UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

þQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended SeptemberJune 30, 20172019

OR

☐TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission file number 000-14319

STANDARD METALS PROCESSING, INC.

(Exact Name of Small Business Issuer as Specified in its Charter)

611 Walnut Street, Gadsden, Alabama 35901 

(Address of Principal Executive Offices)

(888) 960-7347

(Issuer’s Telephone Number, Including Area Code)

N/A 

(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the Registrant: (1) 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 issuer was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☐  No☑þ

Indicate by check mark whether the Registrantregistrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section (§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)fi les).). Yes ☐  No☑þ

No Indicate by check mark whether the Registrantregistrant 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”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

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 Section 7(a)(2)(B) of the Securities Act: ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No☑þ

As of March 20, 2018,17, 2020, there were 127,195,559133,997,423 shares of the Registrant’s common stock, par value $.001 issued, and 128,997,423 outstanding.

STANDARD METALS PROCESSING, INC. 

FORM 10-Q

FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20172019

TABLE OF CONTENTS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Q contains certain statements which are forward-looking in nature and are based on the current beliefs of our management as well as assumptions made by and information currently available to management, including statements related to the uncertainty of the quantity or quality of minerals in our tailings, the fluctuations in the market price of such reserves, general trends in our operations or financial results, plans, expectations, estimates and beliefs. In addition, when used in this Form 10-Q, the words “may,” “could,” “should,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “predict” and similar expressions and their variants, as they relate to us or our management, may identify forward-looking statements. These statements reflect our judgment as of the date of this Form 10-Q with respect to future events, the outcome of which is subject to risks. We have attempted to identify, in context, certain of the factors that we believe may cause actual future experience and results to differ materially from our current expectations, which may have a significant impact on our business, operating results, financial condition or your investment in our common stock, as described in Part II, Item 1A entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016,2018, as filed with the Securities and Exchange Commission (“SEC”) on April 14, 2017.March 5, 2020.

Readers are cautioned that these forward-looking statements are inherently uncertain. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described herein.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, your attention is directed to any further disclosures made on related subjects in our subsequent periodic reports filed with the SEC on Forms 10-K, 10-Q and 8-K.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

STANDARD METALS PROCESSING, INC. 

CONDENSED Consolidated Balance Sheets

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, assuming we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. For the ninesix months ended SeptemberJune 30, 2017,2019, the Company incurred losses from operationshad a net loss of approximately $205,000.$330,564. At SeptemberJune 30, 2017,2019, the Company had an accumulated deficit of approximately $103,034,000$103,515,526 and a working capital deficit of approximately $9,609,000. Our$9,749,438. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on ourtheir ability to raise the required additional capital or debt financing to meet short and long-term operating requirements. During the ninesix months ended SeptemberJune 30, 2017,2019, a related party advanced $62,724 in direct payments on the Company received net cash proceeds of $140,000 from theCompany’s behalf to reduce certain accounts payable by $24,724, and convertible promissory notes payable. Subsequentpayable by $38,000. As the related party has indicated it wishes to Septemberapply its advance to convertible notes, at June 30, 2017, the Company received approximately an additional $83,000. 2019.

Management believes that private placements of equity capital and/or additional debt financing will be needed to fund our long-term operating requirements. The Company may also encounter business endeavors that require significant cash commitments or unanticipated problems or expenses that could result in a requirement for additional cash. If the Company raises additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our current shareholders could be reduced, and such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, the Company may not be able to take advantage of prospective business endeavors or opportunities, which could significantly and materially restrict our operations. We are continuing to pursue external financing alternatives to improve our working capital position. If the Company is unable to obtain the necessary capital, the Company may have to cease operations.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of Standard Metals Processing, Inc., its’and its wholly owned subsidiary Tonopah Milling and Metals Group, Inc. (“TMMG”), and TMMG’sits wholly owned subsidiaries Tonopah Custom Processing, Inc., (“TCP”) and Tonopah Resources, Inc. (“TR”). All significant intercompany transactions, accounts and balances have been eliminated in consolidation.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by US GAAP for complete financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Form 10-K for the year ended December 31, 20162018 filed April 14, 2017.March 5, 2020. In the opinion of management, all adjustments (consisting of normal recurring adjustments unless otherwise indicated) considered necessary for a fair presentation have been included. Operating results for the three and ninesix months ended SeptemberJune 30, 20172019 are not necessarily indicative of the results that may be expected for the year as a whole.

Shea Mining and Milling Assets

The Company recorded the estimated fair value of the Shea Mining and Milling assets as an aggregate amount on the condensed balance sheets. The assets include the mine tailings and dumps, the land, water rights and the milling facility (the buildings and equipment). None of the assets have been put into production, nor has the Company performed any repair or updates to any of the equipment or buildings. As such, the Company will continue to classify them under a single listing.

Mineral Properties

Mineral property acquisition costs are recorded at cost and are deferred until the viability of the property is determined. No properties have produced operating revenues at this time. Exploration, mineral property evaluation, option payments, related acquisition costs for mineral properties acquired under an option agreement, general overhead, administrative and holding costs to maintain a property on a care and maintenance basis are expensed in the period they are incurred. When reserves are determined for a property and a bankable feasibility study is completed, subsequent exploration and development costs on the property would be capitalized. If a project were to be put into production, capitalized costs would be depleted on the unit of production basis.

Management reviews the net carrying value of each mineral property as changes may materialize with a property or at a minimum, on an annual basis. Where information and conditions suggest impairment, estimated future net cash flows from each property are calculated using estimated future prices, proven and probable reserves and value beyond proven and probable reserves, and operating, capital and reclamation costs on an undiscounted basis. If it is determined that the future cash flows are less than the carrying value, a write-down to the estimated fair value is made with a charge to loss for the period. Where estimates of future net cash flows are not available and where other conditions suggest impairment, management assesses if the carrying value can be recovered.

Management’s estimates of gold prices, recoverable reserves, probable outcomes, operating capital and reclamation costs are subject to risks and uncertainties that may affect the recoverability of mineral property costs.

The Company does not own any mining claims. It owns tailings located on the Tonopah property and some tailings located in Manhattan, Nevada. The Company has not disturbed or processed any of this material and does not intend to do so in the foreseeable future.

Impairment of Long-Lived Assets and Long-Lived Assets

The Company will periodically evaluate the carrying value of long-lived assets to be held and used, including but not limited to, mineral properties, mine tailings, mine dumps, capital assets and intangible assets, when events and circumstances warrant such a review and at least annually. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair values are reduced for the cost to dispose.

Use of Estimates

The preparation ofPreparing financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition and Deferred Revenue

As of June 30, 2019, the Company has not recognized any revenues from custom permitted processing toll milling.

Income Taxes

Income taxes are accounted for based upon an asset and liability approach. Accordingly, deferred tax assets and liabilities arise from the difference between the tax basis of an asset or liability and its reported amount in the financial statements. Deferred tax amounts are determined using the tax rates expected to be in effect when the taxes will actually be paid or refunds received, as provided under currently enacted tax law. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense or benefit is the tax payable or refundable, respectively, for the period plus or minus the change in deferred tax assets and liabilities during the period.

Accounting guidance requires the recognition of a financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company believes its income tax filing positions and deductions will be sustained upon examination and accordingly, no reserves, or related accruals for interest and penalties have been recorded at June 30, 2019  and December 31, 2018. The Company recognizes interest and penalties on unrecognized tax benefits as well as interest received from favorable tax settlements within income tax expense.

On December 22, 2017, the President of the United States signed and enacted into law H.R. 1 (the “Tax Reform Law”). The Tax Reform Law, effective for tax years beginning on or after January 1, 2018, except for certain provisions, resulted in significant changes to existing United States tax law, including various provisions that are expected to impact the Company. The Tax Reform Law reduces the federal corporate tax rate from 34% to 21% effective January 1, 2018. Management believes the provisions of the Tax Reform Law will have a favorable impact on the Company’s consolidated financial statements should it attain a level of profitable operations.

Recent Accounting PronouncementsStandards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for annual reporting periods for public business entities beginning after December 15, 2017, including interim periods within that reporting period. The new standard permits the use of either the retrospective or cumulative effect transition method. The Company is currently evaluating the effect thatadopted ASU 2014-09 will have on its financial statementsJanuary 1, 2018, and related disclosures. The Company has not yet selected a transition method nor determined the effect of the standard on its ongoing financial reporting, however as there have been no revenues to date, the Company doesadoption did not expect the adoption to have a material impact.impact on the Company’s financial position or results of operations, and no transition method was necessary upon adoption.

In February 2016, the FASB issued ASU No. 2016-02,Leases (Topic 842). The standard requires all leases that have a term of over 12 months to be recognized on the balance sheet with the liability for lease payments and the corresponding right-of-use asset initially measured at the present value of amounts expected to be paid over the term. Recognition of the costs of these leases on the income statement will be dependent upon their classification as either an operating or a financing lease. Costs of an operating lease will continue to be recognized as a single operating expense on a straight-line basis over the lease term. Costs for a financing lease will be disaggregated and recognized as both an operating expense (for the amortization of the right-of-use asset) and interest expense (for interest on the lease liability). This standard will be effective for our interim and annual periods beginning January 1, 2019 and must be applied on a modified retrospective basis to leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Early adoption is permitted. The Company is currently evaluatinghas adopted the timing of adoption and the potential impact of this standard during 2018, but as the Company does not have any significant leases, it does not expect it to have a material impact on its financial position or results of operations.

During the periodsix months ended SeptemberJune 30, 20172019 and through March 23, 2018,the date of this filing, there were several new accounting pronouncements issued by the Financial Accounting Standards Board. Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s consolidated financial statements.

Management’s Evaluation of Subsequent Events

The Company evaluates events that have occurred after the balance sheet date of September 30, 2017, through the date which the condensed consolidated financial statements were issued. Based upon the review, other than described in Note 10 – Subsequent Events, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements.

NOTE 3 – PROPERTY, PLANTMINING AND EQUIPMENTMINERAL RIGHTS

The Company is preparing the Tonopah property site for the construction of a permitted custom processing toll milling facility including grading the land, installing fencing and working with contractors for our planned 21,875 square foot building and servicing and drilling various wells for our future operations.

The Company does not conduct anyhas continued to assess the realizability of its mining activity.and mineral rights. Based on an assessment the Company conducted in January 2020. The Company decided its land, mineral rights and water rights are inseparable and depend on each other in value creation. Accordingly, during the six months ended June 30, 2019, the Company combined the carrying value of the assets to present them more clearly as to their intended use together:

Components of our property, plant and equipment are as follows:

NOTE 4 – CONVERTIBLE NOTES PAYABLE

On August 22, 2017, the Company received cash proceeds of $10,000, and on February 7,In January 2018, the Company issued athree convertible promissory notenotes in exchange for the cash proceeds.principal amounts of $8,000, $40,000 and $15,000. The convertible promissory note accrues interest at 6% per annum and isnotes are due one year from the date of funding.issuance and accrue interest at 6%. The note isnotes are convertible into common shares of common stockthe Company at $0.08 per share,a conversion price of $0.05, with no adjustments to the conversion price. The conversion feature meets the definition of conventional convertible debt and therefore qualifies for the scope exception in Accounting Standards Codification (“ASC”) 815-10-15-74(a) and would not be bifurcated and accounted for separately as a derivative liability. The Company analyzed the conversion feature under ASC 470-20, “Debt with conversion and other options”, and based on the market price of the common stock of the Company on the date of funding as compared to the conversion price, determined there was a $4,000 beneficial conversion feature to recognize, which will be amortized over the term of the note using the effective interest method. No amortization expense was recognized in the three and nine months ended September 30, 2017 as the amount was insignificant.

On June 22, 2017, the Company received cash proceeds of $10,000, and on January 24, 2018, the Company issued a convertible promissory note in exchange for the cash proceeds. The convertible promissory note accrues interest at 6% per annum and is due one year from the date of funding. The note is convertible into shares of common stock at $0.065 per share, with no adjustments to the conversion price. The conversion feature meets the definition of conventional convertible debt and therefore qualifies for the scope exception in ASC 815-10-15-74(a) and would not be bifurcated and accounted for separately as a derivative liability. The Company analyzed the conversion feature under ASC 470-20, and based on the market price of the common stock of the Company on the date of funding as compared to the conversion price, determined there was a $4,000$38,000 beneficial conversion feature to recognize, which will be amortized over the term of the note using the effective interest method. Amortization expense of $1,000$38,000 was recognized related to these discounts in the three and ninesix months ended SeptemberJune 30, 2017.2018, including the accelerated amortization upon conversion of two of these notes, as discussed below.

On March 14, 2017, the Company received cash proceeds of $60,000, and on April 18, 2017, the Company issued a convertible promissory note in exchange for the cash proceeds. The promissory note accrues interest at 6% per annum and is due one year from the date of issuance. The note is convertible into shares of common stock at $0.075 per share, with no adjustments to the conversion price. The conversion feature meets the definition of conventional convertible debt and therefore qualifies for the scope exception in ASC 815-10-15-74(a) and would not be bifurcated and accounted for separately as a derivative liability. The Company analyzed the conversion feature under ASC 470-20 and based on the market priceJanuary 29, 2018, five of the common stock of the Company on the date of funding as compared to the conversion price, determined there was no beneficial conversion feature to recognize.

On February 15, 2017 and March 1, 2017, the Company issuedoutstanding convertible promissory notes payable issued in the aggregate principal amount of $60,000. The notes are due one year after issuance, accrue interest at 6% per annumending December 31, 2017 and are convertible into shares of common stock at a price of $0.02 per share. The Company then analyzed the conversion under ASC 470-20Debt with conversion and other optionsfor consideration of a beneficial conversion feature. The Company recorded a discount for the intrinsic valuetwo of the conversion feature of $60,000, which was to be amortized over the term of the note. On March 7, 2017, theJanuary 2018 convertible promissory notes payable, totaling $60,174 includingprincipal of $144,796 and accrued interest of $3,385, were converted into 3,008,7122,693,978 shares of restricted common stock, andat conversion prices ranging from $0.025 to $0.075. Upon conversion the remainingrelated unamortized debt discount of $58,164$46,250 (including the $38,000 mentioned previously) was recorded as amortization of debt discount.immediately expensed.

Between January 22, 2016During May 2018 and March 31, 2016, the Company issued Convertible Promissory Notes totaling $160,000. The Convertible promissory notes accrue interest at 8% and mature 2 years from the dateJune 2018, two of issue. At the option of the holder the Convertible Promissory Notes convert into shares of the Company’s Common Stock. The $55,000 convertible promissory note is convertible at $0.021 per share based on the ninety day VWAP (volume weighted average price) ending on the date of funding, the $30,000 convertible promissory note is convertible at $0.05 per share based on the ninety day VWAP ending on the date of funding, and the $75,000 convertible promissory note is convertible at $0.05 per share based on a fifty percent discount to the closing sale price on the last trading day immediately preceding the issue date. The Company then analyzed the conversion under ASC 470-20Debt with conversion and other options for consideration of a conversion feature. The Company recorded a discount for the intrinsic value of the conversion feature of $160,000 and will amortize this debt discount over the term of the notes. On July 22, 2016, the convertible promissory notes payableoutstanding as of the year ending December 31, 2017, and two notes that were issued in May 2018 totaling $160,000 andprincipal of $105,000 together with accrued interest of $4,919$2,387, were converted into 4,879,067an aggregate of 2,051,864 shares of restricted common stock.stock, at conversion prices ranging from $0.05 to $0.09. Upon conversion the related unamortized debt discount of $16,277 was expensed and is included in the $71,860 amortization expense for the six months ended June 30, 2019.

TheOn June 14, 2018, the Company issuedsettled an outstanding account payable through the issuance and subsequent conversion of a convertible promissory note in the principal amount of $60,000 on August 1, 2016.$10,000. The note, matures on August 1,which was issued December 29, 2017, was due December 29, 2018 accrues interest at 8% per annum and is convertible into shares of common stock at a price of $0.06 per share. The Company then analyzed the conversion under ASC 470-20Debt with conversion and other options for consideration of a conversion feature. The Company recorded a discount for the intrinsic value of the conversion feature of $60,000 and will amortize this debt discount over the term of the note. Amortization expense of $7,500 and $22,500 was recognized during the three and nine months ended September 30, 2017, respectively, with a remaining unamortized debt discount balance of $25,110 at September 30, 2017.  

The Company issued a convertible promissory note in the principal amount of $65,000 effective on November 28, 2016. The note is due one year after issuance, accrues interest at 6% per annum and is convertible into shares of common stock at a price of $0.06 per share. The Company then analyzed the conversion under ASC 470-20Debt with conversion and other options for consideration of a conversion feature. The Company recorded a discount for the intrinsic value of the conversion feature of $65,000 and will amortize this debt discount over the term of the note. On December 28, 2016 the convertible promissory note payable totaling $65,000 and accrued interest of $353 were converted into 3,262,838 shares of restricted common stock.

The Company issued three convertible promissory notes for a total of $175,000 in 2011 and 2012, which bear interest at 6%, which are. The note was convertible into common shares of the Company at a conversion price of $0.50.$0.025. The note was issued as a settlement in exchange for a $91,463 account payable, that the noteholder purchased from a vendor on December 29, 2017. Upon conversion of the note into 411,046 shares of restricted common stock of the Company, the noteholder signed a debt settlement and release agreement for the outstanding account payable, resulting in a gain on settlement to be recognized in the six months ending June 30, 2018, of $81,463.

During the six months ended June 30, 2019, Granite Peak Resources, LLC (“GPR”), a related party advanced $62,724 in direct payments on the Company’s behalf, to reduce certain accounts payable by $24,724 and outstanding convertible promissory notes are past dueby $38,000. Such advance has been included in a subsequently executed line of credit evidenced by a convertible promissory note. Accordingly, the $62,724 advance has been classified as such at June 30, 2019. See Note 9.

After the foregoing note conversions and advance received, there was $192,724 of principal and $73,791 of accrued interest outstanding on convertible debentures, and a related unamortized discount of $0 at June 30, 2019. With exception of the original terms apply in$62,724 of principal advanced by a related party during the default period. During the ninesix months ended SeptemberJune 30, 2017 interest expense was $13,558, and accrued interest on these2019, the pre-existing convertible notes was $73,222.are in default.

NOTE 5 – PROMISSORY NOTES PAYABLE - RELATED PARTY

On February 11, 2015, the Company issued an unsecured promissory note to Tina Gregerson Family Properties, LLC, an entity controlled by a former director of the Company. The Note for up to $750,000 was provided in tranches. Maturity of each tranche is one year from the date of receipt. Interest will accrue at 8% per annum on each tranche. As consideration, the Company agreed to issue common stock purchase warrants for the purchase of up to 250,000 shares of common stock exercisable for seven years at $1.23 per share. The Company then analyzed the warrant under ASC 470-20-25Debt with conversion and other options for consideration of a warrants issue. The Company recorded a discount from the relative fair value of the warrants of $116,560. The Company valued the warrants using the Black-Scholes option pricing model with the following assumptions: stock price on the measurement date of $1.25; warrant term of 7 years; expected volatility of 75%; and discount rate of 1.83% and accounted for them as debt discount, which will be amortized over the term of the loan. 

Under the terms of the Note, the Company received $200,000 on February 11, 2015, $48,000 on February 13, 2015, $50,000 on April 13, 2015, $150,000 on July 31, 2015, $2,500 on October 20, 2015, $12,000 on October 29, 2015 and $15,000 on November 4, 2015. The Note is in default.

NOTE 6 – SHAREHOLDERS’ EQUITYDEFICIT

Common Stock - Convertible promissory notes conversion  

On March 7, 2017, convertible promissory notes payable and accrued interest totaling $60,174 were converted into 3,008,712 shares of restricted common stock. (Note 4)

Option Grants

The Company uses the Black-Scholes pricing model as a method for determining the estimated fair value for stock awards. Compensation expense for stock awards is recognized on a straight-line basis over the vesting period of service awards and for performance-based awards, the Company recognizes the expense when the performance condition is probable of being met.

The Company reviews its current assumptions on a periodic basis and adjusts them as necessary to ensure an accurate valuation. The risk-free interest rate is based on the Federal Reserve Board’s constant maturities of the U.S. Treasury bond obligations with terms comparable to the expected life of the options at their issuance date. The Company uses historical data to estimate expected forfeitures, expected dividend yield, expected volatility of the Company’s stock and the expected life of the options. In June 2018, 250,000 options granted in 2015 and originally exercisable at $0.75 per share were exercised at a price of $0.10 per share in exchange for $25,000 in cash.

The Company recorded no compensation expense for the three and nine months ended SeptemberJune 30, 20172019 and 2016.the year ended December 31, 2018. As of SeptemberJune 30, 2017,2019, there was $0 in unrecognized compensation expense.

The Company did not grant any options during the three months ended June 30, 2019, no options were exercised, and no options expired, or were cancelled. There are no unvested options as of June 30, 2019.

The following tables summarize information about the Company’s stock options:  

The following table summarizes information about stock options outstanding and exercisable at September 30, 2017:exercisable:

Common Stock Purchase Warrants

For warrants granted to non-employees in exchange for services, the Company recordsrecorded the fair value of the equity instrument using the Black-Scholes pricing model unless the value of the services is more reliably measurable.

The Company did not grant any warrants during the six months ended June 30, 2019, and Wits Basin executedno warrants were exercised, expired, or were cancelled. At June 30, 2019 there were 4,865,640 warrants outstanding, with exercise prices ranging from $0.20 to $1.23, a Settlement Agreement on January 22, 2016. Pursuant to the terms of the Settlement Agreement, the Company issued 630,000 warrants to purchase common stock at anweighted exercise price of $0.70$0.84 and 630,000 warrants at an exercise pricea weighted remaining contractual life of $0.30 to investors of Wits Basin. The warrants are exercisable until December 31, 2018.one year.

The following table summarizes information about the Company’s stock purchase warrants outstanding at September 30, 2017 and December 31, 2016:

The aggregate intrinsic value of the 6,125,6404,865,640 outstanding and exercisable warrants at SeptemberJune 30, 20172019 and December 31, 2018 was $0. The intrinsic value is the difference between the closing stock price on SeptemberJune 30, 20172019 and December 31, 2018 and the exercise price, multiplied by the number of in-the-money warrants had all warrant holders exercised their warrants on SeptemberJune 30, 2017.2019 or December 31, 2018.

NOTE 76 – COMMITMENTS AND CONTINGENCIES

Legal Matters

Stephen E. Flechner v. Standard Metals Processing, Inc.

On April 29, 2014, Stephen E. Flechner filed suit in the United States District Court for the District of Colorado against Standard Metals Processing, Inc. alleging that Standard Metals had refused to allow him to exercise stock options granted to him pursuant to a Stock Option Agreement, dated April 1, 2010, and a second Stock Option Agreement, dated January 21, 2011. On June 12, 2014, Standard Metals filed an Answer and a Motion to Dismiss or, Alternatively, to Stay or Transfer the action to the United States District Court for the Northern District of Alabama, Middle Division .Division. On January 16, 2015, Standard Metals filed a Motion for Summary Judgment. On January 23, 2015, the Court issued an Order granting in part and denying in part Standard Metals’ Motion to Dismiss or, Alternatively, to Stay or Transfer the action to the United States District Court for the Northern District of Alabama, Middle Division. The Court in its Order stayed further proceedings in Colorado pending the issuance of orders by the Alabama court. Thereafter, on January 26, 2015, the Court issued an Order vacating the February 20, 2015 Trial Preparation Conference and the March 9, 2015 Bench Trial. On March 23, 2015, the Court issued an Order denying Standard Metals’ Motion for Summary Judgment. On March 30, 2015, Flechner filed a Motion to Lift the Stay. On March 31, 2015, the Court issued an Order granting Flechner’s Motion to Lift the Stay. On April 6, 2015, the Court issued an Order scheduling a Bench Trial for July 29, 2015. On April 9, 2015, Flechner filed a Motion for Reconsideration of the Court’s March 23, 2015 Order Denying Flechner’s Motion to Enforce the Confidential Settlement Agreement to Settle Certain Issues. On May 1, 2015, the Court issued an Order Granting Flechner’s Motion to Enforce the Confidential Settlement Agreement to Settle Certain Issues. Standard Metals Processing, Inc. intends to continue to vigorously defend against claims by Steven E. Flechner. On August 12, 2015 the United Stated District Court for the District of Colorado issued a judgment in favor of Stephen E. Flechner for $2,157,000. An amended final judgment was ordered in adjudication of the Complaint by the U.S. District Court for the District of Colorado (the “Court”) on August 28, 2015 in favor of Flechner in the amount of $2,157,000, plus interest through the date of judgment of $235,246, plus interest of $472.76/day from August 28, 2015 until paid in full. The Company, in good faith anticipation of a settlement did not appeal the judgment and therefore, the Company’s notice of appeal was dismissed on November 17, 2015. This judgment is now non-appealable.

Midwest Investment Partners, LLC v. Standard Metals Processing, Inc.

On March 17, 2014, Midwest Investment Partners, LLC filed suit against Standard Metals Processing, Inc. inVanderburgh County Superior Court, Vanderburgh, Indiana, alleging that Standard Metals had wrongfully refused to remove a transfer restriction on Midwest’s shares of Standard Metals stock pursuant to Rule 144The Company has recognized the daily interest due from the date of the Securities Act. On March 27, 2014, Standard Metals filedAugust 28, 2015 judgment through June 30, 2019, totaling $685,075, resulting in a Noticetotal amount of Removal$3,077,321 being included in the Accrual for settlement of a Civil Action requesting thatlawsuits relating to this matter in the case proceed in theUnited States District Court for the Southern District of Indiana, Evansville Division as an action properly removed pursuant to 28 U.S.C. §§ 1441 (a) and (b). On April 15, 2014, Standard Metals served and filed its Answer and Affirmative Defenses to Plaintiff’s Complaint and Demand for Jury Trial. On November 26, 2014, Standard Metals filed a Motion for Summary Judgment. On February 11, 2015, the Court issued an Order granting Standard Metals’ Motion for Summary Judgment and entered a Final Judgment in favor of Standard Metals and terminating the action. During the six months ended Septemberaccompanying June 30, 2017 the Company paid $65,000 towards the judgment.2019 condensed consolidated balance sheet.

NOTE 87 – RELATED PARTY TRANSACTIONS

During March 2019, the Company was informed that a change of control of the Company had occurred. Granite Peak Resources, LLC (“GPR”) through its members (including Pure Path Capital Management LLC) acquired 69,464,434 shares of common stock (including 4,500,000 warrants to purchase common stock). The members transferred their shares of common stock of the Company LLC

in exchange for a pro-rata ownership interest in GPR. GPR also acquired the senior secured creditor position previously held by Pure Path ManagementCapital Group LLC, which includes a $2,500,000 first deed of trust on the Tonopah property and an outstanding promissory note with a principal balance of $2,229,187 and accrued interest of $1,096,235 as of June 30, 2019. The members of Granite Peak Resources LLC are listed in the Schedule 13D filed by GPR on March 29, 2019. GPR has not communicated to the Company LLC (“Pure Path”)any plans to change any of the current officers or directors or governing documents and has expressed the purpose of its acquisition is currentlyto assist the Company execute on its business plan and resolve its current obligations and other claims. As of the date of this filing, GPR is the beneficial owner of 18%52.3% of the outstandingCompany’s common stock ofand the Company. On October 10, 2013, the Company issued 27,000,000 shares of common stock toCompany’s largest secured creditor. The background regarding Pure Path Management Company, LLC to settle $1,500,000 of the note payable and accrued interest owed by the Company.Path’s Senior Secured Note is described below.

During the Company’s acquisition of the Shea assets in 2011, Pure Path purchasedthe Loan Modification Agreement and the NJB Forbearance Agreement directly from NJB Mining, Inc.In connection with the assignment of a forbearance agreement the Forbearance Agreement, the PartiesCompany and Pure Path executed an Agreement in Principle setting forth terms of the Forbearance Agreementforbearance agreement (collectively the “Pure Path Agreements”). Pursuant to the Pure Path Agreements, Pure Path was to receive participation payments to be received on a quarterly basis for seven years after the final closing at a rate of 5% of adjusted gross revenue as such terms are defined in the Pure Path Agreements, past and future consulting fees for approximately $1,150,000, collection remedies and legal proceedings against the Company including foreclosure on the Deed of Trust, registration rights, rights of first refusal, tag along rights, preemptive rights, exclusive worldwide rights pertaining to financing and joint ventures, and other negative covenants regarding approval of corporate actions.

Pursuant to the Settlement and Release Agreement executed October 10, 2013 with the Company, Pure Path relinquished the foregoing rights and obligations owed to it and agreed to forbear collection remedies and legal proceedings against the Company including foreclosure on the Deed of Trust, and, in connection with the settlement and release of various debts of approximately $1,500,000 and the consulting fees owed by the Company, and relinquishment of rights by Pure Path, the Company issued 27,000,000 restricted shares and a Promissory Note (the “Pure Path Note”) for an amount of up to $2,500,000 with a beginning principal balance of $1,933,345 bearing interest of 8% per year for the current balance of the amounts owed under the Pure Path Agreements. The outstanding principal balance on the Pure Path Note was $2,229,187 as of both June 30, 2019 and December 31, 2018, with related accrued interest of $1,049,314 and $955,701, respectively. The Note is in default.

On February 11, 2015, the Company issued an unsecured promissory note (the “Note”) to Tina Gregerson Family Properties, LLC, an entity controlled by a former director of the Company. The Note for up to $750,000 was provided in tranches. Maturity of each tranche is one year from the date of receipt. Interest accrues at 8% per annum on each tranche. Under the terms of the Pure Path Note, the Company received $54,590 on February 4, 2015.

On April 11, 2016, the Company$477,500. At June 30, 2019 and Pure Path executed an addendum removing Pure Path’s ability to convert its note into shares of Series B Preferred Stock. Subsequently, the Company retiredDecember 31, 2018, there is $162,826 and cancelled the entire class of Series B Preferred Stock, such class$140,535 interest accrued. The Note is no longer available for issuance.in default.

NOTE 98 – EARNINGS (LOSS) PER SHARE

Basic net loss per common share is computed by dividing net loss applicable to common shareholders by the weighted average number of common shares outstanding during the periods presented. Diluted net loss per common share is determined using the weighted average number of common shares outstanding during the periods presented, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be issued upon exercise of options, warrants and conversion of convertible debt. In periods where losses are reported, the weighted average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.

At SeptemberJune 30, 2017,2019 and December 31, 2018, the weighted average shares from stock options of 32,576,223, warrants of 6,125,6404,865,640 and Convertible Promissory note shares of approximately 2,429,000260,000 were excluded from the diluted weighted average common share calculation due to the antidilutive effect such shares would have on net loss per common share.

NOTE 10 –9 - SUBSEQUENT EVENTS

Convertible Promissory Notes

On October 17, 2017, the Company received cash proceeds of $10,000, and on January 24, 2018, the Company issued a convertible promissory note in exchange for the cash proceeds. The convertible promissory note accrues interest at 6% per annum and is due one year from the date of funding, with no adjustments to the conversion price. The conversion feature meets the definition of conventional convertible debt and therefore qualifies for the scope exception in ASC 815-10-15-74(a) and would not be bifurcated and accounted for separately as a derivative liability. The note is convertible into shares of common stock at $0.05 per share. The Company analyzed the conversion feature under ASC 470-20, and based on the market price of the common stock of the Company on the date of funding as compared to the conversion price, determined there was a $6,000 beneficial conversion feature to recognize, which will be amortized over the term of the note using the effective interest method.

On December 26, 2017, the Company received cash proceeds of $5,000, and on January 24, 2018, the Company issued a convertible promissory note in exchange for the cash proceeds. The convertible promissory note accrues interest at 6% per annum and is due one year from the date of funding. The note is convertible into shares of common stock at $0.025 per share, with no adjustments to the conversion price. The conversion feature meets the definition of conventional convertible debt and therefore qualifies for the scope exception in ASC 815-10-15-74(a) and would not be bifurcated and accounted for separately as a derivative liability. The note is convertible into shares of common stock at $0.05 per share. The Company analyzed the conversion feature under ASC 470-20, and based on the market price of the common stock of the Company on the date of funding as compared to the conversion price, determined there was a $3,000 beneficial conversion feature to recognize, which will be amortized over the term of the note using the effective interest method.

On December 29, 2017, the Company received cash proceeds of $4,796, and on January 24, 2018,17, 2019 the Company issued a promissory note in exchangeto Granite Peak Resources (“GPR”) for $192,079.97 representing the cash proceeds.disbursements made on the Company’s behalf during 2019. The promissory note is payable one year from its issuance and accrues interest at 6% per annumannum.

In December 2019, 4,500,000 options granted in 2013 and originally exercisable at $0.44 per share were exercised by GPR at a price of $0.0426 per share (the current fair market value per share based on the average of the median price and VWAP for the preceding 90 days) in exchange for the $192,080 note.

The Company entered into a Forbearance Agreement with Granite Peak Resources, LLC (“GPR”) effective December 20, 2019. GPR has agreed to forbear any foreclosure proceedings for six months in exchange for the Company pledging the stock of the its subsidiaries as additional collateral under its outstanding obligations. During the six months ended June 30, 2019, GPR advanced $62,723 in direct payments on the Company’s behalf to reduce certain accounts payable by $16,000, accrued expenses by $8,724, and outstanding convertible promissory notes by $38,000.

On March 16, 2020 the Company executed a Line of Credit (“LOC”) with GPR evidenced by a promissory note. The LOC is due one year fromfor up to $2,500,000, matures over three years and may be increased by up to another $1,000,000 and extended an additional two years, respectively, at GPR’s sole option. The LOC is for funding operating expenses critical to the date of funding.Company’s redirection and all requests for funds may be approved or disapproved in GPR’s sole discretion. The noteLOC bears interest at 10% per annum, is convertible into shares of the Company’s common stock at $0.025a per share with no adjustments to the conversion price. The conversion feature meets the definitionprice of conventional convertible debt and therefore qualifies for the scope exception in ASC 815-10-15-74(a) and would not be bifurcated and accounted for separately as a derivative liability. The note is convertible into shares of common stock at $0.05 per share. The Company analyzed the conversion feature under ASC 470-20, and$0.04 based on the marketlast closing sale price of the common stock of the Company on the date of funding as compared to the conversion price, determined there was a $3,000 beneficial conversion feature to recognize, whichand will be amortized oversecured by the term ofreal and personal property GPR already has under lien. The $62,724 advanced by GPR during the note using the effective interest method.

On January 22, 2018, the Company received cash proceeds of $15,000 and issued a promissory note in exchange for the cash proceeds. The promissory note accrues interest at 6% per annum and is due one year from the date of issuance. The note is convertible into shares of common stock at $0.05 per share, with no adjustments to the conversion price. The conversion feature meets the definition of conventional convertible debt and therefore qualifies for the scope exception in ASC 815-10-15-74(a) and would not be bifurcated and accounted for separately as a derivative liability. The note is convertible into shares of common stock at $0.05 per share. The Company analyzed the conversion feature under ASC 470-20, and based on the market price of the common stock of the Company on the date of funding as compared to the conversion price, determined there was a $9,000 beneficial conversion feature to recognize, whichsix months ended June 30, 2019 will be amortized overincorporated into the term of the note using the effective interest method.LOC.

On January 22, 2018, the Company received cash proceeds of $8,000 and issued a promissory note in exchange for the cash proceeds. The promissory note accrues interest at 6% per annum and is due one year from the date of issuance. The note is convertible into shares of common stock at $0.05 per share, with no adjustments to the conversion price. The conversion feature meets the definition of conventional convertible debt and therefore qualifies for the scope exception in ASC 815-10-15-74(a) and would not be bifurcated and accounted for separately as a derivative liability. The note is convertible into shares of common stock at $0.05 per share. The Company analyzed the conversion feature under ASC 470-20, and based on the market price of the common stock of the Company on the date of funding as compared to the conversion price, determined there was a $5,000 beneficial conversion feature to recognize, which will be amortized over the term of the note using the effective interest method.

On January 26, 2018, the Company received cash proceeds of $40,000 and issued a promissory note in exchange for the cash proceeds. The promissory note accrues interest at 6% per annum and is due one year from the date of issuance. The note is convertible into shares of common stock at $0.05 per share, with no adjustments to the conversion price. The conversion feature meets the definition of conventional convertible debt and therefore qualifies for the scope exception in ASC 815-10-15-74(a) and would not be bifurcated and accounted for separately as a derivative liability. The note is convertible into shares of common stock at $0.05 per share. The Company analyzed the conversion feature under ASC 470-20, and based on the market price of the common stock of the Company on the date of funding as compared to the conversion price, determined there was a $24,000 beneficial conversion feature to recognize, which will be amortized over the term of the note using the effective interest method.