/down-round protection
 
$0.26, as 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;
 
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;
 
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 March 31,June 30, 2022, 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
 
 
Series 2023 Notes
 
Series A
Notes
 
Total
 
PIK Note Payable, Gross
 
$
18,025,635
 
 
$
29,924,299
 
 
$
47,949,934
 
 
$
18,024,680
 
 
$
30,372,096
 
 
$
48,396,776
 
Less: Discount
 
 
-
 
 
 
(577,289
)
 
 
(577,289
)
 
 
-
 
 
 
(472,104
)
 
 
(472,104
)
PIK Note Payable, Net
 
$
18,025,635
 
 
$
29,347,010
 
 
$
47,372,645
 
 
$
18,024,680
 
 
$
29,899,992
 
 
$
47,924,672
 
  
 
1715
 
As of December 31, 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
 
$
17,759,822
 
 
$
29,925,760
 
 
$
47,685,582
 
Less: Discount
 
 
-
 
 
 
(681,102
)
 
 
(681,102
)
PIK Note Payable, Net
 
$
17,759,822
 
 
$
29,244,658
 
 
$
47,004,480
 
 
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 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.
 
Below are key amended terms of the Series A Notes:
 
●
Maturity
: May 1, 2023.
●
Exercise Price
: $0.40 per share and will be adjusted from time to time pursuant anti-dilution provisions.
●
Stated Interest
: 10% payable semi-annually in arrears through December 14, 2017, 3% payable semi-annually in arrears thereafter.
●
Liquidated Damages
: The Company is required to pay the noteholders 1% of the principal amount of the Series A Notes if a Registration statement is not filed and effective within 90 days of the inception date (and further damages for every 30 days thereafter).
●
The number of shares issuable under the Notes may be affected by the anti-dilution provisions of the Notes. The antidilution provisions adjust the Exercise Price of the Notes in the event of stock dividends and splits, issuance below the market price of the common stock, issuances below the conversion price of the Notes, pro rata distribution of assets, rights plans, tender offers, and exchange offers.
 
The entire principal amount of the Series A Notes and accrued interest thereon shall be mandatorily converted into shares of the Company’s common stock if (i) the Volume Weighted Average Price (“VWAP”) of the thirty (30) preceding trading days is at or greater than $1.00 or the VWAP of the ten (10) preceding trading days is at or greater than $1.40; (ii) the closing market price of the shares of the Company’s common stock is at or greater than $1.00; (iii) all outstanding amounts under each Series 2023 Note or replacement financing, if any, shall have been converted into shares of the Company’s common stock pursuant to the terms of such Series 2023 Note or the replacement financing, if any, on or prior to the date on which a notice of mandatory conversion is received; and (iv) either (x) a registration statement is effective and available for the resale of all of the shares into which the Series A Notes convert on the date on which the Series A notes are mandatorily converted and each of the five (5) trading days prior to the date of mandatory conversion and on the date of mandatory conversion the holders of the Series A Notes are not restricted from selling or distributing any shares into which the Series A Notes convert pursuant to the provisions of the Registration Rights Agreement or (y) the holders Series A Notes may sell all such shares into which the Series A Notes convert immediately under Rule 144 under the Securities Act.
 
1816
 
The Series A Notes were not issued with the intent of effectively hedging any future cash flow, fair value of any asset, liability, or any net investment in a foreign operation. In addition to the customary anti-dilution provisions the notes contain a down-round provision whereby the conversion price would be adjusted downward in the event that additional shares of the Company’s common stock or securities exercisable, convertible or exchangeable for the Company’s common stock were issued for cash consideration (e.g. a capital raise) at a price less than the conversion price. Therefore, the estimated fair value of the conversion feature of $9,212,285 (based on observable inputs using a Monte Carlo model) was bifurcated from the Series A Notes and accounted for as a separate derivative liability, which resulted in a corresponding amount of debt discount on the Series A Notes. In addition, an additional debt discount of $7,348,486 was recorded as a result of the difference between the $12,500,000 of cash received and the $19,848,486 of principal on the Series A Notes. This combined debt discount of $16,560,771 is being amortized using the effective interest method over the 9-year term of the Notes as Interest Expense, while the PIK Note Derivative is carried at fair value (using a Monte Carlo model) until the Notes are converted or otherwise extinguished. Any changes in fair value are recognized in earnings.
 
During the six months ended June 30, 2022, the Company issued additional Series A Notes of $449,384 in lieu of cash interest payments. The carrying value of the Series A Notes Payablepayable as of March 31,June 30, 2022 was $29,347,010. $29,899,992.
The amortized debt discount expensed during the three months ended March 31,June 30, 2022 was $103,813.$105,186.
 
As of March 31,June 30, 2022, the Company was in compliance with the covenants of the Series A Notes.
 
As of March 31,June 30, 2022, Geoffrey Scott, a director of the Company owned $4,573,534$4,642,137 of principal of the Series A Notes.
 
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.
 
The Series 2023 Notes convert into the Company’s common stock at a conversion price of $0.59 per share, which is subject to customary anti-dilution adjustments; the holders may convert the Series 2023 Notes at any time. The Series 2023 Notes are mandatorily convertible after one year when the weighted average trading price of a share of the common stock for the preceding ten trading days is in excess of the conversion price. The Series 2023 Notes contain customary representations and warranties and several covenants. The proceeds are being used for general corporate purposes. No broker was used and no commission was paid in connection with the sale of the Series 2023 Notes.
 
These Series 2023 Notes were not issued with the intent of effectively hedging any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. In addition to the customary anti-dilution provisions the notes contain a down-round provision whereby the conversion price would be adjusted downward in the event that additional shares of the Company’s common stock or securities exercisable, convertible or exchangeable for the Company’s common stock were issued for cash consideration (e.g. a capital raise) at a price less than the conversion price. Therefore, the estimated fair value of the conversion feature of $2,055,000 (based on observable inputs using a Monte Carlo model) was bifurcated from the Series 2023 Notes and accounted for as a separate derivative liability, which resulted in a corresponding amount of debt discount on the Series 2023 Notes. The debt discount is being amortized using the effective interest method over the 10-year term of the Series 2023 Notes as Interest Expense, while the PIK Note Derivative is carried at fair value (using a Monte Carlo model) until the Series 2023 Notes are converted or otherwise extinguished. Any changes in fair value are recognized in earnings.
 
During the threesix months ended March 31,June 30, 2022, the Company issued additional PIK Notes of $265,813$266,694 in lieu of cash interest payments. The carrying value of the Series 2023 Notes Payable was $18,025,635$18,024,680 as of March 31,June 30, 2022.
 
19
As of March 31,June 30, 2022, the Company was in compliance with the covenants of the Series 2023 Notes.
 
2017
 
NOTE
8
NOTE 8 – 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 March 31,June 30, 2022 and December 31, 2021, 187,000164,000 and 262,000 shares
of preferred stockSeries B Preferred Stock were issued and outstanding, respectively.
 
2022
During the three months ended March 31,On May 3, 2022, no78,000 shares of preferred stockSeries B Preferred Stock were issued.
issued at a stated price of $1.00 per share for cash proceeds of $75,000, net of $3,000 in 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 a $49,869 beneficial conversion feature to additional paid in capital and amortized at the time of issuance.
 
2021
During the three months ended March 31,
On February 17, 2021,
, 95,000 shares of Series B Preferred Stock were issued at a stated price of $1.084 per share for cash proceeds of $100,000, 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 a $60,738 beneficial conversion feature to additional paid in capital and amortized at the time of issuance.
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 in 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 a $51,874 beneficial conversion feature to additional paid in capital and amortized at the time of issuance.
Each share of Series B Preferred Shares will carry an annual dividend in the amount of twelve percent (12%) of the Stated Value (the “
Dividend
“Divided Rate”), which shall be cumulative and compounded daily, payable solely upon redemption, liquidation or conversion. The Company has 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.
 
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. On March 31, 2021, the Company recorded Deemed dividend on Convertible Series B Preferred Stock of $14,172.
2118
 
Common Stock
The Company is authorized to issue 700,000,000 shares of common stock with a $0.001 par value per share.
 
At March 31,June 30, 2022 and December 31, 2021, 252,563,747285,787,382 and 217,655,150 shares were issued and outstanding, respectively.
 
2022
During the threesix months ended March 31,June 30, 2022, (i) 20,164,153 shares of common stock were issued upon the conversion of
75,000
shares of Series B Preferred Stock issued in August 2021, (ii) 10,000,000 shares of common stock were issued as in conjunction with entering into a consulting agreement with an investor relations firm, (iii) 4,444,444 shares were issued to settle certain liabilities, and (iv) 300,000 shares of common stock were issued as debt issuance cost.cost, (v) 9,275,000 shares of common stock were issued upon the conversion of 35,000 shares of Series B Preferred Stock issued in August 2021, and (vi) 23,948,635 shares of common stock issued upon the conversion of 66,000 shares of Series B Preferred Stock issued in September 2021.
 
2021
During the threesix months ended March 31,June 30, 2021,
 (i) 6,167,273 shares of common stock were issued upon the conversion of 128,000 shares of Series B Preferred Stock issued in August 2020, (ii) 3,836,475 shares of common stock were issued upon the cashless exercisedexercise of options to purchase 9,528,689 options,shares of common stock, and (iii) 1,162,791 shares of common stock were issued to an employee in lieu of a bonus payment of $58,140.
 
NOTE
9
– OPTIONS AND WARRANTS TO PURCHASE COMMON STOCK
 
Outstanding Stock Warrants
 
A summary of the status and changes of the warrants issued for the threesix months ended March 31,June 30, 2022:
 
 
Shares Issuable
 
 
 
 
upon Exercise of
 
Weighted Average
 


 
 
 
Shares Issuable
upon Exercise of
Outstanding Warrants
 

Weighted Average
Exercise Price
 
 
Outstanding Warrants
 
Exercise Price
 
 
 
 
 
 
 
 
 
 
 
Outstanding at
December 31, 2021
 
 
11,000,000
 
 
$
0.10
 
 
 
11,000,000
 
 
$
0.10
 
Issued
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
Exercised
 
 
-
 
 
 
 
 
 
 
-
 
 
 
-
 
Forfeited
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
Outstanding at March 31, 2022
 
 
11,000,000
 
 
$
0.10
 
Outstanding at June 30, 2022
 
 
11,000,000
 
 
$
0.10
 
 
At March 31,June 30, 2022, the intrinsic value of the outstanding warrants was $0.
 
A summary of the status of the warrants outstanding and exercisable at March 31,June 30, 2022 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
 
 
$
 
 
0.10
 
 
11,000,000
 
 
 
0.71
 
 
$
0.10
 
 
 
 
 
 
 
 
11,000,000
 
 
 
0.71
 
 
$
0.10
 
 
 
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
 
 
 
0.42
 
 
$
0.10
 
 
 
 
 
 
 
 
 
11,000,000
 
 
 
0.42
 
 
$
0.10
 
 
 
2219
 
Common
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.
 
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.
 
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. During 2021The Company did 0t grant any stock option awards during the Company
issued
options to
purchase
9,450,000 shares of its common stock with an exercise price of $0.03 and a term of five years to certain executives and directors.six months ended June 30, 2022.
 
A summary of the status and changes of the options granted under stock option plans and other agreements during the threesix months ended March 31,June 30, 2022:
 
 
Shares Issued
Upon Exercise of
Options
 
Weighted Average
Exercise Price
 
 
Shares Issued
Upon Exercise of
Options
 
Weighted Average
Exercise Price
 
 
 
 
 
 
 
 
 
 
 
Outstanding at December 31, 2021
 
 
52,790,845
 
 
$
0.25
 
 
 
52,790,845
 
 
$
0.25
 
Granted
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
Exercised
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
Forfeited
 
 
(2,904,653
)
 
 
0.83
 
 
 
(3,854,653
)
 
 
0.79
 
Outstanding at March 31, 2022
 
 
49,886,192
 
 
$
0.21
 
Outstanding at June 30, 2022
 
 
48,936,192
 
 
$
0.21
 
 
 
2320
 
A summary of the status of the options outstanding at March 31,June 30, 2022 is presented below:
 
 
Options Outstanding
 
Options Exercisable
 
 
Options Outstanding
 
Options Exercisable
 
Range of per
share exercise
price
 
Shares
 
Weighted
average
remaining
contractual
life (years)
 
Per share
weighted
average
exercise
price
 
Shares
 
Weighted
average
remaining
contractual
life (years)
 
Per share
weighted
average
exercise price
 
 
Shares
 
Weighted
average
remaining
contractual
life (years)
 
Per share
weighted
average
exercise
price
 
Shares
 
Weighted
average
remaining
contractual
life (years)
 
Per share
weighted
average
exercise price
 
$0.03 - $0.08
 
 
38,409,881
 
 
 
5.16
 
 
$
0.05
 
 
 
36,834,881
 
 
 
5.20
 
 
$
0.05
 
$
0.03
- $0.08
 
38,409,881
 
 
 
4.91
 
 
$
0.05
 
 
 
38,016,131
 
 
 
4.92
 
 
$
0.05
 
$0.10 - $0.84
 
 
7,434,251
 
 
 
1.67
 
 
 
0.33
 
 
 
7,434,251
 
 
 
1.67
 
 
 
0.33
 
 
6,784,251
 
 
 
1.57
 
 
 
0.34
 
 
 
6,784,251
 
 
 
1.57
 
 
 
0.34
 
$1.10 - $1.66
 
 
4,042,060
 
 
 
0.71
 
 
 
1.57
 
 
 
4,042,060
 
 
 
0.71
 
 
 
1.57
 
 
 
3,742,060
 
 
 
0.51
 
 
 
1.57
 
 
 
3,742,060
 
 
 
0.51
 
 
 
1.57
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
49,886,192
 
 
 
4.28
 
 
$
0.21
 
 
 
48,311,192
 
 
 
4.28
 
 
$
0.23
 
 
 
48,936,192
 
 
 
4.11
 
 
$
0.20
 
 
 
48,542,442
 
 
 
4.11
 
 
$
0.20
 
 
Compensation expense of $21,211,$42,422 and $3,943, has been$7,886 was recognized for the vestedvesting of options forduring the threesix months ended March 31,June 30, 2022 and 2021, respectively. The aggregate intrinsic value of the outstanding options at June 30, 2022 was $0. At June 30, 2022, $5,421 of unamortized compensation expense for time-based unvested options will be recognized over the next 0.06 years on a weighted average basis.
 
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 was scheduled to occur 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 March 31, 2022. 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. In July, 2021, the board accelerated the vesting of 1,195,138 options granted to Christopher Carney in August, 2017 and accelerated the vesting of 333,333 options granted in March 2019 to Sharad Mathur,
former
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 grant vested in July 2021 and the remainder vests in equal monthly amounts through June 2022. In July 2021 the board approved a grant to 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 fair value of the options granted in July on the grant date using the Black Scholes model was $169,690. As of March 31,June 30, 2022, the Company had $26,632$5,421 of unamortized compensation expense.
 
 
2421
 
NOTE 1
0
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 March 31,June 30, 2022, the weighted average shares outstanding excluded options to purchase 49,866,19248,936,192 shares of common stock of the Company, warrants to purchase 11,000,000 shares of common stock of the Company and 136,515,636156,407,336 shares of common stock of the Company issuable upon the conversion of notesSeries A Notes and Series 2023 Notes because their effect would be anti-dilutive.
 
At December 31, 2021, the weighted average shares outstanding excluded options to purchase 52,790,845 shares of common stock of the Company, warrants to purchase 11,000,000 shares of common stock of the Company and 124,437,208 shares of common stock of the Company issuable upon the conversion of notes payableSeries A Notes and Series 2023 Notes because their effect would be anti-dilutive.
 
NOTE 1
1
12 – SUBSEQUENT EVENT
S
EVENTS

On June 14, 2022, a former contractor of the Company filed a mining services lien on the Dragon Mine property for an amount of $177,777.78 for labor, services and equipment furnished under a Mining Services Agreement entered into between the Company and the contractor on August 1, 2021. On March 31, 2022, prior to the filing of the lien, the Company had entered into a Settlement Letter with the former contractor for an amount equal to $200,000. Under the terms of the Settlement Letter, the Company agreed to (i) make ten consecutive monthly cash payments of $10,000 to the former contractor beginning in April 2022 and (ii) issued 4,444,444 restricted shares of common stock to the former contractor. If the weighted average trading price of the shares of the Company’s common stock over the five trading days immediately preceding October 1, 2022 (“WATP”) was less than $0.0225 per share, the Company agreed, at its option, to (a) issue to the former contractor a number of shares of common stock equal to ((4,444,444 x (0.0225 – WATP)) / (0.9 x WATP)) or (b) make a cash payment to the former contractor equal to ((4,444,444 x (0.0225 – WATP)). As of June 14, 2022, the Company had made $61,379 in cash payments to the former contractor. On July 27, 2022, the Company entered into a Lien Settlement Agreement with the former contractor. Under the terms of the Lien Settlement Agreement, in exchange for a cash payment of $49,731.90 and the issuance of an additional 17,777,777 shares of common stock, the former contractor agreed to file a release of the mining services lien on the Dragon Mine property. Payment of the Lien Settlement Amount by the Company will also deem the Settlement Letter null and void.
On May 2,August 15, 2022,
the Company received a Notice of Release of Lean from Provo Mining indicating Provo Mining has received the payment stipulated on the Lien Settlement Agreement and the lien placed on the Company's listed assets have been released.
Between July 6, 2022 and July 27, 2022, the Company issued 9,275,00043,409,524 shares of common stock upon the conversion of shares of Series B Preferred Stock.

On May 2, 2022, the Company issued 78,00086,000 shares of Series B Preferred Stock for cash proceeds totaling $75,000, net for $3,000sold by the Company in legal fees. The detailsDecember 2021. 
On August 9, 2022 the Company closed on the sale of the Series B Preferred Stock are included inrights to its iron oxide resource, 20 million shares of common stock, its Alpine Mill building, and related milling equipment. In exchange for
$300,000, less a Form 8-K filed on May 6, 2022.previously paid down payment of $120,000 and $20,000 of reimbursable legal expenses, the Company sold to BMI Minerals Company the rights to its iron oxide resource and 20 million restricted shares of common stock of the Company.
I
n exchange for $1,700,000, the Company sold to Brady McCasland, Inc. its Alpine Mill building and related iron milling
equipment. In conjunction with the sale of the Alpine Mill building the Company entered into (i) a ground lease with a term of 100 years, (ii) a Mining Operations Agreement and a (iii) Milling Operations Agreement.

On August 9, 2022, which coincided with the closing of the sale of (i) the rights to the Company’s iron oxide resource and (ii) its Alpine Mill building, the directors forfeited $1,630,811 of accrued but unpaid and two directors forfeited approximately $226,000 of accrued but unpaid compensation.

On August 6, 2022, the Company obtained waivers related to the negative covenants attached to its Series 2023 and Series A PIK Notes which restrict certain activities, in this case its Iron Sale, Mill Sale, Mining Operation, and Milling Operation agreements with BMI and BMC. MB obtained the waivers and noted the majority holders approved to waive the breach of the covenant in exchange for payments of: $244,500 to Samlyn Offshore Master Fund, Ltd., $130,500 to Samlyn Onshore Partners, LP, $250,000 to M. Kingdon Offshore Master Fund, LP, and $125,000 to Berylson Master Fund

2522
 
ITEM 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 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.
 
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 OTC market under the symbol AMNL.
 
 
2623
 
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, 2021. There have been no material changes in our critical accounting policies and estimates during the three monthssix-month period ended March 31,June 30, 2022 compared to the disclosures on Form 10-K for the year ended December 31, 2021.
27
 
Three Months Ended March 31,June 30, 2022 Compared to Three Months Ended March 31,June 30, 2021
 
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 March 31,
 
Variance
 
 
Three Months Ended June 30,
 
Variance
 
 
2022
 
2021
 
$
 
%
 
 
2022
 
2021
 
$
 
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
REVENUES
 
$
78,045
 
 
$
273,672
 
 
$
(195,627
)
 
 
(71
)%
 
$
106,105
 
 
$
465,493
 
 
$
(359,388
)
 
 
(77
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
             
 
OPERATING EXPENSES:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
             
 
Production costs
 
 
133,336
 
 
 
462,166
 
 
 
(328,830
)
 
 
(71
)%
 
 
177,959
 
 
 
418,959
 
 
 
(241,000
)
 
 
(58
)%
Exploration costs
 
 
243,470
 
 
 
51,590
 
 
 
191,880
 
 
 
372
%
 
 
6,543
 
 
 
76,259
 
 
 
(69,716
)
 
 
(91
)%
General and administrative
 
 
405,378
 
 
 
389,523
 
 
 
15,855
 
 
 
4
%
 
 
335,728
 
 
 
411,949
 
 
 
(76,221
)
 
 
(19
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
             
 
Total Operating Expenses
 
 
782,184
 
 
 
903,279
 
 
 
(121,095
)
 
 
(13
)%
 
 
520,230
 
 
 
907,167
 
 
 
(386,937
)
 
 
(43
)%
Operating Loss
 
 
(704,139
)
 
 
(629,607
)
 
 
74,532
 
 
 
12
%
 
 
(414,125
)
 
 
(441,674
)
 
 
(27,549
)
 
 
(6
)%
 
 
 
 
 
 
 
 
 
 
 
 
OTHER INCOME (EXPENSE):
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net, including amortization of deferred financing cost and debt discount
 
 
(471,898
)
 
 
(463,897
)
 
 
8,001
 
 
 
2
%
OTHER (EXPENSE) INCOME:
 
 
             
 
Interest expense, net (including amortization of deferred financing cost and debt discount)
 
 
(480,717
)
 
 
(463,402
)
 
 
17,315
 
 
 
4
%
Other income, net
 
 
60,372
 
 
 
247,546
 
 
 
(187,174
)
 
 
(76
)%
 
 
121,046
 
 
 
69,883
 
 
 
51,163
 
 
 
73
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
             
 
Total Other Expense, net
 
 
(411,526
)
 
 
(216,351
)
 
 
195,175
 
 
 
90
%
Total Other (Expense)
 
 
(359,671
)
 
 
(393,519
)
 
 
(33,848
)
 
 
(9
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
             
 
NET (LOSS)
 
 
(1,115,665
)
 
 
(845,958
)
 
 
269,707
 
 
 
32
%
NET LOSS
 
$
(773,796
)
 
$
(835,193
)
 
$
(61,397
)
 
 
(7
)%
 
Revenue for the three months ended March 31,June 30, 2022 totaled $78,045,$106,105, a decrease of $195,627$359,388 or 71%77%, compared to the same period in 2021. The decrease was driven primarily by a $153,562$277,297 net decline in sales of AMIRON iron oxide and a net decline of $127,700 in sales of DRAGONITE halloysite clay sales.
Sales of AMIRON iron oxide during the period totaled $17,230, a decrease of 94% when compared to the same period in 2021. The decline was in large part due the expiration in December 2021 of a supply agreement with a producer of cement. Sales of DRAGONITE during the period totaled $88,920, a decline of $53%. The decline was driven primarily by the absence of purchases for field trials by certain customers that occurred during the same period in 2021. A number of those field trials are still in process.
Operating expenses for the three months ended June 30, 2022 totaled $520,230, a reduction of $386,937, or 43%, compared to the same period in 2021. The reduction was driven by a $241,000, or 58%, decrease in production costs, a 69,716, or 91%, decrease in exploration costs and a 76,221, or 19%, decrease in general and administrative expense.
24
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.  
Production costs incurred during the three months ended June 30, 2022 were $177,959, a decrease of $241,000, or 58%, compared to the same period in 2021. The decrease was driven primarily by a reduction in contract labor, wage and mining materials related expenses associated with the expiration in December 2021 of a contract to supply iron to a producer of cement. Production expense for the three months ended June 30, 2022 include a charge totaling $39,556, related to an adjustment of the stock component of a settlement entered into with a contract miner in March 2022.
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 June 30, 2022 were $6,543, a decrease of $69,716, or 91%, compared to the same period in 2021. The decrease was due primarily to a reduction of $27,683 in wages and workers’ compensation expense, related to the elimination of non-mining related workers and the reclassification of certain workers’ compensation costs, a decline of $14,957 in ground support expense, related to certain mine exploration activities, and the absence of $7,000 in consulting fees associated with works related to the Company’s lithium-ion battery project.
General and administrative expenses incurred during the three months ended June 30, 2022 totaled $335,728, a $76,221, or 19%, decline when compared to the same period in 2021. The decline was driven primarily by a $72,945 decline in corporate wage and wage-related benefits expense. General and administrative expense incurred during the three months ended June 30, 2022 included (i) compensation expense for an employee who resigned in April 2022 and (ii) $127,500 of directors’ fees, which the Company expects to be reduced significantly in subsequent quarters upon the expected resignations of three directors.  
Operating loss incurred during the three months ended June 30, 2022 was $414,125, a $27,549, or 6%, decrease when compared to the same period in 2021. The decline was driven primarily by a $404,946, or 45%, decline in operating expenses, partially offset by a decline of $359,388, or 77%, in revenue when compared to the same period in 2021.
Total other expense was $359,671 for the three months ended June 30, 2022 compared to $393,513 in same period in 2021. The $33,848 decline was due primarily to a $51,017 increase in other income, related to the sale of obsolete equipment and the reimburse of expenses associated with the DOE STTR grants awarded to the Company in June 2021, partially offset by a $17,315 increase in PIK Note interest expense..
Net loss for the three-month period ending June 30, 2022 was $773,796, a decline of $61,397, or 7%, when compared to the same period in 2021. The decrease was primarily driven by a $27,549 decline in operating loss and a $33,848 decrease in total other expense.
25
Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021
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:
 
 
Six Months Ended June 30,
 
 
Variance
 
 
 
2022
 
 
2021
 
 
$
 
 
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
REVENUES
 
$
184,150
 
 
$
739,165
 
 
$
(555,015
)
 
 
(75
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
OPERATING EXPENSES:
 
 
 
 
 
 
 
 
 
 
 
 
Production costs
 
 
311,295
 
 
 
881,125
 
 
 
(569,830
)
 
 
(65
)%
Exploration costs
 
 
250,013
 
 
 
127,849
 
 
 
122,164
 
 
 
96
%
General and administrative
 
 
741,106
 
 
 
801,472
 
 
 
(60,366
)
 
 
(8
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Operating Expenses
 
 
1,302,414
 
 
 
1,810,446
 
 
 
(508,032
)
 
 
(28
)%
Operating Loss
 
 
(1,118,264
)
 
 
(1,071,281
)
 
 
46,983
 
 
 
4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
OTHER INCOME (EXPENSE):
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net (including amortization of deferred financing cost and debt discount)
 
 
(952,615
)
 
 
(927,299
)
 
 
25,316
 
 
 
3
%
Other income, net
 
 
181,418
 
 
 
317,429
 
 
 
(136,011
)
 
 
(43
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Other Income (Expense)
 
 
(771,197
)
 
 
(609,870
)
 
 
161,327
 
 
 
26
%
 
 
 
 
 
 
 
 
 
 
 
 
 
NET LOSS
 
$
(1,889,461
)
 
$
(1,681,151
)
 
$
208,310
 
 
 
12
%
Revenue for the six months ended June 30, 2022 totaled $184,150, decrease of $555,015, or 75%, compared to the same period in 2021. The decrease was due to a $413,629 decrease in the sale of AMIRON iron oxide due to the expiration in December 2021 of a supply agreement with a cement producer and a $42,065$141,386 decrease in the sale of DRAGONITE halloysite clay.
 
Sales of AMIRON during the period totaled $900,$17,230, a decrease of 99%96% when compared to the same period in 2021. The decrease was due in large part to the endexpiration in December 2021 of a supply agreement with a cement producer in December 2021.producer. Sales of DRAGONITE halloysite clay during the period totaled $77,145,$166,921, as decrease of 46% compared to the same period in 2021.The decrease in sales of DRAGONITE was driven primarily by (i) the absence of purchases of DRAGONITE for field trials by certain customers that occurred during the same period in 2021 and (ii) the impact of COVID on certain customers’ decisions to delay the commercialization of new products developed on DRAGONITE. A number of the field trials referenced above are still in process. The Company believes the stalled commercialization of certain customer products using DRAGONITE may resume during the latter half of 2022.
Operating expenses for the six months ended June 30, 2022 totaled $1,302,414, a decrease of 36% when$508,032, or 28%, compared to the same period in 2021. The decrease in sales of DRAGONITE halloysite claydecline was driven primarily but the decision of certain customers to delay repeat purchases of DRAGONITE until later in 2022. Despite theby a $569,830, or 64%, decline in sales of DRAGONITE during the period, the Company expects total sales of DRAGONITE for the full year of 2022 to exceed thoseproduction costs partially, a $60,367, or 8%, decline in 2021.general and administrative expense, partially offset by a $122,264, or 96%, increase in exploration costs.
26
 
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.
 
28
Production costs incurred during the threesix months ended March 31,June 30, 2022 were $133,336,$311,295, a decrease of $328,830,$569,830, or 71%65%, compared to the same period in 2021. TheApproximately $450,000 of the decrease was driven primarily by the elimination of costsa reduction in contract labor, wage and mining materials related expenses associated with miningthe expiration in December 2021 of a contract to supply iron to a producer of cement. The remaining reduction of $115,000 was due to the reduction in clay tolling expense. Production expense for the supply agreement, which terminated in December 2021. Wages and benefits expense was approximately 50% of production costs during the period and are,six months ended June 30, 2022 include a charge totaling $39,556, related to an extent, fixed up toadjustment of the stock component of a certain level of production volume. The Company does not expect its wages and benefits expense to increase materially if DRAGONITE volumes increase duringsettlement entered into with a contract miner in March 2022.
 
Exploration costs include operating expenses incurred at the Dragon Mine that are not directly related to production activities. Exploration costs incurred during the threesix months ended March 31,June 30, 2022 were $243,470,totaled $250,013, a $191,880$122,164, or 372%96%, increase compared to the same period in 2021. The increase was due primarily driven by one-time accrual of $200,000to a $$200,000 expense related to thea settlement of a dispute with a provider of contract mining services the Companyminer used to mine iron during 2021. Excludingfor a supply agreement that expired in December 2021, partially offset by a $43,239 reduction in wage and workers’ compensation expense, a reclassification of $17,673 of health insurance expense and the settlement, exploration costs would have totaled $43,470absence of $14,956 of ground support expense incurred during the period, a decline of $8,120 compared tosix months ended June 30, 2021.
  
General and administrative expenses incurred during the threesix months ended March 31,June 30, 2022 totaled $405,378,$741,106, a $15,855,decline of $60,366, or 4%8%, increase when compared to the same period in 2021. During the period the Company recognized $92,211 of equity-based compensation expenses related to the vesting of equity options issued to directors and management, an increase of $29,129 compared to 2021. During the period the Company also incurred $37,525 of legal and consulting expenses it does not expect to incur in the future. Furthermore, the wages expense incurred during the period was $75,000. The Company expects wages expense to be reduced to $37,500 with the departure of an executive in April 2022.
Total operating expenses was $782,184, a decrease $121,195 or 13% when compared to the same period in 2021. The declinedecrease was driven primarily by a $328,830 decline$104,861 decrease in productionwage and wage-related benefit expense and a $23,68 decrease in shareholder-related expenses, partially offset by a $191,880an increase in exploration costs.professional services expenses of $63,823.  General and administrative expense incurred during the six months ended June 30, 2022 included (i) compensation expense for an employee who resigned in April 2022, (ii) $192,500 of directors’ fees, which the Company expects to be reduced significantly in subsequent quarters upon the expected resignations of three directors and (iii) $112,400 of equity-related compensation expense.
 
Operating loss incurred during the threesix months ended March 31,June 30, 2022 was $704,139,$1,118,264, a $74,532,$46,983, or 12%4%, increase when compared to the same period in 2021. The increase was driven primarily by a $195,627 decline$555,015 decrease in revenue and a $191,880$122,264 increase in exploration costs,expense, partially offset by a $328,830$569,830 decrease in production expensecosts when compared to the same period in 2021.
 
Total other expense was $411,526 for the threesix months ended March 31,June 30, 2022 was $771,197, an increase of $161,327, or 26%, when compared to total other expense of $216,351 inthe same period in 2021. The $195,175$161,327 increase in total other expense was due primarily to the elimination of the gain associated with the forgiveness of a PPP Loan$136,011 decline in other income when compared to the same period in 2021.
 
Net Lossloss for the three-monthsix-month period ending March 31,June 30, 2022 was $1,115,665,$1,889,461, an increase of $269,707,$208,310, or 32%12%, when compared to the same period in 2021. The decreaseincrease was primarily driven by a $74,532 increase in operating loss and a $195,175$161,327 increase in total other expense.expense and a $46,983 increase in operating loss.
 
 
2927
LIQUIDITY AND CAPITAL RESOURCES
 
The Company has suffered recurring losses from operations and currently a working capital deficit. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
 
Management believes that in order for the Company to meet its obligations arising from normal business operations through May 21,August 20, 2023 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 May 21,August 22, 2023. 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.
 
Cash used in operating activities during the threesix months ended March 31,June 30, 2022 was $170,778$205,800 compared to $440,254$848,263 used during the same period in 2021. The difference was drivendue primarily by a $314,573
an increase of $524,254 in accounts payablecash generated from the change in operating assets and accrued liabilities.
 
Cash provided by financing activities during the threesix months ended March 31,June 30, 2022 was $146,621$151,253 compared to $314,566$347,632 provided during the same period in 2021. The reduction$196,379 decrease in cash provided during the period was drivendue primarily to $264,472 of proceeds received from a Paycheck Protection Program loan and an increase of $110,000 in proceeds from private placements during 2021, partially offset by the absence of PPP Loan$200,000 in proceeds received from loans payable during 2022.
 
30
Total assets at March 31,June 30, 2022 were $1,061,063$945,890 compared to $1,177,821 at December 31, 2021, a decrease of $116,758$231,931 due primarily to decreasesdecrease in the Company’sCompany cash, accounts receivable, prepaid expenses, and operating lease right-of-use assets.assets and deposits. Total liabilities at June 30, 2022 were $52,430,881$52,993,293 compared to $51,578,703 at December 31, 2021. The increase of $852,178$1,414,590 in total liabilities was due primarily to $920,192 increase in the PIK Note balance and a $447,161 increase in accounts payable and accrued liabilities. As of June 30, 2022, accrued liabilities and the assumptionincluded $1,630,811 of $200,000 of loans payable during the period.directors’ fees.
 
ISSUANCE OF CONVERTIBLE DEBT
 
For information with respect to issuance of convertible debt, see Note 7
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.
ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
We have no exposure to fluctuations in interest rates, foreign currencies, or other factors.
 
 
3128
 
ITEM 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 threesix months ended March 31,June 30, 2022, 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.
 
32
 
PART II.     OTHER INFORMATION
 
ITEM 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.
 
ITEM 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 2021 Annual Report on Form 10-K.
 
ITEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
None
 
ITEM 3.     DEFAULTS UPON SENIOR SECURITIES
 
None
 
ITEM 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.
 
ITEM 5.     OTHER INFORMATION
 
None.
 
ITEM 6.     EXHIBITS
29
 
(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.
 
 
3330
 
SIGNATURES
 
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: May 25
,August 22, 2022
 
/s/ CHRISTOHERCHRISTOPHER T. CARNEY
 
 
By: Christopher T. Carney
 
 
Chief Executive Officer
 
 
 
Dated: May 25
,August 22, 2022
 
/s/ CHRISTOPHER T. CARNEY
 
 
By: Christopher T. Carney
 
 
Chief Financial Officer
 
 
3431