Indicate by check mark if the Registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the Registrant is not
required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate by check mark whether the issuer (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 ☒
No ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐
Indicate by check mark whether the registrant
is a large, accelerated filer, an accelerated filer, a non-accelerated filer, 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.
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 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☐
Indicate by check mark whether the Registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ☐ No ☒
As of March 31, 2023, the Registrant’s non-affiliates
owned shares of its common stock having an aggregate market value of approximately $3,093,836 (based upon the closing sales
price of the Registrant’s common stock on that date).
On April 13, 2023, there were 2,674,530 shares
of common stock outstanding, which is the Registrant’s only class of voting stock.
Documents Incorporated by Reference: None.
PART I
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form
10-K contains both historical statements and statements that are forward-looking in nature. Historical statements are based on events
that have already happened. Certain of these historical events provide some basis to our management, with which assumptions are made relating
to events that are reasonably expected to happen in the future. Management also relies on information and assumptions provided by certain
third- party operators of our projects as well as assumptions made with the information currently available to predict future events.
These future event predictions, or forward-looking statements, include (but are not limited to) statements related to the uncertainty
of the quantity or quality of ore or tailings grades, the fluctuations in the market price of such reserves, as well as gold, silver and
other precious minerals, general trends in our operations or financial results, plans, expectations, estimates and beliefs. You can identify
forward-looking statements by terminology such as “may,” “could,” “should,” “anticipate,”
“believe,” “estimate,” “continue,” “expect,” “intend,” “plan,”
“predict,” “potential” and similar expressions and their variants. These forward-looking statements reflect our
judgment as of the date of this Annual Report with respect to future events, the outcome of which is subject to risks, which may have
a significant impact on our business, operating results and/or financial condition. 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 update forward-looking statements.
The risks identified in Item 1A, among others, may impact forward-looking statements contained in this Annual Report.
ITEM 1. BUSINESS
Business Overview
General
American Clean Resources Group,
Inc. f/k/a Standard Metals Processing, Inc. (“we,” “us,” “our,” “ACRG” or the “Company”)
is an exploration stage company having offices in Lakewood, Colorado and, through its subsidiaries, a property in Tonopah, Nevada. Our
business plan is to purchase equipment and build a facility on our Tonopah property to serve as a permitted custom processing toll milling
facility (which includes an analytical lab, pyrometallurgical plant, and hydrometallurgical recovery plant).
The Company plans to perform
permitted custom processing toll milling, which is a process whereby mined material is crushed and ground into fine particles to ease
the extraction of any precious minerals contained therein, such as minerals in the gold, silver, and platinum metal groups. Custom milling
and refining can include many different processes that are designed specifically for each ore load and to maximize the extraction of precious
metals from carbon or concentrates. These toll-processing services also distill, dry, mix, or mill chemicals and bulk materials on a contractual
basis and provide a chemical production outsourcing option for industrial companies, which lack the expertise, capacity, or regulatory
permits for in-house production.
We are required to obtain
several permits before we can begin construction of a small-scale mineral processing facility to conduct permitted processing toll milling
activities and construction of the required additional buildings for us to commence operations.
Any reference herein to “ACRG”
“the Company,” “we,” “our,” or “us” is intended to mean American Clean Resources Group,
Inc., a Nevada corporation, and all of our subsidiaries unless otherwise indicated.
Corporate History
The Company was incorporated
in the State of Colorado on July 10, 1985, as Princeton Acquisitions, Inc. On December 7, 2009, the Company changed its name to Standard
Gold, Inc. Effective March 5, 2013, the Company moved its domicile from Colorado to Nevada and changed its name from Standard Gold, Inc.
to Standard Gold Holdings, Inc. In 2013, the Company changed its name to Standard Metals Processing, Inc., and coincident with announcing
its plans to acquire 80.1 % of the SMS Group during 2022, changed its name to American Clean Resources Group, Inc. to more accurately
reflect the business plans contemplated by the Company, and relocated its administrative offices into those adjacent to Granite Peak Resources,
LLC (“GPR”), an ACRG affiliate. (see “Recent Actions” below for further information regarding the SMS Group).
On March 15, 2011, we closed
a series of transactions, whereby we acquired certain assets of Shea Mining & Milling, LLC (“Shea Mining”), which assets
include land, buildings, a dormant milling facility, abandoned milling equipment, water permits, mine tailings, mine dumps and the assignment
of a note payable, a lease and a contract agreement with permits. We completed the Shea Exchange Agreement to acquire the Shea assets
to develop a permitted custom processing toll milling of precious minerals business in Tonopah, Nevada. Toll milling is a process whereby
mined material is crushed and ground into fine particles to ease the extraction of any precious minerals contained therein, such as gold,
silver, and platinum group metals. Custom milling and refining can include many different processes to extract precious metals from carbon
or concentrates. These toll-processing services also distil, dry, mix, or mill chemicals and bulk materials on a contractual basis and
provide a chemical production outsourcing option for industrial companies which lack the expertise, capacity, or regulatory permits for
in-house production. The land encompasses 1,183 deeded acres, one of the largest private land holdings in Esmeralda County, Nevada. Approximately
334 acres of this land has an estimated 2.2 million tons of tailings known as the Millers Tailings from the historic gold rush of Goldfield
and Tonopah, Nevada sitting on it.
Subsidiaries
The Company has one wholly
owned subsidiary, Aurielle Enterprises, Inc. f/k/a/ Tonopah Milling and Metals Group, Inc. (“AE”), a Nevada corporation. AE
has two wholly owned subsidiaries, Tonopah Resources, Inc., a Nevada corporation and Tonopah Custom Processing, Inc., a Nevada corporation.
Products and Services
We seek to establish ourselves
as a custom processing and permitted toll milling service provider. Our business plan is to build a facility on our Tonopah property,
which includes an analytical lab, pyrometallurgical, and hydrometallurgical recovery plant.
The Company’s intention
is to become a full service permitted custom toll milling and processing company that facilitates the extraction of precious and strategic
minerals from mined material. The Company will need to obtain permits for the planned construction and operation of our permitted custom
processing toll milling facility with state-of-the-art equipment capable of processing gold, silver and platinum metal groups. Many junior
miners do not have the capital or the ability to permit a processing facility, yet they have a large supply of mined material that requires
milling be performed. It is often cost prohibitive or impractical for these mine operators to send their materials to processing mills
owned by the large mining companies, or to other customers badly needing milling and processing services.
While Nevada has a historic
role as a mining center with good proximate geology and ample mined product, very little custom processing toll milling capacity remains
in the state. During the last several decades, other processing facilities have been shuttered due to high costs of regulations and the
vertical integration of milling within large mining companies leaving junior miners with few options for local milling services. As a
result, we are in a unique position among processing facilities because we are capable of true permitted custom processing. We have the
only ball mill located within a custom toll milling facility within 300 miles allowing us to serve miners in the western United States,
Canada, Mexico, and Central America.
Many junior miners are undercapitalized,
have limited access to capital markets and have a large supply of mined material that requires milling be performed. Many large mining
companies reserve their milling capacity for their inventory, which does not make providing third party services worthwhile. This provides
the Company with an opportunity to provide these potential customers with badly needed milling and processing services. Some of our mining
customers will be able to take their tailings (the material left over after the desired minerals have been extracted) from the material
they deposited with the Company and put it back in the exact same mines those particular tailings came from. This eliminates the need
for the Company to dispose of those tailings.
Water Pollution Control Permit with Nevada
Department of Environmental Protection
Through Tonopah Custom Processing,
Inc. (“TCP”), a Water Pollution Control Permit (“WPCP”) Application was filed with the Nevada Department of Environmental
Protection (“NDEP”) Bureau of Mines and Mining Reclamation (“BMMR”) for the approval of the permits necessary
for a small-scale mineral processing facility planned for the Tonopah property. The plant will perform laboratory testing, pilot testing,
and custom processing of precious metal ores and concentrates from mining industry clients. Processing of ore materials will employ standard
mineral processing techniques including gravity concentration, froth flotation and chemical leaching and carbon stripping.
The WPCP must be approved
prior to commencing the planned construction of our processing plant in Tonopah, Nevada. While the Company awaits approval, we are preparing
for construction of our processing facility which includes working with contractors that will be building the planned 21,875 square foot
processing plant, cleaning and preparing the property, and refurbishing a trailer that will act as our construction office.
In connection with our WPCP
application, NDEP suggested that we take the following actions: (i) retain a Nevada Certified Environmental Manager (“CEM”),
(ii) perform Meteoric Profile II water testing on ground water directly below the mill as well as surrounding wells located off site,
and (iii) determine baseline values of water using the Meteoric Profile II results. NDEP regulations require that the Company delay any
new construction planned for “metal extraction” until after the permits are in place.
Survey
Advanced Surveying & Professional
Services, a Professional Land Surveyor (“PLS”), completed surveys and testing of the Tonopah property required for the application
of our required permits. After completion of the survey, it was determined the property is 1,183 acres. The scope of work the PLS completed
includes: (i) setting a total of 19 permanent monuments at angle points along lines, (ii) setting eight permanent monuments locating US
Hwy 95, (iii) recording a professional map indicating longitude and latitude for all corners, and (iv) providing a digital map accessible
in Auto Cad software.
Site Preparation
We have completed the initial
grading of specific designated areas on the 40 undisturbed acres of land including clearing all vegetation, removing of all scrap metal,
and the excavation of the building pad for the preparation of the new 21,875 square foot processing plant and have completed the removal
of all the extra and unnecessary materials and old equipment that has accumulated on the land.
Toll Milling
Toll milling is a process
whereby mined material is crushed and ground into fine particles to ease the extraction of any precious minerals contained therein, such
as minerals in the gold, silver and platinum metal groups. Custom milling and refining that are designed specifically for each ore load
can include many different processes to maximize the extraction of precious metals from ore, carbon, or concentrates.
Procedure
Ore is sent to our facility
at the responsibility and cost of the customer. The Company will take a sample of the ore through a specific ore sampling procedure. The
Company’s metallurgist will test the sample on site. To obtain a quantitative determination of the amount of a given substance in
a particular sample, the Company can perform wet methods and dry methods. In the wet method, the sample is dissolved in a reagent, like
acid, until the purified metal is separated out. In the dry method, the sample is mixed with a flux (a substance such as borax or silica
that helps lower the melting temperature) and then heated so that the impurities in the metal fuse with the flux, leaving the purified
metal as residue.
If it is determined that the
sample is approved for processing, the customer and the Company will then agree upon a value of the metal grade per ton. If there is any
disagreement on the value, a third-party referee determines the value by testing the sample. The Company charges either a flat fee per
ton of the ore processed or a percentage of the precious metals extracted during processing, or a combination of both based on the amount
of work that is performed.
There are various methods
of extraction. The Company determines which method to use based upon the sample sent to the Company. In most situations, a series of tests
will be performed on a bulk sample ranging in size from 250 to 1,000 pounds. A metallurgist will determine the best process or processes
to use for the extraction based on several factors. These include the composition of the host rock, mineralization of the host rock, whether
or not it is an oxide or sulfide ore body, and the particle size of the precious metal. After the metallurgist reviews these characteristics,
the Company will run ore on a gold table and assays the concentrates, middlings, and tails. An assay is an investigative procedure for
qualitatively assessing or quantitatively measuring the presence, or amount of, precious metals in ore. If there is too much gold in the
middling or tails, the size of the grind is adjusted to increase yield or if there is not enough gold in the middlings or tails the Company
grinds the material to a finer mesh.
Some of our miner customers
will be able to take their tailings (the material left over after the desired minerals have been extracted) from the material they deposited
with the Company and put it back in the exact same mines those particular tailings came from. This eliminates the need for the Company
to dispose of those tailings.
Concentrate/Leach Circuit
Concentration is the separation
of precious minerals from other materials by utilizing different properties of the minerals to be separated including density, magnetic
or electric and physiochemical. The Company will attempt to create a “concentrate” of minerals to reduce the size of each
ton processed. The Company may also receive concentrates from customers, especially those where transport of tons of raw ore is not feasible.
The leaching process uses
chemicals to extract the metals from the solid materials (concentrates) and bring them into a solution. Once the metals are in the solution,
it is passed through carbon or resin columns where the precious metals are deposited onto the carbon/resin.
The metals will then be stripped
from the carbon back into a different solution where they are pumped through an electrowinning circuit in a process called carbon stripping.
The metals are then deposited onto stainless steel in the electrowinning circuit. After this stage, the metals are either sold or further
refined off-site. The solution is recycled and used again to process additional material.
Recent Actions
On
January 10, 2022 the Company executed a definitive agreement to acquire a controlling interest in Sustainable Metal Solutions LLC (“SMS”).
The purchase price for the controlling interest in SMS will be determined based upon the price of ACRG common stock on the date of closing,
such date to be decided by the Parties in good faith after all conditions precedent are met. SMS is an American multi-company environmental
development platform focused on producing carbon neutral precious metals and minerals thereby driving American mineral independence while
revitalizing the environment and minimizing the impacts of climate change. The business of SMS is consistent with the Company’s
posture to acquire, license or joint venture with other parties involved in toll milling, processing, or mining related activities, which
may include GPR and its affiliated entities, including, but not limited to, NovaMetallix. Inc., and BlackBear Natural Resources, LTD.
Employees
As
of December 31, 2022, we did not have any employees. The Company’s and its subsidiaries’ officers, directors and independent
contractors conduct all operations.
Available Information
You can request a free copy
of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed
or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such
material, or furnish it to the Securities and Exchange Commission (“SEC”) the above filings by writing or calling us at our
principal executive offices, the address and telephone number for which are set forth on the cover page of this Form 10-K for the year
ended December 31, 2022.
ITEM 1A. RISK FACTORS
An investment in our common
stock is highly speculative and involves a high degree of risk. Before making an investment decision, you should carefully consider the
risks described below together with all of the other information included in this prospectus. The statements contained in or incorporated
into this prospectus that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could
cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks
actually occur, our business, financial condition or results of operations could be harmed. In that case, the value of our common stock
could decline, and an investor in our securities may lose all or part of their investment.
Risks Related to Our Capital Stock
INVESTORS MAY BE UNABLE TO ACCURATELY VALUE
OUR COMMON STOCK.
Investors often value companies
based on the stock prices and results of operations of other comparable companies. Currently, we do not believe another publicly traded
permitted custom processing toll milling company exists that is directly comparable to our size and scale. Prospective investors, therefore,
have limited historical information about our permitted custom processing toll milling capabilities on which to base an evaluation of
our performance and prospects and an investment in our common stock. As such, investors may find it difficult to accurately value our
common stock.
INVESTORS MAY FACE SIGNIFICANT RESTRICTIONS
ON THE RESALE OF OUR COMMON STOCK DUE TO FEDERAL REGULATION OF PENNY STOCKS.
The SEC has defined any equity
security with a market price of less than $5.00 per share as a “penny stock.” Penny stocks are subject to the requirements
or Rule 15(g)-9 of the Securities Exchange Act of 1934. Our common stock is quoted on the Over the Counter (“OTC”) Markets
under the symbol ACRG and despite recent trading prices above $5.00 per share, has historically been below $5.00 per share. Therefore,
our common stock is deemed a “penny stock” and is subject to the requirements of Rule 15(g)-9. Under such rule, broker-dealers
who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice
requirements, including a requirement that they make an individualized written suitability determination for the purchaser and receive
the purchaser’s consent prior to the transaction. The required penny stock disclosures include the delivery, prior to any transaction,
of a disclosure schedule explaining the penny stock market and the risks associated with it. Such requirements could severely limit the
market liquidity of the securities and the ability of purchasers to sell their securities in the secondary market.
WE DO NOT INTEND TO PAY DIVIDENDS FOR THE FORESEEABLE
FUTURE.
We have never declared or
paid any dividends on our common stock. We intend to retain all of our earnings, if any, for the foreseeable future to finance the operation
and expansion of our business, and we do not anticipate paying any cash dividends in the future. Our Board of Directors retains the discretion
to change this policy.
THE MARKET FOR OUR COMMON STOCK MAY FLUCTUATE.
Currently, our common stock
is traded on the Over the Counter (“OTC”) Market. Stock prices on the OTC Markets can be more volatile than stocks trading
on national market systems such as NSADAQ, NYSE or AMEX. Our stock price may be affected by factors outside of our control and unrelated
to our business operations.
Risks Related to Our Financial Condition
WE CURRENTLY DO NOT HAVE ENOUGH CASH TO FUND
OPERATIONS AND/OR REDUCE OUR DEBT DURING 2023.
We have very limited funds,
and such funds are not adequate to develop our current business plan, or even to satisfy our existing working capital requirements. We
will be required to raise additional funds to effectuate our current business plan for permitted custom processing toll milling and to
satisfy our working capital requirements. Without significant additional capital, we will be unable to start operations. With respect
to our proposed permitted custom processing toll milling operations, the costs and ability to successfully operate have not been fully
verified because none of our proposed tolling operations have begun and we may incur unexpected costs or delays in connection with starting
operations. The cost of designing and building our operations and of finding customers and sources of ore for our toll milling sources
can be extensive and will require us to obtain additional financing, and there is no assurance that we will have the resources necessary
or the financing available to attain operations or to acquire customers and ore sources necessary for our long-term business. Our ultimate
success will depend on our ability to raise additional capital. Additionally, such additional capital may not be available to us at acceptable
terms or at all. Further, if we increase our capitalization and sell additional shares of our capital stock, a shareholder’s position
in our Company will be subject to dilution. In the event we are unable to obtain additional capital, we may be forced to cease our search
for additional business opportunities, reduce our operating expenditures or to cease operations altogether.
WE HAVE NOT YET BEGUN OPERATIONS AND WE EXPECT
TO INCUR LOSSES FOR THE FORESEEABLE FUTURE.
We have yet to commence active
operations. We have no prior operating history from which to evaluate our success, or our likelihood of success in operating our business,
generating any revenues, or achieving profitability. This provides a limited basis for you to assess our ability to commercialize our
services and the advisability of investing in our securities. We have not generated revenue from our toll milling services to date and
there can be no assurance that our plans for permitted custom processing toll milling will be successful, or that we will ever attain
significant revenue or profitability. Also, toll milling is a new area of business for us, and our management team has little experience
in permitted custom processing toll milling operations. Although we intend to hire knowledgeable and experienced employees and/or consultants
with significant experience in toll milling operations, there is no guarantee that we will reach profitability in the near future, if
at all. As we develop our Tonopah property to prepare for operations, we are subject to unforeseen costs, expenses, problems and difficulties
inherent in new business ventures.
OUR MANAGEMENT HAS SUBSTANTIAL DOUBT ABOUT
OUR ABILITY TO CONTINUE AS A GOING CONCERN.
The financial statements for each of these periods were prepared assuming
that we would continue as a going concern. We have had net losses for each of the years ended December 31, 2022, and 2021, and we have
an accumulated a deficit as of December 31, 2022, of $106,530,496. Virtually all of the Company’s assets are encumbered or pledged
under senior secured debt that is in default. These conditions raise substantial doubt about our ability to continue as a going concern.
Furthermore, since we do not expect to generate any significant revenues from operations for the foreseeable future, our ability to continue
as a going concern depends, in large part, on our ability to raise additional capital through equity or debt financing transactions. If
we are unable to raise additional capital, we may be forced to discontinue our business.
Risks Related to the Company
WE HAVE LIMITED ASSETS.
Our assets to be used in the
development of a toll milling service have not yet been utilized, we will need to acquire additional equipment and construct additional
facilities and there can be no guarantee that we will be successful in utilizing our current assets or obtaining the additional equipment
and facilities that we will need to operate going forward. We do not anticipate having any revenues from our permitted custom toll milling
processing for the foreseeable future. Additionally, without adequate funding, we may never produce any significant revenues.
OUR MAJOR ASSETS ARE ENCUMBERED UNDER A DEED
OF TRUST OR PLEDGED.
The Tonopah property is subject
to a first deed of trust securing a $2,500,000 promissory note in default and a $5,000,000 Line of Credit held by GPR, a related party.
At December 31, 2022, the outstanding principal and accrued interest amounts are $2,229,187 and $1,689,685, respectively. In addition,
the Company entered into a Forbearance Agreement with GPR effective December 20, 2019. GPR agreed to forbear any foreclosure proceedings
for six months in exchange for the Company pledging the stock of its subsidiary and its subsidiaries as additional collateral under its
outstanding obligations. The Forbearance Agreement expired June 30, 2020 and has not been renewed.
On March 16, 2020 the Company
executed a Line of Credit (“LOC”) with GPR, a related party, evidenced by a promissory note. The original LOC was for $5,000,000,
maturing March 16, 2025, but may be increased by another $5,000,000 and extended another five years, and is secured by the Company’s
real and personal property GPR already has under lien. The Company entered into an Amendment and Forbearance Agreement with GPR on January
5, 2023 wherein GPR agreed to: (a) increase the existing LOC from $5,000,000 due March 16, 2025 to $35,000,000 due March 16, 2027, (b)
roll two existing promissory notes purchased by GPR into the LOC resulting in the extinguishment of such notes as separate instruments,
and (c) to forebear until January 12, 2024, on exercising its foreclosure rights under its defaulted Senior Secured Note. The Company’s
Board of Directors approved a revision in the conversion price at which the LOC may convert into the Company’s common stock from
$1.65 per share to $1.05 per share, based upon the market price of the Company’s common stock over the 3 days preceding the agreement.
GPR is the Company’s majority shareholder and largest debtholder. GPR holds a senior secured interest in all of the assets of the
Company, including the stock of its subsidiary entities.
OUR MANAGEMENT TEAM MAY NOT BE ABLE TO SUCCESSFULLY
IMPLEMENT OUR BUSINESS STRATEGIES.
If our management team is
unable to execute our business strategies, then our development could be materially and adversely affected. In addition, we may encounter
difficulties in effectively managing the budgeting, forecasting and other process control issues presented by any future growth. We may
seek to augment or replace members of our management team or we may lose key members of our management team, and we may not be able to
attract new management talent with sufficient skill and experience.
OUR SUCCESS IN THE FUTURE MAY DEPEND ON OUR
ABILITY TO ESTABLISH AND MAINTAIN STRATEGIC ALLIANCES, AND ANY FAILURE ON OUR PART TO ESTABLISH AND MAINTAIN SUCH RELATIONSHIPS WOULD
ADVERSELY AFFECT OUR MARKET PENETRATION AND REVENUE GROWTH.
We may be required to establish
strategic relationships with third parties in the mining and toll milling industries. Our ability to establish strategic relationships
will depend on a number of factors, many of which are outside our control, such as the suitability of our property, facilities and equipment
relative to our competitors, or the quality grade of precious minerals we are able to extract from the ore we process. We can provide
no assurance that we will be able to establish strategic relationships in the future.
In addition, any strategic
alliances that we establish, will subject us to a number of risks, including risks associated with sharing proprietary information, loss
of control of operations that are material to developed business and profit-sharing arrangements. Moreover, strategic alliances may be
expensive to implement and subject us to the risk that the third party will not perform its obligations under the relationship, which
may subject us to losses over which we have no control or expensive termination arrangements. As a result, even if our strategic alliances
with third parties are successful, our business may be adversely affected by a number of factors that are outside of our control.
Risks Relating to Our Business
WE WILL REQUIRE ADDITIONAL FINANCING TO FUND
OUR PERMITTED CUSTOM PROCESSING TOLL MILLING DEVELOPMENT AND OPERATIONS.
Substantial additional financing
will be needed to fund the current plan to begin toll milling services and develop and maintain the Tonopah property. Our means of acquiring
investment capital is limited to private equity and debt transactions. We have no significant sources of currently available funds to
engage in additional development. Without significant additional capital, we will be unable to fund our current property interests or
effectuate our current business plan for permitted custom processing toll milling and mining services. See “—Risks Relating
to Our Financial Condition – We Currently Do Not Have Enough Cash to Fund Operations, and/or Reduce Debt During 2023”.
OUR PERFORMANCE MAY BE SUBJECT TO FLUCTUATIONS IN MINERAL PRICES.
The profitability of any permitted
custom processing toll milling services could be significantly affected by changes in the market price of minerals. Demand for minerals
can be influenced by economic conditions and attractiveness as an investment vehicle. Other factors include the level of interest rates,
exchange rates and inflation. The aggregate effect of these factors is impossible to predict with accuracy.
In particular, mine production
and the willingness of third parties such as central banks to sell or lease gold affects the supply of gold. Worldwide production levels
also affect mineral prices. In addition, the price of gold, silver and other precious minerals have, on occasion, been subject to very
rapid short-term changes due to speculative activities.
OUR PERMITTED CUSTOM PROCESSING TOLL MILLING
OPERATIONS ARE SUBJECT TO ENVIRONMENTAL REGULATIONS AND PERMITTING, WHICH COULD RESULT IN THE INCURRENCE OF ADDITIONAL COSTS AND OPERATIONAL
DELAYS.
All phases of our operations
are subject to current environmental protection regulation. There is no assurance that future changes in environmental regulation, such
as greenhouse gas emissions, carbon footprint and the like, will not adversely affect our operations. Some of our proposed operations
will require additional permits, which could incur additional cost and may delay start up and cash flow. In addition, each toll milling
mineral source must be fully permitted for its own operation, a process over which we have no control.
OUR PERMITTED CUSTOM PROCESSING TOLL MILLING
OPERATIONS WILL REQUIRE US TO DEPEND ON THIRD PARTIES AND OTHER ELEMENTS BEYOND OUR CONTROL, WHICH COULD RESULT IN HARM TO OUR BUSINESS.
Our permitted custom processing
toll milling operations will rely on mineral material produced by others, and we have no control over their operations. Delivery of ore
to our processing facilities is also subject to the risks of transportation, including trucking and aviation operations run by others,
regulations and permits, fuel cost, weather, and travel conditions. Toll milling requires that the mineral producer and the mineral processor
agree on the grade of the incoming material, which can be a source of conflict between parties. Although a third party will be utilized
for any such conflict, any disagreements with mineral producers, or problems with the delivery of ore, could result in additional costs,
disruptions and other problems in the operation of our business.
U.S. FEDERAL LAWS
Under the U.S. Resource Conservation
and Recovery Act, companies such as ours may incur costs for generating, transporting, treating, storing, or disposing of hazardous waste.
Our permitted custom processing toll milling operations may produce air emissions, including fugitive dust and other air pollutants, from
stationary equipment, storage facilities, and the use of mobile sources such as trucks and heavy construction equipment which are subject
to review, monitoring and/or control requirements under the Federal Clean Air Act and state air quality laws. Permitting rules may impose
limitations on our production levels or create additional capital expenditures in order to comply with the rules.
The U.S. Comprehensive Environmental
Response Compensation and Liability Act of 1980, as amended (CERCLA) imposes strict joint and several liability on parties associated
with releases or threats of releases of hazardous substances. The groups who could be found liable include, among others, the current
owners and operators of facilities which release hazardous substances into the environment and past owners and operators of properties
who owned such properties at the time the disposal of the hazardous substances occurred. This liability could include the cost of removal
or remediation of the release and damages for injury to the surrounding property. We cannot predict the potential for future CERCLA liability
with respect to our property.
THE GLOBAL FINANCIAL MARKET MAY HAVE IMPACTS
ON OUR BUSINESS AND FINANCIAL CONDITION THAT WE CURRENTLY CANNOT PREDICT.
The global financial market,
especially the precious metal market and its market price fluctuations have, and may continue to have, an impact on our business and our
financial condition. We may face significant challenges if the price of the minerals we intend to process do not achieve or stay at adequate
price levels. Our ability to access the capital markets may be severely restricted at a time when we would like, or need, to access such
markets, which could have an impact on our flexibility to react to changing economic and business conditions. The market price of ores,
metals and precious metals could have an impact on any potential lenders or investors or on our customers, causing them to fail to meet
their obligations to us.
ITEM 2. PROPERTIES
On March 15, 2011, in an effort
to enter the precious metal toll milling business, we completed the Shea Exchange Agreement, whereby we acquired the Tonopah property,
consisting of land, buildings, mining tailings, a dormant milling facility, abandoned milling equipment and water permits.
Our Tonopah property consists
of 1,183 acres of land, buildings, mining tailings, a dormant milling facility, abandoned milling equipment and water permits. The Tonopah
property was transferred to Aurielle Enterprises Inc f/k/a Tonopah Milling and Metals Group, Inc. (“AE”), the Company’s
wholly owned subsidiary and then transferred to Tonopah Resources, Inc., a wholly owned subsidiary of AE.
During 2022, our corporate
office was relocated to 10567 West Cedar Drive, Suite 105, Lakewood, Colorado 80228-2039, a commercial office building owned and operated
by GPR’s affiliates. We believe that our facilities are adequate for our current needs and are in closer physical proximity to our
property.
ITEM 3. LEGAL PROCEEDINGS
Stephen E. Flechner v. Standard Metals Processing,
Inc.
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 has recognized the daily interest due from the date of the August
28, 2015 judgment through December 31, 2022, totaling $1,311,490, resulting in a total amount of $3,703,736 being included in the accrual
for settlement of lawsuits relating to this matter in the accompanying December 31, 2022 consolidated balance sheet.
On November 29, 2021, the
Company was notified that its majority shareholder, GPR, had executed definitive documents with Stephen Flechner to acquire his judgment
against the Company. Documents have been filed with the Court to reflect this acquisition.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON
EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock is quoted
on the OTC Market under the symbol “ACRG.” As of March 31, 2023, the last closing sale price of our common stock as reported
by OTCQB was $2.51 per share. The following table sets forth for the periods indicating the range of high and low closing sale prices
of our common stock:
| Period | |
High | | |
Low | |
| | |
| | |
| |
| Quarter Ended March 31, 2022 | |
$ | 8.50 | | |
$ | 4.40 | |
| Quarter Ended June 30, 2022 | |
$ | 11.75 | | |
$ | 7.50 | |
| Quarter Ended September 30, 2022 | |
$ | 8.95 | | |
$ | 1.75 | |
| Quarter Ended December 31, 2022 | |
$ | 3.14 | | |
$ | 1.50 | |
| | |
| | | |
| | |
| Quarter Ended March 31, 2021 | |
$ | 4.85 | | |
$ | 1.80 | |
| Quarter Ended June 30, 2021 | |
$ | 4.26 | | |
$ | 1.01 | |
| Quarter Ended September 30, 2021 | |
$ | 5.00 | | |
$ | 1.08 | |
| Quarter Ended December 31, 2021 | |
$ | 7.50 | | |
$ | 3.82 | |
The quotations from the OTC Market above reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not reflect actual transactions.
Transfer Agent
Our transfer agent is American
Stock Transfer & Trust Company, LLC, and is located at 6201 15th Avenue, Brooklyn, New York, NY 11219. Their telephone number is (718)
921-8124 and website is www.astfinancial.com.
Holders of Common Stock
As of April 5, 2023, there
were approximately 151 shareholders of record of our common stock. As of such date, 2,674,530 shares were issued and outstanding.
Dividends
We have never paid cash dividends
on our common stock and have no present intention of doing so in the foreseeable future. Rather, we intend to retain all future earnings
to provide for the growth of our Company. Payment of cash dividends in the future, if any, will depend, among other things, upon our future
earnings, requirements for capital improvements and financial condition.
Recent Sales of Unregistered Securities
During the year ended December
31, 2022, GPR, a related party, advanced $314,433 pursuant to a secured line of credit in direct payments on the Company’s behalf
to reduce certain accounts payable and operating expenses. The balance due GPR under this line of credit is comprised of principal of
$1,199,527 and accrued interest of $184,928 at December 31, 2022.
During the year ended December 31, 2021, GPR, a related party, advanced
$665,497 pursuant to a secured line of credit in direct payments on the Company’s behalf to reduce certain accounts payable and
operating expenses. The balance due GPR under this line of credit is comprised of principal of $885,095 and accrued interest of $77,172,
at December 31, 2021.
After the foregoing note conversions and advances received, there was
$1,299,527 of principal and $270,810 of accrued interest outstanding on convertible promissory notes payable at December 31, 2022, which
included a pre-existing $100,000 convertible note and $85,882 of related accrued interest in default, which was acquired by GPR in September
2021.
ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should
be read in conjunction with the Financial Statements of the Company and notes thereto included elsewhere in this Annual Report. See “Consolidated
Financial Statements and Supplementary Data.”
Cautionary Notice Regarding Forward Looking
Statements
Readers are cautioned that
the following discussion contains certain forward-looking statements and should be read in conjunction with the “Special Note Regarding
Forward-Looking Statements” appearing at the beginning of this Annual Report.
The information contained
in Item 7 contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Actual results may materially differ from those projected in the forward-looking
statements as a result of certain risks and uncertainties set forth in this report. Although management believes that the assumptions
made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions
will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.
We desire to take advantage
of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. This filing contains a number of
forward-looking statements, which reflect management’s current views and expectations with respect to our business, strategies,
products, future results and events, and financial performance. All statements made in this filing other than statements of historical
fact, including statements addressing operating performance, events, or developments which management expects or anticipates will or may
occur in the future, including statements related to distributor channels, volume growth, revenues, profitability, new products, adequacy
of funds from operations, statements expressing general optimism about future operating results, and non-historical information, are forward
looking statements. In particular, the words “believe,” “expect,” “intend,” “anticipate,”
“estimate,” “may,” variations of such words, and similar expressions identify forward-looking statements, but
are not the exclusive means of identifying such statements, and their absence does not mean that the statement is not forward-looking.
These forward-looking statements are subject to certain risks and uncertainties, including those discussed below. Our actual results,
performance or achievements could differ materially from historical results as well as those expressed in, anticipated, or implied by
these forward-looking statements. We do not undertake any obligation to revise these forward-looking statements to reflect any future
events or circumstances.
Readers should not place undue
reliance on these forward-looking statements, which are based on management’s current expectations and projections about future
events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions (including those described below),
and apply only as of the date of this filing. Our actual results, performance or achievements could differ materially from the results
expressed in, or implied by, these forward-looking statements. Factors which could cause or contribute to such differences include, but
are not limited to, the risks to be discussed in our Annual Report on form 10-K and in the press releases and other communications to
shareholders issued by us from time to time which attempt to advise interested parties of the risks and factors which may affect our business.
We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future
events, or otherwise.
Water Pollution Control Permit
Through the Company’s
subsidiaries, a Water Pollution Control Permit (“WPCP”) Application will need to be filed with the Nevada Department of Environmental
Protection (“NDEP”) Bureau of Mines and Mining Reclamation (“BMMR”) for the approval of the permits necessary
for a small-scale mineral processing facility planned for the Tonopah Property. The plant will perform laboratory testing, pilot testing,
and custom processing of precious metal ores and concentrates from mining industry clients. Processing of ore materials will employ standard
mineral processing techniques including gravity concentration, froth flotation and chemical leaching and carbon stripping.
The WPCP must be approved
prior to commencing the planned construction of our processing plant in Tonopah, Nevada.
In connection with the WPCP
application, NDEP suggested that we take the following actions: (i) retain a Nevada Certified Environmental Manager (“CEM”),
(ii) perform Meteoric Profile II water testing on ground water directly below the mill as well as surrounding wells located off site,
and (iii) determine baseline values of water using the Meteoric Profile II results. NDEP regulations require that the Company delay any
new construction planned for “metal extraction” until after the permits are in place.
Advanced Surveying & Professional
Services, a Professional Land Surveyor (“PLS”), completed surveys and testing of the Tonopah property required for the application
of our required permits. After completion of the survey, it was determined the property is 1,186 acres. The scope of work the PLS completed
includes: (i) setting a total of 19 permanent monuments at angle points along lines, (ii) setting eight permanent monuments locating US
Hwy 95, (iii) recording a professional map indicating longitude and latitude for all corners, and (iv) providing a digital map accessible
in AutoCAD software.
Site Preparation
We have completed the initial
grading of specific designated areas on the 40 undisturbed acres of land including clearing all vegetation, removing of all scrap metal,
and the excavation of the building pad for the preparation of the new 21,875 square foot processing plant and have completed the removal
of all the extra and unnecessary materials and old equipment that have accumulated on the land. We refurbished a trailer that will act
as our construction office.
Business Plan
The Company is re-examining
its next steps for developing a processing facility. In an effort to move the Company’s business plan forward, Management may evaluate
opportunities to acquire, license or joint venture with other parties, which may include related parties, involved in toll milling, processing,
or mining related activities. The Company is re-examining its next steps for developing a processing facility. In an effort to move the
Company’s business plan forward, Management may evaluate opportunities to acquire, license or joint venture with other parties,
which may include related parties, involved in toll milling, processing, or mining related activities, which may include GPR and its affiliated
entities including, but not limited to Sustainable Metal Solutions, LLC (See – “Recent Actions” above), NovaMetallix.
Inc., and BlackBear Natural Resources, LTD.
On March 27, 2020, the Company
engaged NovaMetallix. Inc. (“NMX”), a member of the Sustainable Metal Solutions Group, a GPR affiliate, to conduct a study
of the quantity and quality of our historic mine tailings, and the economic feasibility of processing them to reclaim their residual content
of gold, silver, and other valuable metals. NMX, a firm comprised of world class mining, geological and metallurgical engineering
professionals, is dedicated to the rapidly developing field of sustainable metal recovery. NMX has agreed to conduct the study of
the Company’s tailings in exchange for GPR’s agreement to underwrite its cost and expense, and the exclusive right to process
the tailings should their economic assessment prove positive. The terms of such processing to be mutually agreed upon in the future
based on the results of the assessment.
Reverse Stock Split
Effective May 18, 2021, the
Company effected a reverse stock split of the outstanding Common Stock, on the basis of one share
for every fifty shares currently issued and outstanding.
Results of Operations
Comparison of the Years Ended December 31,
2022, and December 31, 2021
Revenues
We had no revenues from any
operations for the years ended December 31, 2022 and 2021. Furthermore, we do not anticipate any significant future revenue until we have
sufficiently funded construction and begin operations.
General and Administrative
Expenses
General and administrative
expenses were $323,940 for the year ended December 31, 2022 as compared to $681,939 for the same period in 2021. For the year ended December
31, 2022, general and administrative expenses and professional fees were severely cut due to lack of funding. During the year ended December
31, 2021, the nature of expenses were relatively the same, however we were able to incur and pay normal professional and legal fees and
other necessary expenses due to greater availability of funds. We anticipate that future administration and operating expenses will increase
for fiscal 2023 as we continue to build the infrastructure to proceed with our planned custom processing toll milling services.
Other Income and Expenses
Each year we receive monthly payments of approximately $700 per month,
totaling $8,396 per year, from American Tower Corporation for a cellular tower located on our Tonopah land. In addition, during the year
ended December 31, 2022, the Company recognized gains due to the write off of numerous accrued claims that were no longer enforceable
or settled for less than face amount aggregating $15,137. There were similar no longer enforceable claims written off during the year
ended December 31, 2021, totaling $226,645.
Interest expense for the year
ended December 31, 2022, was $752,233 compared to $680,555 for the respective period in 2021. The $71,678 increase during 2022 compared
to 2021 is primarily due to interest due at rates ranging from 6% to 10% on notes payable to related parties and our increasing balances
of convertible promissory notes outstanding during both periods.
Liquidity and Capital Resources
Liquidity is a measure of
an entity’s ability to secure enough cash to meet its contractual and operating needs as they arise. We have funded our operations
and satisfied our capital requirements principally through increases in our LOC with GPR. We do not anticipate generating sufficient positive
cash flows from our operations to fund the next 12 months. We had a working capital deficit of $12,350,048, at December 31, 2022. Cash
was $1,251, at December 31, 2022, as compared to cash of $2,363 at December 31, 2021.
Our cash reserves will not
be adequate to meet our operational needs and thus, we need to raise additional capital to pay for our operational expenses and provide
for capital expenditures. Our basic operational expenses are currently approximately $32,000 per month, without regard to accrued interest
of approximately $63,000 per month. Above our basic monthly expenses, we estimate that we need $50,000,000 to begin limited toll milling
operations. If we are not able to raise additional working capital, we may have to cease operations altogether.
Recent Financings
During the year ended December
31, 2022, GPR, a related party, advanced $314,433 pursuant to a secured line of credit in direct payments on the Company’s behalf
to reduce certain accounts payable. The balance due GPR under this line of credit is comprised of principal of $1,199,527 and accrued
interest of $184,928 at December 31, 2022. The Company entered into an Amendment and Forbearance Agreement with GPR on January 5, 2023
wherein GPR agreed to: (a) increase the existing LOC from $5,000,000 due March 16, 2025 to $35,000,000 due March 16, 2027, (b) roll two
existing promissory notes purchased by GPR into the LOC resulting in the extinguishment of such notes as separate instruments, and (c)
to forebear until January 12, 2024, on exercising its foreclosure rights under its defaulted Senior Secured Note. The Company’s
Board of Directors approved a revision in the conversion price at which the LOC may convert into the Company’s common stock from
$1.65 per share to $1.05 per share, based upon the market price of the Company’s common stock over the 3 days preceding the agreement.
GPR is the Company’s majority shareholder and largest debtholder. GPR holds a senior secured interest in all of the assets of the
Company, including the stock of its subsidiary entities.
During the year ended December
31, 2021, GPR, a related party, advanced $665,498 in direct payments on the Company’s behalf, to reduce certain accounts payable
and operating expenses. The balance due GPR under this line of credit is comprised of principal of $985,095 and accrued interest of $85,831
at December 31, 2021.
Included in the foregoing
year-end balances was a pre-existing convertible note in default held by a non-affiliate third party with a principal balance of $100,000
and accrued interest of $71,671, which GPR purchased in September 2021.
Going Concern
The consolidated financial
statements contained in this annual report on Form 10-K have been prepared assuming that the Company will continue as a going concern.
The Company has accumulated losses from inception through the period ended December 31, 2022 of $106,530,496, and a working capital deficit
of $12,350,048, as well as negative cash flows from operating activities. Presently, the Company does not have adequate cash resources
to meet its debt obligations in the 12 months following the date of this filing. In addition, virtually all of the Company’s assets
are encumbered or are pledged under senior secured debt that is in default. These factors raise substantial doubt about the Company’s
ability to continue as a going concern. Management is in the process of evaluating various financing alternatives to finance its capital
requirements, as well as for general and administrative expenses. These alternatives include raising funds through public or private equity
markets and either through institutional or retail investors. Although there is no assurance that the Company will be successful with
its fund-raising initiatives, management believes that the Company will be able to secure the necessary financing as a result of ongoing
financing discussions with third party investors and existing shareholders.
The consolidated financial
statements do not include any adjustments that may be necessary should the Company be unable to continue as a going concern. The Company’s
continuation as a going concern is dependent on its ability to obtain additional financing as may be required and ultimately to attain
profitability. If the Company raises additional funds through the issuance of equity, the percentage ownership of current shareholders
could be reduced, and such securities might have rights, preferences or privileges senior to the rights, preferences and privileges of
the Company’s 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 its future plans for developing its business and achieving commercial
revenues. If the Company is unable to obtain the necessary capital, the Company may have to cease operations.
Working Capital Deficiency
| | |
December 31,
2022 | | |
December 31,
2021 | |
| Current assets | |
$ | 1,251 | | |
$ | 2,363 | |
| Current liabilities | |
| 12,351,299 | | |
| 11,299,771 | |
| Working capital deficiency | |
$ | (12,350,048 | ) | |
$ | (11,297,408 | ) |
Current assets remained stable between periods. The increase in current
liabilities is primarily due to an increase in accrued interest relating to the Company’s convertible debentures and notes payable,
as well as the increase of convertible debt balances as a result of increasing advances from GPR, a related party.
Cash Flows
| | |
Years Ended
December 31, | |
| | |
2022 | | |
2021 | |
| Net cash provided by (used in) operating activities | |
$ | (1,112 | ) | |
$ | 1,164 | |
| Net cash provided by investing activities | |
| --- | | |
| — | |
| Net cash provided by financing activities | |
| --- | | |
| — | |
| Increase (decrease) in cash | |
$ | (1,112 | ) | |
$ | 1,164 | |
Operating Activities
Net cash used by operating
activities was $1,112 for the year ended December 31, 2022, primarily due to the net loss for the year, net of expenses paid directly
by related party and increases in accruals for settlement of lawsuit and interest.
Net cash provided by operating
activities was $1,164 for the year ended December 31, 2021.
Investing Activities
For the year ended December
31, 2022, and 2021 the Company conducted no investing activities.
Financing Activities
The Company’s financing
during 2022 was from non-cash advances from a related party totaling $314,433, for expenses of the Company paid by such related party.
The Company’s financing during 2021 was from advances from a related party totaling $665,497, which were paid to certain vendors
on the Company’s behalf.
Off-Balance Sheet Arrangements
During the year ended December
31, 2022, we did not engage in any off-balance sheet arrangements as defined in item 303(a)(4) of the SEC’s Regulation S-K.
Effects of Inflation
We do not believe that inflation
has had a material impact on our business, revenues or operating results during the periods presented.
Critical Accounting Policies and Estimates
Our significant accounting
policies are more fully described in the notes to our audited consolidated financial statements included in our Annual Report on Form
10-K for the year ended December 31, 2022. We believe that the accounting policies below are critical for one to fully understand and
evaluate our financial condition and results of operations.
Impairment of Long-lived Assets
We are reviewing the property
and equipment, intangible assets subject to amortization and other long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset class may not be recoverable. Indicators of potential impairment include: an adverse change
in legal factors or in the business climate that could affect the value of the asset; an adverse change in the extent or manner in which
the asset is used or is expected to be used, or in its physical condition; and current or forecasted operating or cash flow losses that
demonstrate continuing losses associated with the use of the asset. If indicators of impairment are present, the asset is tested for recoverability
by comparing the carrying value of the asset to the related estimated undiscounted future cash flows expected to be derived from the asset.
If the expected cash flows are less than the carrying value of the asset, then the asset is considered to be impaired and its carrying
value is written down to fair value, based on the related estimated discounted cash flows. There were no impairment charges in the year
ended December 31, 2022, however, in 2019 we decided to combine the carrying value of our mining and mineral assets as they are inseparable
and depend upon each other in value creation.
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 December
31, 2022 and 2021. The Company recognizes interest and penalties on unrecognized tax benefits as well as interest received from favorable
tax settlements within income tax expense.
Recent Accounting Standards
During the year ended December
31, 2022 and through April 17, 2023, 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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
The information called for
by Item 8 is included following the “Index to Financial Statements” on page F-1 contained in this annual report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls
and procedures designed to provide reasonable assurance that information required to be disclosed in our reports filed pursuant to the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions
regarding required disclosures. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute,
assurance the objectives of the control system are met.
Under the supervision of,
and the participation of, our management, including our Chief Executive Officer and Chief Financial Officer, we have conducted an evaluation
of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)) as of the end of the period covered by this Annual Report on Form 10-K to ensure that information required
to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in Securities and Exchange Commission rules and forms, and is accumulated and communicated to our management
as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that the design and operation of our disclosure controls and procedures were not effective as of December
31, 2022, because of the identification of the material weaknesses in internal control over financial reporting described below. Notwithstanding
the material weaknesses that existed as of December 31, 2022, our Chief Executive Officer and Chief Financial Officer have each concluded
that the consolidated financial statements included in this Annual Report on Form 10-K present fairly, in all material respects, the financial
position, results of operations and cash flows of the Company and its subsidiaries in conformity with accounting principles generally
accepted in the United States of America (“GAAP”). We are currently taking steps to remediate such material weaknesses as
described below.
Management’s Report on Internal Control
over Financial Reporting
Our management is responsible
for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a set
of processes designed by, or under the supervision of, a company’s principal executive and principal financial officers, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with GAAP and includes those policies and procedures that:
| |
● |
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of our assets; |
| |
● |
Provide reasonable assurance our transactions are recorded as necessary to permit preparation of our financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and |
| |
● |
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
Because of its inherent limitations,
internal control over financial reporting may not prevent or detect misstatements. It should be noted that any system of internal control,
however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be
met. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and
with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an assessment
of the effectiveness of our internal control over financial reporting based on criteria established in “Internal Control-Integrated
Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), as of December 31, 2009.
As a result of our continued
material weaknesses described below, management has concluded that, as of December 31, 2022, our internal control over financial reporting
was not effective based on the criteria in “Internal Control-Integrated Framework” issued by COSO.
Material Weaknesses in Internal Control over
Financial Reporting
A material weakness is a control
deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of annual
or interim financial statements will not be prevented or detected. In connection with the assessment, management identified the following
control deficiencies, which were previously identified, that still represent material weaknesses at December 31, 2022:
| |
● |
The Company, at times in the past prior to the period covered by this annual statement, entered into material transactions without timely obtaining the appropriate signed agreements, stock certificates and board approval prior to releasing cash funds called for by the transaction. Management believes the approval process currently in place is sufficient to alleviate any misappropriation of funds and will change procedures if and when circumstances indicate they are needed. Although the Company has taken steps to prevent this from happening by utilizing an escrow agent, agreements entered into by prior management will continue to cause an issue until such prior agreements terminate or expire. |
| |
● |
Management did not design and maintain effective control relating to the quarter end closing and financial reporting process due to lack of evidence of review surrounding various account reconciliations and properly evidenced journal entries. Due to the Company’s limited resources, the Company has insufficient personnel resources and technical accounting and reporting expertise to properly address all of the accounting matters inherent in the Company’s financial transactions. Additionally, though the Company has recently formed a formal audit committee, the Company has not yet formalized processes and controls that would provide proper board oversight role within the financial reporting process. Management continues to search for additional board members that are independent and can add financial expertise and intends to formalize oversight processes in this area in an effort to remediate part of this material weakness. |
| |
● |
The Company’s change in management, board members and officer positions resulting in changes of the responsible person for certain duties has caused delays in the timely review of financial data and banking information. The Company has very limited review procedures in place. This material weakness, previously identified, continued in 2022 as a result of additional management changes. Management plans to establish a more formal review process by the board members in an effort to reduce the risk of fraud and financial misstatements. |
We are in the process of establishing
certain steps in response to the identification of these material weaknesses that should result in certain changes in our internal control
over financial reporting, but due to the Company’s limited funds and inability to add certain staff personnel, the changes may be
limited and may also not be completely effective. There were no additional material weaknesses noted during the year ended December 31,
2022.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Set forth below are the names
of all directors and executive officers of the Company, their respective ages and all positions and offices with the Company held by each
person as of December 31, 2022:
| Name |
|
Age |
|
Positions with the Company |
| J. Bryan Read |
|
61 |
|
Chief Executive Officer, Director, and Secretary |
| Sharon L. Ullman |
|
76 |
|
Chief Financial Officer, Chief Administrative Officer and Director |
Biographies
J. Bryan Read, Lt. Col, US Army (R) – Chief Executive Officer
Mr. Read, appointed Chief
Executive Officer on December 13, 2016, honorably served as an officer and a commander in the United States Army. He has over twenty years
professional military experience in leadership management, military logistics, training operations, missile defense, property management,
diplomacy, and supply systems. He has commanded military organizations from platoon up through battalion level. As a military attaché
assigned to the State Department and an overseas United States Embassy in the Former Soviet Union, he regularly planned and conducted
meetings with high level foreign government officials and ministries on behalf of the United States involving important defense and commerce
related matters. He has served as the Russian language Interpreter and team leader for the U.S. Humanitarian Special Operations Mission
to Semipalatinsk, Kazakhstan. Additionally, he was a professor at the United States Military Academy at West Point.
Bryan has served as a business
development executive officer and independent business development consultant for variety of companies and industries. He has introduced
businesses to private and government sector opportunities by utilizing operations research, analytics, and networking. The goal was to
present revenue generating opportunities as well as merger and acquisition opportunities. His duties included negotiating terms of agreement
for client projects, analyzing business models, developing marketing strategies, and reviewing P&L. His clients’ products and
services have included the following industries: renewable energy, mining, precious metals processing, B2B connectivity/management services,
e-mail encryption technology software, EVM software, steel manufacturing technology, construction, antennas, smart grid technologies,
computer simulations, and sports recovery nutritional products. He has also served as a business development liaison between Bio-Pharmaceutical
companies in order to coordinate clinical research for FDA approval. He has regularly organized and facilitated meetings for clients with
fortune 500 senior management, government agencies, and congressional staffs. His efforts have a proven track record of producing contracts,
teaming arrangements, alliances, and reseller agreements.
As a member of the American
Council of Renewable Energy (ACORE), Mr. Read has served on the Power and Infrastructure Committee and the Defense Initiatives Energy
Committee. These committee positions allowed him to regularly provide input to elected officials on future energy policy. He regularly
attends national energy conferences to connect and share ideas with public and private leaders in the energy community. Bryan is also
the President and Founder of Keystone General Contracting and Technologies LLC., a Veteran Owned Small Business.
Mr. Read has a master’s
degree from Cornell University and is a graduate of the United States Army Command and General Staff College. He was a Senior Fellow at
the George C. Marshall European Center for Security Studies in Garmisch, Germany. He earned his bachelor’s degree from the University
of Alabama.
Sharon L. Ullman – Chief Financial Officer
Sharon L. Ullman was appointed
to our board of directors on March 18, 2011, in connection with the Shea Exchange Agreement. Effective December 16, 2011, Ms. Ullman was
appointed to serve as the Company’s interim Chief Executive Officer and Executive Chairperson of the Board. On October 9, 2012,
the Board of Directors voted to remove “interim” from her title and approve her position as Chief Executive Officer and Chairman
of the Board. On February 6, 2014, the Board of Directors voted to appoint Ms. Ullman the Company’s President and Executive Chairwoman
of the Board of Directors. On August 20, 2015 Ms. Ullman stepped down as CEO and President and took on the role of Chief Administrative
Officer, she was appointed as the Interim Chief Financial Officer on October 26, 2015. Her appointment as CFO and Chief Administrative
Officer was confirmed by the Board of Directors on April 4, 2016 and she was also appointed as the Treasurer.
Since June 2010, Ms. Ullman
has served as the Manager of Afignis, LLC (“Afignis”), a New York limited liability company, which was established to identify
and develop mining, natural resource and agricultural opportunities on a global basis, with a focus on emerging markets. Afignis has made
several investments, including currently holding approximately 12% of our outstanding common stock and the acquisition of mining and agricultural
interests in Sierra Leone, Africa. The Sierra Leone investment is managed by Afignis Sierra Leone Limited, a Sierra Leone company, which
is a strategic partnership between the Mende tribe and Afignis. Ms. Ullman has been the President of Afignis Sierra Leone Limited since
2010. Afignis Sierra Leone Limited is involved in gold and diamond mining operations and had interests in large parcels of arable land
for agriculture including acres of cacao and coffee plantations.
Ms. Ullman is active in philanthropic
and government relations through her work as the Founder, President and Chief Executive Officer of S. L. Ullman & Associates, Inc.,
formed in 2007 as a private consulting firm, and has been recognized for her achievements in these areas.
Ms. Ullman served as the Executive
Director and President of the 23rd Street Association (the “Association”). Through her efforts, the Association was involved
in the development of Project 9A, the Hudson River Waterfront and the High Line. She was a prominent leader in the revitalization of historic
Madison Square Park, helping to raise millions for its restoration and maintenance. She successfully led the effort to establish the Flatiron/23rd
Street Partnership, a Business Improvement District in the Flatiron/23rd Street area. Her efforts as the founding member and member of
the Board, helped reinforce the Flatiron/23rd Street area’s growing stature as one of the city’s premier destination spots.
Ms. Ullman has worked with
all levels of government and government agencies and has been widely acknowledged for her contributions. Her numerous awards include being
voted a top 100 New Yorker. She was written into the congressional record with remarks in recognition of her outstanding leadership by
congresswoman Carolyn Maloney in 2004 and 2007, she received letters of recognition and outstanding citizen citations from President Bill
Clinton, Governor George Pataki, Mayors Michael Bloomberg and Rudolf Giuliani, and she received letters of recognition from then senator
Hillary Rodham Clinton and Charles E. Schumer.
Ms. Ullman has been awarded
the Outstanding Citizen Award from Speaker Christine Quinn, Council of the City of New York, and letters of recognition from State Senators,
State Assembly Members, City Council Members and Police Commissioners. She received the Tilden Humanitarian Award and the Humanitarian
of the Year Award from Concerned Citizen’s Speak. She has participated in Mayor Bloomberg’s “Friday Morning Breakfasts”
for outstanding community leaders to discuss important issues affecting the city.
Family Relationships
There are no other family
relationships between or among any of our directors and executive officers and any incoming directors or executive officers.
Code of Ethics
We adopted a Code of Ethics
that applies to our principal executive officer, principal financial officer and persons performing similar functions on October 5, 2012.
Compliance with Section 16(a) of the Securities
Exchange Act of 1934
Section 16(a) of the Securities
Exchange Act of 1934 requires our directors, officers and holders of more than 10% of our common stock to file with the Securities and
Exchange Commission initial reports of ownership and reports of changes in ownership of our common stock and other equity securities.
Based solely upon our review of such filings, we are not aware of any failures by such persons to make any such filings on a timely basis.
Audit Committee, Compensation Committee and
Financial Expert
The Company does not currently
utilize a formal audit committee. There were no audit committee meetings held during 2022. Financial information relating to quarterly
reports was disseminated to all board members for review. The audited financial statements for the years ended December 31, 2022 and 2021
were provided to each member of the board in which any concerns by the members were directed to management and the auditors. The Company
does not currently utilize a compensation committee. There were no compensation committee meetings during 2022 and no actions taken by
written consent
ITEM 11. EXECUTIVE COMPENSATION
General Philosophy
Our Board of Directors is
responsible for establishing and administering the Company’s executive and director compensation.
Executive Compensation
The following table summarizes
the compensation of each named executive officer for the fiscal years ended December 31, 2022, and 2021 awarded to or earned by (i) each
individual serving as our principal executive officer and principal financial officer of the Company and (ii) each individual that served
as an executive officer of the Company at the end of such fiscal years who received compensation in excess of $100,000.
| |
|
Annual
Compensation |
|
|
|
|
Option |
|
|
All Other |
|
|
Total |
|
| Name and Principal Position |
|
Year |
|
Salary |
|
|
Bonus |
|
|
Awards (1) |
|
|
Compensation |
|
|
($) |
|
| J. Bryan Read, |
|
2022 |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
| Chief Executive Officer |
|
2021 |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Sharon L. Ullman |
|
2022 |
|
$ |
|
|
|
$ |
— |
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
| Chief Financial Officer and Director |
|
2021 |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
| (1) |
The amounts shown are the aggregate grant date fair values of these awards computed in accordance with Financial Accounting Standards Board (“FASB”) guidance now codified as Accounting Standards Codification (“ASC”) FASB ASC Topic 718, “Stock Compensation” (formerly under FASB Statement No. 123(R)). |
Employment Agreements
We have not entered into any severance or change
of control provisions with any of our other executive officers.
Equity Compensation Plans
No options were exercised
by our named executive officers during the year ended December 31, 2022. At December 31, 2022 the executive officers held no options or
warrants.
Director Compensation
Members of our board who are
also employees of ours receive no compensation for their services as directors. Non-employee directors are reimbursed for all reasonable
and necessary costs and expenses incurred in connection with their duties as directors. In addition, we issue options to our directors
as determined from time to time by the Board.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
The following information
sets forth the number and percentage of shares of the Company’s common stock owned beneficially, as of April 13, 2023, by any person,
who is known to the Company to be the beneficial owner of five percent or more of the Company’s common stock, and, in addition,
by each director and each executive officer of the Company, and by all directors and executive officers as a group.
Information as to beneficial
ownership is based upon statements furnished to the Company by such persons and the shareholder list provided by the Company’s transfer
agent, American Stock Transfer & Trust Company, LLC, as of April 13, 2023.
| Name and Address | |
Amount of
Beneficial
Ownership (1) | | |
Percentage of
Class % | |
| | |
| | |
| |
| J. Bryan Read | |
| 3,000 | | |
| * | |
| 611 Walnut Street | |
| | | |
| | |
| Gadsden, AL 35901 | |
| | | |
| | |
| | |
| | | |
| | |
| All directors and officers as a group (1 person) | |
| 3,000 | | |
| * | |
| | |
| | | |
| | |
| Granite Peak Resources, LLC. | |
| 1,441,926 | | |
| 53.9 | % |
| 30 N Gould Street, Suite R | |
| | | |
| | |
| Sheridan, WY 82081 | |
| | | |
| | |
| (1) |
Except as otherwise indicated, each person possesses sole voting and investment power with respect to the shares shown as beneficially owned. Shares are deemed owned in the same percentage as the individual’s ownership in the entity owning such shares. |
Equity Compensation Plans
The following table sets forth
certain information regarding equity compensation plan information as of December 31, 2022:
| Plan category | |
Number of
securities
to be issued
upon
exercise of
outstanding
options (a) | | |
Weighted-
average
exercise
price of
outstanding
options | | |
Number of
securities
remaining
available for
future
issuance
under
equity
compensation
plans
(excluding
securities
reflected in
column (a)
(b) | |
| Equity compensation plans approved by security holders | |
| 65,000 | (1) | |
$ | 62.50 | | |
| 1,460,000 | |
| | |
| | | |
| | | |
| | |
| Equity compensation plans not approved by security holders | |
| — | | |
$ | — | | |
| — | |
| | |
| | | |
| | | |
| | |
| Total | |
| 65,000 | | |
$ | 62.50 | | |
| 1,460,000 | |
| (1) |
granted pursuant to the 2014 Option Plan, for individual grants. See the notes to the financial statements. |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The following describes certain
relationships and related transactions that we have with persons deemed to be affiliates of ours. We believe that each of the transactions
described below were on terms at least as favorable to our Company as we would have expected to negotiate with unaffiliated third parties.
Granite Peak Resources, LLC
During March 2019, the Company
was informed that a change of control of the Company had occurred. GPR, through its members (including Pure Path Capital Management LLC)
acquired 69,464,434 shares of common stock (including 4,500,000 options to purchase common stock). The members transferred their shares
of common stock of the Company in exchange for a pro-rata ownership interest in GPR. GPR also acquired the senior secured creditor position
previously held by Pure Path Capital 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 $ 1,690,183 as of December 31, 2022, which is in default.
The members of GPR are listed in the Schedule 13D filed by GPR on March 29, 2019. GPR has not communicated to the Company any plans to
change any of the current officers or directors or governing documents and has expressed the purpose of its acquisition is to assist the
Company execute on its business plan and resolve its current obligations and other claims. During January and September 2020, GPR purchased
another 648,648 and 375,070 shares, respectively, and 2,600 in October 2022, in private transactions. As of the date of this filing, GPR
is the beneficial owner of 53.9% of the Company’s common stock and is the Company’s largest secured creditor.
On March 16, 2020, the Company
executed a Line of Credit (“LOC”) with GPR evidenced by a promissory note. The LOC is for 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 Company’s redirection and all requests for funds may be approved or disapproved
in GPR’s sole discretion. The LOC bears interest at 10% per annum, is convertible into shares of the Company’s common stock
at a per share price of $20.00 based on the last closing sale price and is secured by the real and personal property GPR already has under
lien and in pledge. During the year ended December 31, 2022 GPR, a related party, advanced $314,433 pursuant to the LOC in direct payments
on the Company’s behalf to reduce certain accounts payable. The balance due GPR under this LOC is comprised of principal of $1,199,527
and accrued interest of $184,928, at December 31, 2022.
During the year ended December
31, 2021, GPR advanced $665,497 in direct payments on the Company’s behalf, to reduce certain accounts payable and operating expenses.
The balance due GPR under this LOC is comprised of principal of $885,095 and accrued interest of $77,172, at December 31, 2021.
The Company entered into an
Amendment and Forbearance Agreement with GPR on January 5, 2023 wherein GPR agreed to: (a) increase the existing LOC from $5,000,000 due
March 16, 2025 to $35,000,000 due March 16, 2027, (b) roll two existing promissory notes purchased by GPR into the LOC resulting in the
extinguishment of such notes as separate instruments, and (c) to forebear until January 12, 2024, on exercising its foreclosure rights
under its defaulted Senior Secured Note. The Company’s Board of Directors approved a revision in the conversion price at which the
LOC may convert into the Company’s common stock from $1.65 per share to $1.05 per share, based upon the market price of the Company’s
common stock over the 3 days preceding the agreement. GPR is the Company’s majority shareholder and largest debtholder. GPR holds
a senior secured interest in all of the assets of the Company, including the stock of its subsidiary entities.
Tina Gregerson/Tina Gregerson Family Properties,
LLC
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 officer and 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 upon default the interest rate increased to 12% per annum.
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 (exercise price does not reflect the reverse stock split). The Note is in default and the
warrant has expired. The Company was informed in September 2021 that GPR had purchased Ms. Gregerson’s entire interest which amounted
to $477,500 of principal plus accrued interest of $296,788 at December 31, 2022, and $477,500 of principal plus accrued interest of $258,588
at December 31, 2021.
Director Independence
Our securities are quoted
on the OTC Market, which does not have any director independence requirements. We evaluate independence by the standards for director
independence established by applicable laws, rules, and listing standards including, without limitation, the standards for independent
directors established by The New York Stock Exchange, Inc., the NASDAQ National Market, and the Securities and Exchange Commission. Subject
to some exceptions, these standards generally provide that a director will not be independent if (a) the director is, or in the past three
years has been, an employee of ours; (b) a member of the director’s immediate family is, or in the past three years has been, an
executive officer of ours; (c) the director or a member of the director’s immediate family has received more than $120,000 per year
in direct compensation from us other than for service as a director (or for a family member, as a non-executive employee); (d) the director
or a member of the director’s immediate family is, or in the past three years has been, employed in a professional capacity by our
independent public accountants, or has worked for such firm in any capacity on our audit; (e) the director or a member of the director’s
immediate family is, or in the past three years has been, employed as an executive officer of a company where one of our executive officers
serves on the compensation committee; or (f) the director or a member of the director’s immediate family is an executive officer
of a company that makes payments to, or receives payments from, us in an amount which, in any twelve-month period during the past three
years, exceeds the greater of $1,000,000 or two percent of that other company’s consolidated gross revenues. Based on these standards,
we have determined that our directors are not independent directors.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Our Board of Directors appointed Turner, Stone & Company, L.L.P.
(“Turner”) PCAOB Auditor ID76 to audit our consolidated financial statements for the years ended December 31, 2022, and 2021.
The following tables set forth the fees billed to the Company for professional services rendered by Turner for the years ended December
31, 2022, and 2021:
| Services | |
2022 | | |
2021 | |
| Audit fees | |
$ | 35,200 | | |
$ | 34,035 | |
| Audit related fees | |
| | | |
| — | |
| Tax fees | |
| | | |
| 0 | |
| All other fees | |
| | | |
| — | |
| Total fees | |
$ | 35,200 | | |
$ | 34,035 | |
Audit Fees
The aggregate fees billed
are for professional services rendered by Turner for the audit of the Company’s annual consolidated financial statements and review
of consolidated financial statements included in the Company’s Form 10-K and 10-Qs for 2022 and 2021, and services that are normally
provided by the accountant in connection with statutory and regulatory filings or engagements for the years ended December 31, 2022 and
2021.
Audit-Related Fees
There were no fees billed in each of the last two years for assurance
and related services by the principal accountant that are reasonably related to the performance of the audit or review of the Company’s
financial statements.
Tax Fees
There were no fees billed in each of the last two years for professional
services rendered by the principal accountant for tax compliance, tax advice, and tax planning other than as presented in the table above.
All Other Fees
There were no other fees billed in each of the last two years for products
and services provided by the principal accountant, other than the services reported above.
Pre-Approval Policies and Procedures
The Company does not currently
utilize a formal audit committee as it has yet to formalize processes and controls that would provide proper Board oversight. Our Board
approves each engagement for audit or non-audit services before we engage our independent auditor to provide those services. The Board
has not established any pre-approval policies or procedures that would allow our management to engage our independent auditor to provide
any specified services with only an obligation to notify the audit committee of the engagement for those services. None of the services
provided by our independent auditors for fiscal year 2022 were obtained in reliance on the waiver of the pre-approval requirement afforded
in SEC regulations.
The accompanying footnotes are an integral part
of these consolidated financial statements.
The accompanying footnotes are an integral part
of these consolidated financial statements.
The accompanying footnotes are an integral part
of these consolidated financial statements.
The accompanying footnotes are an integral part
of these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
NOTE 1 – NATURE OF BUSINESS
American Clean Resources Group, Inc. f/k/a Standard
Metals Processing, Inc. (“we,” “us,” “our,” “ACRG” or the “Company”) is an
exploration stage company, incorporated in Nevada having offices in Lakewood, Colorado and through its subsidiary, a property in Tonopah,
Nevada. The business plan is to purchase equipment and build a facility on the Tonopah property to serve as a permitted custom processing
toll milling facility (which includes an analytical lab, pyrometallurgical plant, and hydrometallurgical recovery plant).
The Company plans to perform permitted custom
processing toll milling which is a process whereby mined material is crushed and ground into fine particles to ease the extraction of
any precious minerals contained therein, such as minerals in the gold, silver, and platinum metal groups. Custom milling and refining
can include many different processes that are designed specifically for each ore load and to maximize the extraction of precious metals
from carbon or concentrates. These toll-processing services also distil, dry, mix, or mill chemicals and bulk materials on a contractual
basis and provide a chemical production outsourcing option for industrial companies, which lack the expertise, capacity, or regulatory
permits for in-house production.
We are required to obtain several permits before
we can begin construction of a small-scale mineral processing facility to conduct permitted processing toll milling activities and construction
of the required additional buildings and well relocation necessary for us to commence operations.
Going Concern
The accompanying consolidated financial statements have been prepared
in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), 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 year ended December 31, 2022, the Company incurred net losses from operations of $1,052,640. At December 31, 2022, the Company
had an accumulated deficit of $106,530,496 and a working capital deficit of $12,350,048. In addition, virtually all of the Company’s
assets are encumbered or pledged under a senior secured convertible promissory note payable to a related party that is in default. These
circumstances raise substantial doubt about the Company’s ability to continue as a going concern. Our ability to continue as a going
concern is dependent on our ability to raise the required additional capital or debt financing to meet short and long-term operating requirements.
During the year ended December 31, 2022, the Company had $314,433 of expenses that were paid directly by GPR, a related party and the
Company's convertible note line of credit with GPR was increased by this same amount. (See Note 6). 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 ACRG, and its wholly owned subsidiary Aurielle Enterprises, Inc., (f/k/a Tonopah Milling and Metals Group,
Inc.) and its wholly owned subsidiaries Tonopah Custom Processing, Inc., and Tonopah Resources, Inc. All significant intercompany
transactions, accounts and balances have been eliminated in consolidation.
Basis of Presentation
The accompanying consolidated financial statements
of the Company have been prepared using the accrual method of accounting in accordance with U.S. GAAP and considering the requirements
of the United States Securities and Exchange Commission.
Cash
We maintain our cash in high-quality financial institutions. The balances,
at times, may exceed federally insured limits, however the Company has not experienced any losses with respect to uninsured balances.
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 annually at a minimum. 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
Preparing financial statements in conformity with U.S. GAAP 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 December 31, 2022, we have recorded no revenues from custom permitted
processing toll milling. If we achieve revenue generation, the Company plans to report such revenues consistent with ASC Topic 606 Revenues
from Contracts with Customers.
Financial Instruments
The carrying amounts for all financial instruments
approximates fair value. The carrying amounts for cash, accounts payable and accrued liabilities approximated fair value because of the
short maturity of these instruments. The fair value of short-term debt approximated the carrying amounts based upon the expected borrowing
rate for debt with similar remaining maturities and comparable risk.
Loss per Common Share
Basic earnings (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 earnings 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 December 31, 2022 and 2021, the number of
equivalent shares of convertible notes payable of 846,499 and 590,387 respectively, 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.
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
consolidated 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 December 31, 2022
and 2021. The Company recognizes interest and penalties on unrecognized tax benefits as well as interest received from favorable tax settlements
within income tax expense.
Recent Accounting Standards
During the year ended December 31, 2022, and through April 14, 2023,
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 consolidated
balance sheet date of December 31, 2022, through the date which the consolidated financial statements were issued. Based upon the review,
other than described in Note 11 – Subsequent Events, the Company did not identify any recognized or non-recognized subsequent events
that would have required adjustment or disclosure in the consolidated financial statements.
NOTE 3 – MINING AND MINERAL 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 has continued
to assess the realizability of its mining and mineral rights. Based on an assessment the Company conducted during 2021, the Company decided
the combined carrying value of its land, mineral rights, and water rights of $3,883,524 was fairly stated and not exposed to impairment.
NOTE 4 – Senior
Secured CONVERTIBLE Promissory Note PAYABLE, related party
On October 10, 2013, a Senior Secured Convertible
Promissory Note (the “Secured Note”) for up to $2,500,000 was issued to Pure Path Capital Management Company, LLC (“Pure
Path”) pursuant to a Settlement and Release Agreement. The note had an original principal balance of $1,933,345, with a maturity
date of April 10, 2015, and bears interest at 8% per annum. The settlement agreement included the issuance to Pure Path of 27,000,000
of the Company’s common shares, resulting in Pure Path becoming a related party. Upon an event of default additional interest will
accrue at the rate equal to the lesser of (i) 15% per annum in addition to the Interest Rate or (ii) the highest rate permitted by applicable
law, per annum (the “Default Rate”). The Company has obtained a waiver on the default rate interest, allowing the 8% interest
rate to remain in effect during the default on the Secured Note. The Secured Note is securitized by any and all of Borrower’s tangible
or intangible assets, already acquired or hereinafter acquired, including but not limited to: machinery, inventory, accounts receivable,
cash, computers, hardware, land and mineral rights, etc.
The outstanding principal balance on the Secured Note was $2,229,187
as of both December 31, 2022 and 2021, with related accrued interest of $1,689,685 and $1,509,542, respectively which is included in accrued
interest, related party in the accompanying consolidated balance sheets. In March 2019, Pure Path’s interest was acquired by GPR.
The Secured Note is in default.
The Company entered into an Amendment and Forbearance
Agreement with GPR on January 5, 2023 wherein GPR agreed to: (a) increase the existing LOC from $5,000,000 due March 16, 2025 to $35,000,000
due March 16, 2027, (b) roll two existing promissory notes purchased by GPR into the LOC resulting in the extinguishment of such notes
as separate instruments, and (c) to forebear until January 12, 2024, on exercising its foreclosure rights under its defaulted Senior Secured
Note. The Company’s Board of Directors approved a revision in the conversion price at which the LOC may convert into the Company’s
common stock from $1.65 per share to $1.05 per share, based upon the market price of the Company’s common stock over the 3 days
preceding the agreement. GPR is the Company’s majority shareholder and largest debtholder. GPR holds a senior secured interest in
all of the assets of the Company, including the stock of its subsidiary entities.
NOTE 5 – PROMISSORY NOTES PAYABLE – RELATED PARTY
On February 11, 2015, the Company issued an unsecured promissory note
(the “TG Note”) to Tina Gregerson Family Properties, LLC, an entity controlled by a former director of the Company. The TG
Note for up to $750,000, was provided in tranches. Maturity of each tranche is one year from the date of receipt. Under the terms of the
TG 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. Interest accrues at 8% per annum on
each tranche. Accrued interest was $296,837 and $258,637 as of December 31, 2022 and 2021, respectively. The TG Note is in default and
was purchased from Ms. Gregerson by GPR, the Company’s majority shareholder in September 2021.
NOTE
6 – CONVERTIBLE PROMISSORY NOTES PAYABLE
On March 16, 2020 the Company executed a Line of Credit (“LOC”)
with GPR, related party, evidenced by a promissory note. The LOC is for 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 Company’s redirection and all requests for funds may be approved or disapproved in GPR’s sole discretion.
The LOC bears interest at 10% per annum, is convertible into shares of the Company’s common stock at a per share price of $0.04
based on the last closing sale price on the date of execution and will be secured by the real and personal property GPR already has under
lien. During the year ended December 31, 2022, GPR, advanced $314,433 pursuant to the LOC in direct payments on the Company’s behalf,
to pay certain operating expenses of the Company. At December 31, 2022, the balance due GPR under the LOC is $1,199,527 principal and
$184,928 accrued interest.
During the year ended December
31, 2021, GPR advanced $665,497 pursuant to a secured line of credit in direct payments on the Company’s behalf to reduce certain
accounts payable and operating expenses. The balance due GPR under this line of credit is comprised of principal of $885,095 and accrued
interest of $77,172, at December 31, 2021.
After the foregoing activity, there was $1,299,527 of principal and
$270,810 of accrued interest outstanding on convertible promissory notes payable at December 31, 2022. Included in the foregoing
year-end balances was a pre-existing convertible note in default held by a non-affiliate third party with a principal balance of $100,000
and accrued interest $85,882 which GPR purchased in September 2021.
NOTE 7 – SERIES A PREFERRED STOCK
The Series A Preferred Stock is presented as mezzanine equity
due to its rights and preferences.
Attributes of Series A Preferred Stock include but are not limited to the following:
Distribution in Liquidation
The Series A Preferred Stock has a liquidation
preference of $10,000,000, payable only upon certain liquidity events or upon achievement of a market value of our equity equaling $200,000,000
or more. Upon any liquidation, dissolution or winding up of the Company, and after paying or adequately providing for the payment of all
its obligations, the remainder of the assets of the Company shall be distributed, either in cash or in kind, first pro rata to the holders
of the Series A Preferred Stock in an amount equal to the Liquidation Value (as described below); then, to any other series of Preferred
Stock, until an amount to be determined by a resolution of the Board of Directors prior to issuances of such Preferred Stock, has been
distributed per share, and, then, the remainder pro rata to the holders of the Common Stock. Upon the occurrence of any Liquidation Event
(as defined below), each holder of Series A Preferred Stock will receive a payment equal to the Original Issue Price for each share of
Series A Preferred Stock held by such holder (the “Liquidation Value”). A “Liquidation Event” will have occurred
when:
| ● | The Company has an average market capitalization (calculated by adding the value of all outstanding shares of Common Stock valued at the Company’s closing sale price on the OTC Market or other applicable bulletin board or exchange, plus the value of the outstanding Series A Preferred Stock at the Original Issue Price per share) of $200,000,000 or more over any 90 day period. The holders of the Series A Preferred Stock would have the right, for 30 days after the end of such qualifying 90 day measurement period, to require the Company to purchase the Series A Preferred Stock for an amount equal to the Liquidation Value. |
| ● |
Any Liquidity Event in which the Company receives proceeds of $50,000,000 or more. For purposes hereof, a “Liquidity Event” means any (a) liquidation, dissolution or winding up of the Company; (b) acquisition of the Company by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger, share exchange, share purchase or consolidation) provided that the applicable transaction shall not be deemed a liquidation unless the Company’s stockholders constituted immediately prior to such transaction hold less than 50% of the voting power of the surviving or acquiring entity; or (c) the sale, lease, transfer or other disposition, in a single transaction or series of related transactions, by the Company or any subsidiary of the Company of all or substantially all the assets of the Company and its subsidiaries taken as a whole, or the sale or disposition (whether by merger or otherwise) of one or more subsidiaries of the Company if substantially all of the assets of the Company and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries. |
Written notice of any Liquidation Event (the “Liquidation
Notice”) shall be given by mail, postage prepaid, or by facsimile to non-U.S. residents, not less than five days prior to the anticipated
payment date state therein, to the holders of record of Series A Preferred Stock, such notice to be addressed to each such holder at its
address as shown by the records of the Company. The Liquidation Notice shall state (i) the anticipated payment date, and (ii) the total
Liquidation Value available for distribution to Series A Preferred Stock shareholders upon the occurrence of the Liquidation Event.
Redemption
The Series A Preferred Stock may be redeemed in
whole or in part as determined by a resolution of the Board of Directors at any time, at a price equal to the Liquidation Value.
Voting Rights
Shares of Series A Preferred Stock shall have
no rights to vote on any matter submitted to a vote of shareholders, except as required by law, in which case each share of Series A Preferred
Stock shall be entitled to one vote.
Conversion Rights
Holders of Series A Preferred Stock will have
no right to convert such shares into any other equity securities of the Company.
NOTE 8 - Common Stock
Common Stock issued
on exercise of stock option
None.
Sale of Common Stock
None.
Option Grants
At December 31, 2022 and 2021, there were no option
grants issued, cancelled, or outstanding.
Common Stock Purchase Warrants
For warrants granted to non-employees in exchange
for services, the Company recorded the fair value of the equity instrument using the Black-Scholes pricing model unless the value of the
services is more reliably measurable.
At December 31, 2022 and 2021, there were no stock
purchase warrants issued, cancelled, or outstanding.
The aggregate intrinsic value of the outstanding
and exercisable warrants at December 31, 2022 and 2021, respectively, was $0, as there are no outstanding and exercisable warrants.
Reverse Stock Split of Common Stock
Effective May 18, 2021, the Company
effected a reverse stock split of the outstanding Common Stock on the basis of one share for every fifty shares issued and outstanding
at that date. The reverse stock split has been retroactively reflected in all outstanding common share amounts in the accompanying consolidated
financial statements.
NOTE 9 – COMMITMENTS AND CONTINGENCIES
Merger with SMS
On January 10, 2022 the Company executed a definitive
agreement to acquire a controlling interest in Sustainable Metal Solutions LLC (“SMS”). The purchase price for the controlling
interest in SMS will be determined based upon the price of ACRG common stock on the date of closing, such date to be decided by the Parties
in good faith after all conditions precedent are met. SMS is an American multi-company environmental development platform focused on producing
carbon neutral precious metals and minerals thereby driving American mineral independence while revitalizing the environment and minimizing
the impacts of climate change. The business of SMS is consistent with the Company’s posture to acquire, license or joint venture
with other parties involved in toll milling, processing, or mining related activities, which may include GPR and its affiliated entities,
including, but not limited to, NovaMetallix. Inc., and BlackBear Natural Resources, LTD.
Legal Matters
Stephen E. Flechner v. Standard Metals Processing,
Inc.
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 has recognized the daily interest due from the date of the August
28, 2015 judgment through December 31, 2022, totaling $1,311,490, resulting in a total amount of $3,703,736 being included in the accrual
for settlement of lawsuits relating to this matter in the accompanying December 31, 2022 consolidated balance sheet.
On November 29, 2021, the Company was notified that its majority shareholder,
GPR, had executed definitive documents with Stephen Flechner to acquire his judgment against the Company. Documents have been filed with
the Court to reflect this acquisition.
NOTE 10 - INCOME TAXES
The components of income tax expense for the years
ended December 31, 2022, and 2021 consist of the following:
| | |
2022 | | |
2021 | |
| Current tax provision | |
$ | — | | |
$ | — | |
| Deferred tax benefit | |
| (221,000 | ) | |
| (237,000 | ) |
| Valuation allowance | |
| 221,000 | | |
| 237,000 | |
| Total income tax provision | |
$ | — | | |
$ | — | |
Reconciliations between the statutory rate and
the effective tax rate for the years ended December 31, 2022, and 2021 consist as follows:
| | |
2022 | | |
2021 | |
| Federal statutory tax rate | |
| (21.0 | )% | |
| (21.0 | )% |
| State taxes, net of federal benefit | |
| 0 | % | |
| 0 | % |
| Permanent differences | |
| — | | |
| — | % |
| Valuation allowance | |
| 21.0 | % | |
| 21.0 | % |
| Effective tax rate | |
| — | | |
| — | |
Significant components of the Company’s deferred tax assets as
of December 31, 2022, and 2021 are summarized below. The calculations presented below reflect the new U.S. federal statutory corporate
tax rate of 21% effective January 1, 2018. See Note 2 – Income Taxes
| | |
2022 | | |
2021 | |
| Deferred tax assets: | |
| | |
| |
| Net operating loss carry forwards | |
$ | 7,809,000 | | |
$ | 7,588,000 | |
| Impairment of assets | |
| 6,941,000 | | |
| 6,941,000 | |
| Stock based compensation | |
| 2,228,000 | | |
| 2,228,000 | |
| Loss on settlement of debt | |
| 32,000 | | |
| 32,000 | |
| Change in prior estimates | |
| (798,000 | ) | |
| - | |
| Total deferred tax asset | |
| 16,212,000 | | |
| 16,789,000 | |
| Valuation allowance | |
| (16,212,000 | ) | |
| (16,789,000 | ) |
| | |
$ | — | | |
$ | — | |
Management decisions are made annually and could
cause the estimates above to vary significantly. As of December 31, 2022, the Company revised the estimate of its deferred tax asset,
and corresponding valuation allowance, for prior years in the amount of approximately $798,000.
As of December 31, 2022, the Company had approximately
$106,000,000 of federal net operating loss carry forwards. These carry forwards, if not used, will begin to expire in 2028. Future utilization
of their net operating loss carry forwards is subject to certain limitations under Section 382 of the Internal Revenue Code. The Company
believes that the issuance of their common stock in exchange for the Shea Mining and Milling properties in March of 2011 resulted in an
“ownership change” under the rules and regulations of Section 382. Accordingly, the Company’s ability to utilize their
net operating losses of $69,000,000 generated prior to this date is limited to approximately $1,000,000 annually.
As of December 31, 2022, we do not believe any
of our net operating loss carry forward consists of deductions generated by the exercise of warrants or options to purchase our stock.
In the future, the stock options referenced in the above table of deferred tax items may be exercised and we may receive a tax deduction.
To the extent that the tax deduction is included in a net operating loss carry forward and is in excess of amounts recognized for book
purposes, no benefit will be recognized until the loss carry forward is recognized. Upon utilization and realization of the carry forward,
the corresponding change in the deferred asset and valuation allowance will be recorded as additional paid-in capital.
We provide for a valuation allowance when it is
more likely than not that we will not realize a portion of the deferred tax assets. We have established a valuation allowance against
our net deferred tax asset due to the uncertainty that enough taxable income will be generated in those taxing jurisdictions to utilize
the assets. Therefore, we have not reflected any benefit of such deferred tax assets in the accompanying financial statements.
We reviewed all income tax positions taken or
that we expect to be taken for all open years and determined that our income tax positions are appropriately stated and supported for
all open years. The Company is subject to U.S. federal income tax examinations by tax authorities for years after 2011 due to unexpired
net operating loss carryforwards originating in and subsequent to that year. The Company may be subject to income tax examinations for
the various taxing authorities which vary by jurisdiction.
NOTE 11 - SUBSEQUENT EVENTS
The Company entered into an Amendment and Forbearance
Agreement with GPR on January 5, 2023 wherein GPR agreed to: (a) increase the existing LOC from $5,000,000 due March 16, 2025 to $35,000,000
due March 16, 2027, (b) roll two existing promissory notes purchased by GPR into the LOC resulting in the extinguishment of such notes
as separate instruments, and (c) to forebear until January 12, 2024, on exercising its foreclosure rights under its defaulted Senior Secured
Note. The Company’s Board of Directors approved a revision in the conversion price at which the LOC may convert into the Company’s
common stock from $1.65 per share to $1.05 per share, based upon the market price of the Company’s common stock over the 3 days
preceding the agreement. GPR is the Company’s majority shareholder and largest debtholder. GPR holds a senior secured interest in
all of the assets of the Company, including the stock of its subsidiary entities.
Consistent with the Company’s Definitive Plan of Merger dated
January 10, 2022, the merger target, Sustainable Metal Solutions, LLC and Subsidiaries (“SMS”) agreed to the Company’s
independent accountants conducting an audit of its financial statements for 2022 and 2021 and to assist in the financial disclosure requirements
required by the SEC. As previously disclosed, this is a complex audit and is still in process. In addition, the SK 1300, a comprehensive
independent engineering report on SMS’s mineral reserves at December 2021 and 2022, required by the SEC, are being completed; another
necessary step in preparing the merger disclosure documents to solicit ACRG’s shareholder approval of the planned business combination.
SMS is a group pf companies that has developed
a significant primary source of metals for conventional mining and secondary sources of metals from previously discarded mining tailings
for re-reprocessing and recovery. Access to the large amount of mine tailings on ACRG’s Nevada property adds favorably to SMS’s
plans. Its goal is to enhance the US’s supply chain of various metals produced locally using environmentally friendly methods. In
addition, SMS’s sustainable resource program has developing interests in alternative sources of energy, including ACRG’s Nevada
property which is zoned for solar development, and the conservation of our water resources.
Besides SMS’s efforts to prepare for broad
public disclosure of its currently privately held business, ACRG must uplist to NASDAQ as a condition of closing the merger. GPR, an SMS
affiliate, has provided all of ACRG’s funding over the last four years, and is committed to continue to do so to assist ACRG in
developing a successful future.
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